Is Macro Economics real?

I was reading a friend's blog over at the Scratching post when I came across a very interesting sub-post by MISH on FIV. Mish compared the economics theories that have dominated macro-economic practice since 1930 to the common sense approach most eighth grade graduates would take... Very humorous and he brings up a good point... has the field of Macro Economics missed the mark? Our recent recession would indicate that the combined efforts of Keyns, Friedman, and even Hayek can not predict how and why a economy grows or fails.

But I think that MISH over-simplifies, implying that the world economy is a fixed size making balancing spending with saving as the only way to success. But that argument is countered simply by looking at the last 100 years, it is clear that the the economy is expanding but how fast? and why?

I like to combine basic physics with economics... applying the conservation of energy law to monetary policy. The applicable interpretation goes something like this; the economy is the total sum of energy created by a the people in the economy. The economy grows when the people work more to add value, but it shrinks when the population takes more than they contribute. Value is fluid across the economy much like currency (or mass and velocity in the analogy), making it easy for the economy to aggregate total value but very difficult to decompose and analyze.

So the bottom line, is that Monitarists and Keynesian theories work better if the population is adding more value through work than they are extracting through consumption. What does that mean for governments? That means that successful governments will incentivize people to add more value than they extract, making the economic pie bigger. If a nation's economic pie is bigger than the population needs, everyone is comparatively richer than they were when the economy was smaller.

Unfortunately this concept eventually runs up against entropy, or the tendency of all energy to seek it's lowest form. In economic terms the lowest energy state is the hunter and gather, or subsistence state. The implication to policy makers is that no matter how great the stimulus for increased productivity, there is always a tendency for a population to slip into less productive habits.

Which brings us back to today's problems... We built a big economy, with lots of potential, but policy makers became lazy and didn't continue to incentiveize the economy to grow honestly. Additionally we allowed our accounting practices to become clouded, impairing our ability to track real value generation. Policy makers allowed corruption to infiltrate the economy, stealing value from the core of our economy until it was a hollow shell of what it appeared to be, a real potemkin village.

It seems to me that in the future, Government should proceed on two tracks, first create a very transparent financial system that allows the true value of an economy to be exposed. Second, it should incentivize value creation at the core of the economy; creating an innovative, efficient environment for companies to succeed or fail on their own merit.

Sounds simple, right?

I want mine...

There is a new trend... in the news, around the house, even over dinner with friends... with massive amounts of federal money flowing in the name of the economic bail out, everyone is wondering about how they get their share? In some circles this may have always been a topic of conversation, but not so much in the circles I run in. This is new!

It might help if I described my friends and family; they are hard working - no excuse types of people. They pay their taxes, they manage their money, they don't whine (much), they are democrats and republicans, all sexes and orientations, and of many races... in other words I mingle with a healthy cross section of the U.S. population. I believe the people I associate with are a good representation of the hard working core of middle class America.

In our conversations we talk about the rich fat cats that are getting bailed out, we talk about the misinformed consumer (very gentle moniker) who overestimated their ability to pay for homes that were much too expensive, and we talk about the greedy middle men who set these deals up. But we have also talked about people who were relocated to an expensive area to keep a job, or entrepreneurs who took a risk in this greed fueled feeding frenzy to make a business work, and how their loss is our loss.

There is never a consensus about what steps Governments (lets bring our global partners into this, they are equally responsible) or individuals should take in the coming years, the economic crisis has put the personal interests of the very people who make the Government work at odds with the Government itself.

At the end of the conversation, one thing is always clear... we hate the idea that this crisis is going to be resolved at the expense of the people who were careful to make good choices and manage their lives according to their means. We don't like the idea that many greedy, irresponsible people are going to wind up with our tax dollars in their pockets. I just pray that we all have temperance to guide us in the coming years, because what ever happens we are not going to like the end result.

There is no "fair solution"; this crisis was brought about by greedy people taking advantage of ill informed people and the Government not enforcing the regulations. And as for my friends, we are not blameless, we sat and watched while our the cocoons we fought to build for ourselves were hijacked by greed and sloth.

Quote

"If you want to make an apple pie from scratch, 
you must first create the universe." -Carl Sagan

The campaign is over... Finally...

Even though we all must get used to having to watch regular television, drive the streets without campaign slogans, and in general re-engaging with our loved ones, none have it worse than the hard core Obama fans.  Check out this video from "the Onion"


Obama Win Causes Obsessive Supporters To Realize How Empty Their Lives Are

Lorne Michaels ... a Sarah Palin fan?

For all you Palin Nay sayers out there, check out this quote from Lorne Michaels of Saturday Night Live after she appeared on SNL...

"What do you think Palin gained from her appearance?
I think Palin will continue to be underestimated for a while. I watched the way she connected with people, and she's powerful. Her politics aren't my politics. But you can see that she's a very powerful, very disciplined, incredibly gracious woman. This was her first time out and she's had a huge impact. People connect to her." (EW.com from entertainment weeky)

This isn't what you hear most of the liberal media saying... Check it out...

The current financial Meltdown is Jimmy Carter's fault!

while listening to Rick Roberts on the way into work this Morning, I caught his summary of an Article in the "News BLAZE," going over the history of our current financial Meltdown meltdown. Its very interesting that both Bill Clinton & George W. Bush tried to correct the situation but were thwarted by liberals in congress.

P. Diddy Examines John McCain, Proclaims Him “Buggin’ the F**k Out”

P. Diddy Examines John McCain, Proclaims Him “Buggin’ the F**k Out”

I feel much better about Obama now that I've watched this...

Posted using ShareThis

Its a small world... economically speaking.

While sweating on the elliptical trainer, I had the opportunity to listen Thomas Mayer, chief European economist talk about the Macro Economic situation in Europe. Well it appears that Despite the strong Euro, the Europeans are having problems of their own. Dr Mayer laments the fact that the grand European experiment is hitting some rough spots. It appears that Europe's schizophrenic approach to separating fiscal and monetary policy has caused inflation in many parts of Europe and recession fears in other areas. In other words without control of the fiscal policies of the member countries, the ECB can't take any action right now without hurting some of it's members.

Even though the ECB has maintained interests rates at a higher level than the U.S. Central bank, the European's recent growth, like the U.S., has been fueled by highly leveraging credit. The result is that the Europeans are looking at the same credit crunch as the U.S. but without having benefited from a period of sustained low interest rates.

Most folks reading this are well aware of the situation the U.S. finds itself in... with a slowing economy and a bursting credit bubble, we've got a long way to go before we are back to boom times.

And China is no better off, being the owner of much of the Debt generated in the U.S. and Europe over the last decade, they can't even spend the money they have in reserve for fear it will cause either the U.S. economy of the European economy to take a dive. And what good is money if you can't spend it?

A new strategy for McCain?

While the recent events in the presidential race have been slow lately I think McCain has stumbled on a winning strategy.

Just shut up!

It seams that when McCain is quiet and Obama does all of the talking, McCain narrows the gap. If you look at Real clear politics polls you can pick out the periods when McCain is out in front stumping his brains out and the periods where the media is ignoring him because he does better when the media is completely focused on Obama (like his trip to the Middle East)

Check it out



If you look at the far right edge of the above snapshot, you'll notice how successful the Britney and Paris adds were

The real reason for line standing

Over the weekend I had to buy some new clothes. I hate shopping so when I have to buy clothes that means that my old ones are nearly falling apart. So I hit my favorite spots; unfortunately they are everyone's favorite spots so the lines were long.

While standing in line, I struck up a conversation with a very attractive young lady from Zimbabwe. At first we were talking about goofy stuff like golf gifts lining the queue. But then it came up that she was here for a semester to begin her graduate study in law, piquing my curiosity. What does a law student from Zimbabwe think about our culture and our legal system?!? As we continued through the queue, she explained how she was amazed about how well the law works here in the U.S. and observed that even though the police are not ubiquitous, and apparently way under armed (only service revolvers in most cases, no AK-47's) she felt safe. I hypothesized that it was because we have a functioning independent court here in the U.S., her reaction was one of surprise, like the concept had not ever been mentioned before.

About that time, the checker was calling for the next person in line (her) and then it was my turn. A tremendously interesting conversation was ended much to soon. The more I travel, the more I talk to people from other cultures, the more I appreciate our form of Government. Every encounter leaves me amazed by the perfect storm that occurred in the years around 1776 that brought together a group of inspired Geniuses to create these United States.

Mérida Initiative

In my last post (I know it was a long time ago) I mentioned the Mérida initiative and the rising death toll in Mexico's struggle to reform itself, Since that time I have come across this additional information from the Mexico Institute on providing an overview of the Mérida initiative. This article gives an overview of the plan including to the Mexican legal system, establishment of a non-corrupt Mexican FBI, and an accounting of the 500M of aid sent to Mexico each year under the program to purchase things like helicopters for use in drug enforcement.

The bad news is that my last post under reported the number of murders and assassinations carried out by the drug cartels who will stop at nothing to derail the reforms. If Mexico eliminates corruption, the drug families will have a much more difficult time exploiting the Mexican people as they cash in on the American appetite for illegal drugs.

Every Californian should understand what the Mérida initiative means to our economy, safety, and overall well being.

The heck with Iraq, the war we need to watch is just south of us.

There is a tremendous amount of blather on the airwaves about what we should do in Iraq when we should be watching the war waging just south of us in Mexico. I'm not talking about illegal aliens, that has been sooo overdone, the people I'm worried about don't have to worry about crossing the boarder, their credentials are rock solid. In case you haven't figured it out by now, I'm worried about the toll the drug cartels are taking against the people and Government of Mexico. The roughly 28 prominent families that run the drug trade in Mexico have declared open season on anyone who would deny them their access to the valuable U.S. illicit drug market. According to the San Francisco Chronicle (I hate quoting these guys) the death toll in the war against drugs last year topped 2000! In other words, you don't have to travel to Iraq to put your life at risk, just travel south.

This explosion in violence has been largely in response to the crackdown on Government Corruption by the Felipe Calderon Government. Calderon has been doing some major house cleaning in the judicial, police and military forces in an attempt to bring Mexico out of its second class economic status. This is important to us, because the sooner we get Mexico's economy on line, the sooner we will be able to control the boarder and all of the crime that comes with having a porous boarder.

A good source of information on the topic has been Strategic Forecasting Inc. The often have good articles on Mexico's heroic efforts to control corruption. Also keep an eye on the Merida Initiative as it could be the key to our security in this hemisphere.

Military history in food

This video is an entire course in Military history, combined with international cooking. I've got to talk to the Dean to see if we can get this added to the cirriculm.

I had the privilege to listen to listen to a presentation by David M. Walker, Comptroller General of the United States on his last day in office. He took the opportunity to go over a presentation that he has given in various forums over the past few months to explain how his generation, the baby boomers, have not been good stewards of our economy. He is concerned that, if things don't change, we will not be able to sustain our economy or our current standard of living. If his predictions are correct, the baby boomers will be the first generation in American History to leave the economy in worse condition than they found it.

The graph below is is one of the first in his discussion of trends in federal spending.

Click on the slide to view the entire brief. Shows the growth of mandatory spending compared to discretionary spending such as defense

As you go through the brief, keep in mind

• We are paying compounded interest on our growing debt
  
• We are a rich nation today because nations around the world believe that we are a good economic risk, and spend lots of money in the U.S.
  
• The U.S. economy would be in grave danger if the markets were to flee the U.S. dollar because we were no longer a safe investment

One last slide from his brief to help make the point.

In this slide Walker makes the point that the U.S. spending is already exceeding revenue, and if no action is taken by 2040, we will not have enough revenue to cover some of our mandatory obligations (like Medicare & Medicade) and discretionary spending such as National Defense and Diplomacy . Sad to say, if our economy gets to the 2040 scenario, the average American will have more to worry about than medical coverage and national defense.

Mr Walker presented a compelling argument for fiscal reform and restraint, I encourage everyone to check out his briefings posted on the GAO site and watch as he transitions into the private sector.

Did Enron Kill Innovation in America?

I was fortunate enough to sit through a presentation of a venture capitalist, I can't say who or what company because we operate on the principle of non attribution (you get better info that way). She had several extremely interesting points that I will attempt to weave together to get a little closer to the answer...

Up until 2003, IPO's were among the best ways for a company to acquire the funding needed to further a good idea. Granted there were several bad ideas that went public on the stock exchange but they were quickly weeded out by market forces. The bottom line is that IPO's are a great, market driven way for companies to raise money.

Sarbanes Oxley has increased auditing burden placed on public companies and discourages IPOs for companies less than 200 Million dollars in annual revenue because of the huge cost. To comply with the SOX (AKA Sarbanes Oxley), companies must hire a staff of auditors, accountants and attorneys to ensure their continued compliance with the new laws designed to prevent fraud in corporate America.

Congress mixed up market exuberance with fraud when they created SOX. Market exuberance is a natural psychological element of a market. Simply stated; when people get excited about an idea they throw their money at it. If the idea is really good it becomes self sustaining, making its investors a nice profit. If its not so good it falls short, costing the investors their stake in the company.

• This is good!
• This is Capitalism!
• This is what our economy is built on!

Fraud is when people with malice of forethought enter into an agreement with the intention of bilking their counterparts in the agreement out of their stake. This was the case with Enron, MCI and others in the early 00's.

• This is Fraud!
• This is Criminal Behavior!
• Protection from fraud is one of the most important roles a Government can have in a market based economy!

SOX was put in place in response to Corporate Fraud to protect investors from the massive criminal behavior observed in the Enron scandal. Unfortunately, Congress didn't take into consideration the second order effect that it would have on the American entrepreneur. We should re-look at SOX and ask our selves these questions:

• Is SOX making it to expensive for startups to access public funds?
• Is the reduced availability of venture capital hindering inventors and entrepreneurs?
• Did Enron start a chain reaction that will stifle a major American Innovation Engine?

More on Traffic

The guys over at cognitive daily noticed that even under perfect conditions where everyone is trying to avoid traffic jams that traffic jams occur.




So remind me again why we're not required to telecommute more? It seems that the human race is just a little to uncoordinated to handle driving without traffic jams.

China's Competitive Advantage

Check out the Chinese Scaffolding:


Chinese Welding Mask:

Chinese Hard Hat:


Chinese Particle Free Breathing:


One thing we forget when we talk about how scary China is, the Chinese people are all just trying to make a living for their families. The above are some pictures from a Chinese shipyard, they obviously want to get home to their families and friends (or they would not be doing the weird things in the picture to protect themselves) just like we do here in the U.S. . Unfortunately, the workers in China are forced to take the same types of risks that our forefathers took for us over the past centuries.



Building a country is hard work, it takes great sacrifice by all of a country's citizens. I just pray that the Chinese Government is working as hard as its people to build the Civilization that its citizens deserve.

Solution for frustrating Bureaucracy

When I first moved back here to the Washington area I hypothesized that one of the reasons that our Government was so illogical was that our law makers are forced to drive on the hairball of a road system that surrounds the Washington D.C. area. It's not like California, where everything is laid out on a grid, and the shortest distance between to points is a straight line. Here goat paths, that have been in existence for centuries, are paved over and now make up the roadways. I can't tell you how many times I have been on a road, could see my destination and the road leading up to the destination and still had to drive 10 miles to get there.

I wonder if we straightened out the roads in Washington DC if our bureaucracy would become more straight forward and transparent?!?

The official Pentagon Blog site

Check out the new link to the DoD Blog feed on the right of the screen, I believe that it is staffed by the pentagon Public Affairs Office and caries the pentagon's latest releases to the world wide web. As far as I know it is the only public site at the pentagon. There is lots of cool stuff there so Check it out.

How does Google make so much #@#$ without charging us?

Wired magazine just published an article about the search engine industry by Chris Anderson, the author of "the long tail", called "Free". The article goes into how Google pioneered the use of Cross subsidy advertising to provide unbelievable service to its customers for FREE. It also explains why Google keeps giving us more stuff like google earth, google docs, and Grand Central (Someone click the Call me button!) all for free. Check out the article its well worth the read.

This new service is like "Got V-Mail" advertised on FOX. But this is free and offered by Google! They are accepting beta testers now, so get you phone number quickly.

I've got it installed on my more random, sometimes tech focused blog "Mobloggin"

Who created all of this money we've been spending?

The following is an excerpt from a paper I wrote about the interdependency of foreign exchange currency markets, and the mortgage crisis.

Traditionally the money supply has been fairly well understood and controlled by an age old system of leveraging reserves to loan money to borrowers. The federal monetary policy regulated the percentage of reserves required to be maintained by the bank, freeing the bank to lend the remainder, making profit form the interest. In the old days the bank would keep the loan on their internal books, which in turn acted as an incentive to minimize the risk of the loans they issued.

In recent times banks and non-bank lenders (good example of non bank lender in this article from 1998) have developed a system by which they package loans and sell them to investment groups. These groups then use the loans as collateral for securities and sell the securities to investors. This process does two things, first it eliminates risk for the lending institution by taking the loan off of the origonator's books. Second it provides a loophole for lenders to subvert the reserve requirements established by the Federal Reserve allowing them to lend up to 100% of the value of the property.

From a bank's perspective this is a real win-win situation. Banks can now reduce their overall risk profile by selling off all but the very best loans, making them very stable. The Fed using it's traditional means of monitoring a banks reserve requirements are very satisfied.

The investors using the loans as collateral are also very happy with this new business process. Using new technology to help police the default risk of the loan packages, companies securitize the loan packages with some degree of confidence. The new security is in most cases less volatile than many other financial instruments, and offer a good rate of return for a reasonable risk. Unfortunately there is a dark side to this portion of the securitization process, since the rating of loan packages as securities is relatively new, there are not strong regulatory standards established providing the FED with oversight capability. The result is that the securitizer, often faced with a conflict between profit and reliable transparent ratings, can inflate the rating of the security.

I believe that this conflict of interest in the risk rating of this type of security is at the heart of the current loan crisis. On one hand the securitizer makes the most money on his investments by giving the investor the impression that these are low risk real estate backed securities with a great rate of return. On the other hand, he has to encourage the lenders to make loans no matter what the risk to keep the gravy train rolling. Meanwhile, the investment firms are acting under a different set of regulations than banks while perfoming a banking function... creating money!

The investment companies are effectively augmenting the money supply outside the traditional means established and monitored by the Federal Reserve. Would-be borrowers with some equity (or in some cases the expectation of equity) now have a way of securing money against their collateral quickly and at a reasonable cost. Borrowers can now take their expectation increased equity and convert it into money quickly for near term projects or expenses. Although the mechanisms are quite different, this approach to securitization of loans provides a means to generate revenue much like public corporations have been able to do in the past by selling stocks against their future profits or securing ventue capital.

I hope this makes sense...

Tax Policy - a fable

BARSTOOL ECONOMICS

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do.The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20." Drinks for the ten now cost just $80.The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free.But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?'They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (3 3%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings."I only got a dollar out of the $20,"declared the sixth man. He pointed to the tenth man," but he got $10!""Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than I got""That's true!!" shouted the seventh man. "Why should he get $10 back when I got only two? The wealthy get all the breaks!""Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!And that, ladies and gentlemen, journalists and college professors, is how our tax system works.

The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

This is a repost from Sound Politics Public Blog but it was making the rounds via email.

Get over it!

AAAAGH!

I was just flipp'n through the channels and I came across a Glen Beck rerun on CNN headline news!?!

I generally stop in when I surf past Glen's show, because I enjoy watching crazy people talk about interesting stuff, but I couldn't take it, a CNN news show re-run... And even worse, It was Glen whining about Romney dropping out. His gripe was that Romney was the only financial genius running for the President, and the only hope for the country. Oh what to do?

Well Glen, you've admitted to not being an economist on other shows and I have to agree with you, your no economist. There are plenty of economics genius's working for either camp, I know some of them personally. The cure for our economy's problem is not one of math or supply and demand, it's one of selling one of several unpleasant solutions to an American population that only wants good news.

With our current account balance dropping to record lows by last September, consumers taking advantage of an underrepresented increase in money supply through cheap loans with low buy-in thresholds we've been on an economic bender for several years. Economics is a lot like drinking, you can indulge a little and take little corrections along the way (the french say it its good for you) or you can have a real blow out and have a big hang over the next day. With any luck, while your blissfully intoxicated you don't break any laws and get picked up by the police and screw up the rest of your life. To get back to the analogy, the U.S. have been on a binge for several years with all of our favorite trading buddies and it's time to pay our tab.

The bottom line is that the solution to our economic problems are not hard to figure out, but they take some real political courage to implement. When the next administration chooses between holding our population accountable, or punishing our allies for irresponsibly throwing money at us while we were on our binge, someone is not going to be happy. Ideally there will be a compromise somewhere in there where neither group gets rolled in the alley, our economy needs both groups to be happy.

The next president has to be good at getting children to take their cod liver oil before bedtime. That skill will come in handy when he has to talk U.S. consumers into getting used to tighter money supply (less real money in their pockets), and trading partners used to a weaker dollar (they own so many dollars a weak dollar is last on their Christmas list). Its going to be a tough sell both ways.

We need a skilled politician to sell some hard choices, Romney couldn't even sell himself... what chances would he have had.

For another interesting rant on the sour grapes some in the republican party check out my friend KT Cat.

I'm committed

I have been on the fence in this political race until last night when my kids asked me who I would support in the upcoming elections. I took account of the candidates positions and records and realized that the only candidate that I could support was John McCain. Just for fun (and so I can remember for next time), I'll go over my thought process.

First, National Security: If we pull out of Iraq before we have a chance to put the pieces back together, we will be facing a much more dire security risk from the Middle East than if we bail out because it has turned uncomfortable, and unpopular. It will take political courage to stick with Iraq until it is self sustaining (my estimate... 2 to 10 years).

The Economy: I have been playing with a couple of economic models over the past few months and if they are as comprehensive as they are advertised to be, the Medicare, Medicaid, and Social Security situation will become a real problem within the next ten years. If you don't believe me, just look at the growth projections from the Congressional Budget Office. We can't afford another large entitlement program that is going to increase exponentially as baby boomers retire.

Taxes: Targeted tax cuts act as incentives, to expand business. If you lower the burden on business they will respond by growing, more importantly growing businesses make more jobs than shrinking business. If you want to shrink business you tax it. The AMT is a very regressive tax, it is basically a success penalty, do we really want to dis-incentivize success?

Education: The democrats want to improve education, which I support, unfortunately, they want to increase taxs and re-allocate to tuition, which will increase the supply for educated adults but will decrease the demand for them. I personnally think that tax incentives could be created for companies to invest in the educational process, after all they are going to be the ultimate benefactor of an upgraded workforce.

Immigration: Immigration is one of the toughest problems we face today! Huge national security problem, but it is also a huge demographic and economic issue as well.

Developed countries have all had problems with a lower birthrate than required to maintain a vibrant workforce. Our illegal immigration is filling a vacuum caused by our low birth rates and hot economy; if we were to eliminate the illegal workforce our economy would have millions more jobs than workers. In that situation the only two options are to shrink our economy, or to export jobs to other countries; none of the options would be popular. Our illegal immigration problem has made our demographic crush much less painful that of Japan, Europe, or Russia who are going through a much more severe demographic problem than we are. China is going to see a real problem when their one child policy hits their workforce in 10-20 years.

Rule of Law: Rule of Law is the counterargument to the demographic/economic argument, how can a nation of laws (rule-of-law is to governments what opposable thumbs are to mammals) reward a large population of citizens for breaking the law? I don't believe you can! To make matters worse, amnesty would not fix the demographic/economic problem that caused the illegal behavior to begin with. The illegal immigration problem is tough, and I'm not sure anyone has it figured out.

Goning back to McCain, he demonstrates the courage and conviction that I think will make him a very good President. While he and I don't completely align on the issues, his principled approach to policy gives me some comfort that he will not stray far from the positions he has articulated during his campaign, and I can support that.