I LOVE THIS COUNTRY

HAPPY 4TH OF JULY TO ATiM.

But beware the new immigration policy set to go into effect soon.  I blame Obama.  Mark, lms and I should be very afraid.

Conservatives Behind the 8-Ball

Ever since last week I have been contemplating writing a post about the Supremes and judicial philosophy, but have not had the time to really put my thoughts in order, so I have put it off. Today, however, William McGurn, writing in the WSJ, noted in passing precisely the topic I wanted to write about, so I figured I would just highlight what he said. His article is primarily about Chief Justice Roberts’ decision to switch votes on the ACA case for what are seemingly political rather than constitutional reasons. But what caught my attention, and what I have been thinking about for a few days now, was the following aside:

Justice Scalia’s dissent in Casey illuminates a political handicap imposed on conservatives by their own principles. Whereas the liberal belief in a living Constitution allows them to stretch its limits to justify almost any desired outcome, conservatives believe the Constitution imposes real limits.

This strikes me as a real handicap. This is not to say that conservatives on the Court everywhere and always apply that belief and those limits consistently. We need look no further than Roberts and the recent decision itself to know that. But it seems to me that conservatives are uniquely open to the charge of failing to uphold their self-proclaimed principles because they actually profess to have some.

Putting aside whether or not the charge of hypocrisy actually had merit, at the very least it is fair to question whether or not the conservative bloc ruling in Bush v Gore set aside ostensible principles (eg states rights) in order to reach a politically desireable result. But imagine a mirror situation in which the reverse had happened. Imagine that a liberal majority on the court had made precisely the same ruling resulting in a Gore victory. The liberals might be accused, as they often are, of simply ignoring the constitution out of convenience. But who could ever seriously charge them with judicial hypocrisy? If liberal constitutional philosophy is correct and it is true that the constitution is “living” and therefore its meaning perpetually in flux depending social norms, circumstances, or who knows what else, then at any given time their interpretation of it may well be the “correct” one, even if it stands in contrast with the plain words of the constitution itself.

Basically, it seems to me that conservatives advance a theory of constitutional interpretation that makes conservative opinions objectively critique-able on their own terms, while liberals do not. That is why hand-wringing over the legitimacy and politicization of the Court inevitably centers around conservative Court opinions, and never, ever around liberal Court opinions. Again, the recent ACA case is instructive. Conservatives are now attacking Roberts, not the liberal bloc that voted with him and made up 80% of the majority, for what seems to be a politically inspired opinion, not because they think liberals aren’t being political, but because Roberts seems to have gone against his principles, while the liberals were just doing what liberals do.

Morning Report 7/3/12

Vital Statistics:

Last Change Percent
S&P Futures 1358.2 0.6 0.04%
Eurostoxx Index 2309.4 17.3 0.75%
Oil (WTI) 85.75 2.0 2.39%
LIBOR 0.461 0.000 0.00%
US Dollar Index (DXY) 81.93 0.057 0.07%
10 Year Govt Bond Yield 1.59% 0.00%
RPX Composite Real Estate Index 182.8 0.3

Markets are flat ahead of the 4th of July on a holiday-shortened day.  Bonds will close at 1:00 pm, and stocks will close at 2:00. There is very little economic data this morning.  We have the jobs report later this week and then earnings season kicks off with Alcoa on Monday.

Bob Diamond is out at Barclay’s after political pressure from the LIBOR pricing scandal forced him to resign. He will be in front of Parliament tomorrow to address questions regarding the scandal and is prepared to fight back with claims the regulators knew what was going on and didn’t object for fear the banking system would be further destabilized if the markets knew the truth.  Needless to say, the politicians are shocked to find gambling in this establishment.

The Federal Reserve Bank of San Francisco has an interesting paper on housing bubbles. Needless to say, they let the Fed off the hook, and continue with the standard academic “angels dancing on the head of a pin” argument about how to identify a bubble. But that isn’t the most interesting part of the paper. Most people know that Scandinavia experienced a massive housing bubble in the late 80s.  When it burst, many banks failed, and Sweden effectively nationalized its banking system.

However, in contrast to the Japanese experience, house prices in Norway had a V-shaped rebound and have subsequently passed their old peak by 130%. This has caused the household debt to income ratio to increase to 210%.  By way of comparison, that ratio peaked at 130% in 2007 here. If oil prices collapse and that bubble bursts, Norway will undoubtedly hit the wall. It will be interesting to see how that government reacts.  But the more interesting observation is how you can have a second bubble so soon after one bursts.

The US government is pulling out all the stops trying to put the air back into the housing bubble.  Most people assume they will fail. Norway shows that it is possible they may be able to pull it off.

Right now, all the pundits and talking heads are discussing how smart the Scandinavians have been with their “smart regulation.” and how we should emulate them. Similarly, everyone loved the US model in the late 90s and everyone thought the Japanese had cracked the code in the 80s.  Often times, the countries that are the flavor of the day just happen to be in the glory days of a bubble that will eventually burst. That prosperity is never permanent.

Have a happy 4th of July.

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