Monthly Archives: June 2014

Order at the Border

This past week the Supreme Court of the United States (SCOTUS) issued a ruling in Riley v. California that dares to uphold the remains of a much abused 4th Amendment. The court ruled that the police may not search the cellphone of someone placed under arrest (often for offenses as trivial as “disobeying a lawful order” or “disorderly conduct”) without first having obtained a search warrant. In the digital age the principal of good design “form follows function” no longer is guaranteed. Digital function is not deducible from physical form; the sublime masks astounding capabilities. The contention was that since traditional wallets can be searched it must follow that anything approximately the same size as a wallet can be searched. A cellphone and a wallet may be comparable in size but that is where the similarities end. The rules that allow the police to search a defendant after an arrest dictate a limited spatial area (typically directly under the suspect’s direct control e.g. a car). So at first blush it might seem that if a cellphone is within that area it is fair game. But that analysis ignores the ways in which technology can redefine notions of spatiality. Cellphones (or the “smart” ones anyway) are not mere digital copies of the old-fashion wallet. They are but a keyhole onto a warehouse of information. Packed into these devices is the equivalent of what formerly would have been contained in ones home years ago; in essence they do indeed house ones “papers, and effects” which the 4th Amendment specifically protects from warrantless searches. Chief Justice John Roberts summarized this idea in his ruling:

 “With all they contain and all they may reveal, they hold for many Americans ‘the privacies of life.’ The fact that technology now allows an individual to carry such information in his hand does not make the information any less worthy of the protection for which the Founders fought. …Our answer to the question of what police must do before searching a cellphone seized incident to an arrest is accordingly simple—get a warrant.”

 

However, as heartening as this decision might be, there still remains today an egregious violation of basic 4th Amendment rights that has time and again been upheld but the SCOTUS: border searches. In the court’s opinion (United States v. Ramsey (1977)) searches made at the border are de facto reasonable because they occur at the border and thus is any conflict with the 4th Amendment extinguished with a mere definitional twist. Border searches do not require suspicion nor a warrant; anything and everything may be legally searched and confiscated for no other reason than that one is crossing an imaginary line.

Even if one is inclined to believe that such border searches are necessary to keep out criminals and “illegals,” what may surprise you to learn is that the “border” is defined as 100 miles inland from the actual border (aka a “Constitution Free Zone” that encompasses two-thirds of the US population). What that means is that anyone, anywhere within 100 miles of a US border may be legally detained and searched for no reason at all by the DHS or ICE goon squads. They may seize electronic devices (phones, laptops), copy them wholesale, return them, and then rummage through one’s personal information at their leisure. That this does not currently happen routinely is small comfort; there is not a single barrier to the legality of such behavior. If you are within 100 miles of the border you are fair game. You may think you have nothing to hide, but do you really want total strangers looking at your photos and reading your emails? Secondarily, there is nothing objective about the 100-mile value – it could be changed to whatever arbitrary value our wise overlords deem necessary to maintain, “order at the border.” We are just one crisis away from a 250 or 500 mile border zone.

So while we may applaud the SCOTUS for their recent affirmation of 4th amendment protections, let us not forget to jeer them when they continue to permit those same protections to vanish at the border.

Student Loan Bubble & Moral Hazard

The insurance industry is unique in that its product tends to incentivize the very behavior people seek to protect themselves from. This is called “moral hazard.” For example, all things being equal, someone with collision insurance will tend to drive more recklessly than someone with no coverage. Someone with flood insurance will deliberately build their home in a flood zone. In other words, people do things they would never otherwise do absent the assumption of protection.

There are ways to tame moral hazard. Large first-dollar deductibles ensure that the insured will feel some pain with a loss – negative feedback affects one’s behavior and results in more cautious behavior. Likewise, some events are not insured if the moral hazard cannot be mitigated. For example, homeowner’s policies do not cover loss from damage attributable to failure to maintain the upkeep of one’s home. Although moral hazard is a foundational flaw in human behavior, the market (that is, people) has figured out how to tame it.

The state is an insurer (it purports to protect its citizens). It is however the worst kind of insurer because it actively encourages moral hazard. From the crony-capitalism of “too big too fail”, loan guarantees for favored industries, to student loan bailouts, the state has a sordid record of incentivizing moral hazard by encouraging behavior its minions witlessly seek to avoid. For example, the student loan program was implemented to encourage more tuition lending by banks so that more people would go to college. This created the moral hazard of banks lending to people they otherwise would never lend to, thereby vastly increasing the demand for higher education. This massive explosion in demand (quite predictably) encouraged schools to ratchet tuition upwards. Why? Supply and demand. Loan guarantees ensured ever increasing demand that was insensitive to price increases. In a normal market, increasing tuition would have decreased the pool of available funds for such lending or raised the cost of such lending, but in either case these would have both resulted in inhibition of tuition increases and a subsequent restoration of equilibrium between supply and demand. But in a market suffering state intervention, equilibrium can never be achieved, as rising prices present no inhibitory effect on the level of demand. This resulted in tuition increasing over the last 40 years at 3-times the rate of inflation.

This willful blindness of moral hazard by Obama and his ilk is not merely sad, it is downright destructive. His recent actions only serve to deepen the crisis, not ameliorate it. By executive order (royal decree) he recently extended a cap on student loan payments to cover loans made before 2007. This cap allows borrowers to limit their loan repayments to 10% of their income for 20 years and after that the loan is “forgiven” – that is, it simply vanishes like a fart into the wind, courtesy of the US taxpayer.

This executive order is symptomatic of all state interventions: heaping fixes upon fixes to fix previous fixes. To encourage lenders to make student loans to anyone with a pulse, the state removed bankruptcy protection for student loans in 1976 and then promised the lenders to act as their enforcement agent. Step 1: All risk shifts from lender to borrower. So with Uncle Sam acting as Guido the Enforcer the floodgate of loans opened. Then loan repayment became problematic for a growing number of students (due to a dismal job market resulting from state intervention in the economy) and this inability to discharge loan debt likewise became a political liability for our wise overlords. The quick fix? Step 2: Shift all risk from the borrower to the taxpayer. For now, concentrated benefits (to students) and diffuse costs (from taxpayer) ensure little mass objection. But soon enough these loan write-offs will be priced back into tuition rates. The only solution to this quagmire is the most politically painful one: end all loan guarantees, permit bankruptcy protection, and allow lenders, not the state, to determine who is a worthy credit risk and who is not.

Middle Eastern Chess – Check!

So let me see if I have this straight. Even though there was zero evidence that Iraq was involved in the attacks of September 11, 2001 or that Al-Qaida had any operational presence in Iraq, the US invaded Iraq anyway. This resulted in nearly half a million dead Iraqi’s, close to a million Iraqi orphans and a death toll of US military personnel that more than doubled the carnage of September 11. The invasion was the light that brought on the moth-like focus of Al-Qaida to that region. Not content with that mess, the US unilaterally decided to depose Gadhafi, thereby creating a power vacuum in Libya that allowed Al-Qaida influenced forces to move in. The US then fomented instability in Syria by backing Al-Qaida linked rebels there in the hope that they might overthrow Assad. Now with the entire region destabilized, an Al-Qaida splinter group (ISIS – Islamic State of Iraq and Syria) managed to seize Mosul (Iraq’s second largest city) last week using money and equipment the US funneled to its destabilizing pawns in Libya and Syria. With the capture of Mosul they have further enriched their US equipment arsenal (left behind by the fleeing Iraqi army). This situation is so upside down that the US is actually receiving invitations from the Iranians for joint operations to battle ISIS in Iraq. Brilliant. How did we get here? For years the US supported a number of Middle Eastern dictators as long as they supported a Petrodollar based economy that ensured the free flow of cheap oil to the US. But when our pet dictators stopped behaving, the US tried to displace them with more malleable US-friendly social democracies. Unfortunately the exact opposite developed: US-hostile Islamic theocracies. They have a word for that: blowback.

Then again, US opposition to this shift in power (or the one presently underway in the Ukraine) is completely hypocritical. States may differ in ideology, but they all behave exactly the same. The current power shift merely exposes to public scrutiny the operations of the state normally hidden behind a wall of threats: violence by a select few who proclaim to speak for a majority in order that they may impose their will upon a wider population circumscribed by an arbitrary geopolitical boundary.

In fact nothing is really changing in any of these regions. The flags, slogans and draperies of the capital building may change, but the core violation of the right of the individual to live their life as they, and not others, see fit remains. So even though we may personally object to the precepts of Sharia law, are we objecting to the law itself, or are we objecting to its apparent imposition on the people? Would such objections evaporate if 51% of the people there desired Sharia law? Does majority opinion legitimize such laws? Before you answer that, consider this: ISIS is slowly fostering such communal consent via the oldest political trick in the book – bribery. ISIS is taking a page from the placate-the-people-playbook of modern social democracies. In both Syria and Iraq they have organized “dawa”, i.e. social welfare programs for the local populace (food, fuel, medicine) . And just as honeybees are calmed with smoke, so too are people calmed by the ephemeral gifts of those in power. ISIS is run not by warriors, but politicians with guns. Every politician knows that if you give the people something, they will give you their consent (vote) in return – in this case the price is not literal votes but implied consent to Sharia law. So, if you are for “freedom” and “democracy” and assuming you aren’t a total hypocrite then you should be ok with this extension of majoritarian communal consent. After all, democracy is nothing if not the concept that when some people freely make a choice, it is ok to impose that choice on everyone. But, if you realize democracy is the wool the state pulls over your eyes to fool you into believing you have control, then you will also recognize that majority opinion is as legitimate in determining how we should live our lives as a coin toss.

I hate Paypal

I really hate Paypal. It is astonishing that a company a mere 16 years old could so quickly devolve into a lumbering bureaucratic beast that is indistinguishable from a government agency. As the consumer/buyer I have no qualms with Paypal; sending money to people or companies is more or less a painless experience. However, when the roles are reversed and I’m the one receiving funds, well, they are less “pal” and more “foe.” Allow me to explain: My company has used Paypal for many years to process credit card payments. Their fees are generally lower and their electronic data integration not too terrible. But something has changed in the last few years. We have quite a number of overseas accounts and it would seem that once you start processing charges for such accounts you become the financial equivalent of dead Nigerian potentates and Viagra merchants in their eyes. They suddenly develop a keen interest in the inner workings of your business. They want to know what you do, what you sell, and (for a few “select” transaction involving overseas customers) every few months they request detailed copies of invoices, bills of lading and proofs of delivery. Mind you this is not in response to a complaint from anyone. No one is claiming they didn’t get their product. No one is claiming their card was stolen. They just do it because some misguided bureaucrats at Paypal thinks “not-US” = “criminal enterprise”, therefore all things in any way linked to “not-US” must be subjected to absurdly intrusive levels of scrutiny that would make IRS audits look tame by comparison.

So these requests came up once before and I complied, because (a) they freeze your account so you can’t withdraw funds and (b) I assumed it would just be a one-time event. It wasn’t. It happened again this past week (hence this rant). This time I told them I would not be complying with their silly requests and that perhaps they should consider the amount of charge volume we move through them when they considered my request to cancel their request, unfreeze our funds, and never subject us to this garbage again. They didn’t budge. They don’t care. I was told I would have to 180 days to get the company’s money if I wasn’t going to be supplying them with the laundry list of requested information. So much for valuing the customer.

Now at this point most people would be thinking, “that’s unfair, they can’t freeze your funds absent an accusation of fraud, the government should do something about that!” And to be quite honest I understand the sentiment. But it’s not very empowering thinking “well maybe those folks called government might fix this mess in a few years.” What is much more empowering is realizing you are always in control. I can tell Paypal to pound sand. I do not have to comply with their edicts. Yes waiting 6 months to get the money is an inconvenience, but one that is well worth the gratification of refusing to comply. You always have a choice. Or at least you do when dealing with a private business. If you’re dealing with the government you don’t have that choice; you either comply or face prison or worse.

Why do we have no choice when it comes to government? Because the state declares a monopoly on governance, thereby eliminating all competition in the services provided by said monopoly government. Without competition we end up with entities run as poorly as Paypal but which will never improve because there is no incentive for them to do so. Paypal has competitors. Paypal eventually must change or it too will perish (just witness the ashes of AOL’s internet monopoly). The state allows no competition. It’s power forever ratchets upward, untouched by the counterbalancing force of free competition. Voting is no proxy for competition; it is the false choice of two doors that both open on the same room.

Health of the State

The War on Drugs is perhaps the most unjust “war” ever waged. It is not, as in conventional warfare, a conflict between states, but rather a conflict of a parasite (the state) against its host (the people). Just as cancer grows by attacking its host, so too does state power expand as it attacks its citizens in the name of saving them. The tumor that is the drug war is but one variant of the cancer that is state power.

It has been said that war is the health of the state (Randolph Bourne). If that is so, then traditional wars (against people) are far too fleeting as a means to bolster state power. The end comes relatively soon as both sides are worn down through attrition. In order to have unending war the state must fight an enemy without form, substance, or soul. This is achieved by waging war against thoughts, emotions, and things; for these things can never be conquered, and thus is ensured the eternal health of the state.

The colorful imagery of a “War on Drugs” suggests perhaps we are battling against anthropomorphized weed and poppies as they brutally attempt to intoxicate us by crashing through our doors and up our noses. Yes, I’m being facetious – now I shall be sarcastic: the real criminals in this war are those who possess these vilified substances.

The police will almost never stop a murder, rape or robbery in progress, but gosh darn it they sure as heck can find a crime in progress if the crime is mere possession. What is the easiest way to capture a criminal? Declare random object X illegal and then find people who happen to possess X. Such prohibitionary lawmaking has led to a perversion of policing incentives. The police now have two choices: Demonstrate effectiveness in catching real criminals through laborious detective work that rarely pays off, or, invent new and interesting pretexts to see if dear citizen is in possession of a verboten substances. Which one is more likely to yield results? Exactly. And so focus shifts to the quick and easy result at the expense of the more difficult task of meting out authentic justice.

This truth has engendered the most sinister aspect of the drug war: the no-knock raid. If the police knock then the suspect might stealthily comply with the law and cause himself to no longer possess the banned material. So on the premise that it is better that a thousand men die than one guilty drug user go free, we have seen the birth of the no-knock raid. Yes, sometimes they’ll get the wrong house, sometimes they’ll accidentally shoot totally innocent people (or almost routinely shoot innocent dogs), but it’s all worth it if it prevents a drug possessor from sometimes getting away. No-knock raids are a breeding ground for all manner of confusion and mistakes. To wit, just last week in Cornelia, Georgia a no-knock raid resulted in a 2 year old suffering massive burns over his face and body when a “distraction device” (aka flash grenade) was tossed into his crib, inches from this face, by the invading SWAT team. Naturally this was a mistake; they never intended that to happen. Procedurally they did nothing wrong – everything was by the book. That fact alone should scare the hell out anyone. Who will be next? Maybe someone that matters to you.

Even if we were granted a wish that all recreational drugs were forever vanquished from this planet and the only price would be the life of one innocent, that price would be far too high. The irony is that those in charge of this wretched war are killing people who would never have used drugs in order to possibly save those who actively seek to use them. But what would you expect from the state? States have always sought to butcher civilians in order to persuade others to change their behavior. Sound familiar? But the ends justify the means, so that makes everything ok.