Monday, February 21, 2011

Almost Incomprehensible

I am in the process of preparing for a discussion on the Durbin amendment to the Dodd Frank Act, and the proposed Fed regulation it requires. I am not sure the government understands what problem they are trying to solve. The law falls under the category of consumer protection. But what it actually does is move a little money from the pockets of the banks to the pockets of the retailers. This is exactly what was done in Australia, also purported to be a benefit to consumers, and, of course, it had no impact on them at all. The Fed draft of the regulation has a 135 page meandering preamble full of distinctions that add nothing to the regulation. For example they make the distinction between four party transactions (which are actually five party) and three party transactions, (which are more likely just two party). But the distinction is meaningless in the context of the discussion. Someone must be paid on word-count.

Stupidity in government is nothing new. Back in 1492 Ferdinand and Isabella of Spain did somethings stupid, umm, now what was it? Oh yes, they ordered the expulsion or conversion of the Jews of Spain. In addition to the pain this cause for Spaniards of Jewish heritage, this also had an unfortunate impact on distant Sicily.

Sicily, owed allegiance to Spain and felt it had to go along. It did procrastinate a little. But in the end the Sicilians too, expelled their Jewish population. Almost immediately trade shrank to nothing.

Later, at the end of the seventeenth century some effort was made to get them to come back. The economy needed the trade. It took decades to convince anyone to return, but the returning Jews found unwelcoming arms. They weren’t allowed to stay long. It turned out the queen hadn’t borne a male heir, and the clerics convinced the royal couple that it wouldn’t happen so long as the Jews were around. So out they went again.

Superstition, intolerance, dogmatism, and ignorance are traits easily acquired and difficult to exorcise. Even today, Sicily is feeling the effects of this history.

The Spanish intolerance was a part of its eventual downfall. It was once the undisputed richest country in the world and declined to irrelevance. It spent rather than invested, acquired rather than manufactured, suppressed thought rather than welcomed it, and disparaged hard enterprise. People, both the industrious and the thoughtful, went elsewhere and took scientific investigation and technological innovation with them.

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