It is also hard for me to imagine that much in the way of reform will actually take place—why should one reform if money is readily available from one’s domestic banks? Because we have signed on to a tougher, tighter fiscal treaty? We did not even manage to respect the previous, easier, treaty. Why assume that it will be any different this time? Fool me once, shame on you; fool me twice…

…politicians can’t just do the “obvious best” thing. There is no such thing as a perfect rational maximizer in policymaking. Politicians are always limited by what their voters think is fair. The voters may be right, they may be wrong, but in the end (hopefully), they’re still the boss.

The Secretary of the Treasury of the United States comes to Europe to lecture Europeans on what to do about policy and financial-market disarray and about dealing with deficits, currencies, and economic issues. He brings nothing but words. He has no political power. His government, the Obama Administration, is stymied by a divided Congress. It cannot add funds to the IMF, even if it wanted to. Geithner traipses around Europe telling people whatever he chooses, making bland commentary about the need to correct imbalances; and then he returns home. He returns to a country that is running deficits as large as the worst deficits in Europe. He returns to a country politically divided and rancorous in its inability to solve a problem. He leaves an impression of American arrogance and failure.

We have entered a strange new phase in the Eurozone saga. Truly, Rome is burning while fiddlers are playing. Months of wrangling have produced no fix to bank insolvency, and the manifest internal contradictions of the welfare state model, wrought from decades of borrowing tomorrow’s wealth to pay for today’s consumption, have, like proverbial chickens, come home to roost. Facing the truth of the situation, that failures and defaults are not only an option but vastly preferred over more bail-outs and currency debauchery, is the first of those in the 12-step program to follow.

If what we really need is to solve the problem of Italian and Greek growth, then we’re hosed. Italy and Greece face some pretty large and intractable problems–one of which is the euro. And even if that weren’t true, the record of foreigners marching into a place and whipping its institutions into shape is … well, how’s that Afghanistan thing working for us?

Apart from their bank accounts, Gallup finds education to be the greatest difference between the wealthiest 1% of Americans and everyone else.

If social phenomena are too complex for any of us to understand, and if individuals consistently overestimate their knowledge of these phenomena, then prudence would dictate trying to find institutional arrangements that minimize the potential risks and costs that any individual can impose on society through his own ignorance. To me, this is an argument for limited government.

The practice of politics is built, essentially, on rhetoric rather than education. The process of acquiring and exercising political power involves only at the margins the truth of the persuasion it engages in. It values successful persuasion systematically over truth, and we see that effect carried out systematically over both electioneering practices and in legislation (where public choice explains the sorry disconnect between professed values and legal/political results). The disconnect is endemic, and corrosive to human social life. Decent people regulate their speech and conduct with each other to a considerable degree (not perfectly, of course) with the truth, or anyway what they take to be the truth. In general, if you tell me something, I ascribe to you the belief that that something is true. Not so in politics, where the incentives to acquire and exercise power over other people is the currency of the practice. It is, as Plato pointed out, just what dictators do, only in different form.

If the regulators do not want to shrink the financial sector, then they have to try to prop it up, in part by labeling securities as low risk when they are not. Which is how the financial sector got to be to big in the first place. The regulators labeled mortgage securities as low risk when they were not. Then they labeled sovereign debt low risk when it was not.