I'm thinking of the three major consumer purchases that
are probably at the base of the hierarchy of needs: Fuel, food, and
shelter. Its interesting how very different the media and public
perception is of price changes in these areas.
The reaction to fuel price increases is easy to predict - they are
always portrayed as bad. Rising prices hurt everyone, producers are
evil, and speculators who make bets on rising prices are even more evil.
The reaction to rising food prices is more mixed. That's because we
have come to the collective decision that producers of food are
sympathetic figures whereas producers of oil are unsympathetic. So
media laments about rising food prices are often tempered by good news
stories about rising farm profitability.
And then there is shelter. For this category of consumer expenditure,
everything is flipped on its head. Rising prices are good, and falling
prices are bad. One might argue that housing is different, because
consumers often take an equity position in shelter that they do not
take in food or fuel. But all this means is that home buyers are
speculating on the price of shelter, going long on bets that prices
will rise. They could easily just rent, and pay for their shelter
month-to-month like they pay for their food or fuel, but many consumers
bet on rising rents and shelter prices by buying shelter futures (ie
purchasing a home). In a real sense, home buyers are all speculators (using margin accounts at that!),
but this is one case where we encourage speculation, and even have tax
subsidies for it.
If the reader finds this a funny way to think of home ownership, here
is a thought experiment. Let's say at the age of 30 I wanted to take
an equity stake in my current and future fuel needs. I take out a loan
to buy enough Exxon stock such that the annual dividends will cover my fuel
purchases for the year. If fuel prices go up, the dividends likely go up
as well, so I am sheltered from the vicissitudes of worrying about my
monthly fuel bill, and all I have to do is pay off a regular and
predictable mortgage on my Exxon stock. In 30 years, when the note is
paid off, likely I have a big capital gain in my Exxon stock, which I
could cash in at retirement if I want to downsize to less driving and
fuel use. Or I can pass it on to my kids.
The only difference I can come up with, economically, between this
example and how we do housing is that in my example, consumer capital
is invested in productive enterprises rather than dead real estate.
Please join me in support for poor, beleaguered gas station owners, the
victims of unconscionable price gouging by ruthless consumers who are
taking advantage of market conditions to reduce their demand for
gasoline, driving down the price by nearly $2 per gallon over the last four months. Fortunately, governments are swinging into action. Georgia governor Sonny Perdue issued this statement:
“The financial crisis has disrupted the consumption of gasoline, which
will have an effect on prices. However, we expect the prices that
Georgian gasoline station owners receive at the pump to be in line with
changes in consumers’ incomes and the prices of substitutes and
complements. We will not tolerate consumers taking advantage of
Georgian business owners during a time of emergency.”
If it's almost December, it must be time for the Trans-Siberian Orchestra tour. My son describes them as the "rock electronic Christmas band," and that is as fair a label as any. Many tend to compare TSO to Mannheim Steamroller, the other band that has created a niche for themselves with modern takes on Christmas music, but TSO tends to skew more towards heavy rock than Mannheim Steamroller. I think TSO is similar in many ways to Emerson Lake and Palmer, both with their tendency to cover classical songs as well as their flirtations with pretentiousness in some of their productions. For those unfamiliar with TSO, probably their most famous work of late was "Wizards in Winter," parts of whose music video I think was included in a beer commercial last year.
My son and I got tickets to the concert because we had a couple of TSO albums (we tend to like the instrumentals and think less of the vocals). What we had not realized is that TSO has quite a cult following. Most of the folks around us in the audience had been to 3,4,5 or more of their shows. Many go every year, in a ritual similar to how other folks might go to the Nutcracker every year.
There is no doubt that TSO delivers value to its fans. We saw their second show of the day (!) and they played for a full three hours. Members of the band at different points went all through the audience, down aisles and up stairs while playing some of the final tunes -- far more intimate contact than you will get in most other bands. The key band members all were present after the show in the lobby for a meet and greet with their fans.
OK, so what about the show? Well, I was a little disappointed. To be fair, their leader had a knee injury which forced him to play sitting down, and this tended to reduce some of the band's energy. The music was generally good to very good. The keyboard solos and the high-energy songs at the end were terrific.
The problems were twofold. First, the opening half of the show was stitched together with a narration that was just painful. The poetry was Touched by an Angel meets Dr. Seuss. It was a Night Before Christmas crossed with LA noir. It just did not work for me, and I know it was weak because my 14-year-old son was laughing at it. We both thought we were watching Spinal Tap 2.
The other problem is one that TSO fans will call me out for, but the light show through all the songs was just too much. Don't get me wrong, I have never, ever seen anything to rival the floor show here - 6 trillion lights on the fastest-changing programming I have ever seen, zillions of lasers, flames, more flames, a ten-minute snow storm, band members descending from the sky, band members ascending to the sky, etc. etc. You can get an idea of about 1% of it with this video but any digital camera image of the show is worthless because the ccd can't possibly keep up. Seriously, this video grossly understates the full effect.
The problem was that my eyes could not keep up either. I have walked away from concerts thinking I had a perforated ear drum, but never before thinking I had a burned-out optic nerve. My son said he needed to wear eye-plugs. 90% of the effects would have been OK had it not been for the direct audience facing lights at about 6 trillion candle power they kept insisting on flashing in my face. Anyway, we both are quite experienced with loud, heavy metal concerts and we both walked away with a headache from this one.
Anyway, it was interesting and I am glad I went. And I may even go back next year, but I will be prepared - I am bringing my RayBans next time.
I have gotten a lot of email on my posts about allowing GM to die. Here are a few thoughts:
No matter what our mutual preferences, GM is not actually going to die. It will go in to chapter 11 and reorganize, and, as that law intends, will continue to operate through that reorganization. While Lehman and Enron liquidated, they were really special cases having more to do with financial than operating assets. In the last 20 years, Texaco, PG&E, Worldcom, Delta, and UAL have all passed through chapter 11, and all operated their businesses through bankruptcy. In fact, all of Enron's pipelines and other operating assets are running A-OK right now, just under new ownership. Do you remember all those news stories about massive natural gas shortages because Enron's pipelines all stopped operating when it declared bankruptcy? Yeah, neither did I.
You are welcome to write me about how I suck because your job at GM (or retirement, or health care, or all of the above) is important to you if that helps you psychologically to manage a terrible and stressful time. But, to cause me to back off my opinion about GM and the bailout, you need to tell me why your job is more important than someone else's job. Because, unlike private enterprise, the government does not create wealth, but can only move it around (with a leaky bucket, at that). GM has wasted hundreds of billions of dollars of investment, so having the government invest money to save your job will likely cost >1 job somewhere else. Just because we don't, and may never know, who that specific person is does not make this an ethical choice.
I too, all things being equal, value having a healthy auto industry in the US (which in fact we still have -- it just happens the headquarters of many of the companies that run the plants are over in Japan). However, if you wish to argue that the bailout is necessary to save a US auto industry, you in fact need to argue that the current set of managers/contracts/systems/performance measures/organization/etc. of GM are better able to manage the employees and assets of GM than a different owner with different managers and approaches. Because having GM fail does not make the assets or trained people disappear, it merely makes it more likely they will be managed by a different entity. So all a bailout does is save the GM entity that manages these assets and people.
Technocrats love to pick winners. Leftish technocrats, in particular, love to believe that the complex operations of the entire economy choose technologies that are inferior to those the technocrat would have imposed on the economy had she been in charge. But here is what happens when they try, in a cautionary tail that is particularly relevant given the number of specific technologies Barrack Obama has said he would promote (e.g. a million plug-in hybrids by 2015) (via Tom Nelson)
The federal government has invested billions of dollars over the past
16 years, building a fleet of 112,000 alternative-fuel vehicles to
serve as a model for a national movement away from fossil fuels.
But the costly effort to put more workers into vehicles powered by
ethanol and other fuel alternatives has been fraught with problems,
many of them caused by buying vehicles before fuel stations were in
place to support them, a Washington Post analysis of federal records shows.
"I call it the 'Field of Dreams' plan. If you buy them, they will come," said Wayne Corey, vehicle operations manager with the U.S. Postal Service. "It hasn't happened."
Under a mandate from Congress, federal agencies have gradually
increased their fleets of alternative-fuel vehicles, a majority of them
"flex-fuel," capable of running on either gasoline or ethanol-based E85
fuel. But many of the vehicles were sent to locations hundreds of miles
from any alternative fueling sites, the analysis shows.
As a result, more than 92 percent of the fuel used in the
government's alternative-fuel fleet continues to be standard gasoline.
A 2005 law -- meant to align the vehicles with alternative-fuel
stations -- now requires agencies to seek waivers when a vehicle is
more than five miles or 15 minutes from an ethanol pump.
The latest generations of alternative vehicles have compounded the
problem. Often, the vehicles come only with larger engines than the
ones they replaced in the fleet. Consequently, the federal program --
known as EPAct -- has sometimes increased gasoline consumption and
emission rates, the opposite of what was intended....
The Postal Service illustrates the problem. It estimates that its 37,000
newer alternative-fuel delivery vans, which can run on high-grade
ethanol, consumed 1.5 million additional gallons of gasoline last
fiscal year because of the larger engines.
The article does not even mention that E85 ethanol made mostly from corn does absolutely nothing to reduce total CO2 production (it just shifts it around, due to the amount of energy required to grow corn and convert it to ethanol) while raising food prices.
California did something like this years ago, putting the force of subsidies and state law behind zero-emission vehicles. This wasted a lot of money on electric and hydrogen vehicles that were not yet technologically mature enough to prosper, while missing out on low (but now zero) emissions approaches that could have had much more impact because they were technologically ready (e.g. CNG for fleet vehicles).
Y'all know where I stand on the dangers of CO2. But if we really have to do "something", then the only efficient way to do it is with a carbon tax. But politicians hate this idea, because they don't want to be associated with a tax. But the fact is, that every other action they are proposing is a tax of some sort too, but just hidden and likely less efficient. There is no magic free lunch that Barrack Obama and his folks can think of and impose, no matter how smart they are. In fact, to some extent, smarts are a hindrance, because it tempts people into the hubris of thinking that they are smart enough to pick winners.
Postscript: If you are reading this and thinking "well, if I were in charge, I would not be that stupid and I could make it work" then you don't get it. 1) No one can make it work, for the same reasons the Soviets could not plan their economy from the top -- its just too complex. At best, policy-makers are choosing between a handful of alternatives to back. In contrast, every individual has a slate of opportunities to reduce his/her CO2 production at the least cost, and when you add up all these individual portfolios, that means there are hundreds of millions of individual opportunities that must get prioritized. That is what pricing signals do, but government bureaucrats cannot. 2) The morons and knaves ALWAYS take over. Even if you are brilliant and well-motivated, your successor likely will not be. For years, folks have generally been comfortable with the outsized role of the Federal Reserve because they thought Greenspan (and Volker before him) ran it brilliantly. Well, there are arguments to be made about this, but even if we accept this judgment, what happens when the next guy is in charge and is not brilliant?
Postscript #2: If you want a specific example, let's take plug-in hybrids. How can anyone be against these? I personally like the concept of cars being driven by electric traction motors (I like the performance profile of them) and would love a good plug-in hybrid. But what happens when we find out that many of these cars were bought in coal-burning areas where electricity is particularly cheap, and discover coal-fired electricity pollutes more than an internal combustion engine? Or when we use a cap and trade system to cut back on coal fired plants, and find that the huge number of plug-in hybrids are exacerbating brown-outs and electricity shortages? Or we find that the billions of dollars of capital diverted by the government to expanding plug-in hybrids could have easily yielded far more CO2 reduciton had it been applied in another area? That is why a carbon tax is the only way to go (if we are going to do anything) because it allows individuals to make capital expenditure decisions to reduce CO2 based on their vastly higher knowlege of the opportunities and the pricing signal of the tax.
Are We All Incapable of Doing Anything For Ourselves Any More?
Apparently for some reason having to do with screw-ups and protests in contracting, the State of Arizona is not going to publish a Visitor's Guide.
I run a decent-sized business in Arizona, and have never paid much attention to these guides. Every state and city and town and county and school district seems to put out some kind of visitors guide, and I could go bankrupt paying for ads in all the ones who hit me with marketing calls. Customers have a jillion ways to find out about our business, either from Internet searches or private guidebooks and directories. Heck, when I travel, I usually hit places like TripAdvisor and then run down to Borders to pick up whatever Fodor's guide covers my destination. I have never even thought about calling the government and asking them to send me a visitors guide, but perhaps some of y'all have.
Anyway, what do I know? I am just a little small business trying to run a few campgrounds. Just because I can handle my own marketing needs doesn't mean that billion dollar multinational hotel chains are capable of doing so without the government:
Greg Hanss, director of sales and marketing for the new
InterContinental Montelucia Resort and Spa in Paradise Valley, couldn't
believe it. "For me, the fact that we don't have a state visitors guide
in what is the most challenging economic time of our tourism lives is
Pathetic. It is interesting to see that, for every 20-something anxiously awaiting the government's takeover of healthcare because they are really bummed about all the work it takes to find the right health care plan, there is a corporation waiting for the US govenrment to do its work for them.
My company has over 20 URL's for various recreation facilities we manage. I do all the design and maintenance of these myself, generally using a shared core design with some color and content changes. Since this is just a side job for me, I often put it off and unfortunately things get dated fast.
For a while now I have been wanting to experiment with a content management system to ease the maintenance of multiple web sites. So over the past couple of weeks, I have played around with various CMS's. I was intrigued for a while by ExpressionEngine, but the fact it was not public domain (ie it charges per site licenses that would be prohibitive for me) finally killed the deal. I also looked at Joomla and Drupal.
Eventually, I settled on what many will consider an odd choice: Wordpress. Yeah, I know, its a blogging engine. I know quite well, because I am in the process of converting both my blogs from Typepad to Wordpress. I chose Wordpress for a few reasons:
I understand the blogging paradigm, and so I have a good sense for how the content will be handled, and the limitations.
I am, having messed around with my blogs, comfortable with the Wordpress templating system. Though certainly more limited than ExpressionEngine, it does what I need to do. I am moderately facile in CSS and PHP, the two real requirements to make a good template.
Most of my sites are simple. The only two API's I really need to plug in to are Google Maps and Flickr, and I have tested and am comfortable with the available Wordpress plugins for these.
I want to begin, carefully, to let some of my employees be able to add and edit some content (e.g. changing store hours). I think the wordpress interface is pretty accessible to some folks who may be new to online content and gives me the amount of control I need as an editor. For a noob content contributor, Wordpress is far more accessible than other CMS's.
With a static site, I have an advantage over a blog in that I can turn on full site caching to speed up the site (via WP-super-cache). I also added an SEO plugin to make my permalinks and pages more SEO friendly, something I don't care that much about on my blog.
I think that the first site came out pretty well, and I don't think its obvious that it is built on a blogging engine (site here, for our Arizona snow play area). The biggest internal debate I had was whether to go with fixed or variable widths. I actually went the opposite way of most modern programmers, moving from variable to fixed rather than vice versa. Most of my customers, as shown by my server logs, have slow and dated computers and monitors, so I think fixed width makes sense.
Yeah, I know that no one will ever consider me a l33t h4x0r for using Wordpress, or even for using a CMS at all, but I was absolutely thrilled how fast the second site is going up now that I have built all the templates and functions I need. More reports to come (and hopefully this site will soon be on Wordpress, but I am not holding my breath. Still having trouble with brinking over the permalinks so they all work right).
Wikipedia is virtually useless as a source for anything controversial, such as global warming. However, it is absolutely fabulous as a dictionary of pop culture. Where else can you find 5500 words on h4x0r l33t speech?
My wife and I went to see the opening of Dale Chihuly's new exhibit at the Desert Botanical Garden in Phoenix. Chihuly is, if not the leading, certainly the most famous modern glass artist (he is perhaps best known for the lobby at the Bellagio, though this is far from my favorite work). He has done garden exhibits before, but the shapes and colors were perfect for the desert landscape.
I don't have pictures yet from Arizona (we saw the exhibit at night), but here are some examples of his work:
"Wall Street bomb." Aftermath of the explosion that killed dozens of
people in New York's financial district on September 16, 1920, when a
horse wagon loaded with dynamite and iron sash weights blew up in front
of the J.P. Morgan bank at 23 Wall Street. The attack, which was
attributed to Italian anarchists, was never solved. 5x7 glass negative,
George Grantham Bain Collection.
This is from Shorpy.com, a blog that has daily posts with really nice photography from the 19th and early 20th centuries. The photo above is actually just a thumbnail - go to the original post and click on the full size image. All of their photos are posted in huge, high-resolution scans.
Kevin Drum is off his meds, and is generating a lot of good fodder for me today. I made a couple of small edits in the name of intellectual honesty:
The news keeps getting better and better. The House Democratic caucus just voted 137-122
to replace John Dingell (D–General Motors) as chair of the Energy and
Commerce Committee. The new chair will be Henry Waxman, who cares
deeply about [0.01% changes in atmospheric composition] and will be a huge ally in the fight to get
serious[ly high fuel and electricity prices] next year. This is change we can
I am willing to put my disagreement with a lot of the world on whether on not global warming is dangerous into the "reasonable people can disagree" category. But it just strikes me as outright insanity to try to push forward and pretend that anything that makes a meaningful dent in CO2, and so which has to make a meaningful dent in fuel and electricity consumption, will require either massive shortages or much higher prices. Even a third-way plan that says we will evade this trade-off with new technologies (whatever the hell those are) faces the massive dead-weight-loss of having to obsolete perfectly good power generation or transportation infrastructure and replace it wholesale with trillions of dollars of new stuff. If we found out tomorrow that exposed brick caused global warming, and all of our houses had to be knocked down and rebuilt, would anyone really think we were all richer for that?
The amazing thing to me is that the left has all gotten on the "this will be a net positive for the economy, 5 million jobs, blah blah" message. This is nuts. This is the broken windows fallacy on Barry Bonds' entire steroid inventory. Folks often respond to me, "but we will gain because we will reduce the cost of global warming." But reasonable, non-loony folks don't really honestly think we are incurring any costs right now from global warming. There is an argument that they might exist 50 years from now and that they might be high enough to get started on now, but for the next 10 years or more, there is just cost, no benefit.
Kevin Drum is glad the Democrats are ready to body-slam the health insurance companies, and is rooting them on:
It means the health insurance industry is scared that we might actually
do something in 2009 and they want to be seen as something other than
completely obstructionist. That means only one thing: they've shown
fear, and now it's time to bore in for the kill and gut them like
trouts. Let's get to it.
Because everyone knows that most of the costs of healthcare reform can be paid for by ripping the excess profits out of the health insurance business like a liver from a fish. Just to remind everyone, these are net profit margins reported by Google Finance for 3Q2008 of the largest health care providers and insurers:
Yeah, I know it is not a done deal, but the rumors are that our governor Janet Napolitano will be Obama's choice for Homeland Security.
On its face, this both makes a ton of sense, and simultaneously is odd. It makes sense because Napolitano is one of those rising Democratic stars who get special love in part for not being white males. It is odd because pulling her up to Washington would, by law, pass the governorship for the next two years to the Republicans (the Secretary of State completes the term, and she is a Republican). It also strikes me as odd because I think Homeland Security would be an absolutely awful platform for launching a run for higher office. That job has no upside - it is all downside.
But the final reason in the end that this may make sense can be seen in this table below from Paul Kedrosky on projected state budget deficits as a percentage of state revenues:
Arizona is almost in as bad of shape as California, and California is a disaster area. So the financial chickens are about to come to roost here in Arizona for the drunken spending spree the state has been on, presided over by Napolitano. To preserve her from going to the Gray Davis Memorial Retirement Home for Failed Governors, Obama is likely to beam her up to Washington.
My kids' middle school has a tradition among 5th and 6th graders that once a year each student creates a science model out of food. The kids love it, because they get to eat them after each presentation. But all we parents know how stressful science fair projects can be. Trying to create a meaningful science display from only edible materials is really a pain. We pretty much nuked the kitchen this Sunday and spent all day with this. But it's the last one! And it came out pretty well -- this is my daughter's "physics of the circus."
PS - TGFF - Thank God For Fondant, a material used in making fancy cakes that you can think of as edible clay. The materials here are graham cracker, Hershey bar, and sugar wafer stands, gum drop and lemon ball audience, frosted vanilla cake for the platforms, pretzels for the posts, licorice for the ropes, donuts for the cannon and the hoop, and fondant for the animals and people. And two full pounds of royal icing to glue everything together.
PSS - One of the things you discover about food is that despite the incredible amount of quality control on its composition and taste, there is not much quality control on its construction properties. Pretzel rods that always seemed straight enough turn out to be, when you come to actually build something from them, more warped than picked-over Home Depot lumber. Ditto graham crackers. Mini donut sizes vary tremendously. Licorice tensile strength that always seemed fine turns out to be woefully inadequate. And don't even get me started on gumdrop repeatability.
Here is the hard truth for those of us who believe that, since CO2 has had little effect on global temperatures to date, expensive abatement plans will similarly have little if any measurable effect: They are coming anyway. It is actually probable that the Republicans could combine with heavy industrial states like Michigan in the Senate to block dramatic new legislation. But President Obama already has the legal and legislative authority to enact sweeping and expensive CO2 mandates without going back to Congress.
So with that depressing thought, here is a bit of good news: The media may well come over to the skeptics' side soon, at least partially. Here is why: The media is extraordinarily loath to really challenge policy proposals in advance that are popular with the center-left. They are even less likely to challenge said proposals when they touch on a story of doom. There is nothing the media enjoys more than piling on a good public scare.
But history has shown that the media will turn on these proposals once they are implemented, and sometimes quite soon after. Remember ethanol subsidies? The press were behind this crap all the way, until Congress passed enhanced subsidies a while back, and then the press suddenly starting "discovering" the effect on rising food prices, the environmental problems with land use, the ugliness of some of the subsidy politics, the fact that few scientists think corn ethanol will actually reduce CO2, etc. Yeah, I know, all of this was entirely predictable (and predicted by many of us) in advance. But this just seems to be how the media works.
Because the only thing the media loves more than fear-mongering a crisis that is 20-years away is fear-mongering one that is visibly upon us. The press freaked at the California energy crisis a few years ago, peppering the public with stories of rising prices and rolling blackouts. And what has happened since then? Electricity demand has risen, no one can build electrical capacity, wind and solar are a joke, and Obama is only going to make it harder and more expensive to produce enough power (I think Obama's exact words were "bankrupt the coal industry.")
The Town of South Attleboro, MA sent out wildly threatening past due letters for folks with balances as low as 1-cent (thereby investing at least 42 cents to get one back). In response to charges that this was stupid, City Collector Debora Marcoccio responded:
A computer automatically printed the letters for any account with a
balance remaining, and they were not reviewed by staff before being
sent out, Marcoccio said.
"It would be fiscally irresponsible for me to have staff weed
through the bills and pull out any below a certain amount," Marcoccio
said. " And what would that amount be?"
What, are we living in the 19th century with clerks in a musty room preparing bills by hand? This fix probably requires one whole entire line of program code in the billing system to fix. I could probably teach myself to code whatever language the payroll system is written in (my guess is COBOL, which, god help me, I already know) in less time than this woman has spent fielding complaints and media inquiries. Compare this to what TJIC has to do just to get the mail out.
And don't you love people who don't even have enough spine to make a simple decision about the cutoff for minimum bill size. I have found this is one of those things the government is really, really bad at -- making decisions under uncertainty (which covers about all decisions, except routine ones embodied in SOP). Government has no incentives, in general, for productivity, or production, or customer satisfaction. The only time government employees get feedback at all is when they get negative feedback from having someone yell at them for making a decision that some higher-up didn't like.. So if a decision is not justifiable either by past precedent/SOP or explicitly by the rules, it is not made.
By the way, I had a personal programming milestone last night. I finally built a website without using a WYSIWIG editor that formatted the way I wanted it to all in CSS without a single table. I predict that now that I have finally gotten a decent handle on CSS, which mainly consists of learning all the workarounds for when it doesn't work as you would expect, that someone is about to introduce a whole new system for formatting web pages.
I feel I need to clarify one thing. I am a huge fan of the old Bond
movies. Goldfinger, Thunderball, Diamonds are Forever, Goldeneye --
all great. Despite my comments above, I even like most of the Roger
Moore films, though you have to take a different approach to them. But
the formula was tired. The Survivor formula was hugely popular at
first, but in season 9 or 10 or whatever, it's just done. You either
are repeating the same tired cliches, because you feel locked into a
formula by your fans who will get pissed (as they did with Casino
Royale) when you violate any minute detail the Formula, or you fall into the trap of
trying to top yourself with goofier and goofier plots. I actually
thought the series was dead around about View to a Kill, but Pierce
Brosnan really brought new life to the series for a while.
Oh, and I wanted to really make fun of the plot in the new movie, because it really is a great WTF moment, but I didn't want to include a spoiler, since there is some mis-direction in the movie. However, the spoilers have already come out in the comments, so if you are interested, I reveal the incredible world-shaking evil plot around comment #6 here.
I saw a trailer for the upcoming Star Trek movie, which could essentially be called "young Spock and Kirk." It could be good. Talk about a franchise, though, that has been milked to death. A new take would be refreshing. We'll see. Never forget Battlestar Galactica - from the ultimate in goofiness came one of the better science fiction series to hit television.
The note above reminds me of an idea I have for a movie that I think would be a no-brainer. The Star Wars clone wars stuff has pretty much lost me (actually the dialog in episodes 1-3 pretty much lost me). But I always thought a young Han and Chewie movie - how they met, various pirate adventures, young Lando, etc. would be almost a layup to make succesful. I am increasingly convinced that that the Star Wars movies were good almost in direct proportion to how much Han Solo was on the screen (well, maybe pre-dryfreeze Han Solo -- after he was unfrozen, he was a little goody-two-shoes for my taste.)
My COO reports that his dog Ranger was slashed pretty badly in brawl with a javelina near the family home. The dog is doing fine, and should be proud he defended his territory against the evil interloper.
So why is the poor dog being humiliated? OK, he has to wear one of those funnel things that keep the dog from picking at his stitches. These are kind of embarrassing, but after being nearly emasculated in the field of battle, does he really need this indignity, courtesy of my friend's daughter?
This article from Climate Resistance about the sustainability movement is terrific. I want to excerpt a relatively long chunk of it:
It is our belief that Oxfam’s increasingly shallow
campaigns reflect the organisation’s difficulty in understanding
development and poverty, and the relationship between them. In other
words, it seems to have lost its purpose. This is a reflection of a
wider political phenomenon, of which the predominance of
environmentalism is a symptom. We seem to have forgotten why we wanted
development in the first place. It is as if the lifestyles depicted in
Cecil’s painting were to be aspired to, were there just a little more
rain. Development is a bad thing. It stops rain.
If we were to add a city skyline into the
background of Cecil’s painting it might ask a very different question
of its audience. Why are people living like that, with such abundance
in such proximity? Of course, in reality, many miles separate the two
women from any such city, but the question still stands; there is
abundance in the world, and there is the potential for plenty more. Yet
Oxfam have absorbed the idea from the environmental movement that there
isn’t abundance. This changes the relationship between development and
poverty from one in which development creates abundance into
one in which development creates poverty; it deprives people of
subsistence. But really, the city (not) behind the two women could
organise the infrastructure necessary to irrigate the parched
landscape, the delivery of fertiliser, and a tractor. The field could
be in full bloom, in spite of the weather. The two women could be wealthy.
Oh no, says Oxfam. That’s not sustainable....
The myth of sustainability is that it is sustainable. The truth is
that drought and famine have afflicted the rural poor throughout
history – before climate change was ever used to explain the existence
of poverty. Limiting development to what ‘nature’ provides therefore
makes people vulnerable to her whims. Drought is ‘natural’. Famine is
‘natural’. Disease is ‘natural’. They are all mechanisms which, in the
ecologist’s lexicon are nature’s own way of ensuring ‘sustainability’.
They are checks and balances on the dominance of one species. To absorb
what Hitler called ‘the iron logic of nature’ is to submit to
injustice, if famine, drought and disease characterise it. We can end
poverty, but not by restricting development. Yet that seems to be
Oxfam’s intention. That is why we criticise it.
I do get occasionally amused at being a poster child for Science Fiction’s Digital Future
when I live in a rural town of 1,800 people with agricultural fields
directly to my east, south and west, and Amish buggies clopping down
the road on a daily basis. It’s, like, three cheers for cognitive
I responded in the comments:
I would have had exactly the opposite reaction, that your situation is entirely representative. For 500 years, from the Italian Renaissance through the 20th century, intellectual thought moved forward mainly hand in hand with urbanization. I am not really an expert in describing the ins and outs of this, but there is clearly a density and network effect to intellectual advancement, and given past communication approaches, this required physical proximity. The promise of modern IT technology is that it may allow us to achieve this density without physical proximity.
GM, as reported by Reason's Hit and Run, has actually already had something of a breakthrough in labor costs, at least for new employees:
The current veteran UAW member at GM today has an
average base wage of $28.12 an hour, but the cost of benefits,
including pension and future retiree health care costs, nearly triples
the cost to GM to $78.21, according to the Center for Automotive
By comparison, new hires will be paid between $14 and
$16.23 an hour. And even as they start to accumulate raises tied to
seniority, the far less lucrative benefit package will limit GM's cost
for those employees to $25.65 an hour.
So this puts GM in the position of shoving experienced employees out the door as fast as they can, to make way for lower cost employees hired under this new deal. Apparently GM also has more flexibility to manage costs in a downturn. Good news, assuming they can accelerate a 20 year demographic transition to about 6 months, avoid giving away too much to these newer workers when times are good again, and arrest market share declines with better cars. Oh, and I presume the UAW has not abandoned seniority, which means that in recession-driven layoffs over the next year, GM must being by laying off these much cheaper younger workers. Layoffs will actually mix their labor cost upwards.
I still don't want to bail them out. Like numerous other industries, from steel to airlines, there is no reason GM shouldn't have to pass through Chapter 11 on the road to recovery. However, the argument that GM is turning a corner if we just give them a little help seems to be persuasive with many folks around me, so much so I am tempted to buy some GM stock as a way to go long on my prediction of the creeping corporate state.
Cash-strapped General Motors Corp. said Monday it will delay reimbursing its dealers for rebates and other sales incentives, an indication that the company is starting to have cash-flow problems....
Erich Merkle, lead auto analyst at the consulting firm Crowe Horwath LLP, said GM wouldn't delay payments if it had enough cash.
"I don't even think they've got 60 days," Merkle said. "Their cash
position is probably getting pretty weak right now, and it's cutting
into those minimum reserves that they need on hand."
In the third quarter of this year, GM's operations burned through $7.5 billion in cash, offset somewhat by asset sales and financing activities. But this is really a pre-recession burn rate. What will the burn rate be over the next 6 months? There is an argument to be made that $25 billion is not going to last even a year, particularly given the dynamic that layoffs will hit mostly the lower-cost workers, and a Democratic Congress and Administration that is handing over the money may well restrict GM's freedom of movement on layoffs anyway. I can see the Obama administration now -- don't lay them off, lets put them all in a factory making green energy, uh, stuff.
The Seattle Times has done a ton of work on earmarks, and has a report here. Nothing here will be much of a surprise for earmark critics. This was probably my favorite bit:
Last year, Congress promised to shed light on the secretive process.
But the lists of earmarks are still buried in obscure documents that
are difficult to find and search. Until Congress put them online a
couple of weeks ago, the House disclosure letters, linking lawmakers to
companies, were thick volumes of paper kept in a cabinet in the offices
of the House Appropriations Committee.
When a reporter for the Congressional Quarterly pointed out how
difficult it remains to pull all the information together, Rep. John
Murtha, D-Pa., chairman of the committee that drafts the defense bill,
had a quick answer: "Tough shit."
Murtha, for those who don't know, consistently leads the earmarking numbers, and came in #1 among Congressmen in reaping campaign donations from earmark recipients, bringing in over $1.6 million. They have a database here where you can look up your Congressman (mine, John Shadegg, was one of the few with zero). My sense is that this database is only from the military appropriation and that there are many more earmarks hidden out there in other bills, but it is a good start. (hat tip Hit and Run)
The new, but not surprising, information for me was how Congress easily sidesteps the new disclosure rules.
After months of investigating the $459 billion 2008 defense bill, The Times found:
• The hidden $3.5 billion included 155 earmarks, among them the most
costly in the bill. Congress disclosed 2,043 earmarks worth $5 billion.
• The House broke the new rules at least 110 times by failing to
disclose who was getting earmarks, making it difficult for the public
to judge whether the money is being spent wisely.
• In at least 175 cases, senators did not list themselves in Senate
records as earmark sponsors, appearing more fiscally responsible. But
they told a different story to constituents back home in news releases,
claiming credit for the earmarks and any new jobs.
The Times includes several irritating but entertaining stories of rent-seeking. Take Cyberlux, for example. What do you do when your company has sunk $50 million into a new product, has a $18 million a year burn rate, and only has $300,000 is revenues for the first six months of the year? Why, you call your Congressman and generate revenues via earmarks, with a quick thank you in the form of company-sponsored fundraising for said representative.
And this certainly is a feel-good story for those rooting for the government to re-engineer the American auto industry:
Latrobe Specialty Steel of Latrobe, 40 miles east of Pittsburgh, makes specialty steel for aircraft parts.
In 2006, its parent company, Timken, spent $2.9 million lobbying
Congress on various issues and persuaded lawmakers to ban the Defense
Department from buying any products using foreign-made specialty steel.
As the sole U.S. producer of certain kinds of specialty steel, Latrobe
saw its orders climb. Timken then sold Latrobe to a group of investors
in a $250 million deal.
But the buy-American restrictions for specialty steel caused serious
problems for the Air Force, creating a 17-month lag in getting spare
parts for aircraft used in the wars in Iraq and Afghanistan.
In May 2007, Latrobe said it needed to expand but complained of high
electric bills and publicly threatened to build a new plant in Virginia
or West Virginia instead. Pennsylvania offered grants and tax credits
to the company worth $1.2 million.
In Congress, lawmakers were quietly lining up a much sweeter package.
In the defense bill passed in December, someone had inserted
language that ultimately directed $18.4 million for "domestic expansion
of essential vacuum induction melting furnace capacity and vacuum arc
remelting furnace capacity."
"Latrobe Specialty Steel is the only domestic producer of that steel," Army Lt. Gen. William Mortensen said at a hearing.
A month after the bill passed, Latrobe began a $62 million expansion in its home state.
No one in Congress has admitted sponsoring the Latrobe earmark.
One congressman's fingerprints, however, weren't so easy to conceal.
Latrobe sits in the congressional district of Rep. John Murtha, a
Democrat who chairs the subcommittee that drafts the defense bill and
wields the most power over defense earmarks.
Latrobe's officials have given $5,000 to Murtha's re-election fund in the past two years.
Also, Murtha had talked about giving taxpayer dollars to Latrobe.
"We're trying to get together to see how we can work out an increased
capacity for that particular company," Murtha said at a subcommittee
hearing in April 2007. "I've talked to that producer. And what I'd like
to see is them put some money in, us put some money in, and reduce the
time it takes to get those spare parts out."...
The company would not comment on any discussions it had with Murtha.
A spokeswoman defended getting the grant, saying it had been
competitively bid. Even so, she acknowledged that Latrobe is the sole
U.S. producer of certain specialty steels, a requirement for getting
U.S. states have not lived up to their commitment to devote a major
portion of their huge legal settlement with the tobacco industry a
decade ago on anti-smoking efforts, health advocacy groups said on
In the 10 years since the landmark deal, the states have received
$79.2 billion of the settlement and another $124.3 billion from tobacco
taxes, but have spent only about 3 percent of it — $6.5 billion — on tobacco prevention and cessation programs, the groups said in a report.
Gee, I really thought the settlement was about health care and tobacco education, and now I find out it was just a crass money grab? Who could have ever predicted that?
Those who have read my novel will recognize the sarcasm.
I have no problem if women want to spend four years at college studying (at their own expense) the role of indigenous women in the postmodernist Marxist movement of 1960's Paraguay, or whatever. However, I do have a problem when these same folks later complain that their income is below average or they are under-represented in the board room. Just peruse the top and bottom of this list at Carpe Diem.
College degrees most dominated by women include library science, consumer science, social science, education, language, psychology, and gender studies. Top college degrees most dominated by men include construction trades, engineering tech, transportation, military technologies, engineering and computer science.
Sorry, but I cannot imagine any possible restructuring of society and the economy where the first list is more valuable and has higher income potential than the second list.
David Yermack has an awesome essay in the WSJ this weekend, encouraging Congress to just say no to spending $25-$50 billion bailing out Ford and GM. Why? Well, beyond the obvious moral hazard, these companies are value destruction machines of epic proportions.
Over the past decade, the capital destruction by GM has been
breathtaking, on a greater scale than documented by Mr. Jensen for the
1980s. GM has invested $310 billion in its business between 1998 and
2007. The total depreciation of GM's physical plant during this period
was $128 billion, meaning that a net $182 billion of society's capital
has been pumped into GM over the past decade -- a waste of about $1.5
billion per month of national savings. The story at Ford has not been
as adverse but is still disheartening, as Ford has invested $155
billion and consumed $8 billion net of depreciation since 1998.
As a society, we have very little to show for this $465 billion. At
the end of 1998, GM's market capitalization was $46 billion and Ford's
was $71 billion. Today both firms have negligible value, with share
prices in the low single digits. Both are facing imminent bankruptcy
and delisting from the major stock exchanges. Along with management,
the companies' unions and even their regulators in Washington may have
their own culpability, a topic that merits its own separate discussion.
Yet one can only imagine how the $465 billion could have been used
better -- for instance, GM and Ford could have closed their own
facilities and acquired all of the shares of Honda, Toyota, Nissan and
The AntiPlanner has an update on the New London, CT development that spawned the notorious Kelo case. In short, they tore Ms. Kelo's house down against her will, and then the whole development deal fell through. The city now has a nice vacant lot.
The homes of Susette Kelo and her neighbors have all been torn down
or removed. But, except for the remodeling of one government building
into another government building, virtually no new development had taken place in the Fort Trumbull district by May, 2008.
Having spent at least $78 million on the Fort Trumbull project, the
city had awarded development rights to a company named Corcoran
Jennison, which planned to build a hotel, an office complex, and more
than 100 upscale housing units. The developer had until November, 2007,
to obtain financing.
First, I want to preface that I absolutely loved Casino Royale. I had expected not to like it, being skeptical of Daniel Craig and the apparently trendy substitution of Texas Hold'em for Baccarat. But the movie was fabulous, easily the best Bond ever, and a long-overdue retooling of the franchise. In comparison, the campy Roger Moore 70's Bond movies are almost embarassing.
All that said, I was disapointed in Quantum of Solace. The movie was entertaining and worth the price of admission, but two aspects really hurt the movie for me:
The directors have adopted the currently popular edgy filming style of action sequences which involve lightning quick cuts and jerky camera pans (used in the Bourne movies, for example). The style really increases the confusion of the moment, and has its place in creating tension and giving a first person feel to the action, but it gets tiring and confusing after a time. Compare the opening chase sequences in this movie to the absolutely fabulous chase scene through the construction site near the beginning of Casino Royale. I thought the Casino Royale sequence was much a better, but I must admit I am a big fan of long tracking shots over quick cuts, so I guess your mileage may very. There was one shot I thought really cool in the new movie. Bond and mystery villain #3 or 4 fall through a glass ceiling, and you fall with them POV-style.
The movie seems to be a return to the WTF-style plot of a lot of modern action movies, especially sequels, that put one-upping the action sequences of the previous movie over having a coherant plot. I don't mind twists and turns, but in the end, all the motivations have to make sense. I mean, how many mystery guys can Bond chase, kill, and then say, well, I guess we'll never figure out who that guy was. The early parts were like the Seinfeld version of action movies -- they are not about anything, they are just chase scenes. And, I still don't understand why the bad guys in QoS are doing what they are doing. Its another one of those "spend a billion dollars in a vast conspiracy to make $100 million" Bond villain plans. In contrast, Casino Royale was anchored to what I think was the best Ian Fleming book, and it stuck close to the book. Even when it deviated, for example with the shift from bacarrat to Texas Hold'em, it actually improved the plot, as it shifted to a game that at least involves some skill.
Update: I feel I need to clarify one thing. I am a huge fan of the old Bond movies. Goldfinger, Thunderball, Diamonds are Forever, Goldeneye -- all great. Despite my comments above, I even like most of the Roger Moore films, though you have to take a different approach to them. But the formula was tired. The Survivor formula was hugely popular at first, but in season 9 or 10 or whatever, it's just done. You either are repeating the same tired cliches, because you feel locked into a formula by your fans who will get pissed (as they did with Casino Royale) when you violate the formula, or you fall into the trap of trying to top yourself with goofier and goofier plots. I actually thought the series was dead around about View to a Kill, but Pierce Brosnan really brought new life to the series for a while.
Darin Morely sent me this. Woe be it to the upstart competitor with a new business model who challenges an incumbent with political connections. This goes double when the incumbent is the government itself:
One of the great things about the web, obviously, is that it allows for
much more efficient communication that opens up new and useful
offerings. For example: the web offers the ability to find other people
traveling to the same general place you're heading and to set up a
convenient carpool. It's good for the environment. It's good for
traffic. It just makes a lot of sense. Unless, of course, you're a bus
company and you're so afraid that people will use such a system rather
than paying to take the bus. That's what happened up in Ontario, as
earlier this year we wrote about a bus company that was trying to shut down PickupPal, an online carpooling service, for being an unregulated transportation company. TechCrunch points us to the news that the Ontario transportation board has sided with the bus company and fined PickupPal.
It's also established a bunch of draconian rules that any user in
Ontario must follow if it uses the service -- including no crossing of
municipal boundaries -- meaning the service is only good within any
particular city's limits.
All of us in the states need to be prepared for more of this corporate economy thing in the US. I saw last night on Sunday Night Football that NBC is really going hard on some green initiative, including having a green peacock. GE (parent company of NBC) is a smart company and sees the writing on the wall. It understands the new administration and Congress seem hell-bent on moving us to a more European model. In that model, there are 10-20 corporations per country that insinuate themselves into government and get the opportunity to help run the country to their own benefit. GE wants to be one of these chosen few. The push is going on not just at NBC, but in light bulbs (betting on Congressional action to provide regulatory support for a new type of bulb they have invented) and in power systems (who are making large bets on wind that will not pay off without a government subsidy program).
In the near term, GE may need a bailout in its financial arm. GE must have seen that GM made a huge public push for its Chevy Volt over the last 6 months, spending hundreds of million in advertising on a car that does not exist yet. Why would a company near bankrupcy do this? We now know the advertising was aimed at Congress and the Administration, not consumers, trying to burnish their green image to give Democrats enough political cover to vote for the bailout their UAW supporters so desperately need (any chapter 11 would likely result in enormous restructurings of union contracts).
In a post earlier today on the mortgage market meltdown, I wrote:
And that is what the argument usually boils down to - someone smart
should have been watching them. But lots of smart people were watching
all the time. You can see one such person featured in Lewis's
article. Guys run all over Wall Street looking every day for some
single digit basis point spread they can make money off of. But untold
wealth was just sitting there for someone who was willing to call
bullshit on the whole CDO/CDS pyramid game. These guys playing this
game were searching for people to bet against them.
despite this, despite untold wealth as an incentive, and companies
looking for folks to take the other side of their transactions, only a
handful saw the opportunity. Thousands of people steeped in the
industry with near-perfect incentives to identify these issues ... did
not. What, then, were our hopes of having some incremental government
bureaucrats do so? Usually, after this kind of crisis, there are lines
of pundits and writers ready to suggest, with perfect hindsight, new
regulations to avert the prior crisis. But, tellingly, I have heard
very few suggestions.
So in this context, I found these comments by leftish Kevin Drum, certainly no knee-jerk advocate of free markets, quite interesting:
No argument on the greed and ideology front, but I'm curious: was
there really anyone who made the right call on all this at a policy
level? There were, of course, plenty of people who recognized the
housing bubble for the idiocy that it was (Alan Greenspan notably not
one of them), but were there any major voices making specific policy
proposals to slow down the bubble? Or rein in the mortgage market? Or
regulate the CDO/CDS market in a way that would have prevented some of
the damage? I'm talking specifics here, not just general observations
that the FIRE sector was out of control. Arguments about interest rates
being too low count, if they were made for the right reason, but I'm
interested mainly in more detailed recommendations.
I don't have any big point to make here. I'm genuinely curious. There were
many moments in the past few years when perhaps something could have
been done, but what? And who was proposing serious measures that would
have helped? Any major Dems? Economic pundits? Wall Street mucky mucks?
Who were the unsung heroes? Help me out here.
I got another boiler room broker call today, so I guess the recent downturn has not flushed out all the cockroaches. A while back I discussed the frequent calls I get from boiler room stock promoters. The approach they use with me is this:
So the other day, I accidentally let one of them go further than I
usually allow. He said he was from Olympia Asset Management. (There
is an Olympia Asset Management
web page, but I don't know if it is the same company and the web page
has not been updated for several years.) I let him run for a bit
because a friend of mine runs a very well-respected financial planning
firm with a different name but also with Olympia in the title, and for
a moment I thought it might have been one of his folks.
Anyway, he proceeds to try to convince me that we have talked before
and discussed a certain security. "Remember me, we talked six months
ago about ____". Of course, I had never heard of the guy. At this
point I usually hang up, because I have heard this crap before -- it is
a common pitch.
Its pretty clear to me now that this is what he is doing:
Trying to imply that we have some kind of relationship we actually don't have. Or worse...
Trying to convince me that he touted stock A six months ago, so now
he can tell me stock A has gone up in price. Many reputable brokers
built their reputation by cold calling people and saying: Watch these
3 stocks and see how they do and I will call you back in 6 months.
That way, you can evaluate their stock picking without risk. The
modern sleazy approach is to pick a stock that has gone up a lot in the
last 6 months, and then call some harried business person and pretend you called them with that pick 6 months ago, hoping that they will give you the benefit of the doubt.
The call just went downhill from there. I hung up after his discussion of throwing Molotov cocktails into the cars of people he doesn't like. That was right after I asked him if Tony Soprano was standing beside him listening in on the call.
Anyway, beware. The guy today called me and asked me if I remembered him calling 6 months ago predicting the downturn in the mortgage market and the crash of the financial stocks. You are not crazy - no matter how certain the guy seems, you really did not talk to him 6 months ago.
By the way, I am not the only one getting this pitch. Ed Moed got the same pitch from the same script from the same company. Many of his commenters share similar experiences.
Update #2: Mike Murphy, CEO of Olympia Asset Management, was "a member of the [Hoffstra's] elite football team." Wow. Remember that time Hoffstra ripped through all those SEC teams? Yeah, neither do I. Anyway, this achievement does not hold a candle to the fact that I was once captain of Princeton Tower Club's elite intramural coed field hockey team.
Google's got a new little widget one can embed in a custom 404 error page that looks like this. Its cool because in addition to a search box, it claims to be able to provide the user the closest matching page in cases of typos. I am playing around with it for several of my sites, though I don't think it is an option for the blogs -- I am pretty sure there is no way to implement a custom 404 page on a typepad search. By the way, the Google dashboard / webmaster tools site is pretty helpful, particularly if you are really interested in where and how your search traffic is coming in. I implemented a new sitemap for each of my blogs and uploaded them to google via the webmaster tools site and saw an immediate increase in search hits.
I have criticized the new Typepad editor several times in the last several weeks, and I stand by those criticisms. It is just daffy to have a spell check without a "skip all" or "add to dictionary" option, for example.
But Typepad has really come through for me in the last several days. Their customer service folks helped me modify some of my archive templates so that they include even my oldest posts, and the archives now have a new navigation structure. Also, I would add that for all the problems I have had with the editor, the new publishing platform I am on is much faster, and at least once has been able to help me recover unsaved material I was writing, always a pet peeve of mine when using an online editor.
The technocratic compulsion is very seductive to a lot of people (including, I think, our President-elect). I can't tell you how often I hear "if we just had one smart person to clean up the mess..." But it never works. Just think about this auto czar idea being trial-ballooned this week. Even if you could find someone brilliant enough to perfectly discern and synthesize the diverse buying interests of a hundred million consumers, he can never have the right incentives sitting in that government job. Pretty soon he has group A insisting that he needs to mandate more fuel economy and group B that he needs to protect union jobs and group C that he needs to save jobs in Michigan in preference to Ohio and group D advocating for Ohio over Michigan and... you get the point. All rolled up with the incentive problem that if he actually solves the problem at hand, he will be out of a job, so you can bet the problem is never fully solved.
My wife read the Michael Lewis article and comes back to me and says "I can't imagine how you can read that and still oppose government intervention and increased regulation." I said, "why?" Sure, people screwed up and did stupid stuff, but no defender of capitalism promises that won't happen. Besides, what regulation would you propose? "I don't know, but someone smart should have been watching them."
And that is what the argument usually boils down to - someone smart should have been watching them. But lots of smart people were watching all the time. You can see one such person featured in Lewis's article. Guys run all over Wall Street looking every day for some single digit basis point spread they can make money off of. But untold wealth was just sitting there for someone who was willing to call bullshit on the whole CDO/CDS pyramid game. These guys playing this game were searching for people to bet against them.
And despite this, despite untold wealth as an incentive, and companies looking for folks to take the other side of their transactions, only a handful saw the opportunity. Thousands of people steeped in the industry with near-perfect incentives to identify these issues ... did not. What, then, were our hopes of having some incremental government bureaucrats do so? Usually, after this kind of crisis, there are lines of pundits and writers ready to suggest, with perfect hindsight, new regulations to avert the prior crisis. But, tellingly, I have heard very few suggestions.
Back in the 1980's, everyone was freaked out about junk bond-financed hostile takeovers, greenmail, leveraged buyouts and the like. Since, while this activity has not disappeared, the wackiest of this behavior has really died down. Do you remember that act of Congress and subsequent regulation that really curtailed this behavior? Yeah, neither do I. The fact is that, if they are allowed -- and if they are not shielded by taxpayer-funded bailouts from the consequences of their actions -- individuals learn from their excesses. Or they go bankrupt.
Advocates for the nation's automakers are warning that the collapse of
the Big Three - or even just General Motors - could set off a
catastrophic chain reaction in the economy, eliminating up to 3 million
jobs and depriving governments of more than $150 billion in tax revenue.
Step 2 is obviously pulled off easier if either a) representatives from your industry run the Treasury department or b) the new President owes your unions big time for his recent victory in a critical state. For those of you just trying to keep you small business afloat, don't try this at home. No bailout will ever be forthcoming if you don't have the power to move electoral votes, but you should expect to pay for other people's bailouts.
Postscript: This is funny:
Automakers say bankruptcy protection is not an option because people
would be reluctant to make long-term car and truck purchases from
companies that might not last the life of their vehicles.
I think if people still buy tickets on airlines that are operating out of chapter 11 (an item that has zero value if the company folds) then people will still buy cars. This is so totally lame it is tremendously irritating.
Michael Lewis on ... Whatever the Hell is Happening on Wall Street
As usual, Michael Lewis is a great and informative read, trying to unravel the whole subprime mortgage / CDS / CDO bundle somewhat for laymen. The article does not excerpt well, but I would summarize it in saying he identified four mistakes by the financial world. The first two I would describe as real problems but not really new mistakes -- something similar could have been said about S&L's in the 1980's. These are:
A lot of subprime loans were issued to people with no freaking hope of repaying them, in an incredible general lowering of underwriting standards. (we all should remember, though, the government and the media was trumpeting this as good news -- increase in home ownership rates, blah blah blah).
People who bought these securities grossly underestimated the default risks, particularly in the crappiest tranches (securitized packages of loans are resold in tiers, with a AAA tranche getting first call on any payouts, and the tail end BBB tier getting high interest rates but who takes the first principal losses if the loans default).
But Lewis highlights two mistakes that are in some sense brand new. These mistakes were effectively vast increases in leverage that acted as a multiplier for the subprime problem, while simultaneously spreading the problem into the hands of AAA investors who accepted the higher returns without paying too much attention to how they were obtained
Someone started scooping up the BBB tranches from various securities packages, bundled these together, and somehow got a ratings agency to declare that the top 60% tranche of these repackaged dog turds were AAA.
Credit default swaps, originally insurance policies on loan portfolios, turned into a sort of futures market on subprime mortgage packages. But, unlike futures markets, say in oil, where the futures trading volume are generally well under the total volumes of the underlying commodity flowing around the world, CDS values grew to as much as 100x the underlying commodity volume (in this case subprime mortgage securities). CDS's went from a risk-management tool to a naked side-bet.
This is interesting stuff, and it was really only reading this piece that I think I started to understand #4 above (though if readers think I am describing this wrong, let me know). All of this leads me to a few thoughts:
Nothing about this convinces me any of these firms need to be saved or bailed out. Let them die. Maybe the guys who rebuild the industry in their place will be smarter and more careful. The country is going to face a recession whether Wall Street is bailed out or not -- too much (paper) value disappeared from consumer's net worths (or their perceptions of their net worth) for that not to be the case. I lived through Texas in the 1980s when the S&L industry went bust almost to the last institution. Nearly every one of the top 10 banks in the state went into FDIC recievership.
I have seen people observe that this is an indictment of capitalism because so many people made such bad mistakes. Sure. No one said capitalism is a gaurantee against stupidity, or even fraud. The difference is that the consequences of said stupidity and fraud have to be less in a free market system than if the same people had the power of cersion via government. In a free market, these guys will fail and be wiped out and get washed away. The people who they drag down may consider themselves to be innocent, but they participated of their own free will -- if they did not understand what they were doing, that is their problem. In a statist system, you still have mistakes like this, but they are infinitely more catastrophic, as the stakes in play are often higher. And the people who made the mistakes are never punished financially, because they are in charge of the machinery of state (or friends of those in charge). They make damn sure the power of the state is used to make everyone else pay for their mistake, kind of like ... this $700 billion bailout.
Lewis seems to have a hypothesis that the main system change that allowed all this to happen was the shift in ownership structure from partnerships to publicly-held corporations. And certainly you do get some added agency risks with this, though I find this explanation a bit shallow. I do think that folks with money are going to approach Wall Street "experts" and rating agencies with a lot more skepticism for a long time, and that can't be a bad thing.
The opportunity really exists for someone smart to start a brand new rating agency from scratch. The only reason the current ones won't get wept away is simply that there are not many alternatives right now. Warren Buffett should partner with someone well-connected with the new administration (Maybe Larry Summers, since there is no way he will survive a confirmation hearing with his men-are-from-large-standard-deviations-women-are-from-narrow-distributions baggage.)
Lewis is unfair in depicting all the mortgage lenders as predatory. I am sure some were cheats, but remember that as far as Congress, the Administration, the Federal Government, and the media were concerned, these lenders making subprime loans were doing God's work -- they were expanding home ownership and bringing the dream of owning a home to poor people historically redlined, blah blah blah. It is only with hindsight that we demonize them for doing the wrong thing -- at the time, absolutely everyone on in the country was pushing them to do exactly what they did. This is also why Democrats struggle to suggest a resposive regulatory package to this whole mess, as any real reform would have to address minimum underwriting standards, which in turn would have the direct effect of limiting lending to the poor, an outcome with which no Democrat wants to be associated.
Update: Just to be clear, as I have said before, this is about half of what happened. There are really two stories, and usually authors focus on one or the other. Story 1 is the steps taken by the Federal Government (Fannie, Freddie, Community Reinvestment Act, mortgage interest deduction, low interest rates) that fueled the housing bubble and the expansion of credit to questionable borrowers. It is described here, among other places. Story 2 is the one above, how private firms decided not only to purchase these questionable loans made on bubble-inflated assets, but to leverage these assets up to staggering levels.
If I had a newspaper, I'd have a special regular feature where I dig back 10-20 years in my archives to find such forecasts of doom and check them against reality (actually, if I had a paper, I would not allow activist's press releases to show up virtually unedited as "news" stories, but that is another matter). Heck, I could have a regular feature just reality-checking old Paul Ehrlich forecasts.
Well, I don't have a newspaper, but I do have a blog, and this is a new feature I am working on. I am still trying to play with various search engines and news libraries (such as the NY Times) to see if I can come up with some kind of query format that efficiently digs up such predictions that are at least 10 years old. I am still a little stumped on this, but I am working on it.
Failing at Fairness: How American Schools Cheat Girls eloquently describes the
results of years of
research into sexism in schools. The study began as an examination
of gender bias in textbooks, and evolved into a decade of painstaking
classroom observation uncovering a "hidden curriculum" in classroom
interaction. Authors Myra and David Sadker present a compelling
tale of gender bias in education at all levels.
Taken at face value, the book more than proves the point of the subtitle:
our schools cheat girls out of an education equal to that received by boys.
The authors do an excellent job of pointing out some of the more subtle
ways of favoring boys over girls. However, so many descriptions of
incidents of sexism -- blatant, subtle, by old teachers, young teachers,
male teachers, female teachers, and even by one of the Sadkers' own
"trained" researchers -- are included that it can seem like overkill at
times. In addition, the wealth of statistics can be overwhelming, and yes,
even slightly depressing.
One of the more horrifying aspects of Failing at Fairness is the discussion
about standardized tests, their historical deliberate design as culturally
biased for exclusionary purposes, and the dive in the scores received by girls
as they progress through their education.
Current standardized test administrators claim to be more sensitive
to cultural prejudices in today's tests, although minority students still
score less than white students (at least on the SAT). Also, the book
states quite plainly, "Regardless of ethnic or racial background, all
American girls share a common bond: a gender gap in test performance that
leaves them behind the boys." The prevailing opinion of the discussion group
is that the tests are still exclusionary; they are not measuring achievement,
but are rather reflecting the way students are taught.
I don't doubt that they found their share of anecdotal issues. I am sure I could find them today. But their overall premise that girls were getting hosed by primary education and that standardized tests were structured to exclude girls from college education made no sense even at the time the book was published:
The chart is from Mark Perry, and he shows a similar picture for bachelor's degrees, where women blew past men in 1981, and in PHDs, where women passed men in 2006. People would laugh at this book today, as most discussion is about under-performance of boys.
I don't know the authors, but I would interpret this as the classic inability of activists to declare victory. I am fairly certain that their hypothesis was far more correct in 1969 than in 1994. But society really went through a step-change in the 1970s vis a vis attitudes about females. The previous generation of women's activists did great work to make these issues plain and help lead change in societal attitudes.
But activists have a really hard time declaring victory. From a quite personal standpoint, declaring victory as an activist is exactly the same as walking into your boss and telling him that the company really doesn't need your job position. Money, prestige, academic advancement, and attention, and (self-esteem, for certain types of people) are all tied to there being a major problem. If there is no longer a big problem, then all this stuff goes away.
I post most of my more detailed climate work over at my other blog. But I wanted to repost here something I wrote in response to a number of request for a brief version of what is driving global temperatures.
My sense is that medium to
long scale 20th century temperature trends can be explained mostly
through three drivers:
1. A cyclical variation driven by multi-decade oceanic cycles like the Pacific Decadal Oscillation (PDO):
2. Changes in solar output, either directly as
increased heating or indirectly via a variety of theories on things
like cosmic rays and cloud formation:
3. A long term trend of up to +0.05C per decade that may include a CO2-warming component.
I am willing to posit a CO2 impact net of feedbacks of perhaps 0.5-1.0C over the next century. This may appear low, but is the only scale of number reasonably supported by history.
Any higher number would result in temperatures way too high
historically. And even assuming a number this high runs into the
following problem: There was probably a trend of about this magnitude
emerging from the little ice age 200+ years ago and extending into the
20th century. You can see it in the glacier numbers below: (source)
Those that want to assign the temperature trend, once the
sun and the PDO are removed, post-1950 to CO2, need to explain what
effect was causing the nearly exact same trend from 1800-1950, and why
that trend conveniently switched off at the exact moment man's CO2
takes over. In the context of the glacier chart, what was causing the
glaciers to retreat in 1880, and why is that effect not the one at work
Don Boudreax shares this leftish view of the auto bailout from Pat Garofalo:
More importantly though - as Pelosi and Reid said - “federal aid should
come with ’strong conditions,’ such as requirements that car makers
build more fuel-efficient vehicles.” Bill Scher at OurFuture writes,
“With the auto industry in dire straits, we taxpayers have maximum
leverage to demand the cars necessary to help lower energy costs, cut carbon emissions and reduce our dependency on foreign oil.”
So, uh, only when the government gets involved do consumers have any leverage with producers in terms of what products they produce? Hello? I'm sure Circuit City execs will be relieved to hear this.
In free markets, consumers have all the leverage in determining perhaps not what gets produced, but at least what gets sold in any marketplace. Producers who are unable to match what they produce to what consumers buy eventually go bankrupt. In fact, it is this process of consumers exercising their leverage with GM that Congress is attempting to interrupt with a bailout. Consumers are telling GM loud and clear that GM is not making the cars at the price points they want. Unable to do so, GM will likely fail. This failure will result either in 1) GM, under bankruptcy protection, shedding any number of constraints that are preventing it from making what the consumers want or 2) GM liquidating its production assets to other owner/management groups who can do a better job with them.
This quote is a great example of the technocratic bent many leading Democrats bring to economics. What these guys are asking for is not leverage for consumers, but leverage for a few Democratic technocrats to makeover the auto industry the way they want it. People like Nancy Pelosi who would never in a million years be given the keys to a manufacturing corporation by a sane ownership group can effectively grab that jobs via the leverage herseat in Congress gives her.
Postscript: Garofalo adds:
Podesta added that “the auto industry directly employs about 250,000 people
and if you think about the ripple effects, they are the backbone of our
manufacturing economy.” Indeed, according to estimates, one in 12 U.S. jobs is tied to car manufacturing, and a bailout of the industry could help boost the U.S.’s ailing manufacturing sector.
A couple of points. First, a GM bankruptcy is hugely, enormously unlikely to mean the whole company is just shut down. If you have flown in the last 10 years, unless you have favored only Southwest Airlines, you probably have traveled on a carrier in chapter 11. That's what chapter 11 is - a breathing space while the company continues to operate but is able to restructure its liabilities. Personally, I would love to see the company go chapter 7 and have a new wave of innovative people take over the assets and see what they could do with them. But it is not going to happen. GM may shed jobs over the next year, but they are going to do so anyway in the teeth of a recession, not because they went bankrupt.
Podesta must know that the issue in a bankruptcy will not be jobs, but labor contracts (airlines have practically patented the chapter 11 vehicle for renegotiating union contracts). Most GM manufacturing employees would probably keep their jobs through a bankruptcy, but they may well lose their contract that says they get paid $75.86 an hour with 34.5 days a year of paid leave. Garofalo and Podesta are shilling for the union over wage bargaining, not jobs.
The other observation I want to make is to ask why the loss of these 250,000 jobs is going to be so much worse than the loss of 500,000 jobs over the last several years.
I know parts of Michigan suffered, but Podesta is claiming knock-on effects for the whole country. So where were they?
This is a reprise of a much older post, but it struck me as fairly timely.
I had a conversation the other day with a person I can best describe as a
well-meaning technocrat. Though I am not sure he would put it this baldly, he
tends to support a government by smart people imposing superior solutions on the
sub-optimizing masses. He was lamenting that allowing a company like GM to die
is dumb, and that a little bit of intelligent management would save all those GM
jobs and assets. Though we did not discuss specifics, I presume in his model
the government would have some role in this new intelligent design (I guess like
it had in Amtrak?)
There are lots of sophisticated academic models for the corporation. I have
even studied a few. Here is my simple one:
A corporation has physical plant (like factories) and workers of various
skill levels who have productive potential. These physical and human assets are
overlaid with what we generally shortcut as "management" but which includes not
just the actual humans currently managing the company but the organization
approach, the culture, the management processes, its systems, the traditions,
its contracts, its unions, the intellectual property, etc. etc. In fact, by
calling all this summed together "management", we falsely create the impression
that it can easily be changed out, by firing the overpaid bums and getting new
smarter guys. This is not the case - Just ask Ross Perot. You could fire the
top 20 guys at GM and replace them all with the consensus all-brilliant team and
I still am not sure they could fix it.
All these management factors, from the managers themselves to process to
history to culture could better be called the corporate DNA*. And DNA is very
hard to change. Walmart may be freaking brilliant at what they do, but demand
that they change tomorrow to an upscale retailer marketing fashion products to
teenage girls, and I don't think they would ever get there. Its just too much
change in the DNA. Yeah, you could hire some ex Merry-go-round** executives,
but you still have a culture aimed at big box low prices, a logistics system and
infrastructure aimed at doing same, absolutely no history or knowledge of
fashion, etc. etc. I would bet you any amount of money I could get to the GAP
faster starting from scratch than starting from Walmart. For example, many
folks (like me) greatly prefer Target over Walmart because Target is a slightly
nicer, more relaxing place to shop. And even this small difference may
ultimately confound Walmart. Even this very incremental need to add some
aesthetics to their experience may overtax their DNA.
Corporate DNA acts as a value multiplier. The best corporate DNA has a
multiplier greater than one, meaning that it increases the value of the people
and physical assets in the corporation. When I was at a company called Emerson
Electric (an industrial conglomerate, not the consumer electronics guys) they
were famous in the business world for having a corporate DNA that added value to
certain types of industrial companies through cost reduction and intelligent
investment. Emerson's management, though, was always aware of the limits of
their DNA, and paid careful attention to where their DNA would have a multiplier
effect and where it would not. Every company that has ever grown rapidly has
had a DNA that provided a multiplier greater than one... for a while.
But things change. Sometimes that change is slow, like a creeping climate
change, or sometimes it is rapid, like the dinosaur-killing comet. DNA that was
robust no longer matches what the market needs, or some other entity with better
DNA comes along and out-competes you. When this happens, when a corporation
becomes senescent, when its DNA is out of date, then its multiplier slips below
one. The corporation is killing the value of its assets. Smart people are made
stupid by a bad organization and systems and culture. In the case of GM, hordes
of brilliant engineers teamed with highly-skilled production workers and modern
robotic manufacturing plants are turning out cars no one wants, at prices no one
wants to pay.
Changing your DNA is tough. It is sometimes possible, with the right
managers and a crisis mentality, to evolve DNA over a period of 20-30 years.
One could argue that GE did this, avoiding becoming an old-industry dinosaur.
GM has had a 30 year window (dating from the mid-seventies oil price rise and
influx of imported cars) to make a change, and it has not been enough. GM's DNA
was programmed to make big, ugly (IMO) cars, and that is what it has continued
to do. If its leaders were not able or willing to change its DNA over the last
30 years, no one, no matter how brilliant, is going to do it in the next
So what if GM dies? Letting the GM's of the world die is one of the best
possible things we can do for our economy and the wealth of our nation.
Assuming GM's DNA has a less than one multiplier, then releasing GM's assets
from GM's control actually increases value. Talented engineers, after some
admittedly painful personal dislocation, find jobs designing things people want
and value. Their output has more value, which in the long run helps everyone,
The alternative to not letting GM die is, well, Europe (and Japan). A LOT of
Europe's productive assets are locked up in a few very large corporations with
close ties to the state which are not allowed to fail, which are subsidized,
protected from competition, etc. In conjunction with European laws that limit
labor mobility, protecting corporate dinosaurs has locked all of Europe's most
productive human and physical assets into organizations with DNA multipliers
less than one.
* Those who accuse me of being more influenced by Neal Stephenson's Snow
Crash than Harvard Business School may be correct. ** Gratuitous
reference aimed at forty-somethings who used to hang out at the mall. In my
town, Merry-go-round was the place teenage girls went if they wanted to dress
like, uh, teenage girls. I am pretty sure the store went bust a while back.
Congressional Democrats announced today that they had agreed to a bailout plan for Republicans after last week's devastating election results. While exact details are unavailable, sources tell us that the Republicans will be given 4 seats in the Senate and 15 in the House. Nancy Pelosi said in a statement today: "We've established pretty clearly over the last several months that failed strategies and management should not necessarily have to result in losses in market share, particularly for well-connected Washington insiders."
Asked for comment, Democratic strategist James Carville was giddy. "This is brilliant. It really doesn't give up anything of substance to the Republicans. But it will sap the energy from the Republican Party for making any substantial changes, and make it more likely they will continue the failed strategies that led to this most recent loss. After their recent failures, the Republicans were on the verge of being forced to reinvent their whole organization. This bailout should reduce the likelihood of that substantially."
When asked if bailouts of AIG, General Motors, Ford, Chrysler, Freddie Mac, Fannie Mae, and Bear Stearns wouldn't similarly reduce the urgency to change failed approaches, Carville answered "no comment."
A while back, when I discussed the stagnating wage myth, I observed that folks spreading this meme were careful to show figures only for cash wages, and not for total compensation. In the period from 2000-2006, which is the typical period critics focus on (in part because it implies blame on the Bush administration, and in part because it lets them measure economic peak to trough) there has been a substantial shift in compensation mix from cash to non-cash benefits, including health care and paid time off. Ignoring these components is particularly disingenuous given that many of these same critics have been long-time supporters of more paid time off and better company-funded health care.
As an example, this data (courtesy of Mark Perry) on the Big 3 automakers contracts is telling. In 2000 (table page 3) it shows cash wages per hour worked at $22.71 and total comp at $43.57. In 2006, the most recent year of data, it shows cash wages per hour worked at $29.15 and total comp at $75.86. So, while cash wages per hour have increased about 4.25% compounded each year, total compensation has increased more than twice as fast, at 9.7% a year. That latter increase is due both to a rapid rise in health care expenditures for employees as well as an increase in paid day off to 34.5 a year. (by the way, if you are wondering why the UAW is fighting so hard for a government bailout, look no further than jobs with $75.86 an hour total comp. and seven weeks a year of paid days off.)
Last week I quoted from the Obama transition site:
The Obama Administration will call on Americans to serve in order to
meet the nation’s challenges. President-Elect Obama will expand
national service programs like AmeriCorps and Peace Corps and will
create a new Classroom Corps to help teachers in underserved schools,
as well as a new Health Corps, Clean Energy Corps, and Veterans Corps.
Obama will call on citizens of all ages to serve America, by developing
a plan to require 50 hours of community service in middle school and
high school and 100 hours of community service in college every year.
Now, it says this:
Obama will call on citizens of all ages to serve America, by setting a
goal that all middle school and high school students do 50 hours of
community service a year and by developing a plan so that all college
students who conduct 100 hours of community service receive a universal
and fully refundable tax credit ensuring that the first $4,000 of their
college education is completely free.
Ben Smith and others argue that Obama never said it was mandatory. Fortunately, I got a screen shot of the "require" language before the Obama department of Truth got to the page (click for full size):
Thanks to Walter Olson for bringing the swap to my attention.
Postscript: 100 hours for $4000 is a pretty good deal. Not many private sector employers offering $40 an hour to recent high school grads. Everyone out there OK with the government paying the equivalent of $80,000 a year salaries to 18-year-olds for sorting food at the food bank?
Refresher: It seems that some basic definitions are in order. If one is required to work at a certain task, he is not a volunteer. If one is paid $4000 for 100 hours of labor, he is not a volunteer. A volunteer is someone who works of his or her own free will without monetary compensation, solely for the satisfaction of helping out.
The payday-loan industry, which flourished this past decade on
Arizonans' almost-insatiable need for quick, short-term loans
regardless of their high interest rates, may have to close down in
Arizona unless state lawmakers can be persuaded to ignore voters'
Voters last week overwhelmingly rejected Proposition 200, a ballot
initiative financed and written by the loan companies to allow them to
continue charging high interest rates on small loans. That decision
placed Arizona among a growing number of states that have effectively
shut down the payday lenders.
So, payday loans from company A to person B are really popular with both A & B, and the industry has "flourished." But persons C, who don't participate in this market, have decided that, for their own good, A & B need to stop engaging in this behavior. One such third party explains it this way:
Sen. Debbie McCune Davis, D-Phoenix, opposed Prop. 200 and has
steadfastly fought payday lenders. She sees no need to let payday
lenders continue to charge higher interest rates than other lenders.
Her and voter's actions have effectively limited payday loan companies to charging total interest and fees equivalent to no more than 36% annual interest. OK, you say, this seems like a really high rate. That should be enough, right? Well, the problem comes with fixed costs and loan size. Lets look at an example.
A typical payday loan size and term is about $400 for 18 days (pdf). A typical fee for such a loan is $50, which includes both fixed costs and interest. Wow, annualized that is 250%. Usurious! So would you personally go out and get a payday loan? No way! And that is why voters vote to ban them - they are not good for me personally, so they must not be good for anyone else.
But here is the problem. How do you maintain a storefront and trained people and all the documentation and collection apparatus for less than $50? The same loan at 36% would allow a fee of only $7.20. That barely even covers paying someone to originate the loan at the counter, much less pay interest and a risk premium.
Try going to the bank and getting a home loan or some other type of loan for only a $50 fee. Granted those loans are more complicated, but in turn you will likely get charged hundred and probably thousands of dollars in fees. There is a large fixed cost component to the act of lending which we tend to ignore on larger loans, but is there none-the-less. In fact, just try to go to a bank and get a loan for $400 at all. They don't make them, outside of the credit card industry, which solves this problem in part through economies of scale and in part through cost-shifting costs to merchants, options not really available to payday loan companies.
And so far, we are only talking about fixed costs, not the underwriting risk of extending loans to about any person who wanders in the door and can sign his/her name. Anyone remember sub-prime mortgages? Maybe there is a justification for large risk premiums, after all, on loans to under-qualified borrowers. Particularly when you consider that most payday loan customers could not qualify even for a sub-prime mortgage.
The best equivalent to a payday loan offered by banks is overdraft protection, where the bank will go ahead and pay out on checks where there are insufficient funds, though they will charge a $20-$30 fee per check paid. As you can see, these fees are very similar in magnitude to those charged by payday loan companies, particularly when you consider that these fees are generally charged on checks that average about $150. Also, folks who get one overdraft fee usually get several in a row. People are willing to pay these fees because they are in fact lower than the fees of actually having a check bounce, which can incur similar fees from merchants as well as hurting one's credit.
So, you just had to write three checks to get the power and water and telephone turned on, and you are pretty sure the money is not there in your checking account. You are facing $80 in bounced-check (NSF) fees or overdraft fees. Now might you consider a $400 loan for a $50 fee? Well, probably the answer is still no, you would put it on your credit cards. But everyone doesn't have credit cards, or doesn't qualify for them, or don't have a lifestyle that allows for them. Where do they go, short of Tony Soprano?
Update: A reader sent me a link to this report, comparing payday loan rates to overdraft protection, and finding them of similar magnitude. The author calculates an average $28.61 overdraft fee on an average $155 bounced check yields an APR of 478%. There is a fixed cost to lending, and small very short term loans cost a lot of money, no matter how you get them.
I will remind folks not to be fooled by 18% or 23% rates on credit cards and set that as the market rate for small loans. First, this misses annual fees for the cards. But more importantly, it misses merchant fees. Merchants pay between 2.5% and 3.5% of everything you charge to the credit card companies. This helps to subsidize rates and, particularly, subsidize the fixed costs of small lending transactions.
We have been guided by a Republican administration who believes in the
simplistic notion that people who have wealth are entitled to keep it
and they have an antipathy towards redistributing wealth and they may be able to sustain it for a while but it doesn’t work in the long run.
Remember, though, calling them socialists is racist. Video here.
Channel surfing last night, I ran into the Running Man, an unfortunate movie "adaption" of a pretty good Steven King (as Richard Bachman) book. For those who have seen one and not the other, they have little in common with each other.
What I hadn't realized before was just how bizarre the casting for this movie was -- Richard Dawson, the cheesy game show host as a ... cheesy game show host. Jim Brown, Dweezil Zappa and Mick Fleetwood? The latter, by the way, as himself but in the future. Whatever.
But the best part is that the movie has two United States governors in substantial roles -- Arnold Schwarzenegger (California) in the title role and Jesse Ventura (Minnesota) as one of the "stalkers" trying to kill Arnold. Is this a great country or what?
Do ya'll know any others? I know Sonny Bono did a Love Boat guest appearance, so there must have been two Congressmen in one TV episode (with Fred Grandy of Iowa). There may be a Fred Thompson +1 out there I can't think of. And of course there were probably some Ronald Reagan matchups, but that is before my time.
Update: Rob reminds me that the Ventura-Schwarzenegger team can also be found in Predator.
As mentioned in the updates to this earlier post, the Obama transition web site has, at least temporarily, purged out all the real content they had up about specific programs and legislative goals. So, as a public service, I will help fill this information gap by re-posting an article I wrote about 9 months ago on the "Patriot Employer Act" sponsored by Barrack Obama and likely a kernel for early 2009 legislative action:
Posted 2/13/2008: It turns out, according to Barrack Obama, (who hales from the party
that doesn't believe in questioning anyone's patriotism) that I am not
a "Patriot Employer." This is from the text of Senate Bill S. 1945
of which he is a co-sponsor (My snark is interspersed in italics):
Patriot Employers are to be given tax breaks over unpatriotic employers
(I presume this means that their tax rates will be raised less in an
Obama presidency than those of other folks) with "patriot employers"
defined as such:
(b) Patriot Employer- For purposes of subsection (a), the term
`Patriot employer' means, with respect to any taxable year, any
`(1) maintains its headquarters in the United States if the taxpayer has ever been headquartered in the United States,
OK, I guess I can comply with this. Though I am not sure the
best way to begin an Obama "kindler gentler foreign policy" is to tell
the nations of the world that we will be taxing their company's income
in the US at a higher rate than our own companies.
`(2) pays at least 60 percent of each employee's health care premiums,
So the #1 determinant of patriotism is not commitment to
individual rights but paying 60% of employee health care costs. I
guess I am so unpatriotic
And, just from a practical standpoint,
90% of my employees are seasonal, hired for about 4 months of the
year. To be patriotic, I have to pay their health care costs all year
long? Also, since most of my employees are retired, they are on
Medicare or an employee retirement medical plan. If they pay $0 in
premiums and I pay $0 of that, do I get credit for 60%? Maybe the
government can mandate a solution for zero divided by zero, like they
did for the value of pi years ago
`(3) has in effect, and operates in accordance with, a policy requiring neutrality in employee organizing drives,
I presume neutrality means that in a hypothetical union drive, I
do not express my opinion (and likely opposition) to said unionization
drive? I am told that this also entails allowing card checks rather
than hidden ballot voting. In other words, patriotism is being defined
here as 1) giving up your free speech rights and 2) opposing hidden
ballot voting. Uh, right. Besides, if a union organized our company,
as unlikely as that would be, I would probably have to do a Francisco
d'Anconia on the place.
`(4) if such taxpayer employs at least 50 employees on average during the taxable year--
`(A) maintains or increases the number of full-time
workers in the United States relative to the number of full-time
workers outside of the United States,
In other words, we don't want American companies growing
overseas. This could also be called the "give up international market
share act." This implies that it is unpatriotic for US-based Exxon to
explore for oil in Asia and that it is more patriotic to let the
Chinese national oil company do it. This implies that it is more
patriotic for Coke to lose market share in Germany than to gain it.
This means that it is more patriotic for Mattel to buy its toys in
China from Chinese companies rather than run the factories themselves
(and thereby be accountable themselves for product quality and working
This is beyond stupid. We LIKE to see US companies doing well
overseas. If we have to import our raw materials, we feel more
comfortable if it is US companies doing the extraction. Don't we? In
the name of patriotism, do we really want to root for our domestic
companies to fail in international markets?
`(B) compensates each employee of the taxpayer at
an hourly rate (or equivalent thereof) not less than an amount equal to
the Federal poverty level for a family of three for the calendar year
in which the taxable year begins divided by 2,080,
90% of my workers are retired. They work for me to supplement
their income, to live our in nature, and to stay busy. They need me to
pay them based on the poverty line for a family of three, why? I will
tell you right now that if I had to raise wages this much, most of my
employees would quit. Many of them force me to give them fewer hours
so they can stay under the social security limits for income. I discussed what rising minimum wages often force me to do here,
but just as an illustration, a $1 an hour across the board wage
increase would easily wipe out all the money I make in a year and put
me into a loss position. In which case the lowered tax rate would not
do me much good anyway.
`(C) provides either--
`(i) a defined contribution plan which for any plan year--
`(I) requires the employer to make
nonelective contributions of at least 5 percent of compensation for
each employee who is not a highly compensated employee, or
`(II) requires the employer to make
matching contributions of 100 percent of the elective contributions of
each employee who is not a highly compensated employee to the extent
such contributions do not exceed the percentage specified by the plan
(not less than 5 percent) of the employee's compensation, or
`(ii) a defined benefit plan which for any plan
year requires the employer to make contributions on behalf of each
employee who is not a highly compensated employee in an amount which
will provide an accrued benefit under the plan for the plan year which
is not less than 5 percent of the employee's compensation, and
Uh, I am not sure why it is unpatriotic for an employee to save
for themselves, but I think 401k plans are a nice benefit. I would
certainly offer one except for one tiny fact - ALL MY EMPLOYEES ARE
ALREADY RETIRED!! They are over 65. They are drawing down on their
retirement, not contributing to it.
This is at the heart of the problem with all US labor law.
Folks up in Illinois write laws with a picture of a steel mill in mind,
and forget that employment and employees have infinite variations in
circumstances and goals.
So I am unpatriotic, huh. But if forcing companies to
contribute to emplee retirement plans is patriotic, why is hiring folks
once they are retired to give them extra income in retirement
unpatriotic? In fact, maybe I could argue that 100% of the wages I pay
go to retirement spending
`(D) provides full differential salary and
insurance benefits for all National Guard and Reserve employees who are
called for active duty, and
In other words, we of the government are not going to pay
our employees (ie reservists on active duty) what they are worth and
are not going to give them benefits, so to be patriotic you need to do
it for us. We in Congress are not really very patriotic and don't
support the troops, so you need to do it for us.
All kidding aside, I would do this in my company if it was
applicable, but I really resent being piously told to do so by several
Senators who don't really model this behavior themselves.
`(5) if such taxpayer employs less than 50 employees on average during the taxable year, either--...
blah, blah. Basically the same stuff repeated, though slightly less onerous.
Since when did patriotism equate to "rolling over to the latest AFL-CIO wish list?"
I am having a blast at the Change.gov transition site for Obama, now that I have satisfied myself it is not a fake. Those who doubt that Obama has super-human powers should read this, from the Obama site:
The Obama-Biden plan provides affordable, accessible health care for
all Americans, builds on the existing health care system, and uses
existing providers, doctors and plans to implement the plan. Under the
Obama-Biden plan, patients will be able to make health care decisions
with their doctors, instead of being blocked by insurance company
Under the plan, if you like your current health insurance, nothing
changes, except your costs will go down by as much as $2,500 per year.
If you don’t have health insurance, you will have a choice of new, affordable health insurance options.
Wow - so now you can go out purchase any care you want - any tests, any procedures, whatever - and no one is going to tell you no. Everything is paid for. You have a blank check to go spend. And, by granting you an infinite supply of care, your cost is going to go down. Obama is really superman, because no one else in history has figured out how to invert the supply curve or make 2x cost less than x.
You see, it's all about insurers' margins. If we can just cut down on those fat margins, everyone can have full health care and a pony for less money. You doctors who are worried about health care, you will have it better too:
Prevent insurers from overcharging doctors for their malpractice
insurance and invest in proven strategies to reduce preventable medical
All these years you thought malpractice insurance costs were high because of huge malpractice court settlements that usually bore little relationship to true malpractice, well, you were wrong. Its because of the insurers and their margins. We don't have to reform malpractice tort law (which is just as well since tort lawyers were so generous with donations to our campaign), we just have to get insurers to stop overcharging doctors.
To give you an idea of the absolutely huge amount of savings that can be extracted by just pounding on the insurers to give more coverage for less money, let's take a look at those outsized margins they are making. These are net profit margins reported by Google Finance for 3Q2008 of the largest health care providers and insurers:
Freaking robber barons! Look at those outsized margins. No wonder we have a health care crisis. By cutting these guys margins in half, Obama expects to reduce the price of health care by 1-2%, which should be more than enough to pay for large increases in services and 30-50% price cuts.
Update #2: OK, the page has come down, as have most all the pages that had any kind of policy detail or promises in them. I wish I had screen shots, but I can say everything above was cut and pasted directly form the web site. Could I make that stuff up? Too bad, there probably were another 10 blog posts in there somewhere.
Update: Over the weekend, without comment, the Obama team pulled down the language below and put up new, vaguer language without the "required." Discussion and a screen shot of the original is here.
How do you tax people with who have no money? Why, you take their labor by force. It worked when we dragged Africans over here against their will in the 19th century, and it can work today. From the Obama transition site:
The Obama Administration will call on Americans to serve in order to
meet the nation’s challenges. President-Elect Obama will expand
national service programs like AmeriCorps and Peace Corps and will
create a new Classroom Corps to help teachers in underserved schools,
as well as a new Health Corps, Clean Energy Corps, and Veterans Corps.
Obama will call on citizens of all ages to serve America, by developing
a plan to require 50 hours of community service in middle school and
high school and 100 hours of community service in college every year.
So what was that about no tax increase for people making under $250,000? Because my guess is that most high school and college kids made close to zero, but here is Obama seeking to expropriate 50-100 hours of their labor. Sure looks like a tax to me. By law, high school kids, by DOL rules, can work up to 1200 hours per year. For kid that works every hour she can, this is about a 4% tax. Kids that work less pay a higher effective tax rate, up to infinite for kids not working at all (hey, this tax is even regressive). Also, richer kids trying to get into top colleges will be the least affected, as they are already volunteering at a level close to this, so most of the burden of this tax will fall on the poor.
PS- I thought this site was fake, because it was amazing to me to see Obama's intentions stated so baldly after he so strenuously avoided clarifying his position during the election. But the Huffpo and other sites link to this site as if it is real, so I will treat it as such.
Middle class families will see their taxes cut – and no family making less than $250,000 will see their taxes increase.
The typical middle class family will receive well over $1,000 in tax
relief under the Obama plan, and will pay tax rates that are 20% lower
than they faced under President Reagan. According to the Tax Policy
Center, the Obama plan provides three times as much tax relief for
middle class families as the McCain plan.
OK, we are not going to take more money, we are just going to take your labor directly.
Update:Radley Balko adds the chilling speech implications of such a program:
So who gets to decide what constitutes "community service"? Who
gets to decide which causes and organizations will be credit-worthy,
and which ones won't?
Something tells me that you'd be more
likely to get one of Obama's vouchers by going door to door for one of
ACORN's living wage campaigns than, say, volunteering for a libertarian
nonprofit organization that advocates against things like
government-mandated community service.
Obama supporters will say, no problem, we trust Obama. Hmm. The folks who wrote our Constitution designed our government assuming all politicians would be knaves. Writing laws that depend on the good intentions, fairness, correct incentives, and intellectual capacity of the government folks who run it are doomed to failure. Would Democrats have been happy to have GWB deciding what community service their kids were forced to endure? I doubt it. Well, we don't live in an autarky, and sooner or later GWB's party will be back and making exactly those decisions under such a program.
House Speaker Nancy Pelosi said Wednesday that Congress is considering bailing out Detroit’s Big Three automakers.
may need to make a statement of confidence in our auto industry,"
Pelosi told NPR this afternoon. "We’re not saving those companies,
we’re saving an industry. We’re saving an industrial technological and
manufacturing base... It’s about jobs in America."
Pelosi held a
meeting Monday with Democratic leaders to consider a request from
Detroit’s Big Three automakers for another $25 billion in "bridge
financing" to help them survive a huge downturn in auto industry.
So what if GM dies? Letting the GM's of the world die is one of the
best possible things we can do for our economy and the wealth of our
nation. Assuming GM's DNA has a less than one multiplier, then
releasing GM's assets from GM's control actually increases value.
Talented engineers, after some admittedly painful personal dislocation,
find jobs designing things people want and value. Their output has
more value, which in the long run helps everyone, including themselves.
The alternative to not letting GM die is, well, Europe (and Japan).
A LOT of Europe's productive assets are locked up in a few very large
corporations with close ties to the state which are not allowed to
fail, which are subsidized, protected from competition, etc. In
conjunction with European laws that limit labor mobility, protecting
corporate dinosaurs has locked all of Europe's most productive human
and physical assets into organizations with DNA multipliers less than
I worked for several years for AlliedSignal engines, now Honeywell, here in Phoenix. At our main engine plant here, we endured a couple of union organizing campaigns that both fell just shy of winning a position for the union. A reasonable manager might expect that under the Democrat's proposed card-check system which replaces anonymous votes with open petitions, that enough hijinx could be brought to bear to put the union over the top. I don't now if this is what they have in mind, but...
Phoenix-based Honeywell Aerospace plans to move 700 manufacturing jobs from Phoenix to Mexico and the Czech Republic.
Employees were notified Thursday of the cuts, which will begin in
the second quarter of 2009 and continue for three years. Most of the
job cuts are expected in the first year.
Workers who asked not to be identified said the news caught employees completely off-guard.
The affected jobs are at Honeywell's 34th Street facility at Sky Harbor
International Airport, where the company and its predecessors Allied
Signal and Garrett have built jet engines for almost 60 years.
I think the timing just a day after election results in, and the level of surprise, are telling. Time to get this done now, before the owners have to go cap in hand to their employees to ask permission to run their business as they see fit. I thought this last bit they added brings a nice irony to the situation:
The announcement came two days after Barack Obama,
who has promised to take a hard line with companies that move
manufacturing jobs overseas, was elected the 44th U.S. president.
Whatever that means, but it does give yet another reason to get out fast.
It's fascinating that our local paper, after months of positive Obama coverage, manages to express its first printed criticism of Obama on ... the day after the election.
With President-elect Barack Obama promising tougher government
regulations on some sectors, including the financial markets, a handful
of business leaders expressed concern Wednesday.
"The key thing is to not choke us to death with regulation," said
Ioanna Morfessis, an economic-development consultant and Greater
Phoenix Economic Council founding member.
With the faltering of the financial markets and a massive federal
bailout this fall, Obama and congressional Democrats, who expanded
their majorities with an upset electorate, have called for more federal
oversight on Wall Street. Obama also has called for more regulation in
the energy and health-care sectors, and Democrats could more strictly
enforce environmental rules....
Morfessis said before lunch Wednesday, she received phone calls from 11
entrepreneurs concerned there would be a "higher premium for taking
risks or entering new markets."
Why do I say "start." Because even the line's supporters put the minimum cost at $40 billion, so the taxpayers have authorized 22% of the line. And this is by supporters numbers. By my numbers they have likely authorized less than 10% of the line.
The state that makes up a huge percentage of the current mortgage and
foreclosure problem seems to not have learned its lesson about
I am generally an optimistic guy, but I wonder if we have gotten to the point where there is a large subset of the population for whom voting is solely for the purposes of boosting self-esteem. I feel good when I support public transit, so I vote for Prop 1A, despite the fact there is no possible way it will ever deliver any public transit.
TJIC has the silver lining nailed for libertarians:
Let us not forget the good news from the election: one statist, speech limiting, freedom-agnostic candidate lost.
I'm kind of ambivalent this morning - I knew in advance that freedom was going to lose again in this election, no matter what the outcome.
If I am depressed this morning, it is more about propositions and side issues than about the President and Congress. Had this been a leftward shift in the county, I could have been satisfied that at least losses in freedom in one area might be substituted by gains in others (though for me personally, changes in economic freedom tend to have far more direct and immediate impact than changes in social freedoms).
But the only pattern I could see yesterday was not leftward but government-ward. In the same states where Democratic candidates won with economic interventionist messages, Constitutional bans on gay marriage also won by sizable majorities. In Arizona, gay marriage was banned, an initiative to limit future tax increases was defeated, an initiative to protect health care choice was defeated, an initiative to soften last year's anti-immigrant legislation was defeated, and a payday loan ban was confirmed. The voting in some way defies a traditional left-right explanation and is only consistent in that it was almost all the reverse of the libertarian position. And to make the results even more irrational, nearly the biggest defeat of any ballot initiative in Arizona was for a pay increase for state legislators -- the voters seem to like government but don't trust or respect the individuals employed there.
After the last Bush election, a number of leftish folks claimed they were moving to Canada or France or wherever. But that's the problem for libertarians in this country -- there is not place to run. Those who want to run away to a country with a more controlling government have 180 or so choices. Those of us who seek more freedom have approximately none.
Update: This slight paraphrase from the movie Zoolander encapsulates my thought on this election:
They're the same! Doesn't anybody notice this? I feel like I'm taking crazy pills!
I am actually less frightened by the candidates than by people who seem to get so excited by one or the other of them.
I have voted in a lot of different states, but the way we do it here in my current district seems to work well. I got my ID checked against the voting record -- the lady may an explicit check to make sure the addresses matched. Then I got a paper ballot and a black magic marker. Next to each name is an arrow pointing to the name with a gap in it. One fills in and completes the arrow pointing to the candidate one is voting for. Then, when done, the voter takes the ballot to a machine that looks like a big shredder. She/he feeds the ballot into the slot, and the ballot is automatically read and counted right there. There is a LED readout on the front with a total ballot count that increments by one if the ballot is read correctly, providing a psychologically satisfying feeling that one's vote has been counted. At the end of the day no further counting is required, and I presume they pull the vote counts out electronically or with some kind of summary report. The ballots stay in a locked vault in the scanner and provide a paper trail if the count has to be checked later.
By the way, no line at all. Glad I didn't wait 2+ hours last weekend to vote early in order to avoid the lines. One has to wonder at the decision-making ability of folks who waited hours to vote early to avoid lines that couldn't possibly be any longer on election day. Good to see such folks out voting ;=)
At least in economic policy, progressives like Barrack Obama are deeply conservative. They want industries, jobs, real earnings, and class positions to be stable and predictable. No one ever believes me when I say this, but look at the policies. Trade protectionism protects current industry incumbents and workers, at the cost of poorer future performance due to lack of competition. Unions attempt to lock in current jobs through numerous controls on work rules, slow or stop changes in technology and work processes that have the effect of eventually castrating the company (think GM). Socialized medicine tries to lock in the current standard of care for everyone, while reducing the possibility of future improvements. Redistribution attempts to lock in the current standard of living for everyone while reducing the possibility of future improvements. I discussed this more European model last week.
Obama has no concept of business as a creative and
experimental endeavor. On some deep unconscious level, he assumes that
material wealth is something akin to a natural phenomenon for which no
group of humans can take credit. Therefore, he sees distribution as the
only serious economic issue and ignores how politics interferes with
the actual process of wealth creation.
I always laughed at Democrats that tried to woo me to their party. Now
I laugh at Republicans too. MoveOn may get mileage out of attacking
Bush, but he has done more for the left/liberal cause than Clinton.
Clinton had NAFTA, welfare reform, and (moderated by an aggresive
Republican Congress) fiscal sanity.
Should I Vote? Yes, probably. Many libertarians refuse to vote. They refuse to be party to a choice between Coke-brand statism and Pepsi-brand statism. I sympathize, and respect their decision. You won't hear rants form me about the beauty of the right to vote. But I see two reasons for libertarians to vote. One is to find ways to register our existence, to try to communicate that just because we don't riot at WTO meetings doesn't mean that a great well of dissatisfaction does not exist among us. The second reason is ballot initiatives. While candidate A and B may be equally bad on the freedom scale, there is often a right answer for protecting freedom in the ballot initiatives, and they need your vote.
President: Libertarian Party Guy. Yeah, I know his name is Bob Barr. I don't even care. I am casting the vote for the idea, not the guy, in hopes that the Republicans, as they rebuild themselves over the next 2 years, might notice there are some libertarians out there looking for a home. It would be nice to be as excited about a politician as some folks are about Obama, but really, they are excited by their own vision, not his. We really know little about him, but my sense is that his every instinct about government run counter to mine. McCain is hardly better, perhaps going Obama one further by matching him on tax increases and economic nuttiness but also throwing in a dollop of conservative restrictions on non-economic civil liberties. And I think many of us are exhausted by the prospect of another 4 years of foreign-policy-as-penis-extension that McCain promises. US Congress: John Shadegg. If it weren't for Jeff Flake and Ron Paul, I would say Shadegg is about the best we libertarians can hope for of a major party candidate. Not perfect (he was one of the ones who knuckled under on the second bailout vote) but pretty good.
County Sheriff and City Attorney: Whoever is running against Joe Arpaio and Andrew Thomas. Seriously. I don't even know their names and I am voting for them. I am sick and tired of Arpaio's schtick (index of articles here). Anyone who can go on a crime sweep into the 99% all-anglo tony suburb of Fountain Hills and come out with arrestees who are 75% Hispanic is not even trying to be fair. Andrew Thomas has had Arpaio's back for years, fighting many (losing) civil rights cases for him and prosecuting his critics in the media.
PROP. 100 Protect Our Homes: Yes. I am not sure this is even that relevant. Prevents the imposition of taxes or fees on the sale of real estate (e.g. no real estate sales tax). Not sure if this is even a threat, but I will usually vote to limit the power of government.
PROP. 101 Medical Choice for Arizona: Yes. This proposition would effectively prevent state health care laws like that in Massachusetts that require medical coverage and mandate certain types of medical coverage. In Massachusetts, my current insurance plan (which I pay for and did a lot of research to uncover) is illegal (because it has a higher deductible that politicians want to allow).
PROP. 102 Marriage: Big No. I don't expect to change anyone's mind on this, but I am not in the least threatened by civil marriages of gays, and in fact have a number of friends and family members who have taken advantage of the brief window of opportunity in California to get married to their partner. I am not sure how this can be a threat to me -- last I checked, my marriage is as strong today as it was before gay marriage was allowed. This issue is sort of the conservative equivalent of the left's obsession with income inequality. Conservatives tell folks (rightly) that they should be concerned with their own quality of life and not feel somehow worse if there are people who are wealthier. But, then they tell us all our marriages are going to be worse because somebody over there who we never will meet is going to marry someone of the same sex.
PROP. 105 Majority Rules — Let the People Decide: Haven't Decided. This is a weird one. This would require propositions raising taxes to be passed only if the "yes" votes they receive equate to 50+% of the total registered voting population, not just of the people who voted that day. Basically, it makes it impossible to have tax increases in propositions, which I like. But it is a terrible precedent -- this is simply not how we count elections. In particular, the "registered voter" number is almost meaningless. Requiring a super-majority of those voting would be much better law. I may well vote yes, because I suspect the next 2 years are going to be a heyday of taxation, but I will sort of feel guilty about it.
PROP. 200 Payday Loan Reform Act. Yes. Would un-ban payday loan companies in Arizona. I have always supported choice, even for the poor and unsophisticated. Payday loans are expensive, but as we have learned from subprime loans, maybe credit to borrowers with no income or assets should be expensive. More here.
PROP. 201 Homeowner’s Bill of Rights. No. Created by a pissed off union in a fit of pique as an FU to homebuilders. Mandates decade-long warranties on homes, and offers a myriad of opportunities for trial lawyer hijinx. And what problem is it solving?
PROP. 202 Stop Illegal Hiring Act. Yes, I think. Again, this is one of those confusingly worded initiates that like to use triple negatives. But I believe it is a softening of the Immigration / hiring law that I have long opposed. (related: E-Verify reviewed here)
PROP. 300 State Legislators’ Salaries. No. Changed my mind on this. At first, I thought current salaries were unreasonably low. But now I think that they should all go out and get real jobs, and make the legislature part-time. Maybe they'll meet less often.
You know, when I was asked earlier about the issue of coal, uh, you know — Under my plan of a cap and trade system, electricity rates would necessarily skyrocket.
Even regardless of what I say about whether coal is good or bad.
Because I’m capping greenhouse gases, coal power plants, you know,
natural gas, you name it — whatever the plants were, whatever the
industry was, uh, they would have to retrofit their operations. That
will cost money. They will pass that money on to consumers.
To folks with any kind of background in economics, this has to be the case. Reducing the total output of current power plants, and thereby obsoleting all that investment and squeezing supply, at least in the medium term until new capacity of other types can be built, can only lead to a) rationing through blackouts or b) higher prices to ration the shorter supply. The cost of option a is so high that price is going to have to be the rationing mechanism. Skyrocket is actually pretty close to what would happen to rates if Obama sticks by his plan of limiting greenhouse gasses to 1990 or earlier levels. (His explanation is actually pretty poor for the mechanism - pass-through of retrofit costs would likely be minor to the supply / demand balancing effect of shaving 20/30% off supply in a short period of time.
I think a frank discussion of the dangers of a "pollutant" vs. the cost of abatement is a fair one. I personally think the threat of CO2 is wildly exaggerated, and the cost of doubling or tripling electricity costs will hurt Americans far worse than a few tenths of a degree of warming.
But don't get too excited. Obama is still living in economic never-never land on other related issues:
yes, there is going to be some increase in electricity rates on the
front end, but that over the long term, because of combinations of more
efficient energy usage, changing lightbulbs and more efficient
appliance, but also technology improving how we can produce clean
energy, the economy would benefit.
Sorry, but this is way wrong. Obsoleting perfectly good infrastructure and wholesale replacing it with trillions of dollars of new infrastructure does not help the economy any more than if a massive earthquake had destroyed the plants. This is the broken windows fallacy on steroids. The only benefit from all this cost will be whatever climate benefit we accrue from the CO2 reduction. For there to be such a benefit, one must assume a) substantial future warming and b) that the current temperature happens to be the best possible temperature we could ever be at. But that, as they say, is a whole other blog.
I am getting used to the new Typepad editor, but two issues still really cause me to question the sanity of the developers, particularly since this roll out has been going on since June:
I cannot believe that a blogging engine -- not a generic text editor or HTML editor, but a purpose built blogging engine -- would eliminate the blockquote functionality from the editor. Have these guys ever, you know, actually read a blog or two? We bloggers live off block quotes.
How long has the computing spelling checking been around? A couple of decades? About 10 minutes into that 20 year span, developers learned from users that in addition to a "skip" button, they probably needed a "skip all" button. Because if you write a 5000 word post on the banking crisis and use the "Bernanke" in that post 100 times, it is going to be real boring hitting "skip" 100 times in the spell check rather than "skip all" or even better "add to dictionary." But, the rocket scientists at Typepad did indeed only put in a "skip" option, a bit like Ford building a car in which the windows won't roll down.
The ethanol industry built tremendous production and transportation
infrastructure. It was a "if we build it, they will come" strategy. Then,
the world fell apart. Prices for gas at the pump are back down well
below $3 instead of being headed toward $5 as they were in August.
says it will keep operating, but common shareholders have been crushed
to death. The stock was at nearly $18 late last year. Now it is under
The only quibble I have is in the first sentence. I would would have written the ethanol strategy as "If we seek rents, they will come."