Carpe Noctem

2011-07-07T08:34:00.000-07:00

Green Technology

2010-09-28T16:28:00.000-07:00

This is green "technology" I can get behind - practical, cost-effective, voluntary, and last but not least, plain cool.

Hat tip to Radley Balko at The Agitator.

I Write Like...

2010-07-17T22:27:00.000-07:00

There is an interesting web site that claims to analyze a writing sample that you paste in, and tell which famous writer you write like, in terms of word choice and writing style. What algorithms they use, and how legitimate the whole thing is is anybody's guess, but I pasted ten samples from this blog, and seven of those were evaluated as David Foster Wallace. I admit without shame that I was not familiar with Wallace - something I am now determined to remedy - but from the Wikipedia page, here are some descriptions of him and his style that seem to match well:

Wallace's fiction is often concerned with irony
long multi-clause sentences
(humility alert!) able to ingest complex mathematics, logic and philosophy
incorporate jargon and vocabulary (sometimes invented) from a wide variety of fields

I wonder if I should be concerned that he hanged himself after a lifelong struggle with depression.

The other three samples I pasted in were likened to H.P. Lovecraft (cool!), James Joyce (blah!), and Dan Brown (heaven have mercy!).

On the other hand, as a control, I tested the following:

the first four paragraphs of this work by Hemingway, and the result was Neil Gaiman
the first four paragraphs of The Sensible Thing by F. Scott Fitzgerald, and the result was Ray Bradbury
the first page or so of A Perfect Day for Bananafish by Salinger, and the result was... David Foster Wallace (seems I am in fine company!)

Thus, entertaining as this may be, I judge it a cheap play on pareidolia, not that much different from a horoscope or a psychic reading, although unlike the latter two, this could become something neat if it is fed more texts, and its parameters are refined. Have fun with it.

Reality Bites

2010-05-30T08:15:00.000-07:00

A fool and his money are soon parted, the wisdom goes. That does apply to said fool's future earnings, for all those fools out there who have not gotten the memo. Example: this fool, or pair of fools - mother and daughter - who ~~thought~~ chose not to think, but rather believe that spending $200K that they did not have on a degree from a top-notch school (NYU) in... wait for it... religious and women's studies!... was a great investment, because the precious snowflake could not attend a cheaper school.

Now the snowflake is on the hook for $100K, which is all but impossible to discharge even in a bankruptcy, and - shocker! - feels like someone should have stopped her from being a moron. "It feels wrong to me." Fair enough - for a reasonable fee, and a release form from prosecution for battery, I am willing to beat (including physically, when necessary) into any future young people like Ms. Munna some common sense. That will necessarily include some insight like:

1) The fact that something sounds like a great idea does not make it such.
2) See 1) - When you pay for something, you ~~may~~ REALLY want to figure out what it is worth to you.
3) See 2) - When you commit to pay for something, there are no do-overs. Unless you are a government (like Greece). Or unless you can throw a big enough temper tantrum to get a bailout from... wait for it... the government!
4) See 3) - When you get relief, help, a bailout - that means someone else who was not as dumb as you conveniently claim to be right now has to pay for your mistakes. Where does that fit into the religious and women's empowerment concepts you learned, Ms. Munna? Somewhere in between Psalm 37:21 ("The wicked borrow and do not repay...") and Camille Paglia ("“Capitalism is an art form, an Apollonian fabrication to rival nature. It is hypocritical for feminists and intellectuals to enjoy the pleasures and conveniences of capitalism while sneering at it. Everyone born into capitalism has incurred a debt to it. Give Caesar his due.”)?

A New Germany

2010-04-13T17:58:00.000-07:00

Maybe, just maybe, there is hope for Europe - and I mean this as a geographical, not as a political term. Of course, the plural of "anecdote" is not "data", but... there have been enough anecdotes lately like this one. Money quote: "Germans feel they have paid both their reparations and their dues, “and many times over,” said Ms. Stelzenmüller, especially in an uncertain time of globalization and financial crisis. “People want to be normal, in the sense that other people don’t come to us first and say, ‘You have to pay.’ And it doesn’t have much to do with political orientation. All of us are huddling with our backs against the storm.”

Germany is outgrowing its guilt complexes, and beginning to question how long, for bleep's sake, the reparations will last. Of course, the last time this kind of questions popped up the outcome was very ugly. It probably will be this time too. We are, of course, not talking German divisions marching left and right through Europe - this is kind of passé in these days. But European cities may still be smoldering, most prominently Athens - set ablaze by its own unhappy citizenry. This can of worms was kicked about 7 months down the road by the latest bailout given to Greece - Merkel caved in, and probably will have to surrender the proverbial pound of flesh at the ballot box soon enough. But to hope Greek politicians have all en masse had road-to-Damascus moment recently is beyond naive. The only big question remaining, in my humblest opinion, is whether Greece (again), or someone else (Portugal?) will be the next to come to Brussels (read: Berlin) hat in hand.

This is not a train wreck in slow motion. It's Titanic meets iceberg in slow motion, with Germany in the role of Kate Winslet's Rose, who survives with the bulk of her wealth (the precious jewel) intact, but the love of Jack Dawson (most of the rest of Europe) turned ice-cold by the plunge into ice-cold Atlantic (economic reality).

Your Tax Money at Work

2010-02-08T19:18:00.000-08:00

Stop the presses, newsflash, groundbreaking research unveiled: people are afraid of losing money, and it has something to do with their brains.

The scientific feat has been achieved by studying 2 (yes, that is indeed two) subjects - both female, both with a serious genetic defect - and comparing their behavior in a lab test with that of 12 (yes, that's twelve) other people.

You know, it does not matter that economists have suspected something like that since Harry Markowitz proposed the portfolio selection theory in 1952. It matters even less that statisticians have developed this weird concept of representative samples in order to deal with inference from anecdotal evidence. What does matter is that you can get a nice grant and career advancement opportunities by documenting quasi-research that shows support of a well-known fact on OPM (other people's money). Considerations such as, say, the subjects' incomes and wealth (actually, full financials - balance sheet, income statement, and cash flow ) - known to affect risk aversion - are just trifling, nitpicking details. Why should we correct for exogenous variables, if the "research" will create buzz anyway? Just read the damn paper, and clap, rubes. Oh, yeah, and write a check for a follow-up study - who knows, we may discover something even crazier - say, that people (probably because of their brains, but you never know) enjoy winning money...

Wisdom in Cartoons

2009-12-06T02:52:00.000-08:00

Danish Taxes

2009-12-06T01:20:00.000-08:00

According to Wikipedia, "Denmark, with a mixed market capitalist economy and a large welfare state, ranks according to one measure, as having the world's highest level of income equality. Denmark has the best business climate in the world, according to the US business magazine Forbes. From 2006 to 2008, surveys ranked Denmark as "the happiest place in the world," based on standards of health, welfare, and education." The country is also pretty high in the GDP per capita and employment rankings. It pays generous unemployment benefits, and has free universal health care.

How is this utopia paid for? What a shocker - taxes. As of 2010, the top marginal rate of 42%, and the VAT is 25% (source). What's going on here? Something's gotta give, and sure enough, something does. Young Danes are leaving in droves - leaving, that is, after getting free education, which also includes English proficiency. From the article:

"The Organization for Economic Cooperation and Development, which is based in Paris, projects that Denmark’s growth rate will fall to an annual rate of slightly more than 1 percent for the five years beginning in 2009, reflecting a dwindling supply of a vital input for any economy: labor... studies suggest that about 1,000 people leave the country each year, a figure that masks an outflow of qualified Danes and an inflow of less skilled foreign workers who help, at least partially, to offset the losses."

Who would have thought that when you tax something, you get less of it? So when you tax productive people heavily, and pay others generously not to work... Gee, this is getting complicated. This is the point at which most politicians would stick their fingers up to their elbows in their ears, yell "La-la-la-la, I cannot hear you!", and hope you buy all the BS about the joys of equality and security - which are guaranteed if you only (re-)elect them, and doubly guaranteed if you only let them tax and spend more.

As a parting note, consider that 67% is not the total tax burden you pay in Denmark. The tax rate on non-electric vehicles is 200%, as noted by Dr. Perry at Carpe Diem. There is tax on income from securities, corporate tax, and property tax.

As some poet with economic literacy (or economist with poetic talent) wrote:

Tax his land, tax his wage,
Tax his bed in which he lays.
Tax his tractor, tax his mule,
Teach him taxes is the rule.

Tax his cow, tax his goat,
Tax his pants, tax his coat.
Tax his ties, tax his shirts,
Tax his work, tax his dirt.

Tax his chew, tax his smoke,
Teach him taxes are no joke.
Tax his car, tax his grass,
Tax the roads he must pass.

Tax his food, tax his drink,
Tax him if he tries to think.
Tax his sodas, tax his beers,
If he cries, tax his tears.

Tax his bills, tax his gas,
Tax his notes, tax his cash.
Tax him good and let him know
That after taxes, he has no dough.

If he hollers, tax him more,
Tax him until he's good and sore.
Tax his coffin, tax his grave,
Tax the sod in which he lays.

Put these words upon his tomb,
"Taxes drove me to my doom!"
And when he's gone, we won't relax,
We'll still be after the inheritance tax.

However, if something cannot go on forever, it will stop (Stein's Law), and socialists always run out of other people's money.

Quotes of the Day

2009-12-02T18:08:00.000-08:00

"No lesson seems to be so deeply inculcated by the experience of life as that you should never trust experts. If you believe doctors, nothing is wholesome: if you believe the theologians, nothing is innocent: if you believe the soldiers, nothing is safe. They all require their strong wine diluted by a very large admixture of insipid common sense."

"After all, the great characteristic of this country is that it is a free country, and by a free country I mean a country where people are allowed, so long as they do not hurt their neighbours, to do as they like. I do not mean a country where six men may make five men do exactly as they like. That is not my notion of freedom."

"On general grounds I object to Parliament trying to regulate private morality in matters which only affects the person who commits the offence."

"There is no danger which we have to contend with which is so serious as an exaggeration of the power, the useful power, of the interference of the State. It is not that the State may not or ought not to interfere when it can do so with advantage, but that the occasions on which it can so interfere are so lamentably few and the difficulties that lie in its way are so great. But I think that some of us are in danger of an opposite error. What we have to struggle against is the unnecessary interference of the State, and still more when that interference involves any injustice to any people, especially to any minority. All those who defend freedom are bound as their first duty to be the champions of minorities, and the danger of allowing the majority, which holds the power of the State, to interfere at its will is that the interests of the minority will be disregarded and crushed out under the omnipotent force of a popular vote."

- Robert Cecil, 3rd Marquess of Salisbury.

Subliminal Messages

2009-11-22T23:39:00.000-08:00

This is pure genius, and funnier still when you speak Russian.

H/T Depleted Cranium.

Hero of the Day

2009-11-19T18:50:00.000-08:00

Dog present or not, when you are 91, and naked, and you not only scare the crap out of a 26-year-old burglar, but hold him at gunpoint until police get there to cuff him, you deserve a drink and a hat-tip. Well done, Mr. Thompson!

What Are They Smoking At Burger King?

2009-10-09T17:50:00.000-07:00

Burger King, a venerable burger joint (if a chain with 12,000 outlets can be called that) is revamping its restaurants to give them "an upmarket feel". Huh? The thinking must go something like this: "We hate to be competing with McD and Wendy's... Let's go upscale and incur a cost disadvantage that will price us out of this market and go compete with Ruby Tuesday and Applebee's (perception-wise), and with Pizza Hut and Domino's (value-wise)."

Now, in my humble opinion, BK has the best french fries of all burger chains, and their burgers are pretty damn good. They had a lot going for them, not least brand equity - recall a famous Pulp Fiction dialogue? However, whoever is mapping their corporate strategy is smoking something really, really good. Many companies suffer an identity crisis at some point, and try to reposition themselves. There are good ways to do it. There are bad ways to do it. And then (to quote Al Gore) there is that little known third category that includes Burger King - the phrase "unmitigated disaster" comes to mind.

Let's try to see some of their advertising efforts:

This? Really? They share a golden shower?
This? Really?? The last time I wanted to wake up with a man in my bed was... I'll get back to you on this one, but do not hold your breath.
This? "So special, people may think you're special?" Are we positioning a friggin' BK burger as "what-I-do-not-eat-to-avoid-getting-assaulted-by-psychotic-bitches"?
This? Wow, edgy! Simon & Garfunkel! Mostly Garfunkel, of course. Was Bob Dylan not available?
This? Oh no, this is just too rich... "I like square butts and I cannot lie?" "Phone book implants?" "A butt with sharp right angles?" "He's so spongy?" "Shake that cubicle butt?" "Bob got it goin' on, been known to rock him a thong???!!!" I am.... bemused.
This? And my inner cowboy has what exactly in common with women with mustaches?
This? Maybe I don't?
This? Midgets and "jugs"? Classy!!!
This? There was something there, right up to the "EAT THIS MEAT" part... Yeah, and the 0:37 part where you need frame-by-frame replay to make sure that there was no hand-to-crotch action going on. And the "till my innie turns into an outie" part. And the "I need to stuff a big burger beef jalapeno good thing down" part.
This? The peep-show patron special. When you are so dumb you have not discovered the internet for your porn needs... you may just need a BK burger too. The combination of a sultry male voice and "a very generous king"... touche!
This? Right!!! Piss off one half of your potential customers with a sexist ad...
This? The nipple pinch? "They took my nipples?" I feel so... Well, I know there is a word out there for what I feel, and I'll find it one day. Suffice it to know, it's not a kind word.

Really, Burger King, what is your target customer base again? Maybe, just maybe, even the imperfect financial markets smelled a real stinker (sinker?) here.

In a Parallel Universe Called Washington, DC

2009-10-05T04:14:00.000-07:00

Sen. Benjamin L. Cardin (D-Md.), has this profound insight about the health care bill: "The larger the bill is, the more it's going to save." Just so we do not decide he may be kidding, the genius senator adds emphasis: "and that, he said, is the key", according to the linked WaPo article.

I am going to look for my jaw in the basement.

Quote of the Day

2009-09-26T23:03:00.000-07:00

"It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head." - Warren Buffett on gold.

I May Be Crazy...

2009-09-24T17:58:00.000-07:00

... but at least I am not the only one. Here is what Julian Robertson thinks. According to his profile, this gentleman's hedge fund had gross compounded return of 31.5% between 1980 and 2000, and he closed his fund before the dotcom bubble burst. In 2008, Fortune reported that he had seen 400% return since he had closed the fund. It's hard to argue with such a record - you listen to a man like this, even if you do not agree with everything he has to say. Of course, politicians and bureaucrats who have hardly made an honest buck in their lives (Timmeh!) know better, and insist we have to spend more, begin to buy houses again, and while we are at it, allow them to "reform" health care as they see fit... because their track record is... oh, who cares, just let them do it finally, okay?!

A few weeks ago, Richard Russell of the Dow Theory Letters (subscription required) had this to say:

"Let me get this straight -- Obama's health care plan will be written by a committee whose head says he doesn't understand it, passed by a Congress that hasn't read it, and whose members are exempt from it, signed by a president who smokes in secret, funded by a treasury chief who did not pay his taxes, overseen by a surgeon general who is obese, and funded by a country that is broke.

What could possibly go wrong?"

Robertson says the U.S. has to "quit spending, cut back, start saving, and scale backward". But that does not re-elect politicians - quite au contraire. Thus, while the American consumer/taxpayer is doing just as Robertson suggests, the US government is doing it's darnedest to offset it by spending, expanding, borrowing, and "scaling forward". Much as I hate to bet against the Fed and the Treasury, I cannot help but tip my hat to Robertson's steepener bet. In his own words: "I've made a big bet on it. I really think I am going to make 20 or 30 times... I'm amazed at the amount of money the government is throwing at this thing. You don't even react anymore unless somebody's talking about $1 trillion. I genuinely admire the administration's courage in doing what it's doing, but not the wisdom of it. I look at the TALF (Term Asset-Backed Securities Loan Facility) program, for example, and it's almost a bribe to get people to put on more leverage ... I ask anyone to give me an example of an economy beefed up by huge amounts of quantitative easing that did not inflate tremendously when or if the economy improved. I think what we're doing now will either fail, or it will result in unbelievably high inflation - and tragically, maybe both. That would mean a depression and explosive inflation, which is frightening."

Hear, hear!

About Obama and Health Care

2009-09-11T20:29:00.000-07:00

President Obama's speech on health care (full text here) was not a big surprise - lots of smoke and mirrors on costs, a perfunctory attempt to bring a couple of Republicans on board with a vague promise on tort reform, some posturing, and (pardon the profanity, and expect more) a big hearty fuck-you to young people.

"Now, even if we provide these affordable options, there may be those -- especially the young and the healthy -- who still want to take the risk and go without coverage... The problem is, such irresponsible behavior costs all the rest of us money. If there are affordable options and people still don't sign up for health insurance, it means we pay for these people's expensive emergency room visits."

The young and the healthy cost us money? This is patent fucking bullshit of jaw-dropping proportions. Obama is demonstrably ignorant about basic economics ("profits and earnings ratios"?!), but even he does not believe such tripe. Here's a neat chart of health care costs broken out by age in several countries - and in the US those 75 and older use well over half of the spending. On average, the young and healthy uninsured simply do not pay for the unhealthy old. The government needs the cash and good actuarials of the young to push guaranteed issue and community rating on the insurance companies without bankrupting them promptly. Obama, of course, cannot say that, so he has to resort to a blatant lie, hoping enough of hoi polloi are economically challenged enough not only to not catch it, but also to tune out when the experts call him on it. Puke break.

"Unfortunately, in 34 states, 75 percent of the insurance market is controlled by five or fewer companies. In Alabama, almost 90 percent is controlled by just one company. And without competition, the price of insurance goes up and quality goes down. And it makes it easier for insurance companies to treat their customers badly -- by cherry-picking the healthiest individuals and trying to drop the sickest, by overcharging small businesses who have no leverage, and by jacking up rates.

Insurance executives don't do this because they're bad people; they do it because it's profitable."

In Alabama, that would be Blue Cross Blue Shield Alabama, which is a non-profit. Thus, they do not do it because it's profitable. They probably control the market because they do a good job and offer the best rates, and because regulation at the state level prevents others from selling insurance there. Care to try again? Puke break.

"...we've estimated that most of this plan can be paid for by finding savings within the existing health care system, a system that is currently full of waste and abuse."

As Arnold Kling noted: "And if we don't pass this plan, does he intend to keep the waste and inefficiency, out of spite?" How about first eliminate the abuse and waste, show us the bundle of money saved, and then propose ways to spend it? To propose to pay for a new health care program by making a fucked-up older one run as it should does not exactly inspire high trust in your ability to run health care programs... or any other programs. Departments of Energy and Education... Social Security... Medicare... For Christ's sake, "cash-for-clunkers" has pushed some dealers to the brink of insolvency as they wait for reimbursements. And these people want to run health care. Puke break.

"Now, much of the rest would be paid for with revenues from the very same drug and insurance companies that stand to benefit from tens of millions of new customers."

Customers, eh? I suppose you can call us (I am one of those young, healthy uninsured - the irresponsible prick, you know, who has used $0.00 of health care in the last 10 years) that, much like someone arrested for public intoxication is a "customer" of the county jail. Puke break.

"Now, I don't believe malpractice reform is a silver bullet, but I've talked to enough doctors to know that defensive medicine may be contributing to unnecessary costs. (Applause.) So I'm proposing that we move forward on a range of ideas about how to put patient safety first and let doctors focus on practicing medicine. (Applause.) I know that the Bush administration considered authorizing demonstration projects in individual states to test these ideas. I think it's a good idea, and I'm directing my Secretary of Health and Human Services to move forward on this initiative today. (Applause.)"

Oh, my, what a staunch commitment! It's already a couple of days past, and I have not heard Sebelius' plans to test the blindingly obvious - that $200K/year malpractice insurance premiums increase the cost of care (through defensive medicine) and drive physicians out of business. Puke break.

"For some of Ted Kennedy's critics, his brand of liberalism represented an affront to American liberty. In their minds, his passion for universal health care was nothing more than a passion for big government. "

Damn right it was. Extended puke break.

"But those of us who knew Teddy and worked with him here -- people of both parties -- know that what drove him was something more. His friend Orrin Hatch -- he knows that. They worked together to provide children with health insurance. His friend John McCain knows that. They worked together on a Patient's Bill of Rights. His friend Chuck Grassley knows that. They worked together to provide health care to children with disabilities."

Sheesh, those right there might be a good part of any thinking person's reason to despise the Republicans too. The cream of the douchebag cream. Major puke break.

"That large-heartedness -- that concern and regard for the plight of others -- is not a partisan feeling. It's not a Republican or a Democratic feeling. It, too, is part of the American character -- our ability to stand in other people's shoes; a recognition that we are all in this together, and when fortune turns against one of us, others are there to lend a helping hand; a belief that in this country, hard work and responsibility should be rewarded by some measure of security and fair play; and an acknowledgment that sometimes government has to step in to help deliver on that promise."

And, if the helping hand is not extended, we will have the government twist it, and, if necessary, rip it off? It's not easy to puke and curse at the same time.

"You see, our predecessors understood that government could not, and should not, solve every problem. They understood that there are instances when the gains in security from government action are not worth the added constraints on our freedom."

This almost makes sense, but is, of course, unadulterated bullshit. Our predecessors understood more than that. They understood that the government could not, and should not solve MOST problems. Puke break badly needed, but postponed in expectation of the coup de grace.

"But they also understood that the danger of too much government is matched by the perils of too little; that without the leavening hand of wise policy, markets can crash, monopolies can stifle competition, the vulnerable can be exploited. And they knew that when any government measure, no matter how carefully crafted or beneficial, is subject to scorn; when any efforts to help people in need are attacked as un-American; when facts and reason are thrown overboard and only timidity passes for wisdom, and we can no longer even engage in a civil conversation with each other over the things that truly matter -- that at that point we don't merely lose our capacity to solve big challenges. We lose something essential about ourselves."

Those same predecessors also crafted a Constitution, which enumerates what the government MAY do, not what it MAY NOT do. It has no exceptions for carefully crafted and beneficial measures or for people in need. The government has no monopoly on facts or reason; moreover, most of the time it has neither. Reagan put it best: "The best minds are not in government, if any were, business would hire them away." And civil conversation necessitates the right of all parties to turn around and walk away without being robbed. Nothing left to puke... just a mixture of disbelief, bitter anger, and sadness.

Milton Friedman on Government Spending

2009-09-03T15:54:00.000-07:00

Think about that next time someone on government payroll tells you that the government adds value.

HT: Dr. Mark J. Perry at Carpe Diem.

On The Nature of Liberty

2009-09-02T17:26:00.000-07:00

A brilliant, if I may say so, analysis of liberty and self-determination in a libertarian society. Consent is the key, and withdrawn consent can be discouraged only by civil litigation for damages, not through aggression.

Are there problems with a libertarian society? Sure. There is no perfect society. Libertarian ideas, however, overwhelmingly point the way to a better society these days - we just have too much government, and it is growing to overtake functions that belong with the private citizen.

Cash For Clunkers

2009-08-23T14:44:00.000-07:00

Hard to add much to this. Next proposal: add to the federal first-home buyer subsidy a second-home buyer subsidy, which kicks in if you credibly destroy the plumbing and and electrical wiring of your old "inefficient" home, as long as the new home's electric and utility bills are 10% lower. Of course, you can still re-sell the wood and the roof shingles - that's okay.

Paging Ray Bradbury

2009-08-15T00:19:00.000-07:00

I have been a non-rabid fan of good science fiction for a long time. It challenges, makes you think, puts things into perspective... and entertains. My taste in sci-fi is peculiar, and changing - for example, I was never blown away by Asimov and Bradbury, got disappointed eventually in Orson Scott Card, developed a liking for Heinlein late (although it keeps growing), and I adored Robert Sheckley. Lately, I find my appreciation for sci-fi tilting towards a different aspect of it: it appears elements of its more dystopic visions begin to materialize around me. Without further ado, I tip my hat ever-so-slightly to Ray Bradbury's foresight - coming to a bookstore or library near you, courtesy of the US government, bookburning. You could have almost missed that hat tip, and there is a reason for it - Bradbury stated that "451 Fahrenheit" was not about censorship, but about how television destroys interest in reading literature.

Bradbury is, of course, entitled to his interpretation. Perhaps he picked up a meme without fully realizing it - a testament to his keen perception, if not his sharp intellect - and his creation took on a life of its own. I see it differently. I am not in the least bothered by people glued to their TV's, iPods, or gaming consoles. Such is human nature, and throughout history the vast majority of people have lacked the interest and capacity for elitist, intellectual, abstract knowledge, which was until recently almost exclusively stored and distributed in the form of paper artifacts. I am profoundly bothered, however, when the government restricts access to knowledge.

So, back to our modern-day Guy Montags. I am not a conspiracy theorist, and thus I do not think what the article describes is, per se, outright censorship. These books are just victims of the crackdown on things that those who have been given the power to crack down on things think they ought to be cracking down on, and of the law of unintended consequences. What does get my panties in a bundle, however, is that it does have an element of censorship. It is this element that bothers me, as I expect the modern "firefighters" will soon sense it, and see it a feature, not a bug. What I mean is that by "protecting" little Johnnie and Jane from books printed before 1985, the Agent Smith's are also preventing them from learning about any number of realities from the world before political correctness, multiculturalism, environmentalism, gun control, etc., took hold. Bingo, we are on the proverbial slippery slope. How long do you think it'll be before protecting children from noxious lead-infused illustrations extends into protecting them from noxious thoughts and ideas? Something along the lines of "reading books has been found to contribute to sedentary lifestyle, and hence obesity, therefore thou shalt not read" is not as far out as it seems. That's the danger - the slow creep of the "you may not do it for your own safety" argument as acceptable. When the government gets a tool/weapon, it uses it, sooner or later.

Before you think I am hyperventilating in the paranoid grips of a bad LSD trip, think about pubs in the UK (and increasingly elsewhere). A staple of the British lifestyle, if there is any, and yet a thorn in the side of health Nazis, who prefer a healthier tax base that costs less and pays more in taxes without discussing it too much over a pint. Banning pubs and bars immediately would lead to a revolution, and that's not an exaggeration. So... let's ban smoking there on the grounds that "it's for your own good". Not a ban, sure, but enough to shrink the customer base enough to make many of these fine establishments unprofitable, as enough smokers get tired of shivering in the rain outside to get a puff, evicted from a private property the owner of which would gladly admit them, were not his or her license on the line. Unsurprisingly, pubs are going out of business, and the government has achieved its goal through the back door, without torches and pitchforks being shaken outside Westminster.

I have put Aldous Huxley's "Brave New World" and Orwell's "Nineteen Eighty-Four" and "Animal Farm" near the top of my (re)reading list. I am currently reading Vernor Vinge's "Ungoverned".

Quote of the Day

2009-07-12T05:32:00.000-07:00

Democracy is the theory that the common people know what they want and deserve to get it good and hard. - H. L. Mencken

Cashless Japan

2009-07-03T21:09:00.000-07:00

In Japan, they are not messing around - the Japanese government appears to be considering the abolition of cash. This is evil that everyone remotely concerned about freedom should be willing to rise in arms against.

As can be expected, the idea is sold as kind of cool, sci-fi, futuristic, avant-garde to hoi polloi. A noble justification is ready for the slightly more sophisticated - "we" need to fight the evil deflation. This is BS of epic, retch-inducing proportions.

The Japanese government is drowning in enormous and growing debt, even though Japan has the highest corporate tax rate in the civilized world, and is no tax haven by any stretch of the imagination when it comes to personal taxes. It is becoming increasingly hard to squeeze more taxes out of the Japanese economy. The Yen has been strengthening, which is a millstone on the neck of the export-oriented Japanese industry. The population is shrinking, especially that of working (and tax-paying) age. Furthermore, the Japanese have been enjoying a Clinton-style peace dividend for the last six decades in terms of light spending on defense - "we are pacifists now, let the Americans defend us". Yeah, well, now they've got a very assertive, industrialized China next door, a nut job in North Korea, and a "new" America that does not seem to be as eager to defend them - even if it formally keeps them under a nuclear umbrella. What's a government to do?

Borrow and spend? It tried the Keynesian prescription in the 90's, spending over 100 trillion yen in 10 fiscal stimulus packages. That did not help, since the spending was concentrated into politically favored industries, notably construction, which took a vicious hit in 1989-1992, with real estate prices falling by 80%. Only a government bureaucrat-genius can think you can cure a burst oversupply bubble by supplying more of the good that you have a glut in. A good chunk of the money also went into keeping zombie companies "alive", even though they could never realistically be expected to become profitable and viable again. Even Paul Krugman, back when he was a reasonably bright economist, wrote: "Japan's postal savings system which channels money into public works projects that have little if any social payoff, is monumentally inefficient; so is the practice of rolling over the debts of companies that will never regain profitability and hence keeping capital employed producing what nobody wants." (Krugman 2001) What those stimulus packages did accomplish was to predictably and spectacularly expand public debt to unheard-of proportions. So to borrow now is kinda difficult, and it would help as much as it did in the 90's, unless you believe that politicians can stop being politicians.

Inflate? The monetarist prescription was tried as well. The discount rate was lowered from 6% in 1990 to 0.5% in 1995, and held there for five years. M2 grew in this period at about 2.5% per annum. This did not translate into commensurate credit expansion - the banking system was clogged with bad loans. Even an abbreviation solution was tried - yes, TARP, TALP, PPIP, etc. have a venerable predecessor - the Fiscal Investment and Loan Programme (FILP), which tried to extend loans by bypassing the banks, and loaning directly to businesses. Extend them it did, but surely enough mostly to the businesses best connected to the LDP, not to the ones that generate growth.

Shrink, cut spending, and deregulate? Okay, comical relief break over. That would be a bit too Austrian, we cannot have such nonsense.

So... the government needs to stimulate consumption, which is politically easier to tax than savings. What's the best way to do that? Stealthily tax savings. Two-birds-with-one-stone solution, if there ever was one. If you remove cash from the economy, and then make interest rates negative, those evil people do not have the notorious option of stuffing cash in mattresses, which is every Keynesian's nightmare. Being able to deny access to money with a phone call to their banker to anyone who you do not like is just an added feature which would never be abused, right? Right? RIGHT?

The scary part is that Japan is already deemed a "testing ground". Which means, if history is a guide, that this is coming soon to an economy near you. It's just too good for any government to pass up.

"Meat Free Monday" by Paul McCartney

2009-06-21T09:49:00.001-07:00

Paul McCartney wants you to bow to the altar of health and environmentalism, and observe the Meat Free Monday. Homer Simpson notably exclaimed once upon a time: "Rock stars... is there anything they don't know?"

Dude, you were cool and cutting-edge 45 years ago, and that was mostly by piggybacking on John Lennon. Now you wanna do the same with Bono - he may be an economic ignoramus too, but at least he was mostly original. Go spoon with Al Gore.

I hereby announce and begin promoting Paul McCartney Free Decade.

These People Want to Run Healthcare Too

2009-06-21T09:39:00.000-07:00

Another moment of sheer brilliance from the U.S. Congress - we can get more people to visit the USA by... charging them $10 each in order to tell them to do so. Words fail me.

Word of the Day

2009-06-14T09:43:00.000-07:00

Pareidolia - basically, the tendency of the human brain to search for meaningful patterns in
random, meaningless data.

Quote of the Day

2009-06-06T16:13:00.000-07:00

"Fear is the key element for the IRS in achieving its mission. Without fear, the IRS would have a difficult time maintaining our so-called system of voluntary compliance..." - Santo Presti, former IRS Criminal Investigation Agent.

H/T Strike The Root

The Bond Vigilantes Are Back

2009-05-30T07:08:00.000-07:00

Who woulda thunk? The bond vigilantes are back. Of course, "bond vigilantes" - negative connotations and all - are just investors with a healthy dislike for being screwed over, even if the Fed promises it will pull out in time. One must wonder if Timmy and the Lords of the Underworld really believe bond investors are about as gullible as girls on prom night. Quote: "The surge in the 10-year note is especially notable because its rate helps to determine mortgage lending rates. The Fed is desperate to keep mortgage rates low to reflate the housing market, and last week it promised to inject hundreds of billions of dollars more in this effort. This week the bond vigilantes are showing what they think of that offer, bidding up yields even higher."

The yield on T-Notes hit 3.7%, while current Wall Street lore says that Timmy and Ben want to keep it near 3% to prop the housing market. Makes perfect sense - who would want a market-clearing price, markets are so passé. We would not want a market to self-correct quickly, much better to keep it deflating for years and avoid those scary pops.

History is also passé. Last time the Fed Funds Rate was kept under 2% for 3 years from Dec 11, 2001 till Nov 10, 2004 (and under 1.5% for 1.5 years from Nov 6, 2002 till Aug 10, 2004) we got... that's right, a huge asset bubble. But, as Sir John Templeton would say, "The four most dangerous words in investing are 'This time it's different." This time, the Fed Funds Rate has been at 0-0.25% since Dec 16, 2008 - the idiots did not even have the cojones to call it 0%, and had to bullshit about targeting a range now, eliciting smirks from professionals who had been watching the bond markets for decades. That's not cheap money - that's free money. Is the expectation that all those who got burned in the CDO implosion are going to think "You know, we were wrong, those things are good, after all, let's pile back into them?" Says Ed Yardeni:"Ten trillion dollars over the next 10 years is just an indication that Washington is really out of control and that there is no fiscal discipline whatsoever." Bonds normally do well in times of recession with low inflation. For Q1, US GDP tanked at a 5.7% annual rate, and mild deflation was reported, yet bonds are selling off - anyone dare take a guess as to what kind of inflation expectations are baked into this turd cake?

We are being set up for a massive flight from the US dollar and dollar-denominated assets. When that happens (remember the commodity bubble), you get bubbles everywhere, becasue of the sheer size of the outflows. Watch oil, which has just about doubled from the bottom. Watch the commodity currencies - the Canadian and the Australian dollar. I profess lack of trust in and understanding of gold, but watch that too.

Pravda, nyet?

2009-05-17T23:17:00.000-07:00

This comes from Pravda... Join me in my drunken sobbing.

H/T to Counting Cats.

Bill Gross Wants In Too

2009-04-06T00:45:00.000-07:00

Bil Gross of PIMCO fame (soon to be infamy?) wants in on the gang rape of the American taxpayer, and he even has shaved for the occasion. Quote: "PIMCO would not dispute the need to further capitalize systemically important banks via convertible bonds held by the government, which unfortunately dilute shareholders’ interests. To go further, however, and “haircut” senior debt or even existing preferred stock similar to that issued via the TARP would create an instability policymakers should not want to risk." The much worse news is Bernanke seems to be buying this (badly-)flavored sewage. By now, probably the only entities with exposure to Shittygroup are probably AIG, the Fed, and PIMCO, judging by Gross' Quagmire-ish horny groveling. He deserves not a haircut, not a mustache shave, not a Brazillian bikini wax, but a full-blown beheading, along with anyone dumb enough or cheeky enough to be still exposed. There was plenty of time to pull out, pun very much intended. Yes, I know, a whole lot of pension funds and insurance companies would take a size 16 boot in the crotch (like they have not already!), and the boomers - the richest generation in human history - will be able to spend less on golf and cruises. I am fresh out of sympathy - let them check again when they prove they can behave as adults and vote into office something higher on the evolutionary ladder than toe fungi.

Read also about Gross' "shake hands with Uncle Sam" pickup line, and excuse me while I throw up and take a two-hour shower, which I know will not make me feel any cleaner or less violated.

We Are So F*#@ed

2009-03-29T03:24:00.000-07:00

Are you an American? Or maybe you just live and work in the USA? Or maybe you live elsewhere, but hold US dollar-denominated assets? If you answered yes to any of these, follow-up question: have you been feeling optimistic lately? Yeah, well, snap out of it now. Timmy and the Lords of the Underworld - Tim Geithner, Ben "Helicopter" Bernanke, and our glorious POTUS Obama - have just pillaged and raped you in a manner and to an extent that would make flagellum dei Atilla the Hun and Genghis Khan look like benevolent amateurs, and Bernie Madoff like a harmless two-bit hustler. John P. Hussman describes the PPIP - Public-Private Investment Program (I am not even gonna try to ponder what genius came up with the "public-private" oxymoron) well here. The key number from his excellent analysis: $10-14 trillion - the amount for which US taxpayers have been put on the hook for. Feel raped yet? And no lubrication is forthcoming, mind you. This is a pretty conservative estimate, which, somewhat implicitly, assumes that housing prices have bottomed out. Is that so? Subprime mortgages have by and large already reset, and it is believable that we have seen the worst of the foreclosures from those. However, the option ARM's and Alt-A tsunami is about to hit, and hit hard, and that's not even giving a thought to commercial real estate.

In Retard Timmy's parallel universe:
1) The banks are not lending.
2) They are not lending because they are stuffed up their eyeballs with bad assets.
3) The assets are bad because the market does not appreciate that they are actually good.
4) Ergo, if the banks are helped to unload those assets, they will lend again, and the economy will recover.

In our universe, meanwhile, the banks are lending, just not quite as much as before, mostly because they have come to the realization that lending to borrowers who are unlikely to repay is not all that smart. What is not "lending" is the securitization markets, which at the peak of the craze provided more funding to the economy than the banking system. Good luck reviving that charred corpse. Also in our universe, the bad assets are really pretty damn bad.

Oh, wait, you do not feel royally screwed yet? Here's an example of how the PPIP will work, with made up, but plausible numbers. Bank X holds a boatload of bonds that the market values at 25 cents on the dollar. The Fed and the FDIC give investor Y (not you or me, there are requirements to qualify - $500 mln in private capital and $10 bln in eligible assets under management) non-recourse loans so Y can leverage 6:1. It may actually be 12:1, since the rules are a bit unclear, but let's assume 6:1 - that's horrible enough. Thus, if Y buys the junk for 70 cents on the dollar, he/she puts up 10 cents, and the taxpayer is shafted for the rest. The 10 cents is Y's maximum loss, and that's if the asset goes down to zero in value. There is very little to prevent X from lending Y the money for this - in fact about the only protection is "Asset managers may not purchase eligible assets from sellers which are affiliates of such asset manager or of any private investor which has committed at least 10% or more of the aggregate private capital in the PPIF." Some protection. Thus, if the market's current valuation of 25 cents on the dollar is correct, 45 cents of loss is realized, and the US taxpayer eats about 38.5 cents of that.

I do not know about you, but I want to see Timmy and the Lords of the Underworld swinging from the nearest lightpole, although I would compromise and travel to Washington, DC to watch.

Dr. Laffer on Tax Rates

2009-03-22T10:03:00.000-07:00

It should not be a hard concept: if you increase tax rates to punitive levels, the ones who pay the most tax would find ways not to pay, be it legal backdoors or outright relocation. Quote: "Laffer readily admits that middle and lower-income folks lack the flexibility of the rich when it comes to changing behavior in response to changes in tax rates. Where the rich can shelter, defer and give away income, taxpayers at the bottom rung are like lambs going to the slaughter. Raise tax rates, and they fork it over to the government. Lower tax rates, and the government gets less revenue."

Quite so. I would contend, however, that the middle and lower income folks have a different weapon at their disposal - numbers. If they were to simply start massively underreporting income, they would be in theory criminals, but the government would not have the means to enforce, and most singular audits, let alone lawsuits, would not be cost efficient for the government. The bureaucrats may know Joe Average is screwing with them, and this may get any single Joe in trouble, but not any reasonable number. As it is, the IRS audits approximately 1% of individual returns, with a heavy focus on those with "red flags" - tax shelter investment losses, complex investments, large business expenses relative to income, tax transactions without explanation, etc. Thus, Joe Average is (mostly) safe, and the government is reduced to raising the rates on the "low-hanging fruit" - the wealthy and the corporations. This is precisely the counterproductive thing to do. Quote #2 from the above article: "If the government is truly interested in maximizing its revenue, not in redistributing income, it should cut taxes on the rich. Blasphemy, I know."

As Churchill put it, "If you destroy a free market, you create a black market. If you have ten thousand regulations, you destroy all respect for the law." Transocean, Weatherford, and Tyco are just the pioneers moving to corners of the world where capital is treated with respect, not villified and extorted.

China Stuck with US Bonds

2009-02-15T13:35:00.000-08:00

From the lips of Luo Ping, director-general at the China Banking Regulatory Commission comes some rare honesty, mixed, unsurprisingly, with a healthy dose of statist paternalistic garbage. Quote: "We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] ... we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do... Except for US Treasuries, what can you hold?” he asked. “Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option."

Yes, he gets it. China has become a de facto shareholder in the US dollar through its gargantuan holdings of US Treasuries, and is about to get severely diluted. It must suck really bad to hitch a ride on the US economy, and watch it derail. You (China) are left holding boatloads of bonds you cannot sell to anyone, and will have the pleasure of watching them melt away slowly... or not so slowly. You have tens of thousands of factories that cannot survive the plunge in exports, and will in addition get hit by a weaker dollar, if you let the yuan keep appreciating. If you devalue the yuan, you are only adding to the your US bond pile, with very little effect. Meanwhile, the laid-off factory workers are not happy campers, and are not exactly the domestic consumption you badly need. And since the Party is never wrong, you can only blame it to deregulation in the US. You did not bet the house, and keep reinvesting any gains and virtually all your income, on the wrong horse - the jockey did not whip the horse hard enough. There, you got an oh-so-not-free lesson in capitalism, Comrade Luo - you could have learned from Japan's experience trying to take over the US economically, but you were too smart... and we love the deflation you were exporting for us.

Zimbabwe - Numbers You Do Not See Often

2009-01-25T23:34:00.000-08:00

Another update in Zimbabwe's saga of suffering. Quote: "To get a true sense of the economic problems facing Zimbabweans Professor Steve Hanke from the CATO Institute developed a hyperinflation index that puts the annual inflation rate at around 6.5 quindecillion novemdecillion percent - that is 65 followed by 107 zeros. He noted that prices of basic goods double every 24.7 hours, and this is the reason why shops are refusing to accept Zimbabwean dollars."

This is not a typo, the math actually works: 2^(365/(24.7/24))=5.7817E106.

As I said here, Mugabe needs to pay an elite list of his supporters in foreign currency, but there is not enough of it to pay every ZANU-PF thug. If you - the dictator - do not pay your constituencies, you get unrest. Quote: "Last year saw a number of unprecedented riots involving soldiers, who looted shops and attacked foreign currency dealers after not being able to access their money from cash strapped banks. The past few weeks have seen more spontaneous protests across the country by angry and impatient soldiers, raisings fears of a possible mutiny." Oops. Another quote: "...a separate uniformed gang ... raided a farm belonging to Reserve Bank Governor Gideon Gono and forced farm workers to load their truck with chickens." Oops again. Have the chicken come home to roost?

So what will Mugabe do to get to the diamonds the needs to stay afloat for just a little longer? Try shooting to death of villages from helicopter gunships and torture, including rape and abduction, on a 'massive' scale. I must admit that I have some doubts about the veracity of the gunship claim, since gunships are expensive to obtain and maintain. For the price of one gunship, which I estimate at ballpark $20mln, you can equip 5,000 soldiers with $150/pop AK-47's, and pay them $100/month for 3 years, with enough left for ammunition. There is no need to substitute capital for labor when labor is this cheap, and many fewer than 5,000 soldiers can wipe out an unarmed village without firing a single shot - machetes and fire do just fine.

I re-iterate my call for weapons drops in Zimbabwe, plus potentially a bounty on a few leaders (instead of the hilarious travel restrictions against them in place).

Euro(pe) Burning

2009-01-19T20:58:00.000-08:00

Ambrose Evans-Pritchard has an blood-chilling article.

The Euro is the cause for a lot of pain in Europe. To have a single currency makes some sense when you have a relatively homogeneous economy, with high mobility of capital (check) and labor (NO check). Even then, central bank fine-tuning of macroeconomic parameters has failed spectacularly historically, but it is at least defensible theoretically. Europe, however, despite the wishful thinking of its leaders, is not a country. Its populace speaks numerous languages, has vastly differing cultures, and is thus mostly immobile - how often do you see a Maltese living and working in the Netherlands? The US adopted its constitution in 1787, and a lasting central bank only in 1913. The first attempt - First Bank of the United States - was aborted in 1811, the second - in 1836. From 1862 till 1913, there were SEVERAL national banks. And even when the Federal Reserve in its modern form was created, it was far from non-controversial - Milton Friedman did blame it for the Great Depression, and Ben Bernanke did agree. Europe, however, has a central bank without even having a constitution. How about a single central bank for Guatemala and Papua-New Guinea?

While I am not terribly bullish on the US dollar, I cannot help but be very bearish on the Euro. A short ETF (such as DRR) may not be the best instrument for this, sadly, since it sells the Euro against a broad basket of other currencies, but should be good enough because of the leverage it provides, and because it is hard to think of a good long pair anyway. The Swiss frank comes to mind, but Switzerland is in the heart of Europe, and thus economically very much linked with the European economy, and also under increasing pressure to align its laws and policies with the Euro-diktat.

Destruction in Gaza

2009-01-17T11:48:00.000-08:00

An AP article on the "damage" to infrastructure in Gaza by IDF's operation. Quote: "Israel's fierce assault on Gaza's Hamas rulers has destroyed at least $1.4 billion worth of buildings, roads, pipes, power lines and other infrastructure in already impoverished territory, Palestinian surveyors estimate."

At least $1.4 billion worth to whom? Would any informed and willing buyer pay that much for infrastructure that is used as a launching pad for missile and mortar fire against the most formidable military in the Middle East (except Turkey's, if one wants to consider it part of the region)? One has to assume they mean "It will cost $1.4 billion to rebuild it for Arab and European governments, who are the only economic agents dumb enough to pony up for such an exercise in futility." You could build a road or a pipeline on a military test site, and it will cost you $X, but it is absurd to claim that it is worth $X - after the next test it is likely to be worth close to nothing. Simply put, the $1.4 billion number does not include a significant Hamas risk discount, and that discount should (but will not) be included in the decisions whether to (re)build.

Two counter-intuitive, but plausible corollaries:

1) If (unlikely) Israel's operation were to eliminate Hamas from Gaza, or even credibly render it impotent for a prolonged period of time, the increase in value from the reduced Hamas risk discount on remaining Gazan infrastructure would more than offset the loss of some of it - i.e. the bombing would have made Palestinians as a whole better off.
2) The fair market value of a good is what a willing and informed buyer would pay for it. I would surmise that the average Gazan resident would pay to get out of Gaza, even if in the process he or she were to relinquish any claims to property left behind. Thus, if you ignore loonies who would rather die than abandon Palestine and the fight (for both nationalist and religious reasons), and thus assign infinite value to staying, the fair market value of Gaza plus Hamas is negative.

California's Muerte Anunciada

2009-01-12T23:32:00.000-08:00

One of those stories that leave a lot unsaid.

Quote: The number of people leaving California for another state outstripped the number moving in from another state during the year ending on July 1, 2008. California lost a net total of 144,000 people during that period — more than any other state, according to census estimates. That is about equal to the population of Syracuse, N.Y. ... California's loss is extremely small in a state of 38 million. (emphasis mine) And, in fact, the state's population continues to increase overall because of births and immigration, legal and illegal. But it is the fourth consecutive year that more residents decamped from California for other states than arrived here from within the U.S.

Ahem, maybe so, but the only 4 years ago, a $6.7 bln deficit was considered "deceptively difficult challenge" there, and now they are talking about $41.6 bln. Cutting spending just does not happen over there, taxes are already the highest in the US, and businesses are running for the border because of regulatory overkill.

Furthermore, when a state or country begins to lose people because of high taxes, the first "refugees" tend to be the wealthiest and the most mobile - because they stand to lose the most, and can move with the least amount of disruption to their lives and careers. Those same "refugees" contribute disproportionately more taxes - as California is discovering now (to wit, California charges a 1% additional tax on incomes over $1 mln - with the proceeds used for... mental health services; maybe they need to charge 2%, given the number of mental cases in their government ). Those with AGI over $200,000 accounted for 4% of filers, and 65% of personal income taxes paid, as of 2006 - approximately 582,000 thousand taxpayers. Thus, even though the 144,000 people who left California are a tiny portion of the population, they are very likely about 58,000 (assuming 2.5 persons per household - grown-up children, couples filing separately, etc.) households, and (again, my guess) disproportionately in the $200,000 AGI group. If only half are indeed in that group, then California lost in one single year almost 5% of those filers, and thus over 3% of its personal income tax revenue. I have thrown in a lot of assumptions, but they do not appear very unreasonable, and I am aiming for a ballpark number anyway.

How unreasonable is it to expect that this flight will not only continue, but also accelerate, especially as taxes are further raised to make up for revenue lost? You decide. If you want to invest conservatively for retirement in the relatively near future, short California bonds and buy just about any other bonds you can think of - okay, not New York or New Jersey, maybe. Socialism failed everywhere else, it'll fail in California too - and California cannot print money, only bonds.

Calvin and Hobbes on Detroit

2008-12-29T20:16:00.000-08:00

I have nothing but respect and admiration for the genius of Trey Parker and Matt Stone. Here is an example of a different, albeit related, medium - the cartoon - imbued with pure, prescient satiric brilliance.

Paul Krugman's Logic on Spending

2008-12-28T13:37:00.000-08:00

Paul Krugman is the latest reason I think the Nobel Prizes are worthless (in addition to all the other Peace and Literature Nobel Prizes). Quote: "Here’s how I see it: the opponents of a strong stimulus plan don’t really have an alternative to offer."

I was tempted to call this drivel, but, on second thought, it is not. It is a sinister attempt to shift the burden of proof on one's opponents, and that almost reduces me to unbridled profanity, but I am trying to behave. A decent analogy I can think of would go something like this: someone holds a group of people hostage and justifies killing the guy in the wheelchair by pointing out that he asked everyone to pick someone else, and nobody did. No, Krugman, you bleeping idiot, I cannot offer you an alternative in your sick parallel universe, where my money is yours. In this one, here's an alternative: put down the bleeping spending gun, and begin to sort the bodies from the last few blasts.

Meanwhile, I am actively practicing Ricardian equivalence, namely, saving more than I want to, because I know that when this spending circlejerk is over, my taxes will go up, and I do not want to be poor. I do wonder how many others do the same, and to what extent it explains the wavering spending - and not only in the US.

Note to self: investigate availability and (if available) yields and tax treatment of leveraged municipal bond ETF's.

2008-12-22T01:48:00.000-08:00

Melanie Reid, with all due complete lack of respect, deserves a smack-around for this shining piece of intellectual and linguistic garbage

Quote: "What we must do, I suggest, is introduce a new concept of universal compulsory volunteering."

Instead of pointing out the obvious idiocy, I'll just counter with a quote from William Graham Sumner's essay "The Forgotten Man": "The type and formula of most schemes of philanthropy or humanitarianism is this: A and B put their heads together to decide what C shall be made to do for D."

More on Zimbabwe

2008-12-21T09:07:00.000-08:00

A couple of new gems from/about my favorite basket case - Zimbabwe. This article (HT: Robert Davies), points out one way Mugabe's regime is financing itself for now - blood diamonds. I was not aware of that resource for Zimbabwe, as it it is mostly associated with Siera Leone. Yet, it seems that those folks cannot make money even from diamonds, as it does not appear to occur to them to leave some profit for the "diamond" goose they banished - the British company African Consolidate Resources.

Here's what happens when you let a revolutionary loose - people find alternative uses for currency. One would hope, for the sake of the Zimbabwean people, that those bank notes are soft. And probably these guys should run the Zimbabwean central bank - they at least know about crappy ass-wipes and what is takes to flush them.

Barroso on Who Matters

2008-12-14T08:08:00.000-08:00

Jose Manuel Barroso, the President of the European Commission, while discussing his wet dream of the UK joining the Euro-zone for RTL radio, let slip this little gem: "I know that the majority in Britain are still opposed, but there is a period of consideration under way and the people who matter in Britain are currently thinking about it."

This arrogant piece of dirt makes no bones about his view of regular people. It could be that the reason is that he was not elected in an election, but rather appointed by the European Parliament. It must annoy him to no end that in the UK there is still at least some semblance of that quaint notion that, as Nigel Farage, the leader of the UK Independence Party put it, "The people who matter in Britain are the people, not the professional political class that Barroso is himself a member of."

As a bonus, notice the revealing "still" in his statement. Unfortunately, he is probably right to be smugly confident. The usual will follow - referendum upon referendum upon referendum ad nauseam, with abundant dramatic sighing on behalf of Brussels twits in between, until one actually succeeds, and then the referenda will magically cease. You have to give Barroso credit for sensing it is an opportune time to start the referenda barrage, but his arrogance and ineptitude at hiding it are pretty amazing.

On a side note, where Barroso is failing politically, Gordon Brown is doing his very best to kill the British pound economically. Chronicle of a death foretold, indeed.

Update: on the recurring referenda, here's a little something I found. These folks really do not take "No, thank you!" for an answer. And they will not take "Which part of "No, thank you!" did you not understand? No frigging way, now bugger off!" for an answer either.

UAW's Contribution to Detroit's Demise

2008-12-13T20:12:00.000-08:00

If you have a few years to waste, here's some reading I would not recommend - hat tip to J. Justin Wilson. There is only one organizational form in which any organization can manage this ludicrous level or regulation - and let's not forget that Detroit's Not-So-Big-Anymore Three do take a lot of cues from Congress, EPA, and various other regulators. It turns into a bureaucracy - an encompassing, burdensome, cumbersome, stifling bureaucracy. This organizational form can work very well in times of stability; it does, however, have one remarkable characteristic - of all organizational forms, it's the one most remarkably resistant and hostile to change. It reacts to a dynamic environment by ossifying, and to a stable environment by growing.

Modern economy, however, is anything but stable. If one looks for a predictable, linear career path, the place to look is not in business, but in academia or in government. Globalization has hit automakers with unique opportunities (a global market - and they seem to make great (profitable) use of it outside the US), but also unique challenges - competition by nimble, flexible, smart competitors. As has been noted by wise people, in globalization, it's not the big that eat the small, it's the fast that eat the slow. And why are the Detroit Three slow? Why, that pile of 2200+ pages might give some clue. We know from basic economics that any firm must combine labor, capital, and innovation in some production function in order to operate. Innovation in Detroit is too big of a subject to even begin to tackle, but it also happens to be predicated (in this case) on labor, so let's try to use the magic of Google to see what the UAW - Detroit's legally protected labor partner - actually does:

"UAW apologizes" - 1 hit
"UAW cooperates" - 72 hits
"UAW admits" - 87 hits
"UAW works with" - 131 hits
"UAW proposes" - 305 hits
Last but not least: "UAW takes the blame" - 1 hit (and it's from a blog, in the context of "UAW gets blamed", not "UAW accepts blame")

Let's compare with these:

"UAW sues" - 336 hits
"UAW blames" - 578 hits
"UAW cries foul" - 985 hits
"UAW threatens" - 1440 hits
"UAW lashes out" - 1470 hits
"UAW demands" - 2470 hits
"UAW rejects" - 2540 hits
"UAW warns" - 3160 hits
"UAW strikes" - 9100 hits

With a partner like this, who needs competitors?

I called a "sell" on GM back when it was trading at about $19/share (before Carpe Noctem was started - so only a few colleagues can testify to this), and held that call steadfastly when the stock rose well over $30/share. I am tempted to close this trade now, for a handsome profit, and not because I do not see GM's remaining equity wiped out in the near future, but because there seem to be better uses for this capital at this point. If you want any exposure to automanufacturers at this point, a value volatility play should be "long Ford - short GM".

Two interesting articles

2008-12-08T17:08:00.000-08:00

Here is a very good summary of an even better paper by Lawrence H. White. And here is an interesting riposte by Brad DeLong.

I think Mr. White nailed it. Mr. DeLong's article is great food for thought, although I find it hard to evaluate many of his conclusions, since he does not provide a source for many of the numbers he uses, and others are admittedly his own estimates. One of his claims, however, namely: "We have had little or no bad news about resource constraints, technological opportunities, or political arrangements.", does not pass my smell test.

We have had those in the USA, where the most voracious consumers in the world realized that real estate prices can indeed decline; that treating your biggest and most leveraged asset - your home - as a credit card (often with a variable interest rate) may not be sustainable; and that some people - no matter what the politically correct doctrine dictates - do not make responsible home owners.

We have had those in China, where the government might finally be coming to grips with the fact that you can only build so many roads and airports that hardly anyone uses, while in the process majorly ticking off people who think they own the land you build on, and sending a lot of them in the cities to build impressive buildings - albeit occupied at 10% because of high real estate prices. Furthermore, China may be realizing that it piggybacked on the US consumer. Now, the US consumer will not turn into a Chinese saver overnight, but he/she can cut down on spending, and that translates into tens of thousands of export-oriented factories closing in China, with all the ensuing economic and social disruption.

We have had those in the OPEC countries, Canada, Australia, and Russia, where the realization might be taking place that China (and even the USA) may not continue to gobble oil, coal, industrial metals, and cement at those dizzying rates.

In a nutshell, I think Mr. DeLong is talking/writing out of experience gained in a much less globalized economy. It used to be that the wealth of the US consumer mattered some, but not too much, to many people all over the globe. These days, many governments will need to learn that if you depend on America's consumption, you will prosper disproportionately (in relative terms to your initial condition) when America does, but you will also suffer disproportionately when America catches a cold - and therefore, you might want to grow a domestic consumer class. Globalization acts as a feedback loop too - distress abroad reverberates this much more strongly at home. If I were Mr. DeLong, I'd revisit some assumptions; when a model gives you output that is garbage, only too often it turns out you have fed it garbage.

Finally, for further intellectual tittilation, look at this article by Mark Buchanan. It just may (or it may NOT) be smart to buckle up for a permanent volatility shift.

Understanding Bernanke

2008-12-06T01:29:00.000-08:00

At a November 8, 2002 conference to honor Milton Friedman's 90th birthday, Ben Bernanke said: "I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again." Or... will we?

Mr. Bernanke has an academic and political career to think about, and thus will never emphasize some of the less politically correct points about the Great Depression. He seems to have learned the wrong lessons from the Depression and from Milton Friedman. Here is an excellent essay by Lawrence W. Reed, which gives a great perpective on the business climate FDR created. I have taken the liberty to extract some points.

Herbert Hoover raised top marginal tax rate from 24 to 63%. FDR raised it further to 79%, then later to 90%. According to economic historian Burton Folsom, in 1941, Roosevelt proposed 99.5% marginal tax rate on all incomes over $100,000, and when questioned by an adviser, replied "Why not?". He followed this with an executive order to tax all income over $25,000 at 100%. He also lowered the personal exemption to $600, and hence most US households paid income tax for the first time. Congress rescinded the 100% tax, but went along with the exemption reduction. Furthermore, FDR also tried in 1937 to "pack" the Supreme Court with a proposal to allow the president to appoint an additional justice to the Court for every sitting justice who had reached the age of 70 and did not retire. This failed in Congress, but until it was struck down, added further uncertainty in the investment climate. In his private diary, FDR’s very own Treasury Secretary, Henry Morgenthau, wrote: "We have tried spending money. We are spending more than we have ever spent before and it does not work. . . . We have never made good on our promises. . . . I say after eight years of this Administration we have just as much unemployment as when we started . . . . and an enormous debt to boot!"

Now back to present day, with Mr. Bernanke at the helm of monetary policy. As any macroeconomist, he surely looks at the MV=PQ identity. The perennial clash between monetarists and Keynesians focuses on whether V is stable (monetarists say more-or-less yes, and Keynesians more-or-less no), and whether Q is exogenous (monetairsts say Q is determined by "land, labor, capital, and enterprise", and Keynesians say M can influence Q significanly). Bernanke is observing a credit crunch, i.e. V is tanking. Money is not moving. Even banks with ample liquidity are not lending. His response? Look here. But maybe, just maybe, he ought to re-visit the underlying assumptions for MV=PQ. Among those (not an exhaustive list):
1) Money supply is exogenous.
Well, yes, until is is not. When banks do not lend at any rate (and interests rates cannot get much lower), clearly the bank multiplier is not working right, and the Fed is shooting at a moving target - and one moving way too fast for their lousy shooting skill.
2) The mechanism for injecting money into the economy is not that important in the long run.
Well, no, until it is. The line for federal handouts/bailouts is getting longer by the week - banks, insurance companies, car manufacturers, states/municipalities...

Paulson and Co. let Lehman go under, which sent a chill down the spine of every financial professional in the world. Confidence in one's counterparty's solvency was shattered, and thus V tanked. Everyone and their grandmother is holding on to any cash they have, and will not lend at any rate. Now, I actually think it was right to let Lehman fail, but I also think many others should, and Bernanke is hellbent on not letting them, cost upon the taxpayers and their descendants be damned.

But, let's give Mr. Bernanke the benefit of doubt. Let's say he is desperately working on his part of the MV=PQ, and hoping the government has wisened up, and will not repeat the policy blunders from that 30's. This is probably naive, but at least somewhat defensible. Then logically he should be hoping to be able to mop up this monstrous amount of liquidity pumped into the system when things begin to pick up. When will that be? My pessimistic estimate: just about the time Mr. Obama will be thinking about his re-election prospects. And thus, the Obama administration will probably work feverishly to counter Bernanke's (more likely, his successor's) tightening efforts, which will probably be "too little too late" anyway.

My forecast: inflation will spike around late 2009 to early 2010, and (better, more likely, but still bad scenario) the Fed's efforts to contain it will kill a nascent recovery, or (worse scenario) the Fed will do little, and inflation will rampage at a level the US has not seen yet. I hope I am wrong, but I will be properly positioned short T-bonds and long gold (or any better inflation hedge I may think of).

Scrooge McDuck's Wisdom

2008-12-02T04:12:00.000-08:00

Funny cartoon, at about the right level for the average politician, although some may need help with some of the advanced terminology, like definitions of "money" and "inflation".

Via Dale Amon at Samizdata.

The Global Elders and Zimbabwe

2008-11-29T20:51:00.000-08:00

BBC reports on the mission of the Global Elders to help Zimbabwe. As usual, when one sees a pompous name - Global Elders - one should skeptically expect much form with little content. To begin with, the Elders could not even get into Zimbabwe - Robert Mugabe's ZANU-PF party thumbed their nose at the celebrity cast of this reality show. Furthermore, at 0:22 in the linked video: " The Elders wanted to know what had forced them to leave, and how they are surviving." Well, you have to be seen as doing something even if you can and will do nothing - as the bunch of washed up bureaucrats and politicians knows. So they are asking questions, the answers to which are available to anyone curious.

Where do you even begin to answer such an idiotic question? The poor souls in the Johannesburg church have run away from a place that:
1) Has cholera - a disease, which takes only clean water and sanitary sewer systems to eradicate. The government has abandoned all pretence to care for public health.
2) Is run by a gang of thugs who may lack the sophistication of Nazis in WW2 Germany, but make up for it with diligence, all the while employing their tested methods . The government not only does not protect people, it actively terrorizes anyone it even suspects might potentially be against it.
3) Has unemployment (data is highly suspect, but estimates range) between 80% and 90%. For all practical purposes, Zimbabwe has no economy. The only "productive" activities left are foraging for food, crime, and smuggling - mostly of people out of the country.
4) Has had white farmers (who happened to know how to actually grow food) expropriated, and any foreign or white-owned business forced to cede 51% equity interest. For all practical purposes, property rights do not exist in Zimbabwe.
5) Has inflation that not only has handily beaten any record human history knows, but is, by admission of the Zimbabwean Central Statistical Office, impossible to measure, because there are not enough goods in stores to do so. That admission came a year ago; since then, there have been rumors that these days the computers they use cannot handle the number of digits required to attempt to calculate inflation. A proxy for the Zimbabwean dollar based on shares of Old Mutual listed in Harare and London gives approximately 12 quadrillion Z$ for one US$. According to some estimates, inflation rate runs at 80 sextillion (10^21) per cent. For all practical purposes, Zimbabwe has no currency anymore.
6) Has widespread starvation (too many links to choose from). A story from a couple of years ago, which I cannot find a link to, claimed that in 2005 (to the best of my recollection), starvation was somewhat alleviated by an unusually generous "harvest" of caterpillars.

Usually, this is very near the end of the road for a dictator. To stay in power, a dictator needs an oppressive apparatus, usually a mix of army, police, and followers/allies. However, the army and police need to be paid, and followers/allies need favors. Such a situation can be very stable, as long as the economy produces enough for the dictator to pay. When collecting taxes does not do it, and there is no one with wealth left to steal from, you crank up the printing presses - inflation being a very regressive tax, which is also highly efficient in extracting distributed wealth from the poorest. But a point comes, when you cannot make people use your money - not even facing down the barrel of a gun, since you no longer have the guns. The army and police must be paid, and enough not only for their own physical survival, but for that of their immediate family, and likewise for other allies. When no matter how many zeroes you put on a currency bill, noone will give you a dollar or a loaf of bread for it, you - the dictator - have a serious problem. You try to clamp down on any speculation in hard currency (done a long time ago in Zimbabwe), and you try to deflect the pressure outward - evil colonial powers, subversive elements, etc. (also done long ago). Soon enough, you either have to start a war, or to plan to flee with whatever is left in the coffers or offshore bank accounts.

This is what some of the Elders most likely know (Annan, Tutu, Cardoso (Ph.D. in sociology), Brahimi) and some most likely do not (Machel, Bhatt), but ought to. What they do not want the unwashed masses to realize and clamor about is that we have on our hands a prime example of a case where many of their theories have fallen apart in a most spectacular manner. National sovereignty, non-intervention, disarming of populaces, humanitarian aid, wealth and income redistribution - all have failed Zimbabwe. The most humane thing to do for the Zimbabwean people at this point would be to airdrop a few thousand high-quality sniper rifles with instructions on how to use them and a mechanism to render the weapon useless after a couple of months. If Mugabe does not receive significant boost to his lead intake within that time frame - repeat. When he does - then, and only then, send in humanitarian aid.

To vote or not to vote - for what?

2008-11-23T08:11:00.000-08:00

Megan McArdle has some buyer's remorse about her electoral choice. In an electoral system system with only two viable options, there is always the temptation to view those options on a single dimension spectrum - after all two points define a line, but not a plane, much less a space of higher dimension. This time, for example, Megan looks at the dimension competence vs. "painting a pretty picture for voters." I would argue that, before the actual results are in, the utility of viewing any candidate in American politics through this prism asymptotically approaches zero - or you could just use the simple proxy of "has/doesn't have a campaign strategist."
Moreover, such a strategy - prioritizing one dimension, with maybe a couple more as tie-breakers, without accounting for spreads between positions and for absolute position on an axis - can lock a voter into a pattern of "practical voting" that can turn out very ugly in the long run. Perry de Havilland of Samizdata summarizes it superbly here. An excerpt:
"Guys, you have been voting for the lesser evil for so long you may have lost sight of the fact that you have been voting for evil, just a tiny bit less than the other guy."
PPAA prefers to look at Nolan charts, only of the multi-dimensional kind, along the lines of the ones suggested by the Friesian Institute, and his default position is to not vote - it is up to a candidate to convince him that he or she is good enough, not just better.

Welcoming Introduction

2008-11-22T06:41:00.000-08:00

I intend to post here my observations and predictions about social, political, economic, psychological, etc., events and trends.

I happen to be very libertarian, extremely opinionated, and not at all politically correct - so scale your expectations accordingly, or be prepared to be offended, or find other blogs to explore. No reasonable discussion will ever be suppressed on Carpe Noctem, but nor will uncivil behavior be tolerated. As you can imagine, the definition of "uncivil behavior" is rather amorphous, but profanity is considered a fucking acceptable means of expression, as long as it is not directed at undeserving participants in the discussion. God knows there are plenty of idiots and villains out there, feel free to call them what they deserve.

Welcome, and enjoy!