Saturday, October 31, 2009


I always chuckled when I was a kid when there were references to newspapers as tomorrow's fishwrap. Well, sadly, today's newspapers are fishwrap right off the presses.

Here's Dean Baker taking them to task for failing to understand:
The 3.5 percent GDP growth number reported for the third quarter was widely touted in the media. Some perspective would have been helpful. In the four quarters following the end of the 74-75 recession growth averaged 6.2 percent. In the four quarters following the 1981-82 recession the economy grew at a 7.5 percent annual rate. In short, given the severity of the downturn, the growth reported in the third quarter was quite weak. Most forecasts show growth being even weaker in future quarters.
Here's Dean Baker taking them to task for failing to report:
You would think that an industry that almost completely missed an $8 trillion housing bubble would be trying to do a better job in reporting on the housing market: But that does not appear to be the case. The Census Bureau reported that the number of vacant units hit a new record high yesterday and it appears that no one noticed.
What use is a media with such glaring flaws? It is all fishwrap all the time.

No wonder the newspapers are dying. And TV news broadcasts are more entertainment than news. Magazines grow thinner. The future is bleak. The people prefer bread and circuses to information.

How the Press Wastes People's Time

I'm constantly amazed at how little real 'news' goes into a newspaper or any other 'news' media. Instead of reporting facts and serious opinion, journalists love to spend time treating politics as a beauty contest where you never assess the contestants assets but instead talk about their drive, their background, this 'team', and what the future might hold. The press talks about anything but the issue at hand.

Dean Baker highlights an excellent example of how the press is currently wasting everybody's time with articles about 'job creation':
There is a cottage industry developing among political reporters trying to investigate whether the Obama administration’s claims on jobs created or “saved” by the stimulus are true. For example, ABC’s intrepid White House reporter Jack Tapper said on his blog:

“DeSeve and Bernstein [Obama administration spokespeople] were not able to say how many of the 640,329 jobs were saved and how many were created. How do they know that government officials asking for stimulus funds to help prevent layoffs were legitimate?”

The Washington Post also got into the act with its own piece commenting on the administration's jobs figures that: "Republicans and government watchdogs questioned the reliability of the figures."

This is an exercise in extreme silliness. It will be almost impossible to identify the vast majority of jobs that are created or saved by the stimulus because this would require a full knowledge of the flow of spending from tens of thousands of governmental units and the consumption decisions of 150 million households. However, there are fairly well-recognized economic relationships (outside of the University of Chicago) that allow the administration to produce reasonably good estimates of the number of jobs created or saved by the stimulus.

The administration is not using any hocus pocus in producing these job numbers. It is simply applying rules of thumbs that have been used by both Democratic and Republican administrations as well as impartial bodies like the Congressional Budget Office. If these reporters want to investigate the Obama administration's actions, their time would be much better spent looking at its ties to the financial industry where they could well be some substantive issues.
Think about it. In a couple of years will you care about the debate over 'job creation'? No. Instead you will want to know what policies are on the table, which were excluded and why, and you want to know expert opinion about how these policies could affect your life. But these are things the media really doesn't want to cover.

As Baker points out, a lot of value could come from a press that digs through the Obama relationship with Wall Street and the role his key advisors are playing. A huge financial crisis is still gnawing away at the US and this needs to be fixed. Column inches spent on this are valuable. Time spent on assessing 'how many jobs were created' is a complete waste of time. (But a fraud in spending funds under the rubric of job creation would be useful. But this isn't what the press is doing. They are indulging in silly speculation while serious issues are ignored.)

Obama and the War Dead

I love Maureen Dowd's op-eds in the NY Times. She sends barbed zingers and wickedly nails the truth. I love the following because she gets her digs in on George Bush:
On the tarmac in the darkness, he stood at attention, saluting, as 18 flag-draped cases were taken off an Air Force C-17 and carried to Port Mortuary by military teams in camouflage fatigues and black berets.

The Halloween-eve parade of death included casualties from America’s most horrific day in Afghanistan in four years, and its bloodiest month of the war.

It may have been a photo op, another way Obama could show he was not W., the president who started the Iraq war in a haze of fakery and then declined to ever confront the reality of its dead.


Dona Griffin of Terre Haute, Ind., the mother of Army Sgt. Dale Griffin, who was among those Obama saluted, appreciated the president’s presence.

“Unless we can see the images and look into the eyes and the faces of those that are sacrificing, we forget,” she said on “Good Morning America.”

As Obama conducts his White House seminar on war, Dick Cheney accuses him of dithering. He and W. not only didn’t dither before Iraq, they never bothered to ask “Whither?” Debate and due diligence were for sissies. Far more fun playing Jove, heedlessly throwing thunderbolts.
I am amazed at the fact that roughly one-third of Americans still don't see that George Bush was a disaster. The US was over-extended and he pushed the US beyond the breaking point. This current recession, a product of his wierdly right wing "no government is the best government" philosophy, has seriously wounded the US and it isn't clear that the US will ever really recover.

When I was a kid, the US was head and shoulders above the rest of the world because it came out of WWII unscathed. But that wealth of America has been frittered away on petty wars with no real purpose (think Vietnam and now Iraq) and with political giveaways to the demented right (think de-regulation, trillion dollar tax cuts, and the cult of supply side economics). In the 1950s the US was truly a "beacon on a hill" but the idiocy of the Vietnam War tarnished the image, and the lurch to the right in the 1980s put the US on a pathway different from all the other liberal democracies.

It isn't clear to me that the US can drag itself out of the hole it has dug for itself. And the real tragedy is that most people don't even realize the problem they are in because they've lapped up the promises of politicians. The failing comes from the fact that politicians are ephemeral while the problems are deep-seated and persistent.

I think back to how long and difficult the struggle was in the US to break the chains of slavery. A horrendous Civil War was fought. But the achievements were thrown away during the Reconstruction which was followed by the era of Jim Crow in the Deep South and silent discrimination in the North. The Blacks led a Civil Rights uprising from the 1950s to the mid-1960s but this social change crashed on the rocks of a society breaking apart over the division of Vietnam. Quietly after the 1960s change seeped into institutions around the country and the last shackles were thrown off with the election of Barack Obama. But that is a 150 year struggle to correct a historical wrong. It shows you how hard it will be for the US to crawl out of the hole it has dug for itself with its infatuation with right wing extremism over the last two generations.

As Maureen Dowd states in closing her op-ed:
Obama wants to be the cosmopolitan president of the world, and social engineer at home to improve the lives of Americans.

But what he had in mind for renovating American society hinged on spending a lot of money on energy, education, the environment and health care. Instead, he has been trapped in the money pits of a recession and two wars.

For now, the man who promised revolution will have to settle for managing adversity.

It is, as Yogi Berra said, “déjà vu all over again.”

What's Wrong with Obama?

Thomas L. Friedman has a fairly good op-ed in the in NY Times which spells out why people are losing faith in Obama's policies while still liking the guy:
I’ve always believed that Mr. Obama was elected because a majority of Americans fear that we’re becoming a declining great power. Everything from our schools to our energy and transportation systems are falling apart and in need of reinvention and reinvigoration. And what people want most from Washington today is nation-building at home.

Many people, including conservatives, voted for Barack Obama because in their hearts they felt he could pull us all together for that project better than any other candidate. Many are what I’d call “Warren Buffett centrists.” They are not billionaires, but they are people who believe in Mr. Buffett’s saying that whatever he achieved in life was due primarily to the fact that he was born in this country — America — at this time, with all of its advantages and opportunities.


But to deliver this agenda requires a motivated public and a spirit of shared sacrifice. That’s where narrative becomes vital. People have to have a gut feel for why this nation-building project, with all its varied strands, is so important — why it’s worth the sacrifice. One of the reasons that independents and conservatives who voted for Mr. Obama have been so easily swayed against him by Fox News and people labeling him a “socialist” is because he has not given voice to the truly patriotic nation-building endeavor in which he is engaged.

“Obama’s election marked a shift — from a politics that celebrated privatized concerns to a politics that recognized the need for effective government and larger public purposes. Across the political spectrum, people understood that national renewal requires big ambition, and a better kind of politics,” said the Harvard political theorist Michael Sandel, author of the new best seller — “Justice: What’s the Right Thing to Do?” — that calls for elevating our public discourse.

But to deliver on that promise, Sandel added, Obama needs to carry the civic idealism of his campaign into his presidency. He needs a narrative that will get the same voters who elected him to push through his ambitious agenda — against all the forces of inertia and private greed.

“You can’t get nation-building without shared sacrifice,” said Sandel, “and you cannot inspire shared sacrifice without a narrative that appeals to the common good — a narrative that challenges us to be citizens engaged in a common endeavor, not just consumers seeking the best deal for ourselves. Obama needs to energize the prose of his presidency by recapturing the poetry of his campaign.”
Friedman -- actually Michael Sandel -- has put his finger on it. This captures my uneasiness.

Hopefully this message will filter up to Obama and he will do a course correction and start to deliver on the promises of his campaign.

Sure, it looks like health care reform is coming to the US, but it is a weak version of what he promised. Instead of "Change You Can Believe In" Obama has been delivered "Change in Little Bits over a Long Time". He wouldn't have gotten elected on that platform.

When I was kid Kennedy did the "Ask not what your country can do for you, but what you can do for your country." That was inspiring, like Obama's campaign oratory. But Kennedy delivered a Vietnam war that had 58,000 Americans dying for misguided policy and hundreds of thousands wounded, not to mention the millions of Vietnamese killed and maimed. That was doing a "lot for your country" but in a wasteful, useless way.

I'm getting the feeling that Obama is going down the same road with commitments in Afghanistan, with his special "relationship" with Wall Street, with his inability to galvanize people for real change. The US needs an injection of "can do" optimism. Reagan did it with "morning in America" but sadly Reagan wasted that opportunity with big tax cuts for the rich and ugly little wars around the world.

Where is a leader with vision who can deliver? I get reminded of the American Civil War where Lincoln wanted a general who could fight, but he kept drawing a list of characters who fell short. The American voting public keeps coming up with candidates who don't deliver.

Unemployment in Context

I remember telling a waitress in a restaurant in Grant's Pass, Oregon in late September 2008 that all that fuss in Congress about getting billions for Wall Street was going to affect her. She was incredulous. She simply couldn't believe that news from the east coast would affect her life.

But here's a graph to show how bad this recession really is. This is from the Calculated Risk web site:

As you can see, this Great Recession is worse than anything since the Great Depression. The loss of jobs will be worse, and it is set up to last longer than any post-WWII recession. In short, it will be very, very painful.

I tried to explain to the waitress in Grant's Pass that the owner of her small restaurant might run into credit problems and have to cut staff. She simply couldn't believe it. Sadly, I think she now knows the truth.

The financial folderol of Wall Street does eventually hit Main Street. And the real tragedy is that the fat cats of Wall Street created a multi-trillion dollar mess that everybody is now paying for. This is why it is so galling to hear that salaries and bonuses in 2009 on Wall Street are now higher than they were in 2008. Those guys ran the financial ship onto rocks, they've dumped us in the sea, but magically they have a new yacht, bigger, better than before, and they are merrily sailing off into the sunset while we flail in the water trying not to drown. That is simply so unjust.

Green Shoots and Worries about Inflation

The following graph should lay any of those ideas to rest:

The reality is that the flow of credit is still nearly dead. You do not get a vibrant, growing economy when credit is not flowing.

All those right wing nuts who worry about "inflation" need only look at this and realize that there is no competition for funds driving interest rates higher. Sure a lot of dollars have been dumped on the economy, but those are being sucked up and held. This will be a potential problem in the future, but right now the patient is on his death bed, so it is a little early to worry about how to deck him out for a wedding.

Here's something that should cheer you up...

Joseph Heath's "Filthy Lucre"

I thoroughly enjoyed this book. It is written by a non-economist, a philosopher, and it has the right tone and topics to appeal to me. He points out the foibles of the economists (something which most economists are loathe to do) and it takes up a nice stance between the crazy right and the crazy left (pointing out fallacies in their thinking). It is an excellent book to get you thinking about the economy, economic theory, and political arguments about the economy.

The author takes the eminently sensible position that capitalism is the only system of organizing economics that has been shown to work. But he willingly shows you all the flaws in capitalism in operation and freely admits the needs for regulation. This is refreshing because most ideologues of left and right fail this test miserably.

Here's a sample:
In the decades immediately following the Second World War, many firms in Western Europe were either nationalizedor created under state ownership, not because of natural monopoly or market failure in the private sector, but out of a desire on the part of governments to have these enterprises serve the broader public interest. ...

But something strange happened on the road to democratic socialism. Not only did many of these corporations fail to promote the public interest in any meaningful way, many of them did a worse job than regulated firms in the private sector. ...

We tend to think of these problems as the primary rationale for the privatization of many state-owned enterprises during the neoconservative backlash of the '80s. But this is incorrect. The "public interest mandate of state-owned enterprises was abandoned by socialist, liberal, and conservative governments long before that wave of privatization. ...

The most widely accepted explanation for this extraordinarily perverse outcome is that, during the heyday of public sector ownership, government simply lost control of the managers of these companies -- or else never had it to begin with.
He then goes on to point out that even 'normal' corporations have a similar loss of control by stockholders because of the 'principal-agenct problem'. The book is chockablock full of these insights and discussions. It is a wonderful read, a 'must' read.

Thursday, October 29, 2009

Bogle's "Enough"

I really enjoy Bogle for having created Vanguard. A company that keeps investment costs low. Sadly, it isn't available in Canada.

This book has moments of interest and interludes where Bogle waxes a little too enthusiastic about his own virtues.

My favourite chapter is the entitled "Too Much Focus on Things, Not Enough Focus on Commitment". In this chapter he praises the values of the 18th century since they valued intangible virtues whereas today's world is focused far too much on material things. Here's a taste:
In my day, I've met many successful men and women, too many of whom express their pride in having done it all themselves. But I don't believe that any one of us can take sole credit for our success. Most of us have been blessed by the nurture and love of our families, the support of our friends and colleagues, the dedication of our teachers, and the inspiration and guidance of our mentors, to say nothing of the providence that brought us the opportunity to realize our goals. "We did it ourselves." Really? When I hear that, I'm bold enough to ask, "Now just how did you arrange to be born in the United States of America?"
Other than the nationalistic complacency at the end, the idea is right. We live in a civil society. So much of what we are capable of is embedded in the civil relationships that let us get to where we are and allow us to leverage skills/time/assets for gain in the future. To pretend that this is self-created is absurd. But that is a prevailing attitude today.

The book is a healthy antidote to a lot of what goes for "financial wisdom" these days. It harks back to an era before financial engineering and other madness took control. He emphasizes honesty and trust. These are the values that let you build an economic society. The right wing lie of libertarianism -- i.e. we are all out for ourselves and the devil take the hindmost -- is a clarion call for the dissolution of social ties and the collapse of civil society into mutual distrust and unwillingness to carry out any economic activity. Sadly, that lie has controlled society for over thirty years and delivered us a mess.

Tuesday, October 27, 2009

Same Old, Same Old

Here is an interesting post by Alex Tabarrok on the Marginal Revolution web site:
From Bill Easterly's, Can the West Save Africa.

I get a kick out of all the noise about "lifting Africa out of poverty". The efforts of high profile people like U2's Bono gets the media excited, but as the above table implies, this never changes anything substantively. I remember all the talk in the 1960s of aid to Africa (part of the Cold War strategy to keep African countries "on side"). That aid created boondoggle show pieces. Factories that never produced anything. Highways to nowhere. Just a big waste of taxpayer dollars.

In the end, the only people who are going to lift Africans out of poverty are Africans. The only real help the rest of the world can do is lower tariffs for all African goods, then step back and let Africans figure out how to solve their own problems.

Reich on Banks Too Big to Fail

Robert Reich has a posting on his blog that nails the problem of Obama's administration: they are too cozy with the Wall Street Banks. They aren't taking re-regulation seriously. They are setting us up for another financial crisis. Here is the key bit:
And now there are five -- five Wall Street behemoths, bigger than they were before the Great Meltdown, paying fatter salaries and bonuses to retain their so-called"talent," and raking in huge profits. The biggest difference between now and last October is these biggies didn't know then that they were too big to fail and the government would bail them out if they got into trouble. Now they do. And like a giant, gawking adolescent who's just discovered he can crash the Lexus convertible his rich dad gave him and the next morning have a new one waiting in his driveway courtesy of a dad who can't say no, the biggies will drive even faster now, taking even bigger risks.

What to do? Two ideas are floating around Washington, but only one is supported by the Treasury and the White House. Unfortunately, it's the wrong one.

The right idea is to break up the giant banks. I don't often agree with Alan Greenspan but he was right when he said last week that "[i]f they're too big to fail, they're too big." Greenspan noted that the government broke up Standard Oil in 1911, and what happened? "The individual parts became more valuable than the whole. Maybe that's what we need to do." (Historic footnote: Had Greenspan not supported in 1999 Congress's repeal of the Glass Stagall Act, which separated investment from commercial banking, we wouldn't be in the soup we're in to begin with.)


The Street obviously detests the notion that its behemoths should be broken up. That's why the idea isn't even on the table. But it should be. No important public interest is served by allowing giant banks to grow too big to fail. Winding them down after they get into trouble is no answer. By then the damage will already have been done.

Whether it's using the antitrust laws or enacting a new Glass-Steagall Act, the Wall Street giants should be split up -- and soon.
Here is the key fact that Reich points out:
Historical footnote: Summers and Geithner, along with Bob Rubin, while at Treasury in 1999, joined Greenspan in urging Congress to repeal Glass-Steagall. The four of them -- Greenspan, Summers, Rubin and Geithner also refused to regulate derivatives, and pushed Congress to stop the Commodity Futures Trading Corporation from doing so.
Obama promised "change you can believe in" but he has delivered "more of the same" to Wall Street and empty rhetoric for the rest of us. Obama has surrounded himself by the same crooks who set up this Ponzi scheme that bilked the taxpayers out of money so that the casino operators on Wall Street can keep spinning the wheel.

Monday, October 26, 2009

Viewing the Depression

Joe Nocera has an interesting article in the NY Times about a lawyer who kept a diary during the Great Depression. Here is the key bit:
Mr. Roth’s diaries have just been published in book form — “The Great Depression: A Diary” — edited by his son Daniel, who worked in his father’s law practice for many years, and James Ledbetter, the editor of The Big Money, a financial site run by Slate. It is an eye-opening read, though not necessarily in the ways you might think.

Because it was written in the 1930s, Mr. Roth’s diary is not the kind of tell-all we’ve come to expect in this less restrained age. Although he mentions repeatedly the struggles of lawyers and other “professional men” during the depression — Mr. Roth always uses the lower-case “d” — he never shares how his family struggled through it, or how he was able to send his daughter to college in 1937. (Daniel Roth told me that his father, who died in 1978, later divulged that he had had a good life insurance policy, which he borrowed against to keep food on the table.)

Instead, every few days — or every few weeks during some stretches — Mr. Roth jotted down his thoughts and fears as the Depression deepened. “Banks are absolutely terrible in their insistence on payments of notes and mortgages,” he wrote in 1931. “It is the old story of lending you an umbrella when the sun is shining and then demanding it back when it rains.”

He recounts painful conversations with friends and acquaintances who had accumulated some wealth by speculating in the stock market, and then lost everything when stocks plummeted and they couldn’t meet margin calls. He is obsessed with the stock market; he is constantly noting the prices of the blue chips of his day, and his writing shows him to have the instincts of a good value investor, a term that hadn’t yet been invented. But, as he also constantly points out, he never has any money to invest, much to his chagrin.

Mr. Roth is horrified when the local banks fail (“I still cannot believe that the Dollar Bank — the Gibraltar of Youngstown — has closed its doors”) and points out that even after the banks reopen, customers aren’t allowed to withdraw more than a small fraction of their savings. He explains how entrepreneurs with money buy up people’s frozen passbook accounts for 50 cents on the dollar and how barter and scrip come to replace the money people no longer have.

Events that we know about from the history books he was reacting to in real time. He was furious to learn, thanks to a series of highly publicized Congressional hearings, that some of the nation’s most prominent bankers did terrible things during the Roaring Twenties. (“By manipulation the officers boosted and unloaded on the public their own stock in National City Bank as high as $650 per share when its book value was only $60.”) But he makes no mention of the Securities and Exchange Commission, whose birth was the direct result of those incendiary hearings.

Mr. Roth is skeptical of President Franklin D. Roosevelt’s New Deal programs, and worries that the president’s fondness for deficit spending will ultimately be disastrous. He keeps thinking inflation is right around the corner. He worries about the rise of Hitler. He writes about gangs of farmers who threaten sheriffs, judges and anyone else who tries to foreclose on a farm. He watches the rise of unions, another trend he finds troubling.

Mr. Roth, of course, is writing without the benefit of hindsight.
Notice how the worries of those at the upper end of society never change: worries over 'incipient' inflation, concerns about deficit spending, dislike of the President, dislike of unions, etc. And notice that the same corruption at the top -- banks playing fast and loose with the rules while bankers stuff their pockets -- applied back then as today.

I'm still waiting for the other half of the 1930s to happen: stiff regulation of the financial industry and a closer scrutiny of the stock market. There are too many sharks in the pool. Government's role is to work hard at removing the sharks so ordinary people can put their toes in the pool.

If you want to focus on something in Roth's diaries, this is the part that is probably most applicable to today:
At various points in the early 1930s, the stock market spikes — and he starts to think it’s a good time to buy stocks. Indeed, he writes, many experts are advising people to get into the market, and some of his wealthier friends do so. But six months later, the experts invariably turn out to be wrong, and his friends wind up losing their money. During the Depression, optimism was ruinous.

And yet — and this is something we tend to forget — between 1935 and 1937, business began to boom again, and a sense of growing prosperity took hold in the country. In Youngstown, the steel and rubber factories were operating at near capacity, just as they had in the 1920s. On Christmas Eve in 1936, Mr. Roth wrote: “Just came back thru the stores on my lunch hour. People are spending like drunken sailors.”

A week later, he added, “It seems to me that the time has come where we can formally and officially announce that the depression of 1929 has ended.”

This, of course, turned out to be completely wrong. That September, the market crashed, and the Depression took hold once again. Today, most economists believe that the downturn was caused by Roosevelt, who turned off the spigot too soon, trying to balance the budget instead of continuing to pump money into the economy. Not understanding the reason for the downturn, Mr. Roth was deeply discouraged by the reappearance of the Depression. “It is terrible to contemplate that we are in the 9th year of depression and still cannot see clearly ahead,” he wrote in March 1939.
Those calling for "balanced budgets" and for the Federal Reserve to "raise rates" to cut off incipient inflation need to study these pages very, very hard.

Krugman Cites Massachusetts

Paul Krugman has another op-ed in the NY Times on health care. The part that I got a chuckle over was the bit about the experience in Massachusetts. It matches the Canadian experience, i.e. once it is in place, people (and physicians) love it. Well, almost everyone. There are die-hard ideologues who wouldn't like it if it were free and you got a free shotgun every time you used the service.

Here's the key bit:
Like the bill that will probably emerge from Congress, the Massachusetts reform mainly relies on a combination of regulation and subsidies to chivy a mostly private system into providing near-universal coverage. It is, to be frank, a bit of a Rube Goldberg device — a complicated way of achieving something that could have been done much more simply with a Medicare-type program. Yet it has gone a long way toward achieving the goal of health insurance for all, although it’s not quite there: according to state estimates, only 2.6 percent of residents remain uninsured.

This expansion of coverage has tremendous significance in human terms. The Kaiser Commission on Medicaid and the Uninsured recently did a focus-group study of Massachusetts residents and reported that “Health reform enabled many of these individuals to take care of their medical needs, to start seeing a doctor, and in some cases to regain their health and control over their lives.” Even those who probably would have been insured without reform felt “peace of mind knowing they could obtain health coverage if they lost access to their employer-sponsored coverage.”

And reform remains popular. Earlier this year, many conservatives, citing misleading poll results, claimed that public support for the Massachusetts reform had plunged. Newer, more careful polling paints a very different picture. The key finding: an overwhelming 79 percent of the public think the reform should be continued, while only 11 percent think it should be repealed.

Interestingly, another recent poll shows similar support among the state’s physicians: 75 percent want to continue the policies; only 7 percent want to see them reversed.
There were bitter battles in Canada to get universal medicare in place, but once here citizens (and doctors) loved it. Sure, the odd doctor graduating from medical school here (largely at the expense of taxpayers) has looked south at bigger pay packets and headed down there. But those people forgot that it is easy to charge big bills. However it can be a headache collecting. In Canada a doctor can focus on delivering medicine while the government makes sure he gets paid, i.e. office expenses are far cheaper and you don't need the costly medical insurance you need in the lawsuit-happy US.

It is hard for people to appreciate something new. That's why it is hard to sell people radically new technology. You have to learn to use it and appreciate it. It takes a few years of experiencing universal health insurance, but then people fall in love with it and it can never be taken away.

Sunday, October 25, 2009

The State of Social Democracy

Here's an interesting lecture by Tony Judt. It is entitled What is Living and What is Dead in Social Democracy. There are a number of interesting things about this lecture:
  • Over the last year he has suffered from Lou Gehrig's disease, so he starts his lecture talking about health care and social democracy.

  • Judt's best critique of American culture is that it confounds economics with discussions of politics. He points out that public policy considerations have been reduced to purely financial consideration. We have lost the view of ethics (Adam Smith's "moral sentiments"). The result has been the confusion to think that the "freedom to make money" was in fact "freedom". So healthcare comes down to economic discussion instead of what is good, right, or fair.

  • This is a wonderful review of social policies and the struggles between right and left from the 1920s until today. He explains why there was a shift from left to right in the 1970s. It gives you real insight into how we got where we are today.

  • He compares the great figures of the right (Friedrich von Hayek, Ludwig von Mises, Karl Popper, Joseph Schumpeter, and Peter Drucker) to one of the left (John Maynard Keynes). He points out that those of the right were from around Vienna and had watched in horror as that state fell to totalitarianism. Their conclusion was that you could save liberal society only by constraining the state and keeping it out of people's economic lives. On the other hand Keynes argued the opposite. The only way to keep the masses from being seduced by totalitarianism was to provide them with the comfort and security of social democracy. As he points out Keynes won the debate up through the 1970s, but since then the rightist views of the Austrians has taken over.

  • Judt rants against privitization. He views this as the "steady unloading of public responsibility into the private sector" and he criticizes this as not efficient. He points out that the US and the UK have stepped back into the 18th century and use "tax farming", the very thing you read about that underlay the rage of the French in the French Revolution.

  • He points out that we can't go back to social democracy. Even in the fact of the collapse of the ideology of the right. He points out that the language of social democracy doesn't match up to what can be done. The words of social democracy were written as opposition to Marxism and Communism. He points out that the social democrats won, so the Social Democrat parties of Europe (and Canada) can't win elecctions because the centre and the right are in fact mostly social democrat in policies (but the US is different!)

  • Judt is pessimistic. He sees us entering an age of insecurity similar to the one that ended the era of globalization that led up to WWI. He thinks that Social Democrats have to stop talking about historical necessity and a better future. He thinks they need to talk about fear. They need to talk about the insecurity that we are entering because we have lost the vision of society as a collaborative enterprise that provides security. He concludes by stating that Social Democracy is something worth fighting for.
Here is the lecture. That takes you to the page. Click on the link and it will download a handler that will let you run RealPlayer to view the lecture.

Saturday, October 24, 2009

Urban Myths have us by the Throat!

Here's a post by Roy W. Spencer that was put on Anthony Watt's What's Up With That blog. Spencer raises the key point:
I contend that the belief in human-caused global warming as a dangerous event, either now or in the future, has most of the characteristics of an urban legend. Like other urban legends, it is based upon an element of truth. Carbon dioxide is a greenhouse gas whose concentration in the atmosphere is increasing, and since greenhouse gases warm the lower atmosphere, more CO2 can be expected, at least theoretically, to result in some level of warming.

But skillful storytelling has elevated the danger from a theoretical one to one of near-certainty. The actual scientific basis for the plausible hypothesis that humans could be responsible for most recent warming is contained in the cautious scientific language of many scientific papers. Unfortunately, most of the uncertainties and caveats are then minimized with artfully designed prose contained in the Summary for Policymakers (SP) portion of the report of the UN’s Intergovernmental Panel on Climate Change (IPCC). This Summary was clearly meant to instill maximum alarm from a minimum amount of direct evidence.

Next, politicians seized upon the SP, further simplifying and extrapolating its claims to the level of a “climate crisis”. Other politicians embellished the tale even more by claiming they “saw” global warming in Greenland as if it was a sighting of Sasquatch, or that they felt it when they fly in airplanes.

Just as the tales of marauding colonies of alligators living in New York City sewers are based upon some kernel of truth, so too is the science behind anthropogenic global warming. But there is a big difference between reports of people finding pet alligators that have escaped their owners, versus city workers having their limbs torn off by roving colonies of subterranean monsters.


In December, hundreds of bureaucrats from around the world will once again assemble, this time in Copenhagen, in their attempts to forge a new international agreement to reduce greenhouse gas emissions as a successor to the Kyoto Protocol. And as has been the case with every other UN meeting of its type, the participants simply assume that the urban legend is true. Indeed, these politicians and governmental representatives need it to be true. Their careers and political power now depend upon it.

And the fact that they hold their meetings in all of the best tourist destinations in the world, enjoying the finest exotic foods, suggests that they do not expect to ever have to be personally inconvenienced by whatever restrictions they try to impose on the rest of humanity.

If you present these people with evidence that the global warming crisis might well be a false alarm, you are rewarded with hostility and insults, rather than expressions of relief. The same can be said for most lay believers of the urban legend. I say “most” because I once encountered a true believer who said he hoped my research into the possibility that climate change is mostly natural will eventually be proved correct.

Unfortunately, just as we are irresistibly drawn to disasters – either real ones on the evening news, or ones we pay to watch in movie theaters – the urban legend of a climate crisis will persist, being believed by those whose politics and worldviews depend upon it. Only when they finally realize what a new treaty will cost them in loss of freedoms and standard of living will those who oppose our continuing use of carbon-based energy begin to lose their religion.
Go read the whole post, it is well worth your time.

The Age of Innovation Dies

Marco Arment has a blog posting that sums up how the computer industry shot itself in the foot and have killed innovation and created a marketplace indifferent or hostile to innovation. The article analyzes why people stuck with XP and never upgraded to Vista. But the lesson is much broader. Here is the key bit:
Our industry has collectively taught average people over the last few decades that computers should be feared and are always a single misstep from breaking. We’ve trained them to expect the working state to be fragile and temporary, and experience from previous upgrades has convinced them that they shouldn’t mess with anything if it works. They’ve learned to ignore our pressures to always get the latest versions of everything because our upgrades frequently break their software and workflow. They expect unreliable functionality, shoddy software workmanship, unnecessary complexity, broken promises from software marketers, and degrading hostility from their office’s IT staff.

When we tell them that the new OS is faster and better, only to have the upgrade break a piece of software that we don’t care about but they really do, we burn our likelihood that they’ll ever willingly upgrade again. Every time we tell them that they can now easily edit video or make DVDs, only to have them abandon their first effort in frustration and never attempt it again because our software sucks, we drive them closer to indifference or resentment toward future technology.
I worked in the industry. This is exactly my complaint. I hated Microsoft because they were the worst of the worst. At least the company I worked for took pride of workmanship (despite pressures from management to cut corners and boost profitability). We built custom, then semi-custom large software applications but despite selling one or at most 20 our defect rate was easily 100 times lower than Microsoft's. We didn't have crashes with the need to reboot. It was nutty. Consumer software needs to be rock solid because you are building mostly for people who just want it to work reliably. But our stuff was way more reliable than the junk that Microsoft pushed out the door.

Oh, and part of my career was researching software development methodologies and I always laughed myself silly at the Microsoft "system" for rapid application development. It was a joke. Completely ad hoc. It showed in their products.

What Killed the Dinosaurs?

The Economist has an interesting article on the extinction of the dinosaurs. A new theory says it was an ever bigger comet that heat south of India that did them in, not the comet that made the hicxulub crater in Mexico. Here's the key bit:
EVERYONE knows that the dinosaurs were exterminated when an asteroid hit what is now Mexico about 65m years ago. The crater is there. It is 180km (110 miles) in diameter. It was formed in a 100m-megatonne explosion by an object about 10km across. The ejecta from the impact are found all over the world. The potassium-argon radioactive dating method shows the crater was created within a gnat’s whisker of the extinction. Calculations suggest that the “nuclear winter” from the impact would have lasted years. Plants would have stopped photosynthesising. Animals would have starved to death. Case closed.

Well, it now seems possible that everyone was wrong. The Chicxulub crater, as it is known, may have been a mere aperitif. According to Sankar Chatterjee of Texas Tech University, the main course was served later. Dr Chatterjee has found a bigger crater—much bigger—in India. His is 500km across. The explosion that caused it may have been 100 times the size of the one that created Chicxulub. He calls it Shiva, after the Indian deity of destruction.

Dr Chatterjee presented his latest findings on Shiva to the annual meeting of the Geological Society of America in Portland, Oregon, on October 18th. He makes a compelling case, identifying an underwater mountain called Bombay High, off the coast of Mumbai, that formed right at the time of the dinosaur extinction. This mountain measures five kilometres from sea bed to peak, and is surrounded by Shiva’s crater rim. Dr Chatterjee’s analysis shows that it formed from a sudden upwelling of magma that destroyed the Earth’s crust in the area and pushed the mountain upwards in a hurry. He argues that no force other than the rebound from an impact could have produced this kind of vertical uplift so quickly. And the blow that caused it would surely have been powerful enough to smash ecosystems around the world.


Dr Chatterjee therefore suggests that an object 40km in diameter hit the Earth off the coast of India and forced vast quantities of lava out of the Deccan Traps. As well as killing the dinosaurs the impact was, he proposes, responsible for breaking the Seychelles away from India. These islands and their surrounding seabed have long looked anomalous. They are made of continental rather than oceanic rock, and seem to be a small part of the jigsaw puzzle of continental drift rather than genuine oceanic islands.
There are lots more interesting details in the article, go read it.

If At First You Don't Succeed...

Try, try again using other people's money!

This is a very interesting post about the guy behind the last two big financial crashes, LTCM and
the 2007-9 financial crash: John Meriwether.

Here's the story as told by Matthew Yglesias on his blog Think Progress:
Good news for investors who like to lose all their money, “John Meriwether, the hedge fund manager and arbitrageur behind Long-Term Capital Management, is in the process of setting up a new hedge fund – his third.” What’s that, you ask, didn’t his first fund lose all its money? Why, yes. And didn’t the second fund fold because it lost a ton of money? Yes, quite so. So how will this new one be different? It won’t! It’s “expected use the same strategy as both LTCM and JWM to make money: so-called relative value arbitrage, a quantitative investment strategy Mr Meriwether pioneered when he led the hugely successful bond arbitrage group at Salomon Brothers in the 1980s.”

The way this works is that you identify arbitrage opportunities such that you make trades you’re overwhelmingly likely to make money on. But those opportunities only exist because the opportunities are very small. So to make them worth pursuing, you need to lever-up with huge amounts of debt. Which means that on the rare moments when the trades do go bad, everything falls apart: “The strategy typically has a high ‘blow-up’ risk because of the large amounts of leverage it uses to profit from often tiny pricing anomalies.”

As a friend puts it, this strategy is “literally the equivalent of putting a chip on 35 of the 36 roulette numbers and hoping for no zero/36.” But you’re doing it with borrowed money. I’m not a huge believer in human rationality, so I totally understand how this scam worked once. That he was able to get a second fund off the ground is pretty amazing. If he finds investors for a third spin around the wheel I’m going to propose confiscating all the rich peoples’ money and giving it to capuchin monkeys.
Go read Yglesias' blog to get the embedded links.

Since Obama refuses to legislate banking control, we are bound to go through another crash. Back in the 19th century they came roughly every 10 years. LTCM was 1997 and ten years later we had the latest crash. So be prepared to see another meltdown in 2017!

I thought Obama was a smart guy. Well, I guess he is, but he is smart enough to look after his own interests by selling out to the Wall Street crowd. But he isn't "smart" in the sense that his hero Lincoln was in making hard decisions for the good of the nation. FDR did the right thing by putting banking regulation in place. Why can't Obama. Oh right, Obama is paid for and owned by Wall Street as far as the issue of regulation is concerned.

I guess in Obama's mind he will leave a legacy if he gets a watered down health care bill passed. Who needs financial stability when 95% of the population is covered by a half-assed private insurance system?

In short, I'm disappointed.

A Real Look at Afghanistan

Here is a clip from the Fareed Zakaria show on CNN. If you skip the first 50 seconds you are in with Fareed's first guest, Thomas Ricks, who gives you a real feel for what is happening in Afghanistan. This interview focuses on the battle of Wanat. The insanity of this battle was that the US lost 9 dead and withdrew 3 days later. What is the point of taking on fights that you lose for turf you are prepared to abandon?

I follow Ricks' blog The Best Defense and find it interesting.

If you listen to the economic discussion on the above Zakaria show, you will get a pretty good overview of the situation. Here is the panel:

The most sensible person on the panel is Skidelsky, a Keynesian. Micklethwait is intelligent and reasonable. Wallison is a right winger who misleads with his criticisms. He is pushing "inflation scare" which is exactly the wrong thing. This was the big mistake of 1937 under FDR that created a second collapse in the midst of the Great Depression. Karabell didn't get much chance to participate but he appears to be reasonable in his views. What bugs me is that the right wing ideologues still get a lot of "face time" on the media despite the fact that they marched the US (and the world) right into the worst collapse since the Great Depression. These right wing nuts should be discredited and bannished.

Wicked Weather

I got a kick out of reading this on Anthony Watts' blog but it originates from Alan Caruba as a post on his blog...
In March, William J. Broad, reporting in The New York Times [in this article], noted that Gore’s “scientific audience is uneasy” in the wake of his global warming documentary. “These scientists argue that some of Mr. Gore’s central points are exaggerated and erroneous. They are alarmed, some say, at what they call his alarmism.”

In Great Britain, a judge ruled that the documentary could not be shown in the schools unless teachers read a long list of its erroneous claims.

Since an increase in hurricanes was one of his dramatic claims along with rising sea levels and disappearing polar bears, Gore is batting zero these days. The sea levels have been rising a few inches every century for millennia and it is generally conceded that the polar bear population since the 1950s has been thriving.

In May, hurricane specialist Chris Landsea of the National Hurricane Center in Miami disputed theories that “global warming” has caused more hurricanes. His study was published in The Journal of Climate.

Landsea, like all meteorologists who haven’t been in a coma since the 1980s, knows that the Earth has been in a cooling cycle since 1998. Thus, the warmth that feeds hurricanes has diminished and is likely to stay that way for decades to come.

Landsea’s research showed that, since the mid-1990s, the average number of hurricanes per year had almost doubled what it was during the few prior decades, about on par with hurricane activity in the early 20th century. “It’s busy, yes, but not anything we haven’t seen before,” said Landsea while attending the Florida Governor’s Hurricane Conference in May.

For the non-scientist, that should confirm that hurricanes are governed by natural cycles, not some non-existent, dramatic increase called “global warming.”

Though what I know about hurricanes would fit comfortably in a bug’s ear, I am nonetheless tempted to suggest that the cooling cycle the Earth entered in 1998 may be a contributing factor to why this year’s hurricane season is, at this writing, minus any hurricanes.

So, where are the hurricanes of 2009, Mr. Gore?
And here is the real weather data (from US NOAA) from the same blog, different post. This doesn't look like "global warming" to me:
Record Events for Sat Oct 17, 2009 through Fri Oct 23, 2009
Total Records: 2682
Rainfall: 812
Snowfall: 72
High Temperatures: 152
Low Temperatures: 252
Lowest Max Temperatures: 1129
Highest Min Temperatures: 265
Funny how as it "warms" you get more record lows than record highs. I guess that just proves that climate science is "complex" and that mere mortals need to sit at the feet of the great gurus of climate modelling and simply lap up what they tell us!!!

Friday, October 23, 2009

Wall Street Strangles the Innocent

Not only has Obama dithered, he has completely failed to provide financial regulation. The US is doomed to bubble and burst continuously until the citizens elect a Congress and a President with the will and the gumption to go up against the kings of Wall Street.

Here's a bit from a Robert Reich blog that gives you something to chew on:
At a conference in London, a Goldman Sachs international adviser, Brian Griffiths, praised inequality. As his company was putting aside $16.7 billion for compensation and benefits in the first nine months of 2009, up 46 percent from a year earlier, Griffiths told us not to worry. “We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all,” he said.

Eight months ago it looked as if Wall Street was in store for strong financial regulation -- oversight of derivative trading, pay linked to long-term performance, much higher capital requirements, an end to conflicts of interest (i.e. credit rating agencies being paid by the very companies whose securities they're rating), and even resurrection of the Glass-Steagall Act separating commercial from investment banking.

Today, Congress is struggling to produce the tiniest shards of regulation that would at least give the appearance of doing something to rein in the Street.
The attitude on Wall Street is criminal because:
  1. It shows contempt to the American taxpayer who had to open his wallet to save Wall Street after it collapsed the economy.

  2. These guys were effectively bankrupt and had no job in October 2008, but the taxpayer bailed them out, and now they are paying themselves 46% more than in 2008? Talk about arrogance! These slimeballs like to talk about "adding value" or they talk about how their "skills" are needed and the only way to keep them is to reward them with obscene amounts of money. I saw close them down! The public saved them and they returned the favour by spitting on the public. I say shut them down. Let them sell apples in the street with all their "financial engineering" skills.

  3. The Wall Street types are like the Mafia dons who bought the judges and the police on the beat. In this case Wall Street has bought Congress. So there is no regulation. If Wall Street decides to strangle every new baby born, I'm sure Congress will bring forward a 'Strengthen the American Family Act' with glorious words about how the politicians have discovered that 'true' American family values includes limiting the child-to-parent ratio to ensure an ideal 'balance' at home. And not one politician would notice that he is passing legislation to murder the citizens. Citizens don't count. They only have ballots. Wall Street counts. They have the moolah to buy the politicians.

Watch a Health Care Lobbyist be Drubbed by Al Franken

This is excellent...

His point at the end is key. The lobbyists are very careful to choose their "facts" to sell their point of view. Since they are paid gunslingers, they don't care how many bodies are left lying all over town when they get finished with their "job". Sadly, most people never bother to count the bodies after they highly paid "specialists" do their dirty deeds.


Here's a blog posting by Scott Adams, creator of the Dilbert cartoon:
I'm trying to come up with a good Halloween costume. I prefer something topical and funny. I don't want to be the guy who shows up at the party wearing sweat pants and says he's a baseball player. Maybe you can help.

One idea is to wear a Barack Obama name tag with my regular clothes. Then I'll wait for someone to say, "Barack Obama? How's that Barack Obama? I had such high expectations for your costume and all you did was...oh, wait. I get it."
That pretty well nails it for me.

Early Out the Gate with Gloom and Doom

A key scientist who pushes the global warming alarm button regularly is NASA's James Hansen. He specializes in the-end-is-nigh predictions. Here's a key bit from an interesting article in Salon magazine published in 2001:
Extreme weather means more terrifying hurricanes and tornadoes and fires than we usually see. But what can we expect such conditions to do to our daily life?

While doing research 12 or 13 years ago, I met Jim Hansen, the scientist who in 1988 predicted the greenhouse effect before Congress. I went over to the window with him and looked out on Broadway in New York City and said, "If what you're saying about the greenhouse effect is true, is anything going to look different down there in 20 years?" He looked for a while and was quiet and didn't say anything for a couple seconds. Then he said, "Well, there will be more traffic." I, of course, didn't think he heard the question right. Then he explained, "The West Side Highway [which runs along the Hudson River] will be under water. And there will be tape across the windows across the street because of high winds. And the same birds won't be there. The trees in the median strip will change." Then he said, "There will be more police cars." Why? "Well, you know what happens to crime when the heat goes up."

And so far, over the last 10 years, we've had 10 of the hottest years on record.

Didn't he also say that restaurants would have signs in their windows that read, "Water by request only."

Under the greenhouse effect, extreme weather increases. Depending on where you are in terms of the hydrological cycle, you get more of whatever you're prone to get. New York can get droughts, the droughts can get more severe and you'll have signs in restaurants saying "Water by request only."

When did he say this will happen?

Within 20 or 30 years. And remember we had this conversation in 1988 or 1989.

Does he still believe these things?

Yes, he still believes everything. I talked to him a few months ago and he said he wouldn't change anything that he said then.
Notice these important facts:
  1. To the best of my knowledge the West Side Highway in NYC is not under water, no restaurants are taping their windows because of high winds, and the same birds are living there as have lived there for the last 10,000 years. So he's 3 for 3 in getting his predictions wrong. And despite being wrong, he stands firm in 2001 saying he wouldn't change anything that he said then. Indeed, James Hansen has escalated his rhetoric and now uses radical tactics of blocading coal mines and getting arrested for it. Usually people who become committed activist have passed beyond the stage of rational discourse and are now fanatics unwilling to test their ideas.

  2. He was wrong then and I'd bet dollars to donuts he's wrong now, but he won't admit any mistakes. The sure sign of a fanatic.

  3. He has a 20+ year track record for being wrong. Is this the kind of guy that people should be looking to for advice about climate change?
But it is funny. Those who question the fear mongering of runaway global warming are the ones who are held up to ridicule as being impervious to fact. While those who are wrong and are proud of being wrong and continue to be wrong are held up as paragons of thoughtfulness and scientific honesty. Yep... life is stranger than fiction.

The global warming crowd presents itself as the only level-headed rational group when it comes to discussing climate. But here is a report that polled scientsts and found that 17% dissent from the IPCC view as either attributing too much influence to human contributions to warming or because the underlying science is too uncertain to nail down the conclusions that IPCC draws. There are also 17% who dissent from the IPCC for being too soft on the real doom-and-gloom scenarios that they believe are at hand. And roughly 66% accept the IPCC as a reasonable assessment. There isn't unanimity. And in the climate of today, it takes a strong person willing to risk their career to stand up and be counted in the 17% camp dissenting from the IPCC's conclusions for being too alarming. On the other hand, those in the 17% who are radical and sneer as the IPCC as a weak-kneed response to an imminent catastrophe, generally get kudos and are put on a pedestal. They run no risk of losing their academic career.

The Wave of the Future?

Is this the new ethic? From a report on BBC:
Rich Germans demand higher taxes

A group of rich Germans has launched a petition calling for the government to make wealthy people pay higher taxes.

The group say they have more money than they need, and the extra revenue could fund economic and social programmes to aid Germany's economic recovery.

Germany could raise 100bn euros (£91bn) if the richest people paid a 5% wealth tax for two years, they say.

The petition has 44 signatories so far, and will be presented to newly re-elected Chancellor Angela Merkel.

The group say the financial crisis is leading to an increase in unemployment, poverty and social inequality.

Simply donating money to deal with the problems is not enough, they want a change in the whole approach.

"The path out of the crisis must be paved with massive investment in ecology, education and social justice," they say in the petition.
I'm hoping this is the swing to the left to counteract the last 30 years of rampant right wing, greed is good, he who dies with the most toys wins, I've got mine to hell with you, ethic of the "Reagan revolution".

But the report ends with a bit of cautious realism:
The group held a demonstration in Berlin on Wednesday to draw attention to their plans, throwing fake banknotes into the air.

Mr Vollmer said it was "really strange that so few people came".
It is going to be a hard sell. Most of the rich got that way by working hard and saving. To now turn around and give it away, especially to those who partied through life, never saving, always putting the touch on others to fund them through their personal crises will be hard. If you are an ant and the grasshopper is starving, the right thing to do is feed him, but it grates on you for all your hard working and frugal ways left you watching as the grasshopper froliced, even make fun of you. But now in a time of need the grasshopper comes to bum goodies off of you. Yep... life is cruel.

Thursday, October 22, 2009

A Statement of Principle

This is interesting...

Al Gore is in Trouble

I'm betting he is breaking into a sweat. Here's the result of Pew Research poll:
There has been a sharp decline over the past year in the percentage of Americans who say there is solid evidence that global temperatures are rising. And fewer also see global warming as a very serious problem – 35% say that today, down from 44% in April 2008.

I compare the fight over global warming to the quick and decisive response to CFCs with the Montreal Protocol. In that case the science was clear and the danger obvious, so action was quick and decisive. The global warming hubbub is not so clear. If the CO2 fanatics were serious they would push legislation to slaughter all cattle because methane is a much more serious greenhouse gas and it is easy to pass a bill to kill all the cows. Next they might target termites and exterminate them as a major source of methane. Maybe set fire to the bogs and the undersea methane hydrate deposits to ensure that the stuff doesn't bubble up into the atmosphere. There are lots of things that can be done besides putting curbs on industry and telling people to wear triple layers of sweaters. Don't get me wrong. I see nothing wrong with being conservative in our energy use. I'm as ready as the next fellow to stand on the street corner and blast away at Hummers and SUVs to teach those people an environmental lesson. But going after CO2 strikes me as odd where there are easier targets to start with.

By the way, H2O is a serious green house gas. I guess we could Mars-iform the Earth by getting rid of the oceans to eliminate that source of greenhouse gases. But I'm fight tooth-and-nail to keep the water on earth. Let the eco-nuts go live on Mars.

Sunday, October 18, 2009

Krugman on the Banks

Here's a key bit out of Paul Krugman's latest op-ed in the NY Times:
You may recall that earlier this year there was a big debate about how to get the banks lending again. Some analysts, myself included, argued that at least some major banks needed a large injection of capital from taxpayers, and that the only way to do this was to temporarily nationalize the most troubled banks. The debate faded out, however, after Citigroup and Bank of America, the banking system’s weakest links, announced surprise profits. All was well, we were told, now that the banks were profitable again.

But a funny thing happened on the way back to a sound banking system: last week both Citi and BofA announced losses in the third quarter. What happened?

Part of the answer is that those earlier profits were in part a figment of the accountants’ imaginations. More broadly, however, we’re looking at payback from the real economy. In the first phase of the crisis, Main Street was punished for Wall Street’s misdeeds; now broad economic distress, especially persistent high unemployment, is leading to big losses on mortgage loans and credit cards.

And here’s the thing: The continuing weakness of many banks is helping to perpetuate that economic distress. Banks remain reluctant to lend, and tight credit, especially for small businesses, stands in the way of the strong recovery we need.
It is worth your while to read the whole article.

This point about Obama's administration not acting when it should to fix the financial industry is the reason why I've given up on Obama. He has sold his soul to Wall Street. He is a bought and paid politician.

Sadly, Krugman points out that the cost of the US dragging itself out of this recession is going to a lot more pain and a lot more time than it would have been if Obama had acted decisively when he got into office. He didn't. (Of course, the whole disaster could have been avoided if Bush hadn't been elected in 2000 and sensible financial regulations put in place. But that is old history.)

Sadly, the average American has no clue of how bad things will be and for how long because they don't follow the financial press and don't stay on top of the shenanigans of the politicians. I am horror-struck at how 30% of the US population still think Bush was a "good" leader. These people have no clue how bad he was and how many generations it will take to undo the harm he inflicted on the economy and the institutions of the US. Sad.

Global Warming Sets New Records

From a post on Watts Up With That with the headline:
A cold start to fall: over 4500 new snowfall, low temp, and lowest max temp records set in the USA this last week

I never cease to be amazed at how warming leads to colder temperatures. But the global weather alarmists reassure me that what feels cold is actually record highs because the climate models assure us that we are into runaway global warming. So don't believe your eyes, trust the "science", trust the models... you know, just like those Wall Street types trusted their financial models.

Meanwhile, there is a documentary that gives the anti-global warming message. I haven't seen it. It could be complete crap. But here's the promo:

It could be just propaganda from the right financed by oil companies for all I know. But I'll give it a peek later today to give it a try. But I don't want propaganda. I want facts. I want to see a real debate. I want people who understand the science and the models to honestly engage in a debate so I can sharpen my own viewpoint. I'm tired of one-sided presentations. I'm afraid this might be just another bit of propaganda. What the world needs is information and informed debate. Not paid-for advertisements.

Update 2009oct18: I watched the documentary. The first half was so-so. The second half did introduce some scientists and exposed the issues. It wasn't a "debate" since the film advocated the anti-global warming viewpoint. The only factual error appeared to be with regard to DDT. They made several claims. The one that DDT was now reaffirmed by WHO was new to me, so I did a quick Internet search, and sure enough, despite a global ban (see here), the WHO is now advocating DDT for malaria control (see here). So most of my qualms were assuaged. I can agree with the documentary that Rachel Carson's book, Silent Spring, stirred up the environmental movement. But the film leaves the impression that there was no factual basis for the concerns about lingering poisons in the environment. There was and still is. The poisons had deleterious effects. The point I will agree with on the film is that the hysteria didn't encourage a rational discussion of costs and benefits or a review of options.

What I did like about the documentary was its emphasis on people, that policy actions must line up with the needs of real people and not just the Hollywood activists or the environmental fanatics. I really enjoyed the comments from Patrick Moore, a founder of Greenpeace who left the group (or was tossed out?) because he didn't agree with their radical agenda (which in the documentary he calls their anti-human agenda, i.e. they love fish eggs more than people).

So, on the whole, the documentary was good. It wasn't blatant propaganda. It was heavy on sentiment and image (which I understand is needed to motivate people, but this is too much like propaganda to leave me happy) but it did have a fairly strong section on the underlying science (mostly focused on the misuse of data by the global warming fanatics in producing the infamous 'hockey stick' graph, and provided a bit of interview and background on Stephen McIntyre and Ross McKitrick. I did enjoy the fact that the documentary focused on 'the poor' and 'the average person'. These people are lost in the debate. I especially enjoyed the bit in Uganda where two American women lectured a Ugandan woman who lost her son to malaria and was trying to raise political action to re-introduce DDT. The Americans hectored her with completely wrong 'facts' and their ignorant opinions. I took this as a metaphor by the film maker for the radical environmentalist who hector the world with their agenda while ignoring the needs of real people -- a woman who lost her son to a disease -- as they push their misguided agenda. That was a deft point.

Saturday, October 17, 2009

An Emperor's New Clothes

I guess Obama's proud of his Nobel Peace prize. But it leaves a lot of people like me puzzled. Here's a bit from a NY Times op-ed by Maureen Dowd that catches my eye:
Havel, the 73-year-old former Czech president, who didn’t win a Nobel Peace Prize despite leading the Czechs and the Slovaks from communism to democracy, turned the tables and asked Smale a question about Obama, the latest winner of the peace prize.

Was it true that the president had refused to meet the Dalai Lama on his visit to Washington?

He was told that Obama had indeed tried to curry favor with China by declining to see the Dalai Lama until after the president’s visit to China next month.

Dissing the Dalai was part of a broader new Obama policy called “strategic reassurance” — softening criticism of China’s human rights record and financial policies to calm its fears that America is trying to contain it. (Not to mention our own fears that the Chinese will quit bankrolling our debt.)

The tyro American president got the Nobel for the mere anticipation that he would provide bold moral leadership for the world at the very moment he was caving to Chinese dictators. Awkward.

Havel reached out to touch a glass dish given to him by Obama, inscribed with the preamble to the U.S. Constitution. “It is only a minor compromise,” he said. “But exactly with these minor compromises start the big and dangerous ones, the real problems.”

Our president would be well advised to listen. Havel is looking at this not only as a moral champion but as a playwright. Obama (who, as Robert Draper wrote, has read and reread Shakespeare’s tragedies) does not want his fatal flaw to be that he compromises so much that his ideals get blurred out of recognition.
I always figured there would be less wars if the generals had to be out in front of the troops taking the first blows. Obama seems to favour leading from the rear while consulting with his opponents about how they fray of battle can be turned into a picnic in the shade by the stream. Grand idea, but most battlefields don't have a handy tree, shade, or stream available to fit that aspiration. So, in my eyes, a great leader is the one who can tell you 'war is hell' and promise you only 'blood, sweat, and tears' but actually has a goal that justifies the battle. I just don't get that from Obama. Instead I picture him in the tent huddled with advisors going over options for the n-th time while being interrupted by calls from the opponents to discuss 'deals'.

Don't get me wrong. Obama is infintely better than the screw-up George Bush. But the US is in a crisis. It needs a Lincoln. Instead it is getting a faux-Lincoln who is winning prizes and giving lovely speeches, but hasn't delivered anything. Enough with the poetry and grandstanding. He needs to get into the trenches and deliver the goods.

Here's how Dowd puts it:
Yet Obama’s legislative career offers cautionary tales about the toll of constant consensus building.

In Springfield, he compromised so much on a health care reform bill that in the end, it merely led to a study. In Washington, he compromised so much with Senate Republicans on a bill to require all nuclear plant owners to notify state and local authorities about radioactive leaks that it simply devolved into a bill offering guidance to regulators, and even that ultimately died.

Now the air is full of complaints that Obama has been too cautious on health care, Afghanistan, filling judgeships, ending “don’t ask, don’t tell,” repealing the Defense of Marriage Act and rebuilding New Orleans; that he has conceded too much to China, Iran, Russia, the Muslim world and the banks.
That's quite a long laundry lists of unfilled aspirations. I guess I've decided that Obama's "change" is a Potemkin village, an artifice of words used to motivate crowds and lift him to pre-eminence. When it comes to delivery, he chokes. So it is funny to see him handed a Nobel for Peace. Seems to me the emperor's new clothes are in fact no clothes.

The Stench of Rot

There is rot at the centre of the US economy and nobody in Washington seems aware of it. Instead, Washington's actions speak very loudly. They are selling out Main Street in order to reward Wall Street.

Here are the opening paragraphs of a NY Times article by Graham Bowley:
Even as the economy continues to struggle, much of Wall Street is minting money — and looking forward again to hefty bonuses.

Many Americans wonder how this can possibly be. How can some banks be prospering so soon after a financial collapse, even as legions of people worry about losing their jobs and their homes?

It may come as a surprise that one of the most powerful forces driving the resurgence on Wall Street is not the banks but Washington. Many of the steps that policy makers took last year to stabilize the financial system — reducing interest rates to near zero, bolstering big banks with taxpayer money, guaranteeing billions of dollars of financial institutions’ debts — helped set the stage for this new era of Wall Street wealth.

Titans like Goldman Sachs and JPMorgan Chase are making fortunes in hot areas like trading stocks and bonds, rather than in the ho-hum business of lending people money. They also are profiting by taking risks that weaker rivals are unable or unwilling to shoulder — a benefit of less competition after the failure of some investment firms last year.
Go read the whole article. Then weep.

The Obama administration is walking in the same shoes as Bush. Congress hasn't acted. Washington is "owned" by Wall Street and it means the poor American taxpayer is being taken to the cleaners so that billion dollar bonuses can flow on Wall Street. The stench of rot reaches up to the heavens.

Michael Kaplan & Ellen Kaplan's "Bozo Sapeins"

The Kaplans have put together an entertaining romp through human decision-making and the limits of humans. They bring up all the classic examples of illusions and misperception, they review classic examples of human errors in complex systems, and they romp through human history looking at examples of our failings. It is all good fun. I did learn a few things from the book, but I find the style emphasized more flash-and-dash rather than a careful examination of the limitations and the building of a meaningful understanding. But this is excusable. These two writers are not experts in the field and they are not writing a textbook. This is meant for the general reader, so it is a bit frothy and breathless in its race to uncover more and better examples of our limitations.

Here's their own summary of the content of their book:
Is it instinctive for people -- our doltish enemies, our spontaneous selves -- to get things wrong?

This one question spawns many more: why is it, now that we have taken over the world, that we are apparently unable to stop ourselves from wrecking it? Why do we let belief blind us to evidence? Why do we abuse -- and kill -- each other in the name of unprovable abstractions? Why, despite having information that a Rothschild would envy, are our economic decisions so impulsive and haphazard? Why do we let celebrities tell us what to do? Why do we find mysteries compelling, and their solutions disappointing? And what has all this to do with the fact that all people speak the same way to babies and all cultures imagine heaven as flowery fields, laced with streams and studded with wide-space trees? These are some of the problems we will be taking up in the next six chapters.
They do discuss these topics. They cite interesting relevant reseach. They provide entertaining anecdotes. But in the end, the book isn't fully satisfying. I don't mind recommending it as a 'good read', but it isn't going to make you an expert in the field.

What puzzles me is why the experts can't write the books that this books reveals a market for: explanations of our limitations in decision-making. Of course we are endlessly fascinated in ourselves. Rather than read a he-said, she-said thriller about relationships, this kind of book usefully gets us to think about ourselves and our limits.

Friday, October 16, 2009

Why Obama Falls Short

Here is the key bit in a blog posting by Brad DeLong that identifies the problem with Obama:
Of all the senior members of the Obama administration, [Chair of the Council of Economic Advisors Christine] Romer has by far the least experience with practical legislative politics and also has the job that’s the least concerned with practical legislative politics. And I think that it was in a lot of ways a masterstroke to appoint a very policy-focused academic with no practical legislative experience to the CEA job. When people work too long in Washington, their notions of what would be good policy in principle tend to become unduly corrupted by their knowledge of what’s possible in practice.

But what Lizza is telling us is that on the two biggest pieces of macroeconomic management, the Obama administration is pursuing policies that its in-house expert on macroeconomic crisis management believed were far too timid. He’s also telling us that this was done primarily not because people disagreed with her analysis, but because they felt it wasn’t possible, legislatively speaking, to do what was objectively necessary. It’s a bit of a scary situation.
Obama promised "change you can believe in" but he's delivering "same old, same old". He may end up as a "typical" American President, but he has fumbled the opportunity to be the Abe Lincoln figure that he teased the electorate with during his campaign. A great historical moment for fundamental change has been lost. I am bitter about it. I won't mince words because I'm a nobody sitting on the sidelines. I've already been kicked around by history, so I know how cruel and indifferent history is. For too long I've had to watch the cynical manipulators with the air-brushed appearances strut on the stage and fool people. It is a great tragedy.

Thursday, October 15, 2009

The Future for Robots?

This was unexpected...

After the fact, it is obvious. his is roughly how cells move. That's what is interesting about "new" ideas. Before hand, nobody conceives of it. Afterwords, it is obvious.

Now... the problem is to figure out how to use this new robotic concept.

The Puzzle over Afghanistan

Here's a bit from Thomas L. Friedman's op-ed in the NY Times that summarizes my feelings about Afghanistan:
I have no problem with the president taking his time to figure this out. He and we are going to have to live with this decision for a long time. For my money, though, I wish there was less talk today about how many more troops to send and more focus on what kind of Afghan government we have as our partner.

Because when you are mounting a counterinsurgency campaign, the local government is the critical bridge between your troops and your goals. If that government is rotten, your whole enterprise is doomed.

Independent election monitors suggest that as many as one-third of votes cast in the Aug. 20 election are tainted and that President Hamid Karzai apparently engaged in massive fraud to come out on top. Yet, he is supposed to be the bridge between our troop surge and our goal of a stable Afghanistan. No way.

I understand the huge stakes in stabilizing Afghanistan and Pakistan. Gen. Stanley McChrystal, our top commander there who is asking for thousands more troops, is not wrong when he says a lot of bad things would flow from losing Afghanistan to the Taliban. But I keep asking myself: How do we succeed with such a tainted government as our partner?
What bothers me as a Canadian is that the public has long said "get out of Afghanistan" but our governments, under pressure from the US, have kept troops there. We are now coming up to the end of the original commitment, and as far as I can tell the government will roll over and appease the Americans by extending -- and heaven forbid, increasing! -- the commitment. In my mind, quit now and save lives. Only intervene if there is a clear and present danger from Afghanistan.

It makes no sense to try to do "nation building" in a place where the people are so hostile to Western values. You can't save a drowning person who doesn't want to be saved. Instead, you admit the limits of your abilities and you comment on how tragic it is, but you walk away. There is no point in throwing blood and treasure into a cesspit.

Wednesday, October 14, 2009

DeLong on Deficit Spending

Here is a bit from a blog entry by Brad DeLong dealing with concerns about deficit spending raised by financial hawks (aka the rich people who worry about inflation and don't care about the working people):
This is an exceptional time—a time in which many of the normal rules of the Dismal Science don't apply because, as Paul Krugman puts it, "depression economics" is in the driver's seat. The normal benefits and costs of government borrow-and-spend policies are overturned for now—and for as long as the crisis of high unemployment lasts.

Yet I find that many people do not understand why arguments that make perfect sense in normal times do not apply today. Let's run through the arithmetic—first in normal times, and then in a financial crisis like this one.

In normal times, a boost to government purchases:

Produces a limited increase in production and employment;
Creates a substantial increase in national debt;
And requires that this new debt be financed at a sizeable interest rate.
Consequently, only government spending initiatives that promise a high value for the dollar are worth undertaking. Consider a $100 billion boost to government purchases. In a normal year, the Federal Reserve will worry about inflation, and raise interest rates somewhat to offset the inflationary impact of the fiscal boost. The multiplier effect of the purchases will therefore be something like 0.4—we will spend $100 billion on government purchases and gain perhaps $40 billion in extra production and associated employment out of it. Those who earn that extra $40 billion will pay taxes—perhaps $16 billion. So the net impact on government debt is this: by spending an extra $100 billion we will have added some $84 billion to the national debt.

That debt must then be amortized. At a five-percent-per-year long-run real rate of interest on government bonds, amortizing that debt will cost Americans $4.2 billion a year.

But wait—there is more. The Federal Reserve's compensatory increase in interest rates will also reduce investment. Because of the $100 billion in government purchases, perhaps $60 billion of private investment that would have been made won't be made—it will be crowded out. As a result of the lower capital stock, some $6 billion a year of income that would have been earned won't be.

Thus the net cost will be a reduction in Americans' disposable incomes of $10.2 billion per year.

That is not an attractive bargain: to purchase $40 billion of extra production now at the expense of a reduction in incomes of $10.2 billion in every year in the future. That is a usurious real interest rate of 25.5 percent. No sane economist would recommend a policy with such costs and benefits.

But how different everything looks in those rare times—like now—when depression economics applies!

First, more government spending will not lead the Federal Reserve to raise interest rates to fight inflation; the Federal Reserve has pushed interest rates to the floor right now and wishes it could push them lower still—perhaps another 5 percent into negative terrain. Given that, the multiplier on government spending is not 0.4, but more like 1.5. In other words, we do not get $40 billion of additional production and employment for $100 billion in government spending: We get $150 billion.

How? The federal government spends money to buy something it would not otherwise have purchased, thereby taking that product out of business inventories. Typically, businesses would respond by saying, "Our goods are flying off the shelves; we should raise our prices." As businesses raise their prices, (most of) what the federal government bought would be offset by a decline in private purchases because private buyers, confronting increased prices, decide to hold off on purchases.

But, again, now is not normal. Now, businesses respond to the federal government's purchases by saying, "Demand for our goods is greater than we thought; we don't need to fire as many people." The workers who they don't fire retain incomes they would not otherwise have had, and so they are a bit freer with their spending than they would be otherwise. Add up the extra spending by the federal government, and the extra spending by people who would have been fired but for the spending by the federal government, apply the appropriate offsets, and you wind up with a multiplier that most forecasters—by which I mean people who actually make their livings selling forecasts to businesses—think is probably around 1.5. Thus we get $1.50 of economy-wide spending for each $1 of stuff bought by the federal government.

Second, that boost to production creates a substantial reflow in taxes that makes the spending program lunch not free, but cheaper; $150 billion of added production leads to $60 billion of additional tax revenue, leading to only $40 billion in increased debt.

Third, depression economics means not only that there is no offsetting Federal Reserve interest rate increase, but also that the government can borrow at uniquely favorable terms: 2 percent per year in real terms for the next 30 years. Amortizing the $40 billion of additional government debt requires only $800 million a year in additional interest payments and taxes.

Fourth, the absence of interest rate increases means that there is no crowding-out of private investment. Private-sector incomes down the road are unchanged—or increased.

So the net cost of gaining $150 billion in increased production and incomes this year is $800 million a year going forward. It's not a free lunch—they take away my union card as an economist if I start claiming that things are free lunches—but it is a very cheap lunch: like getting a 2 lb. lobster with all the trimmings for $1.95.

Clearly, a second round of stimulus right now would be a very good deal for the American economy.
The original post then goes on to consider how big the second stimulus should be.

But the rich won't listen to any of this. They simply want deficits stopped "just in case" because they worry about inflation. They don't worry about unemployment. They don't worry about home foreclosures. They don't worry about state & local budget squeezes. They don't worry about school closures. All they worry about is their rents from their investments. They would love to go back to the "good old days" when you didn't have a meddlesome government. The rich simply ran things as an oligarchy and the people were serfs or slaves. None of this handing out money to the needy! Instead, they could not just cut taxes, they would eliminate it for themselves. If their oligarchy needed some cash, you simply round up some of the peasants and sell them off into slavery to whip up some free cash!