I'm about to spread the meme around with a conservative and libertarian stamp of approval. Since the idea is expressed in terms of expresso, I expect that even Liberals and especially Progressives will instantly understand it. What they may not understand is why conservatives and libertarians would support such a scheme. The answer is simple, it cuts out the middleman of government & the compulsion of law and instead uses unregulated markets and the goodness of people's hearts. You know, rather like Instagram, Twitter and Facebook are unregulated markets, or did you forget that?
"We enter a little coffeehouse with a friend of mine and give our order. While we’re approaching our table two people come in and they go to the counter: ‘Five coffees, please. Two of them for us and three suspended’ They pay for their order, take the two and leave.
I ask my friend: “What are those ‘suspended’ coffees?” My friend: “Wait for it and you will see.”
Some more people enter. Two girls ask for one coffee each, pay and go. The next order was for seven coffees and it was made by three lawyers - three for them and four ‘suspended’. While I still wonder what’s the deal with those ‘suspended’ coffees I enjoy the sunny weather and the beautiful view towards the square in front of the café. Suddenly a man dressed in shabby clothes who looks like a beggar comes in through the door and kindly asks ‘Do you have a suspended coffee ?’
It’s simple - people pay in advance for a coffee meant for someone who can not afford a warm beverage. The tradition with the suspended coffees started in Naples, but it has spread all over the world and in some places you can order not only a suspended coffee, but also a sandwich or a whole meal.
The solution is ideal. It gives the person donating the money complete control. If they have the confidence in the business that the goods and services will be delivered to those in need, that is the full level of trust required.
After more than twenty years as a transactional trader and businessman in what I called the “strange profession,” I tried what one calls an academic career. And I have something to report— actually that was the driver behind this idea of antifragility in life and the dichotomy between the natural and the alienation of the unnatural. Commerce is fun, thrilling, lively, and natural; academia as currently professionalized is none of these. And for those who think that academia is “quieter” and an emotionally relaxing transition after the volatile and risk-taking business life, a surprise: when in action, new problems and scares emerge every day to displace and eliminate the previous day’s headaches, resentments, and conflicts. A nail displaces another nail, with astonishing variety. But academics (particularly in social science) seem to distrust each other; they live in petty obsessions, envy, and icy-cold hatreds, with small snubs developing into grudges, fossilized over time in the loneliness of the transaction with a computer screen and the immutability of their environment. Not to mention a level of envy I have almost never seen in business.… My experience is that money and transactions purify relations; ideas and abstract matters like “recognition” and “credit” warp them, creating an atmosphere of perpetual rivalry. I grew to find people greedy for credentials nauseating, repulsive, and untrustworthy.
Taleb, Nassim Nicholas (2012-11-27). Antifragile: Things That Gain from Disorder (Kindle Locations 579-589). Random House, Inc.. Kindle Edition.
This is what I have learned over my lifetime in dealing with academics. It's so true. Here's another example of an antifragile tangent related to the simplicity of the Merlin Rocket engine.
Rocket science is still rocket science, but the best is not needlessly complex.
I've been listening to people talk about how they will change the world for most of my life. Incidently today there is this piece by Eric Raymond, and this piece by Bill Benzon. I do not doubt for a moment that the world has changed and continues to change. In fact, it has been enlightening to run through KOA, The Reconing to help me understand two little tidbits. Let me riff off the tidbits.
In Kingdoms of Amalur, The Reconing, we are playing the role of a fateshifter. You see, we are in the land of elves, gnomes, fae, sprites, boggarts, brownies, jottun and various other creatures. Some of these, the fae, without going too deeply into their taxonomy, are immortal. As immortals they express a great disdain for mortals, because you see, the fae are inextricably bound to the Earth. They represent birth, growth, decay and death, all of which are eternal, and so they are fated in their immortality. This is rather like the fate of neutrinos to be massless and thus travel at the speed of light. As the fateless mortal character, we exist at the opposite end of the spectrum. We are massive and thus bend fate around us and can assume any form, it is a condition of our mortality. I suppose that means I must die at the end of the game, but who knows, I'm only at level 29 and have yet to enter the kingdom of Alabastra, home of the Winter Court of Fae.
The Fae resent change, but must adapt to it, and find uses for it, or exist forever in a state in conflict with their previously eternal fate. For example, the Fae of Sorrows administer the Midden where the dead are separated from their souls. Change has made the Midden to smell to the Fae as it does to humans. Now suddenly their exalted position stinks.
So humans, as being mortals, must in the relatively short time allotted to them must find meaning amongst that which is eternal and transcendent and then force change. We must move swiftly and imbue ourselves with something permanent, or change something that seems permanent. This is what we do when we are confronted with the knowledge that we will die. For the vast majority of us, having children satisfies that condition. We smack up somebody else's life and produce one of the single most life changing changes that we can - creating life where there was none. And of course murder is the counterpart. There it is. End of riff.
In Raymond, the question of tribal prophets is answered rather matter of factly by the first commenter who serves rhetoric to the effect that all the titans of industry were prophets. Why not Ken Olsen, the CEO of DEC? And I have to agree with that point and take it to its proper conclusion which suggests that all such thinking about startup companies and tribes and such purposeful evasions of the public are a species of small-mindedness. This is, of course, the last thing that attendees of a TED seminar want to hear, but I cannot help but be reminded of the sort of eclexia implicit in these endless junkets.
I do not doubt that there is boundless creativity to be found in these tribes. And I find it telling that the speaker to whom Raymond refers begins with a micro history of Superbowl Parties and all such manner of things likely to be captured by the incessant narcissism of social media. But nobody knows what Obama does, they just like the idea that the Presidency is up for grabs and your vote, like your code, and your glib intellectual obiter dicta can be connected into a clever narrative of empowerment.
I am reminded of how many tons of rubber are produced in the world on an annual basis. We all take rubber for granted of course, and we imagine, we being those in the digiterati enthralled by the eclexia of TED, that there must be little of creative interest in the production of rubber and the management of a rubber empire. But I doubt quite seriously that we are correct in such assumptions, rather, we are determined to discount the qualities of such physical artifacts that don't flow over TCP/IP yeilding their secrets to those tools that we can appropriate freely in our open source worlds.
And how are we to change the world?
Well, we don't actually. What we do is we constantly change the way we see the world, and thus in a class of chatters, we frame and re-frame the fashionable intelligence, as has always been the wont and role of the Slice. We who work in close proximity to the Ruling Class. But TED and Google Plus and various streams of Twitter twaddle (and certainly some large unfathomable number of IRC channels) are the new channels that aggregate people into virtual neighborhoods. At long last however, the virtual remains virtual. So now we are witnessing what seem to be like sleepwalkers staring into the virtual multiverse as the stumble through actual streets and wreck their automobiles. Digital consciousness is now a 21st century virus unleashed in the 20th century world. Can it evolve?
I mean to do more than merely suggest but to state that this remote consciousness has devastating consequences for people who must of necessity put their bodies into alien spaces. And depending upon the quality of one's cybermind, every place is alien. There is no such thing as a company town, and this is the community that we are actually looking to build. The tribes fall short. And yet that is the new level of civic engagement, ever smaller, so that ever closer 'friends' feel autonomy in the societies we have built up over history. But these cities will not go away, nor will the distribution networks in place that put rubber on the wheels of all of the millions of automobiles that are also not going away. The virtual people have yet to build a town, and so the question ultimately becomes, at whose mercy are all these changes going to take place?
What is a labor union and what kind of city do they control? Now put them and their expertise in conflict with the TED crowd and what do you get? You get the election of Obama using the Leviathan power of the existing 20th century infrasturucture and physical world to force the labor union to provide the goods and services demanded by the Digerati and their tweeting children.
Do you see the problem as I do?
Silicon Valley is not sustainable. It is not a real, livable place and its vision for living is not real. The changes it makes in the world are to make the common man susceptible to the fashionable intelligence of its Digiterati with no regard or respect for the actual physical networks and infrastructure that it takes for granted. The mega corporations its princelings seek to re-think and remove are the proven successes of the 20th century, and they do not know how to scale their vision of community.
I've called this phenomenon 'the logarithmic shadow' because I beleive that incremental desire follows a log function. Could it be that this is all called marginal value?
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How much do economists (and the economy) depend on the idea (reality?) that rich people don't want what poor people have?
For example, when I was a kid, I spent lots of money on PacMan. At the time, I could never imagine spending $100 on a binge - but I wanted to. I just didn't have the $100. Now that I have it, I'd never waste it on PacMan. Forgetting the 'signal wealth' stuff and the fact that PacMan can be had for free. How is the price of a quarter good for PacMan in such a way that it's cheap enough for poor folks, and 'too cheap' for rich people.
How can anything be 'too cheap' for rich people? Why don't we actually always go for the cheapest stuff? Most importantly, how can this fact be communicated to class warfare conspiracy theorists? If the rich get richer is it always bad news for the poor? Don't super-rich people want rich people to be suckers, not poor people?
Progressives have a problem. Aside from their mendacious populism and occasional inversions of propriety, their problem is that they depend upon the economic success of capitalism yet remain in denial of this. Since few Progressives here in America will admit to the broad overlap between their forms of altruism and Christian ethics, they have an unhealthy relationship with scientism and shallow atheism. This rather seals their fate as mostly appearing to be old crypto Marxists with a post-modern lisp. And if that's not them then they're joined to the hip.
The only thing worse than and old Progressive is a young Libertarian, neither of which can be relied upon to instantiate anything of long-standing intitutional value - aside from the idea of permanent revolution.
So how do we resolve this problem, or is it not possible? Creeping socialism can only creep so long - you cannot dim a candle incrementally. Sooner or later, starved of oxygen, it will cease to burn. You see the analogy - Progressives as demonstrated by the presidency of Obama, must turn away from their 'nemesis' of free market capitalism and appoint a few 'socially-responsible' corporations (or 'green' or 'too big to fail') or some other non-economic appellation.
The problem is that Progressives don't seem to have any sense of balance.
I'm liking the mocking of English of the credulous. That's why I left it at 'the Trayvon Martin'. Anyway, since I've turned off my economic radar, I had to do a little remembering back on whom I used to read for those several years and I found the following off Mankiw's blog:
Greg Smith is about to disappear. The reason why is because we live in an era of cowardice and deceit. The reasons for this era are beyond the scope of this essay, however I predict that Smith will disappear. He will go into that same place where I like to think I live, which is the domain of integrity and courage. It's hard for me to tell because life is a battlefield full of smoke and confusion.
Those who are supposed to be responsible to bring such matters to our attention have not, and so it was on Mr. Smith alone to reveal what we all needed to know. Some might pretend that not all of us need to know that there are moral capitalists possessed of integrity and courage, others pretend that there is no such thing. But those of us who try to have integrity and courage know such acts when we see them, and we understand how painful it is to undertake them. I am like you Mr. Smith, in case you may not have realized how many brothers you have out here in the smoke and confusion.
He will enter the realm of people who are unashamed of bronze medals and runner-up status - those of us who sense the butterfly wing's difference between the efforts required to stand on podiums and the massive difference between the accolades given by those who have no sense of the effort.
Listen to me, I am under the influence of NASA. I purchased a five disk boxed set documenting the endeavors of the Mercury, Gemini and Apollo programs. Last night I watched astronauts - men on a scientific mission enthralled with glee with the spectacle of geology of the Hadley Rille. I watched the extraordinary efforts of men in service of mankind when lives were at stake and millions of eyes were watching. And they were happy, and having the time of their lives. We were right to consider them heroes, even though, by Apollo 15, they were not standing on the podium.
There is an old poem about the strongest and fastest man and to whom life's battles are given. Greg Smith has decided to take no more from the man who thinks he can disrespect his customers and thereby pervert the only morality capitalism possesses which is the mutual benefit of parties.
This is how the decline happens. It happens as those who assumed no good are rewarded with bad news and the myth of evil and incompetence becomes a self-fulfilling prophesy. But we know not to listen, for we are the disappeared. No film at 11.
By the way, it is my opinion that the Volker Rule was all that was needed but purposeful obfuscation has ruled the day, and I agree that Smith is toast.
In a contest between Romney and Obama, the country loses. Both posers are interested in selling their image and putting a lid on things. Romney because it sounds like the only thing he would say, and Obama because it's what he wishes he could do. That is to say Obama can do the first thing and Romney can do the second, neither of which is particularly good for America at this moment in history. So I think today that I'm going to follow Taleb and cast a vote for Ron Paul, the nutcase crackpot. Why? Because only a nutcase crackpot like Paul (being very specific) has the nerve to base his entire campaign on a few salient facts and properly directed wishful thoughts.
Let me take a tangent and speak about videogames.
In Skyrim and all the other best crafted RPGs, you spend a long time wandering around taking odd jobs and dodging authority until you get enough skill to take on more and more powerful characters. At some point, you don't decide which boss you want to support, you decide which boss you want to kill. When you become adequately powerful, even the swarms of police and guards are too weak to contain you. In any case, what you never do is sit around studying positions and strategies and then cast your vote for a proxy who will change the world for you.
You can only see the world by killing the obstacles in your path one by one.
Once you've done that and only once you have done that can you understand the world you have changed through your actions. As I apply this to democratic politics in the context of our bourgeois elections and campaigns aimed at the rhetorical level of peasants, I realize that my symbol is just as good as my vote. Except I get to symbolify as much as I want, here on the blog. In other words, I've recognized the value of killing obstacles blocking my view of the world, and for me, 99% of them are financial. Therefore what I need to do is make every effort to kill financial obstacles. That means voting for Ron Paul because only Ron Paul will create the conditions under which the proper disaster will occur in the short term. Obama and Romney on the other hand will sustain a stasis field which will behave like Wile E. Coyote walking on air over a deeper and deeper ravine.
Since I'm in the 5% and in an industry that grows organically by objective improvements, my primary concern is that new money keeps flowing, and also that I can take advantage of chaos and failure. I cannot advocate chaos and failure because it is not in my nature to be a vulture.
When I see reasonably intelligent and civilized young, single people who talk with upspeak my immediate reaction is 'Val'. For my international readers, a Val is short for Valley. You may be familiar with the term. If not, check out the YouTube.
So I watched this attractive young woman on television - one of those tech talk shows, and she started spewing about her experience at forgettably cutesy spelled dot com which was funded. Funded means you and 12 other twentysomethings with a cool idea managed to convinced somebody with 100 million dollars that you're worth 4.5 million and you have a year to prove it. And 85% of you fail, some spectacularly - meaning you make it for 3 years and get another 40 people and 12 million dollars and *then* fail. It's a story as old as most old dogs.
What surprised me was how instantly it occured to me that she and 12 of her friends would be an unlucky 13 as soon as she started speaking. The very idea of of spending about five million bucks on any endeavor headed by people with less than 5 years work experience, no kids, overpriced undergraduate educations and caffiene fetishes just seems ridiculous right off the bat. And yet we all know it happens. It happens a lot. It shouldn't happen much at all - but it's how a lot of us think about money and work.
There is a small part of me that wants to start a conversation: The only reason I'm not a Silicon Valley millionaire is because... But I don't want to go there or even think I'm going there. It just seems obvious to me that certain things ought to fail. I'm pessimistic today.
His most prominent post-government role was as Director and Senior Counselor of Citigroup, where he performed ongoing advisory and representational roles for the firm.[1] From November to December 2007, he served temporarily as Chairman of Citigroup[2][3] and resigned from the company on January 9, 2009. He received more than $126 million in cash and stock during his tenure at Citigroup.[4]
The Bob Rubin Problem serves to put a face on the ethical problem of public bailouts of private errors. He defies the Hammurabic Code of liability.
According to the NYTimes version of popular opinion, most people would say that I'm rich. And considering what I used to think of somebody in my position, I would have been one of those people. But I don't believe it.
I'd like to think of myself as one of The Slice, the talented segment of society who, by their work, keep actual rich people rich. So let me elaborate a bit about my Peasant Theory while I'm keeping this stuff in mind.
The Origins of the Peasant Theory I originated the Peasant Theory thinking about what Americans would do if the lights went out. It was also part and parcel of my observation as an emergent minority who has made the best of class mobility over the course of my life. What does the Average American expect? What does he have a right to expect? What would he get if America was not super wealthy, and how big is that gap? One enabling metaphor was that of the National Superhighway System.
It's well known that the Interstates were all built to a specification so that battle tanks could be deployed across the country, if it ever came to that. So our highways are strong and smooth - even though the tanks don't need them to be so smooth. Having a car and the ability to drive across country is a side benefit of the military strategic plan of the powers that be. In fact, an ordinary Joe can afford to buy a cheap motorcycle (as in Easy Rider) and get across country. But that is a privilege of him glomming on to something that wasn't built with him in mind and his ability to cross country owes nothing to his native ability to travel. In short, he's a peasant that doesn't have to think or work hard to cross the country, and were it not for the strategic infrastructure of America, the military superpower, he would be stuck in his hometown. Remember that battle tanks don't need highways at all, let alone superhighways. They'd get along fine with dirt roads or no roads, but Fonda's chopper would get nowhere.
So I started to think about this phenomenon in all parallels for emergent classes of Americans. What can we expect in America that we couldn't expect elsewhere and what politics is considered legitimate, what culture is considered legitimate, what education is considered legitimate that is not actually self-sustaining but a consequence of the fact of America's power? In other words what is the difference between a peasant and a free man? What must the free man know and do for himself that the peasant doesn't bother with?
This is a view of society and of mankind that exists independently of our traditional measures of socio-economic class. And it is in this way that I seek to understand people throughout history - with specific regard to their Foucaultian relationship to regimes of power and truth. Are we really free, or are we merely riding in the comfortable belly of the beast? For me, the best way to make the distinction is to consider how people make themselves useful to the powers that be. This is consistent with feudal hierarchies going back throughout history. And what I have concluded is that there is the Slice in every society, just as there are sovereign powers and peasants in every society. What may become absolutely fascinating is whether the Slice can become autonomous. But let's leave that discussion for another day.
Class in America When I look at the standard definitions of class I have basically started with a compressed version for black Americans. These are from top to bottom {Hill, Burbs, Hood, Ghetto, Projects/Sticks} It was conveniently five, but there's probably enough reason to split Projects and Sticks into their own separate categories. My upbringing was in the Hood, in the shadow of the Hill, but with ample distance from the Ghetto. I think I live in the Burbs, but perhaps I live on the Hill considering the priceyness of this particular Burb. By the way, I've always considered $300,000 to be rich. In my mind you make that kind of money not just being a doctor, lawyer or businessman, but a *good* doctor, lawywer or businessman. Be all that as it may (and not so crucially important) these follow a kind of 'geography / demographics as destiny' sort of thinking that was useful in my investigations of redlining (with the subheader 'American Apartheid' c.f. Massey & Denton) and my own national search for the right place to raise my family. It also played along the dialogs of 'mentality' for those interminable internecine discussions about proper blackness.
The larger picture was not incedentally part of the rumnations of comedian Chris Rock who spoke about the difference between 'rich' and 'wealthy', and of course by Dave Chapelle from whose comic bit the title of this essay comes. So from that perspective, the top down view of all of America is {Wealthy, Rich, MiddleClass, Poor, Indigent}. What's most important about this selection is that I think of it directly in terms of the capacity of an individual of one class to assist a member of another, it is my rule of Each One Teach One.
The rule works like this. If you are wealthy, you can move someone from the middle class into the rich class. But it is unlikely, without threatening your own position that you can make someone rich wealthy. Similarly and pointedly at liberal politics, if you are middle class, you can make someone who is indigent poor, but you can't make someone who is poor middle class without threating your own position. Similarly if you are rich you can make someone poor middle class. These are, in my mind, hard and fast economic laws - and like the speed of light, they are regularly abused in fantasy fiction but are never broken in reality.
Weath and Freedom Let's start with rich - because it is the baseline of freedom looking at the high side of Boyd's Razor. (If you want to be free, there are two ways you can do so, you can be rich or you can reduce your needs to zero). I'll deal with the low side later. A rich man is free, and he will remain free so long as the powers that be respect his freedom. A rich man must defend his riches, he must have some skill in that regard no matter how he acquired them. But the most important aspect of riches are that they enable freedom in the civilized world. A rich man can employ others to assist him in accomplishing anything he desires - there are no basic things he cannot afford. Essentially, a rich man can fund his own destiny. I use such vague terms because I'm not trying to think in terms of affluence in the context of a consumer society, but in terms of the broad and general affairs of man. What can a man who is not oppressed do? What might he want to do with his freedom? Whether such things are wise or foolish, the free man is not constrained by his own lack of financial wherewithal.
Wealth and Work The inspirational thought presaging this essay was the idea that if I am to be considered 'rich', which I don't think I am, there has got to be two kinds. Working rich and idle rich, and I am most definitely in the former category. The same can be considered, to a lesser defining degree of the working and idle wealthy. But I suspect that the idle wealthy tend to use a bit less of the Slice than the working wealthy. The business of the world, it seems to me, is more dependent on the machinations of the wealthy whether they work or not. The Slice are the enablers, the demiurges of human affairs. I think much more depends upon their moral decisions - to the extent that they are to offer their services for the various masters they might have.
There's a great passage in Niall Ferguson's latest book Civilization: The West and the Rest that's an excellent jumping off point for discussions about income inequality and the prospects for capitalism. I also see this in terms of my Peasant Theory, so this is an interesting and important area of my concern. My emphasis is bold.
If the Cold War had ever become hot, the Soviet Union would very likely have won it. With a political system far better able to absorb heavy war losses (the Second World War death rate as a percentage of the pre-war population had been fifty times higher than that for the United States), the Soviet Union also had an economic system that was ideally suited to the mass production of sophisticated weaponry. Indeed, by 1974 the Soviets had a substantially larger arsenal of strategic bombers and ballistic missiles. Scientifically, they lagged only a little way behind. They were also armed with an ideology that was a great deal more appealing than the American alternative in post-colonial societies all over what became known as the Third World, where poor peasantries contemplated a life of drudgery under the heel of corrupt elites who owned all the land and controlled the armed forces.82 Indeed, it could be argued that the Soviets actually won ‘the Third World’s War’. Where there was a meaningful class war, communism could prevail.83
Yet the Cold War turned out to be about butter more than guns, ballgames more than bombs. Societies living in perpetual fear of Armageddon nevertheless had to get on with civilian life, since even the large armies of the 1950s and 1960s were still much smaller than the armies of the 1940s. From a peak of 8.6 per cent of the population in 1945, the US armed forces were down below 1 per cent by 1948 and never rose above 2.2 per cent thereafter, even at the height of the American interventions in Korea and Vietnam. The USSR remained more militarized, but the military share of the population nevertheless declined from a post-war peak of 7.4 per cent in 1945 and remained consistently below 2 per cent after 1957.84The problem for the Soviet Union was simple: the United States offered a far more attractive version of civilian life than the Soviets could. And this was not just because of an inherent advantage in terms of resource endowment. It was because centralized economic planning, though indispensable to success in the nuclear arms race, was wholly unsuited to the satisfaction of consumer wants. The planner is best able to devise and deliver the ultimate weapon to a single client, the state. But the planner can never hope to meet the desires of millions of individual consumers, whose tastes are in any case in a state of constant flux. This was one of the many insights of Keynes’s arch-rival, the Austrian economist Friedrich von Hayek, whose Road to Serfdom (1945) had warned Western Europe to resist the chimera of peacetime planning. It was in meeting (and creating) consumer demands that the American market model, revitalized during the war by the biggest fiscal and monetary stimulus of all time, and sheltered by geography from the depredations of total war, proved to be unbeatable. Ferguson, Niall (2011-11-01). Civilization: The West and the Rest (Kindle Locations 4245-4266). Penguin Group. Kindle Edition.
It really boils down to this. Income inequality is the consequence of the ability of individuals and their companies to get a better handle on what the consumer wants in a consumer economy. If you don't have a consumer economy, then the needs of human beings are very basic and entirely capable of being sustained by a central planning government bureacracy. This is how people survive in the Third World without consumer market economies. Human beings can and do adapt to living in relative poverty.
So I want to draw attention to the income inequality between the American middle class and the Soviet middle class. The parents of the Baby Boomers was the first generation of Americans to have access to consumer credit. I grew up in Los Angeles with no credit. My back to school clothes were bought on layaway at Orbachs on Wilshire Boulevard, and even that was a big deal. (Signal Wealth). Is the cost of this banking crisis in America is to take consumer credit back to that era? Could we survive without consumer credit? Of course we could, and the economy would shrink, but personal savings would increase. And it is precisely that formula of reduced spending in the household that people rail against when it is the rich household that is doing so. I believe that a good percentage of American employment is foo foo employment, which is to say 'nice to have' from the perspective of corporate employers who seem to be arbitrarily laying off. That is not to say that many corporations are not well managed and simply callous in their cost-cutting of rank and file employees rather than trimming management. But to say that there are new classes of consumer goods and employment deriving from that which can be considered expendable.
It seems to me that from the Occupy POV, which I interpret as socialist and anti-corporate (but also useful from some perspectives), the waste, fraud and abuse of capitalism comes from its ability to make extraordinarily wealthy people who have orders of magnitude more wealth than the rest of us. To the extent that they are not specific, the enemy is wealth itself. In otherwords they want class warfare. If they are to be specific, then they have to say what sort of wealth is bad. To attack the idea of the corporation itself is to attack equally the makers of baby food and the makers of chemical weapons. Dow Chemical is a corporation and so are the makers of Gerber, Nestle. Nestle is 5x larger than Dow, and why shouldn't they be? I am not able to differentiate Occupy's definition of good wealth vs bad, but if they have one principle with which I agree it is that there should be no public bailouts of private failure. This is an endorsement of private enterprise without industrial (central planning) policy. But the extent to which they may desire advanced and burdensome regulation could amount to the same thing. In any case, without being specific about which corporations are good and which are bad, their focus on banking may end up simply rolling back consumer credit. That doubles down the bet against the consumer economy.
I have always looked at the number of choices in the supermarket as an indicator of the health of the economy. I'm not alone in wondering what's wrong when I don't see fresh produce of the sort I want in that aisle. The connection to signal wealth consumer items, as foo foo as they may be is what gives the American (peasant) consumer his status and what makes his providers rich. Entertainment money is but a fraction of the American consumer's budget, but the connection is much clearer. U2 is rich because their audience pays them. Tom Cruise is rich because his audience pays him. The same is true for McDonalds, Nestle, Dow, Xerox, Ford, etc etc. Americans would not stand for their choices as consumers to be reduced to 'plain wrap' or GI supplies. That reeks of the Soviet system. But inevitably our extra wealth (a lot of which is foo foo signal wealth) comes exactly from that choice being made available in the market and all of the 'extra' business created by fashion. If there were only one style of sunglasses for the masses, then Ralph Lauren and Oakley would be flat on their asses.
Do you want there to be people who can afford a BMW, or should every car be 'the peoples car'? I want the connection to be clear. The more the government regulates, the fewer legal choices exist. The fewer that exist, the more you constrain the economy and make it more centrally planned, the more you increase income equality, the more it works for the Soviets, the more you approach as our good friend CNu terms it, 'warsocialism'. When a job is just a job, then a military job is just like any other.
One thing any Occupy squatter can tell you is that he hates the plutocrats. I can agree with that, I suppose. What's a plutocrat? I'm going to guess that a plutocrat is a crony capitalist who profits from lobbying Congress into granting him monopoly or oligopoly powers. In other words, he short-circuits free market competition by twisting the arm of government to grant him license are guarantee him business.
I've always hated that. Why? Because I learned at a very young age that I needed car insurance. I thought I just needed a driver's license and a car.Then I learned that the police can stop you and ask you to prove that you have bought insurance and give you a ticket if you didn't have it. And so I had to pay, living in a redlined neighborhood, the rate that somehow every insurer agreed on was the proper rate for me living in 90016 at the age of 19. So I grew up with an intense hatred of insurance companies - those government mandated entities that made it safe for people who had money for premiums to live their lives without risk along with those of us who had to deal with risk. In California, if you had 100,000 in liquid assets, you could self-insure. Pay up or avoid the cops.
The resentment lasted into my 30s, I guess. But I started to wonder why mothers of gangbangers didn't take out life insurance policies on their sons, and other ways to game the system. I paid close attention to the changes in the law with regard to the new coverage called 'uninsured motorist' and then realized something new. Not only do insurance companies know that some people won't buy insurance, but they insure against that - and who pays? You guessed it. The insured motorist.
But why is car insurance necessary anyway? When you think about it, it's because so many people buy cars on credit. If you wreck the car or even ding that rapidly depreciating object you possess but don't own, somebody wants to get their money back. That somebody, the finance company, doesn't really trust you not to wreck. Nowadays, some people even need payment insurance - you're not even trusted to pay the note. So it all gets back to trust, or I should say a lack of trust for the uninsured motorist. Or in my case, that realization, when some cholos rear-ended my Karmann Ghia on the Harbor Freeway, then fled the scene. There's all kinds of liability out there, and guess what? Shit happens.
What does any of this have to do with plutocrats and oligopolies? Somebody convinced the State Legislature in California that if it was going to have 15 million some odd drivers, and all the car dealers wanted to sell them cars on credit.. all of the dynamics I just explained. You can be sure the Automobile Insurers of California or whatever their name is, watchdogs that legislation.
There is something inherently difficult about the insurance industry. If I had a million bucks, I wouldn't try to come up with actuarial tables and register with the Insurance Commission to do business in California. But somebody does, like that annoying Flo chick in her white nursey uniform and that obnoxious smarmy little gecko with the New Zealand accent, and that snarky cartoon babe with purple hair, not to mention that 32 bit animated general with the hat over his eyeballs. Oh wait, those are just corporate logos for Progressive, Geico, E-Surance and General, not the oligarchs themselves. I'd imagine there are almost no youth in America today who go to college and say that someday they want to be the CEO of a better insurance company than State Farm. Who thinks Prudential or The Hartford are sexy? Even when Farmers is building Los Angeles a new football stadium, that ain't sexy.
But you can't think about car insurance or car dealing or car financing or hit & run driving without thinking about all of that, and you can't really do anything new in that business without having a lot of expertise because ultimately it's about regulating human behavior around models of risk. Non-trivial to be sure. And did I mention lawyers? Do you have any idea how much legal procedure happens around car accidents, drunk drivers, underage drivers, vehicular manslaughter, hit and run and plain old grand theft auto?
I wonder if Occupy doesn't mention anything about the insurance industry because they don't know, or they acknowledge it as a reasonable thing, or they don't have a cutesy epithet like 'bankster' for actuaries. The current administration said that health insurance for everyone ought to be the law of the land. As soon as he said that, I heard that angry voice of the 19 year old me being rejected at Mercury, the discount car insurance firm, just for being too young. Yeah, they have all the angles on car insurance figured out, and they have it figured out for every sort of insurance. Why? For the same reasons, we're all living on somebody else's credit and the system cannot afford the uninsured.
The thing is, of course, that everyone can game the insurance business, and the wealthy can game the game and hedge against those who don't play. But that's all about how much risk you can stand. The fundamental question remains. Can you play in a risky world without insurance, or do you need an industry to help you get through a life with some legal recourse? Don't want to lose your house because you get sick? There's an insurance policy for that. Don't want to get your car repossesed after an accident? There's an insurance policy for that. Don't want to miss a payment on your credit card? Don't want to die broke? Don't want to have a cavity unfilled? There's an insurance policy for every peasant situation you can get yourself into. Hell, I should sell pepper spray insurance to protesters.
Transcript: "Good morning Mr. van Rompuy, you've been in office for one year, and in that time the whole edifice is beginning to crumble, there's chaos, the money's running out, I should thank you - you should perhaps be the pinup boy of the euroskeptic movement. But just look around this chamber this morning, look at these faces, look at the fear, look at the anger. Poor Barroso here looks like he's seen a ghost. They're beginning to understand that the game is up. And yet in their desperation to preserve their dream, they want to remove any remaining traces of democracy from the system. And it's pretty clear that none of you have learned anything. When you yourself Mr. van Rompuy say that the euro has brought us stability, I supposed I could applaud you for having a sense of humor, but isn't this really just the bunker [or banker?] mentality. Your fanaticism is out in the open. You talk about the fact that it was a lie to believe that the nation state could exist in the 21st century globalized world. Well, that may be true in the case of Belgium who haven't had a government for 6 months, but for the rest of us, right across every member state in this union, increasingly people are saying, "We don't want that flag, we don't want the anthem, we don't want this political class, we want the whole thing consigned to the dustbin of history." We had the Greek tragedy earlier on this year, and now we have the situation in Ireland. I know that the stupidity and greed of Irish politicians has a lot to do with this: they should never, ever have joined the euro. They suffered with low interest rates, a false boom and a massive bust. But look at your response to them: what they are being told as their government is collapsing is that it would be inappropriate for them to have a general election. In fact commissioner Rehn here said they had to agree to a budget first before they are allowed to have a general election. Just who the hell do you think you people are. You are very, very dangerous people indeed: your obsession with creating this European state means that you are happy to destroy democracy, you appear to be happy with millions and millions of people to be unemployed and to be poor. Untold millions will suffer so that your euro dream can continue. Well it won't work, cause its Portugal next with their debt levels of 325% of GDP they are the next ones on the list, and after that I suspect it will be Spain, and the bailout for Spain will be 7 times the size of Ireland, and at that moment all the bailout money will is gone - there won't be any more. But it's even more serious than economics, because if you rob people of their identity, if you rob them of their democracy, then all they are left with is nationalism and violence. I can only hope and pray that the euro project is destroyed by the markets before that really happens."
I have been thinking about how awful I would be to the hippies of OWS. But then I would only be throwing rotten tomatoes. They like vegetables, right?
Of course everybody who is 'occupied' is not a hippy. But I cannot seem to get out of a particular bubble. I think my G+ account has been spammed to that crowd. I know, unsubscribe. But I need to know what everybody thinks. Nevertheless, I've been thinking about the nature of this protest and comparing it to the LA Riots, where people were ready to burn down buildings. Well, actually they did burn down buildings. That's the level of street action that gets results. Militancy.
So now the Kadaffi is dead, it's probably a good time to take inventory and compare America to the Middle East.
Iraq: Saddam: Dead Libya: Kadaffi: Dead Egypt: Mubarak: Deposed Yemen: Saleh: On the ropes. Pakistan: lots of dead ex-leaders
In good old Washington DC, Barney Frank is still chilling, and journalists like Wolf Blitzer are looking mighty fine in their silk suits.
The Tea Party has been shown up a little bit. But their ruckus has been a bit more long in the tooth than the new OWS peasants. My favorite stories from OWS ground zeroes reveals that my cynicism has gotten the better of my skepticism. In one, some dude with felony warrants was hanging out in a tent at Z. Park because he knew he could score drugs and get free food. In another, some poor fool woman who thought she could just go out and sleep in the same tent with a stranger was sexually assaulted.
Tangentially, there's a big CNN story about how many Americans end up behind bars in the Prison Industrial Complex. There's a reason for that: we have lower tolerance for people who have felony warrants and sexual assault. In other countries, those people are free to roam the streets.
So I continue to compare OWS to football. Football is still producing more concussions and injuries. Football is still getting more people to yell and shout in a community. Football is still producing more concrete winners and losers that people can objectively track on a weekly basis.
I hear that the movement is planning a bank run on BAC. That is really interesting. I wanna see how well they do. I heard from Rick Santelli recently because I was on East Coast time. But I don't have time for his pith. That's a long show - too long to record and watch.
If I had to describe the root of all our financial difficulties in two sentences they would be:
The linchpin in America's financial system was that it assumed that in the worst of times only 3, or maybe 4% of Americans would stop paying their mortgages.
When that number DOUBLED to 6% the whole system froze up.
Now, let's use one more simple analogy. This from Lingales. All of the dicey CDOs, swaps etc were all hedged risk. In short, they were nothing more or less than insurance policies against mortgage defaults. The net effect was some four fools bought four separate insurance policies on the same house. When the 6% f America's houses burned down (against all the odds and anybody's best guess) all of those policies could not possibly pay off. So the all of the insurers were headed for certain failure. Except that 'we' wouldn't let them fail, because, analogously speaking, we would have no more such thing as fire insurance. And we couldn't have that, now could we?
What we have essentially done now, is to use the 'full faith and credit of the USA' aka Treasury Bonds to use instead of fire insurance, and given the all those insurers a bailout via low interest rates and cash until they get on their feet. But the cost of all those insurance payouts have now been transferred from Wall Street to the US Treasury (meaning you Mr. Taxpayer) - mind you without much work being really done on making any houses more fireproof.
So all of these corruptions the OWS crowd will inevitably find are just kids playing with matches. The larger problem remains unsolved. Which is how do you stop from over-insuring against 'fire' i.e. financial failure?The problem isn't that capitalism is broken. The problem is psychologically, we don't like the consequences of losing the wealth it produces. We like playing with fire. We just don't like getting burned. Nobody does. So we keep insuring against getting burned.
The problem is that you can't. Because this is America, and most Americans believe they can guarantee anything. That's why Obama was elected because he promised he could guarantee healthcare insurance for everyone. And this is the fundamental problem.
Everybody in OWS is suffering from the exact same illusion that caused the problem in the first place. They believe in guarantees. They believe that all you have to do is find the right sucker (or class of taxpayers, or government agency, or Wall Street company, or Buffet-like billionaire) who will pay a little bit more for the guarantee.
It is not the desire for security that causes our ruin, it is the implacable demand for it.
Listen to the rhetoric and you will see the fragile state of the American soul. We demand infinite recourse against all slights and offenses. Against fat in the food at McDonalds. Against incompetence in the teachers in free public schools. Against offensive remarks and jokes. Against the very presence of unwanted people from undesireable countries. Against unbelievers. Against believers. Against the possibility of dying of cancer. Against the belly fat you get from AIDS medication. We have become a nation of infants with zero tolerance for pain. So somebody has got to pay.
Today is a good day to be a grifter. That is because all the yellers and screamers want to hear is how somebody screwed up and made their life miserable. All a grifter has to do is agree and sell them an insurance policy against that somebody, write up some legal fine print that says 'you take your chances' and voila - there's an app for that.
Michael DC Bowen - I'm glad to see this discussion, but it's not specific enough. What I would like to impress upon people is that the business of finance is very important and very difficult, and unlike 'Trading Places', you cannot get away with murder 99% of the time. That is because people, markets and information are unpredictable. It's all about what you know, when you know it and how much confidence you have. Since human beings have certain cognitive limitations, there will always be errors, but they are not necessarily fraudulent. The problem with the majority of the criticism directed at the business of finance & investment (aka 'Wall Street') is the assumption that there is an inside game going on. If there is a confidence game, it is precisely the same game that blames 'Wall Street' without knowing how many people know the system. So let me try to explain this property.
First, understand that there are millions of people around the world who play in these global markets. All of them are pretty much equally smart, but only some of them are trusted. Lay people trust Goldman Sachs the way they trust Apple. There are plenty of engineers everywhere who can make computers that do the exact same thing as Apple computers but only Steve Jobs gets to be Steve Jobs (even beyond the grave like Elvis). This is called 'mindshare'. It means when you think of something that's actually common, you attribute it to a few specific actors. They 'own' your thinking. So 'Wall Street' owns the thinking about finance and investment and people are lumping them all together. If this reform movement wants to get traction, the first thing they have to do is disambiguate the actors. Just because there are hedge funds doesn't mean Wall Street only makes money from hedge funds. Hedge funds go broke all the time.
If you really want to understand what's wrong with the investment community you have to stop saying that it's evil and begin to understand that it's stupid. Which is to say, extending our analogy here, some people made stupid bets.
You should know, by the way, that I am a computer programmer who builds financial systems.
Michael DC Bowen - The next thing I want to do is give people who are trying to learn some shortcuts. Cory Doctorow doesn't understand how economics actually works. His concept of 'Whuffie' is cute but laughable. Part of the problem with dot-commers and their universe is that they live in reality distortion fields. They fail much more often than they succeed with their economic theories. Even market professionals know that the best economists get it wrong, but there are some players you should be hearing out. So I'm going to give you three names of people who understand .
1. Nicholas Nassim Taleb He, first and foremost understands how traders and investors mistake the map for the territory. That is to say, they mistake what their computer models tell them about risk from the actual reality of risk. He used to run a hedge fund, and coined the term 'Black Swan'.
2. Nouriel Roubini Known as Dr. Doom. He is the guy who predicted most accurately the scale of the credit crisis. He is a super bear and believes everything will fail, but he's not stupid and he has been proven correct in many instances. He's not somebody whose solutions I particularly favor, but he is well informed.
3. David P. Goldman This is the guy I listen to and trust. He used to be a very high level guy in the Street and got out when he saw people starting to do stupid things. I trust him implicitly and have been following him for about 3 years now (the other two slightly longer). Goldman writes as Spengler'
Look these three guys up and listen to what they talk about. This will take you a couple notches above the political BS that you can get Reich and Krugman to talk about.
I learned of all these guys through listening to Bloomberg Surveillance. If you want to get to know Wall Street at a serious level, that is the place to begin.
7:31 AM - Edit
Michael DC Bowen - Finally, I want to help you understand why there is no political solution, and it may sound biased but hear it out. One of the economists I've been paying attention to is Luigi Zingales. He came up with a solution to the mortgage crisis three years ago. It's called a debt-for-equity swap. It works like this.
The cost for your house was 300,000 when you bought it. It is now 200,000. Your mortgage was 275k. You are essentially 75k underwater. You have no incentive to pay off the mortgage. The bank has no incentive to forclose. That's because they have to then show that A) they had a non-performing loan and B) they take the hit on the asset that you now are taking. So.. what if you agree, you and the bank, to do a Debt-for-equity swap. The bank simply agrees to lower your mortgage size to 200k in exchange for your promise to give them the first 75k when you sell the house.
You now have a smaller mortgage and you are not underwater. You begin to get equity if/when the house goes to 275. Your monthly payment goes down. The bank now has less worry about you walking away from your mortgage, their loan performs, and they can book the 75K.
The problem is that no politician would get to take credit for saving the homeowners because the transaction is entirely between the books of the bank and the homeowners. There's no government program or government money involved. So even though this would solve the foreclosure crisis if it were legal, there's no political incentive to make it so in Washington.
The American Revolution was in 1776. The Russian Revolution was in 1917. Was America too early? Were the Founders simply not evolved enough?
CD rants on about the 'special debt' MLK says was owed to the Negro. From my way of thinking, the Negro thought his own way out of the existential beartrap of race, except of course for those who didn't and still cherish the Negro Solutions proposed 50 years ago by the likes of Bayard Rustin and A. Phillip Randolph. Those of course were socialists and Rustin's arc proved to be prophetic with regard to the intervention that Progressives believe they are executing on the nation.
It brings me to some questions about the extent to which various diehards feel that the American experiment is permanent and why exactly they stick it out.
I'm interested in your outline of the dimensions of that special debt, and exactly how 'America' is supposed to pay it. I say that very idea is socialist. I wonder, in consideration of that, how much you would suggest that the American Left is completely unimpressed with the idea of a completed America - ie that the sort of republic America is supposed to be is so wide of the premises of the Constitution, or of the proper ends of enlightenment that King's experiments as well as those of such activists after him, are just the beginning of an evolutionary process.
That being the case is it nothing more than America's wealth that keeps them here? I mean if the Constitution was nowhere near good enough, why not start fresh elsewhere? What is the special promise of America? Is it perhaps the flexibility of its body politic? Do Progressives believe they can morph America into the shape that Marxists failed to accomplish in Europe and Russia?
What is the endgame?
I think Progressives beleive that their progress does not end, that there are going to appear more steps in Maslow's hierarchy they will be able to deliver once they eliminate, through the miracles of the scientific method, all traces of the lower needs from the world's populations. In other words, utopia, or at least six or seven more Constitutional Amendments.
Congressman Allen West (FL-22) made the following statement tonight on the passage of the revised Budget Control Act of 2011.
"A year ago no one would have thought it was possible that the dominant conversation within the United States Congress would be about cutting spending.
For the first time in American history tonight, the United States House of Representatives raised the debt ceiling with equal to or exceeding spending cuts. It is imperative now that we alleviate the anxiety of the American people and our capital markets and instill a sense of confidence and certainty regarding our fiscal policy. This will assuredly lead to long term sustainable economic growth and American jobs.
The task before us now is to follow through with a plan that was a 70- 75 % common sense solution, and execute it to 100 % perfection. I remain committed to ensuring this is the dawn of a new era in fiscal responsibility in America."
I can live with that statement. So far West has said very little that I can disagree with.
I am troubled by the prospect that Obama will become the first President to get smacked down by Moody's, then again, what's Moody's. America is still the most powerful and richest nation on the planet, it's just a pitiful shame that this knucklehead President was so blind to think he could put on brakes and have no plan whatsoever for accelleration.
"I just want to share the wealth." will go down in history as one of those moments in which the President's facility with that economic thing we are is proven to be woefully inadequate.
Boehner is demonstrating that he can't add either. Apparently his plan, now accounted for by the CBO, doesn't even meet his own criteria. He's about to be a day late and a couple hundred billion short. Thursday is voting time, and Harry Reid, super-genius has got several crates of Acme products just a-waitin'.
In the meantime, I just read a remarkable story about a man with an 800 FICO score, 30K in the bank and 20% down was not approved by Wells Fargo for a condo loan. We are back, ladies and gentlement. Back to 1981 - well, not quite yet. We don't see the inflation yet, but we are in those days of liquidity crisis. And guess what, you don't get no credit, suckas.
My man David Goldman tells us that Moody's is the company for people to lazy and/or inept to do their own credit analysis, and those that know already know and have hedged appropriately. When America goes AA, we'll still be America, and the deals we will do, we will do. This is the realpolitik that Obama is expecting he can play, like the rest of the Social Democrats who find nothing particularly upsetting about banking on the IRS' abillity to collect rain or shine.
The IRS will be hacked.
That's what happens in banana republics. Realpolitik and deals will be done because of powers that will force them to be done. To hell with merit. We don't even talk that language any longer. Once upon a time, there were no gambling casinos in California and we approved them for the tax money. Once upon a time there was no lottery in California and we approved it for the tax money. Today marijuana and same sex marriage await their day in the legal sun. Tax it! That makes it OK, so goes the logic. That's Double A ball. Bush league thinking.
I know my father. I knew my father's father. I know the name of his father as well although he died in 1918, long before I was born. I have confidence that my resemblance to all of those men is more than genetic. I inherit their character and demeanor, and I have been well served by this.
The other day, reading in The Confusion, I came across a passage that immediately made me think of contemporary black American society.
“These Malabar women are as free with men, as Charles II himself was with women,” Jack explained. “In these parts, a man can never tell which children are his. Or to put it another way, every man knows his mother but hasn’t the faintest idea who his father might be. Consequently, all property passes down the female line.”
“Including the crown?”
“Including the crown. One peculiarity of this arrangement is that a man, going in to pay a call on a lady, never knows what other man he might discover in her bed. To prevent awkward situations, a gallant therefore leaves his weapon leaning against the door-post when he enters — as a sign to all who pass by that the lady’s attentions are spoken for.”
I don't mean to suggest much more than that there is a well-functioning matriarchy alive and well in black society, and it is significant. Perhaps if it were admitted and understood, then we might find some interesting patterns emerging.
Like most of the Kwaku set, I engaged quite a bit on last week's controversy over who got married in slavery days. And since I wasn't born last week, I have heard all of the generalizations about the greatness and persistence of the African, the legacies of slavery, the refutations of Moynihan, black macho and the myth of the super woman, and my new favorite - the Luther Problem, which is kinda like The Denzel Principle. So let me digress on that a bit.
The Luther Problem is the extraordinary acceptance of black women of the romantic blatherations of gay black men on the reverse DL. IE gay men singing love songs about women. Which is to say there is something profoundly odd about the fact that women fall in love with men who use the romantic proxy of gay Cyranos. A chair is just a chair, even when there's no one sitting there, but a male is not a man and a homo is not a wingman. Unless he is, and Luther was. There is surely something to protest in this point of view, but I won't hear it from anyone who prattles on about Catholic priests. Either love is Platonic or it is not. End of (strange) digression.
So this basically boils down to the fundamental question of whether it is reasonable to make beef about the extraordinary fact of black single parentage. Is it cultural or economic phenomenon? If it is a cultural phenomenon, then the extent to whether it should be considered positive or negative must depend on your view of matriarchy.
Like most Americans, I didn't know Eric Cantor before today. But he stood toe to toe with the President and neither of them blinked. I think we're going to find out what those two men are made of in the next few days.
As much as I take tax abatement to be a one note drone with the intellect of a stone, I gave it a second thought today as I read the various hearsay over the negotiation showdown. The counter to the argument I've been making presented itself to me as I thought about the size of our numbers.
When you're spending trillions and you start negotiating between 1.5T and 1.7T, it's easy to forget that how big that T is. Somewhere I read that 2.5T was within the realm of possibility, if the appropriate cuts were made. Now splitting the difference between 1.7 and 2.5 with some mix of tax increases and loophole closings sounds like a deal. Let's say you split it 50/50. You're trying to cut 800Billion.
So you say OK Mr. President if you cut 400B in spending I'll concede 400B in revenue. Deal.
Hold up. Wait a minute. What's 800Bilion? 800 Billion is the total cost of the Iraq War to date, with 100 Billion to spare. So you're telling me that to meet the President halfway, you have to raise taxes to the tune of more than half the cost of the Iraq War? Just to get cuts in *discretionary spending*?
Sorry. Didn't I mention that? Non-Defense discretionary spending is about 600 billion per year. Defense is another 600 billion. The 2011 spending plan is 3.8 and the revenue plan is 2.1T leaving a shortfall of 1.65T except we're so deep in the hole paying interest on the debt that number keeps growing.
So we spend 1.7 trillion more than we make, we keep raising our credit limit, and to meet the President halfway means we pay 400B more in taxes. Given all that, we break even and we're spending 2.5 Trillion a year.
The temptation here is to keep using the Ts and the Bs and look at 'split the difference' and abstract with percentages. It's very easy to get comfortable doing that, which is exactly why the banking industry failed and has yet to be fixed, recovered or trusted. I kid you not when I tell you that we used to have something called a Savings & Loan industry whose focus was getting people in America mortgages without using leveraged CDOs and hedged tranches of loans who originators were 6 parties removed. America doesn't have a Savings & Loan industry any longer. It's gone. Like the Apollo Program. Like $1 gas with 10x Blue Chip Stamps. They are all uneconomical now. The opportunity to go back does not exist. That's why that temptation is foolish in the extreme.
What the President has now is the bully pulpit, which means a script and some fraction of the American public that still trusts men in blue suits, white shirts and red ties when they speak on that thing called 'prime time television'. But the bully pulpit doesn't make money and I've never seen it make people want to spend money.
No Mr. President I'm not going to eat my peas because they're not my goddamned peas. I didn't order the peas. You and your predecessor did while you were out shopping for stuff you thought would be good for me. I'm pushing the plate back and I'm not eating those peas. And I'm not going to scrape them off my plate to the dog, or my kids either. Matter of fact, I'm going on a diet. And I'm going to the cupboard and see what other expensive fatty crap you've been out buying. And we're going to make you take it back.
So this is the standoff.
It has come to this, and this will end in tears. I'm afraid our President is unprepared to convince the American people that he's the kind of leader who can make us eat our peas and dare us to say something. He's right, this wouldn't have happened to Ronald Reagan because Reagan enjoyed being a cowboy. But Candidate Obama was a healer, a community man. A lover, not a fighter. Which is why Eric will call the bluff, and face what?
My (new) boss gave me something to think about the other day as we were eating Bahn Mi at the local Pho joint behind Walmart. He said, why don't you go and work in Singapore for a month, you know, when we get the right engagement? I love my new boss. Finally, somebody who thinks like me. What have I been doing all these years?
Thsi morning's Bloomberg News had me reading about a gent from 'Middle Africa' who owns a pineapple farm there. He got his loan from Ecobank in which Mark Mobius is a stakeholder.
Pineapples grow in Africa? Mark Mobius is still around, in Singapore? I clearly have been out of touch for a long time. My latest podcast download from the RSA featured an enviro-wackjob who nonetheless provoked me into thinking that it might not be a bad idea to live in Asia. I might like it better than I like a lot of things that I don't like in America.
I say 'in' America rather than 'about' America, because the things that I love 'about' America I love anywhere they can be found, like a good Bahn Mi, and enough wifi to get me Bloomberg News on my iPad, and people who ignore Donald Trump, and a nice hotel room with all sorts of pillows. And obviously everything that's in America isn't what America is about. I think that's something a certain class of obnoxious and objectionable Americans don't understand, and I'm happy to leave them behind - just to get their noise out of my head.
I have a lot of what I call external imperative noise in my head these days. It makes me a very inefficient me. I'm going to air my brain out in the next couple of weeks. It should be good.
In the meantime, it makes sense to keep in mind what it is that Asians and Africans are trying to acheive and at exactly what cost. It might very well be a low cost with a high reward, and it seems to me that I need to figure that out.
Imagine, if you will, the following scenario. Bernie Madoff is the tipping point, or worse yet, the tip of the iceberg and the guys at Zero Hedge are right - that the only thing left to do is wait for the rest of the sucker to pony up. The affluent and lumpen rich get soaked over the next decade and the the Obamaheads get exactly what they want, a big fat stupid undifferentiated middle-class with very little more prosperity than there was in 1952. Which was good if your idea of luxury was a Packard. America goes back to Fred and Wilma-style one car, one kid families and you have a great ocean of grey equality. There will be haves and have-nots, but no more have-mores like me. We'll all be in Singapore with Mark Mobius.
That's a crazy scenario. There's no way I have the capital to be a baby banker chasing waterjug moms in Emerging Markets. But I can start to think along the same lines as my (new) boss, who has coders in South America, family in Bangalore, and an office in Lower Manhattan.
In May of 2008, I went to the mat looking for some sensible discussion about the US policy in the Horn of Africa and Somalia in particular. There was a lot of noise surrounding my calling Somalia a failed state, which it was and still remains. I would say 'much to the consternation of my opponents on the matter' but it's difficult to see if they were opposing me just for spite or if there was real logic behind their contentions. Perhaps in retrospect, some of those questions might be answered. Cobb remains a fertile field for investigation.
So I have seen the straw that breaks my camel's back in the tragic deaths of Adam, Adam, McKay & Wriggle. So now I'm opening up the can of worms, heading down the rabbit hole and otherwise 'going there'. I need to get some high level understanding of how US policy in the Horn has succeeded or failed in effecting this increase of piracy which now clearly calls for stepped up military action. What has transpired on the ground that has made the sea dangerous, and how bad are we going to let it become?
This article by the Economist is nicely round and informs me about CTF-151 which is the group of military ships working in coalition with EU-sailor-types to have a counter-terror and anti-pirate mission in the area. I've given them props when they've succeeded, knowing that they can do the right thing, but I'm still not convinced that the current ROE has been stepped up appropriate to the increase in the piratical.
There is a general moaning out there, where are the carriers? Libya is coming apart at the seams in what appears to be a much more violent way than we've seen in Egypt and there is no American carrier in the Med. The situation seems to be that there are some five or six thousand 'Westerners' stranded in Libya with no way out. It all gets back to my speculation gathering evidence I want to see that Obama really has no strategic military sense and has politically cowed the Joint Chiefs. So long as Americans are dying only by the sub-dozen, he can keep a lid on things and his press secretary can defer questions. But this just confirms what I've known about Obama for a long time, which is that he only really cares to master the dynamics of domestic affairs, the world be damned.
My position is fairly simple. I am for the US to be the global police of the seas. I am less sanguine about an Internal Third World than I have ever been. This means that I am more pro-global with America as master of premium markets and the rest of the planet producing and consuming the cheaper stuff. That absolutely necessitates free international trade and law and order on the high seas, which I think is best accomplished by the American Navy as strategically envisioned by Thomas PM Barnett. My mind is open on The Horn. But the piracy must stop. Allowing it to fester and grow these past several years is prima fascia evidence of civilization crumbling.
There is no oil involved in the Horn. So to you cynics out there, understand that you too should see this as an opportunity for America to work on principle. Or are you romanced by piracy?
Business Insider says, “If you had to sum up the education bubble in one misconception, it might be: ‘The average 22-year-old is a good credit risk for $150,000 in debt, collateralized by something completely intangible.’”
For Immediate ReleaseOffice of the Press Secretary May 18, 2008 President Bush Attends World Economic Forum Sharm el Sheikh International Congress Center
Sharm el Sheikh, EgyptIn Focus: Middle East Trip3:00 P.M. (Local)
THE PRESIDENT: Klaus, thank you very much. Thanks for inviting me. Klaus said, it's about time you showed up.Proud to be here. Laura and I are so honored that, Klaus, you gave us a chance to come. I do want to thank President Mubarak and Mrs. Mubarak for their wonderful hospitality. I want to thank the members of Congress who are here. I appreciate the heads of state who have joined us. I thank the foreign ministers who are here,including my own, Secretary of State Condoleezza Rice. And I want to thank the members of the Diplomatic Corps.
Laura and I are delighted to be in Egypt, and we bring the warm wishes of the American people. We're proud of our long friendship with your citizens. We respect your remarkable history. And we're humbled to walk in the ancient land of pharaohs, where a great civilization took root and wrote some of the first chapters in the epicstory of humanity. America is a much younger nation, but we've made our mark byadvancing ideals as old as the pyramids. Those ideals of liberty and justice have sparked a revolution across much of the world. This hopeful movement made its way to places where dictators oncereigned and peaceful democracies seemed unimaginable: places like Chile and Indonesia and Poland and the Philippines and SouthKorea. These nations have different histories and different traditions.Yet each made the same democratic transition, and they did it on their own terms. In these countries, millions every year are rising frompoverty. Women are realizing overdue opportunities. And people offaith are finding the blessing of worshiping God in peace.
All these changes took place in the second half of the 20th century. I strongly believe that if leaders like those of you in this room act with vision and resolve, the first half of 21st century can be the time when similar advances reach the Middle East. This region is home to energetic people, a powerful spirit of enterprise, and tremendous resources. It is capable of a very bright future -- a future in which the Middle East is a place of innovation and discovery, driven by free men and women.In recent years, we've seen hopeful beginnings toward this vision. Turkey, a nation with a majority Muslim population, is a prosperous modern democracy. Afghanistan under the leadership of President Karzai is overcoming the Taliban and building a free society. Iraq under the leadership of Prime Minister Maliki is establishing a multi-ethnic democracy. We have seen the stirrings of reform from Morocco and Algeria to Jordan and the Gulf States. And isolation from the outside world is being overcome by the most democratic of innovations: the cell phone and the Internet. America appreciates the challenges facing the Middle East. Yet the light of liberty is beginning to shine.
There is much to do to build on this momentum. From diversifying your economies, to investing in your people, to extending the reach of freedom, nations across the region have an opportunity to move forward with bold and confident reforms -- and lead the Middle East to its rightful place as a center of progress and achievement. Taking your place as a center of progress and achievement requires economic reform. This is a time of strength for many of your nations' economies. Since 2004, economic growth in the region has averaged more than 5percent. Trade has expanded significantly. Technology has advanced rapidly. Foreign investment has increased dramatically. And unemployment rates have decreased in many nations. Egypt, for example, has posted strong economic growth, developed some of the world's fastest growing telecommunications companies, and made major investments that will boost tourism and trade. In order for this economic progress to result in permanent prosperity and an Egypt that reaches its full potential, however, economic reform must be accompanied by political reform. And I continue to hope that Egypt can lead the region in political reform.
This is also a time to prepare for the economic changes ahead. Rising price of oil has brought great wealth to some in this region, but the supply of oil is limited, and nations like mine are aggressively developing alternatives to oil. Over time, as the world becomes less dependent on oil, nations in the Middle East will have to build more diverse and more dynamic economies.
Your greatest asset in this quest is the entrepreneurial spirit of your people. The best way to take advantage of that spirit is to make reforms that unleash individual creativity and innovation. Your economies will be more vibrant when citizens who dream of starting their own companies can do so quickly, without high regulatory and registration costs. Your economies will be more dynamic when property rights are protected and risk-taking is encouraged -- not punished -- by law. Your economies will be more resilient when you adopt modern agricultural techniques that make farmers more productive and the food supply more secure. And your economies will have greater long-term prosperity when taxes are low and all your citizens know that their innovation and hard work will be rewarded.
One of the most powerful drivers of economic growth is free trade. So nations in this region would benefit greatly from breaking down barriers to trade with each other. And America will continue working to open up trade at every level. In recent years, the United States has completed free trade agreements with Jordan, Oman, Morocco, and Bahrain. America will continue to negotiate bilateral free trade agreements in the region. We strongly supported Saudi Arabia's accession to the World Trade Organization, and we will continue to support nations making the reforms necessary to join the institutions of a global economy. To break down trade barriers and ignite economic growth around the world, we will work tirelessly for a successful outcome to the Doha Round this year.
As we seek to open new markets abroad, America will keep our markets open at home. There are voices in my country that urge America to adopt measures that would isolate us from the global economy. I firmly reject these calls for protectionism. We will continue to welcome foreign investment and trade. And the United States of America will stay open for business.
Taking your place as a center of progress and achievement requires investing in your people. Some analysts believe the Middle East and North Africa will need to create up to 100 million new jobs over the next 10 to 15years just to keep up with population growth. The key to realizing this goal is an educated workforce.
This starts early on, with primary schools that teach basic skills, such as reading and math, rather than indoctrinating children with ideologies of hatred. An educated workforce also requires good high schools and universities, where students are exposed to a variety of ideas, learn to think for themselves, and develop the capacity to innovate. Not long ago the region marked a hopeful milestone in higher education. In our meeting yesterday, President Karzai told me he recently handed out diplomas to university graduates, including 300 degrees in medicine, and a hundred degrees in engineering, and a lot of degrees to lawyers, and many of the recipients were women. (Applause.)
People of the Middle East can count on the United States to be a strong partner in improving your educational systems. We are sponsoring training programs for teachers and administrators in nations like Jordan and Morocco and Lebanon. We sponsored English language programs where students can go for intensive language instruction. We have translated more than 80 children's books into Arabic. And we have developed new online curricula for students from kindergarten through high school.
It is also in America's interest to continue welcoming aspiring young adults from this region for higher education to the United States. There were understandable concerns about student visas after 9/11. My administration has worked hard to improve the visa process. And I'm pleased to report that we are issuing a growing numbers of student visas to young people from the Middle East. And that's the way it should be. And we'll continue to work to expand educational exchanges, because we benefit from the contribution of foreign students who study in America because we're proud to train the world's leaders of tomorrow and because we know there is no better antidote to the propaganda of our enemies than firsthand experience with life in the United States of America.Building powerful economies also requires expanding the role of women in society. This is a matter of morality and of basic math. No nation that cuts off half its population from opportunities will be as productive or prosperous as it could be. Women are a formidable force, as I have seen in my own family -- (laughter and applause) -- and my own administration. (Applause.) As the nations of the Middle East open up their laws and their societies towomen, they are learning the same thing.
I applaud Egypt. Egypt is a model for the development of professional women. In Afghanistan, girls who wereonce denied even a basic education are now going to school, and a whole generation of Afghans will grow up withthe intellectual tools to lead their nation toward prosperity. In Iraq and Kuwait, women are joining political partiesand running campaigns and serving in public office. In some Gulf States, women entrepreneurs are making aliving and a name for themselves in the business world.
Recently, I learned of a woman in Bahrain who owns her own shipping company. She started with a small officeand two employees. When she first tried to register her business in her own name, she was turned down. Sheattended a business training class and was the only woman to participate. And when she applied for a customslicense, officials expressed surprise because no woman had ever asked for one before. And yet with hard work and determination, she turned her small company into a $2 million enterprise. And this year, Huda Janahi was named one of the 50 most powerful businesswomen in the Arab world. (Applause.) Huda is an inspiring example for the whole region. And America's message to other women in the Middle East is this:You have a great deal to contribute, you should have a strong voice in leading your countries, and my nation looks to the day when you have the rights and privileges you deserve.
Taking your place as a center of progress and achievement requires extending the reach of freedom. Expanding freedom is vital to turning temporary wealth into lasting prosperity. Free societies stimulate competition in the marketplace. Free societies give people access to information they need to make informed and responsible decisions. And free societies give citizens the rule of law, which exposes corruption and builds confidence in the future.
Freedom is also the basis for a democratic system of government, which is the only fair and just ordering of society and the only way to guarantee the God-given rights of all people. Democracies do not take the same shape; they develop at different speeds and in different ways, and they reflect the unique cultures and traditions of their people. There are skeptics about democracy in this part of the world, I understand that. But as more people in the Middle East gain firsthand experience from freedom, many of the arguments against democracy are being discredited.
For example, some say that democracy is a Western value that America seeks to impose on unwilling citizens.This is a condescending form of moral relativism. The truth is that freedom is a universal right -- the Almighty's gift to every man, woman, and child on the face of Earth. And as we've seen time and time again, when people areallowed to make a choice between freedom and the alternative, they choose freedom. In Afghanistan, 8 millionpeople defied the terrorist threats to vote for a democratic President. In Iraq, 12 million people waved ink-stainedfingers to celebrate the first democratic election in decades. And in a recent survey of the Muslim world, there was overwhelming support for one of the central tenets of democracy, freedom of speech: 99 percent in Lebanon, 94 percent here in Egypt, and 92 percent in Iran.
There are people who claim that democracy is incompatible with Islam. But the truth is that democracies, by definition, make a place for people of religious belief. America is one of the most -- is one of the world's leading democracies, and we're also one of the most religious nations in the world. More than three-quarters of our citizens believe in a higher power. Millions worship every week and pray every day. And they do so without fear of reprisal from the state. In our democracy, we would never punish a person for owning a Koran. We would never issue a death sentence to someone for converting to Islam. Democracy does not threaten Islam or any religion.Democracy is the only system of government that guarantees their protection.
Some say any state that holds an election is a democracy. But true democracy requires vigorous political partiesallowed to engage in free and lively debate. True democracy requires the establishment of civic institutions thatensure an election's legitimacy and hold leaders accountable. And true democracy requires competitive electionsin which opposition candidates are allowed to campaign without fear or intimidation.
Too often in the Middle East, politics has consisted of one leader in power and the opposition in jail. America isdeeply concerned about the plight of political prisoners in this region, as well as democratic activists who areintimidated or repressed, newspapers and civil society organizations that are shut down, and dissidents whosevoices are stifled. The time has come for nations across the Middle East to abandon these practices, and treattheir people with dignity and the respect they deserve. I call on all nations to release their prisoners of conscience,open up their political debate, and trust their people to chart their future. (Applause.)
The vision I have outlined today is shared by many in this region -- but unfortunately, there are some spoilers whostand in the way. Terrorist organizations and their state sponsors know they cannot survive in a free society, so they create chaos and take innocent lives in an effort to stop democracy from taking root. They are on the wrongside in a great ideological struggle -- and every nation committed to freedom and progress in the Middle Eastmust stand together to defeat them.
We must stand with the Palestinian people, who have suffered for decades and earned the right to be a homeland of their own -- have a homeland of their own. I strongly support a two-state solution -- a democratic Palestine based on law and justice that will live with peace and security alongside a democrat Israel. I believe that thePalestinian people will build a thriving democracy in which entrepreneurs pursue their dreams, and families own their homes in lively communities, and young people grow up with hope in the future.
Last year at Annapolis, we made a hopeful beginning toward a peace negotiation that will outline what this nation of Palestine will look like -- a contiguous state where Palestinians live in prosperity and dignity. A peace agreement is in the Palestinians' interests, it is in Israel's interests, it is in Arab states' interests, and it is in the world's interests. And I firmly believe that with leadership and courage, we can reach that peace agreement this year. (Applause.)
This is a demanding task. It requires action on all sides. Palestinians must fight terror and continue to build the institutions of a free and peaceful society. Israel must make tough sacrifices for peace and ease the restriction son the Palestinians. Arab states, especially oil-rich nations, must seize this opportunity to invest aggressively in the Palestinian people and to move past their old resentments against Israel. And all nations in the region must stand together in confronting Hamas, which is attempting to undermine efforts at peace with acts of terror and violence.
We must stand with the people of Lebanon in their struggle to build a sovereign and independent democracy. This means opposing Hezbollah terrorists, funded by Iran, who recently revealed their true intentions by taking up arms against the Lebanese people. It is now clearer than ever that Hezbollah militias are the enemy of a freeLebanon -- and all nations, especially neighbors in the region, have an interest to help the Lebanese people prevail. (Applause.)
We must stand with the people of Iraq and Afghanistan and other nations in the region fighting against al Qaeda and other extremists. Bin Laden and his followers have made clear that anyone who does not share their extremist ideology is fit for murder. That means every government in the Middle East is a target of al Qaeda. And America is a target too. And together, we will confront and we will defeat this threat to civilization.We must stand with the good and decent people of Iran and Syria, who deserve so much better than the life they have today. Every peaceful nation in the region has an interest in stopping these nations from supporting terrorism. And every peaceful nation in the region has an interest in opposing Iran's nuclear weapons ambitions.To allow the world's leading sponsor of terror to gain the world's deadliest weapon would be an unforgivable betrayal of future generations. For the sake of peace, the world must not allow Iran to have a nuclear weapon.(Applause.)
The changes I have discussed today will not come easily -- change never does. But the reform movement in the Middle East has a powerful engine: demographics. Sixty percent of the population is under 30 years old. Many of these young people surf the web, own cell phones, have satellite televisions. They have access to unprecedented amounts of information. They see what freedom has brought to millions of others and contrast that to what they have at home.
Today, I have a message for these young people: Some tell -- some will tell you change is impossible, but historyhas a way of surprising us, and change can happen more quickly than we expect. In the past century, one concept has transcended borders, cultures, and languages. In Arabic, "hurriyya" -- in English, "freedom." Across the world, the call for freedom lives in our hearts, endures in our prayers, and joins humanity as one.I know these are trying times, but the future is in your hands -- and freedom and peace are within your grasp. Just imagine what this region could look like in 60 years. The Palestinian people will have the homeland they have long dreamed of and deserve -- a democratic state that is governed by law, respects human rights, and rejects terror. Israel will be celebrating its 120 anniversary as one of the world's great democracies -- a secure and flourishing homeland for the Jewish people. From Cairo, Riyadh, Baghdad to Beirut, people will live in free and independent societies, where a desire for peace is reinforced by ties of diplomacy and tourism and trade. Iran and Syria will be peaceful nations, where today's oppression is a distant memory and people are free to speak their minds and develop their talents. AlQaeda, Hezbollah, and Hamas will be defeated, as Muslims across the region recognize the emptiness of the terrorists' vision and the injustice of their cause.
This vision is the same one I outlined in my address to the Israeli Knesset. Yet it's not a Jewish vision or a Muslim vision, not an American vision or an Arab vision. It is a universal vision, based on the timeless principles of dignity and tolerance and justice -- and it unites all who yearn for freedom and peace in this ancient land.
Realizing this vision will not be easy. It will take time, and sacrifice, and resolve. Yet there is no doubt in my mind that you are up to the challenge -- and with your ingenuity and your enterprise and your courage, this historic vision for the Middle East will be realized. May God be with you on the journey, and the United States of America always will be at your side. Thank you for having me.
Somebody said that Obama sounds like a college professor. Exactly. Which is why in the end I kinda had to stop listening. I find it quite difficult to find anything approaching much more than good sounding ideas that get squashed like bugs when they meet the real world and so he grabs sledgehammer style armtwisting power and makes a hash of what might have been good policy. Then like Spence says, he compromises his way out, cursing the devil in his loyal opposition and saying the best that could possibly be done has been done. That's the pattern.
I didn't hear a bad idea, not one, in all the time I listened. I just don't believe he can really do much very well. And what characterizes it for me were two things. 1. He wants to get rid of loopholes in the corporate tax code and reduce to a flatter lower corporate tax. 2. He went to some obscure place in the midwest to say he was going to spend a couple hundred million on some worthy cause. The second is obviously pandering, and with no real money to speak of. The first is impossible to do in two years without more of the same, professor.
I'm starting to think that at long last we have got our William Jennings Bryan / Adlai Stevenson President. All the leadership of a college town department egghead. All his drama is gone. He talked about high speed trains, fer chrissake. Didn't we hear that Donald Fagen song in 1982?
(Sigh)
It's a good thing I don't care about politics much. I'd be pretty bummed out right about now. I'm just waiting for the drama of chance. Did you hear there might be cold fusion? Did you hear Yemen and Tunisia might collapse? And why doesn't somebody just shoot Hosni Mubarak? I'm sick of his old ass. Meh. I'm listening to Hardcore History again, Rome, Nazis. Nothing contemporary has the shock and awe. Maybe Rand Paul is actually worth listening to.
OK I promised I'd be serious. But if the President is serious about taking loopholes out of the tax code, how does he expect to incent businesses to do anything? Is he just going to write executive order-style regulation like he tried with Wall Street compensation? Rule by fiat instead of incent with tax breaks? Really?
It never ceases to amaze me how certain old hacked arguments serve as fundamental excuses to do or say more than the the consequence bears. To me in the end it all represents nothing much more than uneconomic thinking - a kind of rationality that appreciates reason, but cannot stand the fact that everything isn't always reasonable. It is, I imagine, at the very least some measure of healthy hope and faith in mankind, but often more resembles religious devotion of the intolerant sort.
There are two arguments I have in mind at the moment, the first being oddly placed as a point against today's Republicans. This is that the fact that slaves held in America were counted as 3/5 of a person indicates a fundamental flaw with the Constitution. I don't really mean to go much into that debate, but I have recently been reminded that the Bill of Rights was not ratified until the end of 1791. That was two years after the Constitution itself was adopted, superceding the Articles of Confederation which had been authored in 1777 and enacted in 1781. So the very essence of what we consider our freedom, the right of free speech, our First Amendment right wasn't manifest until 15 and a half years after the beginning of the Revolution, a violent rebellion which itself could be counted as begun with the murder of Attucks in 1770.
Did it take 21 years for America to recognize the right of free speech? No. It took the process that long to officially ratify that which they held in their hearts for all that time.
But the central argument I wish to counter is the idea that American consumption make us immoral when it in fact employs the world. You should by now be familiar with the anti-American syllogism which begins, America has only 5% of the world's population but consumes... and then some multiple of that 5% and the subsequent admonishments for us to cut back, repent and beg the global south for forgiveness. Except that the global south are doing their best to supply us with what we desire, and so earn their fortunes.
That is the sum essence of my argument, easily refutable if one cares to I imagine. But it does honestly puzzle me to determine how the American standard of living does such presumed damage to the standards of living elsewhere on the planet. I've paid attention to one commodity it can be said we rather hoard and gulp at absurd volumes and that is chocolate. You'll scarcely find any American who is abashed by their desire and few who would think that giving up chocolate will 'save the planet' and 'help the developing world'. But there is no other crop I can think of whose production is more worthy of the sorts of environmentalist alarms we hear applied to all of our 'excess' appetites. World cocoa production is an increasingly expensive proposition, supply struggles to meet demand, comes from Third World countries like Cote DIvoire and Cameroon, is controlled by wealthy families with names like Ghirardelli, Mars and Hershey and multinational conglomerates like Nestle. What's not to protest?
But if Americans suddenly stopped eating chocolate, would they stop being so 'evil'? If Americans stopped buying second cars or expensive cell phones or different clothing for every season of the year, who would be better off? If Nike stopped making shoes in China, what would those Chinese do? Who is going to pay to re-educate the shoe factory worker? Who is going to find out what Americans are going to buy so much of next that it employs people on the other side of the globe?
I am often amazed at the arrangements that make it possible to build something made from raw materials in one country, assembled in another and shipped as product to a third. Yes, a preponderance of that global traffic ends up at Walmart, Sears and Target. There's surely a pile of it here in my house. I'm affluent. I buy stuff I want but don't need. I'm upper middle class. I signify about the brand and the quality rather than be satified by the function. I'm wasteful. I replace rather than repair. This is a cultural thing. It generates surplus work. I certainly could save, I could stop my conspicuous and constant consumption of multiple streams of household goods and services. I could go downscale, and often plan ways to do so. But I'll take down a lot of folks with me, and so would you if you stopped buying.
The difference between December and January in the IT business is often budgetary and often holiday related, both are cultural. They way people buy consulting services up in the domain where we bill like surgeons and attorneys often depends on conventions of lumping several hundreds of thousands of dollars together into non-trivial decision packages for funding projects. The demand is out there but the supply waits for the word 'go'. It's more reliable than fishing, but just as frustrating. There is nothing, and then within a week or two, there is everything all at once. We all wait for demand to speak up. We watch with anticipatory fever as it digs into its pocket and produces the moola. We sit around by the phone waiting for his minions to tell us when he's ready to bargain with us for what we do. We stand on the corner waiting to flag him down.
But what if he decides to just stay home and watch TV? What if he decides to sit on his zillions and just play golf with his friends instead of fund our fabulous idea? What if he decides that he's trying to cut down all the time we've been learning to bake cake?
Human appetites are predictable. What do we want? We want everything and we want more of it. We demand. And in demanding, we create reasons for others (who are ourselves) to make themselves useful. In the honest exchange is a circle of life. It is economical. It goes to the core of why we do things, the choices we make and our convoluted decisions. Our demands are real, and they form the essence of human necessity. It is the call that cannot be ignored and the service that cannot be refused. It is our way to satisfaction. It cannot be arbitrarily branded as evil simply because of the fractions of who demands and who supplies and from whence these human actions come. The only righteousness supply and demand require is an honest exchange and a fair price.
If you've listened to any gangsta rapper for long enough, you know that he will eventually tell you that he could have you killed. Generally, the person who would do the killing would be one of the rapper's former associates, and the price of the deed will be relatively small.
Knowing that there are people who would never kill and that there are others who would kill for cheap, or even free, poses an interesting problem. It is the problem of absolute vs relative value. This is a problem that I have found particularly troublesome in my rise through American society. It cuts several ways.
I characterize this problem as 'the logarithmic shadow', for my lack of the generally accepted term. I observe that people abstract in such a way that small differences are seen as large and large differences are seen as small. The truth of the differences are obscured in shadow, as exemplified by logarithmic scales.
Hacker's 20% Andrew Hacker, the famous social scientist, took a survey in his book 'Money'. He found that when he asked people of various income levels what their ideal raise would be - a raise they would say could take care of all of their financial needs, the answer was more or less universal. It was 20%. People's expectations are relatively finite. For the man with $10 shoes, those costing 2 dollars more would be all he desired, but for the man with $200 shoes, he required 40 dollars.
Look at it the other way. For the man driving a Ford, he would need to get a BMW in order to be complimented. But for the man already driving a BMW, he'd probably need to buy an Aston-Martin to get a similar compliment from his peers.
The Cocktail Party A welder is invited to a cocktail party celebrating the opening of the new building he helped construct. He happens to overhear a conversation between an architect and an attorney, both who make a great deal more money. The architect makes an aesthetic statement about the beauty of a particular archway in the lobby of the building. The welder knows that there were many difficult welds used in the steel of that arch. In fact, one of his subordinates injured himself. The attorney takes the architect's statement and elaborates on the beauty. The welder pipes up, smiling with pride, yeah it cost Joe his finger. The conversation halts, abruptly with embarrassment. The subject is changed.
The Cookie vs The Credit Card A new technology called e-Commerce becomes available so that ordinary people can shop online. In order to accomplish this, a technology called a 'cookie' is stored on the buyer's computer. It just so happens that a very sophisticated thief can get personal information from you by hacking your computer and accessing this cookie. People are horrified by the possibility. Yet every day these same people speak to travel agents to book their business travel. These travel agents know their favorite airlines, hotels, car rental, and meal preferences. Whenever people go to restaurants, they willingly hand their credit cards over to waitstaff who make much less money.
Flies on the Belly Marta is a starving sick illiterate child in a poverty stricken country with a population of 2 million. A healthy altruist comes on television to tell us that for a mere $20 a month, Marta can get food, clothing, shelter and education. Tens of thousands of people respond netting $20 million in contributions. Two years later the same commercial comes on television. Nobody wants to contribute any longer.
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These are all paradoxes of perception. I could probably structure them more properly were I to spend more time, but they all illustrate to me the difference between effort expended and results achieved, between things of equal import that can generate asymmetric reactions. I am coming to understand very specific kinds of flaws in human perception owing to the fact that I have had a career in translating such perceptions into computer aided systems of representation. A precise translation still often yields misinterpretations. People cheat in over- or underemphasis in order to communication something of value.
What is particularly fascinating in all of this to me are the border conditions of perceptual change and the manner in which shifts are communicated.
Facebook vs Arpanet The first time I sent an email, I was still in college. It was through a system called DECnet. I was part of a small project, assisted by a guy named Richard Z. White who was working at Raytheon. We established what was then called NSBENET. It worked for a short period of time, then went unused. Even among college engineering students, it was considered geeky and complicated. A few years later, in 1985 or 86, I began sending email messages in the current way we do, client server store and forward GUI based email. In fact, I wrote back in 1986 how cool it would be if we could have our computers store and forward digitized music. At the time, CDs were first being sold, and I can remember a time when it was almost impossible to get reggae music on Compact Disk. The social context of spending many hours in a week in front of a computer screen was decidedly declasse. Today, a generation of parents who have probably experienced email for the first time in the late 90s are fretful of how many hours their children spend on Facebook.
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This is the cross-fertilized field of cognition, economics and philosophy. It is fascinating to me. One last example.
The Ignored Prospectus Ever since 2007 behavioral economics has become a dominant theme in discussions of what's going wrong in the market. People who have relied on the 'efficient market hypothesis' have now been faced with evidence that the invisible hand is a lot more clumsy and slow than they ever thought. That's because people, whose behavior ultimately determines the price of things in the market, often misperceive risk. These aggregate misperceptions establish themselves as market prices which are not efficient and they generate bubbles which certain conditions can conspire to sustain. There is probably no better example than Greenspan's indictment of 'irrational exuberance'. If there is, it's probably 'too big to fail'. Both are examples of unsustainable prices for which 'the efficient' market did not correct precisely because the aggregate perception expressed a desire that was contrary to rationality. In other words, if enough people suspend disbelief, you can sustain castles made of sand longer than rationality dictates and 'efficient' markets are not exempt.
So one of the many studies coming out to explain where we went wrong had very definite conclusions about how people perceive risk. You could draw very specific warnings out in the language of any security for sale, and people will generally ignore those expert warnings in favor of their feelings on the matter. It's rather like a reverse transferrance. No matter how big the warning label, once people have decided to buy, they go with their gut.
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I expect upcoming books by Taleb and Ariely to aid my consideration at length of how people's cognitive errors manifest themselves with regard to how they take up information. I'm particularly interested in this from the perspective of abstracts of big data. There are many phenomena that we have heretofore been physically unable to probe, owing to the massive amounts of data. As our technical ability increases, and more computer mediated interpretations become the norm, what kinds of cognitive errors will we make?
I'm surprised to have found this interactive tool which portends to be the way of the future of democracy. According to the tool, I solved the federal budget deficit with a combination of tax increases (31%) and spending cuts (69%). It took all of ten minutes.
There are a number of problems with the tool, but those problems could be worked out with a little bit of elbow grease. This is probably the single greatest thing the NYT has done in the past 5 years. Note their qualifications:
Notes: These suggested cuts would need to be implemented gradually over the next 20 years, some taking effect well before 2030 in order to keep the deficit, and thus interest payments on the national debt, at a manageable level between now and 2030. All figures are adjusted for projected inflation and expressed in terms of 2010 dollars. The baseline for this exercise assumes that all current policies continue, even those scheduled to expire, like the Bush tax cuts.
By SHAN CARTER, MATTHEW ERICSON, DAVID LEONHARDT, BILL MARSH and KEVIN QUEALY/The New York Times |
Sources: New York Times analysis of data provided by Alan Auerbach and William Gale; Committee for a Responsible Federal Budget; Tax Policy Center; Congressional Budget Office; Sustainable Defense Task Force; Cato Institute; Economic Policy Institute; National Commission on Fiscal Responsibility and Reform; Joint Committee on Taxation; Centers for Medicare and Medicaid Services; Social Security Administration
What they failed to do is to provide briefing statistics for each of the decision points in the mix. If they had done so, this would have given a complete interactive tool for distribution. Nice job though.
(artlessly copied whole cloth from David P Goldman)
I’ve been warning for months that a few state and municipal bankruptcies (actually, a few states and a great many city bankruptcies) will be required to slay the beast of government-union pension liabilities. The total size of the muni bond market is about $2.4 trillion. Unfunded pension liabilities (calculated with a realistic discount rate) are almost as high, according to one study. Now comes James Pethokoukis of Reuters to tell us of a “secret GOP plan” to bankrupt local governments and crush the government unions.
Congressional Republicans appear to be quietly but methodically executing a plan that would a) avoid a federal bailout of spendthrift states and b) cripple public employee unions by pushing cash-strapped states such as California and Illinois to declare bankruptcy. This may be the biggest political battle in Washington, my Capitol Hill sources tell me, of 2011.
That’s why the most intriguing aspect of President Barack Obama’s tax deal with Republicans is what the compromise fails to include — a provision to continue the Build America Bonds program. BABs now account for more than 20 percent of new debt sold by states and local governments thanks to a federal rebate equal to 35 percent of interest costs on the bonds. The subsidy program ends on Dec. 31. And my Reuters colleagues report that a GOP congressional aide said Republicans “have a very firm line on BABS — we are not going to allow them to be included.”
In short, the lack of a BAB program would make it harder for states to borrow to cover a $140 billion budgetary shortfall next year, as estimated by the Center for Budget and Policy Priorities. The long-term numbers are even scarier. Estimates of states’ unfunded liabilities to pay for retiree benefits range from $750 billion to more than $3 trillion.
I’m not going to trade in Capitol Hill rumors, but whether there is a secret plan or not, the US federal government is in the same position that Germany is with respect to Greece — the creditors (in this case public employee pensions) have to take a massive haircut for the numbers to add up. The delayed effect of the real estate collapse (which is still getting worse) is going to hit local revenues next year due to massive downward adjustment in tax assessments. This is the killer:
It’s cities, not states, that live off real estate taxes. Local government was riding the real estate boom along with everyone else but it takes a couple of years for the price collapse to work its way through tax assessments. What’s going to happen is two, three, many Harrisburg bankruptcies. The cities will collapse and the states will push them over the edge (like NY State with NYC in 1974). They’ll make a horrible example of a couple of states — California and Illinois — others will hold the line as the cities go down like ninepins
There are nearly 11 million local government employees (not counting 3.56 million part-time), or a full-time equivalent of 12.2 million. Full-time equivalent for states is only 4.4 million. So most of the savings (and union-busting) has to come from local governments in the first place.
There’s a limit to how far they can take this: Banks and insurance companies together have about $700 billion of munis. You can wipe out mom and pop (did so already with the auction securities market) but a 40% haircut would take out about $300 billion of financial institutions’ capital — not pretty. And that’s not to mention the spillover effect on other markets. That’s yet another reason not to own the banks’ common equity.
Individuals
Mutual Funds1
Banking Institutions
Insurance Companies
Other
Total
2010
Q1
1,034.3
959.1
269.2
444.4
137.6
2,844.6
Q2
1,033.3
955.2
255.5
444.1
145.0
2,833.1
36.5%
33.7%
9.0%
15.7%
5.1%
My best guess is that two states go down — Illinois and California — and lots of Democratic city machines. In lots of states, Republican governors and state legislatures will actually win support by running against the machines.
If you have to own munis, own the better-quality states–in fact, own bonds that have first claim on revenues rather than General Obligation debt. The municipal bond funds are loaded with School District of West Squashbug and the general obligation bonds of Death Gulch. Even if you own bullet-proof munis (and I own some myself) be prepared to take a big mark to market hit as the crisis plays out.
Freeman Dyson, many years ago, said the most simple and radical thing I've ever heard. It was the biggest idea. The second biggest idea I heard, also many years ago came from Nicolas Negroponte. He predicted the downfall of broadcast television. His explanation was simple. Everything is going to go digital because Moore's Law will make digital cheaper, and since video is digitally bulky, it's going to be easier to send it through cables than over the air. The content will follow the cheapest path. To be more comprehensive, he said that the phone companies and the broadcast companies would switch places because it was ironic to him that voice was going over wires and video was going over the air. It hasn't finished happening, but the simple beautiful truth of it is becoming manifest.
Freeman Dyson's idea was even larger. He said the way to go is to personalize energy distribution. Most of our energy is lost because it is centrally generated and hierarchically distributed. If you could find smaller energy sources and distribute them equally, it would alleviate the need for pipelines, high tension wire, truck and train transportation of energy. We'd save huge amounts. Moreover we could start living at a more reasonably human rather than sardine scale.
Dan Nocera has obviated a couple of basic assumptions about energy production and seems to be on the way to demonstrating how fuel cells can power all of our needs. Most excellent
So, the deal Obama got might net the economy 2.2 million jobs -- but a better deal could've gotten us 2.7 million jobs at the same price. That second deal wasn't on the table, of course.
To ascertain the jobs created by these provisions we use multipliers provided by theCongressional Budget Office and economist Mark Zandi. We average the low and high estimates from CBO and the Zandi estimates. We then apply a rule of thumb, based on CBO’s estimates of the macroeconomic impact of the American Recovery and Reinvestment Act, which posits that each 1 percent of gross domestic product creates 1 million new jobs, to arrive at our the jobs estimates.
So what they're saying is that the effect of taxation can, through the use of multipliers, be expressed in terms of 'jobs' which is essentially a statistic derived from GDP. So these aren't real jobs being created, they are an expression of money. Just wanted to make that clear. These are potential jobs, or it is tax savings that potentially might create jobs. But of course neither Klein nor any economist can promise that such jobs would be created, every profit or gain does not automatically cause new jobs, just as every loss does not automatically cost jobs. 'Jobs' is just a term to appeal to people who want to understand the economy strictly in those terms.
The political spin on this, which Obama used in his speech, is to suggest that there is no economic proof that giving tax cuts to the wealthiest American individuals and estates will create jobs or improve the economy. So Ezra Klein is obviously arguing that one side of the volleyball net is higher than the other side. I presume you do see the ironic double standard. The deal that was off the table costs jobs just by changing taxation on the rich, but no hypothetical deal Republicans can come up with could gain jobs just by changing taxation on the rich.
Obama takes the opportunity to blame the obstructionists a bit more honestly by focusing on the deficit, but he does so without breaking out the net amount that the Bush Tax Cuts actually give to that wealthy 2%, which is 133 Billion, not 700 Billion. The Bush Tax Cuts were aimed at all Americans, the middle class part being the meat, based on the conservative principle that all Americans deserve to keep more of their tax dollars. No surprise that Obama is replaying his populist spin, which is easy to do when you don't talk about spending.
The problem is that the government spending Obama has focused most upon, government sponsored healthcare insurance, doesn't cut costs or help the economy. It certainly doesn't improve unemployment. But then again maybe somebody has some multipliers that will help explain how Obamacare will create 'jobs'.
What's more worrisome to this conservative is the ease with which Klein accepts that Obama is the head dealer and what he should be dealing is jobs. If only we could shut up the opposition.
Transcript:
"Good morning Mr. van Rompuy, you've been in office for one year, and in that time the whole edifice is beginning to crumble, there's chaos, the money's running out, I should thank you - you should perhaps be the pinup boy of the euroskeptic movement. But just look around this chamber this morning, look at these faces, look at the fear, look at the anger. Poor Barroso here looks like he's seen a ghost. They're beginning to understand that the game is up. And yet in their desperation to preserve their dream, they want to remove any remaining traces of democracy from the system. And it's pretty clear that none of you have learned anything. When you yourself Mr. van Rompuy say that the euro has brought us stability, I supposed I could applaud you for having a sense of humor, but isn't this really just the bunker [or banker?] mentality. Your fanaticism is out in the open. You talk about the fact that it was a lie to believe that the nation state could exist in the 21st century globalized world. Well, that may be true in the case of Belgium who haven't had a government for 6 months, but for the rest of us, right across every member state in this union, increasingly people are saying, "We don't want that flag, we don't want the anthem, we don't want this political class, we want the whole thing consigned to the dustbin of history." We had the Greek tragedy earlier on this year, and now we have the situation in Ireland. I know that the stupidity and greed of Irish politicians has a lot to do with this: they should never, ever have joined the euro. They suffered with low interest rates, a false boom and a massive bust. But look at your response to them: what they are being told as their government is collapsing is that it would be inappropriate for them to have a general election. In fact commissioner Rehn here said they had to agree to a budget first before they are allowed to have a general election. Just who the hell do you think you people are. You are very, very dangerous people indeed: your obsession with creating this European state means that you are happy to destroy democracy, you appear to be happy with millions and millions of people to be unemployed and to be poor. Untold millions will suffer so that your euro dream can continue. Well it won't work, cause its Portugal next with their debt levels of 325% of GDP they are the next ones on the list, and after that I suspect it will be Spain, and the bailout for Spain will be 7 times the size of Ireland, and at that moment all the bailout money will is gone - there won't be any more. But it's even more serious than economics, because if you rob people of their identity, if you rob them of their democracy, then all they are left with is nationalism and violence. I can only hope and pray that the euro project is destroyed by the markets before that really happens."
Seven hundred billion minutes. That’s how much time Facebook’s 500 million active users spend on the site every month. 700,000,000,000 minutes. Let that one sink in for a moment. Every month we spend the equivalent of 1.3 million years on Facebook; the equivalent of nearly 18,000 lifetimes. More than half of us login every single day; we average 130 friends. And we spend vast amounts of time on there.
It’s funny that so much of the news on people spending time in cyberspace is considered unproductive. As somebody in the industry, we spend our careers competing for human attention. So for us this is all great news. Think about it from our perspective: time spent in cyberspace is essentially time spent reading and writing – well, even in it’s more primitive forms it is intellective work. It is time spent NOT driving cars. It is time spent NOT in dangerous streets where there might be crime. It is time spent not employing toxic chemicals, or risking physical injury. It is time spent using less and less energy as systems become more efficient.
So in my head there are several larger unfocused concepts gaining traction as I witness continued innovation in the IT industry and relative failure in automotive, heavy manufacturing and other 20th century styles of industrial production. This morning I was provoked by two tangential ideas. The first was that of Borkies. The second was the clumsy, secretive work being done by the Administration to take more American land off the market.
Secretary of the Interior Ken Salazar today issued a Secretarial Order elevating the Office of the National Landscape Conservation System and Community Partnerships in the Bureau of Land Management (BLM) to the level of a directorate within BLM.
“This action reflects the growing importance of the 27-million acre National Landscape Conservation System to local economies, to the health of communities, and to the conservation of some of America’s greatest landscapes,” Salazar said at the National Landscape Conservation System Summit in Las Vegas. “The BLM plays a special role in protecting America’s great outdoors for the benefit of all Americans – for it is the national conservation lands that contain the forests and canyons that families love to explore, the backcountry where children learn to hunt and fish, and the places that tell the story of our history and our cultures. Each of these places within the National Landscape Conservation System holds special meaning to the American people and is an engine for jobs and economic growth in local communities.”
Well I tell you how I interpret that in the economic context of a government in midterm jeopardy of sovereign default, the government will buy up as much land as legally possible, slap a 'no humans allowed' sticker on it, with very specific provisions, and then sell out at ridiculous prices.
I may be bound to think rather cynical things of this Administration, but there are several things in particular are brought to mind. The first is how the shift in land use and rules has occurred over my lifetime. Once upon a time, there was just wilderness. Now there are very deliberate rules and regulations about exactly what you can and cannot do in these government owned and protected properties. It's called public land, but it's hella regulated. All those canyons and forests where we might hunt and fish.. well who says what we can hunt and fish and why? Are those the rules generated by hunters and fishermen or by conservationists? It goes without saying that there are a good deal more commonsense laws than a few in these protected areas, but the politics sustain ridiculous compromises at the macro level. Nothing illustrates this quite like the refusal of water conservationists to allow for market pricing of scarce water resources due to legislative frameworks forged in the 19th century. NLCS is under suspicion. It's a big deal.
It seems to me that Landscape Conservation means no development. It means hiking and fishing Disneylands in perpetuity, not homesteading and low rent housing, not energy production, and if any pol would dare allow for housing, it would only be after interminable subjective environmental impact studies. We know this - it's the environmentalist status quo. "Engine for jobs and economic growth in local communities" is just a lie.
Sea Change The Wild West is still fairly wild. There are places where land could be cheap if you were legally entitled to buy it. Much of the place where the government owns large plots are out here in the Western States. Nevada is most noticeable on Malkin's map. But who wants to live in the Nevada desert? So what if it's all government land? Well, in my larger Borkies story, I imagined some ecological disaster in which an ocean borne virus infected millions with a fairly severe flu. The point of that was to effect a tipping point in real estate value such that desert environments became more valuable than beachfront property.
What's much more likely than some farcical aquatic paranoia or H1N1 'Fish' virus is the changing way that upscale populations view their amenities and lead lives worthy of emulations - at least economically speaking. One only has to look at affluent American teens today to know that they care more about being electronically connected than developing a sense of geography. Exploring cyberspace is more interesting than floating down rivers with Jim. Is a house a good house? That depends on bandwidth and connectivity.
So why should we build the cities of the future near the coasts, or on riverbanks? The meaning of major transportation hub is changing as more and more human activity is engaged via computer communication networks. Why land is affordable has everything to do how it is expected to be used. If it sounds outrageous to you to see real-estate prices changes to make desert property more valuable than beachfront property, think about how our economy has been transformed by outsourcing and offshoring. The cheap property and cheaper economy in India and China has evaporated many domestic industries via improvements in logistic and telecommunications. Proximity is redefined.
So where do you live, and why is your real-estate valuable? What economies does it sustain?
--
I predict a day coming soon when people don't care so much about what car you drive, but what networks you belong to and what kind of device you sit on the table in front of you at the meetup. What do you see in a post-transportation economy?
This is a flow chart created by a financial wizard who took a year to find out exactly what kind of mortgage he has, and who has got their hands in the complex set of arrangements that is the mortgage business. I am immediately struck by the absolute impossibility for this process to be humanly comprehensible and simultaneously aware of how easily it is for computers. This is what we in the IT business call spaghetti. It is the accumulated complexity of interfaces that guarantee only what little they know with no comprehension of what goes on elsewhere. It is the triumph of interoperability without a strategic vision and the perfect sort of system whose failure cascades in unforeseen dimensions.
If you think this Administration is serious about reforming this spaghetti, raise your hand. In aggregate each of those arrows are relationships worth billions of dollars, and locked into place by a warren of lawyers as thick as thieves.
If you ever get into a debate about Affirmative Action, you may encounter the white woman. The white woman in this debate plays the role of the usurper - someone who sleeps with the enemy, or at the very least has undue influence on him. She steals the jobs that were supposed to be reserved for the protected class using the technicality of her class to game the system. Therefore, instead of Fred Astaire, Gene Kelly and Donald O'Connor, you get Debbie Reynolds in Fred's place. Surely it's a different movie but just as white as before.
I've just been handed another 'flash' which is that "1% of the people hold 90% of the wealth". It's a misdirected sentiment from anyone in the middle class. The middle class ought to be more concerned with associating themselves with economies of permanence. But where have all those flowers gone?
America still manufactures. There are still companies like Cincinnati, John Deere and Square D. There are still people around here who know what a press brake is or how gears work in a trans-axle. But I wonder how many of those jobs were Affirmative Action jobs. My guess is few. And there is something about our economy that went wrong when millions of white collar jobs began to outweigh the blue collar jobs and everything we started learning about business management improvement inflated the business management improvement industry instead of improving business. And there's something odd about an economy that is sustained by consumer products being upwards of 68% of GDP. And I like to quote Sheila Bair when she said that there's something wrong with an economy that makes so much money shuffling money instead of building things. And so we are witness to bubbles.
The video above has an 80% disapproval rate at YouTube. I don't think that is mere class conflict. I think it is a reawakening of common sense in the common man. I hope that at some point we will find the leadership who will know the proper direction for that energy and that we will not beat up on the wrong people. Sentiments against the wealthy for their concentrations of wealth are off target, rather we ought to watch what's being done with the money. Everybody needs to eat, but nobody should eat so much junk food. Every nation needs wealth, but not junk wealth inflated by junk skills and supported by junk minds.
I would be the last to suggest we should instigate some political movement towards planning our economy, rather we should become more disciplined and pragmatic accelerating the piercing of idiot bubbles. Let's make our market smarter by heaping opprobrium on the shallow, by making all our money smart money.
Equality means nothing if it means equality in mendacity, mediocrity or poverty.
Riffing off Belmont, here's a clear and present disaster. I'm surprised Nulan hasn't picked up on it, focusing as he does on Orlov. But it's all rather simple and transparent to me:
Green investments are linked to two factors. First, the intensity of environmental regulations and second, the perceived benefit of “green” activities. Reuters described the effect of a failure to pass environmental legislation in Congress as a setback for “Green” investment.
You have this gaggle of people who are convinced that retirees deserve pensions. That's very clearly a peasant incentive, considering especially CALPERS which are nothing much more than a bunch of middle class civil servants - ex-government employees much less well deserving of pensions than say soldiers... Anyway, they tie their investments to the newly invented ethics of 'green' in hopes that some legislators somewhere will come up with a regulatory scheme to monetize carbon out of human existence. In other words, based on something entirely scientifically unprovable, but legislatively within the realm of political possibilities, they invent an economy literally out of thin air and desire to bankroll the future based upon that.
This is yet another inflationary scheme that defies reason and expects a generation of fools to capitalize another economic bubble. It's astounding how quickly people have run out of ideas. More and more the future seems to belong to the computer industry. Are we the only people actually making real progress?
It's fascinating, as I go through these briefs by Friedman how directly I perceive that everything he is saying came to me via Thomas Sowell. I wonder if Sowell has done much more that popularize that which Friedman was saying. I think it's a good thing that he has, as without Sowell as a black man, it is unlikely that I would have had anyone introduce me to the ideas of Friedman as useful and good. But it is a bit odd for Sowell to be Friedman's Metatron.
Nevertheless the main subject here draws our attention to the intersection of legality, morality and sentiment, put only as an economist could.
Table
4.
PERSONS
OBTAINING LEGAL PERMANENT RESIDENT STATUS BY STATE OF RESIDENCE:
FISCAL YEARS 1999 TO 2008
State of residence
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Total
644,787
841,002
1,058,902
1,059,356
703,542
957,883
1,122,257
1,266,129
1,052,415
1,107,126
Alabama
1,271
1,894
2,246
2,562
1,689
2,247
4,200
4,277
3,393
3,877
Alaska
1,055
1,364
1,389
1,557
1,188
1,261
1,524
1,554
1,617
1,534
Arizona
8,651
11,935
16,197
17,588
10,955
19,507
18,986
21,529
17,528
20,638
Arkansas
937
1,594
2,561
2,531
1,903
2,288
2,698
2,924
2,722
2,997
California
160,924
216,447
281,469
289,422
175,579
253,858
232,014
264,667
228,941
238,444
Colorado
6,965
8,167
12,451
12,027
10,661
11,255
11,975
12,713
11,039
12,741
Connecticut
7,861
11,263
12,089
11,213
8,274
12,335
15,334
18,697
12,932
12,190
Delaware
1,024
1,563
1,847
1,856
1,487
1,705
2,991
2,263
2,085
2,295
District of Columbia
2,130
2,528
3,034
2,719
2,491
2,148
2,457
3,775
2,541
2,652
Florida
57,216
94,474
104,148
90,460
52,770
76,178
122,915
155,986
126,277
133,445
Georgia
9,377
14,707
19,370
20,496
10,794
16,681
31,527
32,202
27,353
27,769
Guam
1,723
1,551
1,720
1,685
1,355
1,275
1,436
1,716
1,438
1,305
Hawaii
4,292
6,047
6,282
5,478
4,899
6,405
6,480
7,499
7,236
6,572
Idaho
1,904
1,914
2,285
2,229
1,686
2,299
2,768
2,377
2,044
2,766
Illinois
36,895
36,052
48,087
47,095
32,413
46,896
52,415
52,452
41,971
42,723
Indiana
3,546
4,105
5,980
6,838
5,241
6,262
6,913
8,122
6,639
8,028
Iowa
1,771
3,035
5,014
5,570
3,419
4,067
4,535
4,085
3,103
3,696
Kansas
3,251
4,554
4,018
4,500
3,804
4,139
4,512
4,277
4,141
5,344
Kentucky
1,528
2,902
4,525
4,667
3,038
3,820
5,265
5,504
4,340
5,315
Louisiana
2,034
2,981
3,751
3,176
2,214
3,095
3,776
2,693
3,475
4,011
Maine
558
1,123
1,185
1,265
992
1,322
1,907
1,717
1,488
1,617
Maryland
15,543
17,565
21,919
23,677
17,770
20,549
22,868
30,199
24,255
27,062
Massachusetts
15,125
23,302
28,847
31,498
20,127
28,067
34,232
35,558
30,555
30,369
Michigan
13,614
16,655
21,386
21,724
13,515
18,851
23,591
20,907
18,727
17,947
Minnesota
5,932
8,554
11,091
13,477
8,406
12,097
15,449
18,249
13,814
15,832
Mississippi
696
1,074
1,338
1,145
729
1,312
1,829
1,480
1,593
1,679
Missouri
4,157
5,988
7,574
8,585
6,160
7,050
8,742
6,852
6,459
7,078
Montana
306
488
484
419
453
452
589
505
575
543
Nebraska
1,437
2,201
3,839
3,655
2,827
3,002
2,996
3,795
3,066
3,668
Nevada
8,268
7,757
9,459
9,447
6,336
8,798
9,823
14,713
12,308
11,768
New Hampshire
999
1,992
2,578
2,995
1,868
2,280
3,298
2,987
2,272
2,466
New Jersey
34,008
39,778
59,587
57,478
40,699
50,699
56,176
65,931
55,834
53,997
New Mexico
2,439
3,951
5,186
3,374
2,336
3,076
3,513
3,805
3,112
3,509
New York
96,764
105,521
113,698
114,531
89,538
103,151
136,815
180,157
136,739
143,679
North Carolina
5,774
9,193
13,861
12,868
9,451
11,036
16,710
18,987
15,469
15,174
North Dakota
312
414
556
770
331
591
864
649
496
662
Ohio
6,832
9,201
14,653
13,827
9,787
12,072
16,892
16,585
14,078
14,595
Oklahoma
2,367
4,550
3,471
4,215
2,385
3,578
4,702
4,590
4,269
4,306
Oregon
5,217
8,479
9,560
12,083
6,946
8,540
9,623
9,188
7,905
9,028
Pennsylvania
13,465
17,970
21,328
19,428
14,606
18,813
28,902
25,950
22,811
23,646
Puerto Rico
3,021
2,624
3,426
3,053
3,110
4,760
3,623
4,093
2,917
3,287
Rhode Island
2,043
2,513
2,802
3,048
2,492
3,740
3,852
4,778
3,354
3,735
South Carolina
1,770
2,253
2,862
2,952
1,942
2,672
5,028
5,291
4,788
4,241
South Dakota
351
445
668
899
487
747
881
1,013
668
773
Tennessee
2,575
4,837
6,234
5,674
3,367
5,844
8,960
10,037
8,942
8,348
Texas
49,294
63,391
85,905
88,142
53,412
92,440
95,951
89,027
77,278
89,811
Utah
3,547
3,667
5,218
4,871
3,159
4,346
5,082
5,749
5,168
6,087
Vermont
494
802
950
1,003
550
814
1,042
894
791
771
Virginia
15,111
19,985
26,767
25,319
19,726
22,104
27,095
38,483
29,682
30,257
Washington
13,003
18,245
22,977
25,631
17,935
19,758
26,480
23,803
22,657
23,170
West Virginia
392
569
736
635
483
634
847
763
721
798
Wisconsin
3,038
5,034
8,442
6,486
4,357
5,580
7,907
8,339
7,381
7,306
Wyoming
251
247
306
278
253
304
321
376
380
458
Other1
1,726
1,557
1,531
1,227
1,140
1,077
937
1,366
1,047
1,117
Unknown
3
-
15
8
7
6
9
1
1
-
- Represents zero.
1 Includes U.S. territories and armed forces posts.
As we all learned several years ago to great fanfare, there's a dude named Roland Fryer over at Harvard teaching Economics. He collaborated with the Freakonomists, Levitt and Dubner and made quite a name for himself. Isn't it a wonder that we haven't heard much of him lately, or are we just watching the stupid channels?
I was just rolling back in some of the blog and found a couple posts that mention him. But it was this one in particular that leads me to think that maybe his current is the last project dealing with race he'll take on that gets any traction. He has an attractive and impressive site over at Harvard and has picked some Progressive subjects that cover a variety of hot topics. With any luck, we should learn some interesting new correlations, but I think the chances for that are slim. What I think is really going on is another generation of institutional patronage.
In The Black Endgame I wrote:
What is the black endgame? At what point does one reach zero marginal utility for blackness? At what point in American history will the need for black politics be obviated? When do African Americans drop the hyphenation?
As some inveterate readers of Cobb know, I have written essays every 5 or so years going back to 1984 entitled 'The End of My Blackness'. And each time I surpass what I thought was black, I find a new reason to reinvest. That's just me, but it's clear that some folks, like Ward Connorly for gratuitous example, have stopped reinvesting. I think the answers to these questions will come all in individual packages - there is no one answer for the nation, but that blackness will fade slowly into distant memory like the sound of a dime going down into a pay phone. People will still talk about 'dropping a dime', but nobody will do that literal thing. People will still talk about 'black community' but it won't exist.
And now Fryer is picking up several blackish subjects. Here's one:
Too many low-income and minority students attend schools that are underperforming. They often have an all or nothing view of success: their typical role models are celebrities or the adults in their community, thus the link between academic success and future opportunities either doesn't exist or "isn't for them".
We need a cultural movement that makes academic achievment something every student believes that he or she cannot live without.
It's interesting the extent to which Fryer's experiments rely on cold hard cash as an incentive. And one has to believe that without his particular input these four programs, in Chicago, DC and NYC simply would not exist. He has insured that there will be money for good grades in middle schools. He's eyeballing the center of gravity and I think his weighing will be very precise. The bottom line is that he will do one of the things that I do with my kids, and one of those things that when I was a kid, I wanted - which was bonus money for good report cards. It's an old middle class idea that millions of families have done and continue to do, but now it's institutionalized through Harvard and Fryer. But how long will the subsidy last?
Presumably once the study has been done and some success has been achieved, there will be proof positive that you can, for lack of a better term, purchase good grades for inner-city kids. Of course it would be done not through parenting but through enrollment in a program administered by a progressive political machine. I wonder if in fact this can actually work. Not just now, but later. You see, my conservative knee is reacting against the proposition that governments can do this, but I'm also assuming that Harvard can, but can they? In fact, can anyone and does it actually work? I mean let's take the stereotype in the other direction shall we?
How effective is a trust fund in establishing academic achievement? How effective is any benchmark used in judging the improvement of poor underachievers as compared to that with rich underachievers? In other words, isn't injecting capital into the education of youth merely buying grade inflation? Were the WASP elites of the bad old days really all that smart, or did they just execute passable academic achievement? When we look at standardized test scores, we're all fairly certain that the highest correlation to high scores is with family income, neh? So what are we actually subsidizing here? Academic bling? Isn't that what an Ivy League legacy is?
I may be a little oversensitive, as the Statistical Morality posts below will show, to those dialogs that engage black Americans through statistical abstractions. Nevertheless, this is certainly a mainstream activity and where would Andrew Hacker be if it wasn't? Where indeed will any economists of race be when the premises of racial equality are finally taken seriously? If we know and accept that genetics means very little and that development and economics means everything else, then we will finally see that this is a cultural and environmental problem and not a moral problem revolving around racism of any kind. That is the breakthrough that Fryer just might provide, and if so, he'll be the last of his kind.
You should have seen this Xtranormal video by now. If not, here it is.
Hilarious. But a more serious take is given by my man on the economy, David P Goldman.
In forty years of watching financing markets, I have seen nothing like the global jeer at the Fed’s proposed quantitative easing–not, in any case, since the US de-linked the dollar from gold in 1971. Even in 1980, when then Fed chairman Paul Volcker returned from the October IMF meeting in Belgrade and pushed the fed funds rate into double digits, criticism of the Fed were muted, and made behind closed doors. Now the German finance minister is calling the Fed “clueless” in the newspapers and the Asians are threatening exchange controls.
In any number of ways, the market is telling the Obama administration that it can’t keep expanding US debt indefinitely. That was the message from the president’s bi-partisan Deficit Commission last week, which called the debt expansion a “cancer.” That was the message from China’s leading rating agencies, which downgraded US debt to A+. That was the message from Moody’s, which threatened to put Treasuries on negative watch and possibly remove their AAA rating. And that was the message from the G20, which threatened to erect exchange controls to keep unwanted dollars out.
I think not. But it is the end of capital markets as we knew them a couple years ago.
I just started to understand the rudiments of financial engineering back when I read Derman's 'My Life as a Quant'. The career I might have had, if I had stayed in NYC, would have been to be a programmer for the guys on Wall Street. I often think about the moola I might have made, but actually it's the technology that excites me. On the other hand I might have just been another tool at Bloomberg. But what's clear is that there have been a number of technological innovations over the past two dozen years that have given brokerage houses enormous power in altering the physics of trading securities. In addition, there has been, like with CAD, a revolution in the types of financial instruments that can be created. I can remember when stocks weren't traded in pennies. Don't you?
Sheila Bair rightly said that financial institutions are providing too much fake money into the GDP. Our nation should not expect upwards of 30% of GDP to come from the finance industry. It has become too self-serving and not serving enough of the nation's proper economy. We shouldn't make so much money just by playing with money, but by creating goods and services that people need.
We need to get back to a world where our financial sector supports the functioning of our economy, and not the other way around. And we need to fix what caused the crisis by reforming our mortgage lending and securitization practices. Only by getting back to basics in these most fundamental areas of our financial system can we begin to restore balance to our broader economy and confidence in our economic future.
As I think about the future of the US economy, there are several things that stick out in my mind.
1. Biotech is the future.
2. Smart money will remain in America
3. Fewer banks is OK.
4. Chimerica will continue.
But here's the big thing. My goto guy, David Goldman says we're going into a zombie bank economy. It basically means that the banks will not take risks, they will not lend much. It will slow the entire economy. To me that means people sitting on capital are going to slowly bleed it rather than to aggressively risk it. The institutions that could more or less guarantee >7% returns on capital just won't be able to.
I can't predict much from that. I can't tell if that's good or bad for the innovative businessman. On the one hand, I think money would get clubby as it is now and only go to super safe investments like US Treasuries. On the other hand, the opportunity to make a killing just making regular businesses smarter is very real. There will be *some* growth industries in America, even if that growth is only 8%. It won't be the whole economy, but when Wall Street was promising that, it was all bubble anyway.
Capitalism isn't going away. This is just the business cycle reminding us that it's permanent. Nobody is inventing a new kind of accounting, and accounting standards are going global and getting written into the substrate of IT. The human race doesn't even know another way to think about money other than through the tools capitalism has provided.
"We enter a little coffeehouse with a friend of mine and give our order. While we’re approaching our table two people come in and they go to the counter:
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