iCount

by reader vtcodger



In a discussion on November 16th under the title The Gold Standard in One Easy Quote, I suggested inverting a chart of the spot price of gold in dollars to get a chart of the way a gold based currency would behave. Rdan thoughtfully inverted said chart (labels and all) and asked me to write up whatever the heck it was I was thinking of.



What I was thinking is that if Gold is indeed a true measure of value then a chart of the spot price of X amount of Gold is a chart of the true price of a market basket of goods and services over time. In fact, the extent that such a chart differs from a straight horizontal line ought to be a pretty good chart of inflation in the fiat currency over time. Might be a good way to check if CPI actually describes inflation. So here's the chart.







Oopsie. Kind of bumpy, no? Belay that inflation checking thing. Data seems way too noisy for that.



Why invert the chart?







Well, we're kind of used to looking at charts where economic downturns point down, not up. And those peaks in the price of Gold correspond to times where those who have cash will thrive and those who have borrowed will be in trouble -- especially if they are leveraged. They must repay Gold they borrowed in easier times with Gold that has become dear. Times like ... well ... today. So here is the inverted chart.



There are two kind of scary things about the charts whether right side up or inverted. One is the amount of volatility. The value of either Gold or dollars is apparently often bouncing by 10-20% or more in a few weeks. Quite large changes are seen in a few months or a year. It probably isn't dollars that are bouncing. If it were, we'd see that in in other metrics like inflation. It would, I think, be difficult to transact modern business with a currency whose purchasing power was that variable. The second is the relatively small amount of time that the inverted chart spends in sustained upward trends that would seem to be growth intervals of expanding money supply 1979-81, 1982-1984, 1987-1992, 1996-2000.



This little essay is hardly the final word on the efficacy of a Gold Standard. But I think these charts ought to give even the most fervent gold bug pause. If the charts really tell us about purchasing power and economic growth in a Gold Standard world, my feeling is -- Thanks no, I'd go with a fiat currency or maybe Milton Friedman's constant money supply growth. Don't need no steenking Gold.



Rdan here:

Also bullion has a run on and suppliers run dry

by rdan (noreply@blogger.com) on November 21, 2008 10:05 AM

Emanuele Millemaci and Robert Waldmann



This paper focuses on two main issues. First, we find that, on average, households’ discount rates decline. This implies dynamically inconsistent preferences. Second, we calculate an indicator of the degree of dynamic inconsistency that may help us to understand how households overcome their self-control problems. We use a micro data set containing households’ reports on the compensation for receiving hypothetical rewards with delays. We find that individuals with more severely dynamically inconsistent preferences on average hold a statistically significantly lower share of their total wealth in checking accounts. A possible interpretation is that subjects use pre-commitment strategies to limit their temptation to consume immediately.



Please download a pdf of the whole paper



old longer abstract after the jump











OK so there is this wonderful underused dataset from CentER via Luigi Giamboni (warning pdf).



It includes a question on what return people would demand in order to wait 3 months for cash and in order to wait 12 months (no cash really changed hands so it is just a survey not an experiment). One can calculate an annual required interest rate from the answer two the wait three months question. Very often this was much higher than the required annual rate. This means that respondents had dynamically inconsistent preferences. That means (in English) that, given their stated preferences, they would like defend the interests of their 12 months later selves by preventing their 9 months later selves from spending as much as said 9 months later selves would like to spend. If one has dynamically inconsistent preferences one would like to tie one's future hands.



A sophisticated agent who knows that he or she has dynamically inconsistent preference will find ways to restrict his or her future choices. For example, people with weight problems go to fat farms, People pay for residential drug treatment, drug addled (but not completely addled) celebrities hire dissenablers to prevent them from using drugs etc etc.



If one is worried about future consumption one's desire for liquidity may actually be negative for some levels of liquidity. I might want to tie my money up in a non liquid asset, say a house, because otherwise I won't be able to keep myself from spending it. Cash and the balances of checking accounts are very liquid and people with spending problems may rationally choose to hold an unusually small fraction of their wealth as checking account balances.



Why lo and behold the computer says this is true. The coefficient of a household money demand equation on the dynamic inconsistency index is negative and statistically insignificant.



Who ever would have thunk ? Well I would have for 24 years by now, but I never found the data to test the hypothesis.

by Robert (noreply@blogger.com) on November 21, 2008 01:21 AM

Ken Houghton



Christopher Buckley leads the Republican Party to water, and speculates on watching them sink:

...GOP pin-up girl Sarah Palin.



I’ll stipulate that that’s condescending, if my former confreres on the Right will stipulate that had Gov. Palin’s first name been “Bob” or “Chuck,” her surname would still be unrecognizable to 90 percent of the American electorate.

The other pull quote was pulling and sits in the center of the article. While I encourage you to Read the Whole Thing, it really is too delicious not to requote as well. Rendered by Buckley as a parenthetic:

Nexis and Google have so far failed to unearth evidence of any previous candidate for the U.S. vice presidency being called—by their own campaign, no less—a “whack job.”*

Read the Whole Thing, including some of the comments.



*One guesses that memories of Admiral Stockdale, besides whose accomplishments John McCain looks like the inept cadet he was, have escaped Google and Nexus, since he was surely called the equivalent or worse.

by Ken Houghton (noreply@blogger.com) on November 20, 2008 10:58 PM

Paleocon Daniel Larison minces no words in explaining why Bush doesn’t get more credit from his critics:

War opponents don’t give him credit that his war is now not nearly as destructive and horrifying as it once was–he started the war! Critics of his NATO expansion policies don’t give him credit for that because it was a terrible idea that contributed to the outbreak of the war in the Caucasus. Critics of recognizing Kosovo independence don’t give him credit for that, either, because once again it was a terrible idea that also contributed to the outbreak of the war in the Caucasus. He does not get credit for the loose monetary policy that helped to create the present crisis, because that is not something to be praised. His deliberate efforts to increase homeownership in reckless ways are not praised because they were misguided and have come back to bite us. Which policies, exactly, merit appreciation and respect for Mr. Bush? The illegal use of wiretapping, or the use of torture, or perhaps the shredding of 4th Amendment protections (with a big assist from the Congress), or maybe declaring U.S. citizens and foreign nationals enemy combatants without real cause and then holding them without charge for years? If you are concerned about AIDS in Africa and homelessness, by most accounts Bush administration policies in these areas have been reasonably effective. In most other respects, his administration has been a disaster. It is difficult to see what it is we will be thanking him for in the years to come. Many of his critics don’t blame him for everything that has gone wrong–they hold him accountable for the things that he and his administration did wrong, including many things that take away any right to expect the respect that is properly accorded to his office. Mr. Bush frittered away that respect with the decisions he made, and in the process he diminished the respect shown to our country.

by tgirsch on November 20, 2008 10:54 PM

Back in the Good Old Days, Leveraged Buyouts (LBOs) all the rage. Not coincidentally, the phrase "underfunded pension liabilities" moved into the mainstream.



Long story short: when legislation is finally passed to make the "underfunded" portion a thing of the past (you can stop laughing any time), several large companies run by Captains of Industry—think Roger Smith and GM—complained that actually putting that funding on their balance sheet would cost One Billion dollars off their market cap. So they were given twenty (20) years to Make It Right.



And Everyone Lived Happily Ever After.



Apparently, until today:

Stung by outsize investment losses, some of the nation’s biggest companies are pushing Congress to roll back rules requiring them to put more money into their pension funds, just two years after President Bush signed a law meant to strengthen the pension system.



The total value of company pension funds is thought to have fallen by more than $250 billion since last winter. With cash now in short supply for companies, they are asking Congress to excuse them from having to replenish the required amounts.



Lawmakers from both parties seem receptive to the idea, and there was talk of adding a pension relief provision to the broad fiscal stimulus package Congress considered for this week’s lame-duck session. [emphasis mine]

The best line, of course, comes from an advocate of the Steal Short, Pauperize Long crowd:

“Congress needs to make the funding less volatile,” said Representative Earl Pomeroy, Democrat of North Dakota, who has long been outspoken on pension issues. “I believe that taking this step will save thousands of jobs without costing the Treasury anything.”

I believe in the Easter Bunny, the Tooth Fairy (not the Tom Noonan version), and the Reagan Revolution, too.

by Ken Houghton (noreply@blogger.com) on November 20, 2008 03:00 PM

Hat tip MG.



CNBC has a good video on the next 12 months and a possible floor for the DIJA. MG says a pretty good bet is around 6500, and a worst in the 4500 range.



Update: Vtcodger points us to a post at Calculated Risk with graphs.

by rdan (noreply@blogger.com) on November 20, 2008 11:49 AM

by Tom (STR)



Physician Foundation Report 11/18/08

The Physicians’ Foundation was founded in 2003 with settlement funds from a major lawsuit against Aetna (long story). Physicians Foundations



The PF issued a report this morning after reviewing 12,000 survey responses from practicing physicians.



The conclusions about medicine in general and primary care in particular in the U.S. are very grim.



 Many physicians plan to retire early



 Many physicians are looking for non-clinical jobs.



 Many physicians plan to cut back on patient loads.



 There is too much paperwork.



 Some physicians want to cut back to part-time.



(There is another topic lurking here, but it is very sensitive, and will be covered in another post). See Health Care Think Tank

by rdan (noreply@blogger.com) on November 20, 2008 11:09 AM

by guest poster David Zetland of Aguanomics



Fixing Credit Rating Agencies



And now for something completely different...



I read yet another story on how the credit rating agencies (Standard and Poors, Moodys, Fitch, et al.) failed at their task of rating credit instruments (bonds, derivatives, etc.) to reflect the risk of those instruments.



The credit rating business works like this: Companies that want to issue instruments pay the agencies to rate them (AAA, BBb, etc.) for risk. The companies then sell instruments on the market to buyers who look at the rating when deciding how much to pay. The higher the rating, the higher the price that the companies will get, and the less risk the buyers think they are taking on.



Now there's a clear conflict of interest: Companies paying agencies want a high rating, agencies have an incentive to give high ratings (in exchange for bigger fees, more future business, etc.), but buyers depend on agency ratings.



Unfortunately, buyers cannot pay the agencies. They cannot pay in advance (they are not sure they will buy until AFTER ratings are done), and -- even if they did -- they would suffer from free-riding (if some buyers pay for the rating, other buyers can use that information without paying).



So, how do we fix the system (improving accuracy) while maintaining the current payment relationships? Change incentives in this way:



1. Set a standard fee for rating that depends on the type of instrument, the size of the issue, etc. Such standardization would remove one obvious problem (negotiated fees) while giving agencies an incentive to turn down business that's too complicated to understand.

2. Track the performance of all instruments rated by an agency in a given credit category (e.g., AA-) against all others in that category. Those that underperformed (price fell below the average) are probably riskier than the initial rating indicated, i.e., the agency was overoptimistic. Performance ratings should be weighted by the age of the instrument/rating, the size of the issue, etc.

3. Adjust each agency's fees to equal some fraction of the standard fee based on that agency's performance relative to other agencies, e.g., 80% if ratings are too high (missing hidden risk) or 110% if the ratings are too low (seeing non-existing risk).



Under this system, buyers could observe how accurate agencies are, and companies would have an explicit notion that they are paying for a rating of an agency that's often too optimistic/pessimistic, etc.



Note that this system depends on competition, so it's important to avoid cartels, oligopoly, etc. Even if standard prices are "set" (good place for a regulator), the competition will take place ex-post, when markets "reveal" the quality of the agencies' work.



Also note that #2 alone could do quite a lot to improve matters, but it's nice to link income to performance (#1 and #3).



Bottom Line: We need credit ratings, but we need to punish rating agencies that do a bad job, and the market is the best place for punishment.

___________________________

by guest David Zetland

by rdan (noreply@blogger.com) on November 20, 2008 10:50 AM

by cactus



Fuel and the Free Market: Why Is Brazil Ahead of the US When it Comes to Cars that Run on Something Other than Gasoline?



In the last year or so, before the price of oil dropped, there was a bit of interest in finding ways to reduce our dependence on oil, and on "alternative fuels" and sources of energy.



Here's the interesting thing - in Brazil, today, if you feel like it you can buy a vehicle from any of the major manufacturers that is tri-flex. That is, your vehicle will run on gasoline, ethanol, or natural gas. When you're running low on fuel, you figure out which gives you more miles to the buck real on that day and that location and fill up on whatever is cheapest. The same car will run on any of the three fuels, and on pretty much any mix of gasoline and ethanol.



As an aside - ethanol in Brazil is a real, viable option, unlike the hoax that's perpetrated on the American public. Ethanol in Brazil comes from sugar cane, which grows like a weed at the side of road in many places and contains a lot of sugar, which is what you need to make alcohol. Furthermore, what else are you going to do with sugar cane, if not make sugar and/or alcohol? Put another way - if there's anything sugar cane isn't like, its, well, corn.



Now, you may be wondering - how come the Brazilians have tri-flex fuel cars? Why will GM and Ford and Volkswagen sell those vehicles in Brazil but not in the US? Wouldn't having such vehicles help reduce our dependence on oil? Heck, forget even about gasoline and ethanol - the US and Canada are among the largest producers of natural gas in the world, and as a result, the price of natural gas is lower in the US than most places in the world. Why don't we even see vehicles running on natural gas, other than the odd city bus or garbage truck in random municipalities?



The answer is a simple but unpleasant one. See, we in the US would label the way that Brazil got to that point by an epithet: socialism. It makes no sense to label it socialism - the policies that today allow Brazilians to purchase vehicles with technology you won't see in the US for at least a decade, and probably a lot longer, have their origin with Brazil's military dictatorship, which could better be described as fascist than socialist.



Around the time of the oil embargo, countries around the world looked at ways to reduce their dependence on Middle Eastern oil. Brazil was no different, and it cast its eyes on alcohol. I believe the government went so far as to decree that by a certain date, some percentage of new vehicles sold had to run on alcohol. (Back then it was either alcohol or gasoline - the technology wasn't there to allow you randomly mix the two fuels in the same gas tank like they do today.)



But... and here's the key question - even if alcohol is cheap and plentiful in Brazil, how do you get Brazilians to buy cars that run on alcohol when there are no service stations selling alcohol? (Put another way - even though natural gas is cheap and plentiful in the US, how do you get Americans to buy cars that run on natural gas when there are no service stations selling natural gas?) In Brazil, the answer is simple: ensure that there are service stations selling natural alcohol. (In the US the answer is even simpler: you don't.) The usual suspects at the time (Exxon, Texaco, Shell) ran gasoline stations in Brazil at the time. But so did Petrobras, the giant Brazilian oil company. But Petrobras was state owned at the time, so the government could simply decide to have it sell alcohol as well. And it did. As I recall (I was living there at the time) - it was some time in the late 70s or early 80s.



In any case, when it comes to fueling up one's car, Brazilians have choices. They've had choices for decades. And nowadays, they have even more. Americans have no such choices. I imagine the free market will eventually provide a solution in the US. Maybe. But its clear that sometimes the free market, left to its devices, provides fewer and worse choices - i.e., provides less of a free market - than what we here in the US like to call "socialism."

__________________________________

by cactus

by rdan (noreply@blogger.com) on November 20, 2008 10:07 AM

Was the Great Depression really THE Great One? Apparently not, according to Scott Reynolds Neslon, 19th century historian. The Real Great Depression was the Panic of 1873 [fixed]. The parallels to present day, he says, are unnerving and uncanny. I include practically the entire piece. It is well worth the read.

That crash came in 1873 and lasted more than four years. It looks much more like our current crisis.

The problems had emerged around 1870, starting in Europe. In the Austro-Hungarian Empire, formed in 1867, in the states unified by Prussia into the German empire, and in France, the emperors supported a flowering of new lending institutions that issued mortgages for municipal and residential construction, especially in the capitals of Vienna, Berlin, and Paris. Mortgages were easier to obtain than before, and a building boom commenced. Land values seemed to climb and climb; borrowers ravenously assumed more and more credit, using unbuilt or half-built houses as collateral. The most marvelous spots for sightseers in the three cities today are the magisterial buildings erected in the so-called founder period.

But the economic fundamentals were shaky. Wheat exporters from Russia and Central Europe faced a new international competitor who drastically undersold them. The 19th-century version of containers manufactured in China and bound for Wal-Mart consisted of produce from farmers in the American Midwest. They used grain elevators, conveyer belts, and massive steam ships to export trainloads of wheat to abroad. Britain, the biggest importer of wheat, shifted to the cheap stuff quite suddenly around 1871. By 1872 kerosene and manufactured food were rocketing out of America's heartland, undermining rapeseed, flour, and beef prices. The crash came in Central Europe in May 1873, as it became clear that the region's assumptions about continual economic growth were too optimistic. Europeans faced what they came to call the American Commercial Invasion. A new industrial superpower had arrived, one whose low costs threatened European trade and a European way of life.

As continental banks tumbled, British banks held back their capital, unsure of which institutions were most involved in the mortgage crisis. The cost to borrow money from another bank — the interbank lending rate — reached impossibly high rates. This banking crisis hit the United States in the fall of 1873. Railroad companies tumbled first. They had crafted complex financial instruments that promised a fixed return, though few understood the underlying object that was guaranteed to investors in case of default. (Answer: nothing). The bonds had sold well at first, but they had tumbled after 1871 as investors began to doubt their value, prices weakened, and many railroads took on short-term bank loans to continue laying track. Then, as short-term lending rates skyrocketed across the Atlantic in 1873, the railroads were in trouble. When the railroad financier Jay Cooke proved unable to pay off his debts, the stock market crashed in September, closing hundreds of banks over the next three years. The panic continued for more than four years in the United States and for nearly six years in Europe.

The long-term effects of the Panic of 1873 were perverse. For the largest manufacturing companies in the United States — those with guaranteed contracts and the ability to make rebate deals with the railroads — the Panic years were golden. Andrew Carnegie, Cyrus McCormick, and John D. Rockefeller had enough capital reserves to finance their own continuing growth. For smaller industrial firms that relied on seasonal demand and outside capital, the situation was dire. As capital reserves dried up, so did their industries. Carnegie and Rockefeller bought out their competitors at fire-sale prices. The Gilded Age in the United States, as far as industrial concentration was concerned, had begun.

As the panic deepened, ordinary Americans suffered terribly. A cigar maker named Samuel Gompers who was young in 1873 later recalled that with the panic, "economic organization crumbled with some primeval upheaval." Between 1873 and 1877, as many smaller factories and workshops shuttered their doors, tens of thousands of workers — many former Civil War soldiers — became transients. The terms "tramp" and "bum," both indirect references to former soldiers, became commonplace American terms. Relief rolls exploded in major cities, with 25-percent unemployment (100,000 workers) in New York City alone. Unemployed workers demonstrated in Boston, Chicago, and New York in the winter of 1873-74 demanding public work. In New York's Tompkins Square in 1874, police entered the crowd with clubs and beat up thousands of men and women. The most violent strikes in American history followed the panic, including by the secret labor group known as the Molly Maguires in Pennsylvania's coal fields in 1875, when masked workmen exchanged gunfire with the "Coal and Iron Police," a private force commissioned by the state. A nationwide railroad strike followed in 1877, in which mobs destroyed railway hubs in Pittsburgh, Chicago, and Cumberland, Md.

In Central and Eastern Europe, times were even harder. Many political analysts blamed the crisis on a combination of foreign banks and Jews. Nationalistic political leaders (or agents of the Russian czar) embraced a new, sophisticated brand of anti-Semitism that proved appealing to thousands who had lost their livelihoods in the panic. Anti-Jewish pogroms followed in the 1880s, particularly in Russia and Ukraine. Heartland communities large and small had found a scapegoat: aliens in their own midst.

The echoes of the past in the current problems with residential mortgages trouble me. Loans after about 2001 were issued to first-time homebuyers who signed up for adjustablerate mortgages they could likely never pay off, even in the best of times. Real-estate speculators, hoping to flip properties, overextended themselves, assuming that home prices would keep climbing. Those debts were wrapped in complex securities that mortgage companies and other entrepreneurial banks then sold to other banks; concerned about the stability of those securities, banks then bought a kind of insurance policy called a credit-derivative swap, which risk managers imagined would protect their investments. More than two million foreclosure filings — default notices, auction-sale notices, and bank repossessions — were reported in 2007. By then trillions of dollars were already invested in this credit-derivative market. Were those new financial instruments resilient enough to cover all the risk? (Answer: no.) As in 1873, a complex financial pyramid rested on a pinhead. Banks are hoarding cash. Banks that hoard cash do not make short-term loans. Businesses large and small now face a potential dearth of short-term credit to buy raw materials, ship their products, and keep goods on shelves.

If there are lessons from 1873, they are different from those of 1929. Most important, when banks fall on Wall Street, they stop all the traffic on Main Street — for a very long time. The protracted reconstruction of banks in the United States and Europe created widespread unemployment. Unions (previously illegal in much of the world) flourished but were then destroyed by corporate institutions that learned to operate on the edge of the law. In Europe, politicians found their scapegoats in Jews, on the fringes of the economy. (Americans, on the other hand, mostly blamed themselves; many began to embrace what would later be called fundamentalist religion.)

The post-panic winners, even after the bailout, might be those firms — financial and otherwise — that have substantial cash reserves. A widespread consolidation of industries may be on the horizon, along with a nationalistic response of high tariff barriers, a decline in international trade, and scapegoating of immigrant competitors for scarce jobs. The failure in July of the World Trade Organization talks begun in Doha seven years ago suggests a new wave of protectionism may be on the way.

[Italics bold mine]

by Stormy (noreply@blogger.com) on November 20, 2008 04:46 AM

Robert Waldmann



has some concern that, having been elected President of the USA with a brown skin and middle name Hussein, Barack Obama is looking for a real challenge. He is known to be much interested in "Team of Rivals" wants Hillary Clinton to be Secretary of State and Joe Lieberman to impartially investigate whether he is putting America firs.



Based on the idea that Obama wants a cabinet of rivals, I make the following predictions



State Hillary Clinton

Defence John McCain

Attorney General Eric Holder (already announced sigh I was expecting David Addington)

Treasury Douglas Holtz-Eakin

HHS Charles Krauthammer MD

Intelligence Director Steve Clemons

Labor Mark Penn

Interior Ralph Nader

Energy Sarah Palin

Commerce Glenn Hubbard

Vetarans Saxby Chambliss

Transportation Ted Stevens

Education Pat Robertson president of Liberty University

HUD Newt Gingrich

Homeland Security Michelle Malkin

Agriculture Tony Harper

UN John Bolton



update: My dream Cabinet after the jump





State Juan Cole (I mean it)

Defence Richard Clarke (don't ask why I want him in defence and I won't tell)

Attorney General Glenn Greenwald (this is absolutely serious)

Treasury Brad DeLong (or Paul Krugman if DeLong is not available)

HHS George Mitchell (total hero of the Clinton failed reform effort)

Intelligence Director Valerie Plame

Labor Larry Katz (been there done that -- sortof)

Interior Richard Waldmann (he's my brother)

Energy Michael O'Hare (really the whole RBC community)

Commerce Merge with Treasury

Veterans Max Cleland

Transportation Duncan Black

Education Claudia Goldin

HUD Atrios (OK so I cheated).

Homeland Security Abolish the department

Agriculture Jim Hightower

UN Zalmay Khalilzad

(holy mother of Allah, I agree with Bush on something)

by Robert (noreply@blogger.com) on November 20, 2008 04:45 AM

In the debate about whether to bail out the Big Three automakers or let them go into Chapter 11 (an issue about which I’m still genuinely on the fence), one of the commonly-repeated talking points I keep hearing from the anti-bailout crowd is that Chapter 11 would allow the automakers to “dispose of legacy costs.” It’s pretty clear what that actually means, however, and why the Chapter 11 proponents don’t want to call it what it is: Screwing the pensioners.

Now some will doubtless object that the federal pension insurance will cover the pensioners, but there are two problems with this. First, this insurance will only pay a fraction of what the pensioners are currently receiving, and secondly, it makes those payments on the taxpayer dime, which means that from that perspective, we’re screwing both the pensioners and the taxpayers.

Now maybe this is unavoidable at this point — maybe the pensioners can’t fully be saved. I don’t know. But when we’re talking about real people, real benefits, and real jobs, we should at least be honest about what it is we’re talking about doing.

by tgirsch on November 19, 2008 07:40 PM

This is delicious. A right wing documentary maker got Zogby to conduct a push poll designed, apparently, to make Obama voters look like idiots. Nate Silver explains why the questions are so ridiculous, misleading and inaccurate here and interviews the person who commissioned the poll here:

NS: Do you stand by all the statements in the survey as being unambiguously true?

JZ: I stand one hundred percent by the notion that there is absolutely zero ambiguity as to what the right answer is to any of the questions. With the one exception of the Palin-Russia-Alaska question which we asked the way we did for a very specific purpose which was to try and gauge the Tina Fey Effect which I think we did in a very effective manner which was what was actually said by Tina Fey, everyone attributed to Sarah Plain. But for purposes of scoring Obama supporters’ answers we counted Palin as a correct response.

NS: What was the right answer to that [Palin] question?

JZ: The technically accurate question [sic] is that none of the four people said that, but we counted it as correct if they said Sarah Palin.

NS: Why would you commission a survey question with no correct response?

JZ: The purpose of the question, you pinhead, was we wanted to determine the Tina Fey Effect.

It sorta goes downhill, in a gloriously hilarious fashion, from there. The last three or four questions are not to be missed.

by Kevin on November 19, 2008 04:35 PM

No, really!

by tgirsch on November 19, 2008 03:14 PM

by reader tinman



With GM being the bigger of the three bullies vying for our monetary attention what are your guy’s thoughts about what to actually do with GM if it does enter bankruptcy?



I’m guessing since it’s even being tossed out there when only 3 months ago (??) Wagoner was insisting bankruptcy was not even an option on the table. Sure sounds like the winds of change have blown that one into the room here lately…and now they’re saying it’s their only option if they don’t get the money?!



So, if GM enters bankruptcy, I kinda like my idea of making “General Motors” a designer & builder of chassis and underlying bits to then sell to their former subdivisions.



GM can also offer contract building & assembly services to these companies – for a price obviously.



Spin off all of them and let’s see whether “survival” (of the fittest?) is something that can be done in the auto industry.



I’m sure you’ll have a bit of consolidation though how much is difficult to predict but I imagine it would be a while (5-10 years?) especially since they (the former subsidiaries) couldn’t cost-effectively jump from the GM ship too soon.



Remember, it takes years to design a car the buying public wants – and they have to be able to predict the future too! *puke*



And with them standing as their own entities you could effectively let the market decide what they’re worth overall and whether they’re even worth saving ultimately.



The US Governement:



Big problem, meet C-4 *boom*



Now, all you little “problems” need to decide how you’re to survive on your own.



And if you feel like going under it’s not something we forced you to do.



But if you come back to us for money, you (should be) are now a much more manageable issue.



It buys “us” time and does what the GOP loves to crow about when it works ‘right’ – the free market will decide.



Possible GM structure:



All brands separated from the parent conglomerate (Chevrolet, Pontiac, Cadillac, GMC, Hummer, Holden, Open, Vauxhaul, Daewoo, Breckland – anything else I missed?).



These separations incorporate the design studios, dealership sales contracts (for those individual brands only) & repairs. They can strike out on their own for tooling and manufacturing but there will be great incentives to contract with the former parent.



GM then becomes a tooling creator, manufacturer, chassis & parts supplier to the now free-standing brands. Each brand can use (or not) the GM Platforms™ as the basis for their vehicles which are designed and customized by their own in-house designers with GM providing the know-how to build and assemble the parts.



You’ve effectively made the auto industry into a carbon copy of the PC industry! There is an underlying set of features & capabilities (the “chassis” offered by AMD or Intel) that incorporates various alternate components (Seagate or Hitachi hard drive? NVidia or ATI video card? Similar to whether you get the leather or cloth interior…) depending upon what brand (HP, IBM, Dell, Sony – a la Pontiac or Opel) you ultimately buy.



It’s not only been successful for the past 20+ years (the PC industry) but there’s been intense competition within the industry as a whole for the various features offered by all participants.



Do you want a cheap but functional PC for e-mail only? Then an all-in-one product from AMD is your choice.



Like to play games? Then you’re looking at the highest-performing chip from Intel or AMD coupled with the highest-performing video card from NVidia or ATI.



Why couldn’t the auto industry operate in the same fashion? Maybe my glasses are a bit too rose colored…

__________________________________

by reader tinman

by rdan (noreply@blogger.com) on November 19, 2008 12:51 PM

Some stole a five year old’s wheelchair — her pink, decorated with stickers and painting to her personal specifications by her friends and family wheelchair. And then tore it to pieces:

A custom-built wheelchair stolen from a 5-year-old girl was recovered Tuesday but chopped up into “a million pieces,” her mother said.

The $8,000-chair belongs to Annabelle Hulgan, who has been paralyzed from the waist down since birth by spina bifida. It was stolen Monday from the front yard of her daytime caregiver.

Annabelle’s mother, Christen Hulgan, said the chair was found dumped beside a city street with much of its frame disassembled and its pink striped wheels pulled off. Thieves may have planned to sell the chair for scrap metal, she said, and parts of it appeared to have been hacksawed.

8 grand is a lot of money and the family is not in the best financial shape. Her life is severely restricted without it. I know times are tough, but if you have some extra cash, you could do worse than helping her out:

To donate to the Anabelle Wheelchair Account, you can contact Nancy Martin at MIFA by calling (901) 529-4525.

by Kevin on November 19, 2008 12:38 PM

reader Howard Covitz says:



If the U.S. auto industry wants a bailout, let us respond by offering to foot their health care bills. The U.S. auto industry is at a comparative disadvantage to foreign auto companies because they pay for part of employee (including retired employee) health insurance. This dollar figure has grown far faster than inflation for over a decade. If the U.S. government offered to include all auto industry employees in its government employee health care pool (this is Obama's plan for national health care), it would not only take a huge weight off of Detroit's shoulders, but also benefit the US by serving as a proof-of-concept for national health care. The success of the plan will take a lot of wind out of the sails of the anti-national healthcare lobbying groups (who derailed Hillary's proposal in 1993).



It's a win-win idea!

by rdan (noreply@blogger.com) on November 19, 2008 10:58 AM

rdan



hat tip vtcodger, who adds "All the focus on cars is on the Big Three whose CEOs will lay out their begging mats in Washington today. But imports aren't doing so great either."





But these are not ordinary times. (NYT)

For now, the port itself is the destination. Unwelcome by dealers and buyers, thousands of cars worth tens of millions of dollars are being warehoused on increasingly crowded port property.



And for the first time, Mercedes-Benz, Toyota, and Nissan have each asked to lease space from the port for these orphan vehicles. They are turning dozens of acres of the nation’s second-largest container port into a parking lot, creating a vivid picture of a paralyzed auto business and an economy in peril.



“This is one way to look at the economy,” Art Wong, a spokesman for the port, said of the cars. “And it scares you to death.”



The backlog at the port is just part of a broader rise in the nation’s inventories, which were up 5.5 percent in September from a year earlier, according to the Commerce Department. The car industry has been hurt particularly, with sales down nearly 15 percent this year. General Motors has said it would run out of operating cash by the end of the year if it does not receive a government bailout.



But the inventory glut in Long Beach is not limited to imported cars. There has also been a sharp drop in demand for the port’s single largest export: recycled cardboard and paper products.



This material typically goes to China, where it is used to make boxes for new electronics and other products that are sent back to the United States. But Chinese factories reacting to sharply falling demand are slowing production, so they need less cardboard. Tons of paper are piling up recycling businesses around the port, the detritus of economies on hold.



Long Beach is an important port, particularly for the West. It is where imported products arrive and filter through the tributary of trucks, trains and retailers into the hands of consumers. But now, products are just sitting.



“We’re supposed to move things, not store them,” Mr. Wong said.



Roughly 20 percent of the nation’s container imports last year came through Long Beach, putting it close behind the largest container port, Los Angeles. This year, shipping volume at Long Beach is down 10 percent from 2007, and nearly all major ports around the country have seen similar declines. Veteran port workers say the slowdown since mid-October is like nothing they have ever seen. And it is having a cascading impact on other businesses and workers.

by rdan (noreply@blogger.com) on November 19, 2008 10:40 AM

A depressing sentence from Daniel Gross (h/t Mark Thoma):

The 13-F shows Harvard with some 231 positions worth nearly $2.9 billion, highly concentrated in popped macroeconomic bubble plays.

We now have the title of the book about Henry Paulson's time at Treasury: Popped Macroeconomic Bubble Plays.

by Ken Houghton (noreply@blogger.com) on November 19, 2008 03:10 AM

Why Yahoo! e-mail may be worth using again, non-Jerry Yang edition:

Security researchers, anti-spam groups and the whole security community in general were taken by surprise yesterday when reports of a sudden drop in junk mail activity started flowing in. This was the result of ISPs depeering McColo Corp., a U.S. based company offering web hosting services to many international cybercrime organizations.

First, there was the gathering of evidence:

McColo Corp. is based in San Jose, California and offers web hosting solutions. Nothing bad so far, but according to many reports and an important amount of evidence, a large number of their clients are shady at best. Security experts estimate that the spam generated by the illegal activities hosted by McColo amounts for a whooping 75% of the junk mail sent everyday on a global level.

Then it was presented to the companies that could do something about it.

Brian Krebs, reputable journalist at The Washington Post, informed on the Security Fix blog that he was involved with forwarding evidence of the criminal activity to Global Crossing and Hurricane Electric, McColo's two major Internet service providers. “For the past four months, Security Fix has been gathering data from the security industry about McColo Corp. [...] On Monday, Security Fix contacted the Internet providers that manage more than 90 percent of the company's connection to the larger Internet, sending them information about badness at McColo as documented by the security industry,” he writes.

Then it was left to two companies to examine the evidence. Compare and contrast:

According to Krebs, while the response from Global Crossing was rather evasive, Hurricane Electric was a lot more responsive to the abuse report and even quick to act about it. "We looked into it a bit, saw the size and scope of the problem you were reporting and said 'Holy cow! Within the hour we had terminated all of our connections to them," Benny Ng, the Freemont-based ISP's Director of Marketing, told Krebs.

And the result was immediately clear.

Go read the whole thing.

by Ken Houghton (noreply@blogger.com) on November 19, 2008 12:47 AM

Daniel Larison has started an interesting, but cursory, discussion on what constitutes a “Christian,” and whether or not Obama can rightly be considered one. This is a line of inquiry which has always irked me, but at the same time, given me trouble. On the one hand, we can’t have a definition of “Christian” that’s so broad that it includes anyone who claims to be one, irrespective of their actual beliefs. But on the other hand, we’ve seen far too many attempts to go to the other extreme, defining away anyone who doesn’t agree with someone’s particular brand of Christianity in no-true-Scotsman fashion.

To his credit, Larison recognizes (correctly, I think) that any attempt to define Obama as non-Christian would also define Mormons as non-Christians, and even more compellingly. The problem is, given the nature of the current Christian conservative movement, I’m not sure this is terribly helpful.

And making matters worse, when pressed for a definition of what he thinks really constitutes a “Christian,” Larison refers us to a five-volume set (!); apparently, if there’s an easy-to-summarize layperson’s definition of what’s “really” Christianity, Larison opts not to explain it to us.

In any case, it’s an interesting start, and you should read the whole thing.

[ Side note: Larison also links our old friend and frequent adversary Joe Carter as part of his discussion. So Linky Love for Joe.]

UPDATE: Either I’ve been away from Christian theology far too long, or this reads like complete and total gibberish. My money’s on the latter.

by tgirsch on November 18, 2008 10:37 PM

CNN and many other news services are reporting that:

According to the report, Gulf War illness is a "complex of multiple concurrent symptoms" that "typically includes persistent memory and concentration problems, chronic headaches, widespread pain, gastrointestinal problems, and other chronic abnormalities."



The illness may also be potentially tied to higher rates of amyotrophic lateral sclerosis (ALS) -- more commonly known as Lou Gehrig's Disease -- among Gulf War veterans than veterans of other conflicts.



The illness is identified as the consequence of multiple "biological alterations" affecting the brain and nervous system. iReport.com: Do you know someone affected by Gulf War illness?



While it is sometimes difficult to issue a specific diagnosis of the disease, it is, according to the report, no longer difficult to identify a cause.



The report identifies two Gulf War "neurotoxic" exposures that "are causally associated with Gulf War illness." The first is the ingestion of pyridostigmine bromide (PB) pills, given to protect troops from effects of nerve agents. The second is exposure to dangerous pesticides used during the conflict.



The report does not rule out other possible contributors to Gulf War illness -- including low-level exposure to nerve agents and close proximity to oil well fires -- though it fails to establish any clear link.



The report concludes there is no clear link between the illness and a veteran's exposure to factors such as depleted uranium or an anthrax vaccine administered at the time.



"Gulf War illness isn't some imaginary syndrome," said Ken Robinson, the senior intelligence officer for the initial Department of Defense investigation into Gulf War illness in 1996-97.



"This is real, and it has devastated families. Now is the time to restore the funding cuts that have been made in the Veterans Administration. Our mission has to be to ensure that these veterans get help and become whole again."

by rdan (noreply@blogger.com) on November 18, 2008 10:19 PM

This, sadly, does not surprise me:

Barack Obama’s incoming administration is unlikely to bring criminal charges against government officials who authorized or engaged in harsh interrogations of suspected terrorists during the George W. Bush presidency. Obama, who has criticized the use of torture, is being urged by some constitutional scholars and human rights groups to investigate possible war crimes by the Bush administration.

Two Obama advisers said there’s little - if any - chance that the incoming president’s Justice Department will go after anyone involved in authorizing or carrying out interrogations that provoked worldwide outrage.

Every time the discussion about this comes up, someone, probably many someones, is telling Obamam not to do this. They are telling him that if he does this, he will never get anything done in his first term. The Republicans will go completely apesh*t and defend their brethren with all their might. They will do everything humanly possible to keep his appointments tied up and to kill his legislation. The David Broders of the world will spend their column inches and pixels bemoaning how fall down the partisan rabbit hole and oh isn’t a shame that the Obama is trying to put people in jail who only wanted to help their country. Democratic leaders — some of who were too scared to stand up to Bush when they found out what he was doing and some of whom were too scared to exercise the oversight they should have — will be similarly, if more quietly, working to undermine the investigations. Lieberman will do everything humanly possible form stopping the inquiries, and since he apparently is going to keep his chairmanship, that would probably be quite a lot.

And going after torturers, Obama is being told, is surely a political loser. It will make him look vindictive, they say, and even soft on terrorists. And they may be right. I don;t think they are — I don’t think, outside of the radical right wing loons that there is a constituency for torture. I think that eventually, Obama would look good for having the courage to cleanse the country of the stain of it. I think that a full airing of the details would repulse peopel and turn the practitioners and order givers into pariahs. I think that Obama would have a much easier time getitng Republicans, worried about 2010, to go along with his plans.

But it would not be easy. There is no vocal, elite constituency opposed to the police state tendencies in our government and out nation. The FISA bill proved that. The NY Times and Fox News and the Washington Post all spoke with one voice on that matter, and I suspect they would speak with one voice on investigating torturers and the men who ordered the torture: no. Until that changes, bringing those people to justice will be difficult and I can see why a cautious person would think that ending the practices would be sufficient and that justice wold not be worth the cost of everything else on his agenda. Especially if there were many, many critical issues needing immediate attention.

It is still wrong, but it is not surprising. Until the elite culture is changed, until we force the default security posture in this country away form the twin notions of Empire and “kill them all and let God sort them out”, we are very poorly positioned to bring these people to justice. The political cost will always be seen as too high.

by Kevin on November 18, 2008 05:31 PM

By Spencer



Brad DeLong said that Krugman eviscerated George F. Will on the level of capital spending during the Great Depression.



Delong said:I have never been able to make any sense at all of the right-wing claim that the New Deal prolonged the Great Depression by creating a "crisis of confidence" that crippled private investment as American businessmen feared and hated "that Communist Roosevelt." The crisis of confidence was created by the stock market crash, the deflation, and the bank failures of 1929-1933. Private investment recovered in a very healthy fashion as Roosevelt's New Deal policies took effect.



I have posted on this before, but I would just remind everyone that business fixed investment is essentially a function of three things.

1. Corporate profits.

2. Capacity utilization or the GDP gap.

3. Cost of capital and the stock market is a good proxy for that.







This is just as true today as it was in the 1930s and major econometric model use these three variables regularly.





But if you apply this analysis to the 1930s these three variables do a great job of explaining both the plunge in capital spending in from 1929 to 1932 and the recovery under the New Deal including the 1938 reversal. As this charts shows these variables explain the depression and leave absolutely no room for the right wing thesis that FDR caused a crises of confidence that destroyed business spending in the 1930s.



I'm still waiting for the proponents of this thesis to improve on my model.



P.S. corrected chart tittle.

by spencer (noreply@blogger.com) on November 18, 2008 03:06 PM

By Stormy



Trade means jobs; trade brings money into plants; trade surpluses ripple through the economy, providing not only wealth to employers and employees alike but also moneys into public coffers. Consider it "outside money" flowing into a town, county, state, or country.



Since the late 1970’s, that kind of “outside money” has not been flowing into public coffers or into the hands of the average worker, dramatically so in the last decade. Recently, our trade deficit has grown almost exponentially.



This trend is coincidental not only with the rise of public and private debt but also with NAFTA and China’s entry into the WTO. That the trade deficit is coincident with globalization itself is no accident. During the last ten years, trade as a percentage of GDP has become sharply and dangerously negative.



The following post examines graphically what has happened since 1960. The four following graphs, based on the Bureau of Economic Research’s “U.S. International Transaction Data” tell a story that is not pleasant. [See here.] In addition to the aforementioned data, I used the Bureau’s GDP data. [See here.]



Along with Trade, I look at the sum of three other items in the Current Account section of the Transaction Data: Royalties and License Fees, Income of U.S-owned Assets Abroad, and Transfers under Military Agency Sales. While the trade deficit blossomed, the sum of these last rose dramatically. Unfortunately, they are not offsetting, not by a long shot; but they do tell us a great deal about our priorities.



I have divided the discussion into five parts. Each of the first four includes a graph and discussion of the data. In the fifth, I place that data into the expanding crisis in which we find ourselves.



Net Trade: Exports and Imports of Goods and Services



As the following graph reveals, between 1960 and 1980, the U.S. had a stable balance of trade. After a sharp dip and subsequent rise in the ‘80’s, the trade deficit began its steep downward descent around 1996. NAFTA passed in 1993; China entered the WTO in 2001. Fast track trade rose in importance. The engine of globalization had left the station. Full steam ahead!







Net Trade as Percentage of GDP



The next graph looks at Net Trade (exports + imports) as a percentage of GDP. Again the tale is dramatic.



Prior to 1975, net trade was an important positive contributor to GDP. After a roller coaster ride in the 1980’s, trade became an increasing drag on GDP. That dragged gain impetus from 1996 onwards. In short, beginning in 1983, the trade balances no longer contributed positively to GDP.



Beginning around 1993 net trade as a percentage of GDP began its precipitous descent.



The “outside money” that I mentioned in the first paragraph no longer flowed into public coffers, jobs, and pensions. We had begun our spending spree, spending our accumulated wealth and going deeper and deeper into debt.



Additionally, we were inflating our GDP with the housing bubble. (Real estate comprises maybe ten percent of GDP.) If we could have properly accounted for the housing bubble, we would have made two salient observations:

1. Net Trade as a Percentage of GDP had declined even more precipitously than we thought.
2. GDP growth during this period may well have been illusory.

But we were happy that we could pay less for goods. Cheaper imported goods helped keep inflation down. Our economic focus was consumer based. Adding jobs to health care and government while losing jobs in manufacturing caused some concern. Stocks were up, however. Everything looked rosy.



Look closely at the difference between 1975 and 2006: Almost 7 percentage points.



Transfers/Royalties/Assets Abroad



The next graph reveals some of the items that played a positive role in net trade, i.e., they are considered part of our exports.

1. Transfers under U.S. military agency sales contracts
2. Royalties and license fees
3. Income receipts on U.S.-owned assets abroad.

From 1972 onward, we see a steady climb in these items; in 2002, they climb sharply upward. All three of these items played a positive role in GDP. Other than military hardware, none of them contribute to well-paying jobs. Surprisingly, royalties and license fees moved from 837 million in 1960 to 5,885 million in 1978, to 30,029 in 1995, and to 82,614 in 2007. That companies have seen this item as a cash cow that can be milked is the reason it has played such a prominent role in trade discussions. This kind of income plays well in corporate headquarters and those lucky ones that have a share in patents.



It could be argued that royalties and licensing fees do buttress job security, but I wonder just how many American jobs are being helped here, especially when we consider Net Trade itself.



Not so surprisingly, receipts from abroad moved from 4,416 million in 1960 to 25,231 million in 1975 to 208,065 million 1995 to 804,807 million in 2007!



Balance on Current Account as a Percentage of GDP



The last and final graph displays the Current Account as a percentage of GDP. (The Current Account includes all export and import categories as well as other items.











The Balance on Current Accounts mirrors Net Trade.



Final Thoughts



Some will argue that net trade is relatively unimportant, but every time it blips upward, we hear the bright blaring of trumpets, as if the upward rise were somehow important. A positive trade balance is important. That the balance has been negative for almost thirty years should be of great national concern. Yet it has not been.



The rise in housing prices certainly accelerated GDP, as did the use of the home as an ATM machine, as did all that consumer spending—in short, all that activity that contributed to our collective and personal debt. Now the piper has arrived on our shores; he must be paid. What will our children say?



GDP will certainly fall as we go deeper and deeper into this recession, a recession that many prominent economists—Krugman, among them—claim will be worse than most of us have ever experience, worse than anything since the Great Depression. Only the real old ones know what a Depression means.



We will, of course, buy fewer goods. Imports will clearly shrink.



What about exports? Those, I expect will shrink as well. The reasons are three-fold:

1. The recession will be, global, although some countries may still experience an enviable growth in GDP—China, for example. For this reason, we will find fewer and fewer markets for our own exports.
2. The dollar, paradoxically, remains strong. Without going into the reasons, we can easily deduce that a strong dollar will be a drag on our exports. (I suspect, though, just before we hit bottom, we will see the dollar plummet.)
3. Export platforms in developing countries—Asia and elsewhere—stand ready with cheap labor and plant investment to move into high gear should the global economy improve. We cannot, of course, compete with such export platforms; the above graphs clearly demonstrate we have been unable to compete in the last twenty years. We went deeper into debt and relied more and more on credit.

I am not sure how much economic activity will disappear from the U.S. economy before all this is over. Needless to say, I am profoundly worried.



Each day or week brings to the fore another crisis, be it in the financial sector, in jobs, or in major corporations within the U.S. failing rapidly.



With each crisis, more and more worried doctors surround the patient, each yelling that we need this or that bailout, this or that stimulus package. The entire hospital staff now surrounds this very important personage. Various drugs are administered; powerful defibrillators are rolled in. Cash infusions are poured into financial veins. Alarm bells drown out rationality.



Each crisis compounds succeeding ones.



In the short or medium term, one thing seems almost certain: Exports will not rescue the patient.



We are now in crisis mode, focused only on short-term fixes. We do not see the big picture.



Hopefully, we will fashion the fixes intelligently enough to buy us some much needed time, fixes that will slow down our descent into the maelstrom, the awful dark hole of a real Depression.



We need time. For that reason alone I have partially supported many of the hurried rescue attempts. True, we do not have time to weigh each one carefully, time to plan them intelligently, time to gather the necessary personnel, time to set up efficient administration. True, many institutions or corporations have been poorly run.



What do we save; how do we save it; can we save it? If we cannot save it, should we try to lessen the impact of its sudden loss to the economy. Should we not give it enough life so that it can wither away more slowly, instead of sending a catastrophic earthquake through our economic life? In some cases, I would say, “Yes”



After all the debris has hit the streets and we zombies begin to gain some clarity, we will look again at Net Trade. We will honestly assess how globalization was structured. We will ignore those whose simple minds think that the only option is between free trade and protectionism.



Maybe then we will understand that globalization needs real structure, real planning, not blind belief that anything goes. Trade is the life’s blood of us all. Intelligent trade brings wealth to everyone. Some countries are (or were) far behind us in their share of the pie. I, for one, understand and sympathized with their envy and their rights. I want globalization to work, desperately; but not like this.



On the other hand, these poorer countries should not expect to be suddenly stuffed, like bloated pigs. All they will get are excruciating stomach pains. They, too, will shortly be on the floor along with the rest of us. Great leaps forward, Chinese style, have always failed.



China, for example, in becoming an export platform, has simply not digested enough of its wealth to create a substantial, vibrant middle class. Vibrant middle classes do not appear overnight, or even in a decade.



What are the leaders in Beijing going to tell their poor factory workers when the industrialized nations can no longer consume? “Sorry, our sugar daddy is going on a diet?” or “It was all the fault of those nasty financial capitalists?”



Similarly, we cannot expect to prosper if we just pump jobs overseas. We should not consume our cake, believing the next bite will be even richer and tastier.



China’s plan was just as foolish as our trade agreements, just as foolish as how the WTO has structured globalization. “Wisely and slow. They stumble who run fast,” says Friar Lawrence to the headstrong, lovesick Romeo. Romeo does not wait; does not consider. Instead, he rushes forward, sure that all will be well. We all know what happened.



Look again at those graphs. Did we plan for this kind of disequilibria? Did China or the emerging nations? Did we think we could just ignore producing? Have the emerging nations consider how fast they can wisely grow?



At the beginning of this century, many touted it as having a marvelous future. Well, here it is, barely a decade old, poised on the brink of the worst recession since the Great Depression.



Someone out there better start thinking.

by Stormy (noreply@blogger.com) on November 18, 2008 11:29 AM

by rdan



Health Care Think Tank points to a note on President-elect Obama's website concerning electronic record keeping for medical records.



The new guy Tom (STR) offers no comment himself. In Boston, the major hospitals came together and mandated an electronic record keeping for the area, and compliance is very broad. It does mean privileges are maintained...a powerful incentive.



Personal experience shows it to be efficient in identifying a patient across networks, satellite service and specialty areas in the region, local doctor's notes and records, and insurance.



It was disconcerting to watch a doctor or nurse practitioner type on the laptop during the interview. My experienced doctor handled that well, her nurse practitioner (young to me...?30's?)less well for interview technique, one specialist less well due to awkwardness with the technology.



Otherwise not much difference for the patient, but lots more information was accessed over time. Hopefully having to enter the data at point of service will become smoother. I see a problem with history taking, however, becoming worse.

by rdan (noreply@blogger.com) on November 18, 2008 11:15 AM

rdan



The U.S. Navy says pirates seized a Saudi-owned supertanker loaded with crude hundreds of miles off the Horn of Africa. The vessel, which has a 25-member crew, is the largest ever hijacked by bandits.







What does one do with such a catch?



1. Hold the crew hostage, similar to a hijacked jet?

2. The oil itself could be sold at a discount? Or sold back to the Saudis? Insurance? How to pay comes to mind.

3. Given the size of the tanker, and easily tracked, hiding probably is out of the question, even if you are Goldfinger in 007. Where does one go?

4. If the pirates are not terrorists willing to destroy the tanker or something similar for a political end at the least, what's up?



As you can tell, the only experience I have in the pirate area is watching Peter Pan. My prayers go to the crew.

by rdan (noreply@blogger.com) on November 18, 2008 11:10 AM

rdan







Reader Bear points us to a great essay by



Michael Lewis in Condi Naste Portfolio.com:

In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?

9 pages and worth every bit of time.

by rdan (noreply@blogger.com) on November 18, 2008 10:15 AM

I am once again out of books. Read anything good lately?

by Kevin on November 18, 2008 02:08 AM

While I'm trying to decide whether unmanaged funds are preferrable to mismanaged ones, and wondering whether any discussion of Mark Cuban (I like the picture better than CNN's) belong here,* the NYT decides to continue its determined destruction of its reputation.



Stanley Fish manages to forget—or, more accurately, ignore, since he mentions it in the first paragraph and then never again—that judging Larry Summers's ability to be Secretary of the Treasury might be easier by looking at how he did as, say, Secretary of the Treasury, instead of just sliming his time at Harvard,** and then producing this penultimate paragraph:

What has all this to do with Larry Summers as a potential Secretary of the Treasury in the Obama administration? It depends on how much of the job involves what are usually called “people skills,” the skills that bring men and women of diverse views together in a spirit of optimism and co-operation (two words Obama has often invoked). A cabinet secretary must interact with other secretaries, with the White House staff, with the vice president, with congressional committees, with leaders of industry, with the representatives of other sovereign states and with the media.

Gosh. You think maybe Summers can do that?



*Probably not for the specific issue.



**To be clear, since there was some confusion the last time I spoke nicely about Summers, he wouldn't be my choice for Treasury Secretary. But Jamie Galbraith, while a wonderful person with a good heart, doesn't seem (from the two times I was in the same space as he at the AEA last year) to be an improvement in the people skills department, and a certain NYT columnist already dislikes him.



Peter Orszag should be a contender, but doesn't get named so it's reasonable to assume he's happy where he is.



Fish's piece, however, is the People magazine version of Summers's tenure at Harvard, both in that it obsesses on "personality conflicts" and doesn't deal with any of the substantive reasons, if any (op cit. David Warsh), for Summers's dismissal from Harvard.



But, unless you're going to argue that, because they are later, his five years at Harvard are more related to Treasury than his time at Treasury (which ended when Clinton did) you're only going to either create sympathy for the man you're trying to demonize or make yourself look stupid. Whether these are mutually exclusive is left as an exercise to the reader.

by Ken Houghton (noreply@blogger.com) on November 17, 2008 10:23 PM

By: Divorced one like Bush



I was wondering why Mr. Spitzer had not been heard from? Was his personal indiscretion so great that his knowledge and expertise would not trump such?



He has an opinion at the Washington Post yesterday.

The new president's team must soon get to the root causes of the mistakes that have brought us to the economic precipice. Yes, we have all derided the explosion of leverage, the failure to regulate derivatives, the flood of subprime lending that was bound to default and the excesses of CEO compensation. But these are all mere manifestations of three deeper structural problems that require greater attention: misconceptions about what a "free market" really is, a continuing breakdown in corporate governance and an antiquated and incoherent federal financial regulatory framework.

One of the great advantages U.S. capital markets have enjoyed over the decades has been the view -- held worldwide -- that there was an underlying integrity to the representations market participants made, because the regulatory framework in which they were made was believed to provide genuine oversight. But as we all know, the laws requiring such integrity are meaningless without a government dedicated to enforcing them.



We do not need additional fragmented areas of federal regulation to handle hedge funds, sovereign wealth funds or derivatives. We need a unified approach that addresses the underlying issues: what kinds of leverage we wish to tolerate, how to measure risk, how much disclosure various trading products should provide.



Three overarching priorities should guide government actions in the new structure. First, we need better control of systemic risk.

Second, investors must be protected with adequate, accurate information. Firms must offer transparency both to individual investors and to government regulators.

[third]...we will have to step back from the current environment in which government has become a guarantor of all major risk. The so-called moral hazard will serve to devalue risk in the market, and this too will have a debilitating long-term effect on capital flows. Only if private actors have to bear the real risks they incur will the market function properly. We are now perilously close to nationalizing risk.

by Divorced one like Bush (noreply@blogger.com) on November 17, 2008 06:08 PM

I am not generally in favor of bailing out businesses. In general, businesses should be allowed to live or die as the market dictates. But I was in favor of some kind of bailout for the financial sectors, largely because I believed that the credit market really was in a dangerous place, dangerous enough to take down the rest of the economy. I think we are probably in the same place with GM.

First, it seems pretty clear that the automakers would not be ale to reorganize under Chapter 11 and would have to go to Chapter 7 — meaning liquidation. Not only would that kill those companies, it would kill all of the suppliers who depend on their business. And that would kill all of the companies that depend on those suppliers, and so on and so on down the line. Anywhere from one to three million people could lose their jobs from those effects. And that doesn’t even include the effects from the loss of millions of pensions or the fact that this would be the first major economic downturn with the new, draconian personal bankruptcy laws in place. It would now be harder for unemployed people to get back on their feet, increasing the economic damage. Some studies suggest that it could cost state, local, and federal governments up to 200 billion dollars just to mitigate the damage a collapse would cause. And that number doesn’t even include the cost in lost tax revenues, estimated to be in the neighborhood of 10 billion dollars over the next three years.

That all would be bad enough by itself, but we are already looking at the deregulation recession and it is looking to be a bad one. If the economy cannot survive without a functioning credit market, it can also not survive without consumers who are capable of spending and willing to do so. Unfortunately, consumers have not shared in the productivity gains of the last eight years and are, at best, making as much today as they were eight years ago. They are generally carrying too much debt and will see no increase in their income for quite some time. Consumer sentiment, already at record lows, could very well be crushed by the sight of such a sudden collapse. It could very will be the mental straw that causes consumers to tip the recession into a deep economic stagnation.

There is also no reason to believe that the bailout would be an act of charity. In addition to the savings in government outlays and increased tax revenues, a properly constructed bailout could and even should be a long term benefit to the country. First, any bailout would be an opportunity to force the Big Three to finally address the reality of energy independence and global climate change. That, and the breathing room to finish the management changes they have already undertaken that promise to turn them into better competitors, should make the Big Three much better job producers and tax sources in the years ahead. The last auto bailout actually made the government money, and there is no reason to believe that, eventually, this bailout could not do the same.

In ordinary times, for ordinary businesses, a bailout would not be the correct decision. But these aren’t ordinary businesses, and these certainly aren’t ordinary times.

by Kevin on November 17, 2008 02:00 PM

by Robert Waldmann (stolen wholesale from his website by someone)



Media Matters by Jamison Foser



Foser has a devastating critique of, well the interpretation of a PEJ study. He says that the press (Howard Kurtz of course) has accepted the claim that coverage was biased in favor of Obama, based on the clear liberal bias of the fact, in this case including polls.



I steal much of his post, because I think he buried the lede.



Unfortunately, the conservative complaints got some superficial support from a recent study by the Project for Excellence in Journalism (PEJ) that claimed that John McCain has received much more "negative" coverage than Barack Obama during the campaign.



The PEJ study quickly got significant attention from the establishment media and blogs.



But while the study lends rhetorical support to the conservatives' arguments, it is nearly useless as an actual assessment of how the media covered the campaign.



First off, it is worth noting this little nugget about the study's methodology, buried at the end of the PEJ report: "Talk radio stories ... were not included in this campaign study of tone." PEJ offers no justification for the exclusion of talk radio. Not a word. In what surely must be a coincidence, talk radio skews further to the right than any other medium.



Now, here's PEJ's description of how it assesses whether a news report is "positive" or "negative":



To examine tone, the Project takes a particularly cautious and conservative approach. Unlike some researchers, we examine not just whether assertions in stories are positive or negative, but also whether they are inherently neutral. This, we believe, provides a much clearer and fairer sense of the tone of coverage than ignoring those balanced or mixed evaluations. Second, we do not simply tally up all the evaluative assertions in stories and compile them into a single pile to measure. Journalists and audiences think about press coverage in stories or segments. They ask themselves, is this story positive or negative or neutral? Hence the Project measures coverage by story, and for a story to be deemed as having a negative or positive tone, it must be clearly so, not a close call: for example, the negative assertions in a story must outweigh positive assertions by a margin of at least 1.5 to 1 for that story to be deemed negative.



OK ... anyone want to guess what that means in practical terms?



Unfortunately, the few actual examples of "positive" and "negative" coverage PEJ offers do little to clarify its methodology, and less to inspire confidence. For example, PEJ notes:



Some of that positive coverage was related to evidence that the financial crisis was aiding Obama. "Recent economic woes have given Democrat Barack Obama a clear lead over Republican John McCain," declared a story posted on AOL News on Sept. 24, citing a 9-point lead for Obama in a new Washington Post/ABC News poll.



That's what counts as "positive" coverage of Obama? A fairly straightforward report that a poll finds Obama in a "clear lead" over McCain? And, it seems, much of Obama's "positive" coverage consisted of reports like that:



The data clearly point in this direction for some of the explanation. Of those stories that focused mostly on polls, a clear majority (57%) were positive for Obama, while less than a quarter (23%) were negative. Similarly, stories about the electoral map, swing states and campaign strategy were even more favorable (77% positive vs. 6% negative). These represent the most positive element of Obama's coverage.



So, if a candidate is winning, and the polls show that, and the media report that the polls show the candidate winning, that counts as "positive" coverage. Well, OK, it's true that such a story is "positive," but it tells us nearly nothing about the media.

__________________________________

by Robert Waldmann

by rdan (noreply@blogger.com) on November 17, 2008 10:44 AM

Via Dr. Black, the NYT quotes the Alabama Senator:

“Companies fail every day and others take their place. I think this is a road we should not go down,” said Mr. Shelby, the senior Republican on the Senate Banking, Housing and Urban Affairs Committee.



“They’re not building the right products,” he said. “They’ve got good workers, but I don’t believe they’ve got good management. They don’t innovate. They’re a dinosaur in a sense.”

The first sentence ("Companies fail every day and others take their place.") is clearly true. I believe we refer to this as "creative destruction" if we are feeling positive.



The second sentence ("I think this is a road we should not go down") is clearly a lie, since they have gone down that road with AIG, The Hartford, and several other firms.



The next four sentences are subject to interpretation, but let us assume the first two (“They’re not building the right products,” he said. “They’ve got good workers, but I don’t believe they’ve got good management.") are true, while leaving the third ("They don’t innovate.") as an exercise for Tom* and the fourth as beyond the pale, even if you assume all of the above.



So we have, in the words of Richard Shelby:

1. Bad management, selecting
   
   
2. the wrong products, being made by
   
   
3. Good workers.

So what is the solution Shelby proposes?



Defenestrate the workers. (Is anyone surprised that Tyler Cowen, Bruce Bartlett, and Greg Mankiw appear to endorse this idea?)



The strange thing is that if you follow Mankiw's link into CATO-land, you find the "dinosaurs" argument falling apart:

As the article accompanying this table notes:

Two significant factors jump out of the data: the gap among the six is narrowing – the narrowest margin since the study began in 1989; and the domestics, albeit they had the most improvement required, have made dramatic progress.



The gap in 2007 is a scant five labor hours, roughly, from No. 6 Ford to No. 1 Toyota. Harbour [Consulting] said that amounts to no more than a $250 to $300 per vehicle cost disadvantage to the domestics.

So the workers are (in general) performing better and even the complete cf that is F is not severely underperforming the market (though its moves in the past five years have borne a rather bitter fruit, judging by the production numbers).



In short, the work is being done, and being done well. It's the management that has, for the past 25-plus years, misallocated funds to itself. Looks as if it's an industry that is a prime candidate for a bailout that puts a tight lease on the self-indulgent management. What's the phrase, "auto czar"?



And that's even ignoring any national security considerations (h/t Mark Thoma):

But in 1991, the Persian Gulf war demonstrated the awesome utility of American land power, and the Humvee (and its civilian version, the Hummer) became a star. Likewise, the ubiquitous homemade bombs of the current Iraq insurgency have led to the development of innovative armor-protected wheeled vehicles for American forces, as well as improvements in our fleets of Humvees, tanks, armored fighting vehicles, trucks and cargo carriers.



In a little more than a year, the Army has procured and fielded in Iraq more than a thousand so-called mine-resistant ambush-protected vehicles. The lives of hundreds of soldiers and marines have been saved, and their tasks made more achievable, by the efforts of the American automotive industry. And unlike in World War II, America didn’t have to divert much civilian capacity to meet these military needs. Without a vigorous automotive sector, those needs could not have been quickly met.

I guess Andrew Samwick's "team-crafted in Indiana" Subaru** really isn't fungible with a Dodge Magnum or even a GM Daewoo Nubria.



*I'm inclined to argue that they do innovate, but much of the evidence to which one might point is not in the U.S. market. So let's leave Stormy's post—specifically, "[Canadian Minister of Industry] Tony Clement is well aware that the auto industry must transform itself"—as the AB position-of-record, subject to new information.)



**At least Samwick and I agree on choice of car.

by Ken Houghton (noreply@blogger.com) on November 17, 2008 10:03 AM

Op ed by reader Greg

Lifted from comments cactus style





Recovery vehicle? Who knows.



I know this, whatever it is won't work. This systemic failure was baked into the cake years ago. It was unsustainable form the start. The only question was how long will it last.



I laughed out loud yesterday when I heard an NPR interview with Paulson where he said "They were trying to get people BORROWING again."



Think about that. We are experiencing the blowback of overborrowing and these geniuses think we should borrow MORE??!!



They just act like all the wealth BELONGS to the few (given by God of course) and the rest of us just need to rent it from them. They want to pay just enough salary for us to be able to rent all the things they make available and not a penny more.



Until someone exposes this fallacy of the system ( and although I enthusiastically supported Obama because he is light years better than the entrenched wealth republicans, I'm not sure Obama will make any headway along these lines)

we will continue to be stricken with "business cycles" which really just reflect the schizophrenic wants and needs of the investor class as they "chase" ever elusive double digit returns.



Most people I know want to work, work a full days work, earn a living commensurate to their talents and effort and go home, recreate, (or procreate) sleep and do it again. They'll do it for fifty years if its a job they have chosen.

The idea that people who recognize the abject absurdity of the current debt driven model, sustained by supply side mumbo jumbo are somehow in favor of a Soviet style central economy where you pretend to work and we'll pretend to pay you, is absurd.



These false dichotomies that get thrown about are just ridiculous. You don't have to back the current model with all its warts to be a CAPITALIST. There is a better way to do what we have given our investment class the responsibility of doing. I would not want to be put in charge of setting it up but I know I would start with a maxim. You get paid for work, not for gambling with other peoples money. Gambling with your own money is fine but placing my life savings at risk because you want a side bet with some high roller in London on whether or not some homeowner in Detroit is gonna default on his loan SHOULD be a crime. It should also be punishable by what ever our society deems is the maximum penalty for a crime. There is nothing socially redeemable about this activity.

____________________________

by reader Greg in comments

by rdan (noreply@blogger.com) on November 17, 2008 10:01 AM

By Stormy



Even the conservative Harper government of Canada is having difficulty abandoning ideology for good old fashion pragmatism, something the Republicans in the U.S. have yet to learn. GM and Chrysler's possible implosion affects both countries in terms large numbers of jobs.



Tony Clement,Harper's minister of Industry, is still in "studying the problem mode," collecting information. Nonetheless, he is concerned--as is the CBC news media.



Canadian car sales are down. A lot of jobs are at stake. The Big Three were not prepared for the 21st century. In Canada, Chrysler is building muscle cars--not exactly what is needed.



Like U.S. Republicans, Canadian conservatives are wed to free market ideology. But a melt down of the auto industry challenges such ideology. Pragmatism may rule in Canada. Such pragmatism may distinguish Canadian versus American conservatism. Canadian conservatives will think outside the box, when they are forced to.



Right now, Republicans are toeing the ideological line. They are, however, running a huge political risk if GM and or Chrysler go under before Obama takes office.



Tony Clement is well aware that the auto industry must transform itself.



Unfortunately, it needs time to do so, but it certainly is in no position to re-tool quickly, to about-face and to march to a more intelligent drummer. It needs to get over the present hurdle.



Obama has talked of an auto czar; Conservatives in Canada would most probably follow suit. They are watching carefully to see how the Americans jump.

by Stormy (noreply@blogger.com) on November 17, 2008 01:38 AM

by reader coberly



DANCING AROUND ON ONE NAIL



Here is why we never get anywhere:



Try to ignore the “substance” (such as it is) and follow the logic. It is from a recent thread; names have been omitted in an imperfect attempt to concentrate on the logic and not personalities.



BEGIN THREAD

A: You say, "Nationalize Them."



That is a very slippery slope. Eventually everthing will be nationalized. There is a name for that.



This is exactly what the Democrat Party wants to do, but that's not what Americans want.



B: contrary to what the voices are telling you, democrats do not want to nationalize everything. or even anything.



A: Oh really!



1.) U.S. Representative Maxine Waters during house hearings on the oil companies stated that she wants the government to "socialize" (what she meant was nationalize like Hugo Chavez did in Venezuela) the oil companies. She goes on, after the gaffe, to state she wants the government to take over all the U.S. oil companies.



B: does Maxine Waters speak for the Democrats?



C: She certainly speaks in the U.S. Congress and most certainly for Democrats in her district and elsewhere as evidenced by her many public statements.



B: an example of a members statement does not qualify as a party platform.

try to think of it as a problem in logic.



C: You say things and then act as though you didn't say them.

You made the bogus claim. Jimi answered the mail with a couple of Congressional facts - specifically, Democratic Members statements. And you continue to post junk.

Jimi nailed you fair and square. And you're still dancing around.



As I said upthread:



coberly - jimi contrary to what the voices are telling you, democrats do not want to nationalize everything. or even anything.



coberly - Jimi does Maxine Waters speak for the Democrats?



She certainly speaks in the U.S. Congress and most certainly for Democrats in her district and elsewhere as evidenced by her many public statements.



No point in trying to undo what you said when Jimi has already provided an example at the Congressional level of two Members' statements.



END THREAD





I quote C at length to make it clear that he is insisting upon ridiculing something he apparently cannot understand. Anyone who cares about logic, or language, can go back to the original statement by A, and see that it was a categorical statement about “the Democrat Party.”



B responded, using “democrat” as short for said Democrat Party... pretty clear from the context.



A responds with an example of “a Democrat” as being representative of “the Democrat Party”



B reponds trying to distinguish between “a democrat” and “the Democrat Party”



but C will have none of this. He chimes in with an accusation that B is trying to back away from what he said, because clearly there is NO difference between “a democrat” and “the Democrat Party.” And any effort to maintain the distinction is “dancing around,” “junk,” “trying to undo what you said”.



Apparently in C’s mind there IS no distinction between A member of a class and ALL members of the class, or MOST members, or even MANY members.



This is of course the fallacy that in other circumstances we would call “prejudice” or “racism”. But what it actually appears to be is a simple limitation of some brains that are unable to make an important distinction, and when asked to try to make that distinction they get de