Thursday, April 30, 2009

Bachmann keeps bringing the stupid

She's the Energizer bunny of ignorance.  Bachmann says, "I find it interesting..."

What I find interesting is that 187,000 Minnesotans voted for this idiot.  That state must have a wicked alcohol problem, maybe they should close the bars on election day.

Here's the video.

Wednesday, April 29, 2009

My Rant on a Naysayer...

I know I shouldn't do this, but it's my (only) vice. I read yet another guy going off on how stupid everyone is, especially Congress, the EPA, the administration, yada, yada, yada. The world is ending, nobody can see it, we're all gonna die! We need fiscal responsibility and "limited government"... . Cliche Angry White Man stuff with all the angst and vitriol aimed at the wrong people, not the Dick Fulds and Angelo Mozillos and Phil Gramms and Financial Product salsmen who took our trust and used it for their short term gain and are now living on some tropical island....

No, these guys (and they seem to be mostly men, and certifiably crazy women like Michelle Malkin) go off with their "concern" about all the "troubling" things that the gummint is doing. It's all the gummints' fault. We need "limited government" (and unlimited Angelo Mozillos, I suppose). So now we have "Something's Gotta Give". The drama. My God, it's palpable. Read it, then read my reply below.

My reply:

In Doug Kass' defense, he does say he is increasing cash now due to the overbought condition of the market.

The only thing I can say about your general negative sentiment and crappy world view is that this is exactly how deflationary recessions are supposed to make us feel: sick... like it is dire with the outcome determined to be the worst case.

Deflationary recessions of this magnitude are rare: the previous such cycle was 1929 to 1933 and all other recessions since have been inflationary. Deflations are managed by doing exactly what is currently being done: re-flating assets with govt spending, massive borrowing and the printing of money so that dollars flood the system. This way inventories of goods are sold off with the devalued borrowed dollars and employers don't fire anybody. It may seem counter- intuitive, but that's the cure.

Is this fair to those of us who have been frugal and responsible and now will see our saved dollars devalued? Maybe not, but who said life was fair? In reality, the dollars don't really belong to "us" anyway, they are solely under the control of the Federal Reserve (take out a dollar and look at what is says across the top) and they can do what ever they like. They can print more if they choose or take them out of circulation, whatever they want to do. Don't like it? Then demand your employer pay you in something else: seashells or pork bellies, or better yet, come up with your own currency and market it for general use (that idea is not too far off base since some communities are doing just that, see Berkshares. Furthermore, this would help to massage your "limited government" muscle, and good luck with that.)

I don't know if the current regime of stimulus and easy money will work to ensure the survival of the market economy, nobody can predict-- it may not and we may be overrun tomorrow by marauding bands of disgruntled unemployed UAW members with machetes (at least they would know who the real bad guys are). Who knows? But I do know that doing nothing, freezing spending, having runs on the banks, increasing unemployment and declining industrial production would very likely fracture the economic structure and would surely lead to damage in greater social structures. At least that is what history tells us about the few deflationary recessions that have been well studied.

One last thing: consumer sentiment can turn very quickly. The empty parking lots can fill very quickly once enough (devalued) dollars start flowing and people are more confident that they won't lose their jobs.

This is a gruesome recession, no question, but geez, the world has survived a lot worse things than this. The politicians are no worse and the the circumstances are no more dire. Sure, the world may explode by next Tuesday and leave us all in a pile of ashes, but it probably won't.

Hold cash, or gold or what ever your currency of choice happens to be if you like. Sell down to you sleeping point. Re-supply your fallout shelter and stock up on ammo and canned fish and Glenn Beck DVD's if that makes you feel secure... at least it will keep your mind occupied while the adults fix the country. But soiling your pants and whining about Congress or the EPA are the least productive (and least fun I would think) ways to while away the hours.

Thursday, April 23, 2009

Cub fan creates an everlasting Hell

Maybe only White Sox fans can fully understand the irony of a Cub fan mausoleum in which they can place their cremains upon death. The morbidity and gallows humor that surrounds the Cubs franchise permeates every business venture associated with it. Baseball is supposed to be a hopeful and happy endeavor, the American pastime, but leave it to the Northsiders to find some opportunity in death.

These losers relish their loserdom, so a cemetary is the natural extension to this tragic team.

It fits... I just wish I had thought of this.

Earth Day Rant: what about kids?

With the knowledge that our carbon economy is destroying the ice caps, this year we have more reason than ever to embrace the Earth Day sentiment, so I did the carbon footprint calculator... and, no surprise, I'm one of the worst offenders on the planet when it comes to leeching carbon into the atmosphere and having a general lack of regard for conservation.

I spew out nearly 40 tons of CO2 per year which is 7X the world's average and much more than the US average of 27 tons. The questionnaire covers such topics as how much I drive, the size of my house, my recycling habits and whether I eat organic food and meat. The lowest I can get my carbon level is 9.6 by following all their recommendations of becoming a vegetarian, never traveling by plane, and always driving a hybrid car, etc.

Here's my problem with this and all such carbon footprint calculators: they never ask how many offspring you have. The number of progeny an individual produces definitely would increase the amount of carbon used by the family for energy and other things, assuming the kids lived in Western civilization. Kids will eat meat, need clothes and heat, and some day they will likely drive cars and travel in airplanes and have kids of their own. Yet, none of this is taken into account when figuring someone's carbon footprint versus an individual who has never procreated.

In fact, my personal score improves if my wife and I were to have 2 kids living in our house instead of just the two of us. Using this twisted logic, a guy my age with six kids in my smallish house and using my car would actually be considered to be saving the planet with his lifestyle!

I fully understand the compelling urge to reproduce; we are all the result of the natural process of evolution that has selected out the most successful reproducers. Our limbic systems are hard-wired to make more of us. But let's just realize that these kids will all spew carbon into the atmosphere for 80 years and they will likely have kids themselves who will do the same and this should be factored into the carbon footprint calculation. It's eery how scientists, journalists, conservationists and citizens of every stripe never see this huge discrepancy with footprint calculations and happily go along thinking that if they cart around their passel of a dozen kids in a hybrid Escape then all is well. (Pets, too, generally eat meat and require heat and shelter, although to a much lesser extent than children.)

Where's the little pie wedge labeled "kids"
Although I do not have children, nor have I adopted Third world kids to live a frothy Western lifestyle, and I will never have grandkids or great grandkids to melt whatever remains of the Arctic ice cap and exterminate the polar bears or drown the residents of the Maldives, I do see the immense joy that parents exhibit and appreciate that procreation is not really negotiable. Humans will continue to populate this planet until this planet cannot hold any more of us, and we will continue to justify this even as the last of the remaining large mammals becomes extinct and climate change irrevocably alters our habitat.

Although I pump 40 tons of carbon into the atmosphere every year and remain the scourge of and every other so-called conservation group, I know my destructive planetary onslaught, unlike most everybody else's, will end in a mere 40 years..., I'll take an extra long, extra hot, shower to celebrate Earth Day.

Friday, April 17, 2009

TEA Party makes no sense

Taxed Enough Already (TEA) Parties were staged all over the country with promises to repeat these protests again and again.  I admit that I hardly pay attention to the wingnuts now that they have been relegated to background noise as the adults try to fix the problems of the last eight years, but this phenomenon has penetrated my medulla oblongata.

What are they protesting?  Increased taxes?  The current budget bill calls for reduced overall federal taxation.   Reduced means less, BTW.   Are they complaining about the increased spending? Then why don't they call it Spending Enough Already (SEA) Party?  Just sayin'.

Is the TEA party based on the original Tea Party movement from the 1770's?   If so, then it is not consistnet with the same argument which was taxation without representation.  These nutjobs have representation, they just lost the election.  That's what a republican democracy is all about.

Obviously some other factors are at work with this well-organized movement, and I smell corporatism disguised as populism.  We have the puppetmasters (Armey and Gingrich) whipping up the ignoramuses again with some new faux outrage.  I guess abortion, prayer in schools and gun rights just can't get them elected anymore. 

Thursday, April 09, 2009

Obama is wrong. Period.

Nobody covers this better than Glenn Greenwald.  Olbermann has been issuing scathing criticism of President Obama's reinforcement of the policy of the previous administration regarding civil liberties.  In fact this infringement is being extended by President Obama so that it now includes a prohibition of citizens' rights to pursue damages in court. 

The Olbermann videos in the above link need to be watched, especially the second one with Jonathan Turley, a respected Constitutional attorney.  Any honest person must recognize the travesty implicit in this governmantal abrogation of our rights as citizens.  

Suffice to say that I read Greenwald every single day and I cannot understand how any responsible citizen cannot garner valuable argument from him.  Although I may not always understand his theses or agree with his opinion, Greenwald is one of the most articulate voices from the left, and in this case he is spot on with his defense of civil liberties and his discomfort with the current administration policies.

The Rhyminig of Historical Rhetoric

Cartoon from the Chicago Tribune, 1934.

And you thought Limbaugh and Beck thunk up all that bile on their own!!  

(h/t barry ritholtz)

Wednesday, April 08, 2009

Why GM should be Euthanized

I guess this is what you get when government tries to bully industry into a "good" idea: a really really bad idea  Hummer is being retro-fitted into making segways.

Upsidetrader said it best: "Here's me in the new GM PUMA on my way to a business trip in Chicago. I will arrive on July 2, 2011, but boy do I feel good about myself. "

Why doesn't govt just tax gas and let the market place figure out the technology.  Who's going to buy this piece of crap?    A corporate attorney on his way to meet with a venture capitalist group?  A neurosurgeon rushing to make that 7:30 am craniotomy?  Bankrupt seniors have $5K for a golf cart to knock around the trailer park?

Get real.  Good-bye, GM.  It's just sad to see you go out with such a lack of dignity.

Two ideologies on the economy

Jim Nussle, former OMB Director under George W. Bush, was on CNBC criticizing the Democratic approach to the current economic recession.  He applauded David Walker's rheotoric against deficit spending an went on to say that we should get out of this recession "the way we always do."

He likened the current leadership to a drunk at the bar and said that Europe "lectured America on the ills of socialism."  Really.  I think what happened is that leaders in Europe pointed out that they already have the social safety nets that the US needs to fund and put in place wiht universal health care the main objective.

Nussle said that we need to promote business and employment, but he failed to admit that health care costs are the fastest rising cost to empployers and the major barrier to increasing employment (or limiting layoffs in the recession) for small business.

The fact is that under Republican control we spent like drunks too, the only difference is that the expense went to unncessary and mismanaged war.  Just think what the trillion dollars would have done for American schools and health care over the last decade.

Now we have a global depression lurking at the door due to a deflationary cycle.  We have twoideologies from to choose. Spend money or save money.  Obama, Bernanke and Congress have opted for the former as a way to stimulate the economy by creating jobs.

Imagine the alternative.  Let's not spend any money and let's balance the federal budget over the next 24 months.  Unemployment, now at 10% on it's way to 12%, would rise precipitously to 15 or 20%.  This would likely shatter the already structurally damaged economy.  Reduced consumption would further reduce industrial production which would lead to more layoffs, and the vicious cycle would continue.  This is exactly what happened during the last deflationary recession which was called the Great Depression.

During the 1930's the conomy was not as global and stimulation could be immediately accomplished by putting dollars in peoples' pockets which would go to domestically manufactured products and increased domestic industrial production.  Today many of those dollars would go overseas for consumer products, so the approach has to be nuanced.   Obama's plan is such a plan.

The proposed plan is three-fold: 1) Direct stimulation and immediate spending.  This is accomplished by increasing unemployemnt insurance, direct payments to individuals and lower home mortgage rates.  The advantage is that money is pumped into the economy immediately, the disadvantage is that much of the money goes overseas for imported consumer products.

2) The second part is Keynesian government-funded programs such as infrastructure rehab, transportation projects, education improvemnt, job training and health care funding.  The advantages are that this spending leads  to predominantly domestic stimulation and is value-added with increased long term economic growth coming from a better educated and healthier human resources as well as improved roads and factories for increased efficiency.  The huge disadvantage to this part of the plan is that it takes 18 to 24 months to implement and by then the economy could past the point of rescue.

This potentially has the greatest long term effect and I would argue that if --- IF-- the previous administration and Congress had been alert and proactive and had avoided the huge Keynesian spending in Iraq, we could have diverted those funds to our own domestic spending, which would have given us universal health care, free college education for all and improved and light rail inevery city.  Very regrettable indeed.

3) The third part of the plan is tax cuts, especially for small businesses and middle income people.  Reduces federal tax revenues in the short term, but potentially increases economic growth in the intermediate and long term.

For my money, I would rather spend less and emphasize the needed infrastructure and health care spending, but unfortunately we need immediate stimulus too.  Obama's plan is as close to perfect as it gets. One-third is devoted to each of the three parts of the plan.  We are indeed in bad straits and nobody knows if such enormous spending will work.  The deficit projections are daunting and rely on a large and quick turn-around in GDP.  If it fails, and it may, then we are destined for possible disaster.

But doing nothing is assured disaster.

David Walker and Medicare Advantage

"We want Medicare Advantage to save us money."  David Walker, Comptroller General of the US, on CNBC this morning.

Whoever said that Medicare Advantage was supposed to save us money?  Walker is the guy who goes on 60 Minutes every 6 months or so to tell us all that Medicare and Social Security are going to bankrupt the nation and lead to Armageddon.  We're putting the bill on our kids' credtit card, yada, yada, yada.  

He was doing his shtick with his emotion very well articulated, as usual, this morning.  Today he mentioned how the Medicare Advantage programs are costing the system instead of saving money as they were supposed to do.

Wait a minute.  Who said the Medicare Advantage (MA) program was supposed to save the Medicare system money?  We've known for quite a while that MA plans cost the beneficiary a monthly fee that really adds no value on a population basis, and the costs to the Medicare pool are also increased.  It's a twofer for the insurance industry.

I'm not busting Walker's chops on this, but let's call it like it is.  MA is a boondoggle that was designed by the insurance industry in order to get their grubby hands on public funds, something they have been wanting to do ever since publicly funded health took hold.  In fact, insurance executives brag to shareholders that their MA plans add dollars to the company's balance sheet, and these are dollars that are unavailable to patient care.

Medicare is designed to be comprehensive.  The amount paid in premiums to an insurance company for MA plan is split with much of the total going to further administrative expense.  

Insurance companies tout their ability to screen doctors and monitor quality, which is really cose for limiting choice to the lowest cost providers.  The quality standards within the Medicare system are the highest in the industry and private insurers do not add any value to the product offered.  

Medicare is in financial trouble.  Costs are spiraling upward with increasing enrollment and health care costs.  Having private insurers ladle off some fat was okay when we were solvent, but this is one boondoggle that needs to be removed.  If folks can pay hundreds per month for a private plan, then perhaps they should be paying more for the basic Medicare.

The fact is, the vast majority of MA customers would be better off just banking the premiums and paying out of pocket for additional care and copays.

Sunday, April 05, 2009

Economics and the Avoidance of Armageddon

My open letter to the Anti-pundit, who sent references without any adjoining opinion or discussion.  I'll assume he wanted to solicit my opinion, so here it is.  I welcome a response and discussion.

Items in question:

I read the references that you sent.  Black is correct in maligning the marriage between Washington and Wall Street, but he acts like this is something new.  In fact, going all the way back to Alexander Hamilton, we've had corruption at the highest levels of finance and govt.  And I would say it's even worse in other types of govt models like Communism (Russia is the obvious example, but also we see it in Cuba) and monarchies (QE1 had a stranglehold on the financial system of the world; feudal lords were also an obvious example).

I'm not saying it's okay, just saying that money and power will always get married.  Greenwald implies that a new President can change the status quo in 90 days and that is unrealistic.  While I agree with the sentiment, I can appreciate the practicality of keeping the system intact for now.  There is also a marriage between the educational system and the financial world with the brightest students pursuing careers on Wall Street because that is where the money is.  Sure, there are exceptions like Krugman and Romer and Geithner, who are lifetime academics, but they are rare exceptions.  Romer is chair of Obama's CEA after all.  Geithner is a career govt official.

For the president to ignore Sunmers' and Rubins' input would be lunacy.  We also assume that Obama is blindly following the advice of one side of the debate which is not necessarily true. 

Black made the analogy of a plane wreck and bemoaned having the pilots who crashed the plane lead the investigation.  To use his analogy, I would say we are still cleaning up the debris on the runway and seeing if there are any survivors. Any investigation I have seen so far, such as with the Congressional hearings, has devolved into inane political posturing by the representatives.  I cannot figure out who is the dumber, Maxine Waters or Michelle Bachmann.  Even Barney Frank, who is hailed as the smartest guy on Finance in Washington, seems to have a very superficial understanding of the crisis for someone who has been involved with the issue for 2 decades.  

To wax philosophical for a moment, money is the property of the federal reserve-- they print it and control how much is in circulation.  We can accept it as a payment for the labor and goods we provide, but no law says you are required to do this.  The resolution of this crisis may require the devaluation of dollars at some point, but that point has not come yet, at least not in relationship to other currencies and commodities-- which is after all the only practical way of valuing a currency.   The federal reserve is a quasi private organization of banks and we can only loosely control its management.  Each of us has to make a determination of our value to society and we can choose to accept or reject the offer made.  (Ask John Galt.)   

Black and Greenwald and Moyers have a lot of bile for the status quo and the way it is being handled, and I can appreciate their skepticism and frustration.  But, they offer no alternative solutions.  In September, we approached the edge of the abyss and we successfully backed away.  Not everyone appreciates how close we were to financial Armageddon.  This is not to say that we should not or could not have seen it coming.  Economists like Taleb and Roubini and Ritholtz and many others have been railing about it for years (and reading Ritholtz since 2006 has likely saved me tens of thousands of dollars), although each one of them have intimated in various venues that they had no idea it would unwind so quickly.  Even a semi-coherent non-professional could figure out that lifestyles were out of hand:  entire subdivisions of $500,000 homes were built on speculation, total household debt is 100% of GDP, our trade imbalance is increasing exponentially, federal budget deficits are rising due to wasteful unnecessary war.  And so on.  It has taken us 25 years to reach this point.

I would also comment that as bad as this situation still is, look at the bright side.  It is being managed without bloodshed, revolution or massive dislocations in peoples' lifestyles (so far).  Just look to 40 years ago when a similar (I would even say less severe) crisis occurred in China.  What was the solution?  The Cultural Revolution orchestrated by the Party slaughtered 35 million people.  Or look to the Wiemar Republic in 1933.  After several years of crushing Depression, they elected Hitler as Chancellor whose solution was to exterminate a third of the population and start a world war where 50 million people died.  I hope we have learned from the past enough to avoid such extreme outcomes, but there is no guarantee.

Today we have safety nets: Medicare, Social Security, unemployment insurance, etc.  The crisis will not inundate everyone all at once. That is why we pay our taxes for 20 years and whine that it's not worth it, then all of a sudden, it is worth it.  That's the wisdom of FDR and Ike and like minded progressives.

Ritholtz points out that before AIG developed CDS', we had reinsurance.  I would add that we also had portfolio insurance, S&L shenanigans, internet bubbles, tulip bubbles, etc.  The financial industry has a long history of creating "products" that are designed to bilk us out of our hard-earned labor and the history likely goes back to the first Cro-magnon man selling ink to write on cave walls in France.  As dour as Ritholtz has been for the last several years, I think it's only fair to point out that he has recently called for people to get back into the market and invest in stocks.  I tend to agree with Ritholtz that someone at AIG intended to commit fraud; he's the lawyer and I'll defer to his professinal opinion.

So, bad economic conditions can have dire consequences and calling for a complete takedown of the status quo would have a plethora of unintended consequences, mostly bad.  The solution must be practical.  My opinion is that Obama is handling the greatest economic crisis in 80 years with unbelievable aplomb.  I have no idea if it will have a better or worse outcome than we had in the 1930's or 1917 or the 1870's, and neither does anyone else.  I do know that ignoring the problem, castigating individual banks, calling for massive large bankruptcies, allowing unemployment to reach 25%, being vindictive and wasting time putting the pilots on trial while the passengers are burning to death... all should be options that off the table.

Black and Moyers seem to think that we should dismantle the reserve banking system by 9:00 am next Tuesday.  Is that really in the best interest of the working man?  There will be plenty of time for Waters and Bachmann to make political hay, but let's clean up the runway first.

Ex-Bush diplomat: North Korea is (another) Bush failure...

Of course North Korea (DPRK) launched a ballistic missile.  This is one of the most telegraphed provocations to date.  They have launched before, they have said they would do it again, they had placed the weapon on the platform on display for all the world to see via Google Earth (at left).  It's been an ongoing situation for at least five years.

The threat to the United States is not immediate and, in fact, is only theoretical.  Even under perfect circumstances, the Taepodong missile could barely reach Hawaii from North Korea.  The real threats are that DPRK would destabilize Asian allies, or more worrisome, that the economically challenged regime would sell the technology to Iran or terrorist groups that are hell-bent on attacking us or our allies.

This situation will require astute diplomacy since China has been the enabling big brother to Kim Jong Il and would not be thrilled with US military action on the peninsula.  Yesterday, before the launch had taken place, John Bolton* (at right), who served as the US Ambassodor to the UN under George W. Bush, was interviewed by Greta Van Susteren of Fox News on this very topic. 

The fact is, I don't think the Obama administration knows much what to do. I think their reaction will be in the U.N. Security Council. I think that's going to be entirely inadequate. North Korea, by launching this rocket, is already violating several Security Council resolutions, so I don't think they pay much attention to what happens in New York.
[Note: Obama has said that the act is a violation of UN resolutions and that he will engage our allies in the region.]
And when pressed for an answer on what should be done, Bolton added:

 I don't think the U.N.'s going to do much of anything. I think it's very unlikely they'll get a stiff sanctions resolution. The sanctions that were imposed in 2006, when North Korea tested missiles and a nuclear device, obviously haven't not stopped them.

I think the real pressure has to be applied on China, which gives North Korea 80 to 90 percent of its energy and a substantial amount of its food and other humanitarian needs. China's got the capability to stop this nuclear program. We've just never applied adequate pressure to them.

And then... change of subject.

So there you have it.  Bush's own ambassodor admits, 1) this incident is a threat to US interests, 2) China needs to be engaged on the issue, 3) the Bush administration "never applied adequate presure."  We do not know exactly what President Obama will do in this situation, but if history is a guide we do know what President Bush would do.  After the North Korean missile launch in 2006, Bush did... nothing.  He ignored it, did not engage China or the UN or garner adequate allied pressure on the regime... which I suppose is better than the alternative plan which would have been to attack and invade Australia.

Thank you, Mr. Bolton, you may now drift back into the obscurity which you so richly deserve.  (And the next time you get the urge to take an ad hominem swipe at the current administration which is charged with cleaning up the shitstorm left by your previous boss, please just STFU).

*It is also importatnt to note that Bolton has been a lifetime critic of the UN, not of any specific policy of the UN mind you, but rather of the entire notion of an institution of United Nations.  So, in effect, Bush's appointment of Bolton was really just giving the finger to the UN.

My prediction:  Right wing pundits will immediately wet their pants and then they will busily voice all their inane fears and empty concerns and feel the need to tell us how they are "scared" and "worried"... yada, yada, yada.  Count how many times you see or hear those words on websites and Fox news in the coming week.

Wednesday, April 01, 2009

Martin Feldstein and one problem with CNBC

Martin Feldstein, the conservative Harvard economist who was chair of Reagan's CEA and currently serves on Obama's Recovery Advisory Board, was on CNBC criticizing the administration proposal to limit charitable tax deductions.  

He categorically stated that such a proposal would reduce the amount of charitable giving.  The problem is that he's an academic economist, so I would ask, where's the reference?  Sure, the president argued the opposite point over the weekend saying that the state of the general economy is a better indicator for charitable giving than tax deduction status.  Both men failed to cite an objective study as evidence.

Perhaps this is a problem with economics as a supposed science, and perhaps that is the part of the primary cause of the horrific boom and bust cycles we see.  A high profile academic can go on national business TV with fairly sophisticated viewers and spout his opinion without any compulsion to make his case with a substantive argument or reference.

In medicine, even the least academic practitioner in the most rural locale, speaking to the least sophisticated patient, would likely be able to cite two or three studies published in national referee journals to support placing the patient on the most basic antibiotic or blood pressure medicine.  

So why can't we get a little more rigorous in dealing with the financial crisis that ate the world?

(Also, Feldstein sat on the AIG board that reviewed their financial products; do you think Joe Kernan could broach that important part of his resume during the interview?)