Quotulatiousness

May 30, 2011

NASA’s changing goals for Orion

Filed under: Politics, Space, USA — Tags: , , , , — Nicholas @ 09:56

The ever-sarcastic Lewis Page looks at how NASA has been trying to reposition their planned Orion spaceship:

NASA has declared that its pork-tastic Orion moonship — whose primary mission disappeared with President Obama’s decision that there will be no manned US return to the Moon — is now to be a “deep space transportation system”, suggesting that the agency plans to send it on missions beyond Earth orbit.

It remains unclear how the newly-renamed Multi Purpose Crew Vehicle (MPCV) will travel into space, when it will do so and what its destination might be — though a near-Earth asteroid is a likely possibility. A major reason for Orion’s continued survival appears to be ignoble porkbarrel politics — but there is a tantalising possibility that it might fly beyond Earth orbit in the relatively near future.

What Page calls NASA’s “pork map” shows why the MPCV has strong, bi-partisan political support regardless of its actual utility for the space program:

Regardless of the political support, however, the most likely view of US federal government finances indicates that Orion/MPCV won’t be viable in the proposed timeframe. There’s a non-governmental choice, however:

Famous geekbiz-kingpin Elon Musk and his upstart rocket company SpaceX have come from nowhere in just eight years to successfully test-fly their brand new and very cheap Falcon 9 rocket and Dragon capsule, already apparently quite capable of performing the ISS supply mission. Only a few years ago, many in NASA and the established industry were arguing that this would never happen.

It’s also no secret that Musk and SpaceX are working on a new Merlin 2 rocket engine, much bigger than the current Merlin 1 which propels the Falcon 9. A multicore heavy lifter based on Merlin 2 would be in the 100-tonne-plus realm required to mount a Mars mission, and will surely be the cheapest offering competing at the 2015 heavy lift Mars-rocket decision.

May 29, 2011

Are we facing a crash in the value of the US dollar?

Filed under: Economics, Politics, USA — Tags: , , , — Nicholas @ 11:25

Conrad Black certainly makes a strong case to expect it sooner, rather than later:

When Barack Obama took office, the official normal money supply of the United States was about $1.1-trillion. The $3-trillion in federal budget deficits that have been run up since then have largely, technically, escaped the money supply, though accretions have almost doubled the official total, an unheard of rate of growth (about 40% annualized) in a hard-currency country. About 70% of this debt has been paid by the issuance of bonds to the central bank of the United States, the Federal Reserve, a subsidiary of the United States government. Whatever the balance sheets say, this has produced the effect of a money-supply increase, which has brought pump-priming to a level of over-achievement not seen since Noah felt the compulsion to build an ark. And the annual trillion-dollar deluge is forecast to continue for a decade.

The world’s reserve currency, the fabled vehicle of the “faith and credit of the United States,” is now virtual money — a symbol for all the other massive problems afflicting the U.S. economy. The imported share of America’s oil consumption, for instance, has gone from 20% to 60%. Large suppliers like Iran and Venezuela have become hostile countries. Yet Americans remain neurotic about paying half the gas price of other oil-importing countries.

But he says that we shouldn’t look to Europe to save the day:

Meanwhile, the European Union is a water-logged vessel in a tempest, frantically bailing. In the six weeks since French finance minister Christine Lagarde last bravely proclaimed her personal fantasy that Greece would not default, the interest on Greek government notes has risen from 20% to 26%. Germany will not indefinitely remain so encumbered with guilt for the Third Reich that it will go on eating the costs of the false prospectus Goldman Sachs assisted Greece and others to file when they joined the Euro. The Germans have only tolerated it up to now because the strain Greece, Portugal, Ireland, Spain and eventually others put on the European banking system and the Euro,keep the Euro in fairly close downward mode with the U.S. dollar, which assists German exports. What a splendid irony that Germany, reviled as the rampaging hun in olden time, is now being entreated by genuflecting masses of its former ungrateful subjects to occupy and dominate them again, at least economically. (The Bundesbank’s uniforms are less stylish than those of the Wehrmacht.)

The EU is in hot contention with the United States as the Sick Man of the Great World Economic Powers, because less than 40% of Eurozone citizens work and over 60% are on benefits of some sort. But not to be discounted in this gripping Olympic contest for total fiscal immolation is geriatric, debt-ridden, stagnating Japan, a great but terribly beleaguered and demoralized country.

How’s that for your daily dose of DOOM? Pretty DOOM-ish, isn’t it?

Jim Treacher calls for investigation into hacking of Rep. Anthony Weiner’s Twitter and Facebook accounts

Filed under: Law, Politics, Technology, USA — Tags: , , , — Nicholas @ 11:13

He’s quite right: this sort of thing must be stopped:

I don’t agree much with Rep. Weiner politically, but he’s a congressman and this is a serious crime he’s alleging. Not to mention that identity theft can happen to any of us at any time. Therefore, Rep. Weiner must call for an official investigation. He owes it to himself, to all other victims of cybercrime, and to his fellow members of Congress who might also be at risk. Defrauding someone’s online accounts in order to embarrass and defame them is unconscionable. The culprit must be brought to justice.

And if Rep. Weiner doesn’t want an investigation, somebody should ask him why not.

If you haven’t been following this, the smart money is betting that he won’t want any such investigation to be launched.

QotD: The Yale fraternity prank and the feminist response

Filed under: Bureaucracy, Education, Liberty, Quotations, USA — Tags: , , , — Nicholas @ 10:55

That wise precept, “Sticks and stones may break my bones, but words can never hurt me,” has obviously long disappeared among the sisterhood, however. So, too, has the idea of keeping things in perspective. The DKE brothers’ tasteless pledge prank was just that: a tasteless pledge prank. What is the most provocative thing you could say on a college campus today, the thing most likely to outrage the largest and most influential power bloc? “No means yes.” To inflate this incident into a symbol of anything beyond an unfunny effort at transgression on the part of a trivially small (and marginalized) number of individuals requires a willful blindness to the reality of Yale. (The administration doesn’t even recognize fraternities.) The university constantly sends the message that “no means no,” whether through such formal bodies as its Sexual Harassment and Assault Resources and Education Center, its Sexual Harassment Grievance Board, and a 24-hour sexual-assault hotline or through informal channels such as freshman orientation and public pronouncements. Yale president Rick Levin and Yale College dean Mary Miller condemned what they called the pledges’ “appalling language.” “We will confront hateful speech,” they stated in a press release, “in no uncertain terms: No member of our community should engage in such demeaning behavior.” Last week, Yale banned DKE from conducting any activities on campus, including use of campus e-mail, for five years on the ground that it had engaged in “harassment, coercion or intimidation.” Yale also announced that individual frat members had been disciplined for their speech. If the pledge chant represented official thinking on campus, or was in any way sanctioned by the authorities, obviously there would be cause for concern. Clearly, that is not the case.

To the civil rights complainants, however, the DKE incident and Yale’s allegedly inadequate response to it “precludes women from having the same equal opportunity to the Yale education as their male counterparts,” in the words of signatory Hannah Zeavin. (The signatories also want to gut further Yale’s already ludicrously inadequate due-process protections for those accused of sexual assault or harassment.) Yale has one of the greatest library systems in the world; it showers on students top-notch instruction in almost every intellectual discipline; it lavishes students with healthy food, luxurious athletic facilities, and rich venues for artistic expression. All of these educational resources are available on a scrupulously equal basis to both sexes. But according to the Yale 16 and their supporters, female students simply cannot take full advantage of the peerless collection of early twentieth-century German periodicals at Sterling Library, say, or the DNA sequencing labs on Science Hill, because a few frat boys acted tastelessly. Thus the need to go crying to the feds to protect you from the big, bad Yale patriarchy. Time to bring on the smelling salts and the society doctors peddling cures for vapors and neurasthenia.

Heather Mac Donald, “Sisterhood and the SEALs: How can women join special forces when they can’t even handle frat-boy pranks?”, City Journal, 2011-05-26

May 27, 2011

Colby Cosh: It wasn’t a market failure that caused the sub-prime fiasco

Filed under: Economics, Politics, USA — Tags: , , , — Nicholas @ 10:52

He’s quite right, not that the powers-that-be will take away the correct lesson from the experience:

What I see when I look at the origins of the financial pandemic is the story “government-sponsored enterprises that subsidize crazy lending practices and puppetize legislators fail.” Mortgage-writing institutions did things throughout the late 1990s and early oh-ohs that weren’t just likely to turn out badly; they made enormous amounts of loans that were practically certain to go bust in the short-to-medium term, loans that your mother could have told you would go sour. It wasn’t a “free” market that relaxed mortgage underwriting standards to the point of annihilation; it wasn’t a “free” market that put unskilled workers in million-dollar homes in the Sand States, or that spent too long ignoring the rising default rates that resulted.

We know this, in part, because we know how slightly freer mortgage markets traditionally behaved; they “redlined” the living heck out of low-income neighbourhoods. Because redlining resulted in racial discrimination — critics would just say it is racial discrimination — there has been a concerted attempt among economists to absolve the major U.S. anti-redlining statute, the Community Reinvestment Act of 1977, from any role in creating the housing bubble. Obviously it won’t do to pin the crisis on a 1977 law, but there is such a thing as the straw that broke the camel’s back; the CRA was followed by an even more intense fusillade of statutory and regulatory measures consciously designed to increase home ownership in America without making homes less expensive and valuable per se.

May 26, 2011

Here’s a different way to pay for socialized medicine

Filed under: Economics, Government, Health, USA — Tags: , , — Nicholas @ 09:35

Kevin Drum has an interesting proposal in Mother Jones:

So here’s an idea: why not reform Medicare by means testing it? Conservatives should love this idea.

Here’s how it works. Basically, we leave Medicare alone. Oh, we can still go ahead with some of the obvious reforms. Comparative effectiveness research is a no-brainer for anyone who’s not part of the Republican leadership. Ditto for some of the delivery reforms on the table. Or allowing Medicare to negotiate for lower prices. It would be great if that stuff works. But if it doesn’t, then people will need to pay more for their care. So why not have dead people pay? They don’t need the money any more, after all.

So Medicare stays roughly the same, but every time you receive medical care you also get a bill. You don’t have to pay it, though. It’s just there for accounting purposes. When you die, the bill gets paid out of your estate. If your estate is small or nonexistent, you’ve gotten lots of free medical care. If it’s large, you’ll pay for it all. If you’re somewhere in between, you’ll end up paying for part of the care you’ve received.

Obviously this gives people incentives to spend all their money before they die. That’s fine. I suspect they wouldn’t end up spending as much as you’d think. What it does mean, though, is that Medicare has first claim on their estate, not their kids. But that seems fair, doesn’t it?

It has the virtue of acknowledging that free healthcare isn’t actually “free” at all.

There is no right to privacy, unless you’re a police officer

Filed under: Law, Liberty, USA — Tags: , , , — Nicholas @ 09:24

Jon sent me a link to this post at Reason.com, discussing the odd court decisions which seem to indicate that you have no right to privacy, but that the police do:

Such incidents have led to a national conversation about the propriety of videotaping cops, even as dashboard cameras have become standard in squad cars. There seems to be some tension in the assumption that, as Graber’s lawyer put it, “the officer has a privacy expectation, but the motorist doesn’t.”

That asymmetry has been underscored by recent rulings over global positioning systems. Last year the Virginia Court of Appeals said Fairfax County police did not violate a suspect’s right to privacy when, without a warrant, they surreptitiously put a GPS device on his vehicle to track his movements. Individuals have no expectation of privacy on the public streets, the court ruled — a position also taken by the Ninth Circuit in California.

Yet this past January, Kathy Byron, a member of Virginia’s House of Delegates, introduced legislation that would have forbidden the use of GPS tracking devices for the purpose of following political candidates. People running for public office “are still entitled to some privacy,” she argued.

Even more disturbing is the steady increase in what the police are allowed to do without a warrant or even suspicion of criminal activity:

U.S. border-patrol agents often search the phones and computers of American citizens who cross the border — routinely “accessing email accounts, examining photographs and looking through personal calendars,” according to The Constitution Project, a watchdog group. “In some cases, electronic devices were confiscated for as long as a year.” And in Michigan, the State Police have high-tech forensic devices enabling them to download information from the cell phones of stopped motorists — something they have been doing without a warrant.

[. . .]

Soon Americans might have no right to expect privacy even in the privacy of their own homes. Earlier this month the U.S. Supreme Court ruled 8-1 that police officers may force their way into your domicile without your consent, without a warrant, and without what are usually referred to as “exigent circumstances” — e.g., someone inside the home yelling for help. The case, Kentucky v. King, concerned an incident in which police officers chasing a drug suspect ran into an apartment building, smelled marijuana, heard noises they thought might indicate someone was destroying evidence — and broke down the wrong door. This, said the Supremes, was perfectly fine.

May 23, 2011

The heterosexual wedding boycott

Filed under: Law, Politics, USA — Tags: , , — Nicholas @ 11:13

Rich Benjamin is engaged in a boycott of his friends’ heterosexual weddings because most states do not allow homosexual weddings. He thinks he’s being ideologically pure and striking a blow for equality. What he’s really doing is being an ass and alienating his friends without cause:

I picked up my jangling cellphone one recent Saturday to hear the elated voice of Zachary, my longtime buddy and college classmate. “I just proposed to Caroline,” Zach announced, inviting me to the wedding and angling to plot logistics. “So when are you flying in?”

“Oh, I’m not coming to your wedding,” I said.

It’s true. I’m boycotting all heterosexual weddings.

How utterly absurd to celebrate an institution that I am banned from in most of the country. It puzzles me, truth be told, that wedding invitations deluge me. Does a vegan frequent summer pig roasts? Do devout evangelicals crash couple-swapping parties? Do undocumented immigrants march in Minuteman rallies?

I know what he’s trying to do, but it’s hard to think of a more hurtful way of pointing out the inequality of gay and straight couples to people — one assumes because they’re close enough to him to invite him to their wedding — who are already on his side.

A poll last month showed Americans are split on same-sex marriage. A narrow majority, 51 percent, supports it, while 47 percent do not. Though Zach falls into that slim majority, he scolds me for being “peevish.” He says he resents me for blowing off his special day, for putting political beliefs ahead of our friendship and for punishing him for others’ deeds. But screaming zealots aren’t the only obstacles to equal marriage rights; the passivity of good people like Zach who tacitly fortify the inequality of this institution are also to blame.

They’re proof of a double standard: Even well-meaning heterosexuals often describe their own nuptials in deeply personal terms, above and beyond politics, but tend to dismiss same-sex marriage as a political cause, and gay people’s desire to marry as political maneuvering.

What many straight people consistently forget is that same-sex couples aren’t demanding marriage to make a political statement or to accrue “special rights.”

But you are using their marriage to make a political statement. Consistency? You make a point of explaining that you’re not an activist yet you scold Zach for his “passivity”?

May 22, 2011

QotD: The rise of the “new aristocracy”

Filed under: Europe, France, Politics, Quotations, USA — Tags: , , — Nicholas @ 13:39

A man is innocent until proven guilty, and it will be for a New York court to determine what happened in M Strauss-Kahn’s suite at the Sofitel. It may well be that’s he the hapless victim of a black Muslim widowed penniless refugee maid — although, if that’s the defense my lawyer were proposing to put before a Manhattan jury, I’d be inclined to suggest he’s the one who needs to plead insanity. Whatever the head of the IMF did or didn’t do, the reaction of the French elites is most instructive. “We and the Americans do not belong to the same civilization,” sniffed Jean Daniel, editor of Le Nouvel Observateur, insisting that the police should have known that Strauss-Kahn was “not like other men” and wondering why “this chambermaid was regarded as worthy and beyond any suspicion.” Bernard-Henri Lévy, the open-shirted, hairy-chested Gallic intellectual who talked Sarkozy into talking Obama into launching the Libyan war, is furious at the lèse-majesté of this impertinent serving girl and the jackanapes of America’s “absurd” justice system, not to mention this ghastly “American judge who, by delivering him to the crowd of photo hounds, pretended to take him for a subject of justice like any other.”

Well, OK. Why shouldn’t DSK (as he’s known in France) be treated as “a subject of justice like any other”? Because, says BHL (as he’s known in France), of everything that Strauss-Kahn has done at the IMF to help the world “avoid the worst.” In particular, he has made the IMF “more favorable to proletarian nations and, among the latter, to the most fragile and vulnerable.” What is one fragile and vulnerable West African maid when weighed in the scales of history against entire fragile and vulnerable proletarian nations? Yes, he Kahn!

Before you scoff at Euro-lefties willing to argue for 21st century droit de seigneur, recall the grisly eulogies for the late Edward Kennedy. “At the end of the day,” said Sen. Evan Bayh, “he cared most about the things that matter to ordinary people.” The standard line of his obituarists was that this was Ted’s penance for Chappaquiddick and Mary Jo Kopechne — or, as the Aussie columnist Tim Blair put it, “She died so that the Food Allergen Labeling and Consumer Protection Act might live.” Great men who are prone to Big Government invariably have Big Appetites, and you comely serving wenches who catch the benign sovereign’s eye or anything else he’s shooting your way should keep in mind the Big Picture. Yes, Ted Ken!

Nor are such dispensations confined to Great Men’s trousers. Timothy Geithner failed to pay the taxes he owed the United States Treasury but that’s no reason not to make him head of the United States Treasury. His official explanation for this lapse was that, unlike losers like you, he was unable to follow the simple yes/no prompts of Turbo Tax: In that sense, unlike the Frenchman and the maid, Geithner’s defense is that she wasn’t asking for it — or, if she was, he couldn’t understand the question. Nevertheless, just as only Dominique could save the European economy, so only Timmy could save the U.S. economy. Yes, they Kahn!

Mark Steyn, “The unzippered princelingand the serving wench”, Orange County Register, 2011-05-20

Obama clarifies his last Middle East speech

Filed under: Middle East, Politics, USA — Tags: , , , — Nicholas @ 11:46

Drew M. points out that President Obama is merely doing what every other President since Jimmy Carter has done:

There was a lot of confusion on Thursday about whether Obama’s reference to “67 borders with mutually agreed upon swaps” was news or not. A lot of pro-Israel folks on Twitter (but granted not all) didn’t seem to think it was a big deal at the time. I think two things played into the reaction.

One, the left, led by the New York Times, played this is up as a big change and that an American President was finally standing up to Israel.

Second, the language choices Obama made and the fact that no one doubts in his heart of hearts Obama would throw Israel under the bus if he could. The fact is, Presidents don’t always have full freedom of action. It’s like there are checks and balances or something (thank God).

Now, he’s walked back or clarified his stance (depending on your point of view). The anti-Israeli left will say “the Jews got to him”. Many on the right will say, “Bibi got him”.

I think the fact is, reality got him.

Obama is simply doing what many other Presidents (Carter, Bush, Clinton and even G.W. Bush gave it a shot) have done…try and build a legacy by solving the Israel-Palestinian conflict. He’ll fail just like the rest simply because the Palestinians don’t want to solve it by any means other than the destruction of Israel. Until that changes, this will always be a Siren’s Song that winds up with everyone crashing on the rocks.

That last little nugget is the real reason I always feel depressed when yet another attempt to “resolve” the Middle East crisis gets underway: without Palestinians accepting the right of Israel to exist, there will be no actual progress regardless of the number meetings, declarations, conferences, and so on. One side has the bedrock value that the other side must die — as long as that value remains, no peaceful settlement is possible.

May 20, 2011

Only one high speed rail line in the world is profitable

Filed under: Economics, Government, Japan, Technology, USA — Tags: , , , — Nicholas @ 09:39

Babbage looks at the economics of the various high speed railway lines both in service and planned:

Of all the high-speed train services around the world, only one really makes economic sense — the 550km (350-mile) Shinkansen route that connects the 30m people in greater Tokyo to the 20m residents of the Kansai cluster of cities comprising Osaka, Kobe, Kyoto and Nara. At peak times, up to 16 bullet trains an hour travel each way along the densely populated coastal plain that is home to over half of Japan’s 128m people.

Having worked for many years in Tokyo, with family in Osaka, your correspondent has made the two-and-a-half hour journey on the Tokaido bullet-train many times. It is clean, fast and highly civilised, though far from cheap. It beats flying, which is unbearably cramped by comparison, just as pricey, and dumps you an hour from downtown at either end.

The sole reason why Shinkansen plying the Tokaido route make money is the sheer density — and affluence — of the customers they serve. All the other Shinkansen routes in Japan lose cart-loads of cash, as high-speed trains do elsewhere in the world. Only indirect subsidies, creative accounting, political patronage and national chest-thumping keep them rolling.

California’s planned 800-mile high speed rail route cannot possibly earn a profit, for many reasons (not least of which is that the first segment of the network won’t even run high speed trains until the entire system is built). It’s going to cost an eye-watering amount of money even to build that first section:

Between them, the federal government, municipals along the proposed route and an assortment of private investors are being asked to chip in $30 billion. A further $10 billion is to be raised by a bond issue that Californian voters approved in 2008. Anything left unfunded will have to be met by taxpayers. They could be dunned for a lot. A study carried out in 2008 by the Reason Foundation and the Howard Jarvis Taxpayers Association put the final cost of the complete 800-mile network at $81 billion.That is probably not far off the mark. Last week, the state’s Legislative Analyst’s Office came out with a damning indictment of the project’s unrealistic cost estimates and poor management. The bill this legislative watchdog put on the first phase of the high-speed rail project alone is $67 billion — and higher still if the project runs into trouble gaining route approval in urban areas.

If the latter number is correct, then the first phase of the system is clocking in at nearly $1 billion per mile. And this is the “cheap” section running through mostly thinly populated farming areas. If, somehow, the more expensive sections of the planned network don’t cost much more, the total construction bill will top $800 billion. The original plan had the entire system costing $43 billion.

Cost overruns are an expected part of major government construction projects, but that’s insane.

May 19, 2011

Happy 60th day!

Filed under: Africa, Military, Politics, USA — Tags: , , — Nicholas @ 09:58

Jim Geraghty notes a special day arriving:

Happy 60-Day anniversary, War Kinetic Military Action in Libya! You’re now… pretty much illegal, but almost all of Washington will avert their eyes and pretend you’re legal. It’s kind of like how all the big people there treat their nannies.

Bruce Ackerman and Oona Hathaway are professors of law and political science at Yale, took to the pages of the Washington Post to point out that for a president who was elected by angry lefties chanting about an illegal war, it’s pretty ironic that we’re now fighting what is, pretty much, an illegal war: “This week, the War Powers Act confronts its moment of truth. Friday will mark the 60th day since President Obama told Congress of his Libyan campaign. According to the act, that declaration started a 60-day clock: If Obama fails to obtain congressional support for his decision within this time limit, he has only one option — end American involvement within the following 30 days.”

May 18, 2011

Wendy Kaminer: University students are “unlearning liberty”

Filed under: Education, Liberty, USA — Tags: , , , , , — Nicholas @ 07:18

Wendy Kaminer looks at the disturbing trend in universities that shows female students seeing themselves as helpless and in desperate need of protection from (and active suppression of) the free speech rights of others.

I don’t know the ages of Obama’s OCR appointees, but they seem to be operating under the influence of the repressive disregard for civil liberty that began taking over American campuses nearly 20 years ago. As FIRE president Greg Lukianoff remarks, students have been ‘unlearning liberty’. Concern about social equality and the unexamined belief that it requires legal protections for the feelings of presumptively vulnerable or disadvantaged students who are considered incapable of protecting themselves has generated not just obliviousness to liberty but a palpable hostility to it.

Sad to say, but feminism helped lead the assault on civil liberty and now seems practically subsumed by it. Decades ago, when Catherine MacKinnon, Andrea Dworkin and their followers began equating pornography with rape (literally) and calling it a civil-rights violation, groups of free-speech feminists fought back, in print, at conferences, and in state legislatures, with some success. We won some battles (and free-speech advocates in general can take solace in the Supreme Court’s recent decision upholding the right to engage in offensive speech on public property and public affairs). But all things considered (notably the generations of students unlearning liberty), we seem to be losing the war, especially among progressives.

This is not simply a loss for liberty on campus and the right to indulge in what’s condemned as verbal harassment or bullying, broadly defined. It’s a loss of political freedom: the theories of censoring offensive or hurtful speech that are used to prosecute alleged student harassers are used to foment opposition to the right to burn a flag or a copy of the Koran or build a Muslim community centre near Ground Zero. The disregard for liberty that the Obama administration displays in its approach to sexual harassment and bullying is consistent with its disregard for liberty, and the presumption of innocence, in the Bush/Obama war on terror. Of course, the restriction of puerile, sexist speech on campus is an inconvenience compared to the indefinite detention or showtrials of people suspected of terrorism, sometimes on the basis of unreviewed or unreviewable evidence. But underlying trivial and tragic deprivations of liberty, the authoritarian impulse is the same.

May 17, 2011

Final legacy of the “Cash for Clunkers” program: higher used car prices

Filed under: Economics, Government, USA — Tags: , , — Nicholas @ 09:59

Remember the “Cash for Clunkers” program? It was supposed to give the auto industry a shot in the arm by buying up older vehicles, giving the owners vouchers toward (certain) new vehicles, then destroying the traded-in clunker. Even at the time, economists tried to point out that this was just an elaborate “broken window” fallacy.

Today, use car prices are indeed soaring:

As news outlets around the country are reporting, the price of used cars has lately soared to a modern-day record, with some cars commanding more used than they sold for when new. News accounts commonly finger the Japanese earthquake and high gas prices as reasons, but there are some problems fitting either reason to the case. While the earthquake affected the supply of new cars, it’s the previously driven kind that has scored the more impressive price jump. And while the rise in gas prices would explain a relative shift in buyer demand from SUVs and trucks toward smaller vehicles — which has indeed happened — the strength of the used-vehicle market lately has been such that even the thirstier vehicles have advanced in price, $4 gas or no.

No doubt there are multiple reasons for the price spike, including the severe general slump in new-auto sales in recent years, which has reduced the volume of newer cars coming onto the resale market. But — as Washington scrambles to take undeserved credit for whatever passes for normalization in the auto business these days — it’s worth remembering that an artificial scarcity of used cars isn’t just bad for the poor as a group: it’s bad in particular for the upwardly mobile poor, since in most of the country landing a job means needing to line up transportation to get to that job. When it suddenly costs $6,000 instead of $3,000 to get wheels, the move from unemployment to a paying job faces a new and discouraging barrier.

May 16, 2011

Stephen Gordon: should Canadians be buying cheaper US stocks?

Filed under: Cancon, Economics, USA — Tags: , , — Nicholas @ 13:02

Is now a good time to buy American stocks?

As the dollar appreciates, there are more articles in the financial press commenting on how U.S. stocks are becoming cheaper from the point of view of Canadian buyers. I am probably the last person from whom you should take investment advice, but there are some things to think about when you’re trying to decide if a stock is cheaper or if it is simply worth less.

Buying USD-denominated assets is in large part a bet against the Canadian dollar. Since 2000, Canadians who bought the S&P500 index instead of the TSX have generally regretted it [. . .] The average CAD return on the TSX was 11 per cent more than the CAD return on the S&P500 over the past decade. [. . .]

But that doesn’t necessarily mean that U.S. stocks are a bad deal, because they have one very attractive property: they generate higher returns for Canadians during bad times. This is the sort of correlation that is most valued by investors: we are willing to pay extra for assets that pay off most when extra money is most needed. For example, most people buy fire insurance, even though it is a money-losing investment for almost all households. Even though the odds of a fire are small, homeowners are still willing to pay for an asset that pays off when their house burns down.

I’m not in a hurry to invest in American stock right now, as I still see the US government’s debt addiction having the potential to drag down the US market much further. Not that staying in Canadian stocks insulates me from such things . . . but the impact should be lighter on Canadian holdings than on US positions.

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