Quotulatiousness

January 29, 2010

Short (political and economic) memories

Filed under: Economics, Government, Politics, USA — Tags: , — Nicholas @ 09:20

David Harsanyi looks at the “lost decade” of the last 10 years and finds not so much of a disaster:

Of the many tall tales spun by President Barack Obama during the State of the Union address this week, there is one, and perhaps only one, that most Americans believe to be true.

The old yarn goes something like this: A long time ago, the United States was an economic powerhouse. We built things with our hands and worked in factories and we loved it.

Our recent prosperity, on the other hand, was built on a house of cards — intellectual innovation, risk, free-wheeling markets and international trade — and nothing more than an illusion.

“We can’t afford another so- called economic expansion like the one from the last decade — what some call the ‘lost decade,’ ” Obama explained. The president went on to promise he would do all he could to stop any pesky so-called expansions in the future. And I believe him.

A recent poll shows that Obama is not alone in his aversion to the 2000s. According to a Pew Research Center poll, over 50 percent of American hold a negative view of the decade. Yet, the 2000s, like decades before it, are by nearly any measure — be it health, standard of living, the environment or technology — a success.

The average unemployment rate during this “lost decade” — including one of those unfortunate man-made disasters to the country’s financial center — was at 5.6 percent. One would think that the president — a man who believes a “jobs” bills that only saw unemployment go from nearly 8 percent to over 10 percent was a wild success — would be sort of impressed.

It may be a factor in any given decade, but it’s surprising how deep the short-term memories seem to be coloured by the recession at the end of the decade (the one we’re still struggling out of).

January 21, 2010

Obama’s move to throttle the big banks

Filed under: Economics, Government, Law, USA — Tags: , , — Nicholas @ 13:18

Megan McArdle takes a first look at the Obama administration’s new initiative to control the big banks:

The administration’s new proposal has two core pieces, both of which are at least somewhat novel. First, banks that have access to the discount window will not be able to trade for their own account. That means no prop trading desk. No owning hedge funds or private equity funds. No investments of any kind to make profits for your shareholders. Financial institutions can make profits by servicing clients, or they can make profits by investing for their own book. But they can’t do both.

Senior administration officials I spoke to made it clear that this would not include market making activity, which the administration views as something you do for your clients. But while that may partially reassure banks, that seems to mean that market makers — i.e. Goldman Sachs — are very definitely included. That impression was reinforced by the way Indeed, if they pass this thing, they should probably call it the Hey Goldman Sachs! You’re Not Going to Be So Profitable Any More Act of 2010.

January 18, 2010

How much are the Vikings worth?

Filed under: Economics, Football, Politics — Tags: , , , — Nicholas @ 17:52

An interesting Wall Street Journal article tries to put a dollar value on the “intangible” value of a professional sports team to the fans . . . in this case, the Minnesota Vikings:

Christopher Slinde, a lifetime Minnesota Vikings fan who has endured decades of heartbreak and lots of overpriced beer in supporting his team, believes Vikings fandom is priceless. According to economists, it’s worth $530.65.

“This is deep,” said Mr. Slinde, a 33-year-old X-ray technician, outside the Park Tavern near Minneapolis on Sunday. He had been handed a recent economics paper that is tattooed with equations and attempts to value, in dollars, the joy and pain Minnesotans get from the Vikings.

“Don’t economists spend their time on more serious stuff?” he asked, after thumbing through the paper in the cold.

As fans pack stadiums and couches to watch the National Football League’s divisional playoffs this weekend, they care about victory. Economists are tackling a more abstract challenge: putting a price on the emotional benefits of having a pro sports team in town.

Interestingly, the one question that doesn’t come up is why non-fans (the rest of the taxpayers being asked to pay for a new Vikings stadium) should use their tax dollars to subsidize their sports-mad fellow citizens. The answer is, of course, that if Minnesota won’t then some other state or city will do. It seems reasonable to me to ask the billionaire owners of these sports franchises to pay for their own buildings . . . but there’s a long, inglorious history of these very well-off, well-connected folks being able to get politicians to pry the coffers open and paying public money to benefit private interests.

January 6, 2010

I didn’t think that was what “tolerance” was supposed to mean

Filed under: Politics, Quotations, Religion — Tags: , , , — Nicholas @ 08:57

Rondi Adamson posted an interesting Martin Amis quote:

I just transcribed and edited a speech Martin Amis gave in Toronto recently. The whole thing was wonderful, but this — about Islamic fascism — was the best line:

I have to take my hat off to the left in that they have found something to defend in a movement that is racist, misogynist, homophobic, totalitarian, inquisitorial, imperialist and genocidal. Perhaps it’s their view on usury that is attractive to the left — low interest rates or non-existent interest rates.

December 29, 2009

Worst. Decade. Ever.

Filed under: Government, Humour, Politics, USA — Tags: , , , — Nicholas @ 18:30

December 8, 2009

This is what qualifies as “toughened” standards?

Filed under: Economics, USA — Tags: , , , — Nicholas @ 13:58

An aside in this week’s Tuesday Morning Quarterback column by Gregg Easterbrook caught me completely by surprise. I had no idea that the US housing market was quite this dysfunctional:

As Part of Tough New Standards for Subsidized Mortgages, Home Buyers Will Be Required to Rub Their Heads and Pat Their Stomachs at the Same Time: The Federal Housing Administration underwrites mortgages for people having problems. Before 2008, the FHA supported about 2 percent of the nation’s mortgages, now the number is nearly at 30 percent, which shows how deep the subprime mortgage issue runs and how much taxpayers now subsidize home ownership. Last week, the FHA said it will toughen lending rules. Borrowers will now be required to put up 3.5 percent of the mortgage as cash or gifts from relatives, and there will be a cross-check against the down payment’s appearing to come as a gift from a charity but actually coming from the seller or builder through a middleman disguised as a charity. A generation ago — a decade ago! — home buyers were expected to have a 20 percent down payment; that made them unlikely to try to buy something they could not afford, and banks wouldn’t be exposed if something went wrong, since they were lending only 80 percent of the value of the property. Now requiring 3.5 percent down is viewed as “toughening” standards. Isn’t this an invitation for yet another cycle of mortgage problems?

Absolutely mind-boggling.

November 11, 2009

Contrarian investment strategy: short Chinese stocks

Filed under: Bureaucracy, China, Economics — Tags: , , , — Nicholas @ 17:29

I’ve been skeptical of the official Chinese government economic statistics for quite some time, so I find articles like this one to be quite believable:

Chanos and the other bears point to several key pieces of evidence that China is heading for a crash.

First, they point to the enormous Chinese economic stimulus effort — with the government spending $900 billion to prop up a $4.3 trillion economy. “Yet China’s economy, for all the stimulus it has received in 11 months, is underperforming,” Gordon Chang, author of “The Coming Collapse of China,” wrote in Forbes at the end of October. “More important, it is unlikely that [third-quarter] expansion was anywhere near the claimed 8.9 percent.”

Chang argues that inconsistencies in Chinese official statistics — like the surging numbers for car sales but flat statistics for gasoline consumption — indicate that the Chinese are simply cooking their books. He speculates that Chinese state-run companies are buying fleets of cars and simply storing them in giant parking lots in order to generate apparent growth.

Back in 2004, I wrote:

While there is no doubt that China is a fast-growing economy, the most common mistake among both investors and pundits is to assume that China is really just like South Carolina or Ireland . . . a formerly depressed area now achieving good results from modernization. The problem is that China is not just the next Atlanta, Georgia or Slovenia. China is still, more or less, a command economy with a capitalist face. One of the biggest players in the Chinese economy is the army, and not just in the sense of being a big purchaser of capital goods (like the United States Army, for example).

The Chinese army owns or controls huge sectors of the economy, and runs them in the same way it would run a division or an army corps. The very term “command economy” would seem to have been minted to describe this situation. The numbers reported by these “companies” bear about the same resemblance to reality as thos posted by Enron or Worldcom. With so much of their economy not subject to profit and loss, every figure from China must be viewed as nothing more than a guess (at best) or active disinformation.

Probably the only figures that can be depended upon for any remote accuracy would be the imports from other countries — as reported by the exporting firms, not by their importing counterparts — and the exports to other countries. All internal numbers are political, not economic. When a factory manager can be fired, he has his own financial future at stake. When he can be sentenced to 20 years of internal exile, he has his life at stake. There are few rewards for honesty in that sort of environment: and many inducements to go along with what you are told to do.

Under those circumstances, any growth figures are going to be aggregated from all sectors, most of which are under strong pressure to report the right numbers, not necessarily corresponding with any real measurement of economic activity. So, if the economic office wants to see a drop in the economy, that’s what they’ll get.

Basing your own personal financial plans on numbers like this would quickly have you living in a cardboard box under a highway overpass. Companies in the soi-disant free world have shareholders or owners to answer to. Companies in China exist in a totally different environment.

Five years on, there’s not much (except a few outdated details) that I’d bother changing.

H/T to Ghost of a Flea for the link.

November 2, 2009

Ford reaps financial benefit from not joining Government Motors

Filed under: Economics, USA — Tags: , , — Nicholas @ 08:18

The New York Times has the unexpectedly positive financial news from Ford:

The Ford Motor Company on Monday posted a surprise third-quarter profit of $997 million and said it had its first profitable quarter in North America in more than four years.

The carmaker also said it increased its cash reserves by $2.8 billion during the quarter, ending September with $23.8 billion.

For all of 2009, Ford, the only Detroit automaker to avoid bankruptcy this year, has had a profit of more than $1.8 billion. It reported $834 million of income in the first half of the year.

October 14, 2009

Disturbing historical pattern

Filed under: Bureaucracy, Economics, USA — Tags: , , , , — Nicholas @ 07:58

Eric S. Raymond poses an uncomfortable question:

A few moments ago, I read a review of a new book, Uncivil Society: 1989 and the Implosion of the Communist Establishment, and the following sentences jumped out at me:

This is less a story of dissidents, so-called civil society, than of the bankruptcy of a ruling class–communism’s establishment, or “uncivil society.” The Communists borrowed from the West like drunken sailors to buy mass consumer goods, then were unable to pay back the hard-currency debts and so borrowed even more. In Eastern Europe, communism came to resemble a Ponzi scheme, one whose implosion carries enduring lessons.

I found myself wondering “And this differs from our political class . . . how?

The U.S.’s very own nomenklatura, our permanent political class and its parasitic allies, has been on a borrowing binge since the Great Society programs of the 1960s. Just like the pre-1989 Communist elites, they’ve been piling up debt in order to buy the consent of the governed with ever-more-generous entitlement programs. It took another twenty years, but the insolvency of California is bringing those chickens home to roost here as well. With the CBO now projecting that Social Security will go cash-flow-negative next year, an equally cataclysmic collapse of the federal government’s finances won’t be long in coming — in fact, I now give it over 50% odds of happening before Obama’s first term ends in 2012.

September 24, 2009

QotD: Return of the revenge of the subprime mortgage apocalypse

Filed under: Economics, Quotations — Tags: — Nicholas @ 12:50

Put it all together, and throw in mainstream media outlets that as recently as June were calling for mortgage haircuts specifically to allow people to keep borrowing against their houses, and you’ve got the mother of all perfect storms mixed with the crack cocaine of third rails on steroids. The foreclosure wave may seem all tired and 2008, but it’s hotter than ever.

Update: Because commenter hmm brings up the Coming Commercial Real Estate Hyperpocalypse, which is the elephant in the room of all swords of Damocles spreading like wildfire; and also because like a golem I screwed up Jim the Realtor’s title in my latest print column, I urge you to run, don’t walk, to give two thumbs up to this tour of ghost malls by Jim the Realtor®.

Tim Cavanaugh, “Corpse of a Thousand Houses”, Hit and Run, 2009-09-23

September 22, 2009

Truth in advertising?

Filed under: Cancon, Economics, Media, USA — Tags: , , — Nicholas @ 12:10

Jim Davidson watches the new GM television ad . . . and pukes:

They used to advertise “that great GM feeling.” Nowadays it seems more like “that sinking GM feeling.” Case in point, car-neophyte Ed Whiteacre’s current ad campaign.

“Car for car when compared to the competition, we win. Simple as that,” he says in this bright new ad promoting his complete ignorance about automobiles.

Sure, the white haired old man looks alert and sentient as he parades through a nearly empty show room with strange other people wandering around not selling any cars. But the words make no sense.

Car for car when compared to the competition, GM sucks. And they gave up competing on cars when they went for the enormous taxpayer bailout. It isn’t simple as winning in a head to head car making competition. Remember? GM played that game and they lost. They lost all of their money, so they demanded all of our money.

Later he lies again, “So we’re putting our money where our mouth is.” No, you bastard, you stinking lackey of big government, you filthy thief, you aren’t. GM tried putting their money where their mouth is, and they lost. They went under. So now they are putting our money where their mouth is. He isn’t a nice old man, he’s an evil old liar.

Retirement planning

Filed under: Cancon, Economics — Tags: , , — Nicholas @ 11:24

Dark Water Muse had a post a few days ago about the troubles with retirement planning (he’s just gone through the process).

I guess what only just in recent days became DWM’s “trailer park” retirement lifestyle, which he can almost afford, becomes his “cardboard box” retirement lifestyle. Assuming the healthcare system can afford then to cover the costs of treating paper cuts.

The scary part. DWM is one of the “lucky” ones, in a really good position, according to financial advisors. If this is true then how can anybody, in the past 30 years, have realistically expected “average” North American to be able to afford to retire? Aren’t these the same bong puffers who have been trying to eradicate the poppy fields in Afghanistan?

I guess addiction really is an irrational behavior, even when you dress it up and call it economics.

I wrote a comment, and then thought it might be a useful thing to expand on it a bit here:

This is a multi-pronged problem that will yield to no single solution.

The mere existance of the Canada Pension Plan (and the regular payroll deductions that fund current retirees) lull far too many Canadians into thinking that they’re going to be receiving enough money from CPP to carry on their pre-retirement lifestyle. That’s a huge, unconscious reason for people to fail to save for retirement.

Many Canadians have pension plans that are tied directly to their current employer. For the tiny fraction who successfully keep working for that firm/organization all the way to retirement age, it’s a winning bet. For far too many, three years in one plan, five years in another, seven years in a third will yield three miniscule pension cheques (far less than the amount if they’d been fifteen years in a single plan), as most pensions are geared to long-term employment. Given the commonly quoted notion that most Canadians will have three careers between entering the workforce and retiring, planning on putting in 20-25 years of pensionable work with a big firm is a pipe dream.

The banks and other finance organizations don’t help, either, as many of their print and online offerings for potential customers over-estimate financial needs (“What? I need $3 million to retire at 55? That’s impossible!”).

Schools don’t even attempt to provide financial planning information for students, and even if they did, who among us thought about retirement before age 35? It would likely be a wasted effort, unless it was a mandatory part of the graduation requirements. And even then, everyone under 25 thinks they’ll either live forever or be dead by 30, so it wouldn’t make much practical difference.

I’ve been in the working world for nearly 30 years, yet I’ve only ever worked for companies that had pension plans twice. In neither case did I work there long enough to accumulate any worthwhile seniority in the pension scheme (and given that neither company is still around today, I probably didn’t lose much). Among the other companies I’ve worked for, only two had Group RRSP plans (I think the closest US equivalent would be a 401(k) account). . . which paradoxically have been great for my long-term financial health. The broker for the plan at the first company is still the guy I call to get investment advice (each of us has moved on to different firms more than once, but it’s the personal relationship that matters).

I lost a lot of paper wealth in the last 12 months (at the worst, I was down over 45%). My investments — my retirement savings, that is — are back up to about 85% of their peak. If I hadn’t had to withdraw cash during periods of unemployment, I’d be closer to 95%. I’m nowhere near the multi-millions that the bank “planning software” says I should have at this point in my career, but I’m not panicking, yet.

September 17, 2009

Just how much do governments owe?

Filed under: Economics, Government — Tags: — Nicholas @ 07:51

The Economist has a depressing little graphic display for you, showing you just how much your government is in debt:

Global_Debt

September 14, 2009

QotD: Depoliticizing the economy

Filed under: Economics, Government, Politics, Quotations — Tags: — Nicholas @ 12:12

FOR years now, many businesses and individuals in the United States have been relying on the power of government, rather than competition in the marketplace, to increase their wealth. This is politicization of the economy. It made the financial crisis much worse, and the trend is accelerating.

Well before the financial crisis erupted, policy makers treated homeowners as a protected political class and gave mortgage-backed securities privileged regulatory treatment. Furthermore, they allowed and encouraged high leverage and the expectation of bailouts for creditors, which had been practiced numerous times, including the precedent of Long-Term Capital Management in 1998. Without these mistakes, the economy would not have been so invested in leverage and real estate and the financial crisis would have been much milder.

But we are now injecting politics ever more deeply into the American economy, whether it be in finance or in sectors like health care. Not only have we failed to learn from our mistakes, but also we’re repeating them on an ever-larger scale.

Tyler Cowan, “Where Politics Don’t Belong”, New York Times, 2009-09-12

August 24, 2009

QotD: The real reason Americans are angry

Filed under: Government, Politics, Quotations — Tags: , — Nicholas @ 08:05

Consistently, 60% or more of Americans have opposed the ongoing federal takeover of the domestic automobile industry. And for good reason, too, beyond the crazy economics of throwing good taxpayer money after bad private failure. TARP money was expressly earmarked by Congress for financial institutions, not auto (or any other kind of) manufacturers, which makes the Detroit bailout not only imprudent but illegal.

Financial industry bailouts, too, have been widely reviled. This past week Michael Moore released the trailer for his upcoming agitprop documentary “Capitalism: A Love Story,” and it’s filled with outrage at the fact that all us working shlubs are, without being asked for permission, shoveling over our hard-earned cash to a bunch of fat-cat Wall Street execs who made bad bets and lost. “Where’s our money?” the fat man asks. For a change, he’s right.

This isn’t about liberal or conservative, Democrat or Republican. A majority oppose Obama’s policies because they fly in the face of this country’s bedrock values of personal liberty and limited government. Robbing Peter to pay Goldman Sachs does violence to that fundamentally American ethos.

And increasingly, Obama administration policy does violence to European values, as well. The continent has for the last two decades been systematically disengaging national governments from domestic industries. Top officials from Sweden, of all places, complained about Washington’s auto bailout, tersely announcing that “The Swedish state is not prepared to own car factories.”

Matt Welch, “The Real Reason Americans Are Angry: It’s the Big Government, Stupid”, New York Post, 2009-08-23

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