Obama's economic thinking remains stuck in 2007. He assumes he can turn American into a social democratic state by taxing the top two percent, by closing loopholes on hedgefund managers, and the like.
Yet, the problem of the rich getting richer largely solved itself in a few days in early autumn of 2008. I suspect that hedge fund managers won't be a bottomless source of taxable income in 2009, and for a number of years to come.
So, Obama will eventually realize that he'll have to squeeze the upper middle class: families making from, say, $90,000 to $250,000. He'll have to raise income tax marginal rates on this broad expanse.
If Obama wants to try to preserve all the old age entitlements currently promised he has to jack up taxes even for people making below $90k. If he wants to expand entitlements (e.g. to provide health care benefits to more working age adults and children) then he has to increase taxes even further. The coming financial crisis due to unfunded old age entitlements is going to collide with Obama's ambition to expand other social programs aimed at his younger supporters. Obama stands by the standard liberal position that Social Security and Medicare require only minor tweaks. But this position won't be sustainable as more baby boomers retire. I'm expecting de facto rationing of medical care in response to the entitlements-driven fiscal crisis.
Harvard economics prof Greg Mankiw says even under optimistic assumptions about US economic recovery Obama is going to end up with deficits after the economy recovers larger than Bush had.
During the period 2005 to 2007, the U.S. unemployment rate hovered in the ballpark of 5 percent. What was the budget balance? According to OMB historical documents, the budget deficit averaged just under 2 percent of GDP during those three years.
Now compare these results to the new Obama budget. For the moment, let's put aside concerns about the economic forecast on which the budget is based and take their figures at face value. According to the Obama administration numbers, the economy will reach normalcy of 5 percent unemployment in year 2014, and they project unemployment remaining at that level thereafter. (I infer they take 5 percent to be an estimate of the natural rate of unemployment, which seems reasonable.) What happens to the budget balance when we get to that long-run equilibrium? According to their numbers, under their proposed policies, the budget deficit will average a bit over 3 percent of GDP during that time.
Megan Mcardle says three quarters of Obama's planned improvements to cut the spending deficit come from scaling down the Iraq war and his other expected improvements in the US federal government's budget come from sources that are unlikely to help as much as he projects.
Take the Iraq war. We were not, under any administration, going to spend as much in 2015 as we did in 2005. But by treating that spending as an ongoing cost, Obama now gets to take as much credit for reducing it as he would for closing permanent air bases in Germany, or trimming Social Security. Reducing the cost of "overseas contingency operations" acounts for $1.5 trillion of Obama's much vaunted $2 trillion in savings. Likewise the AMT fix--with high-end incomes falling, deflation in the air, and homeownership rates declining, AMT collections are going to decline even without a fix; this lets them recognize the entire decline at a time when the numbers are so large that taxpayers are too dazed to notice the fall.
The Obama administration is hardly the first to calculate the numbers to allow them to deliver upside surprises; during the Bush administration, the forecasts issued by the White House's Office and Management and Budget started to diverge from those of the Congressional Budget Office in an unexpected direction: they became markedly more pessimistic. Few people think it was an accident that this allowed the Bush administration to deliver a steady stream of "Surprise! The budget deficit is falling even faster than expected!" announcements.
Megan doesn't think most of Obama's other sources of revenue improvements will pan out.
Obama needs those big bath numbers on the Iraq side, because it seems unlikely that a lot of the things he's counting on to bailout his budget are going to materialize. Health care savings are often promised by American politicians, but so far never delivered. The cap and trade revenues which are supposed to deliver $625 billion over the next 10 years are going to be politically controversial, and also, highly dependent on energy demand--if there are too many permits, they won't yield much revenue.
I do not think cap and trade will pan out as a revenue source because I think carbon dioxide emissions will plunge without carbon taxes. We are very close to the arrival of the oil production downslope after Peak Oil. If khebab is right then we've already peaked and the early stages of the decline will be sharp. Less oil produced means less CO2 emitted. US oil consumption flattened in 2006 and 2007 and declined in 2008. We may already be looking at peak US oil demand in the rear view mirror.
Update: Obama wants to get more money from upper income earners. He claims only the top 2% need to pay in order to fix our budget deficit problem. Let us put that in perspective. The top 7% pay 62% of all federal tax receipts.
Consider the IRS data for 2006, the most recent year that such tax data are available and a good year for the economy and "the wealthiest 2%." Roughly 3.8 million filers had adjusted gross incomes above $200,000 in 2006. (That's about 7% of all returns; the data aren't broken down at the $250,000 point.) These people paid about $522 billion in income taxes, or roughly 62% of all federal individual income receipts. The richest 1% -- about 1.65 million filers making above $388,806 -- paid some $408 billion, or 39.9% of all income tax revenues, while earning about 22% of all reported U.S. income.
But that was in 2006 when the upper class were making big money. Their incomes have plummeted. Obama needs a lot more.
But let's not stop at a 42% top rate; as a thought experiment, let's go all the way. A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That's less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable "dime" of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion.
Fast forward to this year (and 2010) when the Wall Street meltdown and recession are going to mean far few taxpayers earning more than $500,000. Profits are plunging, businesses are cutting or eliminating dividends, hedge funds are rolling up, and, most of all, capital nationwide is on strike. Raising taxes now will thus yield far less revenue than it would have in 2006.
To pay for the old age medical entitlements will require several GDP percentage points. Make the taxes on the upper classes too high and they will not earn as much money. There are diminishing returns from higher tax rates and eventually higher taxes become counterproductive. So Obama will need to extend down his tax increases to the upper middle class and the middle class. But an attempt to do that will shrink his political base.
The carbon tax attracts him not just (or even mainly) because it deals with global warming (now rebranded as climate change). The carbon tax allows him to get more revenue without raising income taxes. To get more total GDP as taxes really requires more kinds of taxes. Value Added Tax is his best bet because it is much harder to avoid - spending abroad is the best way to avoid it.
California's unemployment rate jumped to 10.1 percent in January, the state's first double-digit jobless reading in a quarter-century.
The national unemployment rate is 2.5% lower. But it looks set to get worse and double digit national unemployment is a possibility. The US GDP declined 6.2% in 4Q 2008 according to revised figures.
America’s gross domestic product, the nation’s output of goods and services, plunged at an annual rate of 6.2 percent in the final quarter of 2008, according to revised figures released by the Commerce Department Friday. That’s the sharpest drop in GDP since the first quarter of 1982.
Economists at the investment firm Goldman Sachs estimate that the decline, coupled with another slide in the current quarter, may end up as the US economy’s worst back-to-back quarters in half a century.
Economists are predicting a further annual equivalent drop of as much as 5 per cent is US GDP in the present quarter, which would inflict the sharpest back-to-back decline in output over consecutive quarters since 1958.
Will 2Q 2009 be as bad? When is the bottom?
Economists are not making comparisons with the Great Depression of the 1930s, when the unemployment rate reached 25 percent. Current conditions are not even as poor as during the twin recessions of the 1980s, when unemployment exceeded 10 percent, though many experts assert this downturn is on track to be significantly worse.
Rather, economists are using the word depression — a subjective term with no academic definition — to describe a condition of broad and extreme economic distress that remains stubbornly in place for much longer than a typical downturn.
Will we develop a full-blown depression? The odds have gone up.
Allen Sinai, chief global economist at the research firm Decision Economics, sees a 20 percent chance of “a depressionlike possibility,” up from 15 percent a week ago.
“In the housing market, the financial system and the stock market, we’re already there,” Mr. Sinai said. “It is a depression.”
The sources of economic weakness in the fourth quarter were across the board. Consumer spending dropped at a 4.3% pace, its worst performance since 1980. Nonresidential private fixed investment — a.k.a. capital spending — fell at a 21.1% rate, the worst since 1975. Exports fell at a 23.6% annual pace, the worst since 1971. And residential investment was down at a 22.2% pace, but that's the worst only since the first quarter of 2008.
n the circumstances, comments by analysts that the data was "not good" and "seriously bad" were somewhat otiose. The Office for National Statistics confirmed today that the UK economy shrank by 1.5% in the final three months of 2008 and is on course for an annual decline in GDP this year of between 2.5% and 3%. But in Japan, things are much, much worse. Maya Bhandar at Lombard Street Research, says that the economy is contracting at an annualised rate of 14-15% in the current quarter.
Russia’s economy shrank 8.8 percent in January, compared with a year earlier, with the nation’s energy-reliant economy hit hard by a drop in oil prices. And Japan’s industrial production plunged at a record pace in January, as collapsing trade forced manufacturers to cut jobs.
Downturns after asset bubbles are much worse than downturns after inflation. Asset bubbles built on debt (as compared to stock market manias like the dot com era) are worse still because the eventual downturn makes much of that debt go bad and then banks become too crippled to lend. Downturns after asset bubbles are more deflationary due to excesses in productive capacity and in other assets with long lifetimes. The working off of excessive amounts of factories, office space, and housing is a slow and deflationary process. Hence the threat of a depression.
The Obama Administration is trying to avoid large bank failures and nationalizations. Nouriel Roubini says accept the inevitability of the bank failures and take them over temporarily to then re-privatize sound banks.
The man has instant impact on public debate. An idea he floated only last week -- that our "zombie banks" be temporarily nationalized -- aired first on Forbes.com, where he writes a weekly column. It has evolved, in the space of just a few days, from radical solution to almost received wisdom.
Last Sunday on ABC, George Stephanopoulos asked Lindsey Graham, the conservative Republican senator, what he thought about all this talk of bank nationalization. Mr. Graham said that he wouldn't take the idea off the table. And on Wednesday, Alan Greenspan told the Financial Times that "it may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring."
The US Federal Deposit Insurance Corporation is too small to take over Citibank and Bank of America. Their potential losses are too large. The nationalization would need to be done some other way or the FDIC would need a large cash injection.
Roubini says debt losses will keep piling up and will take down more banks.
"Six months from now," he replies, "even firms that today look solvent are going to look insolvent. Most of the major banks -- almost all of them -- are going to look insolvent. In which case, if you take them all over all at once, you cause less damage than if you would if you took over a couple now, and created so much confusion and panic and nervousness.
"Between guarantees, liquidity support, and capitalization, the government has provided between $7 trillion to $9 trillion of help to the financial system. De facto, the government is already controlling a good chunk of the banking system. The question is: Do you want to move to the de jure step."
A trillion here. A trillion there. This is starting to add up to real money. Your living standard is dropping.
The faster we get bad debt off of bank balance sheets the faster the recovery will begin. Nationalization wipes out the shareholders. But if nationalization is inevitable then we are better off doing it sooner rather than later.
Fed chairman Ben Bernanke says we do not have zombie banks. But the markets do not believe him.
On Capitol Hill today, Republican Senator Bob Corker has quizzed Ben Bernanke about the nationalisation speculation.
BOB CORKER: But it seems to me that this has been creating this sort of dead man walking, sort of zombie-like banking scenario, and while I have been not using these words out around, it seems to me that what you have explained is a creeping, a creeping nationalism of our banks.
BEN BERNANKE: I think zombie was not an appropriate description for any of the banks, I think they all have substantial franchise value, they're all lending, they're all active, they have substantial international franchises, so I don't think that's an accurate description.
These banks have franchise value. Sure, they have big customer bases. But that doesn't mean they are solvent. A lot of market participants think Citi and other big banks are already insolvent. The pessimists have been more accurate than the government so far. We can't see what is on their balance sheets. So we can only guess.
The Dow Jones Industrial Average plunged 250 points Monday to close at 7114.78, a nearly 12-year low. The last time the stock index closed below that level was May 7, 1997.
The S&P 500 also effectively erased more than 11 years of gains Monday, falling 26.7 points to close at 743.33. The technology-heavy Nasdaq index dropped 53.5 points to close at 1387.72 points, a level not seen since the dot-com bust of 2003.
Someone who started investing in a 401k or IRA starting in 1997 using actively managed mutual funds or index funds is much worse off than if they'd just put their money in bonds and certificates of deposit. In fact, their money is worth less than it was in 1997 once inflation adjustments are considered. The stock market is not always the best place to invest.
My worry is that we do not have good enough ways to save for retirement. If people become more determined to save will we end up in a Japanese style vicious circle of frugal saving and economic stagnation? My guess is that the American people aren't going to become as frugal as the Japanese.
The economic malaise that plagued Japan from the 1990s until the early 2000s brought stunted wages and depressed stock prices, turning free-spending consumers into misers and making them dead weight on Japan’s economy.
Today, years after the recovery, even well-off Japanese households use old bath water to do laundry, a popular way to save on utility bills. Sales of whiskey, the favorite drink among moneyed Tokyoites in the booming ’80s, have fallen to a fifth of their peak. And the nation is losing interest in cars; sales have fallen by half since 1990.
We need more productive ways to defer consumption. One of the appeals to me of rooftop home solar panels is that they provide a way for individuals to basically build up capital that will generate wealth for them in future years. Instead of buying consumer goods a person can buy solar panels that will pay back as electricity in the future. Home insulation serves a similar function as an expenditure that reduces future costs.
We need more ways to spend now to provide ourselves with goods and services in the future. People need ways to spend money in the present that creates demand in the present but less immediate benefit to the buyer and more long term benefit for the buyer. The financial markets are not secure enough as a way to do this.
Formerly chief of George W. Bush's Defense Policy Board in the run-up to the Iraq war, a huge supporter for the war, and leading neoconservative figure Richard Perle is trying to waltz away from his responsibility for the Iraq debacle. Cheeky devil. Dana Milbank is amazed.
In real life, Perle was the ideological architect of the Iraq war and of the Bush doctrine of preemptive attack. But at yesterday's forum of foreign policy intellectuals, he created a fantastic world in which:
1. Perle is not a neoconservative.
2. Neoconservatives do not exist.
3. Even if neoconservatives did exist, they certainly couldn't be blamed for the disasters of the past eight years.
"There is no such thing as a neoconservative foreign policy," Perle informed the gathering, hosted by National Interest magazine. "It is a left critique of what is believed by the commentator to be a right-wing policy."
Back in 2006 Richard Perle argued that the Iraq invasion could have turned out well if only Bush wasn't incompetent. Not the fault of Richard Perle. Only the fault of Dubya. He even says in retrospect he wouldn't advocate invasion seeing how things turned out. Geez, Bush wasn't an adequate implementer of Perle's policy and so Bush shouldn't have been entrusted with carrying it out. If only we knew in advance.
As soon as the term neocon became a dirty word some of the neocons started trying to disavow any knowledge or membership in the neocon circle of foreign policy intellectual activists. Yet, a history of the fight between paleoconservatives and neoconservatives shows that neocons are a real faction. Check out Scott McConnell's 2003 essay on the battles of these ideologues with other factions on the Right. They made a huge mistake in Iraq though, and some of them are trying very hard to distance themselves from it and from the very existence of their faction. They are trying to claim all of conservatism for their faction. What audacity.
Neoconservatism exists and Irving Kristol, one of its founders, acknowledges it as an ideology. But the ideological America of neocon imaginings is an enemy of the real America.
Update: Some of the neocons are going back into the Democratic Party. Is there some way to persuade all of them to make this switch?
Might there be a reunion, this time with the neocons courting the liberal hawks rather than the liberal hawks trying to court the neocons? The more conciliatory neocons have begun to send up signal flares. It isn’t simply David Brooks’s paeans to Obama. Robert Kagan has praised what he calls “Obama the Interventionist” in his Washington Post column: “Obama believes the world yearns to follow us, if only we restore our worthiness to lead. Personally, I like it.” Even the Weekly Standard has begun to reassess its seemingly intractable hostility to all things Clinton. Vigilant neocon-spotters will have noticed that the Standard featured not one but two items praising the idea of Hillary as secretary of state. The tone of both seemed to be “yes, we should.” Under the heading “Hail Clinton,” Michael Goldfarb, McCain’s deputy communications director during the campaign, blogged that she is “likely to be a nuisance to Obama whether she is inside or outside of his administration, but as our top diplomat she could reprise a role that made Powell a kingmaker in this year’s election. And perhaps she could even present the case for war with Iran to an insubordinate United Nations in the event that Obama’s personal diplomacy somehow fails to deter the mullahs from their present course.”
The Standard’s Noemie Emery went even further. In her view, “For the moment, Hillary Clinton will be the conservatives’ Woman in Washington, more attuned to their concerns on these issues than to those of the get-the-troops-home-now wing of her party, a strange turn of events for a woman whose husband was impeached by Republicans just ten years ago, and whose ascent that party had dreaded since she went to the Senate two years after that.” Indeed.
Maybe they'll succeed in making both of America's political parties nutty.
Low commodity and stock market prices make resource extraction companies a relative bargain compared to what they were 9 months ago. Eventual economic recovery will drive a rise in commodities prices. The Mandarins in Beijing see this as an opportunity. The government of China is buying into natural resources companies around the world.
The China Development Bank, for example, is financing China's biggest-ever foreign investment – a $19.5 billion bid by the mostly state-owned Aluminum Corp. of China for an 18 percent slice of Rio Tinto. The Australian mining company desperately needs the cash in order to pay off $19 billion in debt over the next two years.
That deal, still to be approved by Australian regulators, is seen here as a pathfinder. "It illustrates Chinese state business's strong capacity ... and gathered experience for state-owned firms to operate abroad in the future," explained an article published earlier this month in People's Daily.
Other recent multibillion-dollar deals include the purchase by China Petrochemical Corp., the country's second-largest oil producer, of Canada's Tanganyika Oil, which works in Syria, and the bid that China Minmetals has made for OZ Minerals, an Australian zinc producer on the verge of bankruptcy.
The Chinese are making oil deals with Russia and other countries. See the full text of the article.
China is already the biggest buyer of all commodities except oil (and maybe except natural gas?). China will eventually become the biggest buyer of all commodities with no exceptions. So these moves make sense.
After getting banned from Britain and faced with prosecution in the Netherlands for a film he made that is critical of Islam, Dutch MP Geert Wilders showed his film to some US lawmakers.
WASHINGTON — Republican Sen. Jon Kyl is hosting a film screening at the Capitol building on Thursday for a far-right Dutch lawmaker who claims that Islam inspires terrorism.
Kyl is sponsoring the event for Geert Wilders, who was denied entry to London earlier this month because British authorities said he posed a threat to public order.
Newsweek is, er, ambivalent about Wilders and sees his highly critical film about Islam, Fitna, as "incendiary". Geez, you mean it burns down skyscrapers?
Here's a speech Wilders just gave in Rome. The government of the Netherlands is treating Wilders as a criminal.
Ladies and gentlemen, I would not qualify myself as a free man. Four and a half years ago I lost my freedom. Since then I am under 24-hour police protection. As if that is not enough, the most radical Dutch Imam claimed 55.000 euros in compensation for his hurt feelings because of ‘Fitna’. The State of Jordan is possibly going to issue a request for my extradition to stand trial in Amman. The Amsterdam Court of Appeal ordered my criminal prosecution for making ‘Fitna’ and for my political views on Islam. And last week the British government refused my entrance into the United Kingdom because me showing ‘Fitna’ in the British House of Lords at the invitation of a British parliamentarian would be a threat to British public security. This is the alarming state of freedom of speech in today’s Europe: Criticizing Islam has become a dangerous activity, criticizing Islam has apparently become a criminal act.
But as Wilders argues, his film Fitna is really presenting Islam as a substantial chunk of Muslims see it. So shouldn't they be prosecuted too?
You just saw ‘Fitna’. My name is on the credit roll, but like you have seen, ‘Fitna’ is actually not made by me, but is made by radical Muslims, the Koran and Islam itself. If ‘Fitna’ is considered to be hate speech, then what is the Koran? If I am considered to be a threat to public security, then what is Islam?
He sees the Dutch court that wants him prosecuted and the British government as useful idiots for Islam.
The Court’s decision and my ban by the British government are two major victories for Islam. Both institutions have sided with Islam. The first Soviet leader, Lenin, once labelled ignorant people that unknowingly aided his cause as ‘useful idiots’. Well, the Court and the British government are the ‘useful idiots’ of today, and I think they are even proud of it.
When Lord Ahmed, who organized opposition to keep Wilders out of Britain, learned that Salman Rushdie was to get a knighthood Ahmed accused Rushdie of having blood on his hands. If Ahmed is the moderate face of Islam then moderate Islam is incompatible with Western institutions and values.
In London, Lord Ahmed, Britain's first Muslim peer, said he had been appalled by the award to a man he accused of having 'blood on his hands'.
Think that Muslims who advocate terrorism are extremists and not part of Muslim governments? When Rushdie was given his knighthood the Pakistani religious affairs minister justified suicide bombing in response to Rushdie's knighthood.
As Pakistani MPs issued a demand for the award to be immediately withdrawn, the religious affairs minister, Mohammad Ejaz-ul-Haq, said: "The West always wonders about the root cause of terrorism. Such actions [giving Sir Salman a knighthood] are the root cause of it.
"If someone commits suicide bombing to protect the honour of the Prophet Mohammad, his act is justified."
In fact, the 81-year-old former chairman of the Federal Reserve said, "I don't remember any time, maybe even the Great Depression, when things went down quite so fast."
He noted that industrial production is falling in countries across the globe faster than in the U.S., one result of the decline caused by the breakdown of unbridled financial markets that operated on a global scale.
"It's broken down in the face of almost all expectation and prediction," he noted.
Volcker is also one of the few economic thinkers out there who is not enchanted by the idea of this being a "Black Swan," or a once-in-100-years event: "The financial world follows a normal distribution pattern. If you think that you're a financial engineer, you're not a very good financial analyst."
The "Black Swan" interpretation is appealing to those (e.g. bank CEOs, financial regulators, politicians) who want to be absolved of responsibility. "Wasn't my fault that some extremely unlikely event happened".
I agree with Volcker that complex financial instruments that are touted as innovations are not adding any value.
Mr Volcker, a former chairman of the Federal Reserve famed for breaking the back of inflation in the early 1980s, mocked the argument that "financial innovation," a code word for risky securities, brought any great benefits to society. For most people, he said, the advent of the ATM machine was more crucial than any asset-backed bond.
"There is little correlation between sophistication of a banking system and productivity growth," he said.
What's more, according to the cabinet office in Japan, overseas orders fell a whopping 26.8% in December and 16.7% for the fourth quarter of 2008. While a manufacturing survey conducted by the cabinet office indicated core orders would rise 4.1% in the first quarter of 2009, we think this forecast may prove to be too optimistic. We would not be surprised to see core orders decline in each quarter of 2009. Japanese industrial production fell 9.6%. Exports fell 35.1%.
Also, according to the VDMA machine makers association, German plant and machinery orders fell a massive 40% in December from the same period a year ago, with export orders declining 30%. While mining-machinery orders are expected to increase in 2009, we believe the outlook could become more pessimistic with a further decline in commodity prices.
European industrial production dropped the most on record in December, pointing to a deepening economic slump in the fourth quarter.
Output in the euro region fell 12 percent from the year- earlier month after an 8.4 percent decline in November, the European Union’s statistics office in Luxembourg said today.
According to Barry Eichengreen, an economist at the University of California at Berkeley, the 40 percent decline in Taiwan's industrial production at the end of last year was the "canary in the coal mine" of Team Asia's formidable export machine. At about the same time, Japan's exports fell 35 percent, Korea's 17 percent, and China's fourth-quarter gross domestic product was essentially flat -- no economic growth at all.
A sharp drawback of global demand - especially from the U.S. - is dragging Japanese GDP down quickly.GDP fell largely on exports, which account for an average of 17% of overall domestic production (GDP) in the last three years. In the fourth quarter of 2008, real exports fell 13.9% since Q3, which is a massive 45% annualized decline. Anemic global demand is killing Japan.
An article in the Wall Street Journal asks "If Japan's economy collapses". That the WSJ is entertaining that possibility shows just how far things have deteriorated.
If Japan's economy collapses, supply chains across the globe will be affected and numerous economies will face severe disruptions, most notably China's. China is currently Japan's largest import provider, and the Japanese slowdown is creating tremendous pressure on Chinese factories. Just last week, the Chinese government announced that 20 million rural migrants had lost their jobs.
Closer to home, Japan may also start running out of surplus cash, which it has used to purchase U.S. securities for years. For the first time in a generation, Tokyo is running trade deficits -- five months in a row so far.
George Soros says the financial system collapsed and is on life support. That is an insightful way to characterize it. Most of our banks have failed but have been rescued by the US and other governments.
"We witnessed the collapse of the financial system," Soros said at a Columbia University dinner. "It was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom."
Where's the bottom? We are in deep trouble if the current rate of decline continues into the summer.
The government policy response has been enormous. Obama's intervention makes FDR's spending look like piker small stuff.
The 1930s began with federal outlays representing just 3.4 percent of the nation's economy as measured by the gross domestic product. Roosevelt's efforts to fight the Depression with government spending caused outlays to rise to 10.3 percent of GDP by 1939 and to 12 percent by 1941 on the eve of U.S. involvement in World War II.
By contrast, government spending was 21 percent of GDP last year. Obama's economic recovery policies are expected to bring it up to 30 percent or more.
"The New Deal by today's standards involved a minuscule amount of spending," said Allan J. Lichtman, a professor of political history at American University. He said Obama is more of a "big spender" than was Roosevelt.
But my eye was caught by the following chilling passage (yes, things are so bad that the summarized musings of central bankers can keep you up at night): “All participants anticipated that unemployment would remain substantially above its longer-run sustainable rate at the end of 2011, even absent further economic shocks; a few indicated that more than five to six years would be needed for the economy to converge to a longer-run path characterized by sustainable rates of output growth and unemployment and by an appropriate rate of inflation.”
6 years till normality? I was hoping we'd have a recovery before Peak Oil hit. Looking unlikely though.
People who think like Obama's Attorney General Eric Holder have created a legal and social atmosphere on the topic of race which causes most people to just shut up about it. What does Eric Holder say about this silence? He calls the silent scared people cowards.
Though this nation has proudly thought of itself as an ethnic melting pot, in things racial, we have always been, and we, I believe, continue to be, in too many ways, a nation of cowards. Though race-related issues continue to occupy a significant portion of our political discussion, and though there remain many unresolved racial issues in this nation, we, average Americans, simply do not talk enough with each other about things racial.
It is an issue that we have never been at ease with, and given our nation's history, this is in some way, understandable. And yet, if we are to make progress in this area, we must feel comfortable enough with one another, and tolerant enough of each other to have frank conversations about the racial matters that continue to divide us.
Tolerant enough? He's now a leader in the army of intolerance. I think what he's saying is that he doesn't want his enemies to wear camouflage.
Holder is going to hunt down corporations which reward based on performance and accuse them of racism when they reward Asians and whites more than blacks and Hispanics. Then he's going to call the masses cowards when the masses try to keep their heads down and not get noticed by his hunting club. Cheeky.
Holder thinks people should stand up and get punished without fear.
To respect one another, we must have a basic understanding of one another. And so, we should use events such as this to not only learn more about the fact of black history, but also to learn more about each other.
This will be, at first, a process that is both awkward and painful, but the rewards are, I believe, potentially great. The alternative is to allow to continue the polite, restrained mixing that now passes as meaningful interaction, but that in reality, accomplishes very little.
Imagine, if you will, situations where people, regardless of their skin color, could confront racial issues freely and without fear. The potential of this country, that is becoming increasingly more diverse, would be greatly enhanced. My fear, however, that we are taking steps that, rather than advancing us as a nation, are actually dividing us even further.
People respond to incentives and disincentives. Holder is a man of the Left. These responses frustrate him.
Imagine that for just one day everyone in America was honest about race. The following day the people who enforce the current boundaries of allowable discussion would proclaim that the previous day allowed us to air all of our misconceptions and reveal our ignorance so that now we could make progress and solve our problems involving race. They would then work to reestablish deterrence and silence people while proclaiming that the silent majority are cowards.
Update: On the other hand, If we could somehow get everyone to speak honestly about race people would feel less stressed about their race-related conversations and blacks would feel better about what they heard. At least that seems to be the results found by two Tufts U psychologists.
Self-control is one of our most cherished values. We applaud those with the discipline to regulate their appetites and actions, and we try hard to instill this virtue in our children. We celebrate the power of the mind to make hard choices and keep us on course. But is it possible that willpower can sometimes be an obstacle rather than a means to happiness and harmony?
Tufts University psychologists Evan Apfelbaum and Samuel Sommers were intrigued by the notion that too much self-control may indeed have a downside - and that relinquishing some power might be paradoxically tonic, both for individuals and for society.
They explored the virtue of powerlessness in the arena of race relations. They figured that well-intentioned people are careful - sometimes hyper-careful - not to say the wrong thing about race in a mixed-race group. Furthermore, they thought that such effortful self-control might actually cause both unease and guarded behavior, which could in turn be misconstrued as racial prejudice.
To test this, they ran a group of white volunteers through a series of computer-based mental exercises that are so challenging that they temporarily deplete the cognitive reserves needed for discipline. Once they had the volunteers in this compromised state of mind, they put them (and others not so depleted) into a social situation with the potential for racial tension - they met with either a white or black interviewer and discussed racial diversity. Afterward, the volunteers rated the interaction for comfort, awkwardness, and enjoyment. In addition, independent judges - both black and white - analyzed the five-minute interactions, commenting on how cautious the volunteers were, how direct in their answers - and how racially prejudiced.
As reported in Psychological Science, a journal of the Association for Psychological Science, those who were mentally depleted - that is, those lacking discipline and self-control - found talking about race with a black interviewer much more enjoyable than did those with their self-control intact. That's presumably because they weren't working so hard at monitoring and curbing what they said. What's more, independent black observers found that the powerless volunteers were much more direct and authentic in conversation. And perhaps most striking, blacks saw the less inhibited whites as less prejudiced against blacks. In other words, relinquishing power over oneself appears to thwart over-thinking and "liberate" people for more authentic relationships.
If we all spoke our true thoughts at the same time current mechanisms for controlling the boundaries of discussion would be totally overwhelmed. But I do not see a way to accomplish that level of coordination.
WASHINGTON - In the waning days of the Bush administration, Vice President Dick Cheney launched a last-ditch campaign to persuade his boss to pardon Lewis (Scooter) Libby - and was furious when President George W. Bush wouldn't budge.
It wasn't enough that Bush commuted Libby's 30 month prison sentence for perjury and obstruction of justice. Cheney wanted more. But even Bush is capable of learning.
About the same time, however, an official who has worked closely with both men mused that the relationship "isn't what it was" when Bush tapped Cheney as his running mate in 2000.
"It's been a long, long time since I've heard the President say, 'Run that by the vice president's office.' You used to hear that all the time."
I wonder if Bush decided that Libby pushed disastrous policies and lost sympathy for him.
Over the past 30 years, the returns have gradually disappeared under the pressure of foreign and domestic competition. Yet despite the gradual decline in the power of the union movement, autoworkers have nonetheless been able to negotiate pay and benefits, job security and work rules that have remained significantly more favorable than those at nonunionized factories run by foreign firms in the United States. Now, as General Motors and Chrysler enter the final phase of what amounts to a bankruptcy-like reorganization under the auspices of the U.S. Treasury, that unsustainable old model is at long last being put to rest.
Instead, a new model is emerging that follows the outline of earlier restructurings in the steel and other heavily unionized industries. Under such a model, Detroit's Big Three customers would finally be treated to cars that offer competitive performance and styling to go along with the competitive pricing of recent years.
Employees would be forced to accept lower base pay and benefits, in exchange for a reasonable share of company profits through a combination of performance bonuses and company stock held by the union health and retirement fund.
This is really the end of an era. It is amazing to me that the UAW has managed to ride the Big Three down to such an extreme before they finally had to stop getting wages and benefits so far above the market rate for low skilled manual labor. The losses the Big Three (and their creditors, suppliers, and stockholders) have experienced on the way down have been immense - especially in this final chapter.
The UAW has agreed to cuts in layoff benefits. Those layoff benefits mean the Big Three have to shell out large sums during recessions to supplement unemployment payments that laid off auto workers receive.
The United Auto Workers union, in deals with General Motors Corp. and other U.S. automakers, tentatively agreed to concessions that may include a pay freeze, cuts in layoff benefits and reductions in so-called skilled-trade positions, people familiar with the talks said.
The administration stepped back over the weekend from naming a "car czar," as it had planned, to oversee the restructuring. But according to people familiar with the task force, it named former Lazard Freres & Co. investment banker Ron Bloom a key adviser. Mr. Bloom, who made a name advising U.S. steelworkers to accept major concessions in several bankruptcy cases, is expected to take the task force's lead role, a senior U.S. Treasury official says.
People who know Mr. Bloom expect him to be tough on the auto makers, the United Auto Workers and other parties involved in their restructuring.
President Barack Obama’s top spokesman told reporters aboard Air Force One on Tuesday that he wouldn’t rule out bankruptcy for the Detroit automakers. But GM Chief Operating Officer Fritz Henderson said the bankruptcy scenarios the company has looked into would cost the government more than $30 billion. The worst would cost $100 billion because GM’s revenue would severely drop, he said, citing research suggesting that sales for a bankrupt automaker would “fall off a cliff.”
If the Big Three do not get big enough concessions they'll end up in bankruptcy in 2010 or 2011 if not sooner. BusinessWeek has a pretty good summary of where the Big Three stand with the UAW, debt holders, and their total costs.
A Muslim guy who founded a Muslim TV network in the United States in order to raise the image of Muslims in the US has been arrested for beheading his estranged wife.
The estranged wife of a Muslim television executive feared for her life after filing for divorce last month from her abusive husband, her attorney said — and was then found beheaded Thursday in his upstate New York television studio.
Aasiya Z. Hassan, 37, was found dead on Thursday at the offices of Bridges TV in Orchard Park, N.Y., near Buffalo. Her husband, Muzzammil Hassan, 44, has been charged with second-degree murder.
Stereotypes exist, by and large, because they have a basis in reality.
Muzzammil Hassan, the man who started a TV operation to improve the image of Islam, and then beheaded his wife, turns out to be something of an international man of mystery. Dan Riehl has been researching his background, and discovered that, despite claims he was raising money in America, he raised money for his TV operation in Saudi Arabia.
You know that old saying: You can take the wife-beheader out of the Middle East. But you can't take the Middle East out of the wife-beheader. What is the difference between the bulk of non-Muslim domestic violence and honor killing? Phyllis Chesler outlines the unique characteristics of honor killing. See table 1 at that link.
How much of this behavior is due to Islam and how much is due to consanguineous (cousin) marriage? Either way, we are importing a culture that condones it.
If you want beans, pasta or milk, you're out of luck at the El Barquero Supermarket in Caracas, Venezuela.
"Lentils, grains — you almost can't get them," purchaser Jose Rodriguez said by telephone. "We're always having shortages of one thing or another … and you can't import them because the government controls it all."
Price controls and currency controls lead to shortages. Is Venezuelan President Hugo Chavez surprised by this? Or does he see this as more evidence that Spanish-blooded middle and upper class capitalists are evil?
Inflation runs above 30%. Chávez has implemented price controls, but many producers have reacted by choosing not to sell their goods below what they consider fair cost — resulting in shortages of staple foods. The government has put strict controls on the buying and selling of dollars in an effort to prop up its currency, the Bolivar.
If the price of oil remains very low the rest of this year will the lower classes turn on Chavez? Oil prices will eventually recover. But the Venezuelan government is not investing enough in its nationalized oil industry and Venezuela is on a long decline in oil production anyway.
After nationalizing the holdings of ConocoPhilips (COP) and other oil companies Chávez is now trying to get Western oil companies to invest again now that he's in financial straits. Will any companies go for this?
Embracing the Western companies may be the only way to shore up Petróleos de Venezuela and the raft of social welfare programs, like health care and higher education for the poor, that have been made possible by oil proceeds and have helped bolster his popular support.
"If re-engaging with foreign oil companies is necessary to his political survival, then Chávez will do it," said Roger Tissot, an authority on Venezuela's oil industry at Gas Energy, a Brazilian consulting company focusing on Latin America. "He is a military man who understands losing a battle to win the war."
His nationalizations have left him heavily dependent on oil revenue to keep his regime in power.
Nationalizations in other sectors, like agriculture and steel manufacturing, are fueling capital flight, leaving Venezuela reliant on oil for about 93 percent of its export revenue in 2008, up from 69 percent in 1998 when Chávez was first elected.
One of the objectives of the Chavez government has been to promote the production and consumption of corn in place of wheat consumption which is largely imported. Chavez pointed out that wheat is of European origin and was first brought to the Americas by the Spanish. Corn, on the other hand, originated from the Americas and is produced locally. Chavez pointed out that Venezuela is now self-sufficient in corn production thanks to the agricultural policies of his government that have doubled production in the last 8 years. Currently Venezuelan production supplies 98 percent of national consumption of yellow corn and 100 percent of white corn.
I'm reminded of Atlas Shrugged and an obsession with soy production.
According to the Fed’s survey of consumer finances, released Thursday, average net worth is estimated to have fallen 22.7% from 2007 until October 2008. The median, or midpoint, fell a more modest 17.8%, suggesting declines were centered among wealthier families.
Easy come, easy go.
If the value of second homes and businesses are excluded, the Fed said in its report, average household net worth fell 12 percent, which reflects that such assets are "relatively concentrated among wealthier families."
We've given up all the gains of yet another bubble. I hope we can at least swim in place and not see even bigger declines than 2001 brought.
As of October, median net worth had fallen to $98,900, down 3.2% from the end of 2007 and 2% below the level reported in the 2001 survey that was conducted after the dot.com bubble burst. Since October, stock prices have fallen another 15%, while home prices have fallen at least 2%.
"Americans' personal net worth declined 11% Y/Y from the end of 3Q07 to the end of 3Q08... the largest (year-to-year) decline in 56 years for which the agency has data available."
But some of this net worth decline is not as bad as it looks. Housing price declines are cutting the prices on homes which otherwise are just as usable as when they cost more.
The median price of a U.S. home declined 12 percent to $180,100 from a year earlier and sales of properties with mortgages in default accounted for 45 percent of all transactions, the Chicago-based National Association of Realtors said today. Prices declined in almost nine out of every 10 cities.
For people who want to buy a home salaries aren't going up but then the prices of homes are going down. How this balances out varies from person to person.
About 33 percent of U.S. companies may freeze pay this year, an increase from 25 percent last year, according to a Jan. 22-29 survey of 400 mid-size and large companies released Feb. 9 by Mercer, a compensation consulting company in New York. The survey did not include questions about pay reductions.
Can we unravel the accumulated mountains of private sector debt without deep deflation?
Former president and senior Democratic statesman Bill Clinton has joined a growing drumbeat for government regulation of radio talk shows, claiming the U.S. "ought to have the Fairness Doctrine or we ought to have more balance on the other side."
More right wing people want to listen to political talk radio than do left wing people. Therefore there's more right wing talk radio hosts producing more right wing radio programs. What is wrong with that? If liberals, progressives, and the like really want more programming that agrees with their point of view then they should tune in to listen to more leftie programming.
But what the Democrats want to do is cut back on the number of right wing radio talkers. They want more lefties on the radio. The so-called "Fairness Doctrine" (Orwellian much?) will force radio stations to broadcast more lefties. These leftie shows will not generate enough ad revenue to pay for their programs. This will cause fewer conservative hosts to get programs since effectively the ad revenue from the conservative program will need to pay for the liberal leftie program as well. Assorted Democrats who have little interest in free speech think this is a peachy idea.
Sen. John Kerry , D-Mass., told WYNC's Bryan Lehrer Show in 2007, "I think the Fairness Doctrine ought to be there and I also think equal time doctrine ought to come back."
Last June, John Gizzi reported in Human Events a conversation with House Speaker Nancy Pelosi, D-Calif., in which he asked her if she personally supported revival of the policy.
"Yes," Pelosi answered.
One of the reasons there's so much rightward leaning talk radio is that leftward leaning people dominate most of the TV networks and major newspapers. That this domination isn't enough for them speaks volumes about their attitude toward dissent.
NEW YORK (CNNMoney.com) -- The Obama administration is looking at subsidizing the mortgage payments of struggling borrowers before they default, according to sources familiar with the discussions.
This plan subsidizes imprudent borrowers and imprudent lenders.
One of the goals is to prevent housing prices from declining. But doing that just slows the correction process.
Assisting borrowers before they default would help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.
"This will help put a floor on home values," said one person familiar with the negotiations.
When prices have been inflated to ridiculous bubble levels then prices must come back down to Earth. Trying to prevent the complete deflation of the housing bubble just delays the inevitable.
Also, propping up debtors is a bad idea when the biggest financial problem we face is too much private sector debt. We need to deleverage as rapidly as possible. Recovery isn't possible without deleveraging.
Declining home prices are good news. Lower prices are better than higher prices. Lower prices make goods and services more affordable and raise living standards. You do not hear that in the news media coverage of the financial crisis. But first time home buyers are finding much more affordable housing than just 2 or 3 years ago.
The housing bust is creating a new group of winners: first-time home buyers. People who sat on the sidelines -- often watching wistfully as their friends became homeowners -- are suddenly in a position to grab some great deals. Indeed, first-time home buyers made up 41% of all buyers at the end of 2008, up from 36% in 2006, according to a recent survey from the National Association of Realtors.
The new buyers are being lured in by home prices that are down about 25% from their peak levels in mid-2006, according to the S&P/Case-Schiller Index. In some markets, prices have dropped even further -- slumping around 40% in Phoenix, Miami and Las Vegas. Lower mortgage rates have also helped make real estate more affordable, and as houses languish on the market longer, more homeowners are willing to negotiate. With Congress considering plans to sweeten a tax credit for first-time home buyers, the picture could get even brighter.
Incentives for first-time home buyers are a bad idea. We are still trying to get over one housing bubble. This is not the time to try to start up a new bubble.
High prices make the large number of existing owners feel good. That biases politicians toward favoring high prices. But low prices are good, not high prices.
What I want to know: have lot prices fallen more or less than house prices? Construction costs have fallen too. So in each market have housing prices dropped below lot cost plus construction cost?
Steve Sailer's modest proposal to improve the investing and lending climate in America: force the banks to publish all their securities holdings on the web.
The other problem is something the government might possibly be able to help with. And that is that it's currently prudent to assume there is a high probability that any financial institution you might want to deal with could be broke because their books are black boxes, especially the mortgage-backed securities they own. So, you don't want to invest in them or lend them money because you don't understand their financial position. This uncertainty over the value of financial instruments linked to mortgages can make things even worse than they really are -- All we have to fear is fear itself, etc.
So, it's time for the government to open up the black boxes by requiring all parties to mortgages, mortgage-backed securities, and derivatives tied to mortgage-backed securities to post everything on line. Privacy be damned.
We taxpayers are on the hook to guarantee the deposits in all the banks. So I think this gives us the right to know how they are putting our money at risk. I also think this increased transparency would have salutary effects. Thinking about buying stock in Bank Of America or Wells Fargo? You have no idea how much trouble they are in because they hide too much. Rational stock analysis for these companies isn't possible that I can see. Some might be far better than others and deserving of much higher stock market values.
Also, I want the transparency because I want to know whether the US government is bailing out shareholders of failed banks. Which securities does the government buy from CitiBank versus from JP Morgan Chase versus Bank of America? What's the market price of the securities purchased from these banks?
Geert Wilders, a member of the Dutch Parliament and creator of a movie critical of Islam called Fitna, has been banned from visiting Britain to appear at a viewing of his movie. The British government sees Wilders as a threat to community harmony.
Dear Mr Wilders
The purpose of this letter is to inform you that the Secretary of State is of the view that your presence in the UK would pose a genuine, present and sufficiently serious threat to one of the fundamental interests of society. The Secretary of State is satisfied that your statements about Muslims and their beliefs, as expressed in your film Fitna and elsewhere, would threaten community harmony and therefore public security in the UK.
The British government sees Wilders as a threat to community harmony. Okay, suppose that is true. Why is that? Because the British government let into the country a group that is intolerant of criticism and which contains dangerous members who want to set up an Islamic state. The British government has decided to maintain harmony by appeasing these people. The British government has other choices here. It could deport people who are not willing to respect the right of others to criticise a hostile religion. Or it could vigorously enforce the law against Muslims in Britain who attempt to silence critics. But no, Britain has chosen appeasement.
Imagine that Wilders made a movie critical of Quakers. Would the British government fear Quaker reaction to the movie? Homie don't think so. If you have to keep someone out of your country because you have an ethnic group that gets violent about criticism this is nature's way of telling you to deport troublemakers until the trouble stops.
Derb says the British government puts placating Muslims ahead of a lot of other things.
Persons with incorrect opinions will not be admitted to the U.K., even if they are elected members of another nation's parliament. Nothing, nothing must be allowed if it gives offense to Muslims.
So let’s get this straight. The British government allows people to march through British streets screaming support for Hamas, it allows Hizb ut Tahrir to recruit on campus for the jihad against Britain and the west, it takes no action against a Muslim peer who threatens mass intimidation of Parliament, but it bans from the country a member of parliament of a European democracy who wishes to address the British Parliament on the threat to life and liberty in the west from religious fascism.
It is he, not them, who is considered a ‘serious threat to one of the fundamental interests of society’. Why? Because the result of this stand for life and liberty against those who would destroy them might be an attack by violent thugs. The response is not to face down such a threat of violence but to capitulate to it instead.
The Dutch government isn't any better. Wilders is going to be prosecuted for making remarks against Islam.
The Amsterdam court has ruled that the Public Prosecutor's Office should after all prosecute the populist politician Geert Wilders for anti-Islamic remarks. The Public Prosecutor decided halfway through last year, after six months investigation, not to prosecute on the grounds that Mr Wilders had not committed a punishable offence either in remarks he made to the Volkskrant newspaper or in his controversial film Fitna.
"Islam is a violent religion. If Mohammad lived here today I could imagine chasing him out of the country tarred and feathered as an extremist," Wilders said in an interview with De Pers daily last year.
(CNN) -- Federal judges tentatively ruled on Monday that California must reduce the number of inmates in its overcrowded prison system by up to 40 percent to stop a constitutional violation of prisoners' rights.
This is an erroneous statement:
"Overcrowding is the primary cause of the unconstitutional conditions that have been found to exist in the California prisons," the court concluded.
No, immigration is the primary cause of the overcrowding. A less criminal and smarter population could afford to build more prisons even as fewer people would become criminals.
California's ongoing fiscal crisis makes maintaining the prison population very difficult. A court order to cut overcrowding would put a lot of criminals out on the street.
Former governor Moonbeam, perhaps chastened by his experience as Mayor of Oakland, comes down on the side of sanity.
The California attorney general, Jerry Brown, vowed to appeal the ruling.
“This order, the latest intrusion by the federal judiciary into California’s prison system, is a blunt instrument that does not recognize the imperatives of public safety, nor the challenges of incarcerating criminals, many of whom are deeply disturbed,” Mr. Brown said in a statement.
Deeply disturbed? How about dangerous and evil? I think we need more morally absolutist Mormons on the federal bench for California.
Audacious Epigone takes a look at who believes in right and wrong. The Mormons are convinced that absolute right and wrong exist. Other groups, not so much.
- Below is a moral absolution index, computed by looking at responses to the question of whether or not there are "clear and absolute standards for what is right and wrong". The percentage of an affiliation's members who completely agree is counted as two points, the percentage that mostly agrees is counted as one point, that don't know or refused to answer as zero points, that mostly disagree as a negative one point, and that completely disagree as negative two points. The higher the score, the more morally absolutist an affiliation is. Conversely, the lower the score, the more morally relativistic it is:
Affiliation MA score 1. Mormon 121 2. Jehovah's Witness 119 3. Evangelical 117 4. Historically black 94 5. Catholic 91 All religious 89 6. Mainline Protestant 83 7. Muslim 79 8. Orthodox 73 9. Other Christian 69 10. Unaffiliated 55 11. Hindu 51 12. Jewish 38 13. Other non-Christian 28 14. Buddhist 4
Some non-religious folks see religion as an obstacle to a more rational society. I think we need to look more closely at the net effect of each religion rather than paint with such a broad brush.
What I wonder: how much of the effect above is a result of the sect or denomination's teachings versus people of a particular tendency being attracted to a religious faith that more closely matches their sense of life.
A good article by Jerome Groopman in The New Yorker includes a section on hearing loss among US veterans of the wars in Iraq and Afghanistan and the hearing loss they experience.
A recent report from the Department of Veterans Affairs estimated that nearly seventy thousand of the 1.3 million soldiers who have served in Iraq and Afghanistan are collecting disability for tinnitus, and more than fifty-eight thousand are on disability for hearing loss. In 2006, the V.A. reportedly spent five hundred and thirty-nine million dollars on payments to veterans with tinnitus. A survey of more than a hundred and forty-one thousand Army active-duty, reserve, and Guard members who were examined in audiology clinics from April, 2003, through March, 2004, showed that tinnitus accounted for more than thirty per cent of post-deployment-related diagnoses. The study, from the U.S. Army Center for Health Promotion and Preventive Medicine, concluded, “There were not adequate supplies of earplugs to fit all deploying soldiers. There was also failure of an Army medical readiness automation system . . . to provide unit commanders with information regarding troops having adequate hearing protection. . . . Finally, there is evidence . . . that soldiers having blast injuries may not have been referred to audiology for adequate evaluation and treatment.”
You gotta figure the number who are collecting disability is a fraction of the total that have suffered hearing losses. Plus, lots more will show hearing loss later in life as a result of their war experiences.
The US military lacks the resources needed to deal with the problem.
In the fall of 2004, in an article for Hearing Health titled “Troops Return with Alarming Rates of Hearing Loss,” Schulz wrote, “Unfortunately, the resources required to accomplish the hearing conservation mission throughout the armed forces are diminishing just as the problem worsens.” Positions for active-duty audiologists, Schulz noted, were quickly being eliminated; since 1990, these positions had dwindled from seventy-three to twenty-five, with six more posts expected to be eliminated in the coming years. Meanwhile, Schulz wrote, “In the Army . . . only forty-six per cent of those soldiers who require an annual hearing evaluation—because they are exposed to hazardous noise as a part of their routine duties—received one last year.”
Most of the article is about tinnitus research and treatment. But the part on the military shows yet another cost of America's wars in the Middle East.
Audacious Epigone takes a look at the General Social Surveys data to find that dimmer bulbs are more likely to favor more government intervention and ownership of industry.
In each of the three response pools, the percentage of people saying the government should control the respective industry is small, on the order of 3% to 5%. When it comes to financial services, the intelligence gap is minor. For manufacturing industries, it is more distinct. But the trend is consistent--duller people are more likely to favor government intervention into private industry than more intelligent people are.
Libertarians who support open borders need to come to grips with the fact that they are stoking the fires of government intervention into the economy.
This is bad news for libertarians and free marketeers since AudEpig also finds that dumber people are breeding like rabbits. This brings to mind the Harvey Danger Flagpole Sitter lyrics "That only stupid people are breeding. The cretins cloning and feeding".
He also finds that skinny conservative religious girls are less likely to cheat on their spouses. Why does skinniness help? Less sex drive?
Get a girl you're interested in to tell you all her thoughts on God and the President. Other things equal, find a conservative girl who loves Jesus (and probably her mom and daddy, too). The same advice applies to women seeking husbands. The firmer his theism is, the less likely he is to run around on you.
His GSS posts all make for enlightening reading.
The wild variations on the value of many bad bank assets can be seen by looking at one mortgage-backed bond recently analyzed by a division of Standard & Poor’s, the credit rating agency.
The financial institution that owns the bond calculates the value at 97 cents on the dollar, or a mere 3 percent loss. But S.& P. estimates it is worth 87 cents, based on the current loan-default rate, and could be worth 53 cents under a bleaker situation that contemplates a doubling of defaults. But even that might be optimistic, because the bond traded recently for just 38 cents on the dollar, reflecting the even gloomier outlook of investors.
With unemployment rising the loan-default rate will probably rise too. This particular bond isn't even on the principle mortgages. It is on secondary mortgages and the decline of home values makes the sale of many foreclosed houses worth less than their primary mortgages, let alone their secondaries.
The Standard & Poor’s group, Market, Credit and Risk Strategies, which operates independently from the company’s credit ratings business, has been studying troubled securities for investors and banks. The bond that is trading at 38 cents provides a vivid illustration of the dilemma in valuing these assets.
The bond is backed by 9,000 second mortgages used by borrowers who put down little or no money to buy homes. Nearly a quarter of the loans are delinquent, and losses on defaulted mortgages are averaging 40 percent. The security once had a top rating, triple-A.
It amazes me that credit ratings agencies ever triple-A rated secondary mortgages, let alone doing this at the top of a housing bubble when housing price-to-rent and price-to-income ratios were so far out of whack from historical averages. Spain, Ireland, Canada, and Britain were even more out of whack. These sorts of charts ought to be used when rating securities. Do S&P, Fitch, and Moody's use these sorts of ratios when calculating bond ratings?
S&P is making it harder for the banks to continue to carry mortgage-backed securities (MBS) on their books at unrealistic valuations. But closing the barn door after the horses have fled doesn't help as much as doing it before they gallop away.
There’s a saying about death by a thousand paper cuts, and that’s clearly been taking place for most of the private mortgage-backed securities market over the course of the past twelve months. On Monday, Standard & Poor’s Ratings Services lowered the boom — again — on thousands of Alt-A and subprime RMBS, moving them all to a ‘D’ rating, as well as cutting hundreds of formerly AAA-rated securities multiple notches from their previous perch atop the ratings heap. The agency also began cutting ratings on prime deals, as well.
This cuts the incentive of banks to hold onto these MBSs as the prices implied by their ratings are now closer to their market prices.
Which ratings agency has moved most quickly to get realistic about the ratings of MBSs? Is one of the ratings agencies less bad?
Update: The US homeownership rate has declined back down to the year 2000 level. The Rove-Bush plan for increased minority housing ownership has totally failed. In its wake lower income minorities are burdened with housing costs they can't afford.
The AP's analysis reveals the enormous scope of the U.S. housing market bust and how unevenly the burdens are spread, both geographically and demographically. And the situation is worsening — a record 10 percent of U.S. homeowners with a mortgage are at least one payment behind or were in foreclosure as of last fall, compared with 7.5 percent a year earlier and just under 6 percent in 2006.
The burden is clearly more arduous among minority households, the AP analysis found. Just under a third of Hispanic homeowners spend at least 38 percent of their income on housing expenses, compared with about a quarter of Asian and black households and nearly 16 percent of white households.
Do-gooders too often do bad.
About $6.1 trillion of value has been lost since the housing market peaked in the second quarter of 2006 and last year’s decline was almost triple the $1.3 trillion lost in 2007, Zillow said.
How many trillions more to the bottom? How many more banks fail along the way? How many will we bail out via the money we pay in taxes? We can't tell because as Mish Shedlock points out banks are hiding lots of assets off-balance sheet.
Although it is notoriously difficult to quantify the state of the rental market, rents fell in almost every sector of the Manhattan market last year, according to the Real Estate Group, a New York brokerage. The steepest drop was in one-bedrooms, down 5.7 percent in buildings with doormen and 6.53 percent in buildings without. The only category that rose: rents for two-bedroom apartments in doorman buildings, up just a bit, by 0.61 percent. But these numbers, like most available data, represent asking rents rather than the final price. Anecdotal evidence suggests that some people are negotiating rents as much as 20 percent lower than the original prices asked by landlords. These figures also leave out incentives, like a month of free rent or a landlord’s paying the broker fee, which can add up to real savings.
Still not affordable for the vast bulk of the US population.
Ms. Hsiao, 23, and her roommate, David Liu, 24, settled on a two-bedroom two-bathroom apartment in Midtown on the West Side. It was listed for $4,200. They offered $3,650 a month and were accepted. After one month free and a $2,000 signing bonus, the total came to $3,215 monthly, and they did not have to pay the broker’s fee.
The article also mentions a 3 bedroom apartment in Midtown for $7,400. That amount of money would pay the monthly mortgage on a house for over $1 million borrowed.
Peter Eavis of the Wall Street Journal reports that banks expect much higher rates of loan defaults if the unemployment rate hits 10%.
Despite all the pain in the financial sector, bank executives' biggest fear has yet to materialize. Now, it is rearing its ugly head.
Bankers' worst nightmare is the unemployment rate climbing toward 10%, a level at which credit losses could balloon unpredictably because of high defaults among people with previously strong credit histories.
At higher unemployment rates people with high credit scores start defaulting. They have higher incomes and have borrowed more than the lower income people with low credit scores.
Also last week, Kelly King, chief executive of regional bank BB&T, said unemployment of 8% to 8.5% is "kind of manageable," but 9% to 10% would "have a dramatic impact on our scenarios."
Why the trepidation of going above 9%? Take a regular credit-card book. Past data show that a percentage-point increase in unemployment leads to roughly a percentage-point rise in the charge-off rate, the amount of defaulted loans written off at a loss.
But as unemployment exceeds 9%, bankers think charge-offs will start to increase by more than the increase in unemployment. The reason? A high rate could cause an unprecedented wave of defaults among prime borrowers, who tend to have bigger loan balances.
These comments from BB&T's CEO are coming from a bank that did not go hog wild and issue lots of loans to unqualified home buyers. (and unlike, say, the failed Merrill Lynch, the bank didn't go ahead with its bonuses either)
BB&T Corporation, which earned $1.5 billion in net income in 2008, said today that members of its executive team will not receive annual bonuses under its short-term incentive plan.
"We have traditionally set very difficult goals, and although we are among the top performers in the financial industry in 2008, we did not earn a bonus based on our targets," said Chief Executive Officer Kelly S. King. "This has been an extremely difficult economic environment, even for well-capitalized and profitable financial institutions."
BB&T is one of the strongest capitalized financial institutions in the industry. BB&T's Tier I capital ratio, a measure of financial strength and soundness, is 12.0 percent, significantly higher than the government's safety threshold of 6 percent. BB&T's total capital ratio is 17.1 percent, notably higher than the government's minimum ratio to be well capitalized of 10 percent.
Recently retired BB&T former CEO John Allison says the huge banking crisis was caused by US government policies.
Despite what the news media keep saying, capitalism and deregulation were not the causes of the financial meltdown.
Instead, BB&T CEO John Allison pointed the finger at government creations like the Securities and Exchange Commission (SEC), Federal Deposit Insurance Corporation (FDIC) and Fannie Mae and Freddie Mac, the two government-sponsored enterprises that failed last year. Allison was giving a lecture in Washington, D.C. Jan. 29 for the Ayn Rand Center for Individual Rights.
Allison cited a “religious belief in affordable housing” that led the government to institute the Community Reinvestment Act of 1977 (CRA) and later, during the Clinton years, to a huge expansion of Fannie and Freddie.
“In my opinion, I’m certain without Freddie Mac and Fannie Mae we could not have had the magnitude of misinvestment – we’d a had misinvestment but nothing like what we’ve had today,” Allison said.
Coming from Allison, a bank boss who managed to avoid many of the mistakes that many other banks made, this explanation gains credibility. George W. Bush and Karl Rove built upon CRA to make the disaster monumental in scope. Also see how the CRA, by controlling which banks became big, selected for reckless banks to become big.
Update: So will unemployment rise high enough to put the sound banks into trouble? Nouriel Roubini thinks things will get substantially worse.
Even as he wins plaudits for his prescience, Roubini, 50, says worse lies ahead. Banks face bigger credit losses than they realize, more financial companies will require state takeovers and the world economy will keep shrinking throughout 2009, he says.
“The consensus is catching up with me, but it’s still behind,” Roubini said in an interview in Davos. “I don’t know what some people are smoking.”
I am thinking a 3Q 2009 beginning of recovery is looking less likely. The later the recovery starts the higher the unemployment rate will go.
Recessions and depressions, of course, are not good for mental health. But it is less widely known that in the United States and other affluent countries, physical health seems to improve, on average, during a downturn. Sure, it’s stressful to miss a paycheck, but eliminating the stresses of a job may have some beneficial effects. Perhaps more important, people may take fewer car trips, thus lowering the risk of accidents, and spend less on alcohol and tobacco. They also have more time for exercise and sleep, and tend to choose home cooking over fast food.
In a 2003 paper, “Healthy Living in Hard Times,” Christopher J. Ruhm, an economist at the University of North Carolina at Greensboro, found that the death rate falls as unemployment rises. In the United States, he found, a 1 percent increase in the unemployment rate, on average, decreases the death rate by 0.5 percent.
I used to drive to a supermarket that is pretty close to where I live. But a couple of years ago I started making myself walk instead. Now I walk to many places I used to drive to. Obviously, if you do live close enough to stores to walk you might still need to drive. Though a bicycle could easily make a 3 mile trip feasible without a car.
We aren't adapted to industrial civilization. Our ancestors evolved (really) under conditions far different than those we face today. We need to make choices and shape our environments in ways that will get us the exercise and diets which we are more suited to.