2009 April 29 Wednesday
The Rich Are Worried About Economic Depression

Those poor rich people, woe is them.

The "Survey of Affluence and Wealth in America," set to be released Wednesday by American Express Publishing and Harrison Group, will show that 53% of the nation's wealthy are now worried that they could run out of money, in large measure because many of the respondents fear the country is headed for an economic depression.

Except they are as happy as puppies.

"The irony is that despite the worries and the cutbacks and having to be more resourceful or spend less to make their money go further, the percentage of families reporting themselves to be very happy is up," Taylor added. "Two-thirds of the families say they are very happy, which is up since 2007." Taylor believes that represents a turn toward optimism. Tuesday's consumer confidence numbers generally showed a big step up in confidence, although the overall numbers remained in negative territory. See Economic Report.

What gives? Do they enjoy worry? Or are they happier when they feel more helpless? Or what?

By Randall Parker 2009 April 29 11:58 PM  Economics Elites
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Yemen As Worsening Basket Case

Avoid Yemen and expect it to get worse when the oil runs out.

Yemen, the poorest Arab nation, is seeing annual tourist numbers dwindle to the thousands from 100,000 two decades ago because of worsening security. This is ending government hopes that its historical landmarks, including the 3,000-year-old Queen of Sheba temple and four United Nations World Heritage sites, can generate revenue and jobs to diversify the oil-dominated economy.

The country’s 2.8 billion barrels of oil reserves, which fund 70 percent of the national budget, are forecast by the government to run out over the next decade. With little foreign aid, economic prospects are shrinking for a population that is expected to double by 2030 to 40 million.

A doubling population while per capita GDP declines. Terrorist attacks have caused the tourist industry in Yemen to go in sharp decline. Few tourists still go to Yemen. But if you want bragging rights for an experience none of your peers will have then Yemen does offer a rare exclusive experience.

That oil decline in Yemen is going to repeat in other countries. Think about where you want to be and what job you want to be doing when oil production starts down its final path of production decline.

Yemen's population age distribution is best viewed in charts. Suffice to say, an extremely young and rapidly growing population. Yemen's yearly per capita GDP is somewhere between $765 and $880 depending on who is doing the measuring.

Yemen is across the Gulf of Aden from the territory which is still called Somalia even though Somalia is effectively no longer a single country. Will Yemen also fall down into civil war? It is a place in desperate need of aggressive birth control. But Islam helps to keep the women down and pregnant.

By Randall Parker 2009 April 29 11:44 PM  Chaotic Regions
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Public Works Projects Go Over Budget Due To Lying

Lying about the reasonableness of cost estimates causes large cost overruns.

But a professor at Oxford University in England has done a compelling series of studies trying to get at why big public-works projects such as bridges, tunnels and light-rail systems almost always turn out to be far more costly than estimated.

"It cannot be explained by error," sums up one of his papers, matter-of-factly. "It is best explained by strategic misrepresentation — that is, lying."

The professor, Bent Flyvbjerg (pronounced flew-byair), has become a flash point in civic-planning circles. Some think he's a rock star; others say his analysis is too cynical.

Rail systems promoted by lovers of mass transit suffer from especially high rates of lying. What does this tell us about the most enthusiastic mass transit supporters?

It started seven years ago, when he published the first large study of cost overruns in 258 mega-transportation projects. He found that nine out of 10 came in over budget, and that the average cost overrun was nearly 30 percent. Rail systems had an average cost escalation of 45 percent.

Okay, how to reduce the lying? How to make cost estimates more realistic? Got any ideas?

By Randall Parker 2009 April 29 11:38 PM  Economics Government Costs
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2009 April 28 Tuesday
Grad School Like Detroit Auto Makers?

Mark C. Taylor, chair of the Columbia U religion department, argues in a New York Times Op-Ed that graduate school education in America is th Detroit of higher learning. I think this comparison is unfair to the auto industry.

GRADUATE education is the Detroit of higher learning. Most graduate programs in American universities produce a product for which there is no market (candidates for teaching positions that do not exist) and develop skills for which there is diminishing demand (research in subfields within subfields and publication in journals read by no one other than a few like-minded colleagues), all at a rapidly rising cost (sometimes well over $100,000 in student loans).

Consider, the cost of cars isn't going up as fast as the overall rate of inflation while universities are hiking their prices faster than the rate of education. Then there's quality. Detroit's made huge strides in improving quality.

The online realm is causing a collapse in printed newspaper circulation. Well, it is only a matter of time until online education starts making substantial inroads into live bricks-and-mortar education.

I see signs and indications that online education will take off and some colleges will get converted to commercial office buildings or other uses.

By Randall Parker 2009 April 28 12:12 AM  Education
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2009 April 26 Sunday
Russia Misallocates Resources Toward Military Spending

Never mind that Russia is sinking into a deep recession. Time to crank up military spending.

Russia's leaders are getting used to cutting budgets this year. As the country sinks deeper into recession — unemployment, according to some estimates, is as high as 12% and the economy is predicted to shrink by about 4.5% in 2009 — the government is slashing spending at most of its ministries. The Energy Ministry's budget is down by 33%, and that of the Transport Ministry by 30%. But there is one hugely expensive project on which President Dmitri Medvedev has vowed to actually increase spending: transforming Russia's creaking Soviet-era defense industry into a modern technological power, and turning the 1.1-million-man Russian army into a leaner but more effective fighting force.

The US maintains by far the largest military in the world. In 2008 the US spent $711 billion or 48% of world military expenditures. Russia spent only 5% of world military expenditures or only a little more than a tenth of US spending. In both cases this was mostly waste.

One of the reasons why the US supposedly needs to maintain high levels of military spending is to keep Middle Eastern oil flowing. Well stop and think about that. Imagine we invested some of that money in reducing the amount of oil we needed to buy. There are many ways to do that. The US government could, for example, offer big tax rebates on purchases of hybrids and other fuel efficient vehicles. The US government could also offer a trillion dollars in loan guarantees for nuclear power plant construction. Those loan guarantees would lower the cost of capital enough for nukes that they'd become much more competitive with dirtier coal plants.

The US government could also use regulations and tax rebates to shift a lot lot demand for short haul trucks and buses toward electric power and could do the same for long haul rail. Rail electrification could allow a shift from diesel to nuclear and wind powered rail. Less oil, less need for the Middle East.

Russia has much bigger problems and a much greater need for a shift of money from military spending to other types of spending. Russia's biggest problem is demographic: not enough babies. Russia could offer subsidies for smart people to have lots of babies. Anyone who tests above 120 IQ could get subsidies for baby making with each additional baby earning a larger subsidy than the previous one.

Russia also needs to spend on energy efficiency and nuclear power for when oil production enters its final phase of decline. America needs to do this too.

By Randall Parker 2009 April 26 11:34 AM  Russia
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2009 April 25 Saturday
Credit Default Swaps To Force GM Bankruptcy Filing?

Some GM bond holders are insured and would be better off if GM files for bankruptcy. So credit default swaps may cause GM's bankruptcy filing.

Put it this way: Treasury wants to get about 90% of the bondholders to take the debt-for-equity exchange. So you only need about $2.8 billion worth of debt in the hands of people who also own the swaps and a few others who won't take the deal to hold things up.

There are some $2.7 billion worth of GM credit default swaps swimming around in the market, says Tim Backshall of Credit Derivatives Research.

The Obama Administration would like to screw the bond holders to the extent possible in order to give more GM stock to the UAW for their medical retirement benefits. But in bankruptcy will bond holders or union medical retirements benefits hold more weight in the eyes of a US federal judge? Anyone have a good understanding of that one?

By Randall Parker 2009 April 25 09:45 AM  Economics Credit
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2009 April 24 Friday
Low Educational Achievement Seen Lowering US GDP

We'd be richer if the average American did as well in school as the average Finn.

Closing the educational-achievement gap between the U.S. and higher-performing nations such as Finland and South Korea could boost U.S. gross domestic product by as much as $2.3 trillion, or about 16%, according to a new study by McKinsey & Co., the international consulting concern.

The report, which used a formula McKinsey helped develop to link educational achievement to economic output, also estimated closing the gap in the U.S. between white students and their black and Latino peers could increase annual GDP by as much as an additional $525 billion, or about 4%.

In its report, McKinsey said existing achievement gaps have "created the equivalent of a permanent, deep recession in terms of the gap between actual and potential output in the economy."

That "permanent, deep recession" is going to get much bigger in coming decades.

Strangely enough, over at the New York Times Catherine Rampell speaks out of school when she points out that America spends big on education as compared to other countries with little to show for it.

Unfortunately, throwing money at the system doesn’t seem to help, either. As it is, the United States gets comparatively little bang for its buck on education spending. The United States spends more than any other country per point on the PISA math exam, and 60 percent more than the O.E.C.D. average:

Educators say "give us more money and then we can make it better". My reaction? MRD.

The abilities of students or failures of parents aren't politically correct explanations for low academic performance.

The New York City schools chancellor, Joel I. Klein, who introduced the findings at the National Press Club in Washington, said the study vindicated the idea that the root cause of test-score disparities was not poverty or family circumstances, but subpar teachers and principals. He pointed to an analysis in the report showing low-income black fourth graders from the city outperformed students in all other major urban districts on reading (they came in second in math).

The population growth of higher performing Asian immigrants is far too slow to make up for the huge influx of lower performing Hispanic Amerind immigrants. The Hispanics do not improve in academic performance after the second generation. But academic achievement is as much a symptom of deeper causes of economic achievement as it is a cause of economic achievement. A more powerful factor influences economic growth and does this at the level of nations. Though one can get in trouble for stating the obvious.

By Randall Parker 2009 April 24 12:14 AM  Education
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2009 April 22 Wednesday
Will Congress Repeal Real ID Act?

The Real ID Act, passed by the US Congress to make getting a driver's license more difficult for terrorists and illegal aliens, is under attack and Real ID might be repealed by Congress.

Homeland Security Secretary Janet Napolitano this week said she is working with governors to repeal the Real ID Act, which was passed in 2005 and went into effect last year.

One argument against the Real ID requirements is that they amount to an unfunded mandate on states. True. But states have become the de facto issuers of national ID cards. Identify theft and creation of false identities are enabled by the lax attitude the states take toward verifying identities before issuing drivers' licenses.

Back in June 2008 Napolitano as governor of Arizona signed a measure that rejected Real ID compliance.

On Tuesday, Gov. Janet Napolitano signed a measure, House Bill 2677, barring Arizona's compliance with the Real ID program. In so doing, she called it an unfunded federal mandate that would stick states such as Arizona with a multibillion-dollar bill for the cost to develop and implement the series of new fraud-proof identification cards.

The 9/11 Commission called for measures to cut back on criminal minds from getting ID that they don't deserve to have.

The Real ID Act, passed by Congress in 2005, was intended to create nationwide security standards for driver’s licenses to prevent them from falling into the hands of terrorists and illegal immigrants. The law is based on a recommendation by the 9/11 Commission, the independent panel that investigated the 2001 terrorist attacks and found that the Sept. 11 hijackers had obtained 30 pieces of state identification.

But states have revolted at Real ID, calling it an “unfunded federal mandate” that infringes on a core state responsibility: the issuance of driver’s licenses.

Since 2005, at least 18 states have passed legislation opposing Real ID, either through non-binding resolutions or through statutes that expressly prohibit participation in the program, according to a database kept by the National Conference of State Legislatures. The organization, which represents the nation’s more than 7,000 state legislators, will discuss the new congressional proposal on Friday (April 24) during its annual conference in Washington, D.C.

Some of the opposition to Real ID comes from people who do not want a crack down on illegal immigration. But not all the opposition stems from the debate over immigration.

Authentication that people are who they say they are is not a trivial problem to solve. Birth certificates are stored in county and city buildings all over the United States. There's no easy way to verify the authenticity of large numbers of birth certificates submitted at departments of motor vehicles as part of drivers license applications.

We need better measures for identifying people using false and stolen identities. Congress ought to enact other means for authenticating identity if Congress is going to repeal Real ID.

By Randall Parker 2009 April 22 11:39 PM  Immigration Law Enforcement
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2009 April 19 Sunday
Ignorance Cheaper Than Education For Many

A New York Times article explores the debt burden that many carry when they graduate from college.

“You often hear the quote that you can’t put a price on ignorance,” said Ezra Kazee, who has $29,000 in student debt and has been unable to find a job since graduating from Winona State University in Minnesota last May. “But with the way higher education is going, ignorance is looking more and more affordable every day.”

One guy in the article graduated with a $150,000 debt for training in visual design with $1500 per month payments and he can't find a job that pays anything more than his rent. Oh, and get this: student loans are now hard to discharge in bankruptcy. Go to school and become a serf. Colleges and universities are graduating indentured servants. How's that for enlightened liberalism?

You should not graduate with more total debt than your expected starting salary.

The average cumulative debt among graduating seniors is about $22,500, according to FinAid.org, a Web site that specializes in financial aid.

Mark Kantrowitz, publisher of FastWeb.com and FinAid.org, recommends that students follow a simple rule of thumb. “Do not borrow more than your expected starting salary for your entire undergraduate education,” he said. “If your starting salary is going to be $40,000, then you should borrow no more than $10,000 a year for a four-year degree.”

Higher education has become unaffordable. The return on investment is too low. What is needed to solve this problem? Here's a good start:

  • Make video recordings of lectures for large numbers of college courses. Put these lectures on the web.
  • Come up with standard tests for objective topics of study (e.g. calculus, physics, chemistry, etc). Put them on the web. Let people test their knowledge using web tests.
  • Provide walk-in testing facilities at state colleges (or other facilities) where people can pay to take standardized tests and get certified for their competence.
  • Certification requirements should be set by professional societies (e.g. American Chemical Society, American Physical Society). That way industry can know that possession of certificates of competency demonstrates understanding of substantial bodies of knowledge.

Basically, eliminate the need to go to bricks-and-mortar colleges. They cost too much. They take too much time. They are inconvenient with lecture times that reduce the ability of students to use their time effectively. Also, quality of teaching varies. Recorded lectures of the best teachers would raise the average level of viewed lectures.

By Randall Parker 2009 April 19 11:08 PM  Education
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Obama Administration Delays E-Verify Against Illegal Aliens Again

The Obama Administration inserts a third delay into an effort to make sure illegal aliens do not work for US federal contractors.

WASHINGTON—The applicability date of the final rule requiring federal contractors and subcontractors to begin using U.S. Citizenship and Immigration Services’ (USCIS) E-Verify system has been pushed back by six weeks to June 30, 2009.

The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (collectively known as the Federal Acquisitions Regulatory Councils) will publish an amendment in the Federal Register tomorrow postponing the applicability of the final rule until June 30, 2009. The rule requiring federal contractors and subcontractors to agree to electronically verify the employment eligibility of their employees was first published on Nov. 14, 2008, and went into effect on Jan 19, 2009.

The extension provides the Administration an adequate opportunity to review the entire rule prior to its applicability to federal contractors and subcontractors.

I doubt the Obama Administration ever would have initiated the E-Verify system of background checks for prospective employees if they had to decide at the start. Now they'd like to get out of it. But it is more visible to cancel it when it is fully developed and ready for more extended roll-out.

Says Mark Krikorian:

"An adequate opportunity to review the entire rule"? That sounds like bureaucrat-ese for "We're looking for a way to kill this thing without anyone noticing."

This stage of E-Verify use has already been delayed more than once.

WASHINGTON, D.C.—Agreeing to a request by the U.S. Chamber of Commerce, the federal government will delay until February 20, 2009 the implementation of a new procurement rule that requires federal contractors and subcontractors to use E-Verify. The rule was scheduled to take effect on January 15, 2009.

The US Chamber of Commerce opposes mandatory use of E-Verify. It would reduce the supply of cheap labor. So that's predictable.

Under current federal law, E-Verify use is strictly voluntary and the program may not be used to re-authorize existing employees. On December 23, 2008, the U.S. Chamber of Commerce filed a lawsuit challenging the use of an Executive Order to create a federal procurement rule requiring federal contractors with projects exceeding $100,000 and for sub-contractors with projects exceeding $3,000 to use E-Verify to authorize new employees and to re-authorize all of their existing employees.

The lawsuit, Chamber of Commerce, et al v. Chertoff, et al., is pending in the U.S. District Court for the District of Maryland. The Chamber's co-plaintiffs in the lawsuit are the Society for Human Resource Management, the Associated Builders and Contractors, the HR Policy Association, and the American Council on International Personnel.

It makes sense that the Associated Builders and Contractors oppose E-Verify since one seventh of the workforce used by construction companies are cheaper illegal aliens.

About one out of seven (or 15 percent) of workers employed in construction in the U.S. is an illegal immigrant.[1] Unless strong mechanisms are put in place to prevent the hiring of illegal immigrants, it is reasonable to expect that a similar proportion of workers hired for construction projects under the stimulus bill would be in the country illegally.

Part of the run-up in the federal debt is going to employ illegal aliens.

This delayed rule would more than double the number of companies using E-Verify by adding another 150,000.

Currently, 118,917 employers have signed up for E-Verify, which Congress established as a voluntary system.

E-Verify would be more efficient to use if it allowed pre-hire screening.

Stuebner told a federal official with the U.S. Department of Homeland Security that the process can be costly indirectly.

Employers can use the system only to check on an employee who recently has been hired, but not before that employee has been hired.

For Stuebner, whose 1,100 company has about an 80% turnover rate, that means providing the new employees with a uniform, training and other equipment. "We could spend more than a $100 on an employee only to find out that they can't work," he said.

1000 additional employers sign up with E-Verify every week.

E-Verify is a voluntary program for all employers, with very limited exceptions. Companies can access E-Verify online and compare an employee's Form I-9 information with over 444 million records in the SSA database, and more than 60 million records in Department of Homeland Security immigration databases. E-Verify is an essential tool for employers committed to maintaining a legal workforce, and the number of registered employers is growing by over 1,000 per week.

By Randall Parker 2009 April 19 12:04 PM  Immigration Law Enforcement
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Tax, Borrow, And Spend: America's New Political Model

The Democrats were the Tax And Spend Party. Then in response the Republicans became the Borrow And Spend Party. America has a competitive political market where the two parties try to outdo each other with new offerings. As a result, now the Democrats have now outdone the Republicans and become the Tax, Borrow And Spend Party. The ambition of the Democrats is startling.

The Congressional Budget Office estimated last month that President Barack Obama's budget proposals would produce $9.3 trillion in deficits over the next decade, a figure $2.3 trillion higher than the estimates in the administration's first budget proposal in February.

How were they able to do this? Events (the economic crisis) gave them an opening and they took it. Barack Obama's chief of staff, Rahm Emanuel, knows to exploit crises to achieve larger goals:

"Never let a serious crisis go to waste...it's an opportunity to do things you couldn't do before."

So the needed attitude was there at the highest levels. But what caused the Democrats to take this latest step? Clearly they wanted to increase spending for their constituencies and saw they could cover their spending plans inside of a need for fiscal stimulus. But the Republicans had already increased spending and had already created a big deficit in the process. Well, if the Democrats raised taxes they'd effectively just be funding spending increases that the Republicans already made. So the Republicans would get the credit for the hand-outs and if the Democrats had stuck with tax-and-spend then the Democrats would get blamed for the taxes to fund the spending increases the Republicans already made. So the Democrats felt compelled to do even bigger borrowing so that they could enact their own spending programs too.

David Walker, formerly comptroller general of the United States and head of the Government Accountability Office, argues that eventually taxes must double to pay for all the profligacy.

Meet Owen & Payne (www.owenandpayne.com), partners in a fictional accounting firm that specializes in helping Americans fill out the "new" Form 483000, which spells out how our elected officials are putting our nation into more and more debt and how that bill eventually will have to be paid: By doubling your taxes. The campaign is all in fun, but the intent is very serious.

Owen & Payne: Do you get the play on words?

Unless we begin to get our fiscal house in order, there's simply no other way to handle our ever-mounting debt burdens except by doubling taxes over time. Otherwise, our growing commitments for Medicare and Social Security benefits will gradually squeeze out spending on other vital programs such as education, research and development, and infrastructure.

Think of Tax, Borrow, And Spend as a bubble. Eventually the spending and borrowing will have to go down and the taxing will have to go up. The Democrats are carrying us the rest of the way to the top of the political economic bubble. But both parties contributed to the government bubble just as they both did to the private sector's financial bubble. While the private sector's bubble has popped the government's bubble is still inflating.

By Randall Parker 2009 April 19 12:17 AM  Economics Political
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2009 April 16 Thursday
Right Wing Extremists Seen As Threat

The US Department of Homeland Security has released a report entitled "Rightwing Extremism: Current Economic and Political Climate Fueling Resurgence in Radicalization and Recruitment" which has got me examining myself looking for evidence that I'm plotting terrorist activity. Maybe I'm not sufficiently self-aware to see the evidence in front of my eyes. Maybe all the people on the Right have got to take turns examining each other looking for the danger signs. I am as suspicious of my many immigration restrictionist readers as I am of myself. The report draws attention to our potential for violence.

Over the past five years, various rightwing extremists, including militias and white supremacists, have adopted the immigration issue as a call to action, rallying point, and recruiting tool. Debates over appropriate immigration levels and enforcement policy generally fall within the realm of protected political speech under the First Amendment, but in some cases, anti-immigration or strident pro-enforcement fervor has been directed against specific groups and has the potential to turn violent.

Maybe we should be deported to make America safe for illegal immigrants? I'm thinking a country could be set up just for us dangerous right-wingers. Maybe evacuate Argentina and let all the Argentinians come to America. Then all the American right-wingers could go to Argentina to place us far from high left-liberal civilization. Work for you?

Since veterans returning from the Iraq war are dangerous they too should be transferred to Argentina. In fact, anyone sent out to defend the empire should be given a land grant in some area of the empire instead of being allowed home again.

DHS/I&A assesses that rightwing extremists will attempt to recruit and radicalize returning veterans in order to exploit their skills and knowledge derived from military training and combat. These skills and knowledge have the potential to boost the capabilities of extremists—including lone wolves or small terrorist cells—to carry out violence. The willingness of a small percentage of military personnel to join extremist groups during the 1990s because they were disgruntled, disillusioned, or suffering from the psychological effects of war is being replicated today.

As a recent Pew Research Center poll shows the Right is so dangerous that it fails to recognize Barack Obama as an absolutely great and glorious President. A full 73% of Republicans reject the Messiah.

For all of his hopes about bipartisanship, Barack Obama has the most polarized early job approval ratings of any president in the past four decades. The 61-point partisan gap in opinions about Obama's job performance is the result of a combination of high Democratic ratings for the president -- 88% job approval among Democrats -- and relatively low approval ratings among Republicans (27%).

People who aren't infatuated with our maximal leader could be dangerous.

My worry is that more than just the Republicans are dangerous immigration extremists.

Sixty-six percent (66%) of likely voters nationwide say it is Very Important for the government to improve its enforcement of the borders and reduce illegal immigration. However, the latest Rasmussen Reports national telephone survey found that just 32% of America’s Political Class agrees.

We might need to deport two thirds of the existing American citizens to make America safe for illegal immigrants.

People who get involved in politics are suspect too. Peope who get involved in order to protect themselves from government are therefore today trying to protect themselves from Barack Obama. What a suspect motivation.

Forty-five percent (45%) of Americans adults say most people get involved in politics to protect themselves from what the government might do, according to a new Rasmussen Reports national telephone survey.

Forty-four percent (44%) believe most get involved in politics to help make the country better.

By Randall Parker 2009 April 16 06:05 PM  Elites Betrayal And Incompetence
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2009 April 15 Wednesday
How To Reduce Lemming Behavior In Banks?

Felix Salmon argues financial disasters come when all market players use the same model and they all make the same mistakes.

In 2007, the damage was limited: there was a lot of fallout in the world of hedge funds, but the stock market continued to rise, and the systemic implications seemed to be contained. But the adoption of the Gaussian copula function was much more widespread than a bunch of hedge funds: it was embraced at pretty much every CDO origination and trading desk on Wall Street. And when the entire financial system starts using essentially the same model, the systemic devastation which can result is enormous.

The use of flawed mathematical models (and all financial models will have flaws) causes lemming-like behavior by banks. This leads to the kind of financial crisis we are passing through.

Salmon argues for limits on bank size and also do not let banks do thinks that their regulators can not understand.

My feeling is that the best way to go is to set some very clear and simple rules, much as the Spanish central bank did, and refuse to allow banks to build enormous businesses doing things that the regulators don’t understand. And secondly to place a cap on banks’ balance sheets — I think something around $300 billion is reasonable, and that there’s no reason why any bank should be bigger than that. Alternatively, if you are bigger than that, then you have to become much more constrained in what kind of activities you’re involved in: you should basically just be doing plain-vanilla deposit-taking, borrowing, and lending.

Regards bank size: Would we then just get lots of smaller banks making the same mistake? I'd like to know the mortgage default rates of the average small, medium, and large bank in 2008 and 2009. Did the smaller ones perform better?

By Randall Parker 2009 April 15 09:24 PM  Economics Financial Regulation
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2009 April 14 Tuesday
Unions Want Cuts In Imported Temporary Workers

More supply lowers price and unions do not want lower prices for labor. Unfortunately for unions the elite of Democratic Party want lower labor costs just like the elite of the Republican Party.

Union officials are embarking on what is likely to be a protracted fight with business over the programs that enable immigrants to enter the country for temporary work.

On Tuesday, leaders of two rival labor federations announced a framework for overhauling the U.S. immigration system that includes setting up an independent commission to assess how many immigrants should be admitted to fill temporary and permanent jobs without displacing U.S. workers.

The AFL-CIO and Change to Win propose that such a commission would analyze regional and industry needs to make recommendations to Congress on annual levels of employment visas. The unions argue that current visa levels are outdated and often keep immigrant workers in temporary status, with fewer benefits and job protections. Business groups say temporary-worker programs are effective and don't disadvantage workers.

Immigrants lower labor costs for business. If the immigrants are extremely productive then they develop more products and services and cause a net increase in labor demand. But most immigrants do not make big contributions to overall productivity and innovation. So business gets lower labor costs. But the rest of us do not benefit.

By Randall Parker 2009 April 14 11:40 PM  Immigration Labor Market
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2009 April 12 Sunday
Rising Criminal Illegal Alien Imprisonment Costs

California spends $970 million per year imprisoning illegal immigrants.

Reporting from Washington -- Fifteen years after Congress promised that Washington would help states pick up the tab for imprisoning illegal immigrants convicted of crimes, California is receiving but a fraction -- less than 12 cents on the dollar -- of its nearly $1-billion annual cost.

The problem is that illegal immigrant criminals in other states are growing in numbers and other states are getting more of the federal money for locking up illegals.

But Congress this year provided $400 million nationwide to cover the cost of keeping illegal immigrants behind bars, less than what was provided a decade ago. In that same period, California's share of the federal money has declined from 68% to 39%.

"California's percentage of the total amount gets smaller and smaller each year as the issue of criminal aliens becomes more of a national problem," said Rep. Howard L. Berman (D-Valley Village).

Deport all the illegals and stop letting new illegals from crossing the border. Save billions per year. But even as the economy tosses over 600,000 people per month into the unemployment rolls Obama the Messiah wants an immigration amnesty. He wants to forgive them for some their sins. Messiahs can do that.

By Randall Parker 2009 April 12 11:45 PM  Immigration Crime
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2009 April 10 Friday
Only 53% Of American Adults Prefer Capitalism Over Socialism

Never mind that capitalism produces the goods and services.

Only 53% of American adults believe capitalism is better than socialism.

The latest Rasmussen Reports national telephone survey found that 20% disagree and say socialism is better. Twenty-seven percent (27%) are not sure which is better.

Adults under 30 are essentially evenly divided: 37% prefer capitalism, 33% socialism, and 30% are undecided. Thirty-somethings are a bit more supportive of the free-enterprise approach with 49% for capitalism and 26% for socialism. Adults over 40 strongly favor capitalism, and just 13% of those older Americans believe socialism is better.

I'd really like to see a break-down by race. Are the growing ethnic groups less supportive of capitalism than whites? My guess is "yes". So support for capitalism will probably decline long term. It is all part of being a libertarian open borders society. More freedom means less freedom. War is peace.

By Randall Parker 2009 April 10 01:04 PM  Cultural Wars Western
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2009 April 08 Wednesday
Insurgency And Social Networks In Iraq

Noah Shachtman has written a good piece in Wired about war in Iraq entitled How Technology Almost Lost the War: In Iraq, the Critical Networks Are Social — Not Electronic.

Cebrowski and Garstka wrote about a different kind of power, one that came when connected troops started to share information in ways that circumvented, and bypassed, the Industrial Age military chain of command. But that helps only if troops can connect in the first place. It can take up to a week for them to wrangle their laptops into updating the biometric databases that track who gets in and out of Fallujah. Intelligence reports can take even longer. The people best equipped to win the battle for people's minds — US troops on the ground, local policemen, Iraqi Army officers, tribal leaders — are left out of CPOF's network. It's a bandwidth hog, and the soldiers and marines fighting these counterinsurgencies aren't exactly carrying around T3 lines. Only recently did infantrymen like the ones in Fallujah even get their own radios. The Pentagon's sluggish structure for buying new gear means it can take up to a decade to get soldiers equipped. (Though to be fair, CPOF was purchased and deployed years ahead of schedule.) In Fallujah, the marines of Fox Company, based in an abandoned train station, mostly use their CPOF terminal to generate local maps, which they export to PowerPoint. Their buddies in Fox Company's first platoon, working out of a police precinct, have it even worse. When they want to get online, they have to drive to the station.

The military built an expensive top-down computer network that doesn't address the biggest problem in Iraq: the relationships of the people. The military's network is still useful. But understanding the Iraqis and interacting with them successfully requires a lot more people skills.

The number of people on the military network is far too small for the network to contain useful info about Iraqi social networks.

As for Iraqi access, while CPOF technically isn't classified, all of the data on it is. Locals can't see the information or update any of those databases with their own intelligence. A key tenet of network theory is that a network's power grows with every new node. But that's only if every node gets as good as it gives. In Iraq, the most important nodes in this fight are all but cut off.

The insurgents are using technology with a more bottom-up approach.

Meanwhile, insurgent forces cherry-pick the best US tech: disposable email addresses, anonymous Internet accounts, the latest radios. They do everything online: recruiting, fundraising, trading bomb-building tips, spreading propaganda, even selling T-shirts. And every American-financed move to reinforce Iraq's civilian infrastructure only makes it easier for the insurgents to operate. Every new Internet café is a center for insurgent operations. Every new cell tower means a hundred new nodes on the insurgent network. And, of course, the insurgents know the language and understand the local culture. Which means they plug into Iraq's larger social web more easily than an American ever could. As John Abizaid, Franks' successor at Central Command, told a conference earlier this year, "This enemy is better networked than we are."

Lower tech approaches are more efficacious.

So Colabuno started spoofing the insurgents' posters instead. He put a logo similar to that of the terrorist Islamic Army at the top of a simple black-and-white sheet. "A young boy died while wearing a suicide vest given to him by criminals," one flyer read. "You should remember that whoever makes lies about Allah should reserve his seat in hell." The extremists went nuts — screaming at shopkeepers and locals who posted the flyers, blaming other insurgents for defaming their good names. All the while, Americans watched the action through high-powered surveillance cameras. Consequently the marines knew who to question, and who to capture or kill. "We know where you are and what you are doing," another poster proclaimed. "Who will you trust now?"

The whole article is a good read. It brings to mind US Army captain Stuart Herrington's book about his time in Vietnam: Silence Was A Weapon: The Vietnam War in the Villages. Human relationships are key in an insurgency. Weaponry matters far less.

By Randall Parker 2009 April 08 10:44 PM  MidEast Iraq Military Needs
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2009 April 06 Monday
Early Primary States Get More US Federal Aid

If you vote early for the winner your state will get more bucks from the government.

The 2008 presidential campaign season had the earliest statewide primaries and caucuses in memory, starting with the Iowa Caucus on Jan. 3. Now research from North Carolina State University shows that states may have good reason to push for an early contest. States that hold early presidential primaries or caucuses get a larger share of per capita federal procurement spending compared to other states, the new study says. But being early is not enough, study author Dr. Andrew Taylor says – states must also pick the winner.

"Obviously this has real-world ramifications," Taylor says. "Here is some evidence that order does matter, and that there is some incentive for states to try to move forward in the presidential nomination process."

Evaluating data from 1984 through 2004, the new report finds that the earlier a state holds its primary or caucus, the more federal procurement funding it receives per capita – as long as it backed the candidate who ultimately won the White House. Taylor explains that states receive minimal benefit if they vote early but back a candidate who ultimately drops out of the race or loses the election. Federal procurement is federal funding for goods and services, such as defense contracts.

States that hold later contests, after the field of candidates has been narrowed, have a better chance at picking the winning candidate. But Taylor says that advantage is effectively negated, because states with later primaries or caucuses won't receive much - if any - added benefit for backing the winner.

For example, Taylor's research shows that "If the first state chooses the ultimately victorious presidential candidate in a competitive nomination ... it receives $35.29 more in procurement per capita than if it had picked a loser." In comparison, the benefit if the eighth state picks the eventual winner would be approximately $22.05 more in procurement per capita. Beyond the ninth contest, Taylor says, the benefits are no longer statistically significant.

Pretty small winnings though.

By Randall Parker 2009 April 06 11:10 PM  Politics Money
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Stand Firm For State-Sanctioned Killing Of Apostates

Razib published a message from the Muslim chaplain at Harvard, Taha Abdul-Basser, who basically seems to be arguing for only Muslim governments to kill apostates and not vigilantes. That's the kind of enlightened modern state-supporting reasoning I expect to hear coming out of Harvard.

There are a few places on the Net where one can find informed discussions of this issue (Search ["Abdul Hakim Murad"|Faraz Rabbani" AND "apostasy"]) . The preponderant position in all of the 4 sunni madhahib (and apparently others of the remaining eight according to one contemporary `alim) is that the verdict is capital punishment.

Of concern for us is that this can only occur in the_domain and under supervision of Muslim governmental authority and can not be performed by non-state, private actors._

Imagine the United States didn't let Muslims into the country. Then we wouldn't have a Muslim chaplain at Harvard who thinks Muslim governments should possess a monopoly of force for killing apostates.

Beware hegemonic human rights discourse. Do not feel uncomfortable in the face of it. Stand firm for 7th century desert tribe morality.

I would finally note that there is great wisdom (hikma) associated with the established and preserved position (capital punishment) and so, even if it makes some uncomfortable in the face of the hegemonic modern human rights discourse, one should not dismiss it out of hand. The formal consideration of excuses for the accused and the absence of Muslim governmental authority in our case here in the North/West is for dealing with the issue practically.

Says Razib:

Taha Abdul-Basser is a graduate of Harvard, so that must be how he learned phrases like “hegemonic modern human rights discourse.”

That is so cool. Abdul-Basser goes to Harvard and learns out to use Leftist speak in the service of an argument for killing those who fall away from Islam. That shows the advantage of international student bodies in American universities.

By Randall Parker 2009 April 06 10:58 PM  Civilizations Clash Of
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Razib Sees More Skepticism In Wake Of Financial Crisis

Razib Khan thinks that while America has shifted Left in terms of many policies that a conservative skepticism toward social and financial engineers is growing. I agree. We have incompetent elites and the public is starting to notice.

Despite the fact that here in the United States we are on the precipice of verging to the Left, I can’t but help wonder if the ultimate results of the current crisis will be conservative. Not conservative in specific ways such as the election of conservative governments or greater faith in modern capitalism, but a deep conservatism of disposition which is nourished by the jaundiced skepticism which is in the air. Skepticism of the efficacy of government in the face of corrupt capitalism. Skepticism as to the virtue of the free market. Skepticism of engineering, financial and social. Skepticism of the goodness of one’s fellow man and the inevitable ascent toward the pinnacle of progress.

Though prehaps you’ll find it ironic that my pessimism about the current state of affairs makes me optimistic, so to speak, about conservatism.

I come across indicators from unexpected places that our elites are making wrong decisions. Nobel-winning economist and New York Times "Conscience of a Liberal" columnist Paul Krugman - not exactly a poster child of conservative thinking - argues that Obama's economic team are pursuing the wrong policies to the banking crisis.

After all, we’ve just been through the firestorm over the A.I.G. bonuses, during which administration officials claimed that they knew nothing, couldn’t do anything, and anyway it was someone else’s fault. Meanwhile, the administration has failed to quell the public’s doubts about what banks are doing with taxpayer money.

And now Mr. Obama has apparently settled on a financial plan that, in essence, assumes that banks are fundamentally sound and that bankers know what they’re doing.

It’s as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street. And by the time Mr. Obama realizes that he needs to change course, his political capital may be gone.

Wall Street isn't competently led. Washington DC isn't competently led. I hope this does not matter too much. I hope that lots of people and companies can work out how to make their industries work better in spite of the mistakes getting made in America's twin centers of power in NYC and DC.

By Randall Parker 2009 April 06 10:42 PM  Elites Betrayal And Incompetence
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2009 April 05 Sunday
Obama Wants To Keep Poor People In Expensive Homes

The first group here is the group that shouldn't be living where they are living.

The first group is made up of people who cannot afford their mortgages and have fallen behind on their monthly payments. Many took out loans they were never going to be able to afford, while others have since lost their jobs. About three million households — and rising — fall into this category. Without help, they will lose their homes.

The second group is far larger. It is made up of the more than 10 million households that can afford their monthly payments but whose houses are worth less than what is owed on their mortgages. In real estate parlance, they are underwater. If they want to stay in their homes, they will have no trouble doing so. But some may choose to walk away voluntarily, rather than continue to make payments on an investment that may never pay off.

Scratch beneath the details of any housing bailout proposal, and the fundamental issue is whether it tries to help the second group or just the first.

My initial reaction to reading the above is that of course the first group need to give up their homes and move down into smaller cheaper accommodations. Whereas we should want the second group who can afford to pay their mortgages to stay put and keep paying. But I do not think like a liberal Democrat. Obama wants people to stay in houses that they should never have bought in the first place.

Mr. Obama has evidently decided to focus on the first group, based on the previews of his speech that aides have offered. In coming weeks, his administration will begin spending $50 billion to entice banks to reduce the monthly payments of people who otherwise couldn’t afford to stay in their houses.

So basically this amounts to subsidized housing in the suburbs. Cheat on your mortgage appication, get way in over your head, and his sainthood will bail you out at the expense of net taxpayers.

By Randall Parker 2009 April 05 10:31 PM  Economics Housing
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Obama Wants Turkey In European Union

Obama says putting Turkey in Europe would send a signal. Yes, but would this signal help us or hurt us?

US President Barack Obama has arrived in Turkey on a two-day visit, after giving his support to Ankara's efforts to join the European Union.

He said Turkey's accession to the EU would send an important signal to the Muslim world and firmly anchor the country in Europe.

What signal I think it would send: Muslims can overwhelm Europe demographically. The biggest country in the EU would be Muslim. That's a stupid thing to do. Obama is supposed to be smart. So why does he advocate a stupid policy?

By Randall Parker 2009 April 05 06:59 PM  Elites Betrayal And Incompetence
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2009 April 04 Saturday
US Social Security Trust Fund Surplus Disappears Decade Early

Unfunded old age pension liabilities are getting bigger sooner in the US of A.

The U.S. recession is wreaking havoc on yet another front: the Social Security trust fund.

With unemployment rising, the payroll tax revenue that finances Social Security benefits for nearly 51 million retirees and other recipients is falling, according to a report from the Congressional Budget Office. As a result, the trust fund's annual surplus is forecast to all but vanish next year -- nearly a decade ahead of schedule -- and deprive the government of billions of dollars it had been counting on to help balance the nation's books.

Plan for a longer working career. Save more for your old age. Expect to get less from government. Expect to pay more to government. Think about how to shelter your income from the higher taxes which governments will levy to pay for some of their liabilities.

Trust fund? Surely those government jokers jest. Mish Shedlock argues Social Security: There Is No Trust; There Is No Fund.

Can we stop with the nonsense? Revenues exceed payouts but that does not mean there is a fund. Every penny and then some has been borrowed and spent. And even the so called surplus is falling like a rock, a decade faster than expected.

Maybe the surplus will come back for a few years. But the US government will come out of this deep recession with a much heavier debt burden. Americans will pay for this with benefits cuts and higher taxes.

In the context of writing about Peak Oil Gail the Actuary points out that it is much harder to repay debt in a shrinking economy. Debt becomes a larger percentage of output and income even if total debt is held even. The same holds true for unfunded liabilities. I see some fundamental reasons why US economic growth isn't going to be strong in the 2010s and 2020s. We have an aging and dumbing population. Plus, natural resource supply limitations are going to make themselves felt. We are already living beyond our means (chronic trade and budget deficits and huge increases in all forms of debt - really, lots of debt) even before these problems become severe.

By Randall Parker 2009 April 04 09:49 AM  Economics Demographic
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2009 April 02 Thursday
Doctor Availability Declining For Old Americans

From where I sit medical care rationing in the United States looks inevitable. Rising costs motivate governments to look for ways to cut back care while pretending not to. One way to do this: offer so little money with so much hassle for treating patients that doctors start rejecting large categories of patients. This is already happening with Medicare. Lots of doctors are deciding to not enroll as Medicare care providers.

The solution to this problem is to find doctors who accept Medicare insurance — and to do it well before reaching age 65. But that is not always easy, especially if you are looking for an internist, a primary care doctor who deals with adults. Of the 93 internists affiliated with New York-Presbyterian Hospital, for example, only 37 accept Medicare, according to the hospital’s Web site.

Two trends are converging: there is a shortage of internists nationally — the American College of Physicians, the organization for internists, estimates that by 2025 there will be 35,000 to 45,000 fewer than the population needs — and internists are increasingly unwilling to accept new Medicare patients.

In a June 2008 report, the Medicare Payment Advisory Commission, an independent federal panel that advises Congress on Medicare, said that 28 percent of the Medicare beneficiaries it surveyed who were looking for a primary care doctor had a problem finding one to treat them, up from 24 percent the year before. And a 2008 survey by the Texas Medical Association found that while 58 percent of the state’s doctors took new Medicare patients, only 38 percent of primary care doctors did.

This argues for getting rich (or at least as affluent as possible) before you retire. Put money into a Health Savings Account and accumulate it for years and decades. You'll need it in your old age. Retiree health care costs are rapidly rising.

Rationing (while mostly pretending not to) in Canada, Britain, and other countries shows that rationing can occur on a large scale in otherwise moderately free market countries. You need a big bank account to buy your way around its effects. Plan and act accordingly.

By Randall Parker 2009 April 02 11:32 PM  Economics Health
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2009 April 01 Wednesday
Obama Bluffing On General Motors Bankruptcy?

Holman Jenkins of the Wall Street Journal argues that Obama will not go thru with it and put GM into bankruptcy.

President Obama rightly says "sacrifices" must be made if GM is to emerge as a viable company. But there's one sacrifice he won't make: his re-election chances, by leaving the fate of the UAW truly up to a bankruptcy judge.

Keep that in mind amid the defenestration of Rick Wagoner, who was not as popular with UAW Chief Ron Gettelfinger as Mr. Wagoner's replacement, Fritz Henderson. Keep that in mind amid reports the administration favors a "quick and surgical" bankruptcy. It's a bluff. The same administration that inserted itself into GM's corporate governance to order the resignation of a CEO is hardly likely to defer to the prescribed legal order for a failing company, namely bankruptcy. Even a "prepackaged" filing runs too much risk of a judge imposing more "sacrifice" on the UAW than the administration is prepared to tolerate.

During the Delphi bankruptcy UAW hourly labor rates got slashed. Does Obama want to save GM and Chrysler UAW workers from this fate? One big problem: GM and Chrysler (and Ford for that matter) can not compete in the long run unless their hourly rates go below Toyota's in the US. The Big (and shrinking) Three must compete with all the foreign transplants and cheap cars imported from other countries. Chinese car makers are on the horizon. The Big Three need much lower labor costs or they will not compete.

Can a prepackaged filing protect the UAW? Will the prepackaged filing just allow shutting down lots of dealers while also shafting debt and equity holders? If the UAW doesn't take a much bigger hit then all the losses by dealers, stockholders, and bold holders won't prevent further market loss and another trip into bankruptcy.

The Wagner Act and state-level dealer franchise laws are both products of government and two of the biggest obstacles to a Big Three turn-around.

Investment banker Wilbur L. Ross Jr. gives a GM bankruptcy about 50:50 odds. That's a pretty good interview of him.

By Randall Parker 2009 April 01 10:42 PM  Economics Labor
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