2009 October 31 Saturday
Economy Switching To New Debt Addiction

Richard Cookson, global head of asset allocation at HSBC, gets to the heart of the matter: Federal Reserve and Executive Branch policy amounts to switching the economy from its private debt addiction to a substitute public debt addiction. Be sure to read the Waldman link too.

"The way to think of it is this: It's not a recovering economy, it's a cross-addicted economy," he told CNBC.

"In other words, all you've done is you've taken the private sector debt and you've bunged it into the public sector. That's all you've done. Now that's not a recovering economy, as it were in addictive parlance, but it's simply the fact that you've got a huge amount of money being whacked into economy."

If I thought they were doing this as a temporary measure to gradually wean the economy off its addiction to spiraling credit card, mortgage, and other private debt I wouldn't object. But Timothy Geither, Ben Bernanke, and company seem so focused on the short term that they are doing reckless things.

If Bill Gross is correct how do we adjust the economy to the end of the asset price inflation (he says appreciation) of recent decades? Again, keep reading down to the Waldman link.

Let me start out by summarizing a long-standing PIMCO thesis: The U.S. and most other G-7 economies have been significantly and artificially influenced by asset price appreciation for decades. Stock and home prices went up – then consumers liquefied and spent the capital gains either by borrowing against them or selling outright. Growth, in other words, was influenced on the upside by leverage, securitization, and the belief that wealth creation was a function of asset appreciation as opposed to the production of goods and services. American and other similarly addicted global citizens long ago learned to focus on markets as opposed to the economic foundation behind them. How many TV shots have you seen of people on the Times Square Jumbotron applauding the announcement of the latest GDP growth numbers or job creation? None, of course, but we see daily opening and closing market crescendos of jubilant capitalists on the NYSE and NASDAQ cheering the movement of markets – either up or down. My point: Asset prices are embedded not only in our psyche, but the actual growth rate of our economy. If they don’t go up – economies don’t do well, and when they go down, the economy can be horrid.

Now, you might wonder why this asset price inflation of recent decades. Steve Randy Waldman has a compelling explanation: The big asset price inflation was due to increasing inequality and the propensity of wealthy people to save and buy assets. Click thru and read this full article. Then tell me in the comments what do you think of his reasoning. Seems sound to me.

Whether an economy generates asset price inflation or consumer price inflation depends on the details of to whom cash flows. In particular, cash flows to the relatively wealthy lead to asset price inflation, while cash-flows to the relatively poor lead to consumer price inflation.

Why? In Keynesian terms, poorer people have a higher marginal propensity to consume. The relatively poor include people who are cash-flow constrained — that is they cannot purchase what they wish to purchase for lack of green, so their marginal dollar gets immediately applied to the shopping list. Also, poorer people may be different, there may be a correlation between poverty and disorganization, lack of impulse control, inability to defer gratification etc. Think of Greg Mankiw's Spenders/Savers model.

Less of economic growth was paid as wages. So more went to wealthier people and they used that increased income to buy assets such as stocks and property. Asset prices soared to the extent that monetary policy was expansive.

The wage share of GDP decreased significantly over the 1970s and 80s. Compensation did not decrease as much, but much of nonwage compensation is retirement savings that is saved rather than consumed.

The people who run the US Federal Reserve and other central bankers didn't see a problem since they only worry about consumer price inflation. They fail to recognize that inflation of housing, commercial buildings, and other assets is as important as inflation in the prices of consumer goods.

Why the blind spot when it comes to asset price inflation? When this happens people feel richer. When the cost of consumer goods goes up people feel poorer. Now, unless the real production of goods and services goes up as fast as asset prices the asset price increase is just an unsustainable inflation. The bubble will burst. The results (some of which we are seeing now) are not pretty.

Update: Meta Finance makes a very similar argument:

If the flood of liquidity provided by central bankers does not go into the labor market, then where does it go? Into asset markets. It is also no coincidence that the last few recessions and jobless recoveries have been followed by asset market bubbles, first in technology stocks, then in housing.

Thus the conventional wisdom, that China ‘exports deflation’ to the world, is only partly true. Over the last twenty-odd years, China has indeed exported deflation, but this has been concentrated in very specific segments of the economy: in the prices of retail goods, and in worker salaries. It so happens that these segments are precisely the ones captured in standard measures of consumer inflation. Central bankers, lulled by this quiescence in measured inflation, have time and again erred on the side of loose monetary policy, leading directly to the asset price bubbles that have done so much harm in recent years.

Right now Fed monetary policy is very expansionist. Unemployment is still dropping but the stock market has soared.

By Randall Parker 2009 October 31 10:06 AM  Economics Business Cycle
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2009 October 29 Thursday
Crime TV Show Watchers Have Distorted World Views

TV shows cause people to have distorted perceptions of the criminal justice system and the incidence of crime.

Sparks and Susan Huelsing Sarapin, a doctoral student in communication, conducted 103 surveys with jury-eligible adults about their crime-television show viewing and their perceptions of crime and the judicial system. Their research was presented earlier this month at the International Crime, Media, and Popular Culture Studies Conference: A Cross Disciplinary Exploration at Indiana State University.

"Many people die as a result of being murdered in these types of shows, and we found the heavy TV-crime viewers estimated two and a half times more real-world deaths due to murder than non-viewers," Sarapin says. "People's perceptions also were distorted in regards to a number of other serious crimes. Heavy TV-crime viewers consistently overestimated the frequency of crime in the real world."

Viewers of crime shows also misjudged the number of law enforcement officers and attorneys in the total work force. Lawyers and police officers each make up less than 1 percent of the work force, but those surveyed estimated it at more than 16 percent and 18 percent, respectively, Sarapin says.

Stop watching TV. It is warping your brain. Next time you want to watch TV distract yourself with a video game instead. Though beware that playing video games probably impairs your ability to recognize road-side bombs. So surf the internet instead.

By Randall Parker 2009 October 29 11:27 PM  Media Critique
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2009 October 28 Wednesday
US Govt Not Deporting Half Of Illegal Alien Criminals

A new study from the Center for Immigration Studies highlights the effectiveness of a federal policy to allow local law enforcement officials to do immigration law enforcement. Section 287(g) of the Immigration and Nationality Act (INA) of 1995 enables police to detain illegal aliens. But a shortage of federal resources allows many criminals to escape deportation.

  • 287(g) provides a significant boost to ICE’s ability to identify and remove aliens who have committed crimes. In 2008, the number of 287(g) arrests (45,368) was equal to one-fifth of all criminal aliens identified by ICE in prisons and jails nationwide (221,085).

  • 287(g) is cost-effective and much less expensive than other criminal alien identification programs such as Secure Communities and Fugitive Operations. For example, in 2008 ICE spent $219 million to remove 34,000 fugitive aliens (who are mostly criminals). In 2008, ICE was given $40 million for 287(g), which produced more than 45,000 arrests of aliens who were involved in state and local crimes.

  • The biggest obstacle to improving and expanding 287(g) is the lack of funding for bed space to detain illegal aliens who have committed crimes who are discovered by local agencies. Currently ICE is removing fewer than half of the criminal aliens identified under 287(g).

Deportation of illegal aliens who commit crimes (aside from entering and staying illegally) is great for citizens because the criminals are, well, criminals. They prey on non-criminals. When police are able to identify criminals as illegal aliens the US government should make the necessary effort to deport every last one of them. That the US government can't even get it together enough to deport all the criminal aliens is pathetic.

By Randall Parker 2009 October 28 12:11 AM  Immigration Crime
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2009 October 24 Saturday
Will Living Standards Decline For Young People

Robert Samuelson fingers health care costs as one of the factors likely to hold down living standards in the next couple of decades.

Unless controlled, rising health spending would absorb much of that gain. The increase in per capita GDP from 2007 to 2030 is $16,700. If health spending continued to grow at past rates, it would go from $7,100 per person in 2007 to $15,300 in 2030. This rise of $8,200 is half the overall gain ($16,700) in per capita income. (For policy wonks: This assumes health spending grows 2 percentage points faster than GDP per capita, the 1975-2005 trend.)

Some will ride the down escalator. The de-escalator if you will.

Downward mobility is possible. Expanding health spending would raise taxes (to pay for government insurance), lower take-home pay (to pay for employer-provided insurance) or increase out-of-pocket medical costs. Other drains also loom: higher energy prices to combat global warming; higher taxes to pay for underfunded state and local government pensions and repair aging infrastructure; higher federal taxes to cover deficits and payments to retirees (much of which reflect health spending). The pressures will undermine private living standards and other public services (schools, police, defense).

Since government debt is growing faster than the economy and is projected to do so for at least the next decade the cost of servicing that debt is going to become a rising fraction of government spending. So the spending party will eventually be replaced by a new fiscal austerity coupled with higher taxes. Government will cost more and deliver less.

The United States government is running up large debts with a projected increase in total debt so large that there's a substantial chance total US government debt will hit 100% of GDP. At that point debt service alone could easily equal 5% of GDP.

By Randall Parker 2009 October 24 11:09 PM  Economics Living Standards
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2009 October 21 Wednesday
Smaller Supply Of US Medical Doctors Expected

Will the number of doctors in America fall short of needs by 200,000 physicians in the year 2020?

Compared with a source of data often used regarding physician workforce supply and projected changes, data from the U.S. Census Bureau suggests that the future physician workforce may be younger but fewer in number than previously projected, according to a study in the October 21 issue of JAMA.

Recent projections have indicated that the supply of physicians may soon decrease below recommended requirements, with some projecting a shortfall as high as 200,000 by 2020. "Although debate over potential shortages has focused largely on the number and type of physicians needed in the future, concerns have also been raised about data used in physician supply estimates and projections," the authors write.

The American Medical Association Physician Masterfile (Masterfile) data, although frequently used by workforce analysts, are believed to overestimate the number of active physicians at older ages, attributed to delays in updating the Masterfile data when a physician retires or experiences a change in status, according to background information in the article.

I am skeptical because a lot of visits to a doctor's office are optional. Do you really need to see a doctor about a sprain? Odds are it will heal. Or an allergy? There are over-the-counter meds that work as well as prescription meds for most people. How about a flu? No, it is not a bacterial infection and, no, an antibiotic won't help.

In 10 years time diagnosis will be far more automated. Cheap microfluidic devices will check blood, stool, urine, saliva for orders of magnitude more indicators (e.g. gene expression levels, many pathogens, and cancer cells) and expert systems will analyze the results. We ought to embrace such a future in order to slow spiraling medical costs that are holding down living standards improvements.

You can read a lot of political rhetoric about cutting medical costs. Well, we realistically have two choices for how that'll get done: automation or rationing. If we don't automate we'll ration.

By Randall Parker 2009 October 21 10:39 PM  Economics Health
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2009 October 20 Tuesday
Believers In Equality Bigger Impulsive Shoppers

Believers in equality buy more on impulse and populations of countries differ to the extent that they believe in inequality. What is the direction of causality here?

A new study from Rice University’s Jones Graduate School of Business finds that Americans who believe in equality are more-impulsive shoppers. And it has implications for how to market products differently in countries where shoppers are more likely to buy on impulse.

The study, “Power-Distance Belief and Impulsive Buying,” was authored by Rice management professor Vikas Mittal and recently accepted for publication in the Journal of Marketing Research.

Where people do not believe in equality people exercise more control over their behavior. So has the national promotion of equality in America led to a nation of spendthrifts and credit bubbles?

Power-distance belief (PDB) is the degree of power disparity the people of a culture expect and accept. It is measured on a scale of zero to 100, and the higher the PDB, the more a person accepts disparity and expects power inequality. Americans have a low PDB score relative to people in countries like China and India. The study found that people who have a high PDB score tend to exhibit more self-control and are less impulsive when shopping.

Abandon the dubious belief in equality and get control of your finances.

“In our studies, people with low PDB scores spent one-and-a-half times the amount spent by high-PDB individuals when buying daily items like snacks and drinks,” Mittal said.

If you reject the popular view that equality is good you'll become better able to resist candy?

This effect was even more pronounced for "vice goods" -- tempting products like chocolate and candy -- than for "virtue goods" like yogurt and granola bars. The researchers hypothesized that people with low PDB scores -- who also should have lower self-control -- would show even stronger impulsive buying for vice goods because of their desire for immediate gratification. Indeed, the researchers found low-PDB people spent twice as much on vice goods as high PDB people spent.

Big saving China and Japan have less belief in equality. The lower the score the higher the belief we should all be equal.

On the PDB (Geert Hofstede’s Cultural Dimensions), the U.S. scores at a low 40 compared with Russia (93), the Philippines (94), Singapore (74), China (80) and India (77).

Austria (11), Germany (35) and New Zealand (22) also score low, whereas Japan (54), Vietnam (45) and South Africa (49) score more in the middle.

We aren't equal in intelligence, knowledge, self-control or wisdom. We aren't all equal in our ability to choose leaders or choose foods in a grocery store. Some people are walking talking disasters. Others are wise and brilliant.

By Randall Parker 2009 October 20 10:46 PM  Culture Compared
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2009 October 18 Sunday
Obama Healthcare Revenue Sources

The middle class pays - contrary to Obama's campaign promises.

Think back to the 2008 election, when Obama promised again and again that he would not increase taxes on the middle class.

"And if you're a family making less than $250,000 a year, my plan won't raise your taxes one penny--not your income taxes, not your payroll taxes, not your capital gains taxes, not any of your taxes," Obama told an audience in Orlando, Florida, in August 2008, something he repeated at almost every opportunity.

This not the last tax Obama will level on the middle class. He can't do all he wants to do without casting a wide net.

One of the sources of tax revenue for the Obama medical plan involves taxing high benefit medical insurance plans that cost more than $8000 per year or more than $666 per month. Most of the people who have such plans are in unions and the rest are in upper management of some big corporations. So who is going to pay? The bulk of the money will come from people with yearly incomes less than $250k and more than half the money will come from people with yearly incomes less than $100k.

The analysis by the Joint Committee on Taxation concluded that tax payments would indeed rise. And it found that the middle class would be stuck with the tab.

87 Percent

The report projected that the excise tax would raise about $52 billion in 2019. Of that, about $8.9 billion would come from taxpayers with incomes of less than $50,000; about $19.4 billion from taxpayers with incomes between $50,000 and $100,000; and about $17.4 billion from taxpayers with incomes between $100,000 and $200,000.

Add those up, and you see that about 87 percent of the revenue in the original Baucus proposal to finance Obamacare would come from individuals with incomes of less than $200,000.

On the bright side, if you aren't in a union you probably won't pay - at least not for this particular tax. Other taxes in the plan will hit you though. Obama and the Democrats in Congress are putting taxes on the medical industry that will raise costs of medical services and therefore prices of medical services. This will push up co-pay costs and also insurance premiums.

Massachusetts is supposed to serve as the model for a national requirement to buy medical insurance. In Massachusetts costs are up and rising rapidly.

But insurance premiums for most residents are going up, not down. Many middle-class people who had insurance before the overhaul see little change -- except that they're spending more. They're seeing little or no difference in the quality of their care.

In crafting their plan, Massachusetts lawmakers ducked the tough issues of cost control, including how much public and private insurers would pay physicians and hospitals. So the state still has some of the most expensive medical care in the U.S. And costs are rising faster than the national average. Far faster than wages too.

We are as a nation poorer than our government acts. We are living beyond our means. The reckoning on that lies in the future.

By Randall Parker 2009 October 18 10:58 PM  Economics Government Costs
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2009 October 17 Saturday
US NAEP School Score Progress Stopping?

The release of the 2009 NAEP scores on student performance serves as another occasion to take a look at the hopes of liberals that more school spending, teaching to tests, and longer school days and years can make a difference on student performance. Progress stopped for 4th graders. Charles Murray says progress in raising black scores was faster before No Child Left Behind (NCLB) legislation increased the pressure to raise black and Hispanic scores.

Mark Schneider nailed one problem posed for No Child Left Behind (NCLB) by the new math results—the gains in math prior to NCLB were larger than they have been since. There’s another problem Mark didn’t take up: No progress in achieving the most highly touted objective of NCLB, closing the gap in black and white test scores. From 2004 to 2008, the difference in scores went up by a trivial 2 points for 9-year-olds, down 2 points for 13-year-olds, and was unchanged for 17-year-olds.

The 2009 Grade 4 State Results make interesting browsing. You need Flash enabled. First, you can hover across the green (smarter) states and see that Massachusetts is smarter and generally ice box states are smarter. Then pop down the combo box below "National Public" which probably says "Average scale score" and choose "At advanced". Then a different picture emerges: Colorado, whose "Average scale score" of 243 is bested by a number of states still manages to beat them in the percentage of students scoring "At advanced".

Now click to the White tab with "Average scale score". Suddenly the ranking of states changes dramatically. Texas becomes a contender, tying North Carolina at 254. I suspect that's at least due to migration of engineers and software developers into their burgeoning tech sectors. Many of the Ice Box states become also-rans with only Minnesota, New Hampshire, Massachusetts (clearly the smartest state), Connecticut, and New Jersey staying in the running. Kansas becomes a contender. So the white brains distribution doesn't fit my intuitive expectation.

For whites West Virginia is unsurprisingly the bottom of the barrel at 233 followed by Alabama at 237.

But the real acid test (and a big surprise) of where's the brains is on the White tab on "At advanced". Maryland vaults to the lead at 15% and Minnesota and Massachusetts tie for second place with 14% at the advanced level in mathematics. North Carolina is in third place with 13%.

The Asian/Pacific Islander tab shows much higher numbers for "At advanced" with Kentucky at the top with 35%. Since APac encompasses a huge amount of genetic diversity this leads me to wonder whether Kentucky just has children of immigrant professors in engineering and science from an especially smart ethnic group.

Try browsing around in the data and see what patterns you find. If you aren't easily depressed then click on the Black and Hispanic tabs and choose "At advanced". Hispanics in Montana do best at 4%. Why is that?

Update: I almost missed the Washington DC results. DC has by far the highest scores for whites at the advanced level: 33%! Yet blacks in DC score 0% at advanced level. Two parallel cities in the same boundaries. The children of our rulers are very smart. Lobbyists obviously have brains. This probably explains how Maryland can best Massachusetts and Minnesota. The Puritans and the Swedes aren't as smart as the national cream of the ruling crop. What percentage of the white population of DC are Ashkenazi Jews? Top lawyers work in DC.

Update II: Why is all this happening? Read about the Voldemort View: the View That Must Not Be Named.

By Randall Parker 2009 October 17 05:14 PM  Education
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Poll In Mexico: Immigration Amnesty Means More Illegals

A Zogby poll of Mexicans in Mexico that if Congress passes another illegal immigrant amnesty then more Mexicans will decide to enter the United States illegally. No surprise here. But tell that to the US Congress. It is simple really: If you do not enforce the law more people will break it.

  • A clear majority of people in Mexico, 56 percent, thought giving legal status to illegal immigrants in the United States would make it more likely that people they know would go to the United States illegally. Just 17 percent thought it would make Mexicans less likely to go illegally. The rest were unsure or thought it would make no difference.
  • Of Mexicans with a member of their immediate household in the United States, 65 percent said a legalization program would make people they know more likely to go to America illegally.
  • Two-thirds of Mexicans know someone living in the United States; one-third said an immediate member of their household was living in the United States.
  • Interest in going to the United States remains strong even in the current recession, with 36 percent of Mexicans (39 million people) saying they would move to the United States if they could. At present, 12 to 13 million Mexico-born people live in the United States.
  • A new Pew Research Center poll also found that about one-third of Mexicans would go to the United States if they could.
  • An overwhelming majority (69 percent) of people in Mexico thought that the primary loyalty of Mexican-Americans (Mexico- and U.S.-born) should be to Mexico. Just 20 percent said it should be to the United States. The rest were unsure.

The immigration amnesty supporters in the US Congress call themselves supporters of immigration reform and avoid the term amnesty. They pretend they are promoting a permanent solution. But all they are doing to promoting more of the same with another round of amnesty to be followed by a big surge in illegal immigration.

To stop the illegal immigrant influx we need to enforce immigration laws, not grant amnesties to the immigrant law breakers.

The immigration amnesty stakes are quite high. As Audacious Epigone points out, 41 million Mexicans would move to the United States if they could.

More than one-third of Mexicans living south of the border profess that they would head to the US if they had the "means and opportunity" to do so. That's 41 million aspiring settlers from a country where the purchasing power parity is less then one-third what it is in the US. There is no better way to increase poverty in the US than to import it on such a massive scale.

America has enough people, especially enough poor people who want Robin Hood government for their benefit. Audacious Epigone points out GSS data that shows that we also get a lower support for private property rights from letting in more Mexicans. Oh the irony of libertarians supporting open borders. They support policies that undermine support for their strongly held belief in property rights.

By Randall Parker 2009 October 17 01:14 PM  Immigration Law Enforcement
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Feminist X On Repugnance Of Starving Cat Walk Models

Feminist X rants against a fashion industry that insists on using female models who look like they are starving. The post is basically an attack on the gay guys in the fashion industry who choose female models who are so skinny that they look like boys.

What person looks at that and contemplates the aesthetic value of the dress? That spectacle is not an artistic expression intended to render the wearer invisible so that the clothing becomes the focus. Her shocking presence steals the focus from the dress. She does not look like a hanger. She does not look like a pre pubertal boy. Anyone with a pair of eyes can see that she looks like a woman who is starving to death. Outside of the most shallow and image obsessed people in the fashion industry, who have tried everything to brainwash themselves into thinking that woman is something one should look upon with calm composure, anyone who sees that image experiences a visceral reaction of horror.

What I wonder: Is this state of affairs totally explainable by reference to the sexual preferences of gay fashion designers? If so, we need more female and heterosexual male fashion designers.

What I'd like to know: Do Vera Wang and other female designers use models as skinny as those used by gay male fashion designers? Does Anna Wintour of Vogue prefer skinnier models? If so, why?

Another possible explanation: Maybe the aging affluent female customers who spend big bucks on haute couture prefer to see dresses worn by androgynous models who seem less like sexual competition. Could this have something to do with it? Do upper class women in their 30s, 40s, 50s, 60s and with declining sexual market value really want to go to a fashion show and see incredibly sexy and fertile women modeling clothes?

Since Feminist X is bisexual and shares some of my own preferences for non-starving well-endowed women she's the sort of woman who is least likely to see sexy voluptuous cat walk models as competition. Rather, I bet they look more like tasty morsels to her (that's how I see them).

By Randall Parker 2009 October 17 11:54 AM  Culture Sexual Marketplace
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2009 October 13 Tuesday
Wage Cuts Still Lowering Weekly Pay

We aren't worth as much as we used to be.

The Bureau of Labor Statistics does not track pay cuts, but it suggests they are reflected in the steep decline of another statistic: total weekly pay for production workers, pilots among them, representing 80 percent of the work force. That index has fallen for nine consecutive months, an unprecedented string over the 44 years the bureau has calculated weekly pay, capturing the large number of people out of work, those working fewer hours and those whose wages have been cut. The old record was a two-month decline, during the 1981-1982 recession.

“What this means,” said Thomas J. Nardone, an assistant commissioner at the bureau, “is that the amount of money people are paid has taken a big hit; not just those who have lost their jobs, but those who are still employed.”

We were living beyond our collective means and still are even with pay cuts. The US Federal government is now spending far more than the nation can afford.

Colorado's minimum wage is going down slightly because it is indexed to inflation.

DENVER — When Coloradoans voted to tie the state’s minimum wage to inflation, they were trying to make sure low-wage workers did not fall too far behind the cost of living. But their vote has had an unintended consequence: Colorado plans to lower its minimum wage next year because of falling inflation rates, becoming the first state in the nation do so.

The state’s Department of Labor and Employment said Tuesday that it planned to lower the minimum wage to $7.24 from $7.28, after an August federal consumer price index report showed that the cost of living had fallen in the state.

It is easy to find news articles on pay cuts - especially by state and local governments. Salt Lake County in Utah is cutting wages 2.75%.

Working to save jobs in an economy that continues to create budget challenges, the Salt Lake County Council approved a proposal from Mayor Peter Corroon Tuesday to enact a 2.75 percent across-the-board wage cut next year.

Are we in a deflationary spiral?

Wages for the Colorado Symphony Orchestra will go down 12.5%. The Indianapolis Symphony is also cutting musician pay 12%.

Professors at University of Hawaii are trying to avoid a pay cut.

University of Hawaii professors have rejected a proposed five percent pay cut and will instead make their own proposal on how the university can save money.

These profs want to be insulated from the market forces that most of us face. I'd like to see tenured university faculty feel the same market forces the rest of us feel.

By Randall Parker 2009 October 13 11:25 PM  Economics Labor
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China Increasing Export Marketshare

China rises. Expect it to rise and rise and rise.

The most striking gains have come in the United States, where China has displaced Canada this year as the largest supplier of imports.

In the first seven months of 2008, just under 15 percent of American imports came from China. Over the same period this year, 19 percent did. Meanwhile, Canada’s share of American imports fell to 14.5 percent, from nearly 17 percent.

Besides increasing its share of many American markets, China is increasing the value of exports in absolute terms in some categories. In knit apparel, for instance, American imports from China jumped 10 percent through July of this year — while America’s imports from Mexico, Honduras, Guatemala and El Salvador plunged 19 to 24 percent in each country, according to Global Trade Information Services.

All these countries can not compete against China. The engineered high savings and high investment regime of China is grinding out the goods while not buying much in return. What I wonder: At some point will the rest of the world adopt protectionist policies in response?

Chinese exports have dropped less than those of other major exporters.

The results have been impressive. All told, in the first half of 2009, China exported $521 billion worth of clothes, toys, electronics, grains and other commodities to the rest of the world.

Though that represented a 22 percent decrease from the first half of 2008, it compares favorably to other major exporters. German exports have fallen 34 percent over the same period. Japanese exports were down 37 percent and American exports 24 percent, according to Global Trade Information Services.

Japanese exports and German exports were down more than American exports. Why?

Billionaire investor Jim Rogers says the 21st century belongs to China.

According to Rogers, the 19th century was the era of the British Empire and the 20th century was the U.S.’ heyday. But the 21st century is China’s (though the rest of Asia is definitely going to get a boost too).

The reasons for this are many, but some points brought up by Rogers include the following:

1. The Chinese want to live like we do;
2. They are more eager to work;
3. They are better at saving;
4. There are 1.5 billion Chinese citizens (and 3 billion people in all of Asia), and we owe them money. They are, according to Rogers, “among the best capitalists in the world.”

There will be some setbacks, of course, Rogers says, but these are opportunities. “If you see setbacks in China, you should pick up the phone and get more involved,” he advised, before adding his favorite refrain, “The best advice of any kind that I can give you is to teach your children and grandchildren Chinese.”

Which Chinese companies will do best in the long term? Which Western companies will become roadkill?

When will the majority of American people answer a poll and say they believe the United States is less important and less powerful than China? 2030? 2040?

By Randall Parker 2009 October 13 10:35 PM  China
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2009 October 12 Monday
The Retirement Underfunding Debacle Is Approaching

Time Magazine complains about how people do not have enough money in their 401(k) accounts to retire. The problem here is that people do not want to save. They want to spend now. Time is basically saying that humans can't be trusted to save for their own future. That's certainly true of a large fraction of the populace. But what to do about it if anything?

The ugly truth, though, is that the 401(k) is a lousy idea, a financial flop, a rotten repository for our retirement reserves. In the past two years, that has become all too clear. From the end of 2007 to the end of March 2009, the average 401(k) balance fell 31%, according to Fidelity. The accounts have rebounded, along with the rest of the market, but that's little help for those who retired — or were forced to — during the recession. In a system in which one year's gains build on the next, the disaster of 2008 will dent retirement savings long after the recession ends.

My reaction can be summed up with "as compared to what?". The money in 401k's is not enough. Okay, fine, The biggest alternative one can point to is pension funds for government employees. Those government employee pension funds are a disaster waiting to happen. Politicians over-promised and under-funded.

Before the crisis, many public pension funds had experimented with risky trading techniques or committed more of their money to hedge funds and other nontraditional firms, which in turn invested some of it in complex mortgage securities. When these melted down, pension funds got burned.

Now, facing an even bigger funding gap, some systems are investing in the same securities, betting that a rebound in their value will generate huge returns.

"The amount that needs to be made up is enormous," said Peter Austin, executive director of BNY Mellon Pension Services. "Frankly, they are forced to continue their allocation in these high-return asset classes because that's their only hope."

People can't be trusted to save for themselves. But governments can't be trusted to save for you. Okay, got a third idea in mind? Corporate pensions could make a come-back. But corps would need an incentive for bringing them back: prospective employees of corps would need to assign a bigger weighting to the pension plan when choosing a job. Good luck with that one.

People are going to need to work longer and save more. Increase your pension fund contributions. If you are an American then open an IRA or similar account if you do not already have one and set up automatic deposits into it.

Even under unrealistic optimistic assumptions the state of Virginia's major pension funds are grossly underfunded. No way are public pension funds an example to follow.

But Virginia officials now estimate the funding level of its major pension funds will sink to about 60 percent by 2013.

From there, the deficit will grow even wider, according to Kim Nicholl, the national director of PricewaterhouseCoopers public sector retirement practice. Even if public pension funds were to hit their 8 percent investment targets every year, Nicholl calculated they would have less than half of what they need by 2025. This is because a greater share of the population will be retired and those who are will live longer, thus collecting benefits longer, she said.

Hey, big government pension funds have professional managers. But they still lost big when the market went down. Also, legislatures do not fund the pension programs well enough. What to do? Cut benefits. Make people work longer. These measures are coming. Do not plan on retiring whenever your current pension planning makes you think you can retire.

I think the real picture is far worse than the above describes. The assumption is that the economy will grow and increase the value of stocks. But what happens if Peak Oil makes the economy shrink? The holes in pension plans then become massive. I expect that to happen. My advice: Live on less, work harder, save more, work longer. Find ways to earn extra income.

By Randall Parker 2009 October 12 10:20 PM  Economics Aging
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Community Reinvestment Act Mortgage Disaster

Edward Pinto, chief credit officer at Fannie Mae in the 1980s, says the Community Reinvestment Act's requirements for home lending to the poor and lower performing ethnic groups made a big contribution to our on-going financial disaster.

Though the feds, again, haven’t collected figures for CRA loans’ performance as a whole, we do have statistics from a few lenders that are troubling indeed. In Cleveland, Third Federal Savings and Loan has a 35 percent delinquency rate on its CRA-mandated “Home Today” loans, versus a 2 percent delinquency rate on its non–Home Today portfolio. Chicago’s Shorebank—the nation’s first community development bank, with largely CRA-related loans on its books—has a 19 percent delinquency and nonaccrual rate for its portfolio of first-mortgage loans for single-family residences. And Bank of America said in 2008 that while its CRA loans constituted 7 percent of its owned residential-mortgage portfolio, they represented 29 percent of that portfolio’s net losses.

Whatever the precise magnitude of the CRA’s role, there is no question that as the government pursued affordable-housing goals—with the CRA providing approximately half of Fannie’s and Freddie’s affordable-housing purchases—trillions of dollars in high-risk lending flooded the real-estate market, with disastrous consequences. Over the last 20 years, the percentage of conventional home-purchase mortgages made with the borrower putting 5 percent or less down more than tripled, from 8 percent in 1990 to 29 percent in 2007. Adding to the default risk: of these loans with 5 percent or less down, the average down payment declined from 5 percent to 3 percent of the loan’s value.

The US government is keeping itself intentionally ignorant about the extent to which CRA and related policies contributed to the massive mortgage losses and home foreclosures.

Taxpayers deserve to know why not one regulator had the common sense to track the performance of CRA loans. They also deserve to know why the Federal Reserve, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and other regulators appear to have no idea how trillions of dollars in CRA loans are performing now. But above all, they deserve to know that the damage done by the CRA won’t happen again. Incredibly, the House Financial Services Committee is considering legislation that would broaden the scope of the CRA.

Never mind the disaster. The US government is trying to reflate housing market with reckless issuance of loan guarantees by the Federal Housing Administration for buyers with little money to put down.

The government is giving as many people as it possibly can the chance to buy a house or, if they are in financial difficulty, refinance it. The F.H.A. is insuring about 6,000 loans a day, four times the amount in 2006. Its portfolio is growing so fast that even F.H.A. backers express amazement.

Having learned nothing from the disaster Barney Frank is keen on wasting taxpayer money to slow the decline in housing prices. So he wants more suckers to sacrifice themselves in order to bail out banks and other imprudent people.

Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, said in an interview that the defaults were, in essence, worth it.

“I don’t think it’s a bad thing that the bad loans occurred,” he said. “It was an effort to keep prices from falling too fast. That’s a policy.”

We can go into decline. The nation does not have to keep growing. If the government tries hard enough it can make sure that the decline of the United States becomes a great tragedy told for generations to come in the history books.

By Randall Parker 2009 October 12 07:54 PM  Economics Housing
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2009 October 11 Sunday
Peace Prizes To Stop Which War?

Lost in the debate about the absurdity of Barack Obama winning a Nobel Peace Prize is the fact that there are no big military conflicts or even substantial possibility of a big military conflict in the world in 2009. A need to hand out prizes to keep or make the peace? Not even.

Look around. The conflicts are small. Darfur? Who can look at a map of the world without national border lines and pinpoint where it is? I can't. Below Egypt somewhere I think. Does it matter? Nope. It only matters to the people there and to a small number of Western observers who are trying to use it for status signaling. Did you know fighters in Nigeria try to blow up oil fields because they want a piece of the financial action? Not a big story. Do you care? I don't. I doubt I know anyone who does. I doubt anyone will win a Nobel Prize over it. I think the Tamil Tigers were defeated in Sri Lanka but I'm kinda hazy on the details. The conflict there does not matter. It doesn't even warrant a Nobel Prize.

To say these conflicts do not matter is not a nice thing to say. But it is the truth. Some groups are definitely losing. The Tibetans come to mind. Giving the Dalai Lama a Nobel Peace Prize didn't help their prospects any. Obama snubbed recently the Dalai Lama right before Obama won his own Nobel Peace Prize. The Tibetans are losers. The Han Chinese are the new winners.

We do have the conflicts in Iraq and Afghanistan. We started the Iraq conflict. The US will pull out. We won't negotiate the pull-out with an adversary. Most US negotiations are with the US government. Afghanistan? We are fighting religious tribes with one of the highest fertility rates in the world. We can either pull out or fight for many years to come. Negotiation is pointless.

Can Nobel Peace Prize winners matter on the scale of major potential combatants? Nope. The bigger countries have no interest in fighting each other.

The world has big problems relating to resource depletion, pollution, and population growth. But these issues aren't going to cause the major industrialized nations to duke it out on the field of battle. War isn't a problem.

By Randall Parker 2009 October 11 07:30 PM  Cultural Wars Western
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2009 October 10 Saturday
Obama Won Nobel Prize For Winning Election

There were only 12 days from the time Barack Obama took office until nominations for the Nobel Peace Prize closed. So he didn't even win the prize for things he did in office. That relieves us from the problem of searching his record to find some accomplishment worthy of such a prize.

Editor's Note: Although President Obama had only been in office for 12 days before the nominations for this year's Nobel Peace prize closed the entire process actually takes a full year. According to the official Nobel Prize Web site invitation letters are sent out in September. Every year, the Norwegian Nobel Committee sends out thousands of letters inviting a qualified and select number of people to submit their nominations for the Nobel Peace Prize. The deadline to submit nominations is February 1.

So Obama didn't need to negotiate peace treaties to win a peace prize. He didn't need to solve ancient disputes. But this means he's rising so rapidly that he's running out of potential for advancement. I see this as a serious problem that needs addressing. We can't have a glass ceiling for Barack Obama. Oh no. Obama's rise is so rapid that it begs the question of what's next. Steve Sailer reports on Obama's future big prize win.

I am both surprised and deeply humbled by the decision of the Directorate of the Milky Way to honor me by naming me Galactic Overlord

I think this highlights Obama's big Prize Problem at this point: What can he possibly do for an encore? Another Nobel committee has already snubbed him for a Nobel in Literature. Perhaps a campaign of global outrage for this slight could win him that prize. But then what?

Sure, once Obama's out of office (assuming the US constitution isn't amended to make him President For Life, or better yet, Emperor Of America) then he could go to Hollywood and direct and produce movies. He could even star in one. Then he would of course win Oscars in directing, producing, and acting. Heck, he could write a script (Bill Ayers could help) and win a screenplay Oscar too. But he's much bigger than Hollywood. So then what?

Steve's floating this idea of Obama for the Galactic Overlord position therefore makes a lot of sense. But I think a program of stepping stones up to Galactic Overlordship needs to be developed or else Obama will run out of room for advancement. Maybe there's a Vulcan Prize For Logic And Peace? Can anyone think of some useful steps up from the Nobel Peace Prize? (or, rather, the renamed Obama Peace Prize)

By Randall Parker 2009 October 10 12:32 PM  Cultural Wars Western
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2009 October 09 Friday
When Obama Spurned Dalai Lama He Spurned Nobelist

Recently His Holiness Barack Obama rejected meeting with the Dalai Lama in order to curry favor with China. Well, the Dalai Lama won the Nobel Peace Prize 20 years before Obama did. Truly exalted morally superior people do not turn their backs on their own kind. So what sorts of people are these guys?

By Randall Parker 2009 October 09 09:47 PM  Cultural Wars Western
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Modest Proposal: Rename Nobel To The Obama Prize

The name Nobel is clearly not as lofty or exalted as the name Obama. Isn't it time the rename the Nobel Peace Prize to the Obama Peace Prize?

Alfred Nobel invented dynamite. He clearly doesn't deserve to have his name honored by its association with such an, er, exalted prize. Whereas the Nobel Prize committee clearly thinks that Obama, without yet even accomplishing much, is a morally different and very very unusual human being. What better person to name a famous prize after?

Every time someone wins the Obama Prize we will be reminded what the prize represents. Fitting, no?

By Randall Parker 2009 October 09 07:04 PM  Cultural Wars Western
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2009 October 08 Thursday
Feminists Who Go Crazy For Don Draper

It has taken years for me to come to terms with the full extent to which people claim to hold beliefs and desires that are in conflict with their real behavior and true selves. This isn't just a case of people lying for their economic advancement or to avoid punishment. This phenomenon shows up in supposed experts on human nature and those who pose as moral leaders demanding that we live according to a moral code that they promote. Most notably you can't take self-proclaimed feminists at face value. Writing for Newsweek Katie Baker tries to explain why feminist women pine for Jon Hamm who plays the sexist alpha character Don Draper in Mad Men. Women fall for guys whose values the women claim to detest.

Why are we so wild for Draper? By any measure, the character's a cad. He constantly cheats on his wife. He skips town for weeks and won't write or call. He doesn't talk much, and anesthetizes any feelings with copious amounts of booze. He's an enigma, a locked box of a man who resists, maddeningly, easy explanation. And yet he excites an attraction among women—particularly ones my age, women in their late '20s and '30s who were born after the era that Mad Men portrays—that seems unmatched by any leading man on television today, with the possible exception of Lost's con artist, Saywer (another strapping scoundrel with a deeply troubled soul). We describe our obsession in words that, like the show itself, are somewhat retro. "He is a straight-up man. He makes me feel like a woman via the TV." "He's a throwback to a time when men were men. "It's the thickness of his body." "Shoulders to cry on and a jaw that causes women to swoon."

So get this: Women who encourage men to act like all sensitive and unmasculine aren't really serious. Given a sufficiently alpha male suddenly the claimed rules, ideals, and expectations about men do not apply. Look around. Double standards are the norm.

So what is feminism all about. Roissy sees feminist as a test for men to filter out the guys who are foolish enough to take it at face value. There's some truth in this theory.

I propose, as an extension to this theory, that the absurdity of mid-20th to early 21st century feminism and all its adjuncts are better understood as progressively sophisticated emergent sexual selection strategies which act as social obstacles to filter out men who aren’t able to successfully navigate them. In essence, feminism is an advanced biocomputational Turing test; a giant social subcommunication roadblock devised and embraced by women and, at least in principle if not in practice, by alpha males intended to ensure the continuation of the hypergamous weeding out of lesser men who don’t possess the savvy to play by ever-shifting sexual market rules. Feminism is only superficially about female equality; at its core it is a ginanomicon of secrets to which only socially adroit men are privy.

What I wonder: Do our intellectuals promote more lie-myths than intellectuals did in previous eras? Or is the same amount of lying going on but with changing objectives?

Some people are sincere but self-deceived. Their emotions make them irrational in ways that they do not want to notice. The most earnestly sincere ones are the worst because their sincerity makes them more believable. To kids growing up the sincerity can be harmfully deceiving.

Update: I doubt that feminism was developed in order for women to test men. However, the rhetoric of feminism has effectively become a test of men. Do you believe it? In very important ways many self-styled feminists behave contrary to their stated feminist beliefs - especially when choosing mates. If you take what women say at face value then you won't do as well with women as you will do if you also take into consideration their instinctive drives.

In the comments of Roissy's post a commenter named Canada Dry gets to the heart of the matter.

A huge part of the PUA community are guys that exist in that above average to barely subgenius spectrum (many of us are nerds) that have acknowledged that their intelligence is not important to women in sexual selection, and that it is actually an active hindrance in getting laid. Engaging women intellectually is a losing strategy. Displaying ‘intelligence’ is simply a (shitty) DHV and has nothing to do with actually being ‘intelligent’ (social ‘intelligence’ and quick wit are not intelligence of any kind; everyone probably knows someone that is witty but also as dumb as a rock. Those two things commonly hand in hand actually). Displaying value (ie resourcefulness) by grabbing a women by her hind-brain by winning in a battle of conflicting realities and proving intelligence by engaging her on an intellectual plain are not at all the same thing.

If you are engaging anyone on an intellectual level, you are engaging a part of their brain that has really nothing at all to do with sex. To use that part of their brain they have to temporarily sequester their sexual motivators. No one is getting hot and bothered while doing a math-proof, men or women. To get sex you need to shut down the thinking mind and ‘think’ with the hind-brain. Being smart (and actively using your intelligence) and getting laid are literally at odds with each other. A truly massive part of Game is about shutting down internal dialog. The smarter you are, the harder this is to do. Inner calm is a learned skill for smart people, and a natural state of being for the stupid. Stupid wins in sexual selection because their state of mind is ripe for sex.

Women do not like smart men. They backward rationalize the men they select as being ’smart’. In truth they like ‘resourceful’ men, which is a totally nebulous concept. ‘Resourcefulness’ often just means a man that is pretty much literally thinking with his dick. Displaying value =/= being intelligent.

Now, some genetic outlier women have preferences that run toward general smartness. But guys who are leaders, good salesmen, and talented in handling other people do far better with women than geeky smart guys.

By Randall Parker 2009 October 08 11:38 PM  Human Nature
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2009 October 06 Tuesday
Obama Spurns Dalai Lama For China

Does Richard Gere disapprove? Will liberal-lefties remove their Free Tibet bumper stickers from their Volvos? Or did they fail to reapply those bumper stickers when they traded up to Toyota Priuses? Barack kowtows. Kinda sad. The US President didn't use to be so weak he had to kowtow. I'm feeling nostalgic.

President Barack Obama has refused to meet the Dalai Lama in Washington this week in a move to curry favour with the Chinese.

I would say it is all about the Benjamins. But it is more like it is all about the Maos. The renminbi currency has pictures of Chairman Mao on it.

The Empire State Building is joining in the spirit. Will the Dalai Lama be barred from entering the Empire State Building? How soon till he's barred from entering the US?

Tonight the Empire State Building will be awash in red and yellow. But instead of honoring a singer intrinsically linked to the city, holidays , or something crassly commercial, the Empire State Building, as reported by the Agence France Presse, will "honor the 60th Anniversary of communist China."

By Randall Parker 2009 October 06 12:07 AM  China
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2009 October 05 Monday
High Savings Rate Or Another Bubble?

Get prudent or throw another party?

Savings will continue heading up, perhaps to 8 percent or beyond, some economists say.

“I am unprepared to make numeric predictions without working out some solid numbers, but this sounds right,” writes Jonathan Parker, a finance professor at Northwestern University, in an e-mail. “Why? First, to close the trade gap in normal times (in an accounting sense) would require a saving rate of around 8 percent. Second, more typical saving rates in the US historically are around 8 percent.”

But in August, the personal savings rate fell for the third month in a row to 3 percent of disposable income, the Commerce Department reported Oct. 1. The monthly numbers can jump around a good bit, economists warn: Perhaps consumers were temporarily lured out of savings mode by the “cash for clunkers” program, for example.

But why did the savings rate decline? One possibility: China and other countries forced the US to run a big trade deficit. Then the US government over-inflated the currency in order to get people back to work in spite of manufacturers and even service industries shifting jobs abroad. The loose money policy drove up asset prices and made people think they were wealthier than they really were. People took out second mortgages and saved less as equity markets became overvalued along with housing. Eventually the bubble popped. Bummer.

The American people are crying out for a new bubble that will allow them to avoid living prudent lives. Ian Bremmer and Nouriel Roubini argue that it is hard to avoid a bubble when recoveries are weak. But why are American economic recoveries increasingly weak? Economists do not ask this question enough. But it is the key question. Could the nation be in decline?

As for the exit from monetary easing, the Fed must learn from the fateful mistake it made after the 2001 recession. Then, the central bank cut the federal-funds rate too much and kept it too low for too long. It also moved far too slowly when the normalization occurred—in small increments of 0.25% from summer 2004 until the summer of 2006, when it peaked at 5.25%. Normalization took two full years. It was in that period of slow normalization that the housing, mortgage and credit bubbles spiraled out of control. The lesson learned: When you normalize, move rapidly, or prepare for another dangerous bubble.

Of course, this is easier said than done. From 2002 to 2006, the Fed moved slowly because the recovery appeared anemic and because of significant deflationary pressures. This time around, the recession is more severe—unemployment is at 9.8% and is expected to peak above 10%, and we are experiencing actual deflation. Therefore, the incentive not to exit too soon will be greater and the risk of creating another bubble is greater. Indeed, the sharp increase in the stock market and commodities, and narrowing of credit spreads since March, are partly due to a wall of global liquidity chasing assets and already causing asset inflation.

We need to address root causes. What are the root causes of America's decline? Got some answers?

By Randall Parker 2009 October 05 10:51 PM  Economics Business Cycle
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Gulf Arab Countries Plot To Stop Oil Trading In Dollars?

Writing in The Independent Robert Fisk reports on efforts by the Gulf Arab countries and several major industrial countries to phase oil trade of oil in dollars. Since a decline the dollar causes a rise in the price of oil and since these countries can immediately exchange received dollars for other currencies I question whether a halt to dollar-based trading would help them much. Still, these discussions are a sign of the times.

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

One can understand why countries are questioning the dollar's role. The United States is quickly going deep into debt. Check out this page from the US Congressional Budget Office: The Budget and Economic Outlook: Fiscal Years 2009 to 2019. That page points to lots of budget documents. In particular, check out page 6 of this PDF document. The amount of government debt held by the public could hit multiples of yearly GDP. Doesn't sound like a country whose currency you should want to hold.

The United States can no longer take for granted the role of top dog in the world.

“The United States would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency,” the World Bank president, Robert B. Zoellick, said in a speech at the School for Advanced International Studies at Johns Hopkins. “Looking forward, there will increasingly be other options to the dollar.”

We've got too many financial and demographic problems building. An argument can be made that America peaked in the 1960s. The high school graduation rate in the United States peaked in the late 1960s. Since whites are a declining portion of the US population the graduation rate is going to decline much more than it has already. We are gradually losing the ability to maintain a first world nation.

In an NBER Working Paper published in 2007 7, we demonstrate why such different conclusions have been reached in previous studies. We use cleaner data, better methods, and a wide variety of data sources to estimate U.S. graduation rates. When comparable measures are used on comparable samples, a consensus can be reached across all data sources. After adjusting for multiple sources of bias and differences in sample construction, we establish that: 1) the U.S. high school graduation rate peaked at around 80 percent in the late 1960s and then declined by 4-5 percentage points; 2) the actual high school graduation rate is substantially lower than the 88 percent estimate; 3) about 65 percent of blacks and Hispanics leave school with a high school diploma, and minority graduation rates are still substantially below the rates for non-Hispanic whites. Contrary to estimates based on the status completion rate, we find no evidence of convergence in minority-majority graduation rate Exclusion of incarcerated populations from some measures greatly biases the reported high school graduation rate for blacks.

These trends are for persons born in the United States and exclude immigrants. The recent growth in unskilled migration to the United States further increases the proportion of unskilled Americans in the workforce, apart from the growth attributable to a rising high school dropout rate.

We no longer live in a nation that believes there are solutions. The American public has lost faith in higher spending on education as the solution.

In another sign of declining confidence, the public is less willing to spend more money on public education. In 1990, 70% of taxpayers favored spending "more on education," according to a University of Chicago poll. In the latest poll, only 46% favored a spending increase. That's a 15 percentage point drop from just one year ago when it was 61%.

But when it comes to actual dollars spent per pupil, Americans get the numbers wrong. Those polled by Education Next estimated that schools in their own districts spend a little more than $4,000 per pupil, on average. In fact, schools in those districts spend an average of $10,000.

Smart parents who are willing to do home schooling could do a lot better with that money.

By Randall Parker 2009 October 05 10:35 PM  Civilizations Decay
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2009 October 04 Sunday
Muslim Immigrant Terrorists In America

A couple of recent arrests of foreign terrorists in America highlight the fact that we had to let these people in for them to be a threat to us in the first place.

Najibullah Zazi, 24, appeared in federal court last week. He pleaded not guilty to charges of conspiring with others to detonate explosives in the United States.

Prosecutors allege that on August 28, 2008, Zazi and others flew to Peshawar, Pakistan, a city with a strong Taliban and al Qaeda presence.

Those currently under surveillance in the United States include members of Zazi's travel group, according to one source familiar with the investigation.

So now the FBI is watching his fellow Muslim friends who are also living in the United States. When they went to Pakistan if they had not been allowed to return back to the US then we wouldn't have to deal with the threat they pose within US borders.

I say just keep the Muslims out. We can't afford to fight them over in their own countries. Consider that Muslim warriors in Afghanistan get all of $106 million from outside of Afghanistan. To fight that $106 million jihad army the United States spends a couple orders of magnitude more money and that money is not enough to get control of Afghanistan - let alone of the area in Pakistan where Zazi received training. The war in Afghanistan will not prevent people like Zazi from trying to attack within the United States.

Outward signs of assimilation can be very misleading.

But to Hall and his friends, he is "Omar" Zazi, their friendly van driver during a three-day midsummer trip to Denver to see their favorite band, Phish.

The driver was a knowledgeable sports fan, fluent in American slang, and seemed comfortable with these guys his own age.

Hundreds of members of Zazi's clan live in the United States. I wonder how many of them are married to their cousins.

The family, from a large tribal clan with hundreds of relatives living in the U.S., left Afghanistan to live across the border in Pakistan when Zazi was 7.

Zazi was a legal immigrant. Meanwhile a Jordanian teenager who overstayed his visa was thinking hostile thoughts (which the FBI says he tried to act on to blow up a Dallas building) about America while living in the town of Italy Texas.

Friends of the young Jordanian, Hosam Maher Husein Smadi, painted a complex portrait of him completely at odds with the zealous terrorist that F.B.I. agents said had spouted hateful messages about the United States on the Internet and was lured last week into a plot to blow up the Fountain Place tower in downtown Dallas.

Mr. Smadi was an extremely outgoing 19-year-old, friends in this tiny town said, who smoked marijuana and drank beer with his peers in the complex of domed cottages where he lived. They said he did endless favors for his friends, held barbecues and baby-sat for his neighbor’s children.

He married a local girl. They separated after 3 months. He overstayed a 6 month visa. If he had never been granted a visa then FBI agents wouldn't need to have hunted him down based on his hostile chat group messages. Why let teenage Jordanians come to the United States?

He says he wanted freedom. In the mythology of the Open Borders crowd everyone who comes to America wants freedom. But freedom for what? Freedom to blow up skyscrapers? Think of it as freedom for post-modern artistic expression.

“He said he came here because it was really strict out there in Jordan,” Ms. Deloach, 23, recalled. “He wanted freedom.”

Meanwhile he was on extremist web sites talking about attacking Americans in their homes. A very small number of people committed to terrorism can cause a big change in how we live and in what powers are given to federal law enforcement agencies. Is Muslim immigration really a price worth paying?

5 terrorist probes in 5 states have just popped up into public view.

In the past week, U.S. officials have announced charges in five terrorism probes in five states. It is a confluence of cases unlike anything the country has seen since the September 11, 2001, attacks.

I remember the kind of society we used to have. We could walk into an airport and walk right up to the gate where an airplane's passengers walked out. It was a far more casual society than we have today. It is a society worth trying to bring back again.

By Randall Parker 2009 October 04 10:21 PM  Immigration Terrorism
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Big US Government Jobs Hiring Binge

Government is a growth industry in the United States. It is a shame that it is a growth industry that doesn't create wealth.

A golden age of work for the government is just now dawning, according to a report released last week by the nonprofit Partnership for Public Service, a group in Washington that promotes government employment. There are several reasons: cyclical turnover; fresh demand in areas such as homeland security and veterans affairs, driven by the post-9/11 terrorist threat and wars in Iraq and Afghanistan; and the financial crisis, with the stimulus spending it has spurred.

Homeland security: We could make America substantially safer from terrorism if we just stopped granting most visas to people from Muslim countries?

By the fall of 2012, the Partnership estimates, the federal government will have hired 273,000 new workers for jobs the group calls "mission critical."

At least 12% of those jobs are costs of empire.

Because of the many U.S. soldiers returning from foreign wars, the Department of Veterans Affairs will be the most active employer, hiring 25,000 nurses and 8,500 doctors by 2012.

A lot of soldiers are coming back with long term health problems. More suffer brain damage than die. So we will be paying for Iraq and Afghanistan for decades to come.

By Randall Parker 2009 October 04 08:18 PM  Economics Government Costs
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China GDP To Pass Japan In 2010

That's China coming up in your rear view mirror.

Though recent wild currency swings could delay the reckoning, many economists expect Japan to cede its rank as the world’s second-largest economy sometime next year, as much as five years earlier than previously forecast.

China's rise is accelerating Japan's decline. The same is happening between China and the United States as factories leave and China bids up the prices of oil and other commodities. The US gets less oil so that China can buy more.

China’s rise could accelerate Japan’s economic decline as it captures Japanese export markets, and as Japan’s crushing national debt increases and its aging population grows less and less productive — producing a downward spiral.

To repeat: Rising Chinese buying power is increasing the competition for natural resources. Some of those natural resources (most notably oil) are either nearing or past their global production peak. This puts China's prosperity in competition with America's and Europe's prosperity. Mind you, what I'm saying is heresy.

Remember the good times because some day people aren't going to believe how you are living now.

By Randall Parker 2009 October 04 02:56 PM  China
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2009 October 02 Friday
Economic Recovery Requires Fixing Global Imbalances?

Satyajit Das argues that we can't fix the economy without fixing the global imbalances in savings and consumption. Looks to me that policymakers have decided to inflate a new bubble rather than address the deeper causes.

A cursory look at the respective economies highlights the magnitude of the task. Consumption's contribution to U.S. GDP is 71%, while in China, it is 37%. Given that the GDP of China is around $4 trillion to $5 trillion, vs. $15 trillion for the United States, and average income in China is around 10% to 15% of U.S. earnings, the difficulty of using Chinese consumption to drive the global economy becomes apparent.

Additionally, over the last 25 years, Chinese consumption has declined from around 50% to current levels of 37%. During that same period, Chinese savings have risen and exports have been the engine for growth. Given that a significant portion of exports is driven ultimately by American buyer, lower U.S. growth and declining consumption creates significant challenges for China.

Dealing with these global imbalances has not been a high priority in the various summits, symposiums and talk-fests that global leaders have shuttled to and from. The focus has been ‘NATO' – no action talk only. Half-hearted and unworkable proposals, such as the use of the synthetic Special Drawing Rights as reserve currency, have emerged.

Think about that. In China only 37% of GDP is consumed. The rest is reinvested. The US can not balance its own trade as long as East Asian countries refuse to consume as much as they produce. The US government's budget deficit is in part a reaction to the trade imbalanced caused by Asian savings. The US government is trying to use deficit spending to substitute for the demand loss caused by the large US trade deficit. That trade deficit is caused by external factors - the determination of some other countries to run huge trade surpluses.

The irony is that China's accumulation of dollars doesn't buy them greater security. They can't use those dollars without causing their value to plunge.

Reliance on Chinese foreign currency reserves is probably misplaced. Chinese reserves, a large proportion denominated in dollars, may have limited value. They cannot be effectively liquidated or mobilized without massive losses. Increasingly strident Chinese rhetoric about the safety of their dollar assets reflects increasing panic.

In reality, China is trying desperately to switch its reserves into real assets – commodity or resource producers where foreign countries will allow. In the meantime, China continues to purchase more dollars and U.S. Treasury bond to preserve the value of existing holdings in a surreal logic. On the other side, the U.S. continues to seek to preserve the status of the dollar as the sole reserve currency in order to enable itself to finance itself. The intractable nature of this problem is evident in the frequently contradictory statements from various Chinese spokesmen regarding the official position on the dollar.

Some of China's commodity buys might make sense. If they focus their buying on commodities that are going to become more scarce in the future (e.g. oil) they might even make a profit.

Das says the problems highlighted by the Global Financial Crisis (GFC) can't be solved as long as the huge imbalances in consumption and savings and investment remain. I agree.

No sustainable global recovery is likely without addressing the fundamental global imbalances that lie at the heart of the GFC.

I do not see Timothy Geithner, Ben Bernanke, and other top US policymakers working this problem in earnest.

By Randall Parker 2009 October 02 11:32 PM  Economics Trade
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