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Wednesday, May 30, 2007

FNMA Tightens On Subprime

I know, I know, the popular impression is that Fannie Mae doesn't underwrite subprime but it does. It is a very big player, in fact. Fannies' 0705 announcement is at eFannieMae.

They are tightening credit standards on MyCommunity loans (no more EA-II) and adding a 1% interest rate premium on top of any other feature premiums, among other actions. The 1% goes into effect on August 1st. In 2006, Fannie Mae originations of MyCommunity loans increased to 3 times that of 2005. And year to date 2007, origination of MyCommunity loans is nearly that of all of 2006.

In other words, the credit tightening cycle in not over yet in mortgages.

It really hasn't even begun for corporate credit. It is true that banks are pulling back on corporate and consumer credit (except for credit cards), but they don't control the market.

Other interesting tidbits are that the HUD Area Median Incomes for 2007 are going to be lower in some areas than in 2006....

Mortgage interest rates are moving up significantly now. MBA's latest weekly update gives the average 30 year fixed as 6.32%. I usually use HSH, which gives the national 30 year fixed average as 6.46%. CA, FL, MA, NJ & NY all averaged at or above 6.50% last week. These rates are risk-based to some extent. The difference between the MBA numbers and the HSH numbers is that the MBA numbers assume 20% down, which is not all that common any more.

Housing is acutely sensitive to interest rates, because higher interest rates increase monthly payments and decrease affordability. With higher default risk and higher bond yields, the trend in mortgage rates should be broadly up. It looks to be continuing tough going for home sales.

Tuesday, May 29, 2007

Interfaith Outreach Of A New Sort

The Episcopal Church of the Redeemer in Jacksonville had a theological dispute with their bishop. I don't know quite what it was over.

I do know my mother drew the line in HER diocese when the Druids and so forth were acceptable ministers but the orthodox ministers were being deposed by their Bishop (in PA), and when PA bishop met with her vestry, the bishop insisted that there were many Christs. The Druid and Wiccan services were just part of their interfaith outreach. I know this is true because my mother was there and she told me. This was all happening at the same time as other ministers were being binged out because they did not believe in ordination of women, etc. The message my mother got was that the only thing that was intolerable in her diocese was an orthdox Episcopalian. That witch thing is a real hurdle for orthodox Episcopalians, because that's one of Jesus' commands. Your orthodox Episcopalians are not exactly traditional Bible-thumping fundamentalists, you understand, but there is pretty much an orthodox consensus that the Ten Commandments are not the Ten Suggestions, and that anything the Gospels agree that Jesus said is pretty binding.

In any case, as a consequence of their theological dispute, the Floridian bishop told the rector and the vestry that they were deposed, and he would appoint new ones to his liking.

Needless to say, this was an issue. The organization of the Episcopal church has always been such that congregations elect their vestries, and the vestry finds their own rector. So there is no real precedent for what has been happening all over the Episcopal church in America (once ECUSA, now TEC - as the membership diminishes the name becomes more arrogant). A dispute developed over who had the right to do what, and a Florida court handed down a judgment in the bishop's favor, thus effectively pitching out the rector, the vestry, and the vast majority of the congregation. You can find a link to the summary judgment here.

OK, so far tolerance has not exactly ruled the day. But the dehoused congregation has found a new home to worship - the Beth Israel Jewish Temple, which agreed to rent them space. On Saturday, Beth Israel meets. On Sunday, the Church of the Redeemer meets. One of the displaced:
"This area out here is better than anything we had. So it's just a wonderful area for us to carry on," said Church of the Redeemer parishoner, Bob Hutton.

Lebhar says he expects the Beth Israel building to be the church's home for about 2 years.
Bwhaahahaaaa. I think it's a tolerance lesson for us all.... The Church of the Redeemer has a new bishop - in Uganda, and it is worshipping in the temple. Nothing like going back to your roots!!!! From their first service:

The torah and the menorah in the background....

Monday, May 28, 2007

They died for their country.

Arlington National Cemetary

Sunday, May 27, 2007

By George...

Mark Steyn.

For Memorial Day, QandO here and here, and a video at Blackfive.

For yucks, Ferdie.

Friday, May 25, 2007

Why Al-Queda Really Should Be Scared Stiff

I shouldn't, but I'm gonna. Al-Queda, this message is for you:

Beware of ever starting a Cowboys and Muslims type of war - we've got Christian schooled sixth graders in the south who aren't afraid to take on a 1,000 pound boar with a pistol. And when they come for you, they'll be coming armed with pork sausage and plenty of lard!!!

Jamison, who killed his first deer at age 5, was hunting with father Mike Stone and two guides in east Alabama on May 3 when he bagged Hogzilla II. He said he shot the huge animal eight times with a .50-caliber revolver and chased it for three hours through hilly woods before finishing it off with a point-blank shot.
"I was a little bit scared, a little bit excited," said Jamison, who just finished the sixth grade on the honor roll at Christian Heritage Academy, a small, private school.
I realize that the range of effete politicians and PETA-placating talking heads on American television aren't very intimidating, but you don't want to ever really piss off the rest of us. The only thing holding us back at this point, believe it or not, is our religion. But our patience and our peaceful theology is wearing thin now, and Old Testament passages are being discussed. It's a little-understood fact that Real America is nothing at all like Media America.

I don't know quite how to get this across, but the Iraqi war was actually an American peace overture - which, I might add, our religion requires of us before we get settled into a nice game of Cowboys and Muslims. You really need to stop passing around the torture videos and start passing around tapes of what's being said on the talkshows on the rural radio stations in the US of A. Because people aren't SCARED - they're getting ANGRY. As the Confederate Yankee comments, we have been fighting such wars and winning them for our entire history.

Gas Gouging Law All Clawed Up

Ferdy the Conservative Cat did a fine job on this one. The gas gouging law is a real exercise in pretense, and if anything it will make prices go a bit higher. Read it and weep. Is Congress stupid or do they think we are?

April Home Sales: What A Mess

I'm somewhat disappointed by this month's reports. I know the New Home Sales report was trumpeted as wonderful, but the details did not bear that theory out.

Existing Home Sales were just pathetic. I sure hope I don't end up writing "grotesque" in a couple of months. A few numbers tell the story:
What can I say about these numbers? Bankers everywhere are opting for that drinking lunch. The real theme song for mortgage broker, lender and servicer conventions is now Jimmy Buffet's Wasting Away In Margaritaville. It's a good thing these modern buildings do not have windows that can be opened, because otherwise a horde of bankers would be jumping out the third and fourth floor windows (typically, such organizations have good long-term disability insurance). In case you think I'm being a hysterical redneck, let me quote Turbo's comment over on Calculated Risk:
At their peak, home prices were 6 standard deviations expensive from the historical cost of carry / rent ratio, so David you're right, in that centering a normal distribution on a fat tail event is fraught with risk. The history of bubbles suggests that a fat tail reversion to the mean follows a fat tail price gain, and worse, correlations practically go to one (or -1) in a crisis, meaning the best way to model risk is to hide under your desk and pray that you're one of the early ones to get a termination package before bankrupcy hits. I've really been a banker too long for my own mental health...
Yeah, yeah, yeah. The insurance companies are very unreceptive to benefit claims based on work-related mental problems, Turbo. Try "accidentally" throwing your desk through the window and then falling out. Much better odds.

The reason why the drop in sales by region is important is that median and average prices are much, much higher in the West and Northeast. By region, the most single family sales by far and away were occurring in the South, then the West, then the Midwest and finally, far behind, the Northeast. That pattern has now shifted in the slow market to the South, the Midwest, the West and the Northeast. So (groan) the areas hit hardest are the areas having the largest mortgages, meaning the correction in price will be concentrated there, meaning the average loss per delinquent loan is skewed to the high end.... Urk, gurgle, glumph (to quote Ms. Bullhardt when regurgitating the rock she just ate. It turns out that rocks and stated income mortgages don't digest well.)

For condos, the most sales were occurring in the Northeast, followed by the South, the Midwest, and then the West. However, median prices are highest in the West, followed by the Northeast, the Midwest and the South. Thus, the AIIEEE caused by condo sales in the West is due to the relative expected losses on those loans. In the South, the market has degenerated enough that people will just tend to buy single-family instead.

Now, keep the above firmly in mind, because we now come to the New Home Sales report. Almost everything you read in the press about it is wrong. For one thing, they are talking about seasonally adjusted numbers, and the seasonal adjustment is now distorting the numbers badly. If you looked at actual sales in the New Home sales report, a few highly unpleasant details popped out:
Now, no honest person looking at these numbers can believe anything but that an awful lot of standing inventory is simply priced too high for the demand in that market. You find me a $150,000 condo in Orange County or San Diego! These reports get massively revised, so it is too soon to fling the desks at the windows and jump due to this one report. However, I would not be buying homebuilder stocks. Heck, don't agree to take ownership even if they pay you to take them. There are going to be bankruptcies. What they seem to be doing is starting new communities, probably in different areas, in order to get some sales. They look slated to take some rough, rough losses on current inventory and land, and they are hoping to hold out as long as possible by getting cash flow in different areas.

There is not the faintest glimmer of a hope of a housing turnaround in either of these two reports. This market is EXTREMELY price sensitive. All the data shows it. This is very bad news for underwater home debtholders and whoever is holding payment rights to their paper.

For more background on the New Home sales report see CR's post here.

Thursday, May 24, 2007

God Hates Fags Fliers A Hate Crime?

I have seen reference to this story several times, and I just kept thinking it was misreported. But now it's on Volokh:
She and her 16-year-old friend each face charges of hate crime, disorderly conduct and resisting a peace officer stemming from their arrest May 11 outside Crystal Lake South High School. The charges allege the girls were distributing fliers showing two men kissing and containing inflammatory language toward homosexuals....
The hate crime charge is a felony. Eugene Volokh raises an eyebrow:
Calling it "harassment," "breach of the peace," "disorderly conduct," or "intentional infliction of emotional distress" is just labeling, and doesn't explain which First Amendment exception strips the words of protection. If anything, it highlights the vagueness of the legal theory under which the prosecution is operating, since these terms do not clearly define which speech will be punished by the law, and thus pose the three related problems of vague speech restrictions: lack of fair notice to speakers, risk of discriminatorily viewpoint-based enforcement, and tendency to deter speech. It's not just about "God Hates Fags"; if those words can be made a felony under one of these vague rationales, a wide (and unpredictable) range of other words could be punished as well.
I'm still dubious about whether we really know the story. If the facts I keep seeing written are true, there's trouble ahead. Even spiteful juvenile delinquents, as unadmirable as they might be, are protected by the Constitution. A felony charge for a hate crime seems beyond the allowable limits. The school has suspended them, and I suppose the pictured person has the right to file a civil complaint for libel. Perhaps they are being charged under a harassment statute, sustainable because the picture was of the person harassed?

It is difficult to reconcile Brandenburg V Ohio with this, and while the conduct is uncivil, I do think this sort of thing is taking us into deep waters. The conduct in Brandenburg was egregious, but the statute under which the KKK weekend revolutionaries were charged was deemed unviable by the court:
Measured by this test, Ohio's Criminal Syndicalism Act cannot be sustained. The Act punishes persons who "advocate or teach the duty, necessity, or propriety" of violence "as a means of accomplishing industrial or political reform"; or who publish or circulate or display any book or paper containing such advocacy; or who "justify" the commission of violent acts "with intent to exemplify, spread or advocate the propriety of the doctrines of criminal syndicalism"; or who "voluntarily assemble" with a group formed "to teach or advocate the doctrines of criminal syndicalism." Neither the indictment nor the trial judge's instructions to the jury in any way refined the statute's bald definition of the crime [395 U.S. 444, 449] in terms of mere advocacy not distinguished from incitement to imminent lawless action. 3

Accordingly, we are here confronted with a statute which, by its own words and as applied, purports to punish mere advocacy and to forbid, on pain of criminal punishment, assembly with others merely to advocate the described type of action.
As a practical matter, the quarrel over whether disapproval of homosexuality may be publicly voiced is only making it the rebellion of choice for today's wanna-be teenaged leaders of the pack. This is a growing problem in high schools, and I have to say that people in many political demonstrations that I have seen would probably be in trouble also.

On a lighter note, Iowahawk has returned to the pressing question of the Lutherans, and Dr. M takes a decided whack at vegans - in Illinois, this may or may not be a hate crime. In my experience, Vegans have got to be the most passionate causists on the planet. Not many people are willing to inflict malnutrition on their kids because of a belief - and I've actually seen one of these stunted children. Awful.

It's All About Gas And Food

An interesting Reuters article:
Weller and others warn that sharp up-and-down movements may have more spillover into the rest of the economy, because households have a hard time quickly adjusting their budgets.

There was a hint of this in April when U.S. retail sales slipped 0.2 percent as consumers cut back on other expenditures to compensate for higher gasoline costs, which have spiked 32 percent in inflation-adjusted terms since December.

Consumers reduced spending for clothing, sporting goods, general merchandise and restaurants.
Low-income families take the biggest hit from rising pump prices since gasoline expenditures at current price levels account for about 9 percent of their income, Weller said.

Among middle-income families, gasoline expenditures eat up roughly 5 percent to 6 percent of income.
Even assuming that MEW-funded spending drops effectively only about 2% over the course of the next year, you are looking at a net drop in spending of about 3% on consumer goods other than gas if these figures are correct. This wouldn't necessarily be a problem if food prices weren't galloping up in tandem, but then that's the problem. Food prices for lower-income families are up about 10% in most areas since January. Look at wholesale prices for beef. The current is shown, and you can download older averages from the right sidebar. Look at the 5/18 prices compared to say, the beginning of February. The compression factor is in - prices for the very top cuts and the bottom three quintiles are rising, whereas the prices for the 2nd most expensive quintile are dropping. Of course that is not what the consumer sees at the store, because the store balances the overall profit by raising the lower end prices the most.

CPI YoY food briefing updated 5/22 (containing April figures):
Beef up 4.7%
Poultry up 4.6%
Pork up .7%
Eggs up 18.6%
Fresh vegetables up 8.1%
Cereals up 4.5%
Food at home - 3.9%
Food away from home - 3.4%
I compile a "what can we get in the way of meat for our money this week" index, which is running up over 16% YoY as of May. That would be a bottom-end index which actually describes an astonishing number of families. I believe it is right because eggs tend to be the cheapest form of protein and are a fallback. I've got cereals up 12% and bread up 10%. The largest net increases are in the lower end foods. I've also got prices of canned vegetables up approximately 8% YoY. Stuff like macaroni and cheese up are up more than 10%. So I'm shifting my food price index from ~7.8 to ~10%.

All of this describes a pattern of price-constrained inflation busting out rather than moderating. For example, food away from home increased .3% in April whereas food at home increased .1%. CPI for lower-income workers is probably badly understated. Rental and housing makes up comparatively less of the household budget for rural households in comparison to urban households, so CPI for those areas is understated. Public transportation is effectively unavailable for most workers outside of the densely populated sections, so the average CPI is distorted there too.

What this should mean is that lower-end credit is going to blow up in everyone's faces and indeed that is beginning. There are some real structrural problems that economists had better start accounting for. One of the nastiest aspects of the current economic situation is that close to 69% of the population are homeowners. Most of the rest of the population falls into the segment that is taking a real beating (approximately 10%) in effective spending power from these types of baseline increases in necessities. That's two trends which reinforce each other and exert a structural drag on consumer spending that cannot be overlooked.

Wednesday, May 23, 2007

In Case Anyone Missed It

Dr. Sanity posted about the psychological implications of relegating women to second-class citizenship in Muslim countries. In the process she posted a few emails she had received from a Muslim disputing her claims. I'll excerpt the last:
We Muslims believe in something called "civility" and giving respect to a person even though he/she may not be deserving of it. We also believe in "obedience" and that a woman should always speak to a man only kind and sweet words.... A woman will only be nice, when she is aware of her own limitations. It it only when she is aware of her limitations, and doesn't feel threatened by men who are better than her in some way, that she can be a lady. ... So many girls think that calling any guy they don't like, "a dick" or something is totally fine. But do they ever call any one "a cunt" so easily? No, of course not. That is because females are disgusting creatures, and evil and sexist too.
I'm sure that we are all grateful to this gentleman for setting the record straight on what Muslims really believe about women. Not, btw, that this Sona guy (the email writer) is exactly typical of Muslims - he isn't.

He's got his own blog which he referred to when he showed up in the comments claiming the emails. Try his "probation" tag:
It was pretty boring. She asked me some weird things. They are such sneaky fuckers. Am going to be really careful about this one now. I was explaining something and she did not even let me finish and she said "Hmm... thats perverting the course of justice" and am like wait up let me finish.
So my probation officer is a female. I am dreading going there, as for a start shes a Christian woman and I don't like this - she wears a cross - and I get the urge to try to convert her to Islam. Today we are going to be talking about personal stuff right into the nitty-gritty as she told me the week previously. Once am there and talking to her she is pretty helpful actually. She's pretty good looking to, so 2hrs fly-buy I think she's married too am not sure though. I'll ask her today.
The thing is I can't be a complete bastard to her. I have to be really sweet and nice and so innocent and pathetic. So she puts in a good word for me so I can get out of this probation crap. 12 months of this Jesus I guess I just need to out my head down and get on with it. Shes also going to make me do this anger management thing. She reckons I have anger problems. Well who wouldn't have anger problem women stupid deficient women are doing your head in? they seem to be missing the central point here. Women piss me off which leads to my anger "problems" well its almost time. Damn I think I've put too much aftershave on I feel sick and have a headache.
I guess the woman got tired of being hit on by Sona, who says he is married and in a recent post on his birthday was waiting for his dad to let him use his dad's credit card!!!
Damn I have to do probation with a man from now on. I hate men I was better off with the woman. He keeps changing his name too I am sure. The first time I met him I am sure he said his name was Mark and now he is saying its Tony. Strange guy. Oh and they wanted to do a home visit I had to blag myself out of it. Half of my family ain't even got a clue. Am doing probation.

Monday, May 21, 2007

Angry, Useless Politics

Update: Viola Jaynes referred me to this video by Roy Beck, and it's a good one. The NumbersUSA website.

Well, the immigration bill seems to have set off the political season for real. Now the frothing begins. Bloomberg contemplates the tacking into the political winds by the presidential aspirants, and ends by citing polls that show considerable support in the general population for some sort of deal that regularizes the status of illegal immigrants:
The public, by a margin of 59 percent to 37 percent, supports the idea of granting illegal immigrants legal working status and a path to citizenship, according to a March poll by the Pew Center, a Washington-based research organization.

A Bloomberg News poll conducted April 5-9 found that voters may be receptive to a compromise. A majority of Republicans and Democrats favored combining strict enforcement and a guest- worker program.
But does this compromise satisfy that desire? Regardless, it is usually the case that the general population is in fact more moderate than the political spinners. I wonder if most voting Americans don't really belong to the "pragmatic party", and end up swinging to the party that seems to be best attempting to improve matters pragmatically at any one time.

As far as I can tell, the immigration "compromise" fails the pragmatism test pretty badly. Illegal workers can be exploited, and are exploited, and are used to drive down wages of non-illegal workers. Flooding the market with low-skilled workers also drives down wages. Cheap nannies, yardworkers and dishwashers may be an economic benefit to highly-educated professionals, but they hurt another segment of the population pretty badly (including legal Hispanic immigrants). So legalizing them is a priority; this gives them much more freedom to change jobs and negotiate. It gives them an incentive to sink down roots. I doubt very much that most lower middle-class and under families can afford to have the head of household go back to their native countries, so I don't think this "compromise" is going to accomplish that.

The "send them all back" crowd are wildly unrealistic; we do need more people with our aging population. Furthermore, a lot of illegals are relatively well-integrated and stable; some have even bought houses and many run businesses. It sure would be nice if we could get them all legalized, filing taxes and voting.

Obviously it is a matter of setting rational limits. I wrote before about what I thought of "guest workers" who never have a chance to settle here. I still believe that it is destroying our nation and that it is a form of class warfare. If I have to read any more about "doing the jobs Americans won't do" I might get a little rabid myself.

I have the uneasy feeling that angry political maneuvering and spittle-flecked rhetoric is going to drown out the interests of the American population on this issue once again. We've got the rabid right and the looney left and they're both screamers. (Dr. M has an interesting theory on this question which might explain why so often our rabid right and the looney left seem to be ending up in bed together. She thinks anger and insecurity is what draws people to a certain type of politics, rather than that they get angry because of politics.) I'd hate to see either the rabid right or the looney left conquer the massive middle, but I have an ugly feeling that the large slate of presidential would-bes will mean that everyone will be fighting for small factions in order to stay in.

Carl says that the compromise has destroyed the Republican party for this cycle. I think he's right. I also think that unless we can get candidates who are attached to more than just rhetoric in the Democratic party that the same is true for the Democrats. Obama and Clinton are neck and neck, and so far Obama does not impress me on issues, but I don't trust Hillary's ethics or her ability to concoct or promulgate pragmatic solutions. Both the Democratic and Republican parties have had great moments in our history. The common denominator of those great moments has been when one or another confronted a transitional period, junked the BS, and crafted changes that benefited the great majority of the citizens in the country.

What we need are candidates with much broader experience than our current frontrunners. We want governors. We want people with some expertise in making things work. We don't need to hit home runs, we just need to keep getting runners on base. Right now the whole country seems stalled. If it takes an Independent candidate to accomplish that, I'm all for it and I am not alone in my frustration. The Anchoress:
I hold a relentless belief that undertaking positive actions will always come to better, more fruitful and constructive ends than negative actions.
I can understand dissatisfaction with a bill but I have never loved this notion of scalp-hunting on the left or the right, and for heaven’s sake, at this point some on the right are sounding exactly like the hard-left they abhor. Funny how a tactic one disdains becomes a tactic one endorses when one feels the ends justify the means.
She's right - people who are succumbing to frustration and anger are just letting themselves be suckered. We've got to remain anchored in reality and debating how we could make things better rather than worse.

Beck On Bonds

Rachel Beck writing on the LBO frenzy and the bondholders who are bearing the brunt of it. Mind you, these types of bonds are often held by pension funds and the like:
While shareholders are cashing in big during the current buyout boom, investors holding what had long been considered the least-risky corporate bonds are taking a surprising bath.

It's all about leverage. These days, most takeovers add lots of debt to acquired companies' balance sheets and the result has been credit-rating downgrades of high-quality corporate securities to junk levels.

This wasn't the way things were supposed to go for investors, many of whom are pension and mutual funds. They thought they were buying safety with investment-grade corporate bonds, which have a low risk of default.
Everything old is new again...

Kuwait depegs from the dollar, citing the inflation problem they have. Tell me again how US inflation is going to slow? Khaleej Times. Less than a month ago, Kuwait had supposedly promised not to do it.

Dollar rises against the yen and Euro - Bloomberg.

Update: This is funny. Yal posted these two Countrywide links over at Calculated Risk:
Mozilo whines:
Chief Executive Angelo Mozilo on Monday said regulation in the subprime mortgage industry will help crooks while hurting lenders and the housing market.
"...Regulation, in my opinion, has caused part of the problem. When they attacked the pay option and interest- only loans, that really put a dent in a lot of the product, which is perfectly good product."
While Countrywide REO climbs. If those lovely loans are such good product, why doesn't Countrywide refinance them instead of foreclosing on them? Why doesn't Mozilo put his own money into them? Heh,heh. You can guess the answer. There are, btw, no regulations actually forbidding those loans. All we've got is a strong suggestion that you better make sure your borrower understands them. The only reason anyone forecloses is because the borrower can't make the payments and can't qualify for a workout; Mozilo is really complaining that no one wants to take the dreck off Countrywide's hands.

Saturday, May 19, 2007

Dr M On The Immigration Bill

By far and away the best thing I have read on the matter is Dr. M's post. It's long and succinct at the same time. I heartily recommend it, because it's thoroughly based in reality:
...for economic and social reasons, Congress and the President have no intention of creating a secure border. The United States electorate would experience inflation again with a tight border. It's simple, really. Less workers, higher wages, businesses struggle to keep costs down, prices passed on to the consumer, rinse, repeat.

Once the illegal flow from Mexico is stopped (picking off drug runners armed to the teeth would be a nice start), the question of digestible immigration can resume. It is the height of folly to bring in a socialistic mind-set, subsidize it and then want it to discontinue magically somehow.
Note that as my dear Chief is in fact a Hispanic immigrant, I can hardly be accused of being prejudiced. However, there is a huge difference between allowing people who come here in order to become American to become citizens, and allowing people who neither like nor understand our culture to become citizens in massive numbers. We cannot allow people who really don't like the Constitution to overwhelm our culture. If we do, vast swaths of the US will simply become another culture, with all of that culture's good parts and bad parts. So do you want the US to become like Mexico, or Guatemala, or El Salvador? If you do, you are a lunatic.

The immigration bill(s) will not work. Chief No-Nag disapproves of them too. The first thing to do is to impose drastic penalties upon public and private employment of illegals; that will stop the influx. Any program that doesn't start with that is doomed to fail. Anyone who thinks about it realistically will understand.

Now, there are way too many people here working illegally to simply pitch them all out of jobs. So we will have to put in some sort of temporary grandfather clause in which we allow employers who have long term employees who are illegal a temporary exemption for a couple of years. But if you make too expensive for them to hire new illegal workers, you'll fix the problem on its own.

Once you stop the problem from worsening, then we can deal with things on a rational basis. Until we do, we aren't dealing with it at all. We should not allow anyone to become a citizen until they can demonstrate a pretty good competence in English and have studied our system of laws and the Constitution.

Friday, May 18, 2007

For Non-Commuting Contemplation Only

If you ever wondered why homeschooling became such a trend, SC&A has the answer. Do not read this if you are shortly to hit the roads for a commute home. You are apt to be pretty dazed by educational philosophies such as:
“Education does not mean teaching people to know what they do not know – it means teaching them to behave as they do not behave.”
“…a student attains ‘higher order thinking’ when he no longer believes in right or wrong“. “A large part of what we call good teaching is a teacher´s ability to obtain affective objectives by challenging the student’s fixed beliefs. …a large part of what we call teaching is that the teacher should be able to use education to reorganize a child’s thoughts, attitudes, and feelings.”
"Affective" means emotional. The aim of much modern teaching is to get students to feel passionately about issues; whether they actually understand them is considered unimportant. Indeed, giving them any tools and knowledge that would allow them to assess evidence independently is considered actually harmful. The little brats might start asking hard questions, thus messing up the classroom dynamic.

Your impulse upon reading SC&A's foray into education theory might be to dismiss the selection of quotes as cherry-picking a few random whackheads burbling into silence. Oh, no. This type of thinking dominates educational departments in US universities, and naturally enough has begun to seep into the wider university. See FIRE for examples, such as the Michigan State University "rightthinking" requirement for graduation:
After months of public pressure, Michigan State University (MSU) has ended its controversial Student Accountability in Community (SAC) program. FIRE urged MSU to end the SAC program because it forced students whose speech or behavior was deemed unacceptable to undergo ideological reeducation, or else face effective expulsion.
Eventually we will have to get all of our scientists from Czechoslovakia, Poland and India; our homegrown talent will all be too busy weeping and hugging trees to actually do any research.

Photon Courier, Chicago Boyz and Betsy's Page are three blogs that sometimes look at this issue.

As The World Turns Economically....

The most meaningful economic release today (Yahoo Economic Calendar) will probably be the Michigan consumer confidence survey, which is not all that meaningful. By far and away the most meaningful economic release of the month will probably turn out to be BLS BED. The most current release covers 3rdQ 2006, and it shows that the discrepancy between UI tax receipts and the regular employment surveys in 2006, which generated a correction of about 750,000 jobs in the beginning of 2007, seemed to reverse itself in late 2006:
Opening and expanding private sector business establishments gained 7.4 million jobs in the third quarter of 2006, a decrease of 397,000 from the previous quarter. Over the third quarter, expanding establishments added 6.0 million jobs, while opening establishments added 1.4 million jobs.

Gross job losses totaled 7.3 million, an increase of 50,000 from the previous quarter. During the quarter, contracting establishments lost 6.0 million jobs, while closing establishments lost 1.3 million jobs. (See tables A, 1, and 3.)
This will have major implications for corrections to the Birth/Death model in 2008, and it would suggest that employment this year is being overstated (whereas last year it was understated). For more discussion, see this post at Calculated Risk. My guess, which is no better than anyone else's, is that the negative trend picked up again in the second quarter of 2007 due primarily to continued declines in residential employment. In the third quarter, my guess would be that the trend would spread to retail establishments (rising unemployment among teenagers is probably the first signal of this diffusion, and we saw that clearly in the last monthly unemployment survey; unemployment among Hispanic teenagers especially shot up).

CR comments on his own post that the BED release may indicate that more of the economic impact of the housing decline has already been felt than was believed, and so the future impact may be less than anticipated. I don't agree; I think that employment was strong enough that approximately the first 200,000 - 250,000 of lost construction jobs would be absorbed naturally, and that losses after that will have a much greater significance for the economy.

Anyone who was interested in my post about Quincy Howe's World Diary 1929-1934 will probably find this article about the Spanish economic situation worth a read:
Spain's foreign reserves have plummeted to wafer-thin levels, leaving the country exposed to a possible banking crisis if the property market swings from boom to bust - despite membership of the eurozone.
(To me, the Spanish building boom seems already to be busting. I know some bank funding has drawn back.)
"The current account is completely out of control," said Alberto Mattelan, an economist at Inverseguros in Madrid.

"We have the worst deficit in our history and worse than any other country in the western world. It has not yet become a 'street concern', but I can assure you that it is of great concern to us economists. This will turn bad over the next 18 months," he said.
Mind you, nothing shows in the Spanish economic stats as yet, but in this type of boom cycle the correction tends to happen very quickly indeed.

I have written about the problem of needs inflation. I'm not the only one worried; Thomas Kee discusses the problem in a non-hysterical manner at Seeking Alpha, asking and answering the question of why the FOMC is so worried about inflation:
The concern isn't so much in the core level of producer prices or consumer prices, the concern is in the prices of food and energy. Food and energy make up the non-core components of the consumer price and the producer price indexes. These are extracted on a monthly basis and the result is the core levels of PPI and CPI. On a monthly basis these represent potentially volatile levels, and that's why they are extracted from this data. However, on a longer-term basis this is very important information to use in evaluating inflation.

Over the past seven years, the non-core components of the CPI and PPI have increased at about 37%. Inflationary pressures clearly exist in these non-core components. In the past seven years, the non-core components have increased on average 5.3% per year. From an inflation standpoint, this is an extremely aggressive level of inflation. However, most economists on a month-to-month basis discount the increases in the non-core components. That's a mistake longer term. The non-core components are what we depend on for a day to day living. Every month, regardless of economic environment, we need to spend money on food and energy. If the prices of food and energy are increasing aggressively, then our cost of living increases aggressively too.

The recent concern is about wages. With a low level of unemployment, wage pressures are at the forefront of the Fed's watch list, at least it seemed so during Greenspan's era. However, wage pressures have been tame compared to the prices of the non-core components. During a time when the non-core components increased by 37%, wages only increased by about 18%.
With a substantial group in our population experiencing stagnant wages and escalating living costs, it is really no surprise that levels of consumer debt have ballooned. Obviously, something's got to give. Wages for a large group of the population neither support increased living standards nor increased debt levels, although increased debt levels have recently allowed for maintaining a better standard of living than would otherwise be possible, because this type of debt can be used to defer living costs. But not indefinitely, and the lower income levels of consumer debt are showing the same trends as subprime mortgages.

Because the subprime (and Alt-A) mortgages have been used disproportionately as a means to enter the housing market, the subprime mortgage correction is causing a step down in effective housing demand. Over the next year, we are now going to experience a similar phenomenon in other segments of the consumer economy that are debt-dependent, such as cars and other discretionary purchases. The problem with funding current short-term consumption out of debt on a consistent basis over time is that it magnifies future economic problems. As it turns out, it was unrealistic to expect that people could fund new car purchases by rolling over debt on the previous car for very long. Nor can people continue to buy big-screen TVs on credit cards forever. Spending at restaurants is going to take a hit; retail employment and profits will be pressured. This will then flow through to some very high-paying jobs in companies that manufacture or market products like consumer electronics and business suppliers. Lower tax receipts for municipalities and states are going to force a retrenchment in state and local spending which will also restrain job growth and wage growth in these sectors.

The public policy issues raised by effectively understated CPIs for the elderly are now going to smack us right in the face. Less affluent retirees are in exactly the same boat as less affluent wage earners - a far higher percentage of their incomes goes to pay for fuel, utility and food than the norm. Therefore they are disproportionately affected by this trend, and demographics makes it particularly urgent to deal with the reality of high needs inflation. Raising gas taxes and subsidizing ethanol is worsening economic conditions for far too many people not to affect the overall economy.

If we understand these realities, we can make better public policy choices in the future. If we don't, we are pissing in our own beer and it will gain us nothing to then complain about the taste. Neither the Democratic nor the Republican party wish to deal with economic reality at present, but the population of the United States does not have the option to live in the DC/NY bubble world.

Thursday, May 17, 2007

If These Are Democrats...

An amazing SeattlePI editorial AND comments:
...a key ingredient in any reasonably speedy energy-policy fix must be higher gas prices.

That's particularly true if innovation and technology are to be utilized effectively. A federal gas tax increase of 50 cents or more would assure that there will be a market for new technologies.
From the comments:
Why don't you come up with a better alternative to gas, BEFORE you raise the taxes on gas? Only thing you are going to do, by raising taxes, is create a larger gap between the haves and have nots, which politicians aren't worried about at all, because they are the haves.
A fierce fight develops, about SUVs, global warming, and overpopulation. Of course, it ends up being the fault of the evangelicals. And those greedy bastards are having too many children, too:
Here here...overpopulation is the main issue driving all of this. Unfortunately. it is not even being talked about at the governmental level. Procreation-control should be at the top of the list. I absolutely adore China's one child policy...perhaps the overly religious types should take that as a hint...

Case in point, the brother of my x-girfriend is one of these evangelicals. His first priority after getting married (at age 20 lol) was to have 3 children, despite the fact that he wasn't done with college yet and had no means of paying for said children. The Lord will provide he kept saying, this is what we are supposed to do, etc......lol...this led him right to food stamps. Take this scenerio and multiply it by how many....it becomes a problem exponentially.
Telemark, I have witnessed similar scenarios... I worked at a courier company once and one of the evangelical drivers constantly railed against the "welfare state" while he was, in fact, living in state-subsidized housing for his wife and 9 kids. He also received food stamps and I would assume his church paid some of his bills. His poor wife was pregnant at 49 with another child. Poor kids... the older ones ran away at their first chance.
Religion has hood-winked so many otherwise sane people into acting, believing and voting against their best interests. Evangelicals are the scariest people I know because facts don't matter... feelings matter. My step-mother has eleven different Bibles and at least as many names for God. It's a faith-based addiction.
China has a viable solution, but I don't advocate the throwing of female infants down the well. There should be no tax incentive to having children, no deduction, no Bushie bribes like in 2002. $300 kid rebates... now that's insane. Society as a whole pays for the education, public safety and sometimes the healthcare of our less intelligent people's children.
How about a deduction for the first child, then an equal penalty for every one after.

1st child - $1200 tax credit net: $+1200
2nd child - 1200 penalty - net: $0
3rd child - 1200 penalty - net: $-1200

Let's favor educated rich people in breeding. (Yes, I am serious)
Beautiful! Brorlob has cut to the chase! An heir is OK, and a spare breaks it even. I love this formula.
In the meantime, even the LATimes has figured out that there is something wrong with the government's food inflation figures - except that they think it's somehow confined to LA. They go through a long list of local prices, solemnly comparing them to the national averages. Haha.

Quincy Howe's World Diary 1929 -1934

Everyone should read this book. Quincy Howe was an American who was an editor for a magazine called "The Living Age". In 1934 he published a compendium of international developments in the Americas, Europe and Asia during the period between 1930 through about the first half of 1934. The parallels to our time are astonishing.

From the prologue:
IN THE Wall Street crash of 1929 the United States lost what it had fought for in the World War. Beginning in 1914, Allied orders for food and munitions created a boom in American agriculture and industry that continued until March, 1917, when the British Treasury, the last source of Allied credit, exhausted its borrowing power. At that point the United States had to decide between calling a sudden halt to the boom or supporting the Allies. President Wilson chose the second course, and the American Treasury with its Liberty and Victory Loans took up the burden that the British Treasury had dropped. The country thus avoided a sharp depression by bowing to events beyond its own frontiers. American isolation had come to an end.

The slump that the War had postponed again threatened to creep over the land in 1920. This time, however, the automobile industry, installment buying, and foreign loans based on war-time profits turned the tide. The factories built since 1914 shifted from war-time to peace-time production, and for the next ten years the world marveled at American prosperity. Then, during the summer of 1929, consumption began to lag, stock prices wavered, and on October 24 came the worst crash in the history of the New York Stock Exchange, when nearly thirteen million shares went overboard in a panic of selling,

Less than a year had passed since Herbert Hoover informed his fellow countrymen that poverty had been forever abolished in the United States, promised them a chicken in every pot, and received the largest popular vote ever recorded by a candidate for the American Presidency. The events on Wall Street disturbed him not at all "The fundamental business of the country is on a sound and prosperous basis," he declared on October 25.

After two more sharp breaks in the market he announced on November 15 that "any lack of confidence in the basic strength of the United States is foolish." On November 21 the leaders of industry, banking, and commerce met at the White House and promised to cooperate with the Government and not to reduce wages. Among those present was Henry Ford, who announced that wages in his factories would be raised. On December 3 the President declared, "I am convinced that we have reestablished confidence." And the best opinion in England agreed with him. The Manchester Guardian regarded the Wall Street crash as "a pure gambling crisis," and the London Times went so far as to declare that "in the main speculation rested on a sound basis." The fact that brokers' loans had reached the record figure of eight billion dollars one tenth the national income for the year shows how far this speculation had gone.

What had happened was that thousands of gamblers had purchased stock on margin that is to say, they had put up a fraction of the purchase price and the broker had supplied the rest. If the gamblers could sell the stock at a higher price than had been paid for it, they pocketed the entire profit, but if the stock fell by as much as they had invested, it reverted to the broker, who either demanded more money from the gam bler or sold the stock himself. Now the crash of 1929 not only wiped out the entire proceeds of thousands of gamblers; it even left many brokers holding stock that was worth less than what they had put into it. And since the brokers in their turn had borrowed from the banks, using the stocks as securities for their loans, the entire financial system of the nation suffered. Nor were brokers the only people who had bor- rowed from the banks on securities that had suddenly fallen from twenty to fifty per cent in value.

Shortly before American finance suffered this blow, the leading bankers of the world had prepared a scheme to rescue the finances of Germany. Because the Versailles Treaty had declared Germany solely responsible for the War, the Allied Powers had presented that country with a reparations bill of a hundred and thirty-two billion marks the estimated cost of the War in May 1921. Three years later the Germans agreed to begin making payments through the medium of the Dawes Plan, which had no date of expiration and which put German finances under the supervision of a foreign Agent General for Reparations with headquarters in Berlin. The payments, however, came out of foreign, not German, pockets, and a handful of international bankers instantly collected handsome profits. In. the United States, for instance, a banking syndicate sold Dawes Plan bonds to the Ameri- can public and turned over the proceeds, minus the usual commission, to the German Government. In that way Germany raised enough money to pay reparations for a few years and to stabilize the mark.
These are excerpts from the 1931 entries. First, the summary:
What had happened was that after the Wall Street crash Frenchmen withdrew the money they had been lend- ing to New York and deposited seventeen billion francs in the banks of Great Britain, payable in pounds sterling. The British then used these deposits, on which they paid two and three per cent interest, to extend credit to German banks at five and six per cent. The German banks in turn extended credit to Vienna at eight and nine per cent, and Vienna extended credit to the banks of Bucharest and Budapest at twelve per cent. But the Hungarian and Ru manian farmers who had borrowed from the banks in their national capitals saw the price of wheat suddenly decline fifty per cent in the autumn of 1930 and therefore could not repay their loans. Which explains why the Credit-Anstalt in Vienna collapsed before the Danat Bank in Berlin, and why the Bank of England, quite apart from political considerations, cared more about saving Austria than the Bank of France did.
How it played out:
The same fall in the price of raw materials that had caused half a dozen revolutions during 1930 continued to make trouble during 1931. On May 23 the eleven largest wheat-exporting nations adjourned a futile conference in London, declaring that there was. more wheat in the world than could be sold at a profit. The United States had opposed fixing an export quota for each country but favored reduction of acreage; the Russians favored an export quota provided they could sell as much abroad as they did before the War, when they exported half again as much wheat as the United States. They refused, how- ever, to consider a reduction of acreage. On May 29 the American Farm Board announced that it would continue buying wheat until June 30 at higher and higher prices, and then stop. Within a week grain prices in Chicago dropped below the world level and wheat to be delivered in July fell to 57 cents a bushel, the lowest price since 1896. ...

THIS SLUMP in farm prices played an important part in the events of June. In 1929 the Credit-Anstalt, the largest bank in Austria, had taken over a smaller bank that specialized in farm mortgages. But the declining value of farm properties and the slump in world trade caused the losses of the Credit-Anstalt to rise to twenty million dollars during 1930 an amount larger than its whole capital stock.

This news was announced on May 11, and the Austrian Government at once agreed to place sixteen million dollars at the disposal of the Credit-Anstalt if it could raise a loan of twenty-one million dollars abroad. The Bank for International Settlements was approached, but the French directors on its board insisted that Austria first renounce the customs union with Germany and then submit to international financial control. On June 16 the financial crisis forced the Austrian Cabinet to resign, but the foreign bankers chiefly British and German agreed to extend their short-term loans to Austria for two years. The next day the Bank of England gave Austria a temporary credit of twenty-one million dollars without any guarantees attached and subject to extension. ...

In coming to the aid of Austria, the Bank of England virtually declared war on France in behalf of Germany. Chancellor Briining and his foreign minister, Dr. Curtius, had spent the week-end of June 6 with Ramsay Mac- Donald telling him of their country's desperate plight. German citizens were selling their marks and their Ger- man securities and depositing the proceeds in foreign cur- rency abroad. During the first three weeks of June the Reichsbank lost the equivalent of two hundred and twenty-seven million dollars in gold, or forty-one per cent of its total reserves. The German Government, unable to help Austria and save the customs union which it had counted on to stem the tide of National Socialism, therefore turned to England, which had been lending so much money to Germany that it had a large stake in keeping both that country and Austria solvent.

Because the United States had almost three times as much money as England invested in Germany, President Hoover suddenly proposed a one-year postponement "of all intergovernmental debts, reparations, and relief debts, both principal and interest" to take effect July 1. His faith in the power of undiluted ballyhoo remained unimpaired : he had not consulted a single foreign government in ad- vance. On June 29, the White House announced that all governments except the French had agreed in principle to the proposal, but in the meantime the Federal Reserve Bank of New York had contributed twenty-five million dollars to a short-term loan of one hundred million dollars to the Reichsbank the Banks of England and France and the Bank for International Settlements hav- ing provided the rest. ... STOCK MARKETS at once rose all over the world and the London Spectator commented: "Hope so long deferred has returned like Astrasa to earth. We may well rejoice and thank Heaven that Mr. Hoover has been inspired to his action, for we are escaped, like Job, with the skin of our teeth." The Germans, however, soon discovered that the moratorium saved them only a billion and a half marks, or about as much money as had poured out of the country during the first three weeks of June and about as much as Briining's emergency taxes had yielded. "In spite of Hoover," remarked the liberal Vossische Zeltung of Berlin, "we remain poor as church mice." ... The breakdown of the German banking system reflected the breakdown of German society and these facts prove it There had been sixteen thousand suicides during 1930 and an average of forty-four a day for the past three years. When the Reichswehr needed six thousand new recruits eighty thousand men applied, half of whom had been rendered unfit for service by undernourishment. Half the Berlin school children were getting nothing to eat or drink for breakfast, and in northern Germany one child in five had no bed to sleep in. About sixty million of the sixty-five million people in the country received an average annual income of only two hundred dollars per capita, and the number of bankruptcies during the first six months of 1931 had doubled since the year before.
(My comment: So at a time when wheat could hardly be given away on world exchanges, people in many countries were starving. It was not just Germany; the misery across much of South America was acute, and there was profound poverty in Japan, India and Russia. A growing swell of unemployment was causing suffering in England and the US; the economies of Spain and Italy were impacted severely as well; Spain's government was overthrown and the Rumanian prince was restored during 1930. )
According to the London Times, however, Hoover destroyed the post-war debt structure only in order to preserve the world-wide credit system based on the gold standard: "There is at stake the very basis and maintenance of the international system known as the gold standard, in a world whose members are to-day so linked one with another, so unitedly caught in the vast web of cosmopolitan dealing, that the effect of a collapse of credit at any one of a number of important points can no longer be localized." Events at once confirmed this judgment: the Danat Bank of Berlin, one of the four largest in the country, closed its doors on July 13 following a six-week run. All the other big German banks at once refused to pay more than ten per cent on their deposits, and the Berlin Stock Exchange closed for two days. On July 14 all the banks in Hungary closed for three days and one bank failed in Vienna and another in Latvia.
AUSTRIA had its banking crisis in June, Germany in July. On August 1 the Federal Reserve Bank of New York and the Bank of France each gave a credit of twenty-five million pounds to the Bank of England to enable it to issue more bank-notes and withstand the run on the pound that had immediately followed the run on the mark. Major Walter Elliott, a rising young Conservative member of Parliament, described the atmosphere in London during July with the restraint typical of a British gentleman, on the verge of hysteria: "Last Wednesday men came back from the City to the House of Commons like soldiers coming out of the line. There is no mistaking that atmosphere. Men say little, they sit quiet, they are glad to be at peace. They are not able to accept things around them as real. Reality is out there where they left it, where they will have to go to meet it again,"
Because the Bank of England a private institution, had jeopardized the safety of the pound sterling by unwise loans to Germany, the British Government had to reduce the dole to the unemployed and cut the salaries of all government officials. The Labor Cabinet dutifully set about this task, but the dole cuts it proposed did not go far enough to satisfy the bankers, and the Cabinet split on the issue of meeting the bankers' terms, MacDonald, Snowden, Thomas, and Lord Sankey, favoring acceptance. The Liberal Party took the same line, and since the Labor Government needed Liberal support to exist at all, the entire MacDonald Cabinet resigned on August 24.

ONE RESULT of the overthrow of the Labor Cabinet was that when Gandhi arrived in London to demand complete independence for India at the Second Round Table Conference, he found himself facing a government of imperialists. Another result was that on September 15 the annual maneuvers of the Grand Fleet in the North Sea had to be postponed because the pay reductions ordered by the new Government gave rise to a mutiny which was subsequently laid at the door of the British Secret Service.

Writing on "British Secret Service Secrets" in Crapouillot, an independent monthly published in Paris, Xavier de Hauteclocque, whom we have quoted before, made this statement: "The 'unforeseen' events that recently occurred in the British Navy and that went unpunished were not perhaps absolutely 'unforeseen' by the Conservative Party and its secret assistants. In any case, it seems that 'accidents' like this and the Zinoviev letter will be able to shipwreck any Cabinet that is not oriented in a purely imperialistic direction, in other words, Conservatively." What M. de Hauteclocque meant was that the discontent in the British fleet received encouragement from agents of the Conservative Party, which had controlled the British Intelligence Service ever since 1926 and which was systematically creating a panic before the October elections. In 1924 Conservative agents had staged a similar panic when they made public a forged letter of Zinoviev's in order to spread the idea that the Labor Party was taking money and orders from Moscow.

The Japanese put another interpretation on the mutiny and began acting as if the British Navy no longer stood in the way of their ambitions in Asia. On September 19 their troops marched into Manchuria and seized the city of Mukden on the complaint that one group of Chinese bandits had torn up a short stretch of railway track and that others had shot a Japanese army captain and a military companion who were traveling in civilian clothes on passports that made no mention of their army connections.

This episode marked the triumph of the conservative Seiyukai Party's "positive" policy over the liberal Minseito Party's "negative" policy. Although Premier Shidehara of the Minseito Party had the majority of Parliament and the country behind him, he could not control the army, which, in Japan, is responsible to the Emperor alone. Furthermore, the army had always supported the policy outlined in the famous Tanaka Memorial, a confidential document said to have been submitted to the Emperor by Baron Tanaka, the late Seiyukai leader.
And so the stage was set. In 1930, the governments of Bolivia, Peru and Argentina had been overthrown. In Bolivia, the government of President Siles had racked up tremendous foreign debt, and almost 60% of the budget was being used to support the Bolivian military or pay on the foreign debt. The military deposed him to try to prevent a populist revolution, which had as one of its goal to nationalize the oil wells. Shortly thereafter, President Leguia of Peru was deposed by a military junta. Peru had racked up even more foreign debt than Bolivia. Nearly simultaneously, President Irigoyen of Argentina, who had been a populist, fell when an Argentinian general led a march on the capital at the head of army units. Argentina's exports had fallen through the floor, it was forced to export gold, and the result was severe inflation which eroded his base and panicked the landowners. In China, where famine had been widespread for years, civil war was the norm rather than the exception. In India, Gandhi was leading the breakaway movement from the British Empire with near universal support. In Russia, which was in the throes of the Five Year plan, the drive to export agricultural goods was on to support Russia's attempt to industrialize. When the Japanese army basically moved on its own behest (the civilian government was controlled by the peaceful faction and had nothing to do with it), one of the reasons may have been that the Imperial clan and the Army feared the radicalism of Japan's growing ranks of educated, unemployed elite. Japan's growing textile mills during this period paid very little but were able to export enough to nearly crush the industry in England. A world which produced an oversupply of necessities was suddenly experiencing a crush of poverty which prevented masses of people buying what they needed, thus creating more unemployment and continually reinforcing the drop in consumption.

Most governments today are well aware of history and are fighting to prevent matters from evolving as they did then. The web of international lending today could, in some scenarios, collapse as it did then. The South American situation is evolving in a similar fashion today.

Wednesday, May 16, 2007

Smokin' But Not Burnin'

Is there any connection between these links? I think not, I hope not....

Republican Presidential Debate (I haven't read it yet.)

Fruitflies And Free Will. Wait until PETA hears what they are doing to fruit flies now.

Ann Althouse: Flaming comments on her Falwell post followed by a developing brawl on her Republican debate post. Still, nothing matches DU's intemperate verve on Falwell. Quite a few argue against the bile, too. Here's a sample exchange:
383. I wish nothing but the best for him
As someone who has been lurking on this forum for 3+ years I find many of the comments here out of character for DU. A man passed away today and my thoughts are with his family. I hope he rests in peace. DU is better then all this. That is why I am on the left, because we are better then them. I am not going to judge him. If there is a one supreme judge then I leave the judgement to him/her.
400. I would usually agree with you

But I do not care about Falwell or his family. They represent pure evil and filth. When Hitler died I can't amagine anyone wished his family prayers or solice.

Fuck Falwell, his family and Liberty University. I am glad he's dead. The world is a better place without his hate, swill and garbage.

To balance that, look at some of the comments on Shrinkwrapped's eminently sane post Terror and Societal Regression Revisited. SW is rebutting a commenter's point of view with:
In reality, advocating genocide is evil, whether it is Muslims espousing genocide of the Jews, or Westerners advocating genocide of the Islamic world. The second comment, that Islam is a cancer, which is similar to the Nazi justification for their attempted annihilation of the Jews (ie, that a victim race, culture, ethnic group represents an illness which must be eradicated) is noxious on its face and belied by the fact that there are in fact many millions of Muslims who want nothing more than to live in peace with their neighbors and join the modern world.
SW gets a lot of flak in the comments:
Like the cult of Thuggee, Islam is incompatible with the Western way.

While it may be wrong to call for a genocide of Muslims, it is just as wrong to think that we can live side by side with Muslims who may decide at some point in their lives to live the life that Muhammad and the Qur'an demand of them.

We can and must challenge Islam both by evangelizing to their spirit and their soul, and by diminishing their capacity and desire to threaten us. The one we can do with kindness and compassion, the other we must do adamantly with disproportionate brutality.

We can salvage people, but we can not salvage Islam.
Just purely horrible. What is the western way if it is not to judge individuals upon their actions, rather than making war upon entire ideologies?

The Senate Dissents: a senate page listing scientists who are skeptical about CO2 as a primary driver of 1900-on warming. Isn't this phrasing a bit odd?
Climate scientist Dr. Chris de Freitas of The University of Auckland, N.Z., also converted from a believer in man-made global warming to a skeptic.
Please, please, let scientists be scientists. There's no need to talk of belief and conversions....

To counter the rough tone of the above, The Anchoress posts excerpts from Tony Snow's commencement address:
To love is to place others before you and to make their needs your priority. Do it. When you put somebody else at the center of the frame, your entire world changes, and for the better. You begin to find your own place in the world. When you’re drawn into the lives of others, you enter their problems, their hopes, their dreams, their families. They whisk you down unimagined corridors, toward possibilities that had been hidden to you before. So resolve to do little things for others. You don’t know where they’re going to lead but then again, you don’t have any idea where your life is going to lead. When I was your age, I had long hair, a beard and thought of myself as a socialist. You are going to pinball all over the place, from experience to experience, job to job. And I want you to remember that you’ve got company. And that if you engage them with heart and mind, with faith and energy, you are going to find yourself on a cresting wave. ... The only things that are sure to endure are the artifacts of love. So go out and build as many as you can.

Monday, May 14, 2007

Oops, No Dried Milk Either!!!

``Over the next several months we're going to see some pretty strong prices on all milk,'' said Larry Salathe, an economist and dairy expert at the U.S. Department of Agriculture in Washington. Production needed to bring prices down ``takes at least several months, usually a year to two years, to come.''

Skim-milk powder, the benchmark for world trade, has risen 60 percent in six months to a record $1.58 a pound May 4 on the Chicago Mercantile Exchange, seven times higher than the five- year average. During the first five months last year, prices fell 14 percent.
European and US stocks of dried milk powder are just about wiped out. Same for butter, cheese, etc.

The Senior Loan Officer banking survey was released. More about that later.

Sunday, May 13, 2007

Do Me A Favor

Update: First drops of rain are falling; there is now a line of clouds pretty much parallel to I-75 in the worst areas. This is the airport in Lake City, FL, yesterday:

Georgia and northern Florida are in deep, smoky, dangerous territory. The smoke has been bad for weeks and just keeps getting worse. Yesterday visibility here was down to less than 1/3rd of a mile. It's hard to breathe outside; you have to use AC to filter the air.

There are plenty of evacuations and road closures; in some cases people are trying to move horses and other stock under really negative conditions.

The only thing that's going to help a bit is rain, which is not in the forecast. Please pray for it. People are being moved out of their homes and some have been killed in accidents. The firefighters are working under dangerous conditions and doing the best they can. Southern GA and northern Florida need rain. Worse, we need quiet rain, because windy rain and lightning are going to fan the flames and start new fires. Today all the churches will be praying for it; please join in.

Believe it or not, the fire which nearly burned our home down did not succeed in clearing enough debris that it couldn't be threatened again. The needles and brush from the standing timber are building up again. We got an insurance check and a quote on the roof, but it's pointless to repair it right now.

Friday, May 11, 2007


It's Not A Good Idea.... excellent advice from LawDog, via Conservative Cat.

Yet another publicity stunt gone inexplicably wrong.... Hint - it is a good idea to request help BEFORE you hold a press conference bewailing your lack of help.

Governors don't seem to be behaving too well lately - this time it's Corzine. Hint: when apologizing for speeding, be sure to focus on other people's safety more than your own! An interesting look at governors and other politicians. Via Kaus.

Scrappleface: Animal rights activists working for human rights for chimpanzees have a subtle, horrifying neocon agenda.

Last, but not least, Liberal Larry's rude, crude and gobsmackingly inspired response to Sheryl Crow's little disclosure a while ago. Not work safe. Be sure to read the comments. This is some type of performance office.

Welcome To Dried Milk Territory

Everyone was waiting for PPI and retail sales this morning. Everyone expected them to come in high; the debate was over just how high, as this Reuters roundup shows. Wachovia:
Forecast: +0.5 pct
+0.2 pct

"Another gain is expected in April, albeit at a slower pace than the past two months, with further increases in energy and food prices. Food prices, in particular, have posted four large consecutive monthly gains and are now up 7.8 percent over the past year. Demand for bio fuels is a primary culprit for the increase. Core PPI is expected to advance around 0.2 percent. If our forecast is realized, that would bring the year-over-year measure to 1.8 percent."
The temporary surge on fruits and vegetables is abating in areas with relatively low transport costs, but now the ethanol frenzy is biting the consumer.

Howard of Oraculations on gas prices:

That's what it cost me this AM for gas at the cheapest local station. I used to fill my tank it for less than $20; at the "low" my fill would cost less than $16. $[5]0 per means that $30 of weekly discretionary spending is now going to a necessity. Translate this across the economy and you have a serious recession coming our way.
Add in 7.8% on food.... "Core" inflation measures are much less important at this point than what the consumer is seeing at the store. Fuel costs act as a VAT (tax) on just about everything.

FFIEC/HUD latest median (half below, half over) household incomes by area. In most of these places, $10 extra for food and $20 extra for gas per week if you're careful. $30 after tax equals at least $40 average in wages (including EIC, etc), X 52 = 2,080 per year. Those credit cards ain't gonna get paid back any time soon!

Recent surveys showed that over 25% of Americans are underwater on their cars!

A nasty little secret is that debt is repaid on the margin, whereas this type of inflation is first dollar stuff.

Retail sales results showed an nominal drop, which, price adjusted, equates to a much higher drop in items purchased:
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for April, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $372.0 billion, a decrease of 0.2 percent (±0.7%)* from the previous month, but up 3.2 percent (±0.7%) from April 2006.
Note that the YoY drop is less than real inflation over that period. Tell me that we're not in a recession?

PPI up 0.7% in April. Hoo-hah, sorry Charlie, game's over! Another dirty little secret; economists and politicians have no idea at all about how the average American lives.

Thursday, May 10, 2007

Sometimes It's Nice To Be Small Fry

Wow, this story about three couples getting charged for insider trading really shocked me:
A Morgan Stanley compliance officer and her husband pleaded guilty today to insider-trading charges just hours before another official of the firm and her husband were arrested on identical charges in a separate case.
A compliance officer? All the compliance officers I have known have been extremely focused on their jobs. I just can't fathom one of them doing something like this - but apparently she admitted it. The amount of money they got versus the penalties she would have been acutely aware of is extremely disproportionate.

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