Sunday, March 29, 2009


Yesterday I visited the Intelligentsia coffee shop on Broadway (in Chicago) to get a taste of coffee made from a Clover machine. A few months ago that outlet got rid of its conventional drip machine and in its place installed 3 Clover machines. Which means that each cup of coffee--your cup of coffee--is made soon after you order it, and the whole process takes less than a minute. The Clover machine is slick and quick. It's like a high-tech French press. Unlike French press coffee, however, the coffee that the Clover makes is much smoother. I paid $2.60 for a 12oz cup. You pay for what you get, and it's worth it, especially compared to the price of 12oz of coffee at Starbucks. It is really a shame that the Clover machine (from what I understand) is now owned by Starbucks and they seem reluctant to use it in their own stores and to see it used by anybody else.

Pie-Eyed Pickle of the Week: Dennis Rodman

Dennis Rodman had a reputation--at least among those who didn't know him personally or care to be apprised of his criminal record--that was secured by his glorious days on the basketball court. But after his run on Celebrity Apprentice, the whole world now knows that he is an obnoxious, lecherous, aimless drunk. Dennis, for the sake of your own reputation, you should have stayed out of the public eye and in those Canadian strip clubs.

Friday, March 20, 2009

Payroll Tax Holiday

Rick Hertzberg pimps the idea of a payroll tax holiday as a stimulus option and then also advocates abolishing the payroll tax altogether.  Abolishing the payroll tax would be a step in the right direction policy wise.  It is a regressive tax and it is a tax on labor thereby reducing the returns to work.  That said, the payroll tax currently comprises about 1/3 of all federal revenues.  Even if you implemented some taxes such as a carbon tax and a securities transaction tax, you would only be a 1/3 if the way towards offsetting payroll tax revenues.  If you were to completely offset the payroll tax you would have to implement a VAT or consumption tax of some form in addition to a carbon tax/securities transaction tax.  Such a shift would probably have negligible distributional effects but it would be a lot more efficient.

Wednesday, March 18, 2009

Retention Bonuses

There is much furor over the AIG retention bonuses, and there will probably be more about Fannie and Freddie's, but I don't get why there is the need for them.   The financial industry has contracted severely, and will likely continue to contract.  Where are these folks, the "stars" of AIG and Frannie purportedly going. Are JPMorgan and Goldman Sachs hot after talent with a subject matter expertise in blowing up the world's economy?  It all just seems so odd to me.

AIG Bailout Recipients by Country

hat tip: ezra klein

Thursday, March 12, 2009

Do Americans Secretly Harbor Big Government Desires?

That's the question Walter Shapiro attempts to answer and he answers in the affirmative.  I agree with this assertion and disagree simultaneously.  Most Americans support any number of "big government" interventions or programs with one very important caveat, it doesn't affect them by either depriving them of choices or their money in the form of increased taxation.  Reconciling these competing stances is what politicians are tasked to do and they typically don't succeed, in large part because it is impossible.  The biggest byproduct of this cognitive dissonance is our completely screwed up tax code which is everybody's preferred vehicle for enacting this or that social program which is ostensibly for lower income folks but the value of any "social program" related deduction correlates with one's tax rate.

Kristol's Replacement

Bill Kristol, embarassment of the NY Times, will be replaced by Ross Douthat of the Atlantic Monthly.  Douthat is infinitely better.

Thursday, March 05, 2009

CNBC Sucks

Though, I actually like Jim Cramer (not that I would advise anyone to follow his advice: re: Bear Stearns). Anyhow, John Stewart has a brilliant segment ripping CNBC a new one: This one is an instant classic.

D.C., Suburb of New York?

So says Richard Florida, Mr. Creative Class.  And in a sense, not the traditional sense, but nonetheless, he is sort of right.  Now New York is 200 miles away and nobody would actually commute to an from New York on a daily basis unless they had a private jet.

D.C. used to be exclusively a federal town.  However, a funny thing happened in the 90s.  It became something of a tech and media hub.  And at this point it has become something of a little brother to New York on media matters.  I think this will actually occur to a lesser extent with finance.

Wednesday, March 04, 2009

Detroit: New Hippie Commune Utopia Potential Part 2

The median home price in Detroit is $7,500. That is just insane to me. I am half serious about this whole commune idea. Why not? Instead of buying a warehouse loft in New York you can buy multiple warehouses. Once upon a time Detroit was hip, why not again. Or if not hip at least interesting.

Monday, March 02, 2009

The Taxpayer Will Pay

One of the undercurrents of the discussions of bank Nationalization is who should pay to clean up the banks' balance sheets.  I am of the view that regardless of how the bank cleanup is executed (whether it be a massive recapitalization a la TARP on roids, or a Swedish style bank nationalization) that the end result will be the same: the taxpayer will be on the hook for a couple trillion dollars.  In a nationalization you would see essentially what occurs in a bankruptcy.  The shareholder gets wiped out, the creditor takes a haircut and becomes the new owners or shareholders.   Seems clear enough, the taxpayer doesn't have to pay a dime.  

But I am skeptical of this proposition because the creditors are not some amorphous oligarchs.  Creditors come in the form of bond holders or owners of other fixed income instruments.  They are pension funds or the fixed income portion of 401(k)s.  If they take the hit instead of the taxpayer it will be retirees who are taking the hit.  After having just seen their stocks wiped out they will see their other revenue streams (annuities, bonds, etc.) reduced drastically.  You throw in people that are within a decade of retiring and you have a very powerful special interest.  These are people that vote and vote in large numbers.  Maybe they will be content to just live on their social security check, and take the hit.  But I am skeptical of this.  If you nationalize, I think there will be a massive movement to use social security as a vehicle to mitigate retirees and near retirees' losses. 

This is not an argument in favor of or against nationalization.  I think the taxpayer is going to be on the hook for a substantial sum of money irrespective of the method employed to fix the banking sector.  I think it's important to keep this in mind when we discuss fixing the banking sector.  There isn't a silver bullet that will protect the taxpayer.  For the purposes of planning a banking sector fix we need to assume that liability has already been booked and move on to other considerations.