Jeremy Clarkson on Motorcycles

Here is his review of a Vespa.  Here are two of my favorite bits:

"That said, a bike is much cheaper to run than a car. In fact, it takes only half a litre of fuel to get from your house to the scene of your first fatal accident. Which means that the lifetime cost of running your new bike is just 50p."

"I also liked the idea of a Vespa because most bikes are Japanese. This means they are extremely reliable so you cannot avoid a fatal crash by simply breaking down. This is entirely possible on a Vespa because it is made in Italy."

Coleman Pulling Ahead

According to Rasmussen Reports Coleman has taken a four point lead.  The DFL made a massive mistake in nominating Franken.  Any boring liberal would have won this race in a walk.  Franken may still pull it out but his nomination was definitely a tactical error.  The minute he announced his candidacy the DFL should have tried to throttle the candidacy in its infancy.

Update: Here is some polling info on Texas.  McCain is clearly going to win Texas, but it also finds that 23% of Texans think Obama is a Muslim.  

Barkeley Running in 2014

For Governor of Alabama.  I love this part:

'"I plan on it in 2014," Barkley told CNN's Campbell Brown on Monday.

When asked if he was serious, the former Philadelphia 76er said, "I am, I can't screw up Alabama."

He added that his native state could only improve. "We are number 48 in everything and Arkansas and Mississippi aren't going anywhere," Barkley said."'

Move over Stagflation, Here Comes Stag-deflation

Nouriel Roubini, aka Dr. Doom, is predicting we are set for an extended period of Stag-Deflation, i.e. high unemployment matched with deflation as opposed to inflation which we saw in the 70s.

On a related note here is my co-blogger (on permanent hiatus?) Ilya endorsing deflation. 

Update: I hasten to add that I didn't see a damn thing in the 70s as I wasn't yet even a thought.

Fumes from the Fever Swamp

The newest bat-shit crazy rumor is that Obama is the illegitamite son of Malcom X. Anyhow, it would be badass would if Obama opened his inaugral speech with: "We didn't land on Plymouth Rock - Plymouth rock landed on us."

Bailouts for Everyone

The big three had been lobbying the government, and it appeared successfully, for a bailout ($25 billion in subsidized loans). But this is rich, GM wants $5 to $10 billion from the gummint to assist it in buying out Chrysler. Once it does this, it will axe most of the Chrysler workforce save those that manufacture Jeep products and their minivans and pocket the $11 billion cash Chrysler has on hand. I am not a fan of bailouts in general, and with respect to the auto industry there seems to be the least compelling case for a bailout.

If Chrysler or GM goes under, it would in fact hurt Michigan, and the autoworkers. But in the place of the corpse known as Chrysler or GM a "foreign" automaker such as Hyundai, Toyota, or Honda will simply build more plants in the South, increase shifts at existing plants, and churn out more cars which are better and affordable.

What also makes GM's claim to federal assistance for a merger less compelling is that Nissan appears willing and eager to acquire a stake in Chrysler. If one's concern is for the autoworkers, a Nissan merger would seem to be vastly preferable as there is significantly less product overlap between Nissan and Chrysler than between GM and Chrysler. Thus, Nissan would probably be less likely to cut as many workers as GM.

I find this type of thing noxious because it reeks of economic nationalism. That there is some support for such a bailout/merger seems grounded in the desire to keep an American manufacturer from being consumed by those awful "Feriners". However, with the auto industry this is especially stupid as where a company is headquartered has little relevance any more. A Toyota Corolla is every bit as domestic, or more so, than an F-150. It is designed here, the supplies manufacture here, and the car assembled here. So indeed, the Toyota Corolla is a "Japanese" car, but just as much as it is a product of Alabama or Texas or wherever else in the South they produce them.

Update: The $25 billion in loans to the big three have in fact already been approved. The $10 billion GM is requesting is in addition to the bailout they have already received. This is absurd. There is a reason the big three are in dire straits, they are run like a pension company with a side business in cars and their side business is piss poor.

Another One Bites the Dust

Ted Stevens convicted on corruption charges.

PeP Links

Oprah loves the Kindle.  

Greg Mankiw has an op-ed on the dearth of certainty amongst economists is going on and what will happen.

Signs that the housing market is starting to bottom out.

The plus side of a recession: Income Inequality diminishes significantly.  Not much solace though, as Len Burman points out "Only if you don't like rich people," says Len Burman of the Tax Policy Center. "It's not like their share decline brings improvements for the middle class or the rest of America."

The Treasury is about to give out another $125 billion to banks.

More Chrysler

Daimler says that its 19% stake in Chrysler is worthless.

More on Endorsements

The Strib is set to endorse Coleman.

More Chrysler

Chrysler is cutting a quarter of its salaried workforce. 

Michael Brown Has A Blog

Yes, that Michael Brown.  As in "Brownie, you're doing a heckuva job."  As in the Michael Brown who went to an unaccredited law school, was Joe Allbaugh's college roomate, whose only previous management experience was at the Internation Arabian Horse Association where he was canned and was somehow appointed as General Counsel and then Head of FEMA.  That Michael Brown. Here's the link. Brownie, Welcome to the Blogosphere!

Scrapple

Scrapple is the nastiest shit ever, but it is also delicious. I had some this morning.  It is one of my guilty pleasures. Here is the wikipedia page for scrapple. Here is a brief excerpt:

"Scrapple is typically made of hog offal, such as the head, heart, liver, and other scraps, which are boiled with any bones attached (often the entire head), to make a broth. Once cooked, bones and fat are discarded, the meat is reserved, and (dry) cornmeal is boiled in the broth to make a mush. The meat, finely minced, is returned, and seasonings, typically sage, thyme,savory, and others are added. The mush is cast into loaves and allowed to cool thoroughly until gelled. The proportions and seasoning are very much a matter of the region and the cook's taste."

 Go out and try some.  

Car Thoughts

I have a VW Rabbit and very much enjoy it.  However, there are two things about the car that drive me insane.  One, it has no MP3 input.  You can get one of those FM receiver things but they suck.  To get a dealer installed MP3 input would cost $500.  This is absurd to me.  The Rabbit/Golf is an economy car and its market is presumably younger folks who typically have an iPod or some other MP3 player.  In fact what’s the likelihood at this point that they have an iPod but no longer buy CDs.  That certainly describes me but I have a car that has a 6-cd changer.  Even now, in its third year, the MP3 input is optional.

The other thing that annoys me is that it is a hatchback but doesn’t have any hooks to tie down the back.  Yet again, your market is 20 somethings, most of whom are vagabonds making trips to ikea and target or pilfering their relatives for furniture.  Some sort of a tie down would give the car more crap hauling functionality.  You put in the iPod input and the tie down hooks and you are looking at maybe $50 in material costs and you have a more functional car, one that better serves its intended market.

Tax on Securities Transactions

I don't know why this hasn't occurred.  Presently there is a tax on securities transactions of .0033%.  Setting it at .5% would raise roughly $65 billion.  Such a tax shouldn't have a negative impact on US financial markets competitiveness as other major exchanges such as the UK and Hong Kong levy a similar fee.  Here is a CRS study on a Securities Transaction Tax.

Is Obama a Socialist?

So asks Scott Johnson at Powerline.  This shouldn't surprise me because the guys at Powerline do write some positively insane things and really do seem smitten with conspiracy theories. But, one way to determine whether Obama is a closet socialist is by looking at his proposed policies.  What do we find?  He wants to raise taxes!  Though, if we recall Milton Friedman's old saw, Spending=Taxes.  He wants to institute a pigovian tax on carbon emissions to correct for negative externalities, like that other well known communist Greg Mankiw, oh wait, he was Bush's CEA Chair.  He wants to expand the Earned Income Tax Credit, a program inspired by Milton Friedman's proposal of a negative income tax.  These are all center-left positions, not the onset of a new wave of socialism.  If you want to see socialism in action just look at what's happening with the current administration and the financial bailouts, as Brad DeLong put it: 

"The Bush administration, having entered office as social conservatives, leaves office as conservative socialists, proprietors of the most sudden large expansion of the state's role in the US economy since mobilisation for the second world war."

But one could also look to the policy advisors Obama has surrounded himself by. Jason Furman's selection as Economic Policy Director drew lots of flak because the left views him as an apologist for Wal-Mart.  Here is an online debate between Furman and Barbara Ehrenreich on Wal-Mart.  I hasten to add that Furman has proposed using the same vehicle for reforming the Health Care system as McCain, as chronicled here and elsewhere. Jeff Liebman is the co-author of the LMS Social Security Plan, the M and the S in the LMS plan are Maya McGuineas (former McCain economic advisor) and Andrew Samwick (former member of the Bush CEA).  One of the central elements of the LMS plan is partial privatization.  Very socialist indeed.  And of course there is Austan Goolsbee, of that strong communist foothold in the midwest, the University of Chicago.

Bachman=Batshit Crazy

I tend to agree with Michelle Bachmann, we really need to investigate some of these anti-American politicians. The Committee on Un-American Activities was a great success, if only marred by its limited nature. It sought only those who were commies, in a sense undermining its stated purpose. It was not the Committee on Commie-Activities, rather, Un-American activities. Anti-American activities encompasses people of so many different walks of life and persuasions, not just commies. Go Bachman, Go! Fight the good fight!

Bullshit aside, it has long been the official view of this blog that Bachmann is absurd, though I do think she is a fox. See this brilliant post by my estranged co-blogger, Anti.

Update: Here is Powerline trying to rationalize Bachmann's statements. And yet again.

Chrysler Preparing to Die

Chrysler (owned by the private equity firm Cerberus) is discussing mergers with GM and Nissan-Renault.  The GM merger doesn't make any sense to me, but is apparently the most likely merger scenario.  GM and Chrysler overlap significantly, almost completely.  GM has Hummer, Chrysler has Jeep.  GM's product lineup mostly consists of big crappy cars and trucks, same goes for Chrysler.  Neither company has any credible small cars in the market, both have horrible reputations for vehicle reliability.  At least in a Nissan-Renault merger there would be some areas where it would be mutually beneficial.  Nissan doesn't really have all that much in the way of truck offerings nor a succesfful minivan.  Two areas where Chrysler has actually done well with the Dodge Ram, Chrysler Towne and Country, and the Dodge Caravan. Nissan can provide a platform to Chrysler for the development of a credible economy car (no, the Dodge Caliber does not qualify).  It seems with the GM/Chrysler merger the basic idea is to more or less kill Chrysler and hope that GM is able to capture their old customers.

Read This

It's a goodbye letter from a hedge fund manager closing up shop.  It's hilarious.  Here's an excerpt:

"I will no longer manage money for other people or institutions. I have enough of my own wealth to manage. Some people, who think they have arrived at a reasonable estimate of my net worth, might be surprised that I would call it quits with such a small war chest. That is fine; I am content with my rewards. Moreover, I will let others try to amass nine, ten or eleven figure net worths. Meanwhile, their lives suck. Appointments back to back, booked solid for the next three months, they lookforward to their two week vacation in January during which they will likely be glued to their Blackberries or other such devices. What is the point? They will all be forgotten in fifty years anyway. Steve Balmer, Steven Cohen, and Larry Ellison will all be forgotten. I do not understand the legacy thing. Nearly everyone will be forgotten. Give up on leaving your mark. Throw the Blackberry away and enjoy life."

PeP Endorsement

As the only active contributor, I feel entitled to make the blog's endorsement.  The PeP blog is endorsing Obama, big surprise there.  

While a conservative, I simply cannot imagine McCain as President.  Or rather, I can, and this compels me to vote for Obama.  His impetuous nature simply renders him unfit to lead our nation in foreign affairs.  His unrivaled enthusiasm for war (read: singing Bomb, Bomb, Bomb Iran) is positively frightening.  His lack of knowledge on economic or other domestic matters is simply pathetic for a presidential candidate (such as the inability to credibly defend his health care plan) but also shows an alarming lack of intellectual engagement or curiosity. Such attributes have been in constant display by the current occupant of the Oval Office and to the nation's detriment.

I am not necessarily excited by the prospect of an Obama presidency combined with a Democratic majority in both chambers of Congress.  However, he clearly has the character and intellect to be President.  He will raise taxes, but ultimately they must be raised.  He will spend a lot on infrastructure, but such investments are overdue, and at least with Obama there is a chance that such investments will also include mass transit, and heaven forfend, there might be a more rational process in how these investments are made.  His committment to enact a cap and trade is less than optimal, but his preference for auctioning off permits is vastly superior to McCain's proposal of allocating permits.  And most importantly, Obama's signature foreign policy proposal is to wind down an ill-conceived war instead of doubling down on the existing one and launching a new one.

But further, as a Republican, I believe a loss is deserved on our side for the horrible mismanagement of the nation's affairs from Iraq to Katrina, the scaling back of our civil liberties, the rampant cronyism, politicization of the federal agencies, and deterioration of the nation's fiscal position.  The conservative movement, and the Republican party to which it has become so intertwined as to the point of oneness, has become intellectually and morally bankrupt.  A relevant conservative movement will need to develop ideas beyond the current platform of tax cuts, the politics of denial (climate change, income inequality, and the state of our health care system), gay bashing and conspiracy theories.  The conservative movement has failed to embrace this reality, hopefully a loss will begin a process of reevaluation.

Dining

Here is Tyler Cowen's Ethnic Dining Blog, a must for D.C. area residents.  Recently checked out Bamian, a very nice Afghan place. In general, for D.C., the way to go is Vietnamese (the Eden Center is always the way to go), Central American, Ethiopian, Indian, Afghan, and Bolivian.

It's Official

Powell has endorsed Obama.

PeP Links

Colin Powell may endorse Obama on Sunday.

Warren Buffett says "buy, buy" and repeats his mantra: "Be fearful when others are greedy, and be greedy when others are fearful." The one thing about the meltdown is this is something of a windfall for us younger folks, assuming everything doesn't go to complete hell.

Bill Poole, former Fed Chief of the St. Louis Fed, believes the Treasury is exceeding its authority with the new capital infusion project.

James Surowiecki, he of the "Wisdom of the Crowds", has a new blog: "The Balance Sheet".

PeP Links

Brad DeLong has an illuminating column on how the policy responses to the financial meltdown have evolved.

An online betting firm (based in Ireland) has declared the election over and started paying out to those who bet on an Obama victory.

Southwest has just posted its first quarterly loss ever.  File this one under sign of the times.

This article discusses the uproar over an abortion ship.  This reminds me of a bit by Chris Rock involving Pro-Choice rallies and young lads, but this is a family blog, so I will let you fill in the rest.

Greg Mankiw Readers: Welcome

Thanks for dropping by. Since you are probably coming here off a link to a health care post, I took the liberty to provide some links to my prior posts on health care (rest assured, they are all consistently mediocre):

1. The Things Campaigns Do to You (this was probably the piece that got you here in the first place)

2. Here I Moan about the Inadequacy of Democratic Health Care Plans

3. This one isn't so much about health care but my visceral disdain for John Edwards (but I think it comes off as more cerebral than visceral, but trust me, my disdain is visceral first and foremost)

4. This post is on Signapore's health care system (important note, I don't contribute a single unique thought in this post, but you should read it anyhow)

5. In this post I tepidly bite the hand that feeds me more traffic than I typically generate on my own accord.

More on Krugman

Here is an essay on Krugman by Krugman on his career.  The bits on his Washington experience are very interesting.

The National Review Needs to Cease Publication

Chris Buckley has resigned from the National Review.  He was one of the few good writers remaining at the National Review.  Now he is gone.  Outside of Ramesh Ponnuru and Yuval Levin there isn't a single writer at NR that won't make you instantly stupider for having read their work.

A New Era (hopefully not a new depression)

The US is now a Sovereign Wealth Fund with nukes.

More Krugman

Here is an essay by him on how he approaches work/his career.

Paul Krugman Wins the Nobel

I can't wait to see what the reaction is over at the corner (National Review) and Powerline. I am sure they are ginning up conspiracy theories as we speak.

Politics Decoupled from Policy: Howard Stern Edition

Check out this bit from Stern.

Good News: Morbid Version

"On a separate note, one good thing is that there haven’t been any reports of people on Wall Street jumping out of windows. That’s because the windows in modern office buildings don’t open."

- Paul Krugman

Interesting Paragraph

This is from Arnold Kling:

"1. An FDIC document on the risk weights of different bank assets. The higher the weight, the more capital the bank has to hold against that asset. As I read table 1 and table 3, if you originate a loan with a down payment of 20 to 40 percent, the risk weight is 35. But if you buy a AA-rated security, the risk weight is only 20. So if a junk mortgage originator can pool loans with down payments of less than 5 percent, carve them into tranches, and get a rating agency to rate some of the tranches as AA or higher, it can make those more attractive to a bank than originating a relatively safe loan. If you want to know why securitization dominated the mortgage market, this explains it. Regulatory arbitrage, pure and simple."

Franken Leading

It looks like sixty is within reach.

Higher Education Forum

Cato Unbound is having a forum on higher education.  Charles Murray is writing the lead essay and his basic view is that too many, not too few people are going to college.  Many people are tempermentally or intelllectually ill suited to a traditional 4 year college.  A system of national certifications (such as a CPA, CFA, etc.) should be built up to substitute or supplant the signaling function of a BA.  I highly encourage you to read Bryan Caplan's essay (GMU professor, econlog blogger, and author of the Myth of the Rational Voter).  Here's an interesting outline of his on the signalling.

Questions for the Candidates

Here's a good one from Joe Stiglitz:

"More than a million people have lost their homes in the past two years. A million more are expected to lose their homes in the next 12 months or so. Do you support a more direct program of relief for homeowners? The government pays more of the mortgage costs of rich homeowners, through larger tax deductions, than of poorer homeowners. What would you do to correct this injustice?"

In my fantasy world the answer would be to phase out the mortgage interest deduction.  The benefits skew highly towards the rich, encourage people to buy houses that they otherwise could not afford, or buy more house than is necessary which negatively impacts the environment.  However, I don't see this occuring in the immediate future.  I do think in a couple years, if we weather the present storm, tax reform will undoubtedly be on Congress's mind.  A partial phase out of the interest deduction with an unreasonably high cap that is not indexed to inflation ($500k) might be saleable.

Here's Glenn Hubbard:

"The existing capital standards for financial companies helped create the illusion that risky assets were “safe.” A reformed system could mandate more capital, to support incremental risk-taking, during a boom and lower such capital requirements in a bust. By changing capital cushions over credit cycles, banks would be less likely to be forced into asset fire sales. Would you support such a change?"

Arnold Kling has been advocating capital forbearance as a possible solution to the credit crunch, and I like Hubbard's twist on making it counter-cyclical.

A Distressed Sovereign

Russia might bailout Iceland.  Wild times indeed.

Palin Debate Flow Chart

hat tip: Ezra Klein

The Roots

I went to see the Roots at the Rams Head Live! in Baltimore last night. Massively disappointed. I had seen them live 3 times previously, though the last time was five years ago. Anyhow, they used to be an incredible live act. Anyhow, this time they blew. Literally, they subbed out the beatbox guy for a fucking Tuba player. Don't get me wrong, they immensely talented. But they no longer had the same energy that they once did. They have become a brand not a band. They beatbox guy wasn't touring with them, they ditched their old bassist. The Roots is basically now just Questlove and Blackthought. While they were always the driving force of the Roots, the bassist, beatbox, and keyboardist all fueled the fire. That chemistry is gone. However, the Gymclass Heroes and Estelle opened for the Roots and both acts were brilliant. They alone were worth the money.

The Juice is Going to Jail

OJ has been convicted. The great thing is that this gives me a fresh impetus to make OJ Simpson jokes at work. I work for the government and it is fairly diverse. Even so, the Simpson trial is one of those things that reveals a really interesting dynamic. When I make OJ jokes, my African-American coworkers have a two-fold reaction, they give me shit for "not being right" and at the same time look to get pissed off at any of my white coworkers who laugh. My white co-workers simultaneously find the joke funny, get nervous as shit at the prospect of their African-American coworkers getting pissed at them for believing OJ was guilty. I don't know why this amuses me but it just does.

Bailout Passed

House passed it today.  My guess is this will simply be the first installment on a series of massive industrywide bailouts of the financial industry over the next year.

Wachovia not Going to Citigroup

Apparently Wells Fargo is buying Wachovia now.

My TakeAway From the Debate

I didn't watch the whole thing. Objectively you would have to say Biden destroyed Palin.  However, she came into the debate with such low expectations that even if she were merely atrocious, which she was, as opposed to the ongoing train wreck that we have been witnessing that you would have to deem her performance a success. 

Biden managed to escape any big foot in mouth moments.  When he started choking up when speaking about the safety of his son in the military, which seemed genuine, it was quite endearing. He was very effective in his foreign policy discussions.  

Ifill sucked as a moderator.  There were a couple of follow ups that she plainly blew.  Most glaring among them was the gay marriage question.  She asked Joe Biden a simple yes/no question about gay marriage and his response was a good one, though probably not what most liberals would like to hear.  He said that we should give gay couples the same civil rights that accompany a heterosexual marriage, but that whether it is called marriage is really a matter left to one's faith.  I agree with this formulation and would go one step further and that there should be no such thing as state sanctioned marriage but rather there are civil unions and a civil uinon can take place between two consenting unrelated adults.  Anyhow, Ifill then asked Palin if she agreed with what Biden said. She stated that Joe Biden opposes gay marriage and so does she so they agree.  An obvious followup would be to ask if she believed, like Joe Biden, that gay couples should be accorded the same civil rights as heterosexual couples.  But Ifill didn't make that followup, weak sauce indeed.

Oh, and another great moment from the debate, Ifill asked of both candidates if they agreed with Cheney's view that the Office of the Vice President was a hybrid office that was neither executive nor legislative, fish nor fowl.  Anyhow, Palin agreed!!  Biden did an amazing job in not laughing, or being condescending in his response. 

The other thing, Palin blinked into the camera a number of times.  That was just ridiculously hot. I repeat, Sarah Palin is a stone cold fox.  I want her to stay on the national stage as long as possible, just not as our vice president.

The Debate

Palin is atrocious but she is doing vastly better than I thought she would.

More Thoughts on Palin

Palin has been a monumental train wreck.  My initial reactions to her nomination (found here) were positive because I viewed the election as a throwaway for Republicans and at least this gave an up and coming politician a chance on the national stage that she would probably not have had otherwise (being from Alaska and all).  Anyhow, she has failed miserably on the national stage and I am sure tonight's performance will merely serve cement her status as monumental disaster.  The one upshot is that she seems to have revived SNL.  Tina Fey's impression is brilliant and levity is certainly valuable in times of crisis.

Sarah Palin, the Perfecting of Bush

Here is James Fallows take on the Veep debates:

"Joe Biden will be judged on whether he gets anything wrong; Palin, on whether she gets anything right."

The Republican Party is officially the know nothing party.

Great Article on McCain from the Rolling Stone

This is a must read.  Here's a snippet:

"In its broad strokes, McCain's life story is oddly similar to that of the current occupant of the White House. John Sidney McCain III and George Walker Bush both represent the third generation of American dynasties. Both were born into positions of privilege against which they rebelled into mediocrity. Both developed an uncanny social intelligence that allowed them to skate by with a minimum of mental exertion. Both struggled with booze and loutish behavior. At each step, with the aid of their fathers' powerful friends, both failed upward. And both shed their skins as Episcopalian members of the Washington elite to build political careers as self-styled, ranch-inhabiting Westerners who pray to Jesus in their wives' evangelical churches.

In one vital respect, however, the comparison is deeply unfair to the current president: George W. Bush was a much better pilot."

Medicare to Stop Paying for Errors

This is one of those things that would seem to be an Onion headline but it's not.  Until recently, Medicare and for that matter private insurance pays for medical care even when it's botched.  

I love this part especially:

“Historically, there’s been some acceptance that these things happen,” said Brock D. Nelson, the hospital’s president. “We’ve come to now accept that they’re avoidable. And that’s a sea change.

Some improvements have been technological, like an electronic prescribing system that has helped cut medication errors in half. Others are breathtaking in their obviousness, like diligent hand-washing."

Gwen Ifill

Apparently Gwen Ifill has a book due out on inaugauration on what the Obama presidency means for America and failed to disclose this to the election commission.  This is clearly a conflict of interest and demonstrates an egregious lack of professionalism.  I understand why conservatives will want to pull the bias card out but really this works in Palin's favor.  Ifill, having screwed up will feel forced to put on the kid gloves with Palin.  Frankly, Palin couldn't have a better situation.  Even so, I expect a complete and total train wreck.

Senate Passes Bailout

They put in a bunch of goodies to get it through. It's going to be interesting to see what happens in the house. I think it will ultimately be passed. I have real misgivings about the bill, though, it seems like a majority of people who have an expertise in finance and economics favor passage of the bill. So maybe it is a not so awful thing.

It's Back

It looks like the bailout is back.

Fat is Good

Here is an interview with the Author of Fat, a sorta popular science health/recipe book.  I will probably read it some point and will report back later.  The book is centered on the basic point that animal fat is basically good for you and really tasty.

Thoughts on Paulson

Matt Yglesias has a great post on how Paulson has bungled the bailout among other things.  His basic argument is that the sensible thing for Paulson to have done was quietly go around congress and try to gin up support for a plan before announcing his bailout as opposed to pulling a plan out of his rear and then yelling from the rooftops that all hell would break loose if the plan was not adopted. 

Next Step

Apparently Senator Dodd is proposing expanding the FDIC's authority to deal with insolvent banks.  This is actually something they do quite well so this is an encouraging step.  

hat tip: Marginal Revolution

Retail Banking Sector

The Finance sector has consolidated significantly.  Now with Wachovia being bought by Citigroup (though it appears that Citigroup is going to fold their retail banking business under Wachovia) there are only a handful of players.  JPMorganChase (which has eaten up Bank One and WaMu), Bank of America (Countrywide, though it was basically a thrift without much of a deposit base), Citgroup, and Wells Fargo.  Nat City is surely going to fail and maybe Fifth Third as well.  WalMart has been flirting with the idea of opening up a commercial banking practice for years but has been stymied.  I wonder if regulators will be more receptive to WalMart's entrance into the industry now that there are so few players.

Badass

Light Sabers for the Wii.  I am very pro-Wii conceptually, but anti-Wii in practice.  I prefer games like Grand Theft Auto, actually, that is the only game I like.  But honest to goodness light sabers might be enough to bring me around.

Bailout Failed

I still don't understand why traditional stimulus tools haven't been discussed.   There are roads and bridges to be fixed, mass transit to be built, and local governments to be bailed out.  In the meantime we can pass another stimulus package along the lines of the one passed last year.  I think the goal should be to pump enough money in the economy to soften the blow the contraction of the financial industry, a contraction that should occur.

No to The Bailout

"Any liquidity crisis is caused by the promise of a government bailout. Ken said that his many friends in investment banking said that there is plenty of money to invest in financial services, but right now it is "sitting on the sidelines." Why? Because the financial services industry does not want to pay the terms required to get that money back in circulation (e.g., give up equity). As he put it, why do business with Warren Buffett who will negotiate a tough deal, if you believe that the government will ride in soon with cheaper cash?

Ken also talked about the need to shrink the financial services sector. He thinks it is good that the investment banking houses are failing and many people on Wall Street are losing their jobs because, in his view, we have an oversupply in that sector and our economy just can't support it.

Ken's background with the IMF and on the Board of the Federal Reserve add a certain credibility to his assessment of conditions on Wall Street. If he is right, the $700 bailout is saving some investment bankers' jobs in the short term, but overall it is just making the financial system worse."

Are Fannie and Freddie to Blame

No, but nor are they blameless.  

Another One Bites the Dust

WaMu is gone.  

Bailout Plan Breaks Down

At least I hope this is true.

Mighty McCain

John McCain has just demonstrated the power of preemption.  What a feat!  McCain suspended his campaign to get back to d.c. to take on the task of saving financial markets (of course with a detour to NYC over to the Clinton Global Initiative so that Bill Clinton could himself be a post-partisan figure/exceedingly ungracious loser).  And whaddya know, the mere threat of McCain's participation has compelled Republicans and Democrats, House and Senate to iron out their differences and finalize bailout legislation. I suppose he can attend that debate after all.  Here is the key graf:

"Democrats were hoping to reach a final agreement on the framework of a bill ahead of that meeting, partly to deny any credit to Mr. McCain, who took the bold step on Wednesday of suspending his campaign and announcing that he would return to Washington to help secure a deal. Democrats said they did not need his help."

That's real power right there.

hat tip: Felix Salmon

Android: iPhone Killer?

Probably not but it is a welcome development for consumer electronics geeks anyhow.  T-Mobile is launching the first Android based phone, the G1, in October.  Android is an open source, linux based operating system and it has been launched by Google. Anyhow, I have demonstrated total incompetence in forecasting consumer trends (see Smart Car, T-Mobile Wifi extender), so I won't venture to do so here.  

A Bailout For Everyone

The big three and their suppliers are getting $25 billion in subsidized loans from the taxpayer.  I don't get why keeping the big three in business is so vital. If one of them goes out of business, Toyota, Hyundai or Nissan will simply open up more plants in the South and build more cars (better cars at lower prices).  In the meantime, the surviving "American" auto companies might try to do things a little differently.  

The New New York

Here is Felix Salmon on what New York will look like now that it is deleveraging.  It sounds like more naughty shops, the met stays, less bottle service at clubs.  Not necessarily a bad trade-off.

Peter Orzag on the Bailout

Here's the money quote:

"However, institutions that gave up equity would presumably expect to receive higher prices for their assets, and an equity stake in the firms might not offer any better upside to taxpayers than direct purchases of the assets on a risk-adjusted basis. Furthermore, healthy institutions might be deterred from participating, which could make it more likely that the federal government would overpay for assets by limiting the potential number of sellers—and the potential dilution for existing shareholders if asset prices declined in the future might make it challenging for financial institutions that issued such equity to the government to raise private capital in the future."

Go read the whole thing.

A Better Alternative

Here is an idea posted by Tyler Cowen:

"True just sending money is not incentive compatible. But there is no reason to bail out homeowners. Just intervene in any mortgage default. Seize the property and continue making the mortgage payments. In the short run rent the property back to the homeowner.
This is what I have been advocating to my colleagues. I don't know why it is not under discussion. Before going with the arbitrary implememtation that Paulson is proposing now there should be some convincing argument that it's more efficient than this alternative. It is clearly the most direct approach and therefore should be the default (so to speak.)"

Here is another post along the same lines from Cowen.

McCain Suspends Campaign

McCain is suspending his campaign ostensibly so he can roll up his sleeves and help solve the credit crisis.  Given that any legislation will be coming from the Senate Finance committee, of which McCain is not a member, this seems daft.

Health and Taxes

One of the obnoxious things about employer provided health care is that if you don't take it you don't get anything in return.  I carry my family's health insurance.  Thus, my wife is not enrolled in her employer's plan.  Does the employer cash out the value of her premium? No.  The only savings are realized in the form of her not having to make the employee contribution to the premium.  That's lame.

More on the Bailout

Read this post by Mark Kleiman.  He essentially breaks down the argument over pricing the assets between Brad DeLong and Paul Krugman.

VP Debates

Word is that the VP debates will be tightly structured and moderated, ostensibly to benefit Sarah Palin.  I agree with Mickey Kaus' take that this is a mistake on the McCain camp's part.  Biden's fatal flaw has always been his mouth.  Give him enough rope and he'll hang himself.   However, when given limited time and a more rigid structure Biden is actually pretty effective, as evidenced in the primary debates. 

George Will on McCain

George Will has never been a McCain fan but in this column he comes just short of endorsing Obama and stating that McCain is unfit for office.

Stop The Presses

Barack Obama has conceded that in light of recent events his spending plans would have to be curtailed.  A dose of reality in a presidential campaign.  What a concept.

I Wish This Were on Ebay

Pieces of the Berlin wall are being auctioned off.  I would totally buy one.  They would be great for my patio.

More Thoughts on the Bailout

I am still having difficulty wrapping my head around the mechanics of the bailout. It will be a reverse auction, thus, instead of having multiple buyers and one seller there will be multiple sellers and one buyer.  My first reaction was that it would be impossible to establish a "fair-market" value for the assets because they are too heterogeneous.  A lot of concern right now centers around the fed overpaying for toxic assets, essentially being gamed.  However, if you have many sellers and you are taking the lowest price it seems that the pricing could skew in the other direction.  Consider the following scenario: Healthy Bank inc. (didn't involve itself much in the subprime frenzy, pays a fat dividend, and as a result is currently doing well relative to other financial firms), Marginal Bank Corp. (they have a significant amount of toxic assets and are under captialized but not grossly so; given a moderate capital infusion they should be able to weather the storm), Slimy Brothers Investments (they are neck deep in toxic shit).   It would seem in such a scenario Slimy Brothers Investments has the greatest incentive to offload their assets onto the Fed, however, they also need a generous price to stay afloat.  Whereas Marginal Bank Corp. and especially Healthy Bank inc. can afford to price their assets at a bargain basement value just to get them off their books.

Mark Cuban's Thoughts on the Meltdown

You can basically boil Cuban's diagnosis of the meltdown to the following phrase "Risk and Reward have been decoupled."  Anyways, check it out, he has a lot of interesting things to say.

New World/New Media

Felix Salmon has a very interesting point about the defense of the Paulson plan and what that means for media relations folks moving forward.  It used to be, and in practice still is, that when the administration (any not just this one) needed to sell a policy it hit up the Sunday morning talk shows and other t.v. venues.  This is definitely effective for reaching a segment of the population but there is a clear generational divide, and for the younger generation this simply doesn't work.  I am guessing that those 10 years older and younger than me are consuming most of their news through the web and especially through blogs.  The only government agency that I can think of that does effectively uses a blog is the Congressional Budget Office with its use of the Director's Blog.  

Congress Members Getting Hosed

Bloomberg has a roundup of which members of congress are getting wiped out from the AIG fallout ("a bailout" but I think the fed's line of credit at the libor + 850 basis points is really a forced, if not immediate, liquidation dressed up as a bailout). Anyhow, it looks like Pelosi and Kerry are getting creamed. But they have crap loads of money so they should be just fine. Not that this would ever happen, but I would love to see a requirement that members of congress put all of their assets in index funds as opposed to individual equities. You avoid conflicts of interest and as a bonus, they wouldn't get wiped out if you bet horribly wrong on a stock. Though, it's interesting to see that they didn't liquidate their positions. Given that congressional members typically have a reputation as some of the best traders (it would be an understatement to say they have insider information), this shows how much congress has been cut out of the loop on the government's response to the market meltdown.

More Thoughts on the 1 Trillion Dollar Bailout

I have a basic problem with the notion of spending upwards to a $1 trillion (I think the proposed number is $700 billion right now) to bail out the top .01 percent of the income distribution. If we are going to piss away a trillion dollars to maintain employment and boost asset prices let's do so from the bottom up: fixing bridges, building transit, job retraining, etc. Yes, more financial institutions would fail; however, I am afraid they should. If we do this bailout this will simply be the biggest bailout of all times till the next one around the corner.

Obama Wins the Beer Test

Or in this case the football watching test.  Sadly, I think this is a metric every bit as important, if not more important in understanding voter preference than policy positions or experience.

1 Trillion Dollar Bailout

The administration is proposing a massive bailout of the entire finance industry.

More Reading

Megan McArdle recommends Liar's Poker by Michael Lewis.  Anyhow, the book details wall street trading culture and the advent of mortgage backed securities.

RTC redux?

Calculated risk speculates on what the new RTC would look like.

This Has to be Something from the Onion

The republican party is putting George Allen front and center here in Fairfax County (VA) to do...minority outreach.  Yes, that George Allen, he of the noose in his office and the odd fetish with all things confederate, oh, and lest we not forget, he of "Macacca."

A Good Explanation of the Market Meltdown

Here is good summary from the Freakanomics blog.

The Cost of Cleaning Up

Former IMF Chief Economist Ken Rogoff speculates the cost of cleaning up the mess in the financial industry will be somewhere between $1-2 trillion.  

Morgan Stanley Is On the Clock

The latest word is that Morgan Stanley might merge with Wachovia. Merrill Lynch is now the property of Bank of America, another commercial bank based in Charlotte. Lehman and Bear Stearns are gone. That leaves Goldman as the only independent investment bank. Megan McCardle has an interesting post on what this means for New York. What happens to the world's financial hub when it's financiers are relocating down South or dissapearing?

More Reading

David Leonhardt has a great column in the times. Check it out. Here is an excerpt:
"The Bush administration, the Fed and Congress, meanwhile, continue to focus on the immediate crises, with little attention to the underlying reasons that the economy has gotten into this mess — a stagnation of incomes, an explosion of debt and a decidedly outdated, and limp, approach to government oversight. Remarkably, the presidential campaign has gotten less serious, while the economy’s problems have become more so."

This Should Be Obama's Next Ad

Meltdown Coverage

If you want to follow the meltdown, the single best person to look to is Felix Salmon of portfolio.com. His blog is excellent. It looks like Washington Mutual and Morgan Stanley are next.

BTW

John McCain invented the blackberry.  Oh, and San Diego is German for a "Whale's Vagina".

Google Chrome

I just downloaded Google Chrome (Google's new browser) at work (I have a Mac at home and they don't have a Mac version yet).  So far I like it.  It's simpler, less cluttered than firefox or internet explorer.

Palin Needs Schooling ASAP

Here is a bit from her interview with Charlie Gibson:

"GIBSON: So let me summarize the three things that you’d change in the Bush economic plans. One, two, three.

PALIN: Reduce taxes, control spending, reform the oversight and the overseeing agencies and committees to make sure that America’s dollars and investments are protected.

GIBSON: So let me break some of those down. You talk about spending. How much smaller would a McCain budget be? Where would you cut?

PALIN: We’re going to find efficiencies in every department. We have got to. There are some things that I think should be off the table. Veterans’ programs, off the table. You know, we owe it to our veterans and that’s the greatest manifestation that we can show in terms of support for our military, those who are in public service fighting for America. …It’s to make sure that our veterans are taken care of and the promises that we’ve made to them are fulfilled.

GIBSON: So you’d take military off the table, the veterans’ benefits. That’s 20 percent of the budget. & Do you talk about entitlement reform? Is there money you can save in Social Security, Medicare and Medicaid?

PALIN: I am sure that there are efficiencies that are going to be found in all of these agencies. I’m confident in that."

Palin is pulling the whole fraud, waste and abuse line. Repeat after me: the government is an insurance company with a side business in defense. If you are going to try to bring the budget into balance on the spending side you will have to tackle a combination of defense, medicare, medicaid, and social security.

To be fair, this is not necessarily a fair reflection of Palin's knowledge or lack of knowledge. Many on the right have been peddling this bullshit for ages. This has been a pet peeve of mine for awhile.

hat tip: economist mom

Palin About to Get Schooled...

by Douglas Holtz-Eakin, McCain's Economic and Domestic Policy Director. And thank god on two levels. First, it is clear that Palin has a very thin grasp of policy of all types and needs the preparation. This a crucial distinction between Obama and Palin, preparation, not experience (as neither really has any real experience). But it is preparation, getting up to speed on a wide range of issues which can serve as platform to demonstrate your judgment and thus overcome the experience deficit (at least in the minds' of voters). Second, this gets Douglas Holtz-Eakin out of the media spotlight where he has been peddling some serious b.s.

Don't Look at Your 401(k) Anytime Soon

Because it is really hitting the fan this weekend. Lehman Brothers is about to be liquidated and Merrill Lynch is being purchased by Bank of America.

Earmarks, continued

Here is a pie graph courtesy of Mark Thoma that shows the portion of the federal budget that earmarks constitute (it's the barely visible sliver). McCain's plan to bring the budget into balance by eliminating earmarks is simply not credible. Remember, the government is an insurance company with a side business in defense. That is where the money is and thus where any savings will have to come from.

More on Attack Ads

I am surprised that nobody in the Obama camp has made any hay of McCain's involvement in the Keating Five.  One of the central ironies of McCain's personal narrative as a reformer is that he was caught with his pants down in a pretty large scandal.  Though, there is something to be said for keeping the powder dry till people are actually paying attention.

The Beginning of the Fall

This just begs to be a political ad. Apparently the Alaskan legislature had to ban municipalities and townships from charging rape victims for rape kits (kits used to prove the crime/find the criminal). Apparently these kits cost between $300-$1200 and there was only one city in Alaska that actually charged victims for these kits...yes, you guessed it, Wasilla, while Sarah Palin was the mayor.

hat tip: Ezra Klein

Another One Bites the Dust

It looks like Lehman Brothers will cease to exist by this weekend.

Crappy Sports Names

The Oklahoma City Thunder it is, formerly the Seattle Supersonics. I think it is a craptastic name, but then again, my team is the Washington Wizards. I wish teams would make more of an effort to adhere to naming conventions that have something to do with the city they play in: such as, the Seattle Supersonics.