The only way to fund entitlement programs successfully

is to grow the economy faster than the entitlement spending rises.

David Wessel reports that a ideologically diverse group finds some common ground on runaway Medicare and Medicaid spending:

Social Security, Medicare and Medicaid are projected by the Congressional Budget Office to spend $1.27 trillion this year, or 43% of the projected $2.9 trillion in total federal outlays and the health programs, in particular, are growing faster than other spending. “Our political leaders have been avoiding this enormous issue — largely because it requires that the public be told that not all past promises can be met,” the think tank coalition said.

UPDATE: More here.

Stephen Curry "can do all things"

Can you?

Quote of the day

I'm more concerned about the loss of economic freedom than social freedom - in part, because I think the former will lead to the latter. Decades ago, we were talking about lobotomizing gay people, now we're talking about marrying them. We're not in danger of theocracy. We should be more concerned about what Brandeis called "insidious encroachment by men of zeal, well-meaning but without understanding." The "do-goodism" to which James Buchanan referred is the greater threat. After all, "the licentious sinners we can control; the saintly ascetics may destroy us."--Jon Henke

Fed should reverse some of its strategies

Ronald McKinnon believes:

Illiquid financial institutions cannot effectively bid for funds by putting up suspect private bonds or loans as collateral. Unsurprisingly, there is a "flight to quality" that increases the private domestic demand for Treasuries. But this is happening at a time when the flight from the dollar in the foreign exchanges has greatly reduced their supply.

This increased demand coupled with a fall in supply helps explains why, in the midst of a U.S. credit squeeze with higher interest rates on private financial instruments, nominal interest rates on U.S. Treasury bonds have fallen to surprisingly low levels. Despite substantial ongoing U.S. price inflation of 4.3% in the consumer price index and 6.4% in the producer price index, Treasury yields are less than 1% on a three-month bill, 1.32% on a two-year note, and 3.5% on the benchmark 10-year bonds. There are even reports of effectively negative nominal yields on certain very short-term Treasurys. The real yield on Treasury Inflation Protected Securities has turned negative.

The Fed responds to the credit crunch by cutting interest rates, which would be the seemingly correct textbook strategy if the economy were closed and the foreign exchanges could be ignored. But the economy is open, and capital flies out of the country.

The best solution to the current crisis is to stop the flight from the dollar. This would be beneficial beyond relieving the drain of Treasurys and relaxing the crunch in American credit markets. Letting the dollar depreciate without any convincing action to secure its long-term value against other major currencies undermines confidence in the dollar's long-term purchasing power. It also lets the inflation genie out of the bottle, and makes a return to 1970s-style stagflation look imminent.

I disagree with his recommendation to manipulate USD exchange rates with foreign governments.

But aye, cutting interest rates could be hurting more then helping.

Quote of the day

Who would you rather have in charge of the defense of the United States of America, a group of people who never served a day overseas in their life, or a guy who served his country honorably and has three Purple Hearts and a Silver Star on the battlefields of Vietnam?"--Howard Dean, 2004 (via Carnal Reason)

The path to idiocy is lined

with newspapers.

I posted a similar warning last year.

Intrade changes its check clearing policy

here:

As of Tuesday, March 26th 2008, the Exchange will no longer be pre-clearing check deposits.

All check deposits received after this date will be subject to the full ten-business day clearance policy enforced by our bank. This is regardless of your previous deposit record or if we have pre-cleared checks for you in the past. The funds must now be fully cleared by our bank before being made available for trading.

Identical Tradesports announcement here.

Quote of the Age (of central banking)

The Fed’s only mistake was to guarantee $30 billion of Bear’s portfolio. This action transferred potential losses from the market to the taxpayers. I do not believe the present system can remain if the bankers make the profits and the taxpayers share the losses.--Allan Metzer, Fed historian

Ed Glaeser on John Galbraith

here (via Greg Mankiw):

Galbraith's advocacy of public spending aimed at reducing inequality and improving infrastructure helped usher in the 1960s. Lyndon Johnson's war on poverty was decidedly Galbraithian. While the New Deal social programs were born of economic desperation, Johnson's social spending reflected the confidence of prosperity, just as Galbraith had foreseen. But after 1969, the American public gradually turned against Galbraithian social policy. By 1980, Galbraith's arch-nemesis, Milton Friedman, had found an intellectual home in the White House. In the 1990s, even Democrats embraced private wealth over public spending. But in 2008, "The Affluent Society" seems relevant once more. As the political pendulum swings left, candidates once again call for a more vibrant state to right social wrongs. The excesses of the 1960s are forgotten and once again, the government is seen as society's savior. For people of all political stripes, it is worthwhile returning to "The Affluent Society," and pondering what Galbraith got right and what he got wrong.

While I am a staunch supporter of free markets, I agree with Galbraith that there is much the public sector needs to do. Private firms do not automatically provide safe streets, good roads, and clean water. Even more important, Galbraith was dead right in arguing that we need more effective schools. Human capital is our best tool against poverty and economic stagnation.

Galbraith's great failure was that he never really understood how much society is strengthened by a free and competitive private sector. "The Affluent Society" argues that a lack of regulation made American homes inferior to those in European social democracies. That view was wrong in 1958 and is completely untenable today. American housing is the best in the world, and the weaknesses of the housing market reflect too much, not too little, regulation, especially those rules that stymie construction and make housing unaffordable. While Galbraith was right that some social problems do need a stronger public sector, his analysis would read better today if he had also appreciated the tremendous vitality that comes with economic freedom

Quote of the day

She is concussed. But she is a scrapper, a fighter, and she's doing what she knows how to do: scrap and fight. Only harder. So that she ups the ante every day. She helped Ireland achieve peace. She tried to stop Nafta. She's been a leader for 35 years. She landed in Bosnia under siege and bravely dodged bullets. It was as if she'd watched the movie "Wag the Dog," with its fake footage of a terrified refugee woman running frantically from mortar fire, and found it not a cautionary tale about manipulation and politics, but an inspiration.--Peggy Noonan, on Hillary Clinton

Noonan also quotes blog commenter GI Joe:

Actually Mrs. Clinton was to modest. I was there and saw it all. When Mrs. Clinton got off the plane the tarmac came under morter and machine gun fire. I was blown off my tank and was exposed to enemey fire. Mrs. Clinton without regard to her own safety dragged me to safety, jumped on the tank and opened fire killing 50 of the enemey. Shortly after that a suicide bomber appeared within 5 feet of Mrs. Clinton, she stopped the guards from opening fire on him and took control of the situation. She talked to the man in his own language and got him surrender. She found that he had suffered terribly as a result of policies of George Bush 1. She defused the bomb vest herself and then helped me. Since there was no doctor around and I was in a desperate state she again took control. She stopped my bleeding and saved my life. Chelsea donated the blood. Thankfully we were the same type. I want Mrs. Clinton answering that phone at 3am.

UPDATE: This, via Jon Henke:

Larry Lindsey looks at the Florida and Michigan democratic primaries

by the numbers, and concludes that Hillary would probably have won both of them:

In sum, the Michigan vote was flawed in ways the Florida vote was not. The most statistically valid conclusion would be that changes in voter attitudes in the second half of January would have produced a much narrower win for Mrs. Clinton of 10-12 points (not 15) had the state voted on Super Tuesday instead of Jan. 15. Still, Mrs. Clinton would almost certainly have won.

The behavior of Mrs. Clinton, who went to Michigan to lobby for a revote, and that of the Obama campaign, which worked to thwart a Michigan revote, indicate that both camps know this would be the outcome. Demographically Michigan looks almost identical to Ohio, which gave Clinton a 10-point victory.

Discussion among Democrats on how to deal with Florida and Michigan centers on three options. The first is not to seat them at all. Legally appropriate, but it would doubtless hurt the Democrats in both states in November -- which may be why Republicans in the state legislatures found themselves as allies of Mr. Obama in working against a revote.

The second option would be to seat delegations that were evenly split between Mrs. Clinton and Mr. Obama. This would make the votes of 2.3 million Democrats irrelevant, while creating artificial representation for the states. It is very much like the 72 bonus delegates selected by party leaders to "represent" women, ethnic minorities, the gay and lesbian communities and the handicapped.

The third option would be to let the early primary votes stand, and select delegates according to the outcome. On a statistical basis, this is clearly the right result for Florida. The easiest solution for Michigan is to simply award the 45% of the vote uncommitted or for another candidate to Mr. Obama. This appears to be the intent of those voters, as well as the likely result of a rematch. It would reduce Mr. Obama's current edge in pledged delegates to 115 from 167. It would also reduce the adjusted popular-vote margin, that converts caucus votes to primary votes, to an edge for Mr. Obama of 466,000. If Mrs. Clinton wins Pennsylvania by the margin polls now suggest, the two candidates would be essentially tied in popular votes, with an Obama edge in delegates of about 80. That would leave the remaining primaries and the superdelegates to decide the outcome of an essentially tied race.

Democrats are clearly going to have to rewrite their delegate selection rules after this contest, like they did after similar fiascos in 1968 and 1988. Until then, it's up to the lawyers, and may the cleverest lawyer win. My money is on Mr. Obama blocking the statistically based solution described above. After all, as a product of Harvard myself, I know perfectly well that Harvard produces cleverer lawyers than Yale, regardless of what the numbers might say.

Did a former Soviet leader

just buy some GOD.EXISTS?

Maybe he's a reader of this blog.

UPDATE: Seems like he might have bought a long time ago.

UPDATE: No, he's just come out and said:

Over the last few days some media have been disseminating fantasies — I can't use any other word — about my secret Catholicism, citing my visit to the Sacro Convento friary, where the remains of St. Francis of Assisi lie. To sum up and avoid any misunderstandings, let me say that I have been and remain an atheist.

Paul Krugman implies that George Bush saved Social Security

over at Don Surber's place:

It’s now better than it’s been since 1993.

The latest report of the Social Security Trustees is out. I think the key message is what has happened to the estimate of actuarial balance — the difference between projected outlays and projected revenues over the next 75 years.

Too big

to keep.

I don't have confidence in Obama's energy policy formulation

unless he starts listening to his advisors again.

Google Software Engineering Principles

here:

1. All developers work out of a ~single source depot; shared infrastructure!
2. A developer can fix bugs anywhere in the source tree.
3. Building a product takes 3 commands ("get, config, make")
4. Uniform coding style guidelines across company
5. Code reviews mandatory for all checkins
6. Pervasive unit testing, written by developers
7. Unit tests run continuously, email sent on failure
8. Powerful tools, shared company-wide
9. Rapid project cycles; developers change projects often; 20% time
10. Peer-driven review process; flat management structure
11. Transparency into projects, code, process, ideas, etc.
12. Dozens of offices around world => hire best people regardless of location

(via Chris Masse).

A long time ago in galaxies far away (once upon a time, we called them Salomon Brothers and JPMorgan), I was involved in this process. This post is more for me than for my most of my readers. Thanks for the indulgence.

Quote of the day

I believe that Harvard Professor Jeff Frankel has the correct explanation-- commodity prices at the moment are being driven by interest rates, with a strongly negative real interest rate increasing the incentives for speculation in any storable commodity.--James Hamilton

Here was my explanation in the beginning of the month:

Inflation seems to be most intense in commodities, with oil reaching inflation-adjusted record highs, and certain metals and crops also hitting nominal record highs. The CRB Index has risen 35% in the last 6 months. But I think a significant part of this movement is frenzied speculation fueled by easier money.

If the Fed comes out and says inflation is a problem and raises rates, it may actually pop the commodities bubble. Then consumer inflation eases. If it eases enough, then household spending power goes up, thereby saving jobs (which is what the Fed is trying to do by cutting rates).

How much does Obama love Jesus?

By one ancient measure, not so much.

I doubt Clinton or McCain do better, but they don't talk about Jesus as much as Obama does.

Looking beyond the current credit market wreckage

Liquidity is a function of laziness. By this I mean that liquidity is an inverse function of the amount of research required to understand the character of a financial instrument. A dollar bill requires no research. A bank draft requires less research than my personal check. Commercial paper issued by JP Morgan requires less research than paper issued by a bank in the boondocks ... The less research we are required to perform, the more liquid the instrument - the more rapidly that instrument can change hands and the lower the risk premium in its expected returns.

This emphasis on trust and liquidity in a well-functioning credit market provides useful insights into what is happening. Trust has vanished in many areas where it was taken for granted just a few months back. And when the ratings of S&P and its competitors lost credibility, paper that had traded on sight lost the liquidity it once enjoyed because now it involved far more research than in the past. These words are just an elaborate way of explaining why credit spreads were so narrow just nine months ago and so wide in today's markets.

This extended period of difficulty is going to bring about a new economic régime, different in many aspects from the experience of most people alive today. Along the way, we will have to pass through a transition period that harks back to an unfamiliar past in both the financial system and in the household sector.

But this, too, shall pass. Yes, glassy-eyed bankers, prudent consumers, and a reformulated globalization can keep a lid on economic activity around the world for quite a while. What develops from that transition, however, should resemble what took place over the course of the 1980s. Without anyone realizing it, the errors of the past, drip by drip by drip, were buried and a new and better system took their place.--Peter Bernstein

Megan McArdle demonstrates a key to successful trading

That is, being able to replay the past and take learned lessons forward.

Of course, her microeconomics are tops, too:

This is perhaps why I have so little sympathy for the princes of schadenfreude in this New York Times article, who are hoping that Wall Street will collapse, allowing them to buy Manhattan apartments. Bizarrely, despite the fact that all of them seem to work in some service associated with the finance industry, they seem entirely unaware that if the financial industry in New York collapses, their employers will suffer the same fate. They also seem not to realize that it is the taxes from the banking industry (and its lavish, ridiculous bonuses) that finance Manhattan's low crime rate and excellent public services. Not to mention the restaurants, theaters, and so forth that make them want to live in Manhattan in the first place.

If they wanted to live in the New York that I liked--the one with the Dominicans hanging out on the street corner, the little hole-in-the-wall pizza joints and the improbable shops with ancient leases that sold scavenged junk alongside ticky-tack imports--well then, I could understand their celebration. But they want to live in the New York that the bankers created without the bankers. This is like wanting to go to heaven, but not wanting to die.

Not to mention her linking to culturally transencendent iconography ...

Wal-Mart and the Walton family gave $591 million to charity last year

reports Mark Perry.

This is in addition to the $270 billion it provides American households in increased purchasing power. Not only do its low prices increase discretionary purchases for shoppers, but it also forces Target and Costco and the rest of the retail sector to improve in order to compete and survive.

Hillary Clinton has her Eureka Moment

Let's hire these guys:

1) the one who caused the credit bubble, and

2) the one who runs that bank which has written down the most bad mortgage debt

to fix the economy now!

UPDATE: Hell freezes over--Andrew Leonard agrees with me. That happens less than once in a blue moon.

UPDATE: Hell cools even more--Calculated Risk cites Meredith Whitney to affirm my point.

A life of forgiveness

Jacob DeShazer (1913-2005):

DeShazer was taken prisoner, and was starved, beaten and tortured by his Japanese captors. For 34 of his 40 months in captivity, he was kept in solitary confinement. His pilot (Lieutenant William Farrow) and engineer-gunner (Sergeant Harold Spatz) were killed by firing squad. But DeShazer survived the war, was liberated after V-J Day in August 1945, and went on to get a degree in Biblical literature from Seattle Pacific College (now Seattle Pacific University). In 1948, he returned as a Christian missionary to the country that had nearly killed him, and he would continue his ministry in Japan for 30 years.

John Yoo examines superdelegates

here:

... now these unelected delegates are coming in for a close inspection, because neither Hillary Clinton nor Barack Obama can win their party's nomination without superdelegate support. ... there are a total of 795 superdelegates, none of whom are required to honor the will of the voters of their state at the party's convention.

Sound undemocratic? It is. That the 2008 Democratic nominee for president will be chosen by individuals no one voted for in the primaries flew for too long under the commentariat's radar. This from the party that litigated to "make every vote count" in the 2000 Florida recount, reviled the institution of the Electoral College for letting the loser of the national popular election win the presidency, and has called the Bush administration illegitimate ever since.

Democratic Party reforms in 1982 gave super-delegates about 20% of convention votes -- so that party greybeards can stop a popular, but politically extreme, candidate from seizing the nomination. The Democrats deliberately rejiggered their party's rules to head off insurgent candidates, like a George McGovern or a Jimmy Carter, who might be crushed in the general election.

So much for unfiltered democracy. In truth, the Democratic Party runs by rules that are the epitome of the smoke-filled room and ensure, in essence, that congressional incumbents exercise a veto power over the nomination.

This delegate dissonance wasn't anything the Framers of the U.S. Constitution dreamed up. They believed that letting Congress choose the president was a dreadful idea. Without direct election by the people, the Framers said that the executive would lose its independence and vigor and become a mere servant of the legislature. They had the record of revolutionary America to go on. All but one of America's first state constitutions gave state assemblies the power to choose the governor. James Madison commented that this structure allowed legislatures to turn governors into "little more than ciphers."

That's why, during the Constitutional Convention in 1787, the Framers rejected early proposals to follow any such model. New York delegate Gouverneur Morris explained that if Congress picked the president, he "will not be independent of it; and if not independent, usurpation and tyranny on the part of the Legislature will be the consequence." Choosing the president would result from the "work of intrigue, of cabal, and of faction." After weeks of debate, the Framers vested the presidency with its own base of popular support by establishing a national election, saying that the president should represent the views of the entire people, not the wishes of Congress.

Press reports indicate that the Framers were right to worry. The Clinton and Obama campaigns are now competing hard to win superdelegates. Members of Congress no doubt will cut deals for themselves and their constituents.

But the historical record on this is not heartening. During the reign of the Jeffersonians, the progenitors of today's Democrats, the congressional caucus chose the party's nominee. It was a system that yielded mediocrity, even danger. Congressional hawks pushed James Madison into the War of 1812 by demanding ever more aggressive trade restrictions against Great Britain and ultimately declaring war -- all because they wanted to absorb Canada. It ended with a stalemate in the north, the torching of the U.S. capital, and Gen. Andrew Jackson winning a victory at the Battle of New Orleans.

"King Caucus" finally broke down when the system reached a peak of "cabal, intrigue, and faction." Jackson received the plurality of the popular vote in the election of 1824, but with no Electoral College majority the choice went to the House of Representatives. In what became known as the "corrupt bargain," House Speaker Henry Clay, who had come in fourth, threw his electors behind John Quincy Adams in exchange for being appointed Secretary of State. Jackson spent the next four years successfully attacking the legitimacy of the Adams administration and won his revenge in the election of 1828.

Our Framers designed the Constitution to prevent just this from happening. The Democrats have created an electoral system that echoes failed models from the American past, and threatens to sap the presidency of its independence and authority by turning it into the handmaiden of Congress instead of the choice of the American people.

Quote of the day

If one started to use biofuels ... and in reality that policy led to an increase in greenhouse gases rather than a decrease, that would obviously be insane. It would certainly be a perverse outcome.--Professor Bob Watson, Great Britain's chief science adviser in it's Department for Environment, Food, and Rural Affairs (via Drudge)

I've been sounding the alarm all year.

Sniper fire seared, SEARED, in Hillary's memory

(via Drudge). Weren't we just here four years ago?

Wow

a 66 inch vertical by Arizona Cardinals safety Adrian Wilson (via FanHouse)

How money buys happiness

over at John Tierney's Lab:

The researchers confirmed the joys of giving in three separate ways. First, by surveying a national sample of more than 600 Americans, they found that spending more on gifts and charity correlated with greater happiness, whereas spending more money on oneself did not. Second, by tracking 16 workers before and after they received profit-sharing bonuses, the researchers found that that the workers who gave more of the money to others ended up happier than the ones who spent more of it on themselves. In fact, how the bonus was spent was a better predictor of happiness than the size of the bonus.

The final bit of evidence came from an experiment in which 46 students were given either $5 or $20 to spend by the end of the day. The ones who were instructed to spend the money on others — they bought toys for siblings, treated friends to meals and made donations to the homeless — were happier at the end of the day than the ones who were instructed to spend the money on themselves.

Of course, I've read about this somewhere else, a long time ago. When I give a dollar away, I can have power over the dollar. When I hold onto it tightly for a long time, it can have power over me.

Intrade Global Warming contracts printing today

DISCLOSURE: I am long 2008.GLOBAL.TEMP.TOP5

Greg Mankiw's latest Eureka Moment

The Fed's monetary expansion reduces interest rates, low interest rates drive up commodity prices, high commodity prices make OPEC rich, and finally OPEC uses its new wealth to recapitalize our struggling financial institutions.

This sounds familiar!

James Hamilton finds deep meaning in life

here. Nice post to read and ponder, while I'm racing with the other rats here in NYC.

How Stephen Moore is smarter than Barack Obama and his college student following

here:

A few weeks ago I gave a talk on the state of the economy to a group of college students -- almost all Barack Obama enthusiasts -- who were griping about how downright awful things are in America today. As they sipped their Starbucks lattes and adjusted their designer sunglasses, they recited their grievances: The country is awash in debt "that we will have to pay off"; the middle class in shrinking; the polar ice caps are melting; and college is too expensive.

I've been speaking to groups like this one for more than 20 years, but I have never confronted such universal pessimism from a young audience. Its members acted as if the hardships of modern life are making it nearly impossible for them to get out of bed in the morning. So I conducted a survey of these grim youngsters. How many of you, I asked, own a laptop? A cellphone? An iPod, a DVD player, a flat-screen digital TV? To every question somewhere between two-thirds and all of the hands in the room rose. But they didn't even get my point. "Well, duh," one of them scoffed, "who doesn't have an iPod these days?"

They seemed clueless that as recently as the early 1980s only the richest people in the world had cellphones and the quality of these products left much to be desired. Watch a movie from 20 years ago and you will laugh out loud seeing big clunky black machines that weighed as much as a brick, gave crackly service and cost $4,200. Now cellphones are practically free -- even disposable. And the cost of making calls has dropped dramatically too.

So why the long faces? Sen. Obama reminds them every day of how dreary things are. Here's what Mr. "Audacity of Hope" told workers in Ohio last week: "Everywhere I go . . . you see people who have worked in a plant for 20 years, put their heart and soul into building profits for shareholders. Suddenly, the rug's pulled out from under them; the job's shipped overseas." Not only that, he explains: "They don't have health care. They don't have a pension. They're trying to compete with their teenage kids for a job paying $7 an hour at the local fast food joint."

Times are tough in many old industrial areas of the country. And middle-class anxiety about the costs of health care and higher education is real. But new data from the Census Bureau reveal that Americans of all income groups have made enormous gains in their standard of living in recent decades. As late as 1970, air conditioning, color TVs, washing machines, dryers and microwaves were considered luxuries. Today the vast majority of even poor families have these things in their homes. Almost one in three "poor" families has not one but at least two cars.

Consumption in real per-capita terms has nearly doubled since 1970. The single largest increase in expenditures for low-income households over the past 20 years was for audio and visual entertainment systems -- up 119%. In 2007 Americans spent an estimated $1 billion to change the tune of the ringer on their cellphones. Eating in restaurants used to be something the rich did regularly and the middle class did on special occasions. The average family now spends $2,700 a year dining out.

There's a wonderful new video on Reason.tv called "Living Large." In it, comedian Drew Carey goes to a lake in California where people are relaxing on $80,000 27-foot boats and goofing around on $25,000 jet skis that they have hitched to their $40,000 SUVs. Mr. Carey asks these boat owners what they do for a living. As it turns out, they aren't hedge-fund managers. One is a gardener, another a truck driver, another an auto mechanic and another a cop.

I was a lot more naive during my college days. Nothing like a couple decades of work and a couple of kids to increase my reality index.

Mark Perry nominates Wal-Mart for the Nobel Peace Prize

I second his motion:

BENTONVILLE, Ark., Mar. 14, 2008 – In an address to the Council of Teaching Hospitals in New Orleans later today, Wal-Mart’s senior vice president and president of health and wellness, Dr. John Agwunobi will confirm a major milestone for the company’s $4 prescription program. Since its launch in September 2006, the program has now saved Americans more than $1 billion ($1,032,573,012.61 as of March 10, 2008).

And that was $1 billion in only 18 months!! So while politicians and pundits in Washington fret about 41 million Americans without health insurance, and dream up the next grandiose government-based health care reform, the most effective health care solutions may be right around the corner at your local Wal-Mart, which offers affordable $4 prescriptions and affordable health care clinics (now in 12 states).

And as Steve Horowitz points out, the savings to consumers actually exceed $1 billion because Wal-Mart's $4 drug plan was matched my many of its competitors (Kroger and Publix, etc.).

UPDATE: Steve Horwitz concurs (via Josh Hendrickson):

If Wal-Mart were a government program that created that many jobs, lifted that many out of poverty through higher wages, and gave poor folks back a billion dollars to spend while providing them needed prescriptions, you better believe the left would call it the greatest anti-poverty and healthcare program ever.

Quote of the day

Markets require trust to work well, but when trust is blind they are almost guaranteed to go haywire. We don’t want the paralytic level of skepticism that has reigned in the marketplace in recent months to continue, but we don’t want a return to the way things were, either. It’s a good thing that Bear Stearns was saved. But it’s also a good thing that it nearly died.--James Surowiecki

Predictions Gone Wild

as advertised by Fox Business News (via Eddy Elfenbein).

Eddy also said this last week:

I would say that the most likely outcome is that JP Morgan will sweeten the [Bear Stearns] offer. To add some context, it’s really not that much for JPM. The company’s market value has already increased by $20 billion this week. The offer for Bear will cost JPM $236 million. What’s the big deal if it doubles or even triples the offer? Plus, it could win JPM some goodwill.

He was probably on the other side of my long DUKE (worst realized March Madness loss) and short UCLA (worst unrealized loss so far). Fortunately, my PITTSBURGH short and TEXAS long have helped keep me in the profits hunt.

36: The Gary Parrish March Madness viewing guide

is here, covering the first 36 hours of the tournament (unless you count the play-in game on Tuesday). Parrish cracked me up in trying to save my marriage:

Friday 5:10 ET: At this point, all the games should be over with no more starting for two hours. This is when you should talk to your wife. Make her think you still care about her, then get settled in for the round of night games.

MM On Demand looks better than ever, so check that out if you have never used it before.

Not many planning to watch Stanford's Big Twins take on the Big Red of Cornell, but I will be one of the faithful.

UPDATE: Eddy Elfenbein on the last 23 years of tournament seedings:

The #8 or #9 seed is really screwed because they always must play a #1 in the second round. Only 12 #8 or #9 teams have made it past the second round.

On the other hand, #12 is a pretty good seed. Those teams have a losing, but respectable record against the #5 seeds. A total of 14 number #12 seeds have made it past the second round.

My guess is that the seeds increase linearly while quality increases geometrically. The difference between a #12 and a #5 is probably about the same as a #1 and a #3.

The Great Unwind

here:

Citigroup has declared a very bad scenario first forecast by analysts Stefan-Michael Staimann and Susanne Knips of Dresdner Kleinwort in February 2007, "The Great Unwind," to be in progress. To their credit, they made this bold call months before the credit contraction began. They viewed it as an inevitable outcome of the hedge fund boom.

Maxim's "unsexiest woman alive"

here.

I was at a party with her a few years ago, and she was actually quite stunning.

I'm surprised Hillary didn't make the cut, but I'm not much of a Maxim reader (or gawker) and maybe they comprise part of her base.

A case against military conscription

via Gateway Pundit:

The scarcer the troops, the better risk management from the generals.

Another interesting graph:


Such correlations have been noted in non-military counts, too.

James Annan thinks global warming contracts may be overpriced

here.

Temperatures are now in for Jan and Feb 2008, and they are very cold, at +0.12 and +0.26 respectively (note how "very cold" is still well above the 1951-1980 baseline). So it will require a mean anomaly of 0.62 for the remaining 10 months to trigger the payout. That has happened precisely once before, in 2005. Clearly it is not impossible, but it can't be considered likely. We can do a little more analysis to look at the persistence of monthly anomalies. After detrending, the typical e-folding decorrelation time scale of anomalies looks like 4 months or so, suggesting that the relatively cold temperatures will persist for some time to come. That means the latter part of the year will have to really heat up to bring the average up to the top 5 threshold. I'd be more tempted to sell than buy on the contract at the current price, although I've not actually checked the seasonal predictions of modelling centres which could influence my attitude.

Also, Annan thought I was Chris Masse--not sure whether to laugh or frown.

UPDATE: Richard Harris reports on global cooling.

Simpler times

First of three pages of the 1913 Federal income tax form, via Mark Perry:

Maybe someone like this could be President someday

I'd certainly like to see it for my kids.

Why the relative silence from George Clooney over China?

This is rich:

Gorgeous George is going to “continue to talk to Omega.” He’s going to “go to places” and “ask for help.”

We’ve yet to hear from Clooney on the specific issue of Tibet, but he’ll surely take an even stronger stance than he has over Darfur, given that this time Chinese are doing the shooting themselves, rather than merely supplying the ammunition.

We can perhaps hope for something along the lines of the blistering attack Clooney launched on Nestle last year, when it was politely pointed out that his commercial activities on behalf of a company that’s been criticised for its policies in the third world didn’t sit well with his self-appointed role as global crusader for the oppressed.

Here’s the full, unedited transcript:

“I’m not going to apologize to you for trying to make a living every once in a while. I find that an irritating question.”

Okay, it wasn’t that blistering. However, Clooney has on other occasions been genuinely outspoken in his condemnation of perceived injustices — namely those he feels have been committed by the United States, and specifically by the Bush administration.

He’s been among the most high-profile critics of the Iraq war, which is of course his right, although as Austin Bay has pointed out, the numerous similarities between the case made by the Bush administration for invading Iraq and Clooney’s own justification for US intervention in Sudan somewhat undermine his position.

So why the apparent double standard from a man who affects such fearlessness in challenging injustice all its forms? Why the relative silence from Clooney over China?

He could conceivably make the argument I referred to at the start of this piece — that “engagement” with unpleasant regimes is more useful than punitive measures.

But, come now — no amount of Omega-sponsored photo-shoots and drinks parties featuring Clooney modeling expensive watches are going to affect China’s policies towards Tibet or Sudan.

On the other hand, public severing of his links with Omega would attract worldwide publicity on a scale similar to that generated by Steven Spielberg’s recent decision to snub the Games.

Maybe, like all those corrupt politicians and corporate scoundrels that inhabit his films, Clooney simply has his price.

But there’s another possibility, which is slightly more charitable. Perhaps Clooney needs the money so that he can continue to fund worthy documentaries and “political” feature films which, while well-received critically, aren’t necessarily successful in terms of box office receipts.

How ironic if would be if Clooney was reduced to compromising his principles so that he could make more films in which those principles are so blatantly flaunted.

(via Glenn Reynolds)

Samwick's Law

If an institution is deemed too big to fail, then it is only a matter of time before it finds a way to get big and fail.

Source here.

A brief history of financial crises

from Paul Kedrosky.

We might be in the bottom of the ninth of the stock market correction. Not sure how a UBS, Lehman, or Citigroup sucker punch will affect things--the credit market crisis still has several innings to play out.

BCWUW4: New findings on our healthcare system

from Sherry Glied, via Tyler Cowen:

... the efficiency of operation of the health care system itself appears to depend much more on how providers are paid and how the delivery of care is organized than on the method used to raise the funds.

It is GPs which help the poor, not additional spending on technology or surgery

...patterns of health service utilization in developed countries suggest that the marginal dollar of health care spending -- money used to purchase high tech equipment or specialist services -- is less progressively spent than the average dollar.

And there is evidence that the more a government spends on health care, the less it spends helping people in money ways. That is, there is crowding out.

Putting $1 of tax funds into the public health insurance system effectively channels between $0.23 and $0.26 toward the lowest income quintile people, and about $0.50 to the bottom two income quintiles. Finally, a review of the literature across the OECD suggests that the progressivity of financing of the health insurance system has limited implications for overall income inequality, particularly over time.

Be careful what you wish for.

Why driving a couple of miles might be more environmental than walking

here (via Steve Levitt):

If you walk 1.5 miles, Mr. Goodall calculates, and replace those calories by drinking about a cup of milk, the greenhouse emissions connected with that milk (like methane from the dairy farm and carbon dioxide from the delivery truck) are just about equal to the emissions from a typical car making the same trip. And if there were two of you making the trip, then the car would definitely be the more planet-friendly way to go.

Also, here's why plastic is more environmental than paper:

The making of paper can waste many thousands of gallons of water, as can the recycling of paper. The human and mechanical efforts and costs are very high, not forgetting the physical cost to loggers and those who work around the numerous chemicals. Plastic is, by comparison, efficient and low energy to produce, and, easily and efficiently recycled. Plastic reduces, recycles marvelously, and in that, is reused. After contrasting the efforts behind the making of paper and plastic, it is our unbiased opinion that plastic is indeed more beneficial to the environment, in that it is less harmful. The next time you are asked the dreaded question, "Paper or plastic?", you can answer knowing that you are making the informed choice.

Quote of the day

It is also notable that Mr. Obama situated Rev. Wright within what the Senator sees as the continuing black-white conflict and the worst excesses of racial injustice like Jim Crow. He dwelled on a lack of funding for inner-city schools and a general "lack of economic opportunity." But Mr. Obama neglected the massive failures of the government programs that were supposed to address these problems, as well as the culture of dependency they ingrained. A genuine message of racial healing would also have given more credit to the real racial gains in American society over the last 40 years.--WSJ editorial

The Obama Bargain

by Shelby Steele:

... bargainers have an Achilles heel. They succeed as conduits of white innocence only as long as they are largely invisible as complex human beings. They hope to become icons that can be identified with rather than seen, and their individual complexity gets in the way of this. So bargainers are always laboring to stay invisible. (We don't know the real politics or convictions of Tiger Woods or Michael Jordan or Oprah Winfrey, bargainers all.) Mr. Obama has said of himself, "I serve as a blank screen on which people of vastly different political stripes project their own views . . ." And so, human visibility is Mr. Obama's Achilles heel. If we see the real man, his contradictions and bents of character, he will be ruined as an icon, as a "blank screen."

Thus, nothing could be more dangerous to Mr. Obama's political aspirations than the revelation that he, the son of a white woman, sat Sunday after Sunday -- for 20 years -- in an Afrocentric, black nationalist church in which his own mother, not to mention other whites, could never feel comfortable. His pastor, Rev. Jeremiah Wright, is a challenger who goes far past Al Sharpton and Jesse Jackson in his anti-American outrage ("God damn America").

No matter his ultimate political fate, there is already enough pathos in Barack Obama to make him a cautionary tale. His public persona thrives on a manipulation of whites (bargaining), and his private sense of racial identity demands both self-betrayal and duplicity. His is the story of a man who flew so high, yet neglected to become himself.

I don't have the gift of discernment, but I sense good in Obama that Steele misses. Of course, I could say the same thing about my least favorite president.

UPDATE: Caroline Glick is against bigotry and therefore against Obama. Hmmm.

Tar Heels drawing buyers in the last 24 hours

DISCLOSURE: I am short NCAABK.NORTHCAROLINA.

Closing the education achievement gap

at Freakonomics.

I think the same methods in education should be applied to my achievement gap in basketball. I feel much more comfortable on the football gridiron, baseball diamond, and tennis court. But I've always been awkward on the basketball court.

Some of its how much coaching I get, and how much my family/friend/community subcultures value basketball. But some of it is going to be my personality, my genetic makeup, and how much I care to improve.

I don't think it would be right to give me an affirmative action spot on an NCAA or NBA team, though. Do you? Do the "experts"?

UPDATE: The WSJ cites studies that find a large scarcity of skilled workers, as well as the the increase in overall employment created by filling the unmet demand of skilled workers. America is not producing skilled workers in high enough supply. Rahm Emmanuel, senior policy adviser to President Clinton and congressman from Illinois, says:

If we don't have a well-trained work force, it won't matter whether we put up walls or hammer out new agreements. Our workers' standards of living will continue to fall.

Quote of the day

But looking at government as whole, I would say it is like a 10-year-old boy rescuing an old woman from a fire that the boy started in the first place.--Arnold Kling

Fed starting to move beyond denial, even with 75 bp cut

Here are some excerpts from their statement today:

Inflation has elevated, and some indicators of inflation expectations have risen. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Gary H. Stern; and Kevin M. Warsh. Voting against were Richard W. Fisher and Charles I. Plosser, who preferred less aggressive action at this meeting.

The sooner the fed starts tightening back to realistic levels, the sooner inflation can be mitigated.

UPDATE: Agreement here and here.

Bear Naked Lenders

in today's WSJ:

The hard capitalist truth is that Bear's most senior managers have mainly themselves to blame. They bought their second or third homes with fabulous bonuses during the good times, and they must now endure the losses from Bear's errant investment bets. Bear took particular pride in its risk management, but it let its standards slide in the hunt for higher returns during the mortgage mania earlier this decade. There's no joy in seeing a venerable firm expire, but it has to happen if financial markets are going to have any discipline going forward.

UPDATE: Felix Salmon has a roundup of why BSC is trading well above $2.

UPDATE: Steven Davidoff highlights the collars around the stock, which afford bond holders voting rights.

Quote of the day

It is hard to be confident, however, that on issues of trade policy either Democratic candidate would act like the last Democratic president. Maybe the candidates’ records as legislators are not good indicators of what their policies might be as president. Maybe campaign rhetoric about Nafta is nothing more than that. But counting on it requires, one might say, the audacity of hope.--Greg Mankiw

UPDATE: Arnold Kling helps people understand what Greg is talking about:

Finally, the movement moves toward its logical conclusion: only buy products made in your own household. People give up computers, cars, packaged food, electricity, and plumbing. We go back to subsistence farming and hunter-gathering.

Quote of the day

Taxpayer dollars should be spent based on merit, not political influence.--Senator Jim DeMint

Obama votes against his plans and promises

What to believe?

UPDATE: Then there's this.

Links to past futures

here (via Tyler Cowen).

More here and here.

Quotes of the day

Enter the Fed, our new hedge fund of last resort.--Arnold Kling, commenting on the Fed bailout of Bear Stearns

Suppose that we define "Spitzer" as someone who believes in the aggressive use of political power. A Spitzer believes it is his mission to tell us what to do for own good. Is Barack Obama--who also comes from a Harvard Law School background, and who identifies the "audacity of hope" with government expansion--a Spitzer? Absolutely. Is Hillary Clinton--who sees the the state as a substitute for a village, making it also a substitute for the family--a Spitzer? Positively. Is John McCain--who Virginia Postrel describes as "an instinctive regulator who considers business a base pursuit"-- a Spitzer? Unfortunately, yes.--Arnold Kling

Performance: what sports fans love, but protectionists hate

(via Mark Perry).

Intrade lists Global Warming Contracts!

The announcement is here.

I asked for them at the end of 2006/beginning of 2007 (the post was on Jan 10 2007, but I think I requested them first). A conversation at Midas Oracle, a few months later.

The Contract Rules need more precise specification. While Intrade did use my suggestion of the Goddard Institute for Space Studies data to value the contract, I think Intrade must specifically state that the "J-D" January-December annual mean temperature series is being used, and on either the Global Mean Monthly data set, or else the Global-Land Ocean Temperature Index data set.

I personally prefer the latter, as ocean temperatures play a huge role in ice melts as well as other weather phenomena (e.g. hurricane frequency and intensity, even this political advocacy group pretending to be scientific says so). In any case, the two series are generally correlated well, so I have no strong preference which one Intrade specifies.

I used the latter of course, in working with Adam Siegel and the folks at Inkling Markets to create the very first Global Warming prediction market.

2008 Recession probabilites easing back down

DISCLOSURE: I am short US.RECESSION.08

Girls have a built-in neurological advantage over boys

reports Ryan Hagen:

... according to new research from Northwestern University and the University of Haifa. The researchers found that while girls can easily process language in the abstract, boys depend more on their senses. The upshot is that boys may need to be taught both visually and verbally, while girls can learn equally well through either means and presumably have an easier time with learning because of it.

I guess it's that half-a-brain v. whole-brain thing.

Quote of the day

Ferraro's remark is a sly way of referring to affirmative action, presumably because she thinks it will help Hillary with angry white ethnics in Pennsylvania's depressed coal and industrial regions. It would be repulsive coming from anyone, but its particularly rich from someone whose main qualification for the vice presidency was possessing ovaries.--Megan McArdle

I wonder if there was any inside information between Spitzer and Cramer

Jim Cramer trading on Eliot Spitzer's information would be illegal, of course, but not the other way around. Doesn't seem fair, does it?

Cramer's sadness captured at DealBreaker.

For Shame

When it comes to picking taxpayer pockets, no one -- not the trial lawyers or even AARP -- has it over the farm lobby. How's this for clout? Though last year was one of the best ever for farm incomes -- up 44% to $87.5 billion -- farmers are about to score the most lavish subsidies in American history.

The House and Senate are now ironing out differences between their bills, and it's all but certain that farmers will get about $26 billion over the next five years in subsidies. Soybean and wheat farmers are slated to receive higher price supports, though bean prices hit a 34-year high last year and wheat prices have soared to a new record.

All of this will be highly problematic for America's trade negotiators. Brazil has already won a World Trade Organization complaint against the U.S. for providing illegal subsidies to cotton farmers. That ruling allows Brazil to apply $4 billion in retaliatory tariffs on American goods. Several similar suits are pending against the U.S., and these complaints were filed before any of these latest hikes in price supports.

The giveaways are so large that the House version is the first farm bill ever that would raise taxes to pay for it -- by $14 billion, mostly on the U.S. subsidiaries of foreign companies. This only discourages new foreign investment in the U.S. at a time when the weak dollar is already chasing it away. It's a sign of how insidious these welfare programs are that the Farm Bureau, traditionally an antitax outfit, recently signed off on the tax hikes in return for the subsidies.

And speaking of cashing in, Congress has also spurned the Bush Administration's sensible proposal to establish a $200,000 income ceiling in order to receive subsidies. Instead, full-time farmers will be able to earn up to $1 million per farm ($2 million for a married couple) and still be eligible for a USDA handout. That means you can be in the top 0.2% in income in the U.S. and still get a subsidy check from Uncle Sam. Yet Robert Goodlatte of Virginia, the Republican who helped craft the House bill, says with a straight face that the bill is "real reform and a real safety net for the farmer." Yes, thank heavens for that millionaire safety net.

Kimberly Strassel on Spitzer's warning signs, ignored by duped accessories (otherwise known as the media)

She zings:

What makes this history all the more unfortunate is that the warning signs about Mr. Spitzer were many and manifest. In the final days of Mr. Spitzer's run for attorney general in 1998, the news broke that he'd twisted campaign-finance laws so that his father could fund his unsuccessful 1994 run. Mr. Spitzer won anyway, and the story was largely forgotten.

New York Stock Exchange caretaker CEO John Reed suggested Mr. Spitzer hadn't told the truth when he said that it was Mr. Reed who wanted him to investigate Mr. Grasso's pay. The press never investigated.

On the substance, his court record speaks for itself. Most of Mr. Spitzer's high-profile charges have gone up in smoke. A New York state judge threw out his case against tax firm H&R Block. He lost his prosecution against Bank of America broker Ted Sihpol (whom Mr. Spitzer threatened to arrest in front of his child and pregnant wife). Mr. Spitzer was stopped by a federal judge from prying confidential information out of mortgage companies. Another New York judge blocked the heart of his suit against Mr. Grasso. Mr. Greenberg continues to fight his civil charges. The press was foursquare behind Mr. Spitzer in all these cases, and in a better world they'd share some of his humiliation.

Instead, remarkably, they continue to defend him. Ms. Masters, his biographer, was on CNN the day Mr. Spitzer's prostitution news broke, reassuring viewers that the governor really was a "lovely" guy. Other news reporters were reporting what a "tragedy" it was that such a leading light in the Democratic Party could come to such an ignoble end.

There's little that's tragic about Mr. Spitzer, unless you consider his victims (which would appear to include his own family). The press would do well to meditate on that, and consider how many violations they winked at and validated over the years. Politicians don't exist to be idolized by the press, at least not by any press corps doing its job.

Megan McArdle disagrees with Felix Salmon about the goodness of Spitzer's bully tactics

As usual, she is brilliant:

Some of his more bizarre prosecutions, and the weird settlements he demanded, made it clear that he didn't have the understanding of markets to effectively be the financial regulator he set himself up as.

Worse was how he did it. He couldn't make cases--the highest profile case he brought to trial basically ended with an acquittal on all counts. Yes, securities cases generally settle, but not like Spitzer's--precisely because the cases are generally a hell of a lot stronger than any of Spitzer's, cases where the prosecutors had some hope of proving that someone had actually done something illegal. Spitzer was able to do this through the power of the Martin Act, which gives the New York State attorney general practically despotic powers to go after fraud. Among the provisions: the prosecutor does not have to prove that there was intent to commit fraud, that any transaction took place, or that anyone was actually defrauded; he can interrogate potential defendants with no rights to an attorney or against self incrimination; he can keep the investigation secret or make it public, just as he pleases; and can subpoena just about anything. Practically the only limitation on the AG is his goodwill and sense of fair play. Eliot Spitzer was not overgenerously endowed with either.

Banks and others came to the table because Spitzer would launch these investigations and then use a carefully orchestrated series of press releases and leaks to torpedo their stock price. But many of the more spectacularly incriminating sounding excerpts from subpoenaed documents were so misleadingly taken out of context that they would have been grounds for a libel suit if he'd been a journalist. Don't get me wrong--many of them were guilty. But this kind of tactic doesn't distinguish between the guilty and the innocent; anyone in a credit-dependent industry whose stock value is plummeting would have to negotiate, because Spitzer's inquiry could shut them down. (Can and did, in some cases--indeed, he apparently nearly shut down Merrill's asset management business until a judge reversed the order.) Often, these shaded into personal vendetta--Dick Grasso's pay package seems like he was grossly overvalued, but what business is it of Eliot Spitzer's how much a private body pays it's CEO? This has nothing to do with the reasons we regulate financial markets.

Moreover, all his quick settlements screwed the investors he was supposed to be protecting. The unjust settlements extorted money from those firms' shareholders and dumped it into state coffers. And the just ones did nothing for investors: the money went to the states, not to the people who had allegedly been defrauded. Shutting the investigations down quickly forestalled discovery that would have helped clients sue. Eliot Spitzer got the headlines; investors got nothing.

I'll post Felix's response, since she called him out, if he manages to put something together for their mutual readership. My note of Felix's pro-bullyness here.

Quotes of the day

A university consists of a faculty attached to a fundraising apparatus, where it used to be the other way around.--Arnold Kling

I’m sorry to say that a large part of the progressive movement seems to have lost its sanity.--Paul Krugman

John McCain has the most inconsistent voting record in the Senate

according to Brendan Nyhan, via Tyler Cowen.

A show about nothing can be hilarious. But a voting record about nothing?

Long term inflation concerns

voiced by Ken Rogoff (via Greg Mankiw):

The fact is that around most of the world, inflation ― and eventually inflation expectations ― will keep climbing unless central banks start tightening their monetary policies.

The U.S. is now ground zero for global inflation. Faced with a vicious combination of collapsing housing prices and imploding credit markets, the Fed has been aggressively cutting interest rates to try to stave off a recession.

But even if the Fed does not admit it in its forecasts, the price of this "insurance policy" will almost certainly be higher inflation down the road, and perhaps for several years.

I've looked at inflation here and here and here in the last couple of weeks.

So there IS hope for America!

Former anti-American anti-markets David Mamet writes in the Village Voice (via Russell Roberts):

..., in the abstract, we may envision an Olympian perfection of perfect beings in Washington doing the business of their employers, the people, but any of us who has ever been at a zoning meeting with our property at stake is aware of the urge to cut through all the pernicious bullshit and go straight to firearms.

I found not only that I didn't trust the current government (that, to me, was no surprise), but that an impartial review revealed that the faults of this president—whom I, a good liberal, considered a monster—were little different from those of a president whom I revered.

Bush got us into Iraq, JFK into Vietnam. Bush stole the election in Florida; Kennedy stole his in Chicago. Bush outed a CIA agent; Kennedy left hundreds of them to die in the surf at the Bay of Pigs. Bush lied about his military service; Kennedy accepted a Pulitzer Prize for a book written by Ted Sorenson. Bush was in bed with the Saudis, Kennedy with the Mafia. Oh.

And I began to question my hatred for "the Corporations"—the hatred of which, I found, was but the flip side of my hunger for those goods and services they provide and without which we could not live.

Do I speak as a member of the "privileged class"? If you will—but classes in the United States are mobile, not static, which is the Marxist view. That is: Immigrants came and continue to come here penniless and can (and do) become rich; the nerd makes a trillion dollars; the single mother, penniless and ignorant of English, sends her two sons to college (my grandmother). On the other hand, the rich and the children of the rich can go belly-up; the hegemony of the railroads is appropriated by the airlines, that of the networks by the Internet; and the individual may and probably will change status more than once within his lifetime.

What about the role of government? Well, in the abstract, coming from my time and background, I thought it was a rather good thing, but tallying up the ledger in those things which affect me and in those things I observe, I am hard-pressed to see an instance where the intervention of the government led to much beyond sorrow.

But if the government is not to intervene, how will we, mere human beings, work it all out?

I wondered and read, and it occurred to me that I knew the answer, and here it is: We just seem to. How do I know? From experience. I referred to my own—take away the director from the staged play and what do you get? Usually a diminution of strife, a shorter rehearsal period, and a better production.

And I realized that the time had come for me to avow my participation in that America in which I chose to live, and that that country was not a schoolroom teaching values, but a marketplace.

I began reading not only the economics of Thomas Sowell (our greatest contemporary philosopher) but Milton Friedman, Paul Johnson, and Shelby Steele, and a host of conservative writers, and found that I agreed with them: a free-market understanding of the world meshes more perfectly with my experience than that idealistic vision I called liberalism.

Congrats, Mr. Mamet, the Truth will set you free!

Don't lend money to Gisele Bundchen!

advises Felix Salmon. She gives me the creeps.

2008 March Madness Calendar

March 12-16: Major conference tournaments, automatic bids determined
March 16: Selection Committee announces at-large bids

March 18: 65th v. 64th Play-In

March 20-21: Sixty-Four
March 22-23: Thirty-Two

March 28: Sweet Sixteen
March 30: Elite Eight

April 5: Final Four
April 7: National Championship


The 12 teams who hold automatic bids (as of today, Wed Mar 12):

Cornell (20-5)
Winthrop (22-11)
Austin Peay (24-10)
Belmont (25-8)
Drake (28-4)
George Mason (23-10)
Siena (22-10)
Davidson (26-6)
San Diego (21-13)
Oral Roberts (24-8)
Butler (29-3)
WKU (27-6)

Cornell, my alma mater, did get crushed by Duke (currently ranked #6 in the nation by Associated Press) back in January, losing by 14 points. But Wisconson, #10, lost by 24. So I like our chances!

DISCLOSURE: I am short NCAABK.DUKE and long NCAABK.FIELD.

A 30-year irony capsule

via Wall$treetFolly. Spitzer refers to Hamlet in his high school yearbook, and then here is his notable quote:

The worst thing about political jokes is that some get elected.

Comic roundup of yesterday's top headline

here. A sampling from Letterman, who I think takes top honors:

Did you happen to see the press conference? Very dramatic. Eliot Spitzer was there. He had yellow crime scene tape draped around his pants – crazy.

The thinking now is that the governor may step down now to spend less time with his family.

Top 10 list of Eliot Spitzer Excuses [video]:

10. “Oh come on, like you were never involved in a prostitution ring.”
9. “Hookers is fun.”
8. “Just trying to help the economy.”
7. “Have you ever been to Albany?”
6. “It’s part of my new MTV prank show, ‘Spitz’d.’”
5. “Haven’t been myself since Roy Scheider died.”
4. “Uh, tainted beef?”
3. “Whether it’s a hooker or your wife, you’re always paying for – you married fellas know what I’m talking about.”
2. “Wanted to be known as the Charlie Sheen of politics.”
1. “I thought Bill Clinton legalized this years ago.”

Latest episode of Bikini Statistics

courtesy of Bruce McQuain:

A majority of Americans do not read political blogs, the online commentaries that have proliferated in the race for the U.S. presidency, according to a poll released on Monday.

Only 22 percent of people responding to the poll said they read blogs regularly, meaning several times a month or more, according to the survey conducted by Harris Interactive.

22%?

Well, let’s see, 22% of 300,000,000 is what?

66,000,000.

Yeah, ok, I’ll settle for that.

I’ll tell you who does read political blogs - most of Washington DC and the news media - to include Reuters.

Previous BS installment here.

Statistics are like a bikini. What they present is suggestive, but what they conceal is vital--Aaron Levenstein

Spitzer Resignation contracts listed

at Intrade.

Declaration of War on Columbia contracts, too.

Quote of the day

Our search for happiness might be exactly what is preventing us from finding it--Raina Kelly

Real Median Income per Household Member is up over 60%

in the last 4 decades, from $11,000 to $19,000. Add in the Wal-Mart savings effect, and people can basically buy double what they could in the Sixties. There was probably 1 phone per household back then, and that number may have tripled, while phone bills on an inflation adjusted basis may have decreased as a percentage of household expenditures. And that doesn't even measure the increased utility of digital cellphones.

Felix Salmon endorses bullying

The ends justify the means for some, I gather.

What of freedom and choice, Felix?

This could be big

Like "bringing democratic capitalism back from the brink of implosion" big.

Are basic global warming equations totally wrong?

The possible answer over at Jon Henke's.

Hillary doesn't offend me as many others

but this outlandish claim sickens me to my stomach.

Obama distances himself from his best advisor

reports Megan McArdle. It reminds of this pathetic scene from Seinfeld:

o George: Listen... there's something that's been on my mind and we haven't really talked about it. It's kind of important to me.
o Susan: What is it?
o George: Well... I put a lot of thought into this and I think I would like you to sign a prenuptial agreement.
o Susan: A pre-nup?
o George: Yeah.
o Susan: [bursts out laughing]
o George: What's so funny?
o Susan: You don't have any money. I make more money than you do. Ha ha. Yeah, gimme the papers I'll sign 'em.

Quotes of the day

If Mr. Spitzer wants us to butt out of his private affairs, he should from here on in set an example by butting out of everyone else's private affairs.--Donald J. Boudreaux

Prostitute Admits Link to Elliott Spitzer; Resigns From Escort Service in Disgrace--Radley Balko

Spitzer Swallows?--Economist

From Troopergate to Shtupergate--Suitably Flip

To be sure, we already knew that Eliot Spitzer had no respect for the letter of the law--his signature move was going after people on the basis of moral outrage, rather than, say, violating a statute. But his behavior since he got into governor's office has been, in the deepest sense of the word, scandalous. His use of the state police to prosecute petty political battles, and now his flagrant violations of statutes that he himself used to enforce, seem to indicate that Spitzer thought he had been elected to the position of Third World Dictator. To call him a hypocrite is too kind--he isn't even paying tribute to virtue. If he had an ounce of shame, he would resign.--Megan McArdle

How government makes things worse

by Jeff Jacoby (via Mark Perry).

Eliot Spitzer (a.k.a. "Client Nine") involved in prostitution ring

New York Sun reports:

Prosecutors specializing in government corruption cases are leading the investigation into what authorities say was a prostitution service that charged up to $5,500 an hour — suggesting that the U.S. attorney's office in Manhattan may have evidence that a public official hired a prostitute.

During a court hearing in the case, at which the four people were arraigned, it emerged that all three of the assistant U.S. attorneys assigned to the prosecution are part of the U.S. attorney's public corruption unit. One is the bureau's chief, Boyd Johnson III. The unit investigates wrongdoing by both elected and nonelected officials and bureaucrats at various levels of government.

NY Times reports:

Gov. Eliot Spitzer has informed his most senior administration officials that he had been involved in a prostitution ring, an administration official said this morning.

Those who live by the pen, die by the pen, I guess.

UPDATE: Kimberly Strassel's "The Passion of Spitzer" was predictive (via Larry Ribstein):

Mr. Spitzer's office has clearly spun his verbal tirades as mere differences in recollection, and since most took place in private, he's so far received the benefit of the doubt. But in other instances -- Mr. Grasso, H&R Block and Mr. Greenberg -- there are disturbing suggestions that Mr. Spitzer is peddling information to the public that may not be accurate. You can bet that if this were President Bush, the press would be all over the disparate versions of events. But this is Mr. Spitzer, who at this very moment is running campaign ads that are nothing more than a compilation of the adulatory headlines he's received over his tenure.

Far better for the public if a little more light were directed on these discrepancies. Mr. Spitzer is asking to govern one of the most populous states in the nation. Politicians are certainly allowed "passion," but given the power they wield they also have to demonstrate restraint, honesty and good judgment. Voters deserve to know if Mr. Spitzer has the character to hold such a job.

Why prop up a dictator?

in today's WSJ:

Even as the Venezuelan strongman was threatening war last week against Colombia, Congress was threatening to hand him a huge strategic victory by spurning Colombia's free trade overtures to the U.S.

This isn't the first time Democrats have come to Mr. Chávez's aid, but it would be the most destructive. The Venezuelan is engaged in a high-stakes competition over the political and economic direction of Latin America. He wants the region to follow his path of ever greater state control of the economy, while assisting U.S. enemies wherever he can. He's already won converts in Bolivia and Ecuador, and he came far too close for American comfort in Mexico's election last year.

Meanwhile, Colombian President Álvaro Uribe is embracing greater economic and political freedom. He has bravely assisted the U.S fight against narco-traffickers, and he now wants to link his country more closely to America with a free-trade accord. As a strategic matter, to reject Colombia's offer now would tell everyone in Latin America that it is far more dangerous to trust America than it is to trash it.

The bottleneck is Speaker Nancy Pelosi, who is refusing to allow a vote under pressure from her left-wing Members. These Democrats deride any link between Hugo Chávez and trade as a "scare tactic," as if greater economic prosperity had no political consequences. "President Bush's recent fear-mongering on trade shows just how desperate he is to deliver one final victory for multinational corporations," declared Illinois Democrat Phil Hare, who is one of Ms. Pelosi's main trade policy deputies.

These are the same Democrats who preach the virtues of "soft power" and diplomacy, while deriding Mr. Bush for being too quick to use military force. But trade is a classic form of soft power that would expand U.S. and Latin ties in a web of commercial interests. More than 8,000 U.S. companies currently export to Colombia, nearly 85% of which are small and medium-sized firms. Colombia is already the largest South American market for U.S. farm products, and the pact would open Colombia to new competition and entrepreneurship.

Which brings us back to Mr. Chávez and his many Democratic friends. Connecticut Senator Chris Dodd's early support helped the strongman consolidate his power. Former President Jimmy Carter blessed Mr. Chávez's August 2004 recall victory, despite evidence of fraud. And then there are the many House Democrats, current and former, who have accepted discount oil from Venezuela and then distributed it in the U.S. to boost their own political fortunes. Joseph P. Kennedy II and Massachusetts Congressman Bill Delahunt have been especially cozy with Venezuela's oil company. If Democrats spurn free trade with Colombia, these Democratic ties with Mr. Chávez will deserve more political scrutiny.

Brian Wesbury does not see a recession looming

as he writes:

As a result, following Friday’s report that private payrolls dropped 101,000 in February (the second consecutive decline), it has become easy to believe that a recession has begun.

However, this would be a significant overreaction. Employment data in the past few months has not changed nearly as much relative to its trend as it did in previous recessions. Moreover, jobs fell in 2002 and early 2003, but the economy still expanded. Demographic patterns have slowed employment growth below historical norms. Consequently, the recent decline in payrolls is not proof that the overall economy is contracting.

The last recession officially ended in November 2001 and since then payrolls have grown by an average of about 100,000 per month. In the past two months payrolls have dropped by an average of 43,000. The total swing is 143,000 and this represents a 1.7 million annual change or 1.2% of the total number of payroll jobs currently in existence. This is a significantly smaller shift than those that occurred in the recessions of 1990-91 or 2001.

Why? Well, one reason is that we may not really be in recession. Swings of 100,000 per month in jobs are barely above the level of statistical significance. Another reason is that we have seen a major shift in demographic factors.

Unlike the expansions of the 1980s or 1990s, the current one is the first to be affected by the aging of Baby Boomers beyond their peak working years. At the same time, the current expansion has seen much higher college enrollment rates for young people, while labor force participation by students has fallen. As a result, the trend growth in payrolls has been understandably lower. (Making up for this has been a strong increase in productivity, outdoing the expansions of the 1980s and 1990s.)

How can the economy still grow if payrolls are shrinking? The answer is productivity growth: more output per hour worked. For an historical example, we need look no further back than 2002 and the first half of 2003. During that 18-month period, payrolls declined by an average of 50,000 jobs per month (worse than the average in the past two months) while real GDP expanded at a 2% annual rate (matching our forecast for Q1).

DISCLOSURE: I am short US.RECESSION.08

Intra-party litigation

Al Sharpton mulls a Florida lawsuit (via Drudge).

Ted Olson's litigation prediction from last month here.

The first team to clinch a Men's NCAA Baasketball berth

is Cornell.

Let's Go Red!

Trade of the Year

brought by Eddy Elfenbein. Unfortunately, like most great trades, it's a look-back.

DISCLOSURE: Unfortunately, I am short 2008.GOP.NOM.MCCAIN

Quote of the day

The western financial system is caught in a trap. On the one hand, there is an urgent need for clearing prices to be established for impaired assets to restore confidence; on the other hand, if this is done in a mark-to-market world, there is a risk that some banks will run out of capital. Policymakers are in the unenviable position of knowing almost any step they take risks denting sentiment further.--Gillian Tett

Echoes of Elvis:

We're caught in a trap
I can't walk out
Why can't you see
What you're doing to me
When you don't believe a word I say?

We can't go on together
With suspicious minds
And we can't build our dreams
On suspicious minds

Here we go again
Asking where I've been
You cant see these tears are real
I'm crying

Let's don't let a good thing die

When honey, you know
I've never lied to you

Back in January, I guessed that we were in the 8th inning of the stock market correction, and 4th inning of the credit crunch. I'm thinking that we might be in the 9th inning and 5th inning now, respectively.

UPDATE: The Subprime Wisdom of Megadeath:

Foreclosure of a dream
Those visions never seen
Until all is lost
Personal Holocaust
Foreclosure of a dream

The Ethanol Mess

at MIT's Technology Review (via Steve Levitt).

This is very bad

except for school boards, teachers unions, and the politicians they support.

Oh, I didn't know about this rule of politics

A gaffe is when a politician tells the truth.--Michael Kinsley

A tiny point of light, amidst the chaotic darkness this week

Here is some good news from a recent paper by Harvard economist Andrei Shleifer titled "The Age of Milton Friedman":

The last quarter century has witnessed remarkable progress of mankind. The world’s per capita inflation-adjusted income rose from $5,400 in 1980 to $8,500 in 2005 (see chart above). Schooling and life expectancy grew rapidly, while infant mortality and poverty fell just as fast. With the conspicuous exceptions of China and the Middle East, the world has made significant strides in democratization. Compared to 1980, many more countries in the world are democratic today.

We’ve seen remarkable declines in infant mortality in all regions, with the worldwide population-weighted average dropping from 64.5 to 37.5 per thousand births. The World Bank reports that between 1980 and 2000, the share of the world’s population living on less than $1 a day fell from 34.8 percent to 19 percent. It forecasts that the number of people living on less than $1 a day will continue to fall sharply despite population growth, and account for 10 percent of the world’s population by 2015. Billions of people in Asia have been lifted out of poverty thanks to economic growth.

(via Mark Perry)

John Carney accuses Math of sexism

here:

Math 55 is advertised in the Harvard catalog as “prob­ably the most difficult undergraduate math class in the country.” It is leg­endary among high school math prodigies, who hear terrifying stories about it in their computer camps and at the Math Olympiads. Some go to Harvard just to have the opportunity to enroll in it. Its formal title is “Honors Advanced Calculus and Linear Algebra,” but it is also known as “math boot camp” and “a cult.” The two-semester fresh­man course meets for three hours a week, but, as the catalog says, homework for the class takes between 24 and 60 hours a week.

Math 55 does not look like America. Each year as many as 50 students sign up, but at least half drop out within a few weeks. As one former student told The Crimson newspaper in 2006, “We had 51 students the first day, 31 students the second day, 24 for the next four days, 23 for two more weeks, and then 21 for the rest of the first semester.” Said another student, “I guess you can say it’s an episode of ‘Survivor’ with people voting themselves off.” The final class roster, according to The Crimson: “45 percent Jewish, 18 percent Asian, 100 percent male.”

I fondly reminisce about my freshman weed-out course, Chem 207. All the pre-med hopefuls and engineering frosh converged in Baker Lab for the lectures and "prelims" (major exams before the final exam), to try to finish in the top 16% of the class and get that 3.5 or higher mark for the class.

It was so stressful for we 18-year-olds that they actually had Ithaca police cruisers on watch over the Stewart Avenue and Collegetown bridges for gorge jumpers, after we were done with those tests.

Half the class--on the bottom half of the bell curve--got stuck with a 0.0 - 2.5 grade, and most of those had to get out of the pre-med or engineering track by their sophomore year. Fortunately, one could always bake some cookies, toss some salad for a 4.0. That, or clean out barns/stalls/kennels. Just kidding, those 2 schools are the best in breed in the country, unlike my school which barely cracks the top 10.

Of course, I would bet serious money that we could take Georgia Tech, Urbana-Champaign, USC and UMich in a brawl measured by problem sets, experiments, projects, or pay. The Ithaca of NY is not so much like the Ithaca of Greece; from October to April, it's positively Spartan.

And there were plenty of women who flourished and are physicians today. Probably ten for every female engineering graduate.

Bad Moon Rising: 2008 Recession Contract

odds jumped in the last 24 hours:



DISCLOSURE: I am short US.RECESSION.08

Q. How can the payroll data be negative simultaenously with a reduction in the unemployment rate?

A. Because they are distinctly different surveys. The payroll survey polls a set of employers, while the unemployment rate is derived from a survey of households.

That is why the payroll survey has shown 63,000 jobs lost, while the unemployment rate has dropped from 4.9% to 4.8%. A bear would say the unemployment rate is less credible (due to a higher statistical margin of error), while a bull would assume the payroll data to be unrepresentative, as it does not reflect small business (which is where most people work). In recent years, payroll numbers have had to be revised up. Way up, actually.

You are free to research further and decide. James Surowiecki has recently written a great primer.

Global warming skeptics suffering from "sheer madness"

according to someone who may be genetic-diversity challenged (via Drudge).

I'm sure folks that he trusts will catch up with the latest data (follow the links on "told", "you", "so"). Might take a few years, though, for staffers of royalty--I think they are hired to make the boss feel smart, not simple.

Is this better or worse?

French women 'are the sexual predators now'.

(via Drudge)

I didn't know McCain and Obama were pen pals

Dear Senator Obama:

I would like to apologize to you for assuming that your private assurances to me regarding your desire to cooperate in our efforts to negotiate bipartisan lobbying reform legislation were sincere. When you approached me and insisted that despite your leadership's preference to use the issue to gain a political advantage in the 2006 elections, you were personally committed to achieving a result that would reflect credit on the entire Senate and offer the country a better example of political leadership, I concluded your professed concern for the institution and the public interest was genuine and admirable. Thank you for disabusing me of such notions with your letter to me dated February 2, 2006, which explained your decision to withdraw from our bipartisan discussions. I’m embarrassed to admit that after all these years in politics I failed to interpret your previous assurances as typical rhetorical gloss routinely used in politics to make self-interested partisan posturing appear more noble. Again, sorry for the confusion, but please be assured I won't make the same mistake again....

From McCain's senate website (via Perry Eidelbus).

Is this the dunk of the NBA season?

(via Brett Edwards)

Quote of the day

It was one of the worst nights of my life when I told my dad I was dropping out of Yale to be a cabbie. But I’m making a lot more money driving than being a medieval historian. People get hung up on the word Yale and the word taxi. It’s kind of like jazz—either you get it or you don’t.--Anonymous, via John Carney

Weird hypothesis: Fed should raise rates to save jobs

I am thinking that a fed fund rate increase, even just a symbolic 0.25%, may head off job destruction.

Inflation seems to be most intense in commodities, with oil reaching inflation-adjusted record highs, and certain metals and crops also hitting nominal record highs. The CRB Index has risen 35% in the last 6 months. But I think a significant part of this movement is frenzied speculation fueled by easier money.

If the Fed comes out and says inflation is a problem and raises rates, it may actually pop the commodities bubble. Then consumer inflation eases. If it eases enough, then household spending power goes up, thereby saving jobs (which is what the Fed is trying to do by cutting rates).

Any takers?

Hillary's base: The Rosanne Barr Voters

So says Daniel Henninger:

I always thought of Hillary as the Ma Barker of the Clinton gang in those years. When the going got tough, when the Feds were closing in and the boys were whimpering in the corner, Ma would slap the fight back into them. Well, there are a lot of Ma Barkers in northern Ohio just now and across the U.S. With the economy on edge, their lives stressed and their men moping, these women are the ones who've got to suck it up and hold the house together until the troubles fade.

In Ohio, the ratio of female to male voters was 59 to 41. Among white women, who made up 44% of the Ohio turnout, she got 67% of their vote. In high-school gyms on Sunday in Youngstown and Akron, these women were screaming for Hillary. It was intense. This wasn't the soccer-mom vote. It was the "Roseanne" vote.

Yes, this is Hillary's "base." But till now it's been regarded as an undifferentiated blob, a political category. Now we see that these women don't just support her. They love her -- and what she represents.

But amid the screaming, raucous throng, the fact remains: Her message is a downer. It is completely negative. She helps predisposed audiences to bring their resentments into sharp focus, and explode. Any sense of achieving, or at least feeling, something new or fresh is what Mr. Obama brings to the table. She doesn't. Other than tenacity, there isn't much truly positive that wells up from Hillary Clinton. It may yet turn out that this woman and hard times are a strong match to win the Democratic Party's nomination. If she does, that one big question will remain: Will the whole country want her?

Bernanke disappoints with this loser idea

in today's WSJ:

We've seen some puzzlers over the years, but we'll admit we never expected to see a Federal Reserve Chairman talking down the capital cushion of the nation's banking system.

But there it was on Tuesday, the equivalent of a CEO shorting his own stock, as Ben Bernanke encouraged the nation's bankers to write down the principal on millions of mortgage loans. Voluntary loan modifications aren't doing enough to stop foreclosures, declared the chief steward of the U.S. financial system. "In this environment," he said, "principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure."

Mull over that one for a moment. Mr. Bernanke and the Fed are charged with protecting the soundness of the banking system. The bulwark of such protection is shareholder equity -- capital -- which is generated in part by income-producing assets known as loans. Yet the Fed chief has now advised that, as a matter of public policy, banks should take a chunk of that capital and transfer it to mortgage debtors. How this additional charge -- and new political risk -- against bank earnings will ease the mistrust at the heart of the current credit crisis is a mystery.

This came only a few days after Mr. Bernanke had publicly advised Congress that more banks will fail. And it came on the same day that the Fed's Vice Chairman, Donald Kohn, told Capitol Hill that bank earnings are under increasing pressure. Amid such earnings strain and uncertainty about how far real-estate prices will fall, now seems an especially bad time for a Fed chief to instruct banks to create further losses.

Only the day before Mr. Bernanke dropped his bomb, Treasury Secretary Hank Paulson disclosed that "since July more than one million struggling homeowners received a workout -- either a loan modification or a repayment plan that helped them avoid foreclosure." In January alone, there were 167,000 such modifications, with the number of borrowers receiving help rising faster than the number of foreclosures.

Mr. Bernanke's broadside might well hamper these voluntary workouts by signaling to other borrowers that they needn't do anything at all.

Mr. Paulson had to wonder why Mr. Bernanke was undermining the Treasury Secretary's sensible public opposition, expressed on Monday, to a taxpayer rescue. Do the gentlemen not like each other?

The worst irony here is that the mortgage crisis is in large part the fault of the Fed's own reckless monetary policy. Low real interest rates for too long created a subsidy for debt that spurred the housing and credit bubbles that have now burst. Prices got higher than they should have been, and the first step in any recovery is letting those now-falling prices find a new bottom. Government interference in that price discovery will only prolong the crisis, increasing the chances that the losses are eventually dumped onto taxpayers.

Maybe I was wrong about the Bearded One.

Jon Henke makes sense on the idiocy of government run healthcare

writing:

A few months back, many were outraged when a young girl, Nataline Sarkisyan, died after the administrator of her insurance plan, Cigna Healthcare, did not approve a liver transplant procedure until it was too late to save her life. Many Lefty bloggers (and Michael Moore) were outraged, though they got some of the facts wrong and the situation wasn’t nearly as clear as they seemed to think.

This raises some more questions:

Do advocates of universal health care think cost/benefit resource allocation decisions will no longer happen under universal health care? Do those advocates believe nobody will ever be denied any medical care for any reason? If they disagree with those decisions when the government pays the bills, where will they take their business?

Finally: Cigna Healthcare denied one procedure that had a chance of extending a life. But the FDA routinely delays and denies thousands of medical treatments based on potential risks and uncertainties far less than in the case of Cigna and Nataline Sarkisyan. Far more people are denied treatments by the FDA, but where is the outrage from the Left over government interference and obstruction in the health care decisions?

As McArdle says, we already accept that the process is manned by imperfect people with perverse incentives. Yet we have given them a monopoly over decisions about our medical treatments. That is absurd and inconsistent with the kind of reaction we saw in the Cigna case.

As Hillary goes, so goes CNN?

(via Gawker)

Bryan Caplan is worried that Obama could be the next FDR

the American Mugabe:

Oh well, as long as Obama doesn't turn out to be the next FDR, I'll count myself and the world lucky.

Quote of the day

The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.--George Bernard Shaw

Intrade and Zogby tie on Tuesday, March 4 primaries

Zogby predicted a 2-way-tie for Texas, while Intrade called TX for Obama, so Zogby gets that win. Meanwhile, Intrade called Ohio for Clinton, while Zogby called a 2-way-tie, so Intrade gets the win.

Standings
Wins	Losses	Ties	Pct	Contender	Avg Eve Prob
6	3	9	58.3%	Intrade	68.9%
3	6	9	41.7%	Zogby	39.8%

Schedule
Score	Date		State	Party	Intrade	Zogby	Winner		Intrade Pct	Zogby Pct
6-3-9	4-Mar		OH	Dem	Clinton	2-way-tie	Clinton		70%	45%
5-3-9	4-Mar		TX	Dem	Obama	2-way-tie	Clinton		57%	44%
5-2-9	5-Feb		NJ	Rep	McCain	McCain	McCain		96%	52%
5-2-8	5-Feb		NJ	Dem	Clinton	2-way-tie	Clinton		67%	43%
4-2-8	5-Feb		NY	Rep	McCain	McCain	McCain		98%	53%
4-2-7	5-Feb		GA	Dem	Obama	Obama	Obama		96%	48%
4-2-6	5-Feb		MO	Dem	Obama	Obama	Obama		63%	47%
4-2-5	5-Feb		CA	Rep	McCain	Romney	McCain		56%	40%
3-2-5	5-Feb		CA	Dem	Obama	Obama	Clinton		52%	46%
3-2-4	29-Jan		FL	Rep	McCain	2-way-tie	McCain		51%	33%
2-2-4	26-Jan		SC	Dem	Obama	Obama	Obama		90%	38%
2-2-3	19-Jan		SC	Rep	McCain	McCain	McCain		56%	29%
2-2-2	19-Jan		NV	Dem	Obama	Clinton	Clinton		54%	42%
2-1-2	15-Jan		MI	Rep	McCain	2-way tie	Romney		54%	27%
2-0-2	8-Jan		NH	Dem	Obama	Obama	Clinton		91%	39%
2-0-1	8-Jan		NH	Rep	McCain	McCain	McCain		82%	34%
2-0-0	3-Jan		IA	Dem	Obama	3-way tie	Obama		54%	28%
1-0-0	3-Jan		IA	Rep	Huckabee	2-way tie	Huckabee		53%	28%

It's On! The Intrade v. Zogby Democrat TX and OH Showdown

Zogby is back from the dead.

Date		State	Party	Intrade	Zogby
4-Mar		OH	Dem	Clinton	2-way-tie
4-Mar		TX	Dem	Obama	2-way-tie

Intrade		Zogby		OH Dem
70%		44%		Clinton
30%		47%		Obama
		2%		Gravel
		1%		Someone else
		6%		Not sure
0%				FIELD
				TX Dem
43%		45%		Clinton
57%		47%		Obama
		1%		Gravel
		2%		Someone else
		6%		Not sure
0%				FIELD

Joke of the day

courtesy of Arnold Kling:

One Cuban young woman complains to another. "He lied to me! He told me that he was a luggage handler! It turns out, he's nothing but a neurosurgeon!"

Luggage handlers working the tourist hotels [in Cuba] often make more in one day than medical doctors receive in a month.

NAFTA fearmongers, meet Thomas Sowell

who instructs:

Senator Obama says that he is for free trade, provided it is "fair trade." That is election year rhetoric at its cleverest. Since "fair" is one of those words that can mean virtually anything to anybody, what this amounts to is that politicians can pile on whatever restrictions they want, in the name of fairness, and still claim to be for "free trade." Clever.

We will all have to pay a cost for political restrictions and political cleverness, since there is no free lunch. In fact, free lunches are a big part of the reason for once-prosperous regions declining into rust belts.

When the American automobile industry was the world's leader in its field, many people seemed to think that labor unions could transfer a bigger chunk of that prosperity to its members without causing economic repercussions.

State and local governments in what later became the rust belt also thought that they too could treat the industries under their jurisdiction as prey rather than assets, and siphon off more of the wealth created by those industries into state and local treasuries with ever higher taxes -- again, without considering repercussions.

In the short run, you can get away with all sorts of things. But, in the long run, the chickens come home to roost. The rust belt is where those rising costs have come home to roost.

While American auto makers are laying off workers by the thousands, Japanese auto makers like Toyota and Honda are hiring thousands of American workers. But they are not hiring them in the rust belts. They are avoiding the rust belts, just as domestic businesses are avoiding the high costs that have been piled on over the years by both unions and governments in the rust belt regions.

Many workers in the new plants being built by Toyota and others apparently already understand that. They have repeatedly voted against being represented by labor unions. They want to keep their jobs.

Where does NAFTA come into the picture?

International trade is just one of the many ways in which the competition of lower cost producers can cause higher cost producers to lose customers and jobs. Technological improvements or better management practices by domestic competitors can have the same result.

Jobs are always disappearing. The big question is why they are not being replaced by new jobs. Rust belt policies that drove out old jobs also keep out new jobs.

NAFTA makes it easier for politicians to blame the problem on foreigners. In fact, foreigners make ideal scapegoats for politicians. After all, people in Japan or India can't vote in American elections.

UPDATE: Thimerosol fearmongers, meet Megan McArdle. (This includes you, John McCain, in case you are reading).

People are finally getting wise to the possibility of an incoming Ice Age

(via Mark Perry)

We told you so.

Bubble watch

over at Felix Salmon's. Very neat!

In case you haven't been following, here is where bubbles come from.

Barack's tax plan

projects to equate to a $34,000 per year pay cut for first year MBA analysts on Wall Street.

Quote of the day

Chief Justice John Roberts, ever since his days as a judge on the court of appeals, has virtually defined judicial modesty by opining that if it is not necessary for the court to decide an issue, then it is necessary for the court not to decide that issue.--Laurence Tribe

Let them drink soda!

Some S&P 500 market capitalizations, around noontime today, ranked out of 500:

$113 bil PEP (Pepsico), #20

$109 bil C (Citigroup), #21
$108 bil AAPL (Apple), #22
$103 bil GOOG (Google), #23

The Top 3:

$470 bil XOM (Exxon)
$336 bil GE (General Electric)
$217 bil MSFT (Microsoft)

So Obama will talk with any dictator

but it doesn't mean that he will be speaking honestly:

The accommodating Canadian Embassy nonetheless tried to smooth things over yesterday with a statement saying that "there was no intention to convey, in any way, that Senator Obama and his campaign team were taking a different position in public from views expressed in private, including about NAFTA." Which is too bad, because the apparent revelation that Mr. Obama doesn't believe his own trade rhetoric is the best news we've heard about the Illinois Senator's economic policy.

In Mr. Goolsbee's defense, we too have recognized a language barrier separating the U.S. and Canada, particularly when we enjoy watching NHL games on television. In their understated manner, Canadian analysts describe blows to the head as "messages" and sticks to the face as "taking liberties." So perhaps Mr. Goolsbee's obligatory nod toward the benefits of trade was interpreted in Canada as a passionate defense of free markets.

Like I said, Barack Obama is starting to remind me of Bill Clinton.

UPDATE: And, as Bret Stephens reminds, Jimmy Carter:

In 1977, Jimmy Carter told Americans to get over their "inordinate fear of communism." This year, expect to be told to get over your "inordinate fear" of terrorism.

Two years after he expressed a merely ordinate fear of communism, the Soviet Union invaded Afghanistan. "History teaches, perhaps, very few clear lessons," Mr. Carter said in his response. "But surely one such lesson learned by the world at great cost is that aggression, unopposed, becomes a contagious disease." Mr. Carter learned that the hard way. Let's hope Mr. Obama won't have to learn the same lesson, the same way.

Oh, yeah.

UPDATE: More cred issues:

"When it came time to make the most important foreign policy decision of our generation the decision to invade Iraq Senator Clinton got it wrong," Obama said.

He said that Sen. Jay Rockefeller, a fellow Democrat from neighboring West Virginia, had read the intelligence estimate as a member of the Senate Intelligence Committee and had voted against the war resolution.

Rockefeller, who is now chairman of that committee, endorsed Obama on Friday and campaigned with him on Saturday.

Just one problem: As blogress Clarice Feldman points out, and as the Senate roll-call confirms, Rockefeller voted for the war. We guess it was too good to check!

Obama asks "Which scriptures should guide our policy?"

From Sarah Pulliam:

Obama also cited the Sermon on the Mount in his June 28, 2006, 'Call to Renewal' address.

"Which passages of Scripture should guide our public policy? Should we go with Leviticus, which suggests slavery is ok and that eating shellfish is abomination? How about Deuteronomy, which suggests stoning your child if he strays from the faith? Or should we just stick to the Sermon on the Mount - a passage that is so radical that it's doubtful that our own Defense Department would survive its application? So before we get carried away, let's read our bibles. Folks haven't been reading their bibles."

Well, which passages of Scripture should guide a christian doing a job, any job? I'd start with this one.

The President's job description is stated in the oath of office:

I do solemnly swear (or affirm) that I will faithfully execute the office of President of the United States, and will to the best of my ability, preserve, protect, and defend the Constitution of the United States.

I don't think the scriptures have much to do with the job description or the measurement of how well the job is being done. There's ways of amending the Constitution to adopt or reject similar principles from scripture. Am I missing something important here?

Randy Moss may be returning to New England

possibly for $27 million over 3 years.

I'm guessing he'll get $7 million of that up front, guaranteed.

UPDATE: He's signed, and the upfront money was $12 million.

Quote of the day

With the benefit of hindsight — and the importance of the word ‘hindsight’ should be emphasized — it is not hard to argue that the [Fed] was too slow to raise the federal funds target after taking the target down to 1% in 2003. Also with hindsight, the [Fed] was too slow to start raising the fed funds target in 1999 after dropping it by 75 basis points to deal with the turmoil created by Long-Term Capital Management.--William Poole, Federal Reserve Bank of St. Louis President

In other (related?) news:

Crude-oil futures have topped the inflation-adjusted high set in April 1980, as the dollar's descent continues to send investors into the commodities markets.

Gold for April delivery hit a record of $992 an ounce on the New York Mercantile Exchange. The contract was last up $15.20 at $990.20 an ounce.

Perhaps in 2013 or so, a Fed governor will look back at 2008 and say something similar to what Gov. Poole just did.

Why does the Ivy Tower lean left?

Naomi Riley takes a look.

A Tale of Two States

Texas and Ohio:

Texas has been prospering while Ohio lags, and the reasons are instructive about what works and what doesn't in economic policy.

There's no doubt times are tough in Ohio. The state has lost 200,000 manufacturing jobs since 2000, home foreclosures are soaring, and real family income is lower now than in 2000. Meanwhile, the Texas economy has boomed since 2004, with nearly twice the rate of new job creation as the rest of the nation.

Let's start with the fact that Texas's growth puts the lie to the myth that free trade costs American jobs. Anti-Nafta rhetoric doesn't play well in El Paso, San Antonio and Houston, which have become gateway cities for commerce with Latin America and have flourished since the North American Free Trade Agreement passed Congress in 1993. Mr. Obama's claim of one million lost jobs due to trade deals is laughable in Texas, the state most affected by Nafta. Texas has gained 36,000 manufacturing jobs since 2004 and has ranked as the nation's top exporting state for six years in a row. Its $168 billion of exports in 2007 translate into tens of thousands of jobs.

Ohio, Indiana and Michigan are losing auto jobs, but many of these "runaway plants" are not fleeing to China, Mexico or India. They've moved to more business-friendly U.S. states, including Texas. GM recently announced plans for a new plant to build hybrid cars. Guess where? Near Dallas. In 2006 the Lone Star State exported $5.5 billion of cars and trucks to Mexico and $2.4 billion worth to Canada.

Ohio now ranks 47th out of 50 in economic competitiveness, according to the American Legislative Exchange Council. Ohio politicians deplore plant closings even as they impose the third highest corporate income tax in the country (10.5%) and the sixth highest personal income tax (8.87%). A common joke is that Ohio lays out the red carpet for companies -- when they leave the state. By contrast, Texas has no income tax, a huge competitive advantage.

Ohio's most crippling handicap may be that its politicians -- and thus its employers -- are still in the grip of such industrial unions as the United Auto Workers. Ohio is a "closed shop" state, which means workers can be forced to join a union whether they wish to or not. Many companies -- especially foreign-owned -- say they will not even consider such locations for new sites. States with "right to work" laws that make union organizing more difficult had twice the job growth of Ohio and other forced union states from 1995-2005, according to the National Institute for Labor Relations.

On the other hand, Texas is a right to work state and has been adding jobs by the tens of thousands. Nearly 1,000 new plants have been built in Texas since 2005, from the likes of Microsoft, Samsung and Fujitsu. Foreign-owned companies supplied the state with 345,000 jobs. No wonder Texans don't fear global competition the way some Presidential candidates do.

Ohio has an economy burdened by high taxes and work rules that impose heavy costs on employers. Texas embraces free trade, keeps taxes low, doesn't impose unions on business and has tooled itself for 21st century global competition. Ohioans may not like to hear this, but for any company considering where to locate a new plant or move an existing one, the choice between Ohio and Texas isn't even a close call.

The challenge for our national economy in a world of competition is to become more like Texas and less like Ohio.

UPDATE: Don Boudreaux has more:

Also, as Rossputin's Ross Kaminsky points out to me in an e-mail, the unemployment rate in Ohio in December 1993 -- the month before NAFTA took effect on January 1, 1994 -- was 6.5 percent. Says Ross: "It has never since touched a level that high again. Why the hell doesn't anyone say that in public? It's so obvious a thing to look at."

Great point. (Of course, the reason that Clinton and Obama don't speak this truth is because to do so would not help them politically. Remember, they seek office and power rather than truth and understanding. To expect either of them to utter even one politically inconvenient truth is as reasonable as expecting your pet turtle to recite from memory the Magna Carta.)

Looking at the data on Ohio's unemployment rate from the early 1990s onward is indeed revealing. The unemployment rate in Ohio was declining before NAFTA took effect (it was, for example, 7.0 percent in January of 1993). The rate continued to decline, reaching 3.9 percent as recently as February of 2001. From that date, it began to rise, hitting 6.2 percent for a few months in 2004. From November 2004, Ohio's unemployment began again to fall, settling in to the mid-five-percent range pretty much since then. The most recent reading (for December 2007) is 5.8 percent.

Also, the most recent month prior to NAFTA going into effect in which Ohio's unemployment rate was as low as 5.8 percent is October 1990.

Ohio's unemployment rate before and after NAFTA took effect emphatically does not tell a tale of workers in that state being harmed by expanded trade between the U.S., Canada, and Mexico.

Bimbo of the day

French actress Marion Cotillard has admitted to having doubts about the official version of the September 11 attacks in the US. (via Drudge):

"I think we're lied to about a lot of things," she said during a television programme first broadcast last year which has resurfaced on the Internet.

The actress, who picked up the award for playing Edith Piaf in the French film "La Vie En Rose," cited the attacks on New York and Washington in 2001 as one example, adding: "I tend to believe in the conspiracy theory."

In the video, the 32-year-old Parisian talks about watching films on the internet challenging the official version of the September 11 attacks, saying "its fascinating, even addictive."

She continues: "Did man really walk on the moon? Me, I've seen a fair few documentaries on the subject. That, really, I question. In any case I don't believe everything people tell me, that's for sure."

She's not even blonde.

UPDATE: James Taranto thinks Obama could be more of a bimbo than Angelina Jolie. My wife actually uses the term "manbo" (I speculate that it is a more derogatory term for her than bimbo).

UPDATE: This little kerfuffle fails to die:

News from team Obama:

Despite repeated requests, Barack Obama's campaign is still neither verifying nor denying a CTV report that a senior member of the team made contact with the Canadian government -- via the Chicago consulate general -- regarding comments Obama made about NAFTA....

On Wednesday, CTV reported that a senior member of Obama's campaign called the Canadian government within the last month -- saying that when Senator Obama talks about opting out of the free trade deal, the Canadian government shouldn't worry. The operative said it was just campaign rhetoric not to be taken seriously.

The Obama campaign told CTV late Thursday night that no message was passed to the Canadian government that suggests that Obama does not mean what he says about opting out of NAFTA if it is not renegotiated.

However, the Obama camp did not respond to repeated questions from CTV on reports that a conversation on this matter was held between Obama's senior economic adviser -- Austan Goolsbee -- and the Canadian Consulate General in Chicago.