Monday, January 25, 2010

Quotes of the day

So clear the fogs
Listen to the blogs
Don’t just throw dollars out the door
Make sure them reaches the poor

The island [Samoa] may lose its tuna industry. One cannery, Chicken of the Sea, has left. And because the U.S. Congress wanted to help Samoa by imposing American minimum wage, Governor Tulafono is worried that the last cannery, Starkist, could look to other shores.--Scott Pelley

It's hard to tell whether Pelley gets the irony of the U.S. Congress "helping" Samoa by destroying its tuna industry. He seems to but he doesn't linger on it.--David Henderson

The basic problem is that the current trajectory of spending and taxes is not sustainable. For most of my life federal spending has been around 21% of GDP and federal taxes have been around 19%. The 2% of GDP budget deficit has been sustainable, indeed the debt/GDP ratio in 2008 wasn’t much different than the year I was born (1955.) But we no longer are on a sustainable path.--Scott Sumner

If the [healthcare] legislation fails, liberals will have a long list of scapegoats. They can blame Max Baucus’s delays, Joe Lieberman’s demands and Olympia Snowe’s dithering. They can blame the filibuster, Fox News and Sarah Palin. They can blame Barack Obama’s lack of passion, Harry Reid’s lack of finesse and House Democrats’ lack of guts. But they might want to save some blame for the welfare state their predecessors built. Under Franklin Roosevelt and Lyndon Johnson, liberals created a federal leviathan that taxes, regulates and redistributes across every walk of American life. In the process, though, they bound the hands of future generations of reformers. Programs became entrenched. Bureaucracies proliferated. Subsidies became “entitlements,” tax breaks became part of the informal social contract. And our government was transformed, slowly but irreversibly, into a “large, incoherent, often incomprehensible mass that is solicitous of its clients but impervious to any broad, coherent program of reform.” (J. Rauch)--Ross Douthat

So, listen to your broker's advice on sectors and stocks, just remember to short the stock picks.--Eric Falkenstein

Bankers routinely defended their excessive pay saying it simply amounted to exceptional rewards for exceptional performance. The implication was that if you cut bonuses, you'd cut performance. My research suggests otherwise. Very large bonuses actually can cause job performance to deteriorate. Super-sized pay can take executive's minds off their jobs and onto their bonuses.--Dan Ariely

We wouldn’t argue if corporations have a right to speak, but rather if we have a right to hear what corporations have to say. But in fact we have “free speech,” a right only enjoyed by adult citizens in good standing, a right we jealously guard, wondering if corporations etc. “deserve” it. This right seems more a status marker, like the right to vote, than a way to promote idea competition — that whole competition story seems more an ex post rationalization than the real cause for our concern. Which is why support for “free speech” is often paper thin, fluctuating with the status of proposed speakers.--Robin Hanson

Every year brings more Internet censorship and control, not just in countries like China and Iran but in the U.S., the U.K., Canada and other free countries, egged on by both law enforcement trying to catch terrorists, child pornographers and other criminals and by media companies trying to stop file sharers. The problem is that such control makes us all less safe. Whether the eavesdroppers are the good guys or the bad guys, these systems put us all at greater risk. Communications systems that have no inherent eavesdropping capabilities are more secure than systems with those capabilities built in. And it's bad civic hygiene to build technologies that could someday be used to facilitate a police state.--Bruce Schneier

By most accounts, the Paul Revere figure of this Second American Revolution is an excitable cable-news reporter named Rick Santelli, a former futures trader and Drexel Burnham Lambert vice-president who stood on the floor of the Chicago Mercantile Exchange last February and sounded the alarm on CNBC about the new Administration’s planned assistance for homeowners facing foreclosure. He proposed a nationwide referendum, via the Internet, on the matter of subsidizing “the losers’ mortgages,” winning both the attention and the vocal support of the working traders in his midst. “President Obama, are you listening?” he shouted, and then said that he’d been thinking of organizing a Chicago Tea Party in July, urging “all you capitalists” to come join him on Lake Michigan, where “we’re going to be dumping in some derivative securities.” It was a delicate pose—financial professionals more or less laughing at debtors while disavowing the lending techniques that had occasioned the crisis—but within a matter of hours a Web site,, had gone live, and by the end of the following week dozens of small protests were occurring simultaneously around the country, invoking the legacy of early New England colonists in their revolt against King George.--Ben McGrath

The New York Fed was orchestrating what can only be characterized as an extreme effort to ensure that details of the [AIG] counterparty deal stayed secret. More and more it looks as if they would've kept the details of the deal secret indefinitely, it they could have.--Rep. Daniel Issa (R-CA)

[Pietro Veronesi and Luigi Zingales] conclude that shareholders and bondholders in the banks were about $130bn better off as a result of [Hank] Paulson’s gift. Taxpayers stumped up less than that, taking a loss of perhaps $20bn-$45bn. As much as $5 may have been gained for every tax dollar spent. Infuriating as it may be to those taxpayers who had no desire to write a cheque to bank bondholders, it may be some consolation that the policy was terrific value for money.--Tim Harford

Now, the hard thing about arguing against the Just in Case mentality is that once you picture an eight-year-old... being dragged down the street by her Hannah Montana backpack while the bus driver digs Zeppelin on his cranked-up, off-brand iPod, it certainly seems worth warning the kids to undo their backpack belts. It's so simple. And then - whew! That's one worry off the checklist. The problem is, the checklist just keeps growing. It's like those brooms in the story of the sorcerer's apprentice. Cut one in half, and it comes back as two. Two becomes four.--Lenore Skenazy

I have boundless regard for Paul Volcker, but the proposed restrictions on bank proprietary trading are, well, fixing the barn’s roof after the horse has bolted. The Obama administration really, really doesn’t get the joke. The banks went bankrupt by loading up on supposedly ultra-safe, AAA-rated assets, spawned out of the derivatives hatcheries with the collusion of corrupt rating agencies (who made most of their money rubber-stamping these time bombs). They did NOT, NOT, NOT blow up taking risky proprietary bets. Yet the rating agencies (who claim no liability for misjudgments on the grounds that they are exercising the same Constitutionally-protected free speech as a newspaper editorialist!) are in charge of rating credit quality. Proprietary trading is what SAVED the banking system earlier this year.--David Goldman

Not “enough capital” for lots of low-cost 30 year mortgages? Please God let’s hope these “analysts” are correct.--Scott Sumner

As happens every four years, hubris defeated caution, and the administration began its big-bang approach. As always, it backfired. Instead of building trust in government, the Democrats have magnified distrust. ... The Democrats now have four bad options.--David Brooks

When two units of production – Hillary and Bill, say – are worth more together than they are separately, we call them “complementary assets”, and there is a strong reason to keep them together. If one of the units of production is sleeping with a pancake waitress, then that is a reason to separate them. It’s all a question of how annoying the affairs are versus how strong the complementarities are. Hillary and Bill are highly complementary assets; this is less obvious for Nordgren and Woods. As for a general theory, there is plenty of data out there – a research project for a diligent student of economics such as yourself?--Tim Harford

... at the top of our list [of worst TV bombs ever]: NBC’s decision to put Jay Leno at 10 p.m. It destroyed not only five hours of primetime programming, but also the local newscasts that followed.--Entertainment Weekly

And like Oliver Sacks’ Anthropologist on Mars, I do know how normal humans think about truth. In fact I used to be a normal human. Really.--Scott Sumner

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