Quotes of the day: Dodd-Frank in the crosshairs

From Andrew Ross Sorkin:

... going to deeply entrench crony capitalism into the very fabric of our financial system, which I am terrified about. ... companies that are connected to Washington, that curry political favor, will be favored at the expense of companies that do not have their business model revolve around appeasing politicians and making campaign contributions. ... Every bank in the United States has an F.D.I.C. guarantee on the front door, and they’re more than happy to enjoy the economic rents that go with the taxpayer subsidy relating to that guarantee. The governments guarantee should be limited to very narrow risk taking activities. High quality consumer loans, high quality mortgages, high quality corporate loans. We should keep those parts of our financial systems walled off from that part of our financial system that revolves around aggressive risk taking.--Ken Griffin, head of Citadel

... creates more uncertainty rather than certainty. ... I think it could actually accelerate people’s demise rather than stop it. ... Our financial system in America is the envy of the world. We have more skills, capabilities, infrastructure, data than anybody else and people love it and all of a sudden we’ve sort of turned into it’s like a terrible thing — like we should bust it all up into small little pieces and have a bunch of little companies doing it. It doesn’t make any sense to me. With that comes a risk of some giant companies having a problem, and you don’t run your life around a tail event.--Thomas J. Wilson , chairman of Allstate and deputy chairman, of the Federal Reserve Bank of Chicago

... probably not workable.--Raymond W. McDaniel Jr., chief executive of Moody’s

... I think it’s got deep flaws. ... As soon as you institute an insolvency proceeding for a financial institution, if they haven’t run before it started they’re going to think about running very quickly.--Jim Millstein, the former chief restructuring officer of the Treasury Department who oversaw the bailout of the American International Group

Photo links here and here.

Quotes of the day

It’s funny to me that honesty turns one into a dissident in global development.--Jessica Mack

One of the most unfortunate (and surprising) side-effects of the triumph of computer-generated animation was the death of the female protagonist in children’s movies. Think of all the female protagonists in Disney musicals. There are quite a number, almost as many as there are males—Cinderella, Belle, Ariel, Pocahontas, Mulan… the list goes on. Now think of female protagonists in Pixar movies. There aren’t any. Not a single one.--Stefan

I don’t look at [high frequency algorithmic trading] it as in any way evil … I don’t think the guy who’s trying to hide the supply-demand imbalance [by using an execution algorithm] is any better a human being than the person trying to discover the true supply-demand. I don’t know why … someone who runs an algo-sniffing strategy is bad … he’s trying to discover the guy who has a million shares [to sell] and the price then should readjust to the fact that there’s a million shares to buy.--unnamed New York broker

Whatever view one takes on its ethics, algo-sniffing is indisputably legal. More dubious in that respect is a set of strategies that seek deliberately to fool other algorithms. ... Systems that are both tightly coupled and highly complex, Perrow argues in Normal Accidents (1984), are inherently dangerous. Crudely put, high complexity in a system means that if something goes wrong it takes time to work out what has happened and to act appropriately. Tight coupling means that one doesn’t have that time. Moreover, he suggests, a tightly coupled system needs centralised management, but a highly complex system can’t be managed effectively in a centralized way because we simply don’t understand it well enough; therefore its organization must be decentralized.--Donald MacKenzie

In San Francisco, one of the toughest places in the country to find a place to live, more than 31,000 housing units — one of every 12 — now sit vacant, according to recently released census data. ... Invoking the Ellis Act would also mean that any new tenant to the unit, should Murphy decline the chance to return, would also be entitled to Murphy's old rent amount for many years to come. So the Koniuks would likely opt to just leave it vacant. Increasingly, small-time landlords ... are just giving up. ... Perversely, that is hurting the city’s renters as well, as a large percentage of the city’s housing stock is allowed to just sit vacant, driving up rents that newcomers pay for market-rate housing.--Elizabeth Lesly Stevens

[Mayor Bloomberg's] strategy adds up to one thing: twisting himself in knots to acknowledge the city's untenable fiscal situation while avoiding a head-on fight with labor. But sometimes peace -- and cognitive dissonance -- is unaffordable.--Nicole Gelinas

My gripe is with the Universe. If I were running the Universe, there’d be some level of accomplishment that confers immunity from death, deterioration and obscurity. I’m not sure exactly where I’d set that bar, but I’m sure Dan Quillen would have cleared it.--Steve Landsburg

The more dogmatic and determined the leader, the less likely it is that they’ll face any opposition. Leaders who quash dissent are virtually certain to be able to make any decision they feel like virtually unopposed. ... The danger of the fundamental attribution effect when applied to CEOs or securities analysts or investment gurus or the apparent internet insider with the hot tip is that they’re as mentally hamstrung as we are. If we have to lose money on the markets we can at least do it through our own errors, rather than at second hand.--timarr

... [F.A.] Hayek’s skepticism about government was NOT based on his certainty, as [Francis] Fukuyama would have it, but on his awareness of his ignorance. (and everyone else’s) We public intellectuals who are communicating ideas of Hayek to a broader public are NOT fond of ideas that highlight our own ignorance, so one prediction that can be made with a higher degree of certainty than usual is that Hayek will continue to be misunderstood.--William Easterly

World population grew by almost 300% during the twentieth century; over the same time period, world per capita incomes grew by about 400%.--Gary Becker

Photo link here.

Are we headed for another civil war?

I hope not, and I believe we have the resources, creativity, and opportunity to avoid one.

But when the evil Paul Ryan budget, the destroyer of the nation, increases deficit spending in the next 3 to 5 years, well, maybe we are unable as a democracy to bring our resources and creativity to bear to avoid a civil war. These deficits are not sustainable. We might be able to inflate our way partly out of it, but that is not the ultimate solution.

Anything not designed to go forever will end. China's USD peg. Low carry on the national debt. Entitlement payouts. So what happens? I think the Fed will need to punt at some point when we can no longer finance our entitlement programs. So what does that look like? I think that they could go down the road they've already started with Medicare: punting problems to the states. The catch here is that federal politicians will not want to punt the power and influence that comes with the problems and the campaign promises to solve them.

In any case, I think that inter-state tensions will increase. Texas will eventually have more electoral votes than California. California will not be able to deal with its addiction to spending. Conflict will rise. The fight over slavery was economic. Unlike most wars, it wasn't that religious.

I know that the next 5 years will probably be same as the old boss. But I've got kids that I'd like to see get through college, to get married and to have kids. So I'm interested in the 20-30 year outlook. And if I get a grandkid or two, then the outlook only gets farther out.

Of course, I might be just clinging bitterly to my Social Security and Medicare payments by then.

Image link here.

UPDATE: Greg Mankiw wonders How long will inflation expectations remain anchored? and How long will the bond market trust the United States? He's merely feeling skeptical, not like my Monday morning apocalyptic mood. He is also consistently more humble than the typical economist:

AFTER more than a quarter-century as a professional economist, I have a confession to make: There is a lot I don’t know about the economy. Indeed, the area of economics where I have devoted most of my energy and attention — the ups and downs of the business cycle — is where I find myself most often confronting important questions without obvious answers.

Now, if you follow economic commentary in the newspapers or the blogosphere, you have probably not run into many humble economists. By its nature, punditry craves attention, which is easier to attract with certainties than with equivocation.

But that certitude reflects bravado more often than true knowledge.

UPDATE: The Governator and Maria Shriver split. I told you it was rough out there.

Rep of the day

California Democratic Rep. Henry Waxman was among the loudest proponents of whistleblower protections during the Bush years  ̶  particularly when the subject was the Iraq war  ̶  but GOP staffers say his attitude seems to have changed with the shift to a Democratic administration.  ... senior GOP staffers say Waxman, the ranking Democrat on the House Energy and Commerce Committee, violated his own principles during his questioning of Gregory Jaczko, the chairman of the Nuclear Regulatory Commission (NRC), regarding his decision to shut down his agency’s work on the Yucca Mountain nuclear waste depository last October, at a committee hearing last week. Waxman chose to ignore a large stamp stating “NOT FOR PUBLIC DISCLOSURE” on a series of emails between Dan Grazer, the data manager for the NRC’s Yucca Mountain licensing program, and Judge Roy Hawkins, the chief administrative judge of the Atomic Safety and Licensing Board, and made their content public.--Daily Caller

Photo link here.

This sounded sad: Fashion Meets Finance

And after watching the video, a lot of the participants looked pretty sad.

I guess, like any other situation, the good ones are already off the market.

Photo link here.

Whither thou 9% unemployment rate

Tim Kane is worried.

I actually think its good, ironically, that more people are looking for jobs. Having the government incent people to not look is worse.

But we need a better statistic. Bryan Caplan suggested percentage of the population employed. I think this is better than what we currently have.

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

Previous BS installment here.

Quotes of the day

If it was a real recession and not a bubble, then clearly the policy response has failed. If instead it was a bubble, then the policy response has been an obscene waste of money. There is no way out for Keynesians now.--Tim Kane

... 47% of adults (more than 200,000 individuals) in the City of Detroit are functionally illiterate, referring to the inability of an individual to use reading, speaking, writing, and computational skills in everyday life situations.--Detroit Regional Workforce Fund

Teachers unions and their political allies argue that market forces can't supply quality education. According to them, only our existing system—politicized and monopolistic—will do the trick. Yet Americans would find that approach ludicrous if applied to other vital goods or services.  Suppose that groceries were supplied in the same way as K-12 education. Residents of each county would pay taxes on their properties. Nearly half of those tax revenues would then be spent by government officials to build and operate supermarkets. Each family would be assigned to a particular supermarket according to its home address. And each family would get its weekly allotment of groceries—"for free"—from its neighborhood public supermarket.  No family would be permitted to get groceries from a public supermarket outside of its district. Fortunately, though, thanks to a Supreme Court decision, families would be free to shop at private supermarkets that charge directly for the groceries they offer. Private-supermarket families, however, would receive no reductions in their property taxes.  ... Being largely protected from consumer choice, almost all public supermarkets would be worse than private ones. In poor counties the quality of public supermarkets would be downright abysmal. Poor people—entitled in principle to excellent supermarkets—would in fact suffer unusually poor supermarket quality. ... Recognizing that the erosion of their monopoly would stop the gravy train that pays their members handsome salaries without requiring them to satisfy paying customers, unions would ensure that any grass-roots effort to introduce supermarket choice meets fierce political opposition.  In reality, of course, groceries and many other staples of daily life are distributed with extraordinary effectiveness by competitive markets responding to consumer choice. The same could be true of education—the unions' self-serving protestations notwithstanding.--Don Boudreaux

Public education: Unions, inferior teachers, Democratic candidates raising campaign funds, and poverty win. Kids and economic growth lose.--Cav

A realistic way to gauge the fairness and financial sustainability of retirement benefits for government workers is to estimate how much it would cost if everyone in the U.S. received the average pension granted a state or local worker in California. How much would each active worker need to pay to support these retirees? ... If every American over the age of 55 received a pension of $55,000 per year, it would cost current workers $4.45 trillion per year, an amount equivalent to nearly one-third of America’s annual GDP. Put another way, it would cost every one of the 128 million Americans of working age $34,800 per year to support retirees. ... California’s generous public-employee pensions yield awards that are, on average, more than three times the standard Social Security benefit. And given the earlier retirement age, workers will necessarily pay into the system over a shorter period of time. Understood this way, the ratio of workers to retirees would change from roughly two to one (40 years working, 20 years retired), to a more perilous one to one (30 years working, 30 years retired). Apologists for California’s current public-pension schemes insist that there is no crisis, and that despite the financial collapse and late recession, future investment returns should easily cover the costs. But it’s hard to imagine stock market dividends alone funding California’s unfunded liability of more than $500 billion, let alone the $5 trillion in pension payouts we’re imagining. When more than 100 million people are withdrawing funds on that scale each year to fund their retirements, the market has too many sellers to permit meaningful rates of return.--Ed Ring

In threatening not to buy drugs from Forest Laboratories unless it fires its CEO, the feds are taking a major step toward taking over companies. What was Forest's other sin? Promoting off-label uses. Who else does that? Almost every doctor in America--and the federal government.--David Henderson

150 years ago today, both Tennessee and Arkansas voted to secede. Both were border states, and did not secede because of Lincoln's threat to slavery. They remained in the Union until Lincoln said that they must raise troops to attack their neighbors in the South.--Joshua Horn


Properly speaking, there is no such thing as revenge. Revenge is an act which you want to commit when you are powerless and because you are powerless: as soon as the sense of impotence is removed, the desire evaporates also.--George Orwell

Willie Mays turns 80 years old today.--Joe Posnanski

Photo links here and here.

Mark Haines gets choked up

saying good-bye to his comrade-in-arms, Erin Burnett, headed to CNN.

I guess Mr. Grumpy Pants is actually a softie inside.  Best wishes to Erin; I hope you fare better than Katie, Campbell, Soledad ...

I agree with Mark:

You are the best.

Photo links here and here.

UPDATE: Jim Cramer struggles to keep it together. They all seem to really love her. A colleague and I were speculating that between Maria Bartiromo (the doyenne of the channel who would never give up her pole position) and the rising star that is Carl Quintinilla, then throwing in the fat free agent contract CNN was dangling, this was about as good of an exit that Burnett could structure. I will miss her, smarter than average and as minimally annoying as I could imagine. (Except for her occasional singing, usually as a segue to commercial break). Over the last 5 years, I've spent more than 3,500 hours with Erin, as CNBC broadcasts are what is on the television and the ol' hoot-n'-holler in my workplace.

UPDATE: Bill Griffeth takes the baton from Erin at 3pm, with gracious words for Erin. Noticeably (to me), no Maria Bartiromo on the handoff. And she has not acknowledged Burnett's departure in the first 13 minutes of her program.

UPDATE: Chris Ariens has the juice:

Any chance at moving to a high-profile anchor role at NBC seemed to go by the wayside as “Today” is poised to name Ann Curry the co-anchor, Natalie Morales news anchor and Savannah Guthrie national correspondent.

Chris Masse points out that Intrade futures failed to predict the demise of Osama Bin Laden

here.

Any tool has its limits.  Scroll down on his post for a bit of a conversation in the comments.

I'd say that any committee decisions are difficult to predict, especially if the committee is not stable in membership, nor has a track record of similar decisions to quantify.

Juries might seem fit this description, but I think they are an exception, because there are a lot of legal (e.g. voir dire rules), judicial (charges to the jury from the judge), and cultural (Law & Order television) that would actually stabilize the process of selecting juries.

Image link here.

I've been having this conversation with my 10-year-old

for half her life. 

One of the things I've had to tell her this year is "the students who are best in math and science usually do not become teachers or write your curriculum".  I put it off as long as I could.

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Increasing the money supply to fool employees into thinking they have more money than they do, hoping on a multiplier effect via such derivative compounding logic, is simply absurd

That is the brilliant Eric Falkenstein.

He also writes:

But what are theses variables and relationships that have such mathematical precision? Consider V, velocity. Velocity is the residual of the measurables nominal income and money. Thus, the derivative of V with respect to i (the interest rate) is really from the derivatives, and their correlations, of nominal income and money. Are either of these stable in any sense (d(PY)/di, dM/di)? No. They have no stable values and suggest they are no better than asserting a mathematical relationship between your body temperature and how much coffee you drank based on thermodynamics: there's a simple effect from the initial impact, but very shortly feedback effects that make the initial physical model worthless.

And so it goes with all these relationships. The economy is a complex, nonlinear, adaptive system where short run effects are often opposite of long run effects. Ultimately, people need to be involved in activities that generate more benefit than they they cost for they to be sustainable, and they must appear attractive to individuals given their other opportunities as they see them. A higher growth rate simply involves having more people near their unknown optimal--unknown because only rudimentary laborers know what the truly best use of their time is at any moment--and stagnation is caused when too many individuals lose their ability or willingness to actively search and make these choices. The more government puts in rules saying we can't drill in the Arctic because of potential effects of exhaust on a nearby village of 100 Eskimos, or that we can't cut hair without a state license, the lower our productivity. Economic freedom results in long term growth and so the key to macro policy is not from some chain rule but rather the wisdom of Smith, Bastiat, von Mises, Hayek, Friedman, Stigler, and the rest who found aggregate prosperity and economic freedom synonymous.

Read the whole thing.  Also, check out the comment from Brad Delong and Eric's response.

Photo link here.

To riff off Jefferson: A government powerful enough to give

your kids an education is powerful enough to take that education away.

Kellie Onaga reports:

California's budget crisis has come to this: kids may not be able to go to school for the full school year.

If no new taxes are passed to help fund education, Gov. Jerry Brown and school leaders say shutting down school a month early - or 20 instructional days - is a real possibility.

Via Drudge. Photo link here.

Quotes of the day

This municipal issue, you can criticize me for anything you want, I’m numb to it, because I have more conviction on this than I’ve had on any single thing in my career.--Meredith Whitney

I wear a t-shirt and jockey shorts if only to remind me of a sleeping pot-bellied captain and that old Navy adage – constant bearing, decreasing range – constant bearing, decreasing range.--Bill Gross

In my business, if losing money shakes you up, you won’t last until “spring,” let alone become a “raider in winter.” Ironically, and at the risk of being immodest, I believe the financial crisis was my finest hour as an investor and as a man who stood by his commitments. During the crisis, many hedge fund investors demanded their money back, but many funds refused. My fund returned capital to any investor who asked. To meet withdrawals, from November 2008 to March 2009, I invested $500 million of my own capital, rather than having the fund sell significant positions at depressed prices. While I believed then that my investment might have a major short-term loss, it became one of my best ever, resulting in a 61 percent annualized return. The hedge fund in general certainly was not a losing experience. My investment in it over the last seven years totaled $3.4 billion. My profit on that, including fees, now totals $2.1 billion.--Carl Icahn

In 2009, Mr. Trump's lawsuit against a journalist who estimated his net worth at less than $250 million included a report by his defense team that pegged Mr. Trump's net worth at $788 million. The case was thrown out. Mr. Trump disputes all this, but it is clear that he isn't as renowned on Wall Street as he is on Main Street. ... How about Donald Bren, Richard LeFrak, Leonard Stern or John Sobrato, real-estate developers who rank higher than Mr. Trump on the Forbes richest Americans list? Imagine Mr. Trump in that same lineup. Would anyone not recognize him? Of course not. Fiction usually is more popular than the truth.--David Weidner

At some level, this [special operations mission against Bin Laden] was the ultimate Jack Bauer play.  9/11 was the lens through which ’24′ was watched. This is a cultural touchstone. It wasn’t a drone attack that killed him but a tactical team that went in. It’s the conflation of the fictional world of Jack Bauer and real-life heroism.--Howard Gordon, 24 executive producer

Photo links here and here.

Quotes of the day

My Administration is committed to creating an unprecedented level of openness in Government. We will work together to ensure the public trust and establish a system of transparency, public participation, and collaboration. Openness will strengthen our democracy and promote efficiency and effectiveness in Government.--President Obama, in 2009

I won't release bin Laden death photos.--President Obama, today

I think it's a lot easier campaigning to be President than being President.--Cav

A Republican candidate could mitigate a lot of Obama's advantage on the successful mission against Bin Laden by pointing out that the intelligence that led to locating him was gathered by the Bush administration, using interrogation methods and sites that Obama criticized and promised to shutdown. Had Bush not prosecuted the GWOT in this way, Obama could not have mandated the mission. So Obama loses in 2 ways: one, he failed to keep his campaign promises; and two, he failed to see the benefits/necessities of prosecution and intelligence gathering. Both would weaken him in the eyes of a competent voter.--Cav, comment at NYT

I think thanks are also due to the people who served in the financial front of the war on terror during these ten years—many in the United States Treasury. President Bush announced the terrorist asset freezing operation in the Rose Garden on September 24, 2001. It was before military actions in Afghanistan. It was the first shot in the war on terror.--John Taylor

It's easy to criticize straw men, but even one who tries to make money must realize the value of assuming that markets efficient is useful because otherwise it would be too easy to generate alpha, and any thoughtful person should recognize this is difficult, or at least, rare. ... It's important to know when a paradigm is not working, and clearly macro [economics] is just as unhelpful today as it was in the Great Depression in terms of focusing the debate, eliminating irrelevant distractions. The same arguments are being made for more or less government. I don't have the answers, but I do know that full-time macroeconomists are like active mutual fund managers: articulate, hard working, and basically worthless. --Eric Falkenstein

While his governance style has been quiet, [Stephen] Harper has established an impressive track record. He's cut Canada's value-added tax (the GST) as well as the corporate tax. He's deregulated the telecom industry. And despite strong pressure, he's only modestly given in to the temptation of stimulus spending. The result is that the Conservative Party has credibly promised to cut spending further and to balance the federal budget by 2014. Moreover, based on International Monetary Fund projections, in 2015 Canada's debt-to-GDP ratio will be less than 30%, largely unchanged from the start of the recession—and a third of the projected U.S. debt-to-GDP ratio in that year.--David Gratzer

Medicine, like economics, deals with complex systems that are still not well understood; like economics, it has its share of quacks; but unlike economics, medicine has swallowed many of its ethical qualms about running controlled experiments in difficult circumstances. Randomized controlled trials are now catching on in economics, especially development economics. ... in medicine, academic evidence and everyday practice are intertwined. No doubt this symbiotic relationship is less than perfect in the real world; nevertheless it is something economists would do well to emulate.--Tim Harford

The investigators found that the less salt people ate, the more likely they were to die of heart disease — 50 people in the lowest third of salt consumption (2.5 grams of sodium per day) died during the study as compared with 24 in the medium group (3.9 grams of sodium per day) and 10 in the highest salt consumption group (6.0 grams of sodium per day). And while those eating the most salt had, on average, a slight increase in systolic blood pressure — a 1.71-millimeter increase in pressure for each 2.5-gram increase in sodium per day — they were no more likely to develop hypertension.--GINA KOLATA

Photo link here.

Chart of the day: AAPL v. MSFT

Source: Abnormal Returns.

Quotes of the day

Much like Charlie Sheen, who seems to believe that all publicity is good publicity, recent market behavior suggests that we are in the part of the cycle where “all news is good news.” This was true for the broad market, which shrugged off the continued escalation of commodity prices, unrest in the Middle East, a catastrophe in Japan, tightening monetary policy outside the United States and a deceleration of domestic economic growth.--Greenlight Capital

Pawn shops are benefiting [from the surge in gold and silver prices]. Three publicly traded pawn shop companies, Cash America, EZCorp and FirstCash Financial, recently reported sharp increases in net income compared with a year earlier.--STEPHANIE CLIFFORD

I said to myself, what are the chances of [Mark Zuckerberg] becoming the next Bill Gates? So I didn't meet with him [even though my son-in-law, a former classmate, set up a meeting]. So now I have to work for a living.--David Rubenstein

If I thought delaying this [strike against Osama Bin Laden] could in fact produce better intelligence, that would be one thing, but because of the nature of the security at the compound, we’re probably at a point where we’ve got the best intelligence we can get.--Leon Panetta

Reserve currency status is a global public good that comes with a cost, and people often forget that cost. Just as importantly as a public good it requires a number of characteristics. At a minimum these include ample liquidity, central bank credibility, flexible domestic financial markets, minimal government or political intervention, and very deep and open domestic bond markets. With the exception perhaps of the euro, which may or may not emerge in the next decade on a more rational basis than it currently exists (albeit with more than one defection), no other currency has the necessary characteristics that will allow it plausibly to serve the needs of the global economy. And no other country, not even Europe, will be willing to pay the cost. If there is any chance that the dollar’s status declines in the future, it will require that Washington itself take the lead in forcing the world gradually to disengage from the dollar. Ironically, this is exactly what Washington should be doing. Conspiracy theory notwithstanding, claims that the reserve status of the dollar unfairly benefits the US are no longer true if they ever were. On the contrary, the global use of the dollar has become bad for the US economy, and because of the global imbalances it permits, bad for the world. ... We may seem to be straying from the topic of the role of the dollar, but basically Austin argues that under-consuming countries today are able to use the dollar today for the same reason that European countries used colonialism in the past – as a way of allowing them to export capital and import foreign demand.--Michael Pettis

While some authoritarian leaders greatly improve their economies, they are not the rule. For every example of a dictator like Pinochet and Chiang Kai Shek (in Taiwan) who produced fast economic growth, there is a Stalin or Idi Amin in Uganda with dismal economic policies. Similarly, not every democracy handles the economy well. India, for example, has been a vibrant democracy since its independence in 1947. This democracy during its first 40 years produced slow growth under a socialist government, and then India transited to much faster economic growth after the government shifted toward more market-friendly economic policies.--Gary Becker

Phelim McAleer, an Irish-born film-maker, who lives in Los Angeles, specializes in short polemics poking fun at bossy celebrities who preach green living while traveling in private jets and limousines (previous targets include James Cameron and Robert Redford). Now he’s turning his artistic howitzers upon the heir to our throne.
His film “Prince Charles, hypocrite” was released on YouTube earlier today. It highlights some of the inconsistencies involved in a very wealthy royal, who lives in several palaces, demanding that his subjects “live with less.” Watch it ... on YouTube here.--Guy Adams

A good insult requires far more skill than any compliment. “Cole Porter sang like a hinge” (Ethel Merman). “When she sings, deaf people refuse to watch her lips move” (Jed Larson). “Sting, where is thy death?” (Joe Queenan). The humourless say it’s easy to criticise. Not to that standard, it isn’t. [Simon] Cowell’s put-downs aren’t quite up there, but he hits the odd winner. “You sound like someone who should be singing on a cruise ship. Halfway through your song, I wished the ship was sinking.”--Michael Deacon

Photo link here.

We were reminded again

that there is a pride in what this nation stands for and what we can achieve that runs far deeper than party, far deeper than politics.--President Obama

In a secret CIA prison in Eastern Europe years ago, al-Qaida's No. 3 leader, Khalid Sheikh Mohammed, gave authorities the nicknames of several of bin Laden's couriers, four former U.S. intelligence officials said. Those names were among thousands of leads the CIA was pursuing. One man became a particular interest for the agency when another detainee, Abu Faraj al-Libi, told interrogators that when he was promoted to succeed Mohammed as al-Qaida's operational leader he received the word through a courier. Only bin Laden would have given al-Libi that promotion, CIA officials believed. If they could find that courier, they'd find bin Laden. The revelation that intelligence gleaned from the CIA's so-called black sites helped kill bin Laden was seen as vindication for many intelligence officials who have been repeatedly investigated and criticized for their involvement in a program that involved the harshest interrogation methods in U.S. history.--ADAM GOLDMAN and MATT APUZZO

President Barack Obama on Thursday moved quickly to undo a contentious Bush administration national security program, ordering the CIA to close down secret overseas prisons and the Pentagon to close down the Guantanamo prison within a year. The president also banned the harshest interrogation methods. The CIA has used secret "black site" prisons around the world to question terror suspects, usually plucking them from one country and moving them to another where U.S. agents operated a prison. A senior White House source said the CIA will be allowed to continue these "renditions" but not to countries that torture and not to its own prisons.--msnbc.com, in January 2009

Thank you, President Bush and your administration, for vigorously pursuing the intelligence required to locate Bin Laden. Your secret CIA sites and interrogation methods worked, and we would not have apprehended him without your leadership. I apologize for criticizing you on the campaign trail; in fact, you deserve more credit than I do for this victory.--President Obama. NOT! (Cav)

That last one would really reflect an appreciative, honest, analytical and secure person, wouldn't it?

The American people did not choose this fight

It came to our shores, and started with the senseless slaughter of our citizens. After nearly 10 years of service, struggle, and sacrifice, we know well the costs of war. These efforts weigh on me every time I, as commander in chief, have to sign a letter to a family that has lost a loved one, or look into the eyes of a service member who's been gravely wounded. So Americans understand the costs of war. Yet as a country, we will never tolerate our security being threatened, nor stand idly by when our people have been killed. We will be relentless in defense of our citizens and our friends and allies. We will be true to the values that make us who we are. And on nights like this one, we can say to those families who have lost loved ones to al Qaeda's terror: Justice has been done.--President Obama

A few quick thoughts:

1. This has taken a long time.  Almost a decade since September 11, 2001, and the intelligence on the Abbottabad first surfacing last summer.  While intelligence and special operations are complex and challenging, I still wonder how much of the time was in careful deliberation and how much was in the limits of intel.
2. Hopefully this will strengthen the resolve of the administration when it comes to foreign policy and negotiation.  Peace comes through strength as well as a balanced view of varied interests; not through avoidance, enabling, or capitulation.
3. The competence of the execution of this operation promotes the Obama legacy over Jimmy Carter's to me.  I worried about this back in 2008.  So did others.  I hope this administration's legacy outperforms noticably and measurably.
4. There is a higher police presence in the subway stations, as I saw from my morning commute.  I am sure that this success of U.S. policy will incite and rally al Qaeda sympathies around the world, and bring higher risks of terrorist events against U.S. citizens and on U.S. soil.  But there is no better alternative.  There must be consequences for terrorist actions.
5. The quick disposition of Bin Laden's body at sea begs some questions.  I am certain that photos and probably video of his body exist; but as much as journalists would want to verify the evidence of his death, the controversy they would add is a tradeoff I am sure the bureaucrats in Washington D.C. worked hard to price, and avoid.

Quotes of the day

A people thus united and resolved cannot shrink from any sacrifice which they may be called on to make, nor can there be a reasonable doubt of their final success, however long and severe may be the test of their determination to maintain their birthright of freedom and equality as a trust which it is their first duty to transmit undiminished to their posterity.--Jefferson Davis

I think the birther issue is good for the country. A modern republic needs some simple and unimportant issues to keep its citizens invested in the process. The important issues of our time are far too complicated for the average person, and I count myself in that group. We need a few simple issues so we can be part of the political conversation without hurting anything. The last thing our system of government needs is regular citizens getting involved in Middle East strategy, healthcare reform, the budget, climate change, or anything else that might matter. ... The birther issue is sort of like letting your toddler have a toy steering wheel in his car seat. He feels as if he's doing something useful and you don't have to rely on him to keep you out of the ravine. ... The birther issue is educational too, as are many of the so-called distracting issues. The birther distraction teaches us that a president has to be a natural-born citizen. Readers of this blog already knew that, but I'll bet a third of the country learned it recently with the birther issue. And Monica Lewinsky taught us a thing or two about impeachment.--Scott Adams

Ahead of the company's long-rumored IPO, a group of Facebook employees and investors tried to unload $1 billion in stock at a $90 billion valuation but couldn't find enough investor appetite. Instead, they had to lower their asking price to an implied $70 billion valuation -- the high end of where Facebook has traded on private exchanges that traffic in the shares.--GARETT SLOANE

Venture capital has failed to produce viable investor returns since 1998, produced negative 4.6 percent 10-year returns, performed below the consumer adoption rate of technology in the same period, is being outperformed by corporate innovation and capital, lost public trust because of bad past conversion from valuation to value and does not make a dent in the 80% greenfield of technology adoption. The asset class is only statistically perhaps rescued by the success of Facebook, which managed to grow despite VCs’ traditional playbook (not because of it), and a few others (Twitter, LinkedIn) that quickly jumped into Facebook’s valuation slipstream.--Georges van Hoegaerden

It is not clear why we enjoy certitude so much – certitude being the subjective experience of feeling certain ... there is a serious cost to excess certainty. Whenever an analyst or academic presents a number or a conclusion with too much precision, they reduce the demand for better evidence. Why run a pilot, set up a proper survey, if the answer is already known to three decimal places? The fact is that our political system simply does not take evidence seriously. If I had to suggest one single reason for that, it’s our love of certitude. Evidence is the way to reduce honest doubts. Stuffed on a fattening diet of certitude, who has room for doubt? And if we have no doubts, who needs evidence? .--Tim Harford

Portrait link here.

Chart of the day: Ageism via the movies

Source here.

Quotes of the day

[The film Atlas Shrugged] was made for a trifle by Hollywood standards. The same critics that, if this tiny amount of money was spent on a poorly produced and acted "Indie" film, that happened to be about a hermaphrodite Palestinian boy who after escaping fascist Israeli persecution moves to Texas to face fascist American persecution (and isn't immediately granted his full "right" to all the healthcare the USA can afford), would sing it's praises and laud it's signs of a tight budget as "authentic." I'm not sure if we have art imitating life or the other way around, but the critics are themselves Randian characters. They have an agenda—punish those who love liberty and have the temerity to defend it, then go to parties and be lauded by their friends for their heroic progressivism. And if they can make some snobby lies about cinematography along the way, more the better.--Cliff Asness

I was what you call the buzz kill. ... I could be the ultimate cliché and age first.--Val Kilmer

I don't know if a 6'2 woman gets as much flak as a 5'2 man--but the difference is in degree, not in kind.--Megan McArdle

The place God calls you to is the place where your deep gladness and the world’s deep hunger meet.--Frederick Buechner

Even though their state voted to remain in the Union, about 20,000 Marylanders fought for the South, while about 30,000 fought for the North.--Joshua Horn

We're seeing core consumers under a lot of pressure. There's no doubt that rising fuel prices are having an impact.--Mike Duke, Walmart CEO

I’m shocked that progressive bloggers that are so dismissive of know-nothing conservatives are themselves so ignorant of public finance 101. Tax incidence is all about expected future consumption streams, as is pretty much all of economics. I thought people knew that.--Scott Sumner

So the Obama position seems to be that a) the rich ought to meet obligations over and above what the current tax code requires; b) the Obamas are rich, and c) the Obamas choose to meet no obligations over and above what the current tax code requires. It’s almost enough to make you begin to doubt his sincerity.--Steve Landsburg

Whether or not he was right, the “investigation” of Ackman was a costly and embarrassing error. Without a doubt, it discouraged others from addressing problems at other financial companies—which allowed those problems to grow unchecked. The moral of the story: empowering regulators can result in a less transparent, more dangerous financial system.--John Carney

Having a monarch as the symbolic head of state keeps elected officials in their place, provides an apolitical outlet for popular hero worship and the cults of celebrity, and satisfies the human hunger for ceremonial authority. If it’s an affront to democratic sensibilities, it’s also a safeguard for democratic institutions. Better a real king, crowned and powerless, than the many pseudo-kings who have strutted (and still strut) so destructively across the modern stage.--Ross Douthat

Image link here.

Quotes of the day

Hedge-fund managers made a big bet on Barack Obama and other Democrats in 2008. Now, with the 2012 contest gearing up, some prominent fund managers have turned their backs on the party and are actively supporting Republicans.  Daniel Loeb, founder of Third Point LLC, was one of the biggest Obama fund-raisers in 2008, rounding up $200,000 for him, according to campaign-finance records. In the decade prior, Mr. Loeb and his wife donated $250,000 to Democrats and less than $10,000 to Republicans.  But since Mr. Obama's inauguration, Mr. Loeb has given $468,000 to Republican candidates and the GOP, and just $8,000 to Democrats. Hedge-fund kings have feelings, too, and the president appears to have hurt them.--BRODY MULLINS, SUSAN PULLIAM and STEVE EDER

Indeed, if there is one disturbing characteristic of President Obama's foreign policy to date it is, quite simply, that the President is far too easily diverted from his stated goals and foreign policy convictions because of political opposition. On multiple issues, from Afghanistan and Gitmo to Libya and the Middle East peace process, Obama has laid out a policy, either publicly or privately, and then steadily backed away from it in the face of opposition, either from foreign governments, domestic political constituencies or his own military. He has far too often pursued the policies of least political resistance.--Michael Cohen

The Administration's budget did propose spending levels which make the recently increased rate of government spending as a share of GDP permanent, regardless of the reason for the recent increase. If you want to see this in a way that takes account of changes in nominal GDP growth related to the recession, then you can compare actual spending before the effects of the recession began with proposed spending after the effects of the recession are over. For all of 2007, spending was 19.6 percent of GDP. For all of 2021—after the impacts of the recession and the final year of the budget window—the budget submitted in February proposed spending equal to 24.2 percent of GDP. These two budget facts are part of the data presented in my Wall Street Journal chart and are taken directly from CBO tables. The 4.6 percentage point increase represents $1 trillion more federal spending per year at 2021 levels of GDP.--John Taylor

Last August, student loans surpassed credit cards as the nation’s single largest source of debt, edging ever closer to $1 trillion. Yet for all the moralizing about American consumer debt by both parties, no one dares call higher education a bad investment. The nearly axiomatic good of a university degree in American society has allowed a higher education bubble to expand to the point of bursting. Since 1978, the price of tuition at US colleges has increased over 900 percent, 650 points above inflation. To put that number in perspective, housing prices, the bubble that nearly burst the US economy, then the global one, increased only fifty points above the Consumer Price Index during those years--Malcolm Harris

We often see the world of the poor as a land of missed opportunities and wonder why they don't invest in what would really make their lives better. But the poor may well be more skeptical about supposed opportunities and the possibility of any radical change in their lives. They often behave as if they think that any change that is significant enough to be worth sacrificing for will simply take too long. This could explain why they focus on the here and now, on living their lives as pleasantly as possible and celebrating when occasion demands it. We asked Oucha Mbarbk [a rural Moroccan who had only found 100 days of work in the past year] what he would do if he had more money. He said he would buy more food. Then we asked him what he would do if he had even more money. He said he would buy better-tasting food. We were starting to feel very bad for him and his family, when we noticed the TV and other high-tech gadgets. Why had he bought all these things if he felt the family did not have enough to eat? He laughed, and said, "Oh, but television is more important than food!"--ABHIJIT BANERJEE, ESTHER DUFLO

Lighting a candle really is better than cursing the darkness.--Bryan Caplan

What this world needs is some sort of universal standard so we'd always know for sure who is good and who is bad. The Ten Commandments was a start. That list covers some of the basics. But it's a bit dated, and it doesn't cover the important questions of our day, such as who is arrogant, who doesn't work hard enough, who should come out of the closet, who is a hypocrite, who is an Internet troll, and so on. Society is inventing new ways of being bad more quickly than we can evolve the rules to cover the new situations. We need some sort of standard that can keep up. I'm unqualified for the task of creating this new standard of good and bad because I believe free will is an illusion. By my view, we're born, our molecules bump around then we die. No one is good or bad if we're all just bumping around according to physical laws. Any standard for good and bad behavior that I suggest would be inconsistent with my own point of view. But for some reason I'm going to suggest just such a standard anyway. Apparently I can't help myself.--Scott Adams

Photo link here.

Chart of the day: A prediction of China's GDP overtaking the US

Via Brett Arends.

Pot, meet kettle

Via Mark Perry.

Cartoon of the day

Via Abraham Piper.

Quotes of the day

If God were knowable, why would we believe in him?--Anne Carson

Paul [Krugman] hasn’t liked any president or any Treasury secretary. He always gravitates to opposition and dramatic policy because it’s much more interesting than agreement when you’re involved in commenting on rather than making policy. He savaged the early Clinton administration from the right, blistering Laura Tyson and Bob Reich, and then moved to savage the more liberal Obama administration from the left. He liked the Bush administration least of all. The only politician I remember him praising in the last sixteen years is John Edwards.--Larry Summers

John Edwards, what a miss!--Cav

Chuck Schumer obviously has political reasons for trying to look like he's fighting to save jobs in New York -- although it's hard to square his recent "concern" with his support for the New-York-jobs-killing Dodd-Frank law, but I'll save that for another column.--Charlie Gasparino

It has occurred to me that Roger Goodell might about 20,000 leagues above his head. It has occurred to me that while Bud Selig is destined to be underestimated because of the way he carries himself, that Roger Goodell is destined to be overestimated for exactly the same reason. ... [Goodell's letter] screamed of desperation and, frankly, it felt a bit incompetent too. If Bud Selig ever wrote a letter like that, people would be pulling out their torches and pitchforks. Roger Goodell is undoubtedly a brilliant guy, and he has a strong history with the league, and he is trying to represent a a group of very different owners who probably resents they have to give ANY of their money for the players. But that’s the job of commissioner, and right now it looks like Goodell is flailing.--Joe Posnanski

Today, both people and institutions seem to bear no penalty for their actions. They are rewarded. Why does reputation no longer matter? The reason is unfortunate and partly attributable to why we got into the financial crisis. People simply don’t matter as much on Wall Street as they used to. Instead size and technology carry the day. ... In the absence of reputation, the government and regulators act as substitutes to ensure appropriate conduct. The government becomes the enforcer through civil and criminal actions for law-breaking. So what you get is more law to cover for lost reputation.--Steven Davidoff

The trial dragged on for two years -- marked by 46 days of hearings, 18 witnesses on the stand, and a hefty 89-page ruling by the judge. Mob crime of the century? Complex terror case? Nope. Just trying to get rid of a bad public-school teacher.--CARL CAMPANILE, REUVEN FENTON & YOAV GONEN

There are very strict rules in the existing contract that prohibit the city from deciding in this case whether these [criminals] should be in the classroom.--Mayor Bloomberg

[New airline regulations] add to the costs of airlines and to the costs of flying in the mistaken belief that most consumers are easily tricked by airlines. Beyond that, the regulators fail to see that competition is the most effective way to protect even ignorant consumers from the consequences of their ignorance. The competitiveness of the airline industry is evident from the many new airlines that have entered and existed this industry during the past 30 years, and from the low profits during the decades after deregulation. Encouraging competition in this and other industries is the only really effective way to help the great majority of consumers, including ignorant and easily fooled consumers.--Gary Becker

Photo link here.

Quotes of the day

This magnificent grace, this expansive grace, this 'Amazing Grace' calls me to reflect. And it calls me to pray. It calls me to ask God for forgiveness for the times that I’ve not shown grace to others, those times that I’ve fallen short. It calls me to praise God for the gift of our son -- his Son and our Savior.--President Obama

Speaking as a conflicted McCain voter, I'd say Obama's election captures the five things I love most about my country.--William Stuntz

You may be incompetent at your job, but your 5 year old will still need you very much. There is a basic appreciation for one’s biological parents, regardless of how much they actually hang out (note Obama's elevation of his sperm-donor dad), and the littlest things a grandparent does for a child is often looked back at with profound appreciation. For example, in The Education of Henry Adams, the author recounts an episode from when he was six or seven. He vaguely remembers throwing a tantrum about not wanting to go to school. His frail 80 year old grandfather, the American President John Quincy Adams (son of President and Founding Father John Adams), appears, and takes his hand, and walked him silently a mile to the schoolhouse. No lecture, just a walk, but right to school, and the tantrum was over. Looking back, Henry Adams notes that “the seeds of a moral education would at that moment have fallen on the stoniest soil in Quincy”. These are the things parents and grandparents strive for, hoping that when they are long gone a consciousness truly appreciates something they have done in a profound way. ... This gets down to what, specifically, is in a person's utility function. The traditional objective function takes one's consumption as the primary objective, and then present values the 'utility' of this consumption. This leads to weird convolutions, where one 'consumes' children, and actually doesn't enjoy their company but still prefers them. I think a more reasonable approach would be to assume people are maximizing their external appreciation in society. This is going to be increasing in wealth, because the more money one has, the more favors one can do, the more people will flatter you to get business or use your boat. And it all gets back to maximizing status. A status maximizer maximizes his appreciation in this world. Someone looking merely at their consumption bundle should consider themselves rich in the West even if they are at the bottom of society working as a parking attendant, but of course they would not feel rich at all, they would feel very poor. As people crave appreciation from others, maximizing their status is a direct path to that end. So is having children.--Eric Falkenstein

Photo link here.

Medicare, in under 2 minutes

Keith Hennessey has provided a great brief. He says:

The President and his allies ominously warn that the Ryan plan would “end Medicare as we know it.”

But let’s be honest, how much do you really know about Medicare? If you’re under age 65 there’s a good chance that you know very little about the program. You have had no reason to, at least until now.

Five years ago I had to help a Cabinet Secretary and a senior White House staffer get up to speed very quickly on the absolute basics of Medicare, just the broadest brush strokes. They, like you, needed to understand Medicare principally from a top-down budget perspective, rather than as a participant in the system. I created a simple two-page outline for them to study.

I have updated the numbers in that document and offer it here, hoping it can provide some basic facts and context to the Medicare component of the current budget debate. This outline won’t make you an expert, but at least you’ll have a starting point.

Quotes of the day

To take a net short position [in the US Dollar] now would be illogical. The boat is extremely crowded.--Dennis Gartman (DISCLOSURE: I am short EUR and long CAD in the personal account).

The President’s new budget plan provides insufficient detail to support his claim of $4 trillion of deficit reduction over 12 years. But if we stipulate that amount, it is likely that the President’s new budget proposal would result in $1 trillion more debt over the next ten years compared to the House-passed Ryan plan, and maybe more.--Keith Hennessey

Perhaps the most interesting question is why the FDIC would write a report that could prompt guffaws from financial experts. Two possible reasons come to mind. First, the FDIC made these kinds of claims throughout the debates that led to Dodd-Frank, and somehow they worked. The FDIC was given extraordinary new powers under the new resolution rules, even though the FDIC’s track record in handling large cases is not good. Second, the FDIC has been floundering in its efforts to implement Dodd-Frank’s new requirements. It may be that the report is designed to distract attention away from growing fear that the living will requirement will not be effectively implemented, and that the resolution rules are a disaster.--David Skeel

First of all, while it is technically true that the federal tax take was "around 20% of GDP" during the Clinton era, this was only true at the height of the stock market bubble. Tax revenues exceeded 20% of GDP for exactly one year: 2000. The average tax take under Clinton was 19%. And if you exclude 1999 and 2000, the very height of the bubble, it was more like 18.5%. Without arguing about whether our tax system is fair or not, the fact is that the federal income tax is the most variable part of the code, and the federal income tax is now very progressive; it collects most of its revenue from people at the top. (Whether it should collect even more is an argument for another day.) Because it collects most of its income from people at the top, and because the incomes of the wealthy are more variable than the incomes of the poor and middle class (Warren Buffett's income can drop by $300,000; mine can't), we're going to get deep troughs in recessions, and high peaks in boom times. ... Saying "all we have to do is go back to the tax rates under Clinton" is effectively saying "all we need is another asset price bubble that funnels a huge amount of money into the pockets of the rich". This seems neither particularly feasible, nor desirable. --Megan McArdle

Have you noticed all the huge antiwar demonstrations in the last twelve months? Yeah, me neither. It turns out that a lot of the energy for the movement seems to have been provided by Democrats who are a lot less worried about wars conducted by Democratic presidents. Or at least who believe that advancing the Democratic agenda is much more important than trying to end the wars in Iraq and Afghanistan. This is by no means the whole movement--but it was enough that once a Democrat took office, both the numbers at the demonstrations, and the organizational capacity of the movement as a whole, dwindled away to near-nothingness.--Megan McArdle

Researchers found that job applications containing an attractive picture received roughly a quarter of the responses of one with a plain picture or no picture at all, if the recruiter was a woman. The researchers believe that the reason is that many human resources women are young and in their 20s and subconsciously they do not like extra competition. ... Women who put no picture on their CV were 22 per cent more likely to receive a response than women with a plain picture and 30 per cent more likely than women with an attractive picture. They also that 96 per cent of the company recruiters turned out to be women, typically in their 20s and single. --Richard Alleyne

There's a reason it took centuries for the west to evolve modern economies, the kind where basically everyone is rich by global or historical standards. This stuff is really complicated. The simplest product you buy could not have been brought to your market without a thousand institutions and systems, from double-entry bookkeeping to anti-fraud statutes to telephones and commodity brokers and universal literacy and rail rights-of-way. This stuff cannot be developed overnight, and it cannot be developed by one person, one group, or one plan. And in the end, there is no substitute.--Megan McArdle

It's pretty well known in financial circles that [Donald Trump] is a deadbeat.--anonymous banker

I remember back several years ago that Trump claimed that one of his casinos represented only 2% of his net worth. The casino was bankrupt. 2% of zero is zero.--Cav

Photo link here.

Bikini statistics: Penn & Teller on vaccinations

Warning: Contains colorful language.



Previous BS installment here. Via Tim Harford.

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

Quotes of the day

Avenge the patriotic gore
That flecked the streets of Baltimore--James Ryder Randall

... the $94,900 in [median household] income includes the estimated value of the median family’s health care plan as well as their salary, which is not what most people think of when they hear the term “median income.”--Ross Douthat

Of course Standard and Poor's does not have access to special, secret information about the US debt situation than we do; that sort of thing is, thankfully, public knowledge. And given the performance of the ratings agencies on mortgage-backed securities, I think we are justified in being skeptical that this represents some revolutionary new piece of information. However. S&P is certainly entitled to their opinion--for all their failings, they do spend a great deal of time analyzing government finances, ... Inflation was a good way to ease the burden of our World War II borrowing--once the war was over. But it is not a good way to ease the burden of an increasingly expensive entitlement program that shows no signs of winding down. Especially since these days, the debt markets are much more efficient than they were in 1948; information about the money supply is transmitted very quickly to potential buyers of our bonds. You can pull all sorts of tricks to force bondholders to eat some losses on the money they lent you--but you can't pull them over and over. America was able to wriggle its way out of a substantial portion of its WWII debts in large part because it was otherwise pretty fiscally sound.--Megan McArdle

I know the idea that reduced [Peoples Bank of China] purchases will lead to higher US interest rates is part of a very widely-held consensus, and so I am reluctant to disagree too quickly, especially when someone as smart as Martin Feldstein makes the case, but I have to say that there is something about this argument that really bothers me. I don’t think a decline in the amount of capital recycled by China, whether through the PBoC or through other institutions, will likely lead to higher US interest rates at all. The reason I say this is because if we accept this argument, then it seems to me that we are also saying that one way for the US to reduce interest rates is to allow its current account deficit to explode to significantly higher levels. Why? Remember that foreigners don’t fund fiscal deficits. They fund current account deficits, and they do so automatically. As long as the US runs a current account deficit, in other words, it will receive exactly the same amount of net capital inflows as the size of its current account deficit. So if the US current-account deficit doubles, for example, net foreign inflows will double too.--Michael Pettis

The “it works in Scandinavia!” case for higher taxes tends to understate both the differences between our respective economies (we’re a vast continental empire with high levels of family disruption, large pockets of extreme poverty, a legacy of racial oppression, and an ongoing influx of low-skilled immigrants; they’re small, homogeneous, and highly educated, with children who are much more likely to grow up in intact households) and the already-existing similarities between our respective welfare states (which are greater than a simple glance at federal taxes as a share of G.D.P. would suggest). I think a better approach is to just take the state of the United States economy on its own terms. Whatever the differences between the Scandinavian experience and our own, as a general rule tax increases tend to dampen economic growth. And growth is what we need.--Ross Douthat

“Taxing the rich” cannot work unless you do it in a way that induces the rich to consume less. Journalists make this mistake a lot ...--Steve Landsburg

Suboptimal hypotheses, rightly worked from, have produced more useful results than unguided observations. I think the key is to be intelligent, start from a decent set of assumptions, and work every day towards becoming a better man. If you use reality as a filter, you will do OK. Alas, I think more often then not such maxims from famous people are used as signals as opposed to principles. I remember one NYT story about how these junk bond investors were all acolytes of the great Ed Altman, yet I have never met a junk bond investor who thinks highly of such models, and Altman's model is pretty lame, about as powerful as rank-ordering firms by Net Income/Assets. They wanted to project gravitas, so they paid lip service to the old man. Similarly, people highlight their idea is derivative from some esteemed source, but that's merely posturing.--Eric Falkenstein

We find that CFOs earn statistically and economically higher abnormal returns following their purchases of company shares than CEOs. During 1992-2002, CFOs earned an average 12-month excess return that is 5% higher than that by CEOs.--Wang, Shin and Francis

There is hardly anyone that is both knowledgeable and [sic] unco-opted.--Larry Summers

The essay [I, Pencil] traces all the amazing transactions that need to occur for a simple pencil to be made, pointing out that not one of the people involved could make a pencil by themselves, and most of them don't even know that they're involved in producing a pencil. But what about the US Forestry Service? Rail rights of way? The education system? This is an argument to which the left-wing has a great deal of recourse whenever anyone suggests that people have a right to keep what they earn from voluntary transactions. You can only make money in the context of society, and so society has a right to regulate your transactions, and seize the proceeds, in any way that society sees fit. And yet, the argument applies just as well to our sex lives or our political beliefs: they take place in the context of all sorts of government protections, from rape prosecutions to whistleblower laws. Without markets and the government, the "anything between two consenting adults" morality to which the majority of the elite subscribes would be impossible; the closest substitute for these things is family, and families have a very clear, deep, and persistent interest in regulating the sexual behavior of their members. Does this mean that the government (or our employers) may properly restrict our sexual behavior to that of which a majority of our neighbors approve? That bed you're having sex in probably travelled on the interstate highway system, so standby for government inspection . . . No? The government can't do that? Then why is this argument supposed to be a telling blow against arguments for strong property rights and freedom from interference in voluntary economic transactions?--Megan McArdle

Your perceptions of others reveal so much about your own personality.--Dustin Wood

When I asked why he desires to help so many people, his answer surprised me. He said “because it’s fun.” And then he went on to say “I like helping people because I enjoy it, I’m the opposite of an evangelical.” I don’t know if he knew I was a Christian, but the comment came like a curveball and I had nothing to say. I was so accustomed to the passive guilt complex so many of us hear week after week and in book after book that I knew he’d have no shortage of evidence that Evangelicals are constantly being made to do good things they don’t really feel like doing. In contrast, as I read through the book of Acts, a defining characteristic of the early church is they felt joy in their work. I don’t see a lot of shame and guilt manipulation in Acts, just a bunch of people who act like they are weirdly in love with each other and with God. And I want to emphasize the word weirdly.--Don Miller