Psalm 2012

A psalm of Cav, inspired by Psalm 23, a psalm of David.

The LORD is my banker, I lack nothing.

       He makes me save into insured accounts,
he leads me to capital preservation strategies,

       he releases me from my greed, envy and materialism.
He guides me along tax-advantaged paths
       so I can give even more to Him and to others in poverty.

Even though I walk
       through the valley of the shadow of tail risk,
I will fear no evil,
       for you are with me;
your offering documents and track record,
       they comfort me.

You prepare a budget for financial freedom before me
       in the presence of my overextended neighbors and Keynesian policymakers.
You anoint my community with Walmart;
       My retirement accounts are overfunded.

Surely, your goodness and love will follow me
       all the days of my life,
and I will be a beneficiary of your trusts and estates
       forever.

Quotes of the day

High frequency traders are very sensitive to cash flow (note Trading Machines shut down pretty quickly after not finding a niche), so they aren't building palaces based on unrealistic expectations like, say, California or or NYU journalism majors.--Eric Falkenstein

... the 93% increase in JPMorgan VaR from Q1 2011 to Q1 2012 is solely due to the sudden "realization" that the world's biggest bank by derivative holdings (at just about $73 trillion) is in reality nothing but a glorified hedge fund.--Zero Hedge

[Peter] Orszag’s [compulsory voting] proposal and others like it are potentially harmful solutions to a non-problem. There is no evidence that nations with compulsory voting are, as a result, better governed than those where voting is voluntary. As Tim Cavanaugh points out, the former category includes many states such as Argentina, Lebanon, Egypt, Congo, and others that are hardly paragons of civic virtue. By contrast, one of the few democracies that has even lower turnout rates than the United States is Switzerland, which is widely considered one of the best-governed nations in the world. ... More generally, we should spend less time worrying about turnout and more about whether those who do turn out actually understand what they are voting on.--Ilya Somin

Obama campaigned as a consistent critic of the Bush administration’s understanding of executive power — and a critic with a background in constitutional law, no less. But apart from his disavowal of waterboarding (an interrogation practice the Bush White House had already abandoned), almost the entire Bush-era wartime architecture has endured: rendition is still with us, the Guantánamo detention center is still open, drone strikes have escalated dramatically, and the Obama White House has claimed the right — and, in the case of Anwar al-Awlaki, followed through on it — to assassinate American citizens without trial.--Ross Douthat

I really dislike fawning Keynesians because I used to be one when I was a TA for Hyman Minsky back in college ... In contrast to the Keynesian vision of us all trying to figure out how to spend our endless vacation, there's Eric Hoffer, the enigmatic philosopher who appeared out of nowhere around 1934 in California at age 34 ... A man is likely to mind his own business when it is worth minding, and so those unhappy with their own meaningless affairs will focus on minding other people's business. Hoffer noted one must not merely provide for those without meaning in their lives, but provide against them, because in a democracy and market economy their preferences will have power. Those who see their lives as inferior and wasted crave equality and fraternity more than they do freedom, and this can cause a Republic to fall to a democracy, and ultimately a tyranny. ... In other words, Hoffer describes the essence of the Liberal desire to micromanage society into perfect equality at the expense of liberty. A coalition of intellectuals and the underclass, both of whom feel unappreciated. We haven't figured out a good outlet for these do-gooders, or a good way for those without a purpose to find life rewarding, so they continue to plague us with their plans and angst. That's a realistic vision of society, a future problem that is real yet potentially soluble.--Eric Falkenstein

Walmart often faces strong local opposition when trying to build a new store. Opponents often claim that Walmart lowers nearby housing prices. In this study we use over one million housing transactions located near 159 Walmarts that opened between 2000 and 2006 to test if the opening of a Walmart does indeed lower housing prices. Using a difference-in-differences specification, our estimates suggest that a new Walmart store actually increases housing prices by between 2 and 3 percent for houses located within 0.5 miles of the store and by 1 to 2 percent for houses located between 0.5 and 1 mile.--Devin Pope & Jaren Pope

Quotes of the day

In the long run, we are all better off because our dead ancestors stuck with capitalism.--William Easterly

Your driver informs you that the taxicab business isn’t just for riders; its for drivers, too. Drivers need incomes, and his income of late has been too low to enable him to pay his bills. “So,” your driver announces, “by first going out to Montauk before heading to Times Square, I’ll make a lot more money off of you than I would if I drove you directly to Times Square. You’ll get there, but just not as quickly or as inexpensively as you would if I drove you there directly. Relax and enjoy the view.” ... You’d report any such cab driver as described here to the authorities and call it a crime. But when Congress does the same thing, the producer-favoritism is typically discussed respectfully as “trade policy.--Don Boudreaux

Why am I defensive about Walmart? Let me tell you about the long-gone downtowns, my friends. Before I do, I know you have some wonderful, cheerful, perhaps tearful, stories about the downtowns of your youth. Me too. I don’t want to hear them. Let me tell you, the late downtowns in East Texas burgs were usually small stores run by locals. They generally priced things three times more than they were worth. Maybe they had to, but I don’t care. I don’t want to pay $30 for a hammer and a fistful of nails. If I wanted a banana, I had to go to another store. If I wanted to pick up a pair of shoes, another store. The parking was minimal, and the choices were few. If you worked, by the time you got off work, many of the stores were closed. Saturday, they might be open, but Sunday they were closed again. So for the working individual, the mother or father who had a kid wake up in the night with aching gums from teething, and you wanted something to make it all better, you had to wait until the next day. If you noted it was 7 p.m. and you were expecting dinner guests at 8 p.m., but forgot to buy hamburger for the meat loaf, you were, once again, screwed. If you’re poor and barely making it, or even if your income is middle-of-the-road, it’s good to get what you need at slashed prices, anytime of the day, seven days a week, in a big, ugly, over-lit store that closes only on Christmas and half a day on Christmas Eve. If you forgot to get a gift card and a six pack of tall boys, you have to think, “To hell with downtown.” What we got now in our downtown are specialty stores that provide things we can’t get at Walmart, like maybe a stuffed deer head for that special place over the mantle. The stuff we really need, hell, it’s at Walmart. Here’s something else. With Walmart in town, lots of people can be put to work, far more than downtown ever employed. Someone has to run a 24-hour store, check people out, sack groceries, push carts, place stock, work at the McDonald’s sequestered in the back. The workers have all skin colors, not something I saw a lot of downtown, except for immigrants unloading trucks.--Joe Lansdale

I have been waiting for Paul Krugman to tell me how we are going to handle the debt, once we get this recession out of the way. No, really. There’s no economist whose judgment I trust more. (About economics, that is.) I’ve been all for the stimulus and the jobs bill and even, I guess, the sundry bailouts. But don’t we at some point have to start paying the money back? And how are we going to do that? Krugman’s failure (unless I’ve missed it) to give us an answer to that question is one of the things that makes me worry. A final word to Matt Yglesias, who thinks my problem is “thinking too moralistically about the economy,” because I express doubt that we can escape without pain from the dilemma we find ourselves in. Obviously (or perhaps not) this is a prediction and not a hope. I am not in favor of pain. I just don’t see any way to avoid it. Yglesias apparently believes that we can escape our fiscal dilemma without pain. I would like to know how. And if there is such a way, why have we denied ourselves for so long? Why do we ever bother to show fiscal restraint? Why have taxes at all? Why deny ourselves anything money can buy? If $15 trillion in debt can be a freebie, why not $30 trillion or $60 trillion?--Michael Kinsley

After nearly a month-long scapegoating campaign in which Greek PM G-Pap said he would spit in the faces and skullf#@* all those who dared to buy Greek CDS (because as we have all been lied to by everyone who doesn't know the first thing about CDS, it is CDS buying not bond selling that drives spreads), with the stupidity reaching as far and wide as the Spanish and German secret services, which said they would spy on CDS traders in London and New York, Greek daily Kathimerini has just uncovered that the biggest speculator, holding 15%, or $1.2 billion of the total $8 billion in Greek notional CDS, has been a firm that operates about 2 blocks away from the parliament building in Athens - the state-owned Hellenic Post Bank (TT)!--aka Tyler Durden

This paper examines the effect of alcohol consumption on student achievement by exploiting the discontinuity in drinking at age 21 at a college in which the minimum legal drinking age is strictly enforced. We find that drinking causes significant reductions in academic performance, particularly for the highest-performing students.--Scott E. Carrell (UC-Davis and NBER), Mark Hoekstra (University of Pittsburgh) and James E. West (US Air Force Academy)

Congress "gives" some taxpayers $13/week this year; Walmart triples that for everyone forever

What Congress has done:

The $500-per-worker credit for lower- and middle-income taxpayers that Obama outlined during his presidential campaign was scaled back to $400 during bargaining by the Democratic-controlled Congress and White House. Couples would receive $800 instead of $1,000. Over two years, that move would pump about $25 billion less into the economy than had been previously planned.

Officials estimated it would mean about $13 a week more in people's paychecks when withholding tables are adjusted in late spring. Critics say that's unlikely to do much to boost consumption.

What Walmart has done. (Regardless of paying income taxes or not).

Free markets are impersonal

but the alternative to free markets can be downright cruel:

The blunt tools of legislation or union power can force a corporation to pay higher wages, but if employees don't create an equal amount of additional value, there's no net gain. All other factors remaining equal, the store will have to charge higher prices for its merchandise, and its competitive position will suffer.

This is Economics 101, but no one wants to believe it, because it tells us that a legislative or unionized quick-fix is not going to work in the long term. If you want people to be wealthier, they have to create additional wealth.

To my mind, the real scandal is not that a large corporation doesn't pay people more. The scandal is that so many people have so little economic value. Despite (or because of) a free public school system, millions of teenagers enter the work force without marketable skills. So why would anyone expect them to be well paid?

In fact, the deal at Wal-Mart is better than at many other employers. The company states that its regular full-time hourly associates in the US average $10.86 per hour, while the mean hourly wage for retail sales associates in department stores generally is $8.67. The federal minimum wage is $6.55 per hour. Also every Wal-Mart employee gets a 10% store discount, while an additional 4% of wages go into profit-sharing and 401(k) plans.

Journalist goes undercover at Walmart

And concludes it is much better to work there than Target or mom-and-pop shops (via Mark Perry):

Getting in was not easy, as more than 100 applicants were competing for fewer than 10 job openings. Still, I made it through a very clever screening quiz, then through a series of three interviews, followed by two days of training. I felt ambivalent about taking advantage of the company’s resources in this way, but I was certainly willing to do my part by working hard at the store, at least for a limited period.
...
The job was as dull as I expected, but I was stunned to discover how benign the workplace turned out to be. My supervisor was friendly, decent, and treated me as an equal. Wal-Mart allowed a liberal dress code. The company explained precisely what it expected from its employees, and adhered to this policy in every detail. I was unfailingly reminded to take paid rest breaks, and was also encouraged to take fully paid time, whenever I felt like it, to study topics such as job safety and customer relations via a series of well-produced interactive courses on computers in a room at the back of the store. Each successfully completed course added an increment to my hourly wage, a policy which Barbara Ehrenreich somehow forgot to mention in her book [Nickel and Dimed].
...
Several of my co-workers had relocated from other areas, where they had worked at other Wal-Marts. They wanted more of the same. Everyone agreed that Wal-Mart was preferable to the local Target, where the hourly pay was lower and workers were said to be treated with less respect (an opinion which I was unable to verify). Most of all, my coworkers wanted to avoid those “mom-and-pop” stores beloved by social commentators where, I was told, employees had to deal with quixotic management policies, while lacking the opportunities for promotion that exist in a large corporation.

Of course, I was not well paid, but Wal-Mart is hardly unique in paying a low hourly rate to entry-level retail staff. The answer to this problem seems elusive to Barbara Ehrenreich, yet is obvious to any teenager who enrolls in a vocational institute. In a labor market, employees are valued partly according to their abilities. To earn a higher hourly rate, you need to acquire some relevant skills.

This, on top of Walmart saving each household $200 per month!

Walmart gives away $301 million to charities, and $400 million to customers this month

The Nobel Peace Prize? Why not?

Heh, Walmart's wonders are seemingly endless

It turns out that more affordable healthy food reduces obesity!

Who do you trust more: FEMA or Walmart?

I know who I can count on.

Federal deposit insurance fund

is seriously underfunded.

This is another case--on a huge mound of cases--that demonstrates that government solutions, even led by private sector stars like Hank Paulson, underperform private solutions.

Government is good for many things: protecting individuals, protecting individuals' rights, funding infrastructure and research that are not addressed by the private sector (for example, the Louisiana Purchase and the Internet).

Government is not good for managing people's money, health care, and education--the markets are outperforming government agencies in these areas. We are paying for Social Security once, but the surplus is being embezzled for other programs, so we will have to pay for it yet again. Medicare is also underfunded, and provides neither new solutions nor cheaper solutions to the sick. And as great as a public school is--say UC Berkeley--there are many preferred private schools who provide better education and also better research.

I would love to see our government play to it's strengths, and get out of sectors where it is preventing people access to better alternatives.

UPDATE: Wal-Mart to the rescue. Again.

Wal-Mart reduces hunger

by reducing carbon emissions, increasing local suppliers, reducing corporate middlemen, and increasing truth-in-advertising (by reducing empty air in packages).

Why are they a target of populists and environmentalists?

(Tip to Drudge)

Hillary Clinton and I

both loved Wal-Mart:

Sen. Clinton served on Wal-Mart's board of directors from 1986 to 1992, when she was first lady of Arkansas. During her presidential campaign, she has faced some criticism over Wal-Mart's labor record and the lack of women in upper management.

There is footage in the archive of Mrs. Clinton joining Mr. Walton, Wal-Mart's founder, on a stage at the 1991 opening of a store in Rogers, Ark. "I'm so proud of this company and everything it represents," Mrs. Clinton said. "It makes me feel real good about what we've been able to do."

Mr. Walton responded: "You're a great associate, Hillary." Turning to the crowd, he added: "She's one of us."

When Sen. Clinton was asked whether Wal-Mart is "a good thing or a bad thing" for the nation, she described the retailer as "a mixed blessing."

I still do.

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.

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.

Russell Roberts on economic growth and prosperty

and fisking Harold Myerson along the way:

Harold Meyerson thinks we've become a nation of shoppers rather than a nation of producers:

If 19th-century England was a nation of shopkeepers, the United States today is a nation of shoppers, and our role in the world economy is to buy what other countries -- or U.S.-based corporations with factories in other countries -- make. It was not ever thus. In the four decades following World War II, our largest employer was General Motors; for the past decade, it's been Wal-Mart.

It's a fact. Sort of. Actually, the federal government is the largest employer—1.7 million employees and that excludes the Post Office. Does that mean we've become a nation of bureaucrats because a little over 1% of all employees work for the government? Does it mean we're on a perilous downward path where instead of making things, we regulate things? That would be a silly statement. It is equally silly to conclude that because Wal-Mart is the largest private employer we've stopped making things.

And as it turns out, we do make a lot of stuff here in the United States. Manufacturing output is dramatically greater today than 30 or 40 or 50 or 60 years ago, the halcyon era that Meyerson imagines once existed. Manufacturing output has almost tripled since 1970. What has happened over the last 60 years is that productivity in the manufacturing sector has increased greatly. That has allowed the US manufacturing sector to produce a lot more stuff with roughly the same or even a declining number of employees.

Wal-Mart is a red herring. It's success hasn't come at the expense of the manufacturing sector. The trends in the manufacturing sector go back 60 years, long before Wal-Mart existed.

Meyerson's solution to our alleged economic crisis is to elect either Hillary or Obama:

One of the crucial differences between the two parties this year is that Hillary Clinton and Barack Obama have both revived the idea of a national industrial strategy -- better late than never -- while John McCain still acts as if banks and corporations, left to their own devices, would revive our economy through their investments. Problem is, we've left banks and corporations to their own devices for decades, and they've funded the rise of low-wage, high-profit East Asia . Nonetheless, McCain calls for across-the-board corporate tax cuts, though that money may well be bound for Shanghai. Clinton and Obama, by contrast, call for the public sector to take up the slack created by the private sector's reluctance to invest in the United States.

Ah, that's the ticket. Let's try the Japanese economic strategy. And what does he mean by the private sector's reluctance to invest in the United States? Everybody wants to invest in the United States. Foreign governments, foreign investors, American investors and American companies. The money flows in because the United States is the most productive economy on the face of the earth. Would someone let Harold Meyerson in on this secret?

Tyler Cowen makes sense on the declining USD

He writes (via Eddy Elfenbein):

A falling dollar does mean price inflation in the United States. Just as it costs more for an American to buy a fancy meal in Paris, so do French wines and German cars have a higher markup when they are sold in New York. But imports are only 16 percent of the American economy, and most foreign suppliers have been reluctant to risk their position in the American market by raising prices a great deal. Furthermore many price increases from Europe come on luxury goods and thus they fall on wealthy American buyers, who can afford it most easily. Wal-Mart serves a more working-class clientele and it is stocked with goods from Asia, where currency values have remained weaker against the dollar.

There are offsetting pressures on Europe, China, Canada et al with the falling dollar. We are having a harder time buying, and they are having an equally harder time selling. Our increasing exports are keeping our GDP pretty strong.

The sky is cloudier, but the sun brighter. The sky is not falling; just the dollar. And it may have already bottomed.

Kling tipping his cap to Rodrik is like Solow saluting Schumpeter

But sometimes it happens. Fat tails in econ blogging, I guess.

Kling: I favor limited government.

Rodrik: I favor right-sized, adaptive government. Government must select policies and regulations that take into account local history and conditions. Government must experiment and correct its own mistakes.

Kling: Adaptive government is an oxymoron. In reality, you never observe adaptive government.

Rodrik: The same could be said of limited government.

Kling: [burble]

UPDATE: Steve Conover stumps for Robert Reich. Definitely smelling the leptokurtosis--I never knew I shared so much with our former Labor Sec'y:

Read the following sample of ideas excerpted from his lecture and his book—then guess whether he has been pigeonholed as a "conservative" or a "liberal" by the media.

• The corporate income tax should be eliminated.

• The biggest step toward solving the illegal immigration problem would be to eliminate all agriculture subsidies.

• Corporations are not evil—and that includes Wal-Mart.

• Our energy future will require "going nuclear" in a big way.

• We should be skeptical of any politician who blames a corporation for doing something that isn't illegal.

• Punitive fines that would cripple or destroy a company should not be allowed.

Solow reference to Schumpeter is here.

WSJ reporters say economy is strong

By PETER FRITSCH and KELLY EVANS

For all the concern, the world today is better equipped to swallow expensive oil than it was when Jimmy Carter was installing solar panels and a wood-burning stove in the White House.

The main reason has to do with what some call the Wal-Mart effect. For every extra dollar taken from drivers' pockets at the pump in the form of higher prices in recent years, low-cost exporters from China and elsewhere have put roughly $1.50 back in the form of cheaper retail goods. Even at today's near-record prices, U.S. households today spend less than 4% of their disposable income at the pump, vs. over 6% in 1980.

Current prices are also a reflection of a strong economy, not an oil embargo or war in the Middle East. Since a market-share war between Saudi Arabia and Venezuela flooded the market with oil and drove prices to below $11 a barrel in 1998, oil prices have risen nearly eight-fold. During that run, the global economy grew roughly 5% each year.

Strong growth in places like China helps take some of the edge off the oil-price blow for U.S. and European companies such as Detroit's Big Three auto makers. Many emerging markets are hitting a "takeoff" stage, where per-capita income reaches a level that sparks serious auto demand, says Ellen Hughes-Cromwick, Ford Motor Co.'s chief economist. Growth in emerging markets is a "structural development" that is "less sensitive to oil-price changes," she says.

Here's how Tradesports traders can protect our common interests

We form a union. We lock in politicians and vendors (i.e. TS) and get lots of fat concessions and special treatment.

Where did I get this great idea? From today's WSJ op-ed (subscription required):

Hard-working union members deserve to know, for example, that of the AFL-CIO's $82 million in discretionary disbursements from July 2004 to June 2005, only 36% went to representing members in labor negotiations -- which is what unions were created to do. A whopping $49 million, or 60% of its budget, instead went to political activities and lobbying, while another $2.4 million went to contributions, gifts and grants. The National Education Association was even more skewed toward politics, spending only 33% of its $143 million discretionary budget on improving its members' lots.

By our calculations based on the filings, the AFL-CIO spent at least $2.7 million alone on T-shirts, flyers, telephone calls, Web site hosting, and other support for 2004 Presidential candidate John Kerry. Groups that received AFL-CIO money included Citizens for Tax Justice, an organization devoted to higher tax rates; the Economic Policy Institute, a think-tank that campaigns against Social Security privatization and tax cuts; and the Alliance for Justice, a ferocious opponent of President Bush's Supreme Court nominees.

Dues-paying workers of the world might want to ask: Why is Mr. Sweeney spending more of their money trying to raise taxes, or fighting for the cultural left, than he is on collective bargaining?

The IRS may also want to inspect these forms. That's because, prior to the new LM-2 disclosure rules, at least a dozen large unions had told the tax agency that they spent nothing on politics. The National Education Association's 2004 tax return, for instance, left blank the line for "direct or indirect political expenditures." Yet according to its LM-2, the NEA spent $25 million on such activities from September 2004 to August 2005. Eliot Spitzer could sure have fun with that one -- if he didn't have the NEA's endorsement.

The forms also offer a glimpse at union chief salaries. At least three union heads took home more than a million dollars in compensation in their last fiscal year -- though two were admittedly the heads of the NFL and NBA players unions. The third-fattest union cat was Martin Maddaloni, the chief of the Plumbers and Pipefitters, who took home $1.3 million last year. The Plumbers' "director of training" -- a fellow named George Bliss -- somehow managed to make $456,644 in 2005. Now we know why plumbers are so expensive: They have to make enough to pay the dues that keep their union reps in Armani.

The LM-2 forms show that some 1,015 paid union officers and employees devoted more than 90% of their time to political activities. Combined, these folks took home compensation worth nearly $53 million. Some 1,755 union personnel spent at least 50% of their time on political activities and lobbying.

As for financial management, let's just say some of these union chiefs are having fun in their jobs. United Auto Workers Local 14 reported it spent $67,000 at an amusement park. The International Brotherhood of Electrical Workers spent $124,000 at a hotel resort. And the Plumbers forked over $225,000 on Nascar advertising.

A couple of other fun facts: Of the 100 highest paid union executives, 93% are men. We hope some class-action lawyer isn't looking to sue for gender discrimination. And, believe it or not, unions report that they spent $624,000 at largely non-unionized big box retailers across the country, including Target, Wal-Mart, Sam's Club, Costco and K-Mart. They apparently know a low price when they see one.