It takes a government

To black out the villages...in India;

India's energy crisis cascaded over half the country Tuesday when three of its regional grids collapsed, leaving 620 million people without government-supplied electricity for several hours in, by far, the world's biggest blackout.

Hundreds of trains stalled across the country and traffic lights went out, causing widespread traffic jams in New Delhi. Electric crematoria stopped operating, some with bodies half burnt, power officials said. Emergency workers rushed generators to coal mines to rescue miners trapped underground.

The massive failure - a day after a similar, but smaller power failure - has raised serious concerns about India's outdated infrastructure and the government's inability to meet its huge appetite for energy as the country aspires to become a regional economic superpower.

Power Minister Sushil Kumar Shinde blamed the new crisis on states taking more than their allotted share of electricity.

"Everyone overdraws from the grid. Just this morning I held a meeting with power officials from the states and I gave directions that states that overdraw should be punished. We have given instructions that their power supply could be cut," he told reporters.

That's what happens whenever prices aren't allowed to move in accordance with supply and demand.  Just as the textbooks draw it up.

Why don't you go with that, Barack

The President who thinks 'profits eat up overhead', finally learns a little something about elementary economics;

PAGO PAGO, American Samoa — The president has signed into law legislation to freeze American Samoa's minimum wage until 2015.

President Barack Obama signed the bill Thursday, which delays a 50-cent increase that would have gone into effect in September.

Minimum wage in American Samoa varies from $4.18 to $5.59 per hour, depending on the industry. The Fair Minimum Wage Act of 2007 provided for annual 50-cents per hour increases until the rate matched the rest of the U.S., where the minimum pay is $7.25 per hour.

Employers and a government financial report have suggested automatic increases were harming the U.S. territory's economy.

By pricing low skill workers out of jobs.  Something students learn in the first week of  Econ 101...if they're paying attention, that is.

I saw a man who danced with his wife

Equally amazing, though it happened in London, not Chicago, Chicago, Avinash Persaud is one who is able to manage to discuss LIBOR without having an attack of the vapours;

• Between June 2007 and June 2008 – i.e. in the early days of the crisis, when banks still lent to each other – news that any bank had submitted rates higher than average, lit speculation that the bank was in trouble.

This speculation became self-fulfilling as banks stopped lending to any bank under a cloud of rumour and speculation. ....

In the heat of the crisis, it would be entirely reasonable for the Bank of England to consider that avoiding a speculative attack against one of Britain’s largest banks. Such an attack would have seriously threatened the viability of the UK’s financial system. As such safeguarding the financial system’s stability was a far greater priority than safeguarding the future integrity of Libor.

During financial crises, central bankers make these kinds of unenviable choices all day long – mortgaging the future in order to ensure there is one. 

Nor, as Persaud points out was it a secret.

Paintings by the numbers

For Art's Sake!  Divorce 1% style;

When [Microsoft executive] Christopher Larson and Julia Calhoun got divorced this year in King County Superior Court, some things were easy to divide up.
He got the 1911 Rolls-Royce Silver Ghost, valued at $1.4 million. She got the 11 Volvos. He got the baseball memorabilia, picked up for $7.4 million. She got the 1,983 Victorian posey holders ($5.5 million)....

What proved a challenge to divide was the art — and that's because they both loved the art, if in different ways. The divorce file calls their collection, appraised at $102 million, an "illiquid, non-income producing asset." But art is more than that. We're talking works by Pierre-Auguste Renoir, John Singer Sargent, Albert Bierstadt and Claude Monet.

....Calhoun wrote seven pages, going through the pieces one by one. At times she described her emotional reaction to the art. The Monet, she said, was "incredibly soothing to look into."

....She critiqued, calling paintings "lovely" or "charming," or saying that a Charles Sprague Pearce piece "gains points with me for the portrayal of beauty that is not pale skinned and blond."

Larson's objectives were more businesslike.

He said he wanted his collection to be "well-balanced and diversified."

He said he needed artwork to secure a line of credit with JPMorgan Chase — and that the bank would count, as collateral, only those paintings worth $750,000 or more.

And he said: "I have lots of wall space to cover in the Norcliffe house, and so I do not want a collection consisting of very few expensive paintings."

It's all in the square inches? 

Can't make an omelette

Maybe it's because of all the sausage makers in congress interfering;

[Senator Diane] Feinstein's Egg Products Inspection Act Amendments' would establish a national standard for the "humane" treatment of egg-laying hens and the labeling of eggs, including increasing the size of hen cages.

Her legislation is opposed by a number of farm groups, including the beef, pork and sheep industries, which signed a letter contending the legislation could set a "dangerous precedent for allowing the federal government to dictate everything that happens on farms."

Republicans have advocated national standards on other matters, such as when California sought to regulate greenhouse-gas emissions from vehicles, contending it was preferable to a patchwork of state laws.

Prospects for the bill are uncertain. Feinstein was thwarted in efforts to include the measure in the Senate farm bill.

An effort is under way in the Republican-controlled House to block states from imposing their own standards for agriculture products on producers from other states. The effort comes in response to the California law, which will take effect in 2015, that requires that all eggs sold in the state to be produced by hens held in cages that meet the California standards.

World to End Tommorrow; Women, Children and Chickens to Suffer Most! 

The French have a word for it

And an attitude to match...which is costing them real money;

In France, the world's most visited country, rudeness is also a concern for tourism companies - especially as France feels the bite of the financial crisis.

Atout France, the country's tourism development agency launched a summer campaign in regions where tourism is suffering to promote service quality.

"We're very aware of the problem making tourists feel welcome," says Fanny Moutel, communications director for Atout France, the country's tourism development agency. "We've noticed that there are fewer English visiting places like Brittany and Normandy and the Loire, so the campaign aims to improve the way tourists are treated."

Where English-speaking tourists were once greeted with raised eyebrows and a Gallic shrug, more and more French in the service industry speak English.

L'anglais est un plus doux langage.  English is a softer language, thanks to Shakespeare.  Who knew a few things about economics and languages himself.

The Louse That Roared

Even the Castros can read a newspaper, and wonder if they're next;

Days after prominent dissident Oswalo Paya died in a car crash, [Cuba's dictator Raul] Castro had harsh words for the island's opposition, accusing them of plotting to topple the government.

"Some small factions are doing nothing less than trying to lay the groundwork and hoping that one day what happened in Libya will happen here, what they're trying to make happen in Syria," Castro said.

Castro also reminisced about the 1959 Revolution, promised that Cuba will complete a trans-island expressway halted years ago for lack of funds, empathized with islanders' complaints about meager salaries and said once again that his five-year plan to overhaul Cuba's socialist economy will not be done hastily.

What's the hurry, after all, it's only been since 1959. 

Would you like a controversy with that?

The famous political philosopher Michael Jordan once opined that, 'Republicans buy underwear too'.  It seems we're about to find out who's chicken;

The Baptist family that owns Chick-fil-A, an Atlanta-based fast-food chain with stores in 38 states and the District of Columbia, for years has given millions of dollars to groups fighting same-sex marriage and supporting heterosexual ones.

Small protests against its position have swelled and receded in the past couple of years, but the battle recently has spilled into the halls of city governments and the presidential campaign. Even the Muppets are involved.

....Alderman Proco Moreno of Chicago said this week that he would not move forward on land-use legislation that the company needs to open a second restaurant in that city, and Boston Mayor Thomas Menino last week sent a letter telling [company President Dan] Cathy that his company was not welcome there.

The Jim Henson Co., which created toys for the chain, will not offer any more Muppets. On Friday, the company said Chief Executive Lisa Henson supports same-sex marriage and would donate money that the company had received from Chick-fil-A to the Gay and Lesbian Alliance Against Defamation.

About the same time, Chick-fil-A posted signs announcing a "voluntary recall" of all Jim Henson's Creature Shop Puppet Kids Meal toys, citing reports that some children's fingers had gotten stuck in the holes of the puppets. Last week, Cathy said his company would "leave the policy debate over same-sex marriage to the government and political arena."

Well, that's baseball

Someone must have missed the first day of his economics class--where they talk about alternative uses for scarce resources;

MY brother, Brian, has been a Mariners fan since 1983, when he was just 13 years old. Brian called me on Monday night with the news. "Can you believe they traded Ichiro after 11 years with the Mariners?" 

....All I can offer my brother and other die-hard Mariners fans is some insight as an economist.

It's worth asking: How did we get to this point? Our short-term-relationship mentality extends beyond sports to the employer-employee relationship in general.

At least part of the answer lies in the 30-year decline of traditional pensions, also known as defined-benefit plans, toward 401(k) plans, also known as defined-contribution plans.

Yes, the above is written by someone claiming to be an economist;

Kevin E. Cahill is a managing director at ECONorthwest, a Northwest-based economic consulting firm, and a research economist at the Sloan Center on Aging and Work at Boston College. 

Whose knowledge about the compensation in professional sports is decidedly lacking.  Ichiro is still receiving his annual $18 million, just from a different employer.

An employer with a chance to get into the post season, even the World Series.  If they do Ichiro will make even more money. The lesson to be learned here is much more elementary; as Adam Smith taught; no one makes a trade unless they expect to benefit by doing so.

Ichiro (who requested that the Mariners trade him to a contending team) benefitted from a huge paycheck 'to play a kids game', the new employer strengthened their outfield defense (and their chances of progressing in the playoffs), and the Mariner's opened a position for a young player to replace the aging legend.  No one plays baseball forever.

And, we think that if Ichiro hasn't planned for his own retirement with the $100+ million he's been paid so far, then that is his problem.  We all should be so blessed.

 

What a tangled web...

When the high cost of free parking comes atop already taxpayer subsidized rail transit in the Seattle area;

As the cars overflow from Sound Transit park-and-ride lots, the agency's leaders are considering whether to charge users a daily fee.

Call it Sound Economics?   That surplus and shortage are resolved through the pricing mechanism.  Too bad no one thought this through when the decision was made to build a rail transit system that had no hope of ever recovering its costs in the first place.

Filling trains is arguably the most critical job for Sound Transit, given that taxpayers spent $2.6 billion to build the first 16 miles of light rail, and $1.3 billion so far to establish Sounder commuter trains from Everett and the Tacoma areas into Seattle.

The trains are (nearly) empty, but the parking lots at the stations are full!  Genius at work.

Sticky Wicket

This Just In (and we promise never to use our power for evil, only for good):

The Mariners traded 10-time All-Star outfielder Ichiro to the New York Yankees on Monday for two minor-league prospects and cash considerations.

Bentley University macro-economist Scott Sumner has been tireless in documenting the 'sticky wage problem'.  The Seattle Mariners can sympathize;

The solution seems simple: The Mariners honor Ichiro for his tremendous legacy, but make the prudent decision that the time has come to move on without him. They plug Casper Wells into right field, use the $18 million in salary relief to plug several other holes, and live happily ever after.

But since the player in question is Ichiro, the answer, of course, is not so simple. There are increasing rumblings that the Mariners intend to bring back Ichiro in 2013 for his 13th season with the ballclub, perhaps even on a multi-year deal.

That's former AL Batting Champion, former Gold Glover Ichiro Suzuki who is being paid $18 million dollars to produce an on-base percentage of about 29% right now.


The Mariners slogan being; Not one cent for offense; millions for tribute? 

Into the Wayback Machine for JoePA

If the political got any more personal the NCAA would dig up the remains of Coach Paterno and hold a bonfire on campus;

Penn State football was all but leveled Monday by an NCAA ruling that wiped away 14 years of coach Joe Paterno's victories and imposed a mountain of fines and penalties, crippling a program whose pedophile assistant coach spent uncounted years molesting children, sometimes on university property.

The sanctions by the governing body of college sports, which capped eight months of turmoil on the central Pennsylvania campus, stopped short of delivering the "death penalty" of shutting down the sport. But the NCAA hit Penn State with $60 million in fines, ordered it out of the postseason for four years, and will cap scholarships at 20 below the normal limit for four years. The school also will be on probation for five years.

Any current or incoming football players are free to immediately transfer and compete at another school.

Ah yes, the players.  Whose hard work brought millions of dollars into the Penn State program over those same 14 years.  Let's hope they feel all that nearly uncompensated effort wasn't slandered by the suits at the NCAA, just so the political correctness mavens can feel good about themselves.

Less than kind

Berkeley's Brad DeLong can't quite summon the nerve to explain to what he's objecting in his curious post;

FALSELY SMEARING ERICA GROSHEN AS A COMMUNIST?

Whatever will the Republican slime machine think of next?

I don't think America needs to be rescued from this Republican Party. I think America need to be rescued from any attainable Republican Party. They are so done...

Maybe he's referring to this;

A forthcoming report from the conservative organization Americans for Limited Government (ALG) details how President Barack Obama’s nominee to head the Bureau of Labor Statistics (BLS) sent her children to a politically left-wing Jewish summer camp with Communist roots.

So, isn't the question whether or not the above is true?

Certainly there's no dispute that Camp Kinderland in Massachusetts was founded by Communists.  No one is even attempting to hide that, not even Julius and Ethyl Rosenberg's granddaughter;

TUCKED away in the woods of southern Massachusetts, Camp Kinderland has all the trappings of a summer camp: bunks, a lake, a sports field. But the bunks have names like Joe Hill and Pablo Neruda, and the murals in the dining hall depict great moments in labor history.

Kinderland was founded in 1923 by secular Jews active in the New York City trade union movement, most of them Communists or socialists. As their numbers dwindled, Kinderland fell on hard times.

In 1977, when I was 8 and my brother was 7, my father, Michael Meeropol, traded folk singing for our first summer's camp fee. The buildings were dilapidated, the tone was strident and the camp was struggling to survive. Our small but scrappy group played kickball and sang civil rights songs. We didn't know that the 80's were just a sharp right around the corner as we shouted ''Solidarity Forever'' and waved a Cuban flag in the Peace Olympics.

Or, is the good professor angry that the story is true?

Crumpled Fender

Surely no tears from Barack Obama or Elizabeth Warren, because...well, it's not like it was built by itself;

Fender Musical Instruments, which produced guitars strummed by the likes of Buddy Holly and Eric Clapton and famously set on fire by Jimi Hendrix, said late Thursday that it dropped its plans for an initial public offering.

The news came amid a handful of successful IPOs, prompting speculation about the reasoning behind Fender's decision.

Fender CEO Larry Thomas said current market conditions and Europe's economic woes wouldn't support an IPO that values the company appropriately.

Credit where credit is due

Many complaints are heard about lack of credit availability for mortgages, small business loans, and credit cards, but one area where lending is taking place; auto sales;

...there's one notable exception, an area where lending has been surging: autos. Millions of Americans have found that it's becoming surprisingly easy to borrow money to buy a car.

New bank loans for autos totaled $47.5 billion in the first quarter of 2012, higher than at any point in the past seven years, according to Equifax. Interest rates are getting cheaper by the month. And even Americans with relatively poor finances can get auto loans....

Why might that be?

The auto loan market, which involves many smaller independent operators, remains lightly regulated. The CFPB has not yet stated any plans to oversee nonbank lenders in auto finance. And car dealerships, which frequently offer credit, were explicitly exempt from oversight in the 2010 Dodd-Frank financial regulation bill. 

 Which would seem to be evidence that regulation is hindering some areas of the economy.

Candy is dandy, but...

Don't try smuggling forbidden chocolate into the USA;

Two Seattle men say they spent more than two hours in a detention center at the Canadian border after U.S. border agents discovered illegal chocolate eggs in their car.

Brandon Loo and Christopher Sweeney told KOMO-TV ... they decided to bring home some treats for friends and family during a recent trip to Vancouver, British Columbia. They bought Kinder Eggs - chocolate eggs with a toy inside.

The two men say border guards searched their car and said the eggs are illegal in the United States because young children could choke on the small plastic toys. Importing them can lead to a potentially hefty fine.

Not that border guards have anything else to do with their time. 

At MIT it's Libor-steria all day long

Simon Johnson continues to emulate an adolescent girl at a Justin Bieber concert;

The New York Fed was apparently aware of Libor-rigging at some level in 2007 and serious concerns – although presumably not the full details of what the C.F.T.C. later established – had reached the most senior levels of the Federal Reserve System by early 2008.

Well then, don't just stand there, do something... like communicate with the officials at the Bank of England (the 'L' in LIBOR standing for London, after all).  So, that being done, and specifically including concerns about the British Bankers Assn's 'financial interests in LIBOR', shouldn't the question be, why didn't those English authorities act to remedy to situation.

Professor Johnson seems not to have considered that.  Opting instead for, shall we say, a hook that a candidate for Massachusett's senate seat might find useful?

...why didn’t the Fed do anything itself about the rigging of Libor....

Oh, we don't know...maybe the Fed has no jurisdiction over what happens in London?

Li-bor[ed] to distraction

Journalists and politicians may be fooled into paroxysms over the let's make believe LIBOR, but as this May 2012 piece in Bloomberg makes clear, markets are made of sterner stuff;

Barclays Plc (BARC), Britain’s second- biggest bank by assets, says the interest rate it pays for short-term dollar loans is the lowest ever relative to rivals even as other measures of its credit deteriorate.

Barclays says it can borrow for three months at 0.3 percent in its submission for the London interbank offered rate, compared with the 0.466 percent composite level of the British Bankers’ Association’s measure. The 17 basis-point gap is a record after Barclays reported the biggest decline this year in the rate of the 18 banks contributing to the benchmark for $360 trillion of global securities.

While Barclays says its credit is getting better, the cost of insuring the U.K. lender’s debt has risen 16 percent since Feb. 24, when its Libor contributions started diverging from the combined rate. Prices of credit-default swaps tied to London- based Barclays are worsening as the 10 biggest prime U.S. money- market mutual funds cut their holdings in its short-term debt by $6.65 billion in April, the biggest drop in dollars of any bank.

“There’s a subjective element to Libor,” which “represents the rates at which banks would expect to be able to raise funding at,” said Harpreet Parhar, a credit strategist at Credit Agricole SA in London.

Credit-default swaps tied to Barclays’ senior debt rose 29 basis points to 202 basis points since Feb. 24, the highest level since April 10, according to data compiled by Bloomberg. Contracts protecting its junior bonds climbed 79 to 422.

The above means that financial markets knew very well what the situation was; LIBOR is all hat and no cattle.

He put the 'Gee!' in Good Government

Tom Mack, mayor of Trenton NJ, clearly a believer in graft (honest or otherwise), has had a visit from the FBI, but denies any wrongdoing;

In just Mack's first year in office in Trenton, a city of 85,000, he ran through a string of business administrators. The first resigned after a month, saying the mayor didn't believe in "good government." Another resigned just ahead of pleading guilty to embezzlement on another job.

His housing director quit after it was learned he had a theft conviction. His chief of staff was arrested trying to buy heroin. His half brother, Stanley "Muscles" David, pleaded guilty earlier this year to official misconduct for directing Trenton Water Works crews to perform private side jobs using city equipment and billing the city for the hours.

A former longtime city employee sued the mayor late last year. The parks department employee said she was let go after refusing to dole out jobs for the mayor's friends, refusing to give federal grant money to people who didn't apply and for inquiring about city funds she said were missing.

The ex-employee also said she was replaced by a Mack supporter who never showed up for his $40,000-a-year job.

Proof there are never any shovel-ready projects? 

Guar-anteed!

The poor we may always have with us...except for those in India farming beans in the desert;

...the guar-bean farmers of India have raised their prices and their living conditions because U.S. oil-industry giants need their crop: It's irreplaceable in making fracking fluid. "Now we have enough food, and we have a house made of stone," one farmer says.

Oddly, the NY Times reporter calls this a rare victory for the littlest of the little guys in global trade, seemingly unaware of what's been happening around the world for the past few decades; tens of millions of people climbing out of poverty thanks to global markets.  Nor is this remarked upon;

India produces about 85 percent of the world's guar. As worries rose about the prospects for this year's monsoon, which is vital for an adequate crop, speculation over guar production built to a frenzy. Trading in guar futures was even suspended, and with the monsoon still behind schedule, it remains postponed. Ramesh Abhishek, India's chief commodities market regulator, said guar trading would resume when supplies proved adequate.

"If the physical market doesn't provide enough supplies, then the futures market causes more harm than good," Abhishek said. 

How that is supposed to be will remain a mystery, since futures markets exist to tell participants whether 'the physical market' is likely to provide enough supplies, so suspending it's operation will merely keep everyone in the dark. 

Li-bor[e]

Ho hum, the Great Conspiracy to Under-report, according to Paul Gigot in the Wall Street Journal, wasn't exactly a masterpiece of criminality, given that it was openly discussed with bank regulators since at least 2007.

Mr. Gigot reports on the transcript of a conversation between NY Fed official Fabiola Ravazzolo and a Barclays Banker in 2008, released last Friday;

Barclays executive: "[Y]ou know we, we went through a period where we were putting in where we really thought we would be able to borrow cash in the interbank market and it was above where everyone else was publishing rates. And the next thing we knew, there was, um, an article in the Financial Times, charting our Libor contributions and comparing it with other banks and inferring that this meant that we had a problem raising cash in the interbank market."
Ms. Ravazzolo: "Yeah."
"And, um, our share price went down."
"Yes."
"So it's never supposed to be the prerogative of a money market dealer to affect their company share value."
"Okay."
"And so we just fit in with the rest of the crowd, if you like."
"Okay."
"So, we know that we're not posting, um, an honest Libor."
"Okay."
"And yet—and yet—we are doing it, because, um, if we didn't do it . . . it draws, um, unwanted attention on ourselves."
"Okay, I got you then."

The conversation proceeds for perhaps another 10 minutes before Ms. Ravazzolo signs off with "Have a great weekend. Bye."

Such was the state of things back then.  Now, MIT economists are wringing their hands over the 'rigging' of interest rates.

Picture this

From the indispensable Scott Sumner, all you need to know to understand the current economy is in the above.  The red line is unemployment (right scale).  The blue line is nominal wages divided by nominal GDP.

Both rise very steeply after December 2007.  The reason the blue line goes up is mostly that GDP declines at a faster rate than wages.  I.e., wages are 'sticky', they don't respond quickly to changed labor demand.  The reasons they don't, include long term labor contracts, extended (and high) unemployment benefits, high minimum wages, 'inelastic' benefits packages.

Which reasons are also why the two lines don't descend as steeply (quickly) as they went up.  Eyeballing the graph and extending its slope into the future gives little hope for a 'return to normalcy', such as happened the last time we had a recession of this depth; the early 1980s.

Those, as well as a probably too restrictive monetary policy from the Bernanke Fed.  So, Occupiers, stop throwing rocks;

Vandals broke windows at two Wells Fargo bank branches early Monday in Seattle.

Police says unknown suspects used rocks to smash two large windows and the front doors of a bank in northeast Seattle on Sandpoint Way NE at about 1:30 a.m.

At 3:00 a.m., unknown suspects also smashed at least nine windows at another Wells Fargo in the Madison Park neighborhood. A police dog couldn't pick up a track.

KING-TV reports anarchy graffiti was left on the door of one bank.

Wells Fargo branches in Seattle have been a target of vandals this year. The Madison Park branch and a downtown branch were vandalized in January. Three other banks were damaged by masked vandals in February in the Capitol Hill neighborhood.

From goatherd to go-getter

We guess Joe Stiglitz hasn't heard about this guy;

In a hometown [in Tibet] without electricity, running water or modern medicine, [Lobsang] Dargey came into the world in the traditional way: on the first floor of his home, where the goats, sheep, pigs and cows lived.

"I was born next to a pig," he says.

....When he was 13, he says, his parents "saw something in me" suggesting he was destined for a life other than farming — so they sent him to a Buddhist monastery.

....At 18, Dargey left the monastery with several other monks on an epic 14-month journey, first to the holy city of Lhasa and then to India. The travelers walked most of the way, sleeping on the ground and begging for food.

In India while still a monk, he oversaw every aspect of construction of a boutique hotel for a Buddhist organization.

Now 38, Dargey recruits investors from China and other Asian countries. ....

In 1997, when Dargey came to the United States on borrowed money, his vision of his future was hazy. He thought about starting "a dharma center," or Buddhist community, but decided he didn't have enough English fluency or spiritual training and knew he would have to earn a living.

"When I got off the airplane I made a commitment to myself. Within five years I wanted to have a house and I wanted to have a green card. That was my goal," he said.

....His first job was painting an orthodontist's office in Federal Way, even though he now admits, "Technically I didn't know how to paint." But after navigating the 2 ½-hour Metro bus ride, with transfers, he did a job good enough to get other painting and handyman gigs.

....Dargey was still struggling with English when he applied for a sales job with Sprint. "We still laugh about the interview," said Kayla Schober, who interviewed and then supervised him. "I don't think I understood much of what he said or he understood much of what I said."

....Life took a turn when Dargey attended a fundraiser for the Marsha Rivkin Center for Ovarian Cancer Research, founded by Melissa Rivkin's father, Saul, in honor of her late mother. He met the center's director, Tami Agassi, and was smitten.

Dargey called her office, hoping to set up a date. She declined. He was persistent.

....After a year, Dargey wore Agassi down and she agreed to have lunch with him. Six months later they were engaged. If he had known at the outset she was the sister of tennis great Andre Agassi, "I probably wouldn't have asked her out" because of his misgivings about celebrity families.

The couple were married in 2004.

Sorry, Joe Stiglitz says we have a less mobile society than almost any other major country...and he has a Nobel Prize in Economics. 

Ed Conard; right again

On page 78 of Unintended Consequences by the former Bain Capital partner, we can read;

Men seek beautiful women--even unintelligent, unfriendly ones--for the recognizable status of having attracted a desirable mate. ....Money is just a means to these ends.

Then we read in our morning paper;

[Uma] Thurman, 42, has two older children, 13-year-old Maya Ray and 10-year-old Levon Roan, with ex-husband Ethan Hawke. This is her first with financier Arpad Busson.

Busson has two sons with Elle Macpherson. 

No reports yet on sightings of Mrs. Conard.

In your face, Joe

Stiglitz (and other celebrants of misery) will really hate this from the Wall Street Journal;

...that brings us to Michael Jordan, who starred for the Chicago Bulls from 1984 to 1998. In 1986, the Bulls' median player salary was $300,000. The team's lowest-paid player made $135,000, and its highest-paid player made $806,000. The team's Gini coefficient [a statistical measure of 'inequality of income'; where 0 is least unequal and 1 is most] was 0.36. But Jordan's superstardom increased the team's popularity and revenues, and by 1998 salaries looked different. The median income was $2.3 million, the lowest was $500,000, and the highest (Jordan's) was $33 million. The Gini coefficient had nearly doubled, to 0.67.

Jordan's salary of $33 million consumed over half the payroll, but everyone was better off. The median player in 1998 made more than seven times what the median player made in 1986, while the income of the lowest-paid player in 1998 quadrupled that of his 1986 peer.

Enemy of the poor

How else to describe the reprehensible attitude of Joseph Stiglitz here;

Some people look at income inequality and shrug their shoulders. So what if this person gains and that person loses? What matters, they argue, is not how the pie is divided but the size of the pie. That argument is fundamentally wrong. An economy in which most citizens are doing worse year after year—an economy like America’s—is not likely to do well over the long haul. 

Well, THAT argument is worse than fundamentally wrong.  As economists these days are wont to put it, that isn't even wrong. One's person's prosperity doesn't have to come at the expense of another.  It can, say, in the form of rent (privilege) seeking that is designed to limit your competitor's ability to challenge your position.  For instance, in unionized public employees working to keep their local monopolies free from other options for the nation.

However, the 1% usually aren't that at all (though they do benefit, as we all do, from stable laws that provide security).  They are entertainers (LeBron James, Julia Roberts) who we're free to ignore, and entrepreneurs like Bill Gates who made their fortunes by providing literally trillions of dollars of value to their customers.

Not to mention the higher wages the working classes earn by having the 1%'s capital to use in their daily endeavors--the highest wage countries are those like the U.S. and Japan which also have the highest amount of capital per capita.

There are sound economic reasons (even if we ignore the moral ones) for discouraging people from coveting their neighbor's wealth; if earned in the marketplace, it's re-payed the rest of us many times over in the goods and services we enjoy.

For his efforts, Stiglitz should be awarded an Ignoble Award in Economics too.  If he were true to his science he would be encouraging the 1% to re-invest their gains in attempts to make even more money.  Because, by their so doing they would increase the producer surplus available to, even, the poor.

All the News That Fits...

We print (at the Seattle Times).  But, just to make sure the readers get our point, we need a headline;

Wealthy throwing money at charter-schools initiative

The 'wealthy', in this case, being the notoriously uncharitable Bill and Melinda Gates and Paul Allen.  So, this is just another of their attempts to spread their wealth toward what they see as the less fortunate.  That's not mentioned in the piece.

Though, wealthy business executives may better serve by doing what they do best, reinvesting their profits in new business ventures that could benefit the consuming public (including pupils attending public schools) by increasing their choices.  After all, that is how we went from Pony Express, Western Union, AT&T, Post Office to modern means of communication like e-mail, twitter and Facebook.

Not that that would garner any more favorable headlines.  It would still be about 'income inequality' and Joe Stiglitz's worries about it.

The Good News is...

That the bad news isn't so bad after all;

Stronger earnings from JPMorgan Chase and other big banks launched a stock market rally Friday.

JPMorgan surged 6 percent, by far the biggest gain in the Dow Jones industrial average. The Dow jumped 183 points to 12,761 shortly after noon Eastern. The Dow is coming off a six-day slump, the longest losing streak since mid-May.

JPMorgan, the country's biggest bank, earned $5 billion in the most recent quarter, easily beating Wall Street's forecasts. That came as a big relief to investors who had been worrying about weaker earnings at major U.S. companies.

Investors were also relieved that JPMorgan's trading loss wasn't as bad as the most dire predictions. JPMorgan revealed that the loss from a complex trade it first disclosed in May had grown to $5.8 billion, nearly triple the original estimate. JPMorgan's stock shot up $2.07 to $36.12.

Statistics, Italian Style

Sophia and Marcello could star in this one from Istat, Italy's government statistics office;

Mr Giovannini warned that if Istat stopped putting out statistics the government faced "heavy fines" from Brussels.

"Around 70pc of our production of statistics is based on commitments with the European Union," he said.

"We will not issue data on inflation, deficit, household income, job data. That will trigger very high EU fines for our country for every day of delay.

"I do not think the government and the parliament will want to get to that point."

How do you say, 'Be careful what you wish for.', in Italian?

The deadbeat goes on

Scranton, Pennsylvania, Stockton California...San Bernadino...maybe someone should put it to music.  No, not because they lie along the same route, because they're in the same boat:

The drumbeat of cities filing bankruptcy grows louder: San Bernardino has become the third California city in two weeks to go bust, after Stockton (the biggest U.S. city so far to file) and the small Sierra hamlet of Mammoth Lakes.

The L.A. Times reports that San Bernardino's filing is certain to heighten worries about the fiscal solvency of other California towns. But the next bankruptcy might not come from California: Scranton, Pa., is so cash-strapped that on Friday it made an unprecedented move and cut the pay of its municipal workers to $7.25 an hour--minimum wage.

While Scranton's crisis has been sudden, San Bernadino's has been years in the making: An analysis prepared by the city's finance department blames "accounting errors, deficit spending, lack of revenue growth and increases in pension and debt costs." 

Costs the municipalities simply don't have the money to pay.  Blood...turnip.

Paint is cheap

And rail transit is expensive, said Obama Administration head of the Federal Transit Administration, Peter Rogoff, in a speech at the Boston Federal Reserve in 2010.  His point being that public transit officials have a bias toward rail transport, but they often can provide more and better service with spiffed up buses.

With very very little cost it's possible to move a lot of people, if the rail bias doesn't get in the way.  Which means it is going to take a 'little honesty' in facing up to the huge backlog of deferred maintenance of those existing rail systems, which he estimated at approaching $60 billion dollars.

Rogoff admitted that the majority of public transit trips are made by bus, not rail, but that 3/4 of the deferred maintenance is for rail.  Meaning that it is not just that bus transport is cheaper to operate now, but that rail, if one includes the costs of the deferred maintenance, is only going to be even more expensive in the future.

If that is the case now, he asked, why does it make sense to expand rail systems?

Young Man's Fancy Turns...

...in China--it of the one child policy--to the automobile, and not just any old econobox, vroom, vroom:

Ivan Koh, president of BMW China, says that the average age of a BMW owner in China is about 30, versus 49 in Europe. Young people, he says, can get rich quite quickly as the economy booms; GDP growth rate is running at more than 15 per cent.

A staggering statistic from the Lamborghini stand at this year’s Beijing motor show was that the average Chinese owner of a Lambo supercar is aged just 28. It is not uncommon to see Ferraris and Bugattis racing each other (illegally, and usually at night) through the city streets.

The premium car market is growing fast, which is why BMW has just opened its second factory in China, in the north-eastern city of Shenyang. Jaguar Land Rover is currently in talks with potential local partner Chery Automobile about establishing a plant.

New fields for Ralph Nader?

And leave the driving to Bolt Bus

Private business usually beats government at efficiency, and the old Greyhound Lines is no exception;

BoltBus, Greyhound's new low-cost, nonstop express-bus service, promises to whisk travelers to these cities [Seattle, Portland, Vancouver BC] for fares starting at $1.

Amtrak's Cascades trains are the main competition, but at these prices, why even drive or fly?

....Who's the winner? When it's rainy and cold, sitting inside a train station is better than standing on a street corner waiting for a bus. But when it comes to overall 21st-century convenience, BoltBus is the winner.

Bradford Snell will probably want to hide his eyes from this; what the Seattle Times reporter (Carol Pucci) doesn't mention is that Amtrak is nowhere near covering its costs (operating and capital) from its fares.  It only continues to operate thanks to heavy taxpayer subsidies of something around $ .25 per passenger mile.

Unlike the BoltBus which is a profitable business, that contributes subsidies to Amtrak through the taxes it pays whenever it puts fuel in its fleets' tanks.  Of course, those subsidies eventually come from Bolt's passengers in higher fares.

If you're so smart, why aren't you richer

Two IMF economists, Luc Laeven and Fabien Valencia, say, Curses;

While conventional wisdom would have it that advanced economies with their stronger macroeconomic frameworks and institutional setting would have an edge in crisis resolution, the record thus far supports the opposite: advanced economies have been slow to resolve banking crises, with the average crisis lasting about twice as long as in developing and emerging market economies ....

While differences in initial shocks and financial system size surely contribute to these different outcomes, in a recent working paper (Laeven and Valencia 2012), we suggest that the greater reliance by advanced economies on macroeconomic policies as crisis management tools may delay financial restructuring, with the risk of prolonging the crisis. We refer to this as the ‘curse’ of advanced economies.

Their poster child being 1990s Japan;

Japan is a case in point. Instead of acknowledging the true extent of losses at troubled banks early on, authorities allowed insolvent institutions to continue to operate as “zombie” banks, evergreening bad credits, and using deferred tax accounting to bolster their regulatory capital positions (Caballero et al. 2008). The reluctance of these banks to resolve bad assets contributed to the Japanese lost decade. 

Clearly, they don't think that this time is different;

...the bulk of the cost of this crisis has simply been transferred to the future, in the form of higher public debt and possibly a dampened economic recovery due to residual uncertainty about the health of banks and continued high private sector indebtedness. While monetary policy has avoided an even sharper contraction in economic activity, it has also discouraged more active bank restructuring. The lingering bad assets and uncertainty about the health of financial institutions risk prolonging the crisis and depressing growth for a prolonged period of time. Macroeconomic stabilisation policies should supplement and support, not displace financial restructuring. 

May your days be merry and bright with cash

Disability retirement benefits for the 1%?  U of W legend Brandon Roy will be double dipping (if his knees can take it) in the NBA next season, for the children (his own);

Roy said he plans to move his wife and two young children to Minnesota, planning that it will be his future beyond the contract's two years. When asked by the Wolves at the meeting about the prospect of living in the frozen north, Roy said he wants his kids to experience a white Christmas.

That, and the $5 million plus on the first year of a guaranteed contract the Timberwolves offered. Which comes on top of the $63 million his former team, the Portland Trail Blazers is paying him in 'retirement'.

Flanders fields LIBOR

The BBC's Stephanie, points out what is reality;

So, maybe the Euribor and Libor rates correspond to something, but we know for a fact that they do not always, or even usually, correspond to an actual transaction. Nor, if you look at the guidelines for setting Libor on the British Bankers'Association (BBA) website, are they required to. Banks merely have to report the rate at which they "could" borrow funds before 11am, were they to decide to do so. How, exactly, each bank determines the rate is largely up to them.

The CFTC settlement says Barclays had "no internal procedures and controls" determining how the Libor rates were calculated. The BBA does not seem to have had any problem with that.

As it happens, the strangeness of this situation was captured very well by Sir Mervyn King in testimony to the Treasury Select Committee in late November 2008, when he had this to say about Libor.

"It is in many ways the rate at which banks do not lend to each other, and it is not clear that it either should or does have significant operational content. I think it is convenient, very often, for people to justify what they do for other reasons, in terms of Libor, but it is not a rate at which anyone is actually borrowing. It is hard to see how it can actually have much of an impact."

And yet, despite their inherent fuzziness and lack of "significant operational content", despite the lack of formal checks on banks' internal procedures for coming up with these rates, Euribor and Libor are the benchmark for pricing transactions worth trillions of dollars. US dollar Libor, for example, is the basis for the settlement of the three-month Eurodollar futures contract, which had a traded volume in 2011 with a notional value of $564 trillion, according to the CFTC.

Many of you will find all of that pretty odd - and pretty shocking. I know most economists would.

The HSIB Shadow Committee for Potential Episodes of a Rebirth of the BBC sitcom Yes, Prime Minister, has been watching C-Span's coverage of Bob Diamond's testimony before Parliament, and wishing for the return of Oliver North.  We wish Diamond had said something along the lines of;

'LIBOR is like bar [pub] time.  Everyone knows the clock on the wall is set ten minutes ahead to give the bartender [publican] a margin of error to get his patrons out before legal closing time.'  Everyone knows it, and adjusts their behavior.

'And, banking has nothing to apologize for, in terms of honesty, in comparison with politics, where convenient fibs have been known to have been told from time to time.'

Think life is short?

You should ask the physicists;

The British physicist whose theories led to the discovery of the Higgs boson has admitted he has “no idea” what practical applications it could have.

Prof Peter Higgs said the so-called ‘God particle’, which is the building block of the universe, only has a lifespan of a millionth of a millionth of a millionth of a millionth of a second.

Nor does it have any theological ramifications (contrary to some journalists);

He refused to be drawn on whether the discovery proved there was no God, stating the name ‘God particle’ was a joke by another academic who originally called it the ‘goddamn particle’ because it was so hard to find.

Foolproof

Ask for the proof, and along comes...the Seattle Times Jon Talton;

The London Inter-Bank Offered Rate, or Libor, is an interest-rate benchmark that affects borrowing costs and credit for some $800 trillion in financial instruments. And the banksters have been manipulating it for their profit. 

Evidence for that last sentence being conspicuous by its absence, but that not need detain us.  We're more amused by Mr. Talton's conclusion;

But the solution is simple: A 21st century Glass-Steagall and criminal prosecution of the top playerz.

The UK never had a 'Glass-Steagall' to repeal in the first place, nor is it explained how it would have prevented false rates on 'inter-bank' lending.

America's Banking Reform Act of 1933 (aka, Glass-Steagall) created a cartel of 'commercial' banks that were free from competition from 'investment' banks.  So, if any of the former wished to publish false rates at which they were supposedly borrowing, they'd have even less reason not to do so (absent competition).

Where there's smoke

This incident bears more than a little similarity to the Libor scandal;

Armed police, the Army and emergency services launched an enormous response and closed part of the M6 Toll road after a passenger on board raised the alarm after seeing a "vapour" coming from a bag.

A large stretch of the route near Lichfield in Staffordshire was closed for several hours as the police, army bomb squad and fire service swamped the scene.

Sniffer dogs were deployed, tents were erected and the 48 passengers on board the Megabus coach were searched one by one before being made to sit on the carriageway in a cordoned off area.

But some five hours late the police concluded the incident was not a terror attack but a "health improvement aid for smokers" that was emitting a "vapour" from a passenger's bag.

Diamond in the rough

Our Shadow Glass-Steagall Committee awaits the Brit who can cast the first stone over the Atlantic in their Libor teapot tempest;

The Barclays executive said that he was concerned in autumn 2008 that the Government may seek to nationalise the bank if they thought Barclays was struggling to raise money.

At the time, Barclays was declaring a Libor rate higher than other banks – which may have been interpreted that it was in financial difficulty. In fact, Mr Diamond believed this was because other banks were manipulating their rates to be lower.

When asked about the conversation with Mr Tucker, Mr Diamond said that he interpreted it as a warning over the Government’s concerns.

He was then asked about the identities of the “senior figures” referred to by Mr Tucker.

“I would only be speculating and it’s not appropriate to do that,” he said. “Paul [Tucker] didn’t mention who he was referring to. I don’t know, senior people."

....Mr Diamond also added that Barclays had repeatedly warned regulators in Britain and America about the problems with the Libor rate.

“There was an issue out there and it should have been dealt with,” he said. “We were disappointed.”

Maybe John Roberts is available to adjudicate

The French have a word for it;

Olivier Cadic, a UK based centre-Right member of the Council for the French Abroad, said he found the charges “scandalous”.

“The Socialists made it clear during their electoral campaign that they would not impose any specific tax for non-residents bar in Switerland and Luxembourg. This is proof that they lied to the tune of 250 million euros per year,” he said.

“Not only they didn’t announce it but they make rental income charges retroactive. This underlines a terrible problem in France: one is never sure of anything when it comes to tax, there is total uncertainty as they change things all the time.”

We can appreciate it.

No *&!%^#@, Sherlock

The Associated Press is shocked...shocked! to discover politics going on in Washington DC;

The former Countrywide Financial Corp., whose subprime loans helped start the nation's foreclosure crisis, made hundreds of discount loans to buy influence with members of Congress, congressional staff, top government officials and executives of troubled mortgage giant Fannie Mae, according to a House report.

The report, obtained by The Associated Press, said that the discounts - from January 1996 to June 2008, were not only aimed at gaining influence for the company but to help mortgage giant Fannie Mae.

Missing from this article is what might be called The Education of Angelo Mozilo starring HUD Sec'y Henry Cisneros.  In 1993, readers may recall the Democrats held not only both houses of congress, but the presidency.  


Cisneros told Angelo Mozilo (CEO of Countrywide Mortgage AND President of the Mortgage Bankers Assn) that that political fact of life meant that they had the power to extend the Community Re-investment Bank--1977 legislation that only applied to actual banks--to non-bankers lenders like him.  Especially to opponents of 'sub-prime' and other unconventional home loans, of which Mozillo was perhaps the most vocal at that time.


To save the Democrats the trouble of doing that, said Henry, why wouldn't Mozilo and his fellows in the MBA, simply sign on to HUD's Best Practices Iniative.  Which was the CRA in all but name.  


Mozilo et al. got the message, and HUD was able to announce a slew of 'voluntary' acceptances of their BPI in ensuing years.  Mozil, one might say, got the message, loud and clear; home lending was an intensely politicized business.  If one wanted to participate, then one had to play both offense and defense.


None of which is can be found as backstory to the AP article above.