Friday, January 18, 2008

Reproduced in full from one of my favorite Blogs: "Long or Short Capital"

Five Simple Steps to Becoming a Billionaire: The Greenspan Method

by Johnny Debacle
  1. Become Fed Chairman
  2. Lower interest rates until you create an asset bubble. Hold them low until stagflation is in the air and a real estate bubble is floating
  3. Stop being Fed Chairman and release a book on how you didn’t do anything wrong and have no regrets. If possible, time it perfectly with the worst real estate market in generations
  4. Join the hedge fund which has profited more in % and dollar terms than anyone else has from your mess (which you didn’t create)
  5. Build a platinum statue of your muse, Ayn Rand, and sleep with it every night

It also helps if you are mostly unethical.

The Elder Younger Munger Should be a Musician!

In an earlier post, Mungowitz pointed out how his oldest looked like Robyn Hitchcock. Today, I discovered that he actually also looks a lot like Will Sheff of Okkervil River. Check it out!

Excuse me sir, Can I interest you in a nice fiscal stimulus??

Apparently everyone has decided that one is in order, we are now just arguing over whether to use Viagra or Cialis and what dosage to impart. Shrub has decided to go back to the rebate well.

Our bedrock economic theory says that rebates shouldn't work, right? Permanent income theory says we consume a fraction of our permanent, or lifetime income each period. So a one time rebate will largely be saved and consumed slowly over time. If we want a big increase in consumption, we'd need a permanent tax cut, right? But unless that was accompanied by spending cuts (or perhaps if it was money financed), simply deferring a tax liability doesn't raise permanent income either, right?

Shapiro and Slemrod claim that the theory is right, that rebates don't spark spending on anything remotely close to 1 to 1.

So, I gotta ask WTF, even though I know the answer. It's the same old shinola. Who cares if it works, let's just be sure we do something!

I guess this is why some economists are arguing that the cuts need to be targeted to people who will definitely spend it right away. Liquidity constrained people or Mankiw's "rule of thumb" agents.

Let me make this offer to Bush right here and now: Give it all to me, the whole stimulus package. I will spend every single penny within a month. I hate to do it, but hey I'm a patriot!

Baby 'tude

I have these friends. Can't identify them, but I do. And they have this baby.
Here is a representative photo.

Now, the mom is one of the nicest, smartest people I have ever met. But, if you cross her, if you go back on your word or if you are a rude jerk....well, that little apple didn't fall far from mother tree. That's what I'm sayin' here.

Great picture. Captures a certain something.

Thursday, January 17, 2008

Truly we live in the best of all possible worlds

The wind beneath my wings!

People let me try to explain, why I'm enamored with Johnny McCain
He told Iowans (in a shopping mall?) that he opposed subsidized ethanol
The Michiganders too he cut no slack, "Them manufacturing jobs ain't coming back"
In South Carolina he put on a show, saying "that confederate flag has got to go"
I am no longer a callow youth, but Mr. McCain, he speaks the truth
In the past I've always chosen to abstain, now I'm thinkin' bout votin' and votin' McCain!

Wednesday, January 16, 2008

No Lurking

If you won't do it for me, or for Angus, do it for Amber: don't lurk.


(nod to Chris, though he lurks sometimes)

What the heck else was he supposed to do???

Published: January 16, 2008

Richard Gunn, 52, was driving a lawn mower down a street in Dargaville late Monday evening when the police stopped him and accused him of driving the mower while drunk, a police spokeswoman said. He had already lost his driver’s license and said he had since been using the lawn mower — top speed 5 miles an hour — to get around. The police impounded the mower for 28 days.

Does this remind anyone else of this? I like this movie.

And the truth shall set you free??

John McCain told the truth in Michigan, Mitt Romney did not. Now Mitt has won Michigan and John McCain has not.

"I've got to give you some straight talk: Some of the jobs that have left the state of Michigan are not coming back," McCain said Wednesday in Grand Rapids. "They are not. And I am sorry to tell you that."

McCain is largely bereft of economic nostalgia, saying in Livonia that it "wasn't government's job to protect buggy factories and haberdashers when cars replaced carriages and men stopped wearing hats. But it is government's job to help workers get the education and training they need for the new jobs that will be created by new businesses in this new century."

For those displaced by job loss, McCain has proposed new worker-retraining and short-term unemployment programs and suggested subsidies that would offset a disparity in salary for those moving to lower-paying work.

Meanwhile Romney, whose dad was once president of American Motors (the worst car company ever and yes I'm familiar with the Trabant) says he won't accept that "defeatist" attitude.

In Michigan, Romney's campaign has portrayed McCain's attitude as a gesture of abandonment toward the state, which Romney has identified as a "canary in the mine shaft" of the national economy. "It tells you he doesn't understand this internationally competitive world we live in today," Ron Kaufman, a Romney adviser, said of McCain. "You can not give away any job for any reason."

Now, Mitt is actually a smart guy, he knows he's full of it and he has no plans to deliver on anything he said. It's just noise, like all the other politicians, except for my boy John McCain. For all McCain's faults I love how he lays the smack down even when it's not in his best short term interests.

Tuesday, January 15, 2008


Over the past weeks the FARC has released 4 hostages. However, there are new reports today that they have since kidnapped an additional 6 people. They reportedly continue to hold around 700 hostages. We've noted Hugo Chavez's claim that:

"These are not terrorist groups, they are real armies, real armies that occupy territory in Colombia, that occupy a position," said President Chavez in an address to the Venezuelan National Assembly.

"One must give recognition to the Farc and the ELN, they are insurgent forces that have a political project, that have a Bolivarian project that is respected here."

Now it turns out there is at least one American who agrees with him, the noted diplomat Oliver Stone:

"Farc is fighting back as best it can and grabbing hostages is the fashion in which they can finance themselves and try to achieve their goals, which are difficult. They're a peasant army; I see them as a Zapata-like army. I think they are heroic to fight for what they believe in and die for it, as was Castro in the hills of Cuba."

Unbelieveable. From our pal Wikipedia:

The FARC-EP has employed vehicle bombings, gas cylinder bombs, killings, landmines, kidnapping, extortion, hijacking, as well as guerrilla and conventional military action against Colombian political, military, and economic targets, to attack those it considers a threat to its movement. It has not been uncommon for civilians to die or suffer forced displacement, directly or indirectly, due to many of these actions. The FARC-EPs April 16 and April 18, 2005 gas cylinder attacks on the town of Toribió, Cauca led to the displacement of more than two thousand indigenous inhabitants and the destruction of two dozen civilian houses. A February 2005 report from the United Nations' High Commissioner for Human Rights mentioned that, during 2004, "FARC-EP continued to commit grave breaches [of human rights] such as murders of protected persons, torture and hostage-taking, which affected many civilians, including women, returnees, boys and girls, and ethnic groups."[29]

Krugman Forecasting Update

Greg Mankiw now weighs in, first saying that "his favorite forecasting services" are still predicting we will avoid an actual recession, and then pointing out that back in 2001, when we had our last actual recession, Krugman wrote that a recession was unlikely and any recession talk was political scaremongering by the Bushies.


The Onion Is The Source of Reality, Again

Have you seen my little "Sorry I'm Late!" essay?

This, from the Onion...a perfect dessert course.

(Nod to Mr. Reasonable)

From my Italian Wife....

From an email from my dear Italian wife, this story.
(If you don't think this could actually happen, you don't
have an Italian wife. And, she does make these anisette
cookies, and they are very good).


This is for all the Italians out there, and those who are lucky enough to be married to an Italian, and even to all the friends of Italians.

An elderly Italian man lay dying in his bed. While suffering the agonies of impending death, he suddenly smelled the aroma of his favorite Italian anisette sprinkle cookies wafting up the stairs. Gathering his remaining strength, he lifted himself from the bed.

Leaning against the wall, he slowly made his way out of the bedroom, and with even greater effort, gripping the railing with both hands he crawled downstairs. With labored breath, he leaned against the door frame, gazing into the kitchen. Were if not for death's agony, he would have thought himself already in heaven. For there, spread out upon waxed paper on the kitchen table were literally hundreds of his favorite anisette sprinkled cookies.

Was it heaven? Or was it one final act of heroic love from his devoted Italian wife of sixty years, seeing to it that he left this world a happy man?

Mustering one great final effort, he threw himself towards the table, landing on his knees in a crumpled posture. His parched lips parted, the wondrous taste of the cookie was already in his mouth, seemingly bringing him back to life.

The aged and withered hand trembled on its way to a cookie at the edge of the table, when it was suddenly smacked with a spatula by his wife............

"Get out of here!" she shouted, "They're for the funeral."

Monday, January 14, 2008

Pole Tax

The Texas Pole Tax, from the Economist.

You just can't make this stuff up.

Still....why such a strange tax?

(Nod to the AVP; Thanks!)

A Free Lunch!

David Malpass is the "chief economist at Bear Sterns" who specializes in semi-incomprehensible editorials in the WSJ. Today's is a dandy. He is proposing that the way to both fight inflation and combat an economic slowdown is to simply raise the value of the dollar!

Before our free meal though, let's have some appetizers.

Did you know that all floating currencies sink?

"Not known for deep thinking, the currency markets tend to sell currencies issued by countries which make markets responsible for currency values. The euro found this out the hard way in 2000 when Wim Duisenberg, then head of the European Central Bank, invited markets to set the value of the euro based on Europe's economic fundamentals. Look out below. The free fall didn't stop until Jean-Claude Trichet took over and installed policies to preserve the euro's value regardless of the market's view of economic fundamentals."

Dude, when one currency is falling, the other currency in the equation is ipso facto rising. When the floating Euro was sinking the dollar was also floating and it was floating up not down.

Did you know that Chinese inflation is due to its weak currency?

"The relationship between currency values and inflation or deflation is equally strong in other countries. China is suffering high inflation now because the gold-measured value of the yuan is weak (even though the trade-weighted yuan is strong due to dollar and yen weakness)."

OK you say, enough with the smart remarks, where's my free lunch? Well here you go. As noted, the premise of the article is that we can lower inflation and raise growth by appreciating the dollar, and, according to Malpass, we can appreciate the dollar simply by saying that we want it to appreciate:

"By saying they want a stronger dollar, the Fed, the president or the Treasury could make it happen. Government policy makers have almost absolute control over perceptions of the future scarcity of dollars. This controls the demand for dollars almost as much as it does the supply, setting its value as much or more than rates do."

Enjoy the buffet people. Don't forget to tip your server!

Your Hugo Chavez Update.

There was supposed to be a kinder, gentler, Hugo in 2008 takin' care of bidness at home.
You know, fighting inflation and getting the garbage collected.

But people, that's just not how he rolls, as the next two items indicate

Chavez stops exports of asphalt and threatens to nationalize firms that do not comply.

Chavez sez the FARC is not a terrorist organization but rather, he argued, "I say this even though somebody might be bothered by it: the FARC and the ELN are not terrorist groups. They are armies, real armies ... that occupy a space in Colombia." He added that the two groups' " insurgent forces" have a goal, "a project," that is "Bolivarian" and that "we respect."

And then of course there's this: Chavez floats the idea of another referendum in 2010, this time just to allow unlimited re-election. With a grin, he told lawmakers, ambassadors and government ministers in a nationally televised four-hour speech before the National Assembly that he was only “thinking aloud” and that it would be merely a “small amendment.” Lawmakers stood up applauding and chanted “Chávez is here to stay!”

You know it dudes!

Firm Commitments

For you podcastrians out there.

A discussion with Russ about firms.

Embarrassing, in retrospect. We NEVER once acknowledge the unpublished contributions of S. Bainbridge. Don't know what we were thinking. Sometimes, it just gets away from you.

Tax Base Mobility

A paper of interest to some readers, perhaps.

The Effects of Tax Competition When Politicians Create Rents to Buy Political Support

Wolfgang Eggert & Peter Birch Sørensen
Journal of Public Economics, forthcoming

We set up a probabilistic voting model to explore the hypothesis that tax competition improves public sector efficiency and social welfare. In the absence of tax base mobility, distortions in the political process induce vote-maximising politicians to create rents to public sector employees. Allowing tax base mobility may be welfare-enhancing up to a point, because the ensuing tax competition will reduce rents. However, if tax competition is carried too far, it will reduce welfare by causing an underprovision of public goods. Starting from an equilibrium where tax competition has eliminated all rents, a coordinated rise in capital taxation will always be welfare-improving. For plausible parameter values it will even be welfare- enhancing to carry tax coordination beyond the point where rents to public sector workers start to emerge.

Some thoughts:

1. "Allowing" tax base mobility? Like when East Germans couldn't leave? There are lots of reasons for mobility, and emigration.
2. It is clear why a "coordinated rise in capital taxation" improves welfare. Unless you are an owner of capital. Then it is harder to see why this is a Pareto-improvement. I can see why it would be POLITICALLY expedient. But if all owners of capital are ALSO better off....well, I will need to figure out what feature of the model produces this result.

Sunday, January 13, 2008

They call him "Mr. Sunshine"

Here's a compendium of the wit and wisdom of one Paul Krugman:

  • "[R]ight now it looks as if the economy is stalling..." — Paul Krugman, September 2002

  • "We have a sluggish economy, which is, for all practical purposes, in recession..." — Paul Krugman, May 2003

  • "An oil-driven recession does not look at all far-fetched." — Paul Krugman, May 2004

  • "[A] mild form of stagflation - rising inflation in an economy still well short of full employment - has already arrived." — Paul Krugman, April 2005

  • "If housing prices actually started falling, we'd be looking at [an economy pushed] right back into recession. That's why it's so ominous to see signs that America's housing market ... is approaching the final, feverish stages of a speculative bubble." — Paul Krugman, May 2005

  • "In fact, a growing number of economists are using the "R" word [i.e., "recession"] for 2006." - Paul Krugman, August 2005

  • "But based on what we know now, there’s an economic slowdown coming." - Paul Krugman, August 2006

  • "this kind of confusion about what’s going on is what typically happens when the economy is at a turning point, when an economic expansion is about to turn into a recession" - Paul Krugman, December 2006

  • "Right now, statistical models ... give roughly even odds that we’re about to experience a formal recession. ... [T]he odds are very good — maybe 2 to 1 — that 2007 will be a very tough year." - Paul Krugman, December 2006
Thanks to Jon Henke for this list

KPC salutes the Great American Inventors

Here's the roll of honor:

Al Gore: the Internet
Mungowitz: the multiple male 0-gasm
Hillary: crying to get what you want
S. Bainbridge: the theory of the firm
N. Pelosi: the presidential veto
G. Bush: Democracy

Mistaken Identity

Either Tyler has reached new heights of meta-irony that I cannot comprehend, or he is having a premature senior moment! I refer to his essay "If I were Ezra Klein", in which he says:

"If I were Ezra Klein, I would worship at the shrine of Barack Obama. I would send Barack Obama random postcards of love, affection, and yes money. But I am not Ezra Klein."

By this I take Tyler to mean that Klein is not doing what Tyler would if he were him. But ladies and gentleman, I ask you, what is this, if not "worshiping at the shrine" or a "random postcard of love".

Holy Crap people: Tyer IS Ezra Klein! That explains so much, doesn't it?