30 December 2011

Da Meme, Boss, Da Meme

Krugman's hijacked my meme!!

I had intended to wrap up the year with a song, but before I do that, I have to claim vindication, since (for those who don't follow links) the title of the good doctor's column is "Keynes Was Right". I'll drop him an email asking for props. I'll even let you know if I hear back. I'm not going to hold my breath.

Now, for that song. The 1950's saw two folk music revivals. The first was in the spirit of Woody Guthrie, who is still not all that welcome where he was born. This was music by and about the left behind. With the Red baiting and such, some of these singers were blacklisted, and the revival petered out. Toward the end of the decade, a folk music safe enough for suburban white folk emerged, and chief among the performers were The Kingston Trio. A bit later, one of their arrangers got together with a couple of not quite so safe (and all three a tad older than the college kids around whom this second revival revolved) white guys to be The Limeliters. A bit more sophistication and a bit more edge. Not the Weavers, though.

But, The Kingston Trio did record and perform this song.

Poverty Hill
Fred Hellerman/Fran Minkoff

They come in their summery dresses and jackets so fine, the rich folks who measure success with a big dollar sign.
They gaze with delight with the rocks and the scraggly pines. The come in the Spring and they stay 'til the Fall
On Paradise Mountain away from it all.

Chorus:
Stubble and stone make a hard row to how. What little will grow, the drought will kill.
The summer folks call it Paradise Mountain but we call it Poverty Hill.

They say we have beautiful faces as grainy as wood. Yeah, they'd like to live here of all places if only they could.
Well, we don't get those wood, grainy faces from livin' too good. It's the rocks and the sun and dust and the heat.
It's too much of work and too little to eat.

(Chorus)

They pack and say what a pity that they have to go. They say that Old Smokey's so pretty all covered with snow,
But how we get through the winter they never will know. No lard for the pantry. No grist for the meal
And winter's are cold over Poverty Hill.

(Chorus)

Yes, we call it Poverty Hill.


Fred Hellerman was a Weaver.
Fran Minkoff was a Robert Hunter to the Weavers; she wrote for others, too.

29 December 2011

The Point of No Return

A comment on Can I Peak Your Interest, said, "there's also a basic supply and demand element to interest rates." (this guy). For better or for worse, this is a common misconception, due to treating cash as a commodity. It isn't. As Adam Smith, the real one, asserted, it exists only to simplify barter. Yes, currency arbitrage has been around at least since Jesus tossed out the money changers. That still doesn't mean that, in a functional economy, cash is anything more than WD-40. That's really all it is.

Where it gets a little more complicated, is in capital. Currency is fiduciary capital, whose only reason to exist is to buy physical capital, which economists have long referred to as plant and equipment/machinery. Until recently, anyway, when the quants on Wall Street invented new and bizarre ways to separate "investors" from their currency.

What determines supply and demand? In consumer goods and services, economists have long hung their argument on "utility": an iPhone or Hostess SnoBall or a visit to a massage parlor each bequeath to me some level of this "utility". It is the utility that justifies the payment. And this utility is in my head. The utility of the three legs of the survival stool; food, clothing and shelter, is easier to calculate. But most of what we consume these days is outside the realm of basic survival. For a bit longer, at least. In any case, the supply and demand idea applies here: the perceived utility sets the level of demand.

With physical capital, it's pure arithmetic. If a new plant or machine yields a 10% improvement in production, that's what I'll pay to have that plant or machine. A lower interest rate won't entice my to buy more of that plant or that machine, if there isn't a market for the widgets I'm making. A higher interest rate will compel me to say no. The interest rate is set by the physics and engineering of the plants and machines available to capitalists. In an ideal world, of course, and the one devised by the Wall Street Banksters is pretty far from that. But all they can do is distort the process, mostly to their advantage. The fact remains: the real rate of return on new plant and machines determines the interest rate. Since we've moved on to a Post Industrial Society (haven't we?), matters get a bit more complicated. If money is lent for purposes other than conversion to physical capital, what's the proper interest rate?

Ah, there's where the Banksters messed up. By convoluting the connection between cash and real investment (which broadens the definition to assets beyond simple plants and machines to include any amortizable purchase; I said it was a bit more complicated), they've been able to obscure the process.

By now most understand that Greenspan is Patient Zero of The Great Recession, when he caved interest rates under BushII. If ours were still an industrial economy, very low interest rates *would* have led to a surge of physical investment, since useful, but lower return, plants and machines become profitable. Rather than buying productive plants and machines, all that Greenspan cash ended up in housing CDOs. Why? Because it was viewed as being easier. Easier for two reasons: 1) there wasn't all that pesky stuff to keep track of and 2) the Banksters didn't have to go find capital intensive businesses to soak up the cash. Recall, much of the free cash was coming out of Asia, and profitable physical investments had already been transferred to Asia. Even the Chinese were looking elsewhere to stash (at a profit) all that cash.

Thus was born the subprime loan. And a short respite for the middle class from the debilitating effects of declining median income. The respite also happened to capitalists: while the Right Wingnuts among them rail against consumer debt, without it, all those cushy executive jobs would go the way of the dodo, along with the companies. As Eccles says, an industrial economy requires a way to absorb increasing productivity. If it doesn't get distributed as wage increases, other methods will be found. They were.

The problem from a capital allocation, macro-economic, point of view is that housing isn't capital investment. Housing is just serial consumption of that "utility" thingee. The home owner doesn't generate an economic return on his use of the house; he just lives there with Wifey and 2.2 mini-thugs. For what it's worth, China is finding itself in a housing frenzy, too. Again, not enough clever engineers figuring out better plants and machines. And if they did, there'd be still lower wages for workers to buy the widgets. Can't get away from the distributional collateral damage. Mortgages are supported by (median) income, and nothing else. They're not real investment.

So, back to the initial comment. A supply and demand answer to interest rates in capital is less true than for consumer goods just because the value of the use of capital (not the cash itself) is, with sufficient effort, exactly calculable. This is not true for most consumer goods, which are valued by intrinsic "utility". Thus, the interest rate is determined by the inventiveness of engineers to devise more efficient machines.

Absent, of course, Dr. Evil.

26 December 2011

Can I Peak Your Interest?

Well, may be I've got the spelling off. But may be not. The point of this essay is to debunk the conventional theory of interest, which asserts that interest is paid because savers want to be paid for the use of "their" money, and that they determine what the "real interest" rate is. Bunk.

What really determines the "real" (and I use those quote marks because no one in the economics field knows what's "real", so far as determining an absolute measure of interest; not the rate, but the definition used to derive the rate, that gets into weighing de/in-flation and other factors) is physics, not savers' time preference. Moreover, the world's banking systems subvert the process with many levels of intermediation (see, for example, this about the opposite).

The current Great Recession (and it ain't over, not by a long shot) dates back to Reagan and the PATCO strike; thus began the Long March to removing the middle class; at least, the non-financial sector employed middle class, what some refer to as the blue-collar middle class. For the True Right Wingnuts, a blue-collar middle class is an abomination, a pariah on society. Reagan began the policies in earnest. Alan Greenspan (remember him?) carried them out. It was under BushII that Greenspan caved interest rates, and thus set up the scenario of Your Home (Equity) is Your ATM©. This was necessary, as the decline in median income and the shift in taxes from the few to the many, was well underway. Without the Home ATM, consumption could not continue. Without consumption, the USofA enters its Japan Period. Now we have, and Obambi the patsy can take the blame. Returning to the policies which caused The Great Recession isn't going to end The Great Recession. It's not a coincidence that the only prosperous period since Reagan was Clinton, who throttled back. Couldn't last, not with a Right Wingnut Supreme Court.

So, what, then, does determine the rate of interest, and why is it important?

The latter first: economic growth, which is to say society wide growth as opposed to Corporation XYZ growth, is solely determined by physics. If the totality of the economic engine produces more from period to period, then growth has occurred. Otherwise, not. Without growth in production, growth in population can't be sustained. And, just to be clear: growth in production means more widgets, not just more cash from selling widgets. As Adam Smith, the real one, said money is not goods and services rather, "Labour was the first price, the original purchase - money that was paid for all things. It was not by gold or by silver, but by labour, that all wealth of the world was originally purchased." I wonder how many Right Wingnuts would still call Adam Smith their Mentor if they knew? Further, the production which matters is that which sustains the society; credit default swaps, not so much.

There's another problem. The monetary growth of an economy isn't, by definition, sufficient to sustain population growth. If all that an economy produces is banking services, for example, those services don't supply food, clothing, and shelter to the population. Some monetary equivalencing takes place to value the services against physical goods. Not to mention the fact that the physical goods aren't produced in the economy, but must be imported. The calculus has quickly gotten out of hand.

The IMF, the World Bank, the Great Gaggle of Bondholders (as exemplified by Skull & Bones) decide how much an American Dollar is worth relative to a Euro or Renminbi. Whoever controls international exchange rates (if that's a sovereign country) gets to tilt the playing field to its advantage. The USofA had that advantage for two decades after WWII, in the form of the Bretton Woods convention: "The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar...". In 1973, OPEC (really, the Arabs in retaliation for the USofA's support for Zionism, which one may deny exists, but is quite real to Arabs), demonstrated that this system was no longer in control. Oil was in control.

And so it has been ever since. The fall and rise of Russia is built on oil. The rise of Brazil, and to a lesser extent Venezuela, so too. The American response, beginning with Carter, was to monetize the economy. Most don't remember, or weren't born yet, but Carter began the assault on Government. It wasn't in full stride until Reagan, but Carter started the ball rolling: "The Carter Administration submitted 11 reorganization plans to Congress to streamline the federal government. All but one, a plan to create a Department of Natural Resources, went into effect. The largest of the plans was revamping the civil service system." Carter ended up politicizing public service, the kind that regular folks choose to do, not the figurehead nonsense of Special Ambassadors and such. Reagan just took the anti-government, and by implication anti-intellectual, cudgel and beat the rest of the middle class with it. It was, and is, no secret that the Federal government employs a lot of highly educated people; the enemies of the Right Wingnuts, whether they knew it or not.

We have two positive feedback efforts at work: the attack by the few upon the many, and the financialization of the economy. The former results in policies which move income and wealth to the .1%-ers and the latter moves capital from physical production to monetary gambits. Taken together, the society regresses.

Where we are now. The American economy has devolved from making things to making deals. When an economy makes things, flation in either direction is merely an inconvenience; trading one thing for another is just barter with currency being the oil for the machinery. When an economy stops making things, and just deals, then currency becomes not just the oil, but the machinery. And therein lies the problem. When the world ran on specie money (chiefly, gold), flation was determined by new gold finds; how stupid is that? Studies of 19th American economy note that it was almost wholly de-flationary, and for the simplest of reasons: real production expanded as the population did and territory did (it was taken from the native inhabitants), but without new currency, prices for all goods and services fell. There was, not coincidentally, recurring recession over the century. Not a bit of history the Right Wingnuts and Goldbugs want you to know about. From a macro-economic point of view, the 19th century was anarchy.

The root cause of the Continuing Recession is two fold: the monetization of economic activity and a massive shift of that money from the many to the few. Fixing it will likely not happen, because to do so requires punishing those who engineered the collapse, and those folks remain in control of monetary policy. When I was a kid, one of my tasks as soon as I could walk and count, was to trek to the corner store and get The Parents cigarettes, $.25/pack. Mother stuck with Viceroy, Father switched among a few brands. One of those was Old Gold, and it's still in production, although now a discount brand. Well, the American Dollar is New Gold. You saw the flight to the dollar on those days when the Euro looked to crash. That will continue. And it's not because the USofA makes all the shiny bits that make other countries need dollars to get them. No, it's because the Right Wingnuts are determined to keep the dollar's value stable no matter how badly doing so disrupts growth and equality. Unlike the period of Bretton Woods, Americans don't get any benefit. Well, the .1%-ers do, of course, but not the rest of us. For the .1%-ers, all that matters in currency; each a Little Goldfinger.


[UPDATE]
This just in.

The biggest nutbag is, of course, Ron Paul. He is both a .1%-er and a goldbug. Here's from today's news:
Economists note that Paul's long-standing proposal to return the dollar to a gold standard would force the United States to relinquish control of its currency.

"We would still have monetary policy - it would be set by gold miners in South Africa and Uzbekistan, rather than bureaucrats in Washington," said Michael Feroli, chief U.S. economist with JPMorgan Chase.

"If you like what OPEC means for oil prices, you'd love what the gold standard would do to financial markets."

21 December 2011

Birds of a Feather

That I find more solace in quants than relational databases has always been true and that my view of RDBMS building remains at odds with many of the Kiddie Koders who run their various asylums, are not excuses for pandering to the knuckleheads who very nearly destroyed western civilization. There's just no forgiving that. And is the main reason I've little interest in doing finance quant work.

It remains rare for the business press to print anything remotely discourteous to the quants, as if anyone else would pay them so much to do so much damage should they stamp their little feet and leave. Well, leave it to the Times to unleash its peashooter. The pea was this little bit of text:

"Banks considered the leverage ratio a blunt tool, an insult to all the investments they had made in the last decade to create sophisticated risk management systems, as well as a threat to potential profits and payouts to top bankers."

Read the whole article for some additional context, although the arrogance isn't highlighted. I'll do that. These are the very knuckleheads who shot the rest of us in the gut, and they want the right to continue to do so. Remember, borrowers can only spend what savers supply; national borders really don't matter. While leverage can be used to inflate the profits of individual banks, or even the whole financial sector, leverage doesn't create real resources.

And, if you've not done so recently, check out the quotes at the top of the blog. Birds of a feather, and all that.

Icarus

The sky is falling. Oracle reported down, a bit, but, in particular, didn't report above expectations. Larry has been sly for a long time, in setting guidance low enough that bettering it is a piece of cake. Not this time. As I type, it's down 15%, and news is that much of the tech sector is getting the flu.

The knee jerk reaction: mortgage the farm and buy Oracle stock. IIIIIIIIIIII'm not so sure this time. Here's why.

Oracle didn't get quite the *new* software sales and *new* hardware sales. The latter is, by all accounts, due to customers waiting on the new machines during the quarter. The former is more speculative. The reports are vague. My take: given the aggressive pricing of Oracle RDMBS, ditto for MySql (yes, it's GPL, but Oracle blasted its support prices into the sky in the past year), and putting the screws to java adopters; folks are looking for a safer port.

On the RDBMS side, Postgres gets ever closer to Oracle, if you're not a Fortune X00 company (and even if you are, and building apps off the mission critical axis). Mainstream pundits are crying that "Da Cloud, boss, Da Cloud" is putting Oracle in an untenable position. It is said that cloud providers use dirt cheap components, soft and hard, and Oracle's RDBMS and Sun-ish machines are just too expensive Up There. As if being cheap were the best way to make money!? "Cheap goods sold dear" is an aphorism that's been around forever. The Cloud is shaping up that way, and if so, I'd avoid Fortune X00 companies that chose to put *my data* Up There. In this nascent era of Cloud, too many stories of wandering data to suit me.

What's really stupid about Larry's ploy: the Oracle RDBMS is built on an engine (the piece that actually does all the inserting and updating) which uses Multiversion Concurrency Control (MVCC, as it is known) which is better suited to the asynchronous nature of the Web/Cloud than the locker paradigm that most other (notably, not Postgres) RDBMS have been using for decades. They've been backing in, so to speak, MVCC support recently, but none is a true MVCC database. In other words, Larry has the proper mousetrap for the setting, but has managed to offend his customers. But, that's Larry's way.

Reports say that Oracle claims the shortfall is due to last minute non-signings. If so, then this is an aberrant glitch. Given that Fortune X00 companies are sitting on, by some accounts, more than $3 trillion, there's no macro reason to not buy new IT. Unless you're a Fat Man yearning for Famine.

20 December 2011

A Warren-ted Search

One of the points "for further research" as I used to say when I was an academic, in the Triage exercise was using social media to measure outcomes. R has a library, twitteR, (yes, R folks tend to capitalize the letter at every opportunity), which retrieves some data. I was at first disinterested, since I don't have a twitter account. Thankfully, twits can be gotten without being a twitterer. Since Elizabeth Warren's campaign is just over the border, and sort of important in the grand scheme of things, I've been exploring.

Here's the entirety of the R code (as seen in an Rstudio session) needed to return the twits (1,500 is the max, which will prove troublesome when the battle is fully engaged):

> library(twitteR)
> warrenTweets <- searchTwitter('@elizabethwarren', n = 1500)
> length(warrenTweets)
[1] 9
> warren.Text <- laply(warrenTweets, function(t) t$getText())
> head(warren.Text, 10)
[1] "@elizabethwarren i hope you win agianst sen scott brown. the 99% r with u"
[2] "@elizabethwarren More $$$ coming your way!"
[3] "#HR3505 PAGING: @ElizabethWarren Help us!!!!"
[4] "@elizabethwarren - not to worry, the only job Karl Rove ever got somebody was George W. Bush. and look how that turned out."
[5] "RT @SenatorBuono: What an amazing turnout 4 a superstar. @elizabethwarren"
[6] "HELLO @ElizabethWarren ! PLEASE RUN as a 3rd party or Ind. FOR POTUS2012. Dems just threwSENIORS underthebus for the working tax cut! EXdem"
[7] "@chucktodd We hope 2011 will be remembered for something a LOT closer to home. #ows #OccupyWallStreet @ElizabethWarren #WARREN/PELOSI-2016"
[8] "RT @SenatorBuono: What an amazing turnout 4 a superstar. @elizabethwarren"
[9] "What an amazing turnout 4 a superstar. @elizabethwarren"


The lines starting with > is the R code. The lines starting with [x] are the output. Here we have 9 twits.

Now, what do we do with the text? For that, I'll send you off to this presentation which came up in my R/twitter search (and is the source of what you've seen here), conducted in Boston. Missed it, dang. With slide 11, is the explanation of how one might parse the twits looking for positive/negative response. By the way, even if you're not the least bit interested in such nonsense, visit slide 29.

As I mentioned in Triage and follow-ups, getting the outcomes data is the largest piece of the work. Simply being able to "guarantee" the accuracy of twitter (or any other uncontrolled source) data, given the restriction on returned twits and such, will require some level of data sophistication; which your average Apparatchik likely doesn't care about. The goal, I'll mention again, isn't to emulate Chris Farley's Matt Foley and pump up a candidate no matter what the data say, but to find the candidate out of many most likely to win given some help. Whether Triage would be useful to a single candidate; well, that depends on the inner strength of the candidate.

16 December 2011

Tenant FarmVille-ers

"Something is rotten in the state of Denmark"
-- Hamlet Act 1, Scene 4 (here for a synopsis)

Why quote Hamlet? Today marked the start of public trading in Zynga, a (or *the*) Facebook gaming company. To the consternation of some, it's falling as I write from the IPO price. You can read the links on the page for further explanation.

But, being something of a Luddite techy (an oxymoron in the manner of "happily married") and Keynesian thinker, I've been dismayed over the last decade or so watching the laissez faire driven destruction of the American economy at the hands of money centered capitalism. Krugman, in today's column, deals once again with the topic, echoing what I said earlier in Part 16 of Dee Feat: inflation ain't happenin'. Now, why it's not happenin' doesn't get explained, for some reason. It's that the money is going into corporate coffers, not middle class consumers. The cash will stay there, and so long as it does, there'll be no growth or inflation. Fat Man likes it that way.

Back to Zynga. The company is another in a long line of unproductive siphons of capital, following LinkedIn and Groupon and the rest. As an aside, it was reported that FedEx is doing a booming business due to internet shopping. So let's see: Main Street gets shut down, and we burn hydrocarbons an order of magnitude more just so little Kimmey can have her Barbie? In no rational economy would this make sense. Zynga is just another private sector redistribution scheme; "money for nothing and the chicks are free".

Dee Feat is in Dee Flation, Part 16

The new CPI/PPI numbers are out here, for example (lines for Dec 15 and Dec 16). As usual, we remain on the edge of outright deflation. I posted another Fat Man short piece this week; that one was happenstance, I wasn't expecting confirmation to fall from the heavens like Manna. Jesus loves me! He really loves me. What follows is from a previous Dee Feat piece, regurgitated for your enjoyment. I picked one at random because it saves typing in a whole new file name; doing it this way, I only have to replace the iteration number. Luckily, it deals with both Dee Flation and Fat Man. Yeah, I'm just a lazy good for nothing.

The assertion that there has to be inflation just because the Fed has eased interest rates and cost of reserves to the Banksters doesn't mean that inflation is on the horizon. It's been on the horizon, of the Tea Baggers and Banksters, for a couple of years now. Nuthin'. And for good reason. None of the money makes its way into the economy. Banksters and Capitalists are sitting on an unprecedented cache of cash. Misers all. "It's mine, all mine, and I'm keeping it. Just in case my greed causes an even worse Recession." Which is what the slier among them want, deflation increases the value of their cash cache, and they've got to do nothing to get the "return on investment". Consummate evil. Bernanke may have study the shit out of the Great Depression, but back then corporations were hurt by it. These, except for the occasional bank, have been swaddled in cash. Which they hoard, hoping for deflation. Mark my words; I've said it before.

Once again, three sources of inflation: cost push, wage push, demand pull. Wages are falling (median income was recently reported to have gone down some more, thanks Dubya) none from there, incomes are stagnant (which is why companies, when anyone bothers to ask, don't complain about wages but "lack of demand") so none from there, leaving only scarcity of goods to drive costs up (and that can only be sustained if consumers have the $$$ to pay the higher cost) and that's not been happening, either. In any case, with a 70 to 80 percent service economy, cost push is an outlier in the best (so to speak) times.

14 December 2011

Fat Man in Famine, part 2

I was doing some searching, looking for prior art on using Twitter, etc. to measure campaign event outcomes, when this 538 piece, from today!, popped up. Remember what I've been saying about Fatman in Famine? Think I was just making it up? Here's proof.

12 December 2011

Tiny Antlers

Yes, the title of this piece is intended to tickle the bottom of long term memory; sounds kind of familiar, I guess I should read it. Alas, Elton John (so far as anyone knows) has nothing to do with Obambi. Elton cared about a tiny dancer.

Obambi, last night, displayed a smidgeon a spunk. Not enough to get me convinced he'll do what's needed. He *still* allowed himself to be portrayed as the sole re-distributor, ignoring the record of the Right Wingnuts since Reagan, who saw to it that the 1%-ers (and the far more evil .1%-ers) got rich while the rest got poor.

The numbers that matter: for 22 of the 28 years from Reagan to BushII, the Right Wingnuts controlled at 3 of the 4 branches of the US government. That's a fact. In that time, through law making and activist judges (not the least, the Supremes), they put a severe tilt in the economic policy landscape.

Unless, and until, Obambi tells that story, he'll be toast. He can't continue to allow himself to be played for Stepin Fetchit.

08 December 2011

Both Sides Now

Judy Collins (not Miller!) had a hit with "Both Sides Now", although Joni Mitchell wrote it and later recorded it. I still hear Judy's version in my subvocalized ear. A while back I wrote, again, about the situation with the Euro and ECB, making the assertion that a regime that only had Dr. Friedman without Dr. Keynes couldn't work. I doubt that I was the first to see this, although I did come to the conclusion unaided by mainstream pundits.

So, imagine my surprise when a front page story in the Times contains this tasty morsel:
"...Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France, who are trying to find a way to save the euro while imposing legally binding fiscal discipline on the Continent's floundering southern economies."

Now, fiscal policy in the immediate context is punitive, but in the long run, it has to be supportive. Just, as I have pointed out more than once, here net Federal dollars flow in large quantity to the poor Red states from the hardworking Blue states. That's just a fact, one that the fat headed Red staters (I'm talking to you, Sarah) can't abide discussing. Europe, if it is to have a single currency, will have to have a centralized fiscal policy. That will mean the well-to-do few end up supporting, so some degree, the poor red headed stepchildren. All those folks, here and in Europe, who used debt to buy stuff saved capitalism. Without their demand for goods, capitalists would have died. They will soon enough, if their incomes are shattered. Without real demand (what economists call the desire for goods coupled with cash to buy; I demand a Ferrari, but don't have enough cash, so that's not real demand), production ceases. Production ceases, and only the Fat Men survive the ensuing Famine. The Right Wingnuts, Cameron being the species on display today, always refuse to accept such a simple and unavoidable accounting. It ain't rocket science.

As Eccles, quoted on the front page, makes clear, economics really is a zero sum game in the immediate and medium term. Again, often written, economic growth only sustains if it's measured on physical output, not financial manipulation. An argument is easily made that the "service economy" is just a skewed implementation of income re-distribution. After all, the highly paid services are only minutely consumer facing jobs. The vast majority are overhead, from a macro-economic point of view. And even outside of closely defined financial services companies, as well. GE got into a mess by shifting from production to money laundering, along with the Banksters. They are mending their ways.

How many hours of office "work" is an iPhone worth? In whose currency? These are the uncomfortable questions. To the extent that economies become disconnected from physical production the more difficult it becomes to value labour. In olden days when butchers bartered with farmers two facts controlled: 1) useful goods moved and 2) both parties were consumers. Barter, when one party is not a consumer and one half of the barter is a corporate service, is more difficult. There's another story about the plight of bond traders in today's edition, as well. Trading financial instruments is the ultimate expression of make-work; what in FDR's time would have been dam building and undergrowth clearing. FDR's implementation accomplished a good deal more Good.

Consumers buy Things, corporations buy services. The notion of a post-industrial economy is a myth, or a lie, depending on how annoyed one is. The Great Recession, not nearly done with, is proof.

02 December 2011

"I'm a Fronkensteen"

There is a movie, "Bad Day at Black Rock", and any objective economist (there aren't any, and that includes Your Humble Servent) must think that today is such a day. The Monthly Unemployment report has blown the lid off of the data. How could a lackluster increase in employment yield a 4 tenths of a percentage point *decrease* in the unemployment rate? Yeah, Dude, what's up.

I'm here to reveal the awful truth.

First, contrary to widespread belief, you're not counted as out of the workforce when your UI runs out. And you're not counted as newly hired when you get a job. All the numbers you're hearing today, and likely for some time, are generated by *surveys*; two in the case of the monthly report. This is one. This is the other. And here is a description of sausage making. The last is a rather long, and detailed, report. I'd wager that few economists, data scientists, and certainly not reporters, have ever read one front to back; I did, but that's when I was in grad school, so it shouldn't count.

These, to be technical, are stratified random samples. Just as Gallup and Harris tell you what the most watched TV show is with a handful (relative to the nation's population) of viewers, the BLS and Census tell you what's going on in the economy with a handful. Don't get fidgety, though. The private sector prognosticators do the same thing. The country is too big, both in bodies and square miles, to do a census each month on citizens and businesses.

But, I will admit, that some news spewers have made a point of the 315,000 drop in the labour force to explain how it is that so-so new jobs leads to .4 point drop in the unemployment rate. Same thing happened during Reagan, but no one's made that point.

It's a Mad House

The NY Times is, if nothing else, schizophrenic. It's surely not the last holdout for Liberalism; that myth was spiked by Judy/Judy/Judy. Today's issue is pluperfect. First, Floyd Norris calls for reinflating housing. But, then, we read this story about Germany.

For those who read regularly, you may recall (if you got here at the beginning) I have written about the folly of housing as investment. Housing is capital wasted, if one is a Smith/Rand leaning economist, anyway.

Read both pieces. Note, particularly, the German Man-in-the-Street. And the passing reference to inflation of house prices; yes, the speaker uses the word "inflation" and not "appreciation". Because, housing is just serial consumption, not investment.

29 November 2011

What's The Difference?

To continue with the Triage project, I've spent a day or two with more graphics texts (about which I'll be musing anon), and getting more familiar with the mapping scenarios.

Separate from the scatterplot matrix data shown in Triage, which would be used to measure the micro components of a campaign, is the question of displaying national trend, twixt Us-uns and Them-uns. For that one turns to map graphics, which is a whole other world. Still in R, mind, but not statistical in nature.

What I have recently found is this site, which replicates a US map with 2004 election results. Now, our Apparatchiks won't be downloading zip files from outside sources, of course. On the other hand, the files make for a perfect dive board for the PoC. Load them into PG, swapping Republican for Bush and Democrat for Kerry and Other for Nader (that's not much of a stretch!). Just for completeness, I'd found much earlier (but can't find that I'd cited), this map exercise, but as of now, the author has been too embarrassed to post the R that does it. While only some form of income data (not specified), it is a follow-on (linked to) to an election stream map set, also not supplied with the R that made it. Nevertheless, one can conclude that with enough time, this is a task suited to R. As mentioned in an earlier post, the animation bits are likely via googleVis.

I'll be using his data, since it provides a basis and I don't have to concoct some, though not the R he used (still using the stock R from Wickham). It's not clear how the numbers were derived.

What is really useful about the 2004 map posting is the data source: a county level count. Get these into a PG table, and we have a surrogate for data which our Apparatchiks would have, and which we can further expand with relatively simple SQL; just to see how a map would change. The notion for this part of the Triage effort is to measure the effect of national campaign spending, post some event/ad/debate/foo, at the POTUS/party level; a RNC/DNC (or 501/527/foo group) view of the country.

Here's the new PG table where we load:

CREATE TABLE public.election (
state varchar(25) NULL,
county varchar(25) NULL,
tot_precincts int4 NULL,
precincts_reporting int4 NULL,
republican int4 NULL,
democrat int4 NULL,
other int4 NULL,
constraint pk_election unique(state, county)
)
WITHOUT OIDS
TABLESPACE pg_default


And we get it loaded thus (concated from the state/county files in the zip):

copy public.election from '/databases/rawdata/2004election/output.txt' using delimiters ';' csv header

Note that column names are underscored, rather than camelCase, since PG forces quoting to use anything in the database if there are Caps in names. Yuck.

And here's the PG + PL/R (I've left it as is; comment/uncomment to generate each of the maps, this is the difference map, shown last. The first set are for the two event maps, while the other is for the diff map):



CREATE OR REPLACE FUNCTION "public"."us_graph" () RETURNS text AS
$BODY$
X11(display=':5');
pdf('US_graph_diff.pdf');
library(maps)
library(plyr)
library(proto)
library(reshape)
library(grid)
library(ggplot2)
library(mapproj)
states <- map_data("state")
#elections <- pg.spi.exec ('select state, sum(republican) as "Republican", sum(democrat) as "Democrat" from election where event_number = 2 group by state order by state');
elections <- pg.spi.exec ('SELECT a.state, sum(a.republican - (SELECT b.republican FROM election b WHERE b.event_number = a.event_number - 1 and a.state = b.state and a.county = b.county)) as Republican FROM election a where a.event_number = 2 group by a.state ORDER BY a.state ')
elections$state <- tolower(elections$state)
elections$republican <- elections$republican/10000
choro <- merge(states, elections, sort = FALSE, by.x = "region", by.y = "state")
choro <- choro[order(choro$order), ]
#p <- qplot(long, lat, data = choro, group = group, fill = Republican / Democrat, geom="polygon", asp=.6)
p <- qplot(long, lat, data = choro, group = group, fill = republican, geom="polygon", asp=.6, main = "Poll Shift", xlab = "", ylab = "")
p + labs(y = "", x = "")
p + opts(panel.grid.major=theme_blank(), panel.grid.minor=theme_blank(), panel.background=theme_blank(), axis.ticks=theme_blank())
p + scale_x_continuous("")
p + scale_y_continuous("") + coord_map()
p + opts(axis.text.x = theme_blank(),axis.text.y = theme_blank(), axis.title.x = theme_blank(), axis.title.y = theme_blank(), axis.tick.length = unit(0, "cm"), axis.ticks.margin = unit(0, "cm"))
p + scale_fill_gradient(limits = c(0, 90))
print(p)
dev.off();
print('done');
$BODY$
LANGUAGE 'plr'


All that spinach for the library calls got eliminated by making an .Rprofile in postgres user's home with the following line:

.libPaths("/home/postgres/R/x86_64-unknown-linux-gnu-library/2.14/")

You could also call out the libraries explicitly; both ways work. The additional spinach is various directions to eliminate the lat/long grid on the maps. None work!


Here's the Event 1 map:


Now, let's update the table to include an event_number (easier than using a date, anyway) and an event_type. That way, we can generate maps in sequence, but also note what sort of event just/last happened. We could also generate maps sequences for only certain sorts of events (they'd be in a check constraint).

So, let's make some new data:

insert into election (select state, county, tot_precincts, precincts_reporting, republican * .8, democrat * 1.2, other, 2, 'foo' from election where event_number = 1);

We wouldn't get such dramatic shifts (modulo Swift Boats) in the real world, but this is PoC territory.


This yields a new Event 2 map:


I'm still grappling with my main wish list item: showing the changes in the colors. As it stands, each map takes the full gamut, leaving the legend to display the shifts; doesn't do that all that well. Viewed another way, why not show the delta of polling strength (vote displays are a bit late, after all)? We can do that with a single map. How to get the data out of the election table? For that a correlated subquery is sufficient. It's that big SQL statement.


Here's what the delta map looks like:


What we see is the shift, in absolute, not relative, numbers. So Texas looks to be more Democrat from Event 1 to Event 2 just because it started with more votes; same with California.

Getting rid of the lat/long grid is still a problem, but then, this is a free PoC. Cheap at half the price.

25 November 2011

Tipoeing to the Truth

The NY Times makes another tiptoe step toward truth today. The published an op-ed piece by Herbert Gans, who is semi-famous. What remains unanswered is the question: what has caused the imbalance? In order to fix the problem, the problem must be correctly surmised. Gans, and others, continue to ignore the elephant sitting on the coffee table. He floats a few band-aid tactics, but ignores the cause.

The problem is two fold (as I have written in the past, so this is just today's musing). The first is that recovery from recession presupposes that the workforce can be re-employed doing what it did before the Crash, if only the economy's demand could be restored. That doesn't work this time, since the stability of the Bush years was based on two non-productive uses of capital: housing and finance. As unpleasant as it may be to hear, but putting capital into housing requires diverting capital from productive uses. The only way for the banksters to make money on housing is for the mortgage holders (that vanishing Middle Class) to see increasing income. Houses, per se, don't generate output the way a Brown and Sharpe milling machine does (or any physical capital). Therein lies the root cause of the Crash. Without growing incomes, housing becomes unsupportable as investment.

Finance is a zero sum game: all of the cash involved is fixed by the scope of the savers. Profit to the finance wizards is extracted from the flow of cash between the savers and the borrowers; the finance wizards don't create wealth, they purloin it. More than a few, formerly just from the left fringe and latterly from more staid venues, have suggested that our economies were better off (and would be again) when finance was reduced to the boring trade it was before the failed math fiddlers got involved. They don't appear to have brought anything positive to the situation. Off with their heads.

The elephant is distribution, as it always has been. Those who are lucky enough (and Krugman's piece today says so again) to score big did so out of luck, but continue to assert that it was personal brilliance. They still insist that none of the mess was their fault. It was mortgage companies, then banks, that created sub-prime and liars' loans in order to sell overpriced houses and pocket excess cash in the process. The liars didn't walk in pointing a gun demanding a sub-prime mortgage; there's been sufficient reporting of cases where folks (often of darker hue) were given only sub-prime mortgages when they qualified for conventional. The mess was created by the Gatekeepers to housing, for their benefit, not for the home buyer or society writ large. Off with their heads, too.

22 November 2011

That Stay Puft Man

One of the funniest bits in all of film comedy is the Stay Puft Man vignette in "Ghostbusters". It would be nice to see that look on the faces of Fat Men in Famine (way back in May, 2010 they were my subject). As second prize, is today's NY Times; a mother lode of confirmation. I just got back from my reading of the dead trees version, and here are the stories which relate to Obese Oligarches (comforting to see that the Mainstream Media finally gets it):

Corporations cash out and layoff
LinkedIn's execs cash out, big time
Europe's continuing angst
the party never started

I'll give you just one quote (from the first cite):
"But spending on capital investments like new plants and infrastructure has stagnated more broadly in corporate America, confounding efforts by the Obama administration to spur economic growth. Capital expenditures by companies on the Standard & Poor's 500-stock index are expected to total $546 billion in 2011, down from $560 billion in 2008, according to data compiled by Thomson Reuters Eikon."

As the Fat Man pieces explain, when you've got lots o cash, deflation is the guaranteed, risk free, way to acquire income. Now, that's what's wrong with this country. What the Right Wingnuts won't admit, for if they did their arguments collapse, is that the "debt" of our middle class (here and in Europe) is the necessary cost/price of capitalists' wealth. Without the cash, no one buys the stuff, and if no one buys the stuff, there's no return on capital. Note, carefully, the implication of the quote; to the extent that corporations make "profit" from financial manipulations rather than goods production, is the measure (inverse, alas) of an economy's stature. Jesus threw out the money changers. Oddly, our self-righteous Right Wingnuts don't seem to mind them. As I've written a number of times, economic growth isn't measured by cash increasing, but by increasing production of consumable goods. The only way for a business to re-pay debt is to generate *new* income (or cut costs, but that's explicitly limited to shutting down the business) levels from increased production. Real economic growth comes from better production, not money manipulation. Wall Street Banksters managed to change the rules to favour money manipulation. We, and not they, are the ones harmed by such "free market" decisions.

That last cite might seem out of place. But it fits in this way: I watch Bill Maher's show on Friday/HBO when he doesn't load up on Right Wingnuts; however, during his last show he ranted that college students were not majoring in science and engineering enough to suit him. He quoted some numbers, I forget the particulars, but he contrasted performance art (or somesuch) to engineering (ditto), with the former number of graduates greater than the latter.

Here's a paper looking at the issue, and a quote:
"Paul J. Kostek, who previously managed career activities as vice president of IEEE-USA, the electrical and electronic engineering institute, says there is no shortage. 'You saw what happened to the price of gasoline when there was a shortage last summer. If there's a shortage of engineers, why aren't people paying $200,000 to hire an engineer.'"

There's been plenty of anecdotal evidence that undergraduates flocked to Finance just because it was less rigorous and more lucrative. It's no secret that a degree from a business school was worth many Bongo Bucks. Not so much anymore. It's also documented that undergraduates are leaving computer science; there's no way to earn back the cost competing against a $2/hour Indian.

09 November 2011

Honesty in Government

[UPDATE] -- copied Sales the first time, same issue.

As I transition into data scientist, which means re-adding my stats mojo to my RDBMS mojo (not replacing the latter with the former, by the way), I've come across more than a few postings and writings in the statosphere about truth in data. The writing is always by data professionals (not lobbyists and the like, near as I can tell), and the point is always that the data is truth. By truth one means the most accurate picture of the real world, unadorned by propaganda.

Today's Federal data dump includes September wholesale inventories. They were down .1%. Here's the quote: "..were $462.0 billion at the end of September, down 0.1 percent (+/-0.2%)* from the revised August level." What's the starry thingee, one might ask? Well, it's the link to a footnote.

Here's the footnote:
"* The 90 percent confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero."

Two points to note about the footnote: 1) the CI is 90% level, which is very generous and 2) it spans 0, which means what the note says. I wonder how many of the reports about the report will bother to tell us about that.

Here's the link to the original; click the link for Excel or PDF.

06 November 2011

Walk Like an Egyptian

I walk funny. Such has been observed, sometimes as complement and sometimes as insult, for years. The earliest complement I recall happened when I was working with guys from Touche-Ross (Boston), right out of grad school (1973, or thereabouts). One asked me how long I'd been studying karate. I hadn't said that I was, but I had been for about 6 months. I asked what led him to the conclusion. It turned out that it was my gait.

In high school, the response was somewhat different, along the lines of fruityness. Now, I'll admit to having a preference for hot dogs over tacos when it comes to food, but just the opposite when it comes to activities Sybaritic. Interpret that as you will.

The whole thing traces back to being a Boy Scout, around 1960. The Boy Scouts back then weaved in a good deal of "Indian" lore. One of the Indian practices involved how they moved through the forests. Specifically, how the feet should be held during walking and running. Most folks, especially girls who've spent time in ballet lessons, walk with toes splayed out. Donald (or Daisy) Duck in motion. Not so for the Indian; foot is exactly straight, either walking or running. The explanation in the Handbook was that walking with straight feet saved some number of steps per mile. I trained my feet to point straight ahead. I guess that led to some anomaly in how my gait looked.

That time in Boston wasn't only in karate academy (so he called it), but also running on the indoor track at the Boston YMCA. I ran barefoot, although I guess that wasn't within the written rules. I got spoken to occasionally. I still ran barefoot. Running barefoot required a different form from usual running. The fat running shoe had come into existence, so the common way for runners, especially distance runners, to stride was heel first. I never liked that; too much shock up the leg, shoes or not. Barefoot runners could never do that, anyway. The barefoot runner strides onto the ball of the foot, and releases some weight to the heel as the opposite foot moves forward. It takes more energy to run to the ball of the foot, since the heel stride allows the runner to "fall" onto the foreleg. Since I wasn't interested in marathon running, generating the extra oomph wasn't a problem.

Ball strike running encourages that straight foot form, as well (you want to land first on the knuckle of the big toe, that's what it's there for, then roll through to the arch). Fit very nicely with my zeitgeist.

What in the world compelled me to type all this out? Today's Times magazine has a story about Tarahumara Indians and barefoot running. Seems that what I'd learned from the Boy Scouts 50 years ago, and how I'd run 40 years ago is now Cool. While having nothing to do with Keynesian economics, yet another demonstration of my humble ability to foresee the future. Now, that's cool.

(I read this in today's Times Magazine, dead trees division. Looking for the link for this piece revealed that the author of the article has been writing about this topic for some years; even has a book. First I'd heard of it.)

27 October 2011

Bubble, Bubble Toil and Trouble

I put up this comment, in reply to an R-blogger blogger musing on bubbles. Liked it well enough to share with you all.


So far as the real estate bubble: some of us saw it happening in 2003, although the (self interested) mainstream pundits didn’t or wouldn’t. The measure is simple: the historic ratio of

median house / median income

is a (near) constant over short to medium term in any one place. Aggregated over the USofA, it’s a bit flaky, given regional differences in price/wage levels.

Here’s a plot: http://drcoddwasright.blogspot.com/2011/08/viagra-at-home.html

The point of bubbles is quite simple, they occur when mo money chases less stuff. Credit isn’t really needed, although that certainly happened with the Subprime Mess. A bubble can happen with just a shift of funds out of proportion to some sector. The first dot com bubble was just that; a massive shift of existing funds to a narrow sector.

The Subprime Mess was motivated, in the patient zero sense, by Greenspan’s decree that interest rates would be held down. The bread crumbs can be traced. The point is that it was not the result of independent homo economicus decisions, but deliberate political decisions by a few political appointees. Pre-20th century, not so much.

The financial services coup de etat of our economy is a bubble, from the point of view of historic proportion of national income. This was a co-ordinated shift from the many to the few orchestrated by Right Wingnuts in Congress. Nothing to do with excess credit. One could go on for days.

Specific (or narrow sector) stock bubbles are generally driven by ignorant retail fools. We saw that with vaccine stocks two years ago. Nothing to do with excess credit. Netflix is quite the same.

In other words: Minsky’s only half (b)right. Inflation requires mo money, but narrow (in time or space) inflation need not require global increases in cash/credit. If you look at median income from 1980 to 2008, you’ll see that it moved virtually not at all. The Subprime Mess was motivated as much by existing funds shifting to “higher yield, lower risk” housing instruments due to Greenspan’s enforced low interest rates. Up to then, yes, housing instruments were low risk, *just because* they were restricted to conservative price/income ratio. Blow out that ratio, and you blow out the risk. Some noticed, but the mainstream pundits turned a blind eye. It was in their self interest to do so.

Analytics don’t help much when the propellent is vicious politicians in league with Banksters.

Dee Feat is in Dee Flation, Part 15

Today's news story/analysis adds more data to what is obvious, we're headed into the ditch. Thanks to the Right Wingnuts who've decided that we all should have to feel the pain, just not the Banksters.

The assertion that there has to be inflation just because the Fed has eased interest rates and cost of reserves to the Banksters doesn't mean that inflation is on the horizon. It's been on the horizon, of the Tea Baggers and Banksters, for a couple of years now. Nuthin'. And for good reason. None of the money makes its way into the economy. Banksters and Capitalists are sitting on an unprecedented cache of cash. Misers all. "It's mine, all mine, and I'm keeping it. Just in case my greed causes an even worse Recession." Which is what the slier among them want, deflation increases the value of their cash cache, and they've got to do nothing to get the "return on investment". Consummate evil. Bernanke may have study the shit out of the Great Depression, but back then corporations were hurt by it. These, except for the occasional bank, have been swaddled in cash. Which they hoard, hoping for deflation. Mark my words; I've said it before.

Once again, three sources of inflation: cost push, wage push, demand pull. Wages are falling (median income was recently reported to have gone down some more, thanks Dubya) none from there, incomes are stagnant (which is why companies, when anyone bothers to ask, don't complain about wages but "lack of demand") so none from there, leaving only scarcity of goods to drive costs up (and that can only be sustained if consumers have the $$$ to pay the higher cost) and that's not been happening, either. In any case, with a 70 to 80 percent service economy, cost push is an outlier in the best (so to speak) times.

26 October 2011

Concentration

Before there was "Jeopardy!", there was "Concentration". 1964 and 1958 (or 1963, depending on how you measure) respectively. Both were of the brainiac game show genre, with "Concentration" aimed at short term memory and visual translation. For those who weren't there: there was a game board, which was a grid of squares (just like "Jeopardy!"). Each square contained stacked cards. The outer card was just the serial number of the grid slot. Contestants called for two cards, which revealed the names of prizes; if the names matched, the contestant had the prize added to his/her cache. Then the cards were removed from the stack, revealing parts of the underlying rebus puzzle. The first to solve the puzzle won his/her list of prizes. Concentration to remember which prizes went with which squares, and translating the rebus pictures into a coherent statement.

What jogged my memory (and never a very good one) was a comment by Tom Cordle to the posting of From Sea to Shining Sea on Open Salon, where these posting are duplicated (and those readers make the effort to comment). "It's also a geography lesson, too, because in the latter images, one can identify many major metro areas of the US as blue patches in a sea of red." Concentration. The graphics worked.

I've mentioned in the past that the Tea Baggers' days are short, supposing that the Federal Courts don't curtail free and fair elections (which is in no way a given), in that urbanization leads to liberalism. Demographers and poli-sci types have known this for decades, and is one of those factoids which sits at the back of my brain stem and occasionally barks at me. I usually then pen something, making the point.

You can see what Tom refers to in this back link from the original citation. The first display is a time series of Red/Blue state morphing. So long as militia folks don't get to be the only legal voters, Tea Bagging is a flash in the pan. One can note that the resistance to Nasty Capitalism in Europe is stronger, in part because Europe is more urbanized.

The distinction exists in the current posting by Sparks, which sparked my interest, but it doesn't jump out quite so strongly in the static images.

25 October 2011

From Sea to Shining Sea

As follow up, or update, to the Triage piece, I offer up this post from an R-blogger. As it stands, there's no code (the author claims ugliness), but does applaud ggplot2. The latter I expected, in that Wickham's book has a section (5.7) on using maps, but not much detail.

Of more interest, is the data source, shown as CCES on the plots. Turns out that this is CCES. While not real time data, as Sparks demonstrates, R and ggplot2 can show both categorical and discrete variable impact over a map. For the Triage project, one would need internal real-time (or close) for the effort to be worthwhile, but I'd wager that it is.

21 October 2011

Guilty, Guilty, Guilty

I finished the first draft yesterday, so it was with some pride that I note this news today. As the subtitle of this endeavour says, "It's the Distribution, Stupid". Yes, one can have an economy and society which runs on many poor and a few rich, but that wasn't the notion of the founding fathers, or Adam Smith (who published "Wealth of Nations" in 1776, too). No, the notion of the founding fathers was that autocracy shouldn't happen here. Their ideas depended on an America which ceased to exist in mid 20th century: if you didn't like the society outside your door, you light out for Indian territory, where there's free land and abundant resources. We're going European. Well, gone European. Our survival depends on recognizing that an economy which wastes resources at light speed can't sustain.

I was surfing through the Yahoo! financial pages, when I saw a headline to an article: "Modern Economics has Failed". Neat headline, but not much meaning. "Economics" is the study of how economies actually work. The various theories, attributed to the field, include the ever famous Keynesian, supply side, Austrian, classical, neo-classical, and a host from the 19th century back to before Adam Smith (the real one). For most of these centuries, the field was called Political Economics, in recognition of the fact that States make the rules; while autocracies bent toward social Darwinism long before he was even born, structures of rewards and punishments were always around. And there were always rules, generally tilted toward the Monarch. But rules there were. Economics, when prescriptive, is divergent in thought, and this divergence isn't based on some fundamental economics, but politics. Despite the rise of Behaviour Economics, what economics has to offer is cause and effect policy. Thus, the Right Wingnuts continue to cling to Trickle Down, in the face of total failure over decades. Failure, of course, from the point of view of the commonweal, but not from the point of view of the 1%-ers, who support the Right Wingnuts' marketing.

Which brings me to the thrust of this musing, -isms.
tribalism
monarchism
socialism
capitalism
communism
fascism

That's the historical lineage. Tribes looked out for their own, and to a lesser or greater extent, tried to usurp from neighboring tribes. Once tribes got big enough, and society built cities, monarchism became the rule. And was the (nearly) universal structure in "civilized" societies for millennia. There are those who argue (and I agree) that feudalism marked the beginning of socialism, in that the sovereign recognized a duty to provide for lower classes. In today's arguing, feudalism is often portrayed as slavery, and it certainly wasn't. Not much upward mobility, though. While some describe today's rightward drift as toward a new feudalism; if only we were headed to something that good.

So life remained pretty boring until industrialization made capital more significant than before. Capital in agrarian societies is mostly an oxymoron.

Capitalism brought a drastic set of changes. Urbanization. Concentration of power. And lots of machines. The China situation, where much of American goods are produced (is that, too, an oxymoron?), is a lot like 19th century New England mill towns. The state of people living and working in those mill towns is ably documented by photographs. Yes, the hell of child labor and the rest existed into the modern age. The Foxconn facility is larger, but the principle of production is the same: many cheap hands. For the Chinese government, it makes sense. It's the same sense that happened here in the 19th century, and even early 20th; coerce, cajole, entice the rural population to migrate to cities for "a better life". India has done the same. It's a simple proposition, you get to earn enough for some food and a place to sleep, the only question is whether you prefer to work amongst piles of animal shit outside in the rain and snow or inside without the shit. The quality of your skills is not relevant (if this sounds familiar, yes Mao did that too), since none are needed.

Marx saw where this was all going, and concluded that it wouldn't last for long. He devised a different set of principles, studied a country (which was not Russia, but England), and invented communism. The basic idea is that intelligence is what matters, not accumulated wealth. Accumulated wealth leads to sloth. Living in a seat of hereditary monarchy, he well saw that smarts weren't a qualification for having power. He posited that smart decision making would be made by those best equipped, not those who'd managed to just get rich.

Russia, tossed out the Czar and adopted a version of Marx. Not really very close, but enough to scare the crap out of capitalists in Europe and the USofA. Which gets us to Mussolini. He's the guy who invented fascism, both in word and fact. Here's the Wiki article. What our dear Tea Baggers are promoting, although they claim to be against The Elites, is fascism.

Which brings us to the Pubs. While Obambi hasn't lived up to his (own) billing, none of the set of flunkies can lay a glove on him. Well, if he treats the election as war, which is what the Koch Party surely does, and he's conspicuously lacked so far.

Back to the beginning: in what way has modern economics failed? I said it hadn't, only because economics is largely descriptive in nature. Yes, Keynes and Laffer and Friedman and so on offer up "theories", but The Great Recession wasn't caused by failure of economics. (For those in the know: Samuelson was the one who started the trip into mathematical economic theory, thus obscuring the principles of economics ever further. Somewhat off topic, but here's a post on the effect of interloper quants; follow the back links for more detail. That happened in economics in the mid 1970's. The profession has devolved ever since.) There has been, at least since Harding and the roaring 20's, a split within professional economics between those who earn a living at it by providing justification to constituents (just like a lawyer) and those who look for ways to advance the commonweal. And for those in the second set, much internecine conflict over how to do it. As always, the loggerhead is whether to support the wealthy or the poor with government action. Those that wish the State to support the wealthy generally phrase their argument in terms of social Darwinism: the rich have to be coddled or they'll up and leave for someplace else, and we can't have that; my beloved Bermuda is deep in such throes. I know, that doesn't make sense, but I didn't say that Right Wingnuts made sense.

The failure which drove us to The Great Recession was purely political. We are where we are because for 22 of the 28 years from Reagan to the end of BushII, the Wingnuts controlled at least 3 of the 4 branches of the Federal government. Re-read that sentence. The Wingnuts, largely because Democrats are feckless, have gotten away with blaming anyone to the left of Attila the Hun with anything bad in the economy. Even given the stark evidence that only under Clinton did median income in the nation make any upward progress. One of my favourite quotes, of all time, comes from a recent Times article (spoken by a Bankster): "Financial services are one of the last things we do in this country and do it well. Let's embrace it. ..." Said the spider to the fly. And some wonder why there's an Occupy Wall Street?

Which brings us back to a failed economy (I was tempted to say Failed State, but that would only insult some really famous ones). First, what do we mean by modern economics having failed? Thus encouraged, I went past the headline to the story. And he's right: it's all about politics. Failed in the jingoist notion of American superiority. Failed in the sense that our tribe has been torn asunder. But the author gets it wrong in ascribing the cause to the profession of economics. The cause is purely political.

Now, how to fix the situation. If by fix we mean restoring GDP, then only Keynesian knobs and switches will work. None others have worked in identical times before, they won't work this time either. The Wingnuts always lay the blame for economic decline on workers getting too big a piece of the pie, in face of the pure fact that demand for the Wingnuts' widgets fell off the cliff because workers had no money to buy widgets. The punish labor approach of Reagan and both Bushes didn't work; they gave us The Great Recession.

The simple answer is that an economy can't grow out of depression by making most folks poorer tomorrow than they are today. Making the rich richer is the Right Wingnut agenda. It always works for the 1%-ers, but not the rest of us. It is obvious that restoring a growth inducing distribution of income is the only solution. How that's done really doesn't matter. Only until, and if, the middle class does have most of the income, and thus broad based consumption, will we progress. Japan never did.

19 October 2011

Once Again, With Feeling

I get tired of redoing the litany of why we got where we are, so I've written up a few sentences that get to the kernel. Today, I've put a bit more flesh on the bone. I hereby release all copyright to the public domain, and encourage all to use this words in email forums, mailing lists, or anywhere Right Wingnuts spout lies. Peace.



It was the Right Wingnuts from Reagan to BushII that gave us a Great Recession. And they ran at least 3/4 of the government for 22 of those 28 years. The reason "gummint don't work" is that for those 22 years, the Right Wingnuts actively sabotaged Government. It was they who repealed Glass-Steagall, and let the finance corporations rape the Middle Class. Before Reagan, the 1% took 9% of national income, during BushII it was 24%. Except during Clinton, median income fell over the 28 years. Unless you're a 1%-er, there's nothing that the Right Wingnuts do for you. Get your facts straight. And they were the ones who made it easy to ship our jobs overseas. Get that fact straight, too. Have a nice day.

10 October 2011

By The Numbers

There's that famous quote from The Bard, "The fault, dear Brutus, lies not in our stars, but in ourselves if we are underlings." As my fork in the Yellow Brick Road tracks more towards (what's now called) Data Science, various notions bubble to the surface. One lies in an age old (within my age, anyway) dispute between traditional (often called frequentist) math stats and those who follow the Bayesian path. From my point of view, not necessarily agreed to exist by those on the other side, Bayesian methods are merely a way to inject bias into the results. Bayesians refer to this "data" as prior knowledge, but, of course, the arithmetic can't distinguish between objective prior knowledge and fudging the numbers.

So, I set out this morning, being Columbus Day (a day honoring Discovery for some, invasion for others), to see whether there're any papers floating about the intertubes discussing the proposition that our Wall Street Quants (those who fudged the numbers) bent Bayesian methods in their work. As I began my spelunking, I had no prior knowledge about the degree to which Bayesian had taken over the quants, or not. Quants could still be frequentists. On the other hand, it is quite clear that Bayesian is far more mainstream than when I was in grad school. Could Bayes have taken significant mindshare? Could the quants (and their overseer suits) abused the Bayesian method to, at least, exacerbated, at most, driven The Great Recession. It seemed to me likely, any crook uses any available tool, but I had no proof.

Right off the bat, search gave me this paper which references one (at a pay site) from the Sloan Management Review. The paper puts the blame on risk management that wasn't Bayesian. You should read this; while the post does discuss the SMR paper on its merits (which I couldn't read, of course), it also discusses the flaw in Bayes (bias by the name of judgment) as it applies to risk management.

Continuing. While I was a grad student, the field of academic economics was in the throes of change. The verbal/evidence/ideas approach to scholarship was being replaced by a math-y sort of study. I say math-y because many of the young Ph.D.s were those who flunked out of doctoral programs in math-y subjects. Forward thinking departments recruited them to take Samuelson many steps further. These guys (almost all, then) knew little if anything about economic principles, but department heads didn't care. These guys could sling derivatives (initially the math kind, but eventually the Wall Street kind) on the whiteboard like Einstein. I noted the problem then, the 1970's. This paper touches on this issue (linked from here). "These lapsed physicists and mathematical virtuosos were the ones who both invented these oblique securities and created software models that supposedly measured the risk a firm would incur by holding them in its portfolio." Nice to know it only took 40 years for the mainstream pundits to catch up.

And, while not specifically about Bayesian culpability, this paper makes my thesis, which I realized about 2003 and have written about earlier: "Among the most damning examples of the blind spot this created, Winter says, was the failure by many economists and business people to acknowledge the common-sense fact that home prices could not continue rising faster than household incomes." One of those, D'oh! moments. McElhone, the Texas math stat, introduced me to the term 'blit', which is 5 pounds of shit in a 4 pound sack. By 2003, and certainly following, the US housing market had become rather blit-y. The article is well worth the reading. There are links to many other papers, and it does raise the question of the models used by the rating agencies. Were these models Bayesian? Were the rating agencies injecting optimism?

Which leads to this paper, which I'll end with, as it holds (so far as I am concerned) the smoking gun (which I found to be blindingly obvious back in 2003): "Even in the existing data fields that the agency has used since 2002 as 'primary' inputs into their models they do not include important loan information such as a borrower's debt-to-income (DTI)..."

This few minutes trek through the intertubes hasn't found a direct link between Bayes and the Great Recession. I know it's out there. I need only posit such as initial condition to my MCMC (look it up).

05 October 2011

Robbing Peters to Pay Paul

Much hand wringing going on. The TARP banksters are raising fees on the Little People!!! What the fuck did you expect??? The banksters got the Little People by the nuts; they're the only place left to squeeze, now that subprimes have imploded. And the banksters need some way to pay those extortionate salaries and bonuses, which they earn for the very hard work of moving other people's money from one bankster pocket to another.

What did anyone expect? There's no penalty for screwing the Little People. The banksters, and their enablers in the Right Wingnut Fraternity, have free rein. Tea Baggers all, and stupid. I predicted it, of course.

29 September 2011

The Polar Bare Club

In today's news, is this piece on melting Canada ice. While not all that surprising in and of itself (Arctic ice has been diminishing during summer for decades), it reminds me of reports from a few years back. That reporting, here for example, concludes that with sufficient cold fresh water injected into the North Atlantic (remember, sea ice is nearly salt free), the Gulf Stream (also known as the heat conveyor) movement of equatorial heat to the north, particularly Europe, would slow or cease. Hello Siberia.

"... this is the way the world ends: not with bang but a whimper."

Pretty as a Picture

Along with an interest in stats and graphs comes a level of responsibility. Kind of, guns don't kill people, people kill people. The canonical text is "How to Lie With Statistics", which was first published in 1954. Legend has it, it's never been out of print. Likely so.

It so happens that I've found a couple of blogs/sites which both deal with graphing stat data in non-disinterested ways. I'll note once again that a stat/quant/analyst/foobar is supposed to be disinterested. S/he's just an impartial judge of the data, trying to scope out the real relationships in the data; if there are any, there may not be. Data associated with politics is particularly susceptible to bias. But others face the same pressure. Worker stat bees (having been there) are often encouraged to slant the presentation in a way to make the nappie marketing Suits look like geniuses. It's a problem everywhere; all worker bees are expected to behave as attorneys; staunch defenders of whatever the Suits have done.

Watching the response to drug clinical trials is particularly amusing. Rather often, the sponsor will be shocked (shocked, I say) that its new FooBar Resolver didn't blast the .05 requirement out of the water. There'll be "unexpected placebo levels" or "unbalanced randomization" or "the FooBar Resolver patients were sicker than placebo". And so on.

Be that as it may, here are a couple of sites worth grazing:
The R Graph Gallery, from Romain François
The Gallery of Data Visualization, from Michael Friendly

27 September 2011

Figures Don't Lie, But Liars Figure

I just found this link, which says it all (well, most all) about lying, stats, and graphs. It's only a bit beyond 5 minutes. Time well spent.

Who's Hiding Under that Rock?

Lots of folks, humble self included, have been despondent with Fetchit since he caved on the stimulus. Yes, since nearly the beginning of his term; he then demonstrated that endearing quality of giving up before the first punch is thrown, nay before the bell rings. It's been quite irritating.

Today brings news that Axelrod gets it. Which begs the question: which one of the two, Fetchit or Axelrod, has been living under a rock? Reagan spent his time on the throne blaming Carter and Democrats, while taking credit for ending the Soviet Union (he had nothing to do with it by the way, it was successive crop failures that did in the Kremlin). Fetchit really is beyond naive'. Has Fetchit been ignoring Axelrod all this time, or has Axelrod done a Punxsutawney Phil and declaimed six more years of winter? Either way, D'Oh!!!!!!!

22 September 2011

Yellow Journalism

So, here's the latest on the Market from Yahoo! Finance:

God futures shed an additional ~10 points to fresh lows

Where's Richard Dawkins when you need him? It's quite clear that the Tea Baggers are pulling out the stops to crash the economy again, and try to pin it on Fetchit. They likely will succeed in both respects. Hilaryyyyyyyyyyyyyyyyyyyyyyyyyyyy!

20 September 2011

Not My Ox, You Don't

I had been meaning to write a short piece on the whole deficit reduction and austerity magic elixir. The story being, of course, that lots of rich folks got, and stay, rich by sucking at the Federal teat. The money milk they get is, of course, not only fully justified but necessary to the commmonweal and all that. Reality is, they just don't want to have to get their money from that mythical competitive economy they propose for everybody else, particularly those who work for wages.

Well, here it is. Read it and get angry.

18 September 2011

Fire up the Barby

Put some shrimp on the barby, mate; Charlie's here. Darwin, capital of North Australia, really was named for that passenger on "The Beagle". As I have mused in the past (most recently) and earliest, the Tea Baggers are misanthropic, myiopic Social Darwinists. Today's NY Times, in the Business Section no less, carries an article by Robert Frank (derived from his book) which denies the notion that either Darwin or Adam Smith was a Social Darwinist. Give it a read, and buy his book. I'd ask for percentage, but I'm hardly the only one who's made the case.

A quote from Frank:
Close reading of Smith's work shows that his position was very similar to the modern liberal's.

A quote of Smith by Frank:
In "The Wealth of Nations," he wrote, "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

But, since the Tea Baggers take Cheney's point of view, that only the left engages in reality based policy, I suppose they'll not be fazed. Frank's solution is not so far fetched, but fails, I think, to provide a mechanism in either fiscal or monetary policy when things go bad (or, less often, good). On the other hand, he's saying what I've quoted My Mother (and yours, if she were smart) as saying: "what would be world be like if everybody acted like you?" He touches on the sore spot of Right Wingnut capitalism, which is that it is inherently wasteful. Or put another way, that there is an infinite supply of natural resources. Why an infinite supply? Because of the notion of creative destruction of capital and multiple capitalists consuming capital to produce a Certain Widget. In time, capitalists conspire to choose a monopolist, but not necessarily the one who's most efficient in the production of the Certain Widget. And even if it is, there's no reason that there'll be enough resources left.

Never forget: there are *twice* as many Americans today as 1950. While there were enough resources to support a middle class which really was most of the middle when there were 150 million of us, that's not true today. The shrinking of the Western middle class (and the dramatic slowing of its birth in the East) as a proportion of the population can't be avoided. Sorry.

14 September 2011

The A Team

As Hannibal used to say, "I love it when a plan comes together". Just got back from reading my dead trees NYT, and there on the front page (with circles and arrows on the back) are the numbers I've been reminding folks about since I started this endeavor. The Right Wingnuts *do* want most folks most poor. And most of them are just too stupid, and religulous, to admit they've been gulled.

Dee Feat is in Dee Flation, Part 14

[Nothing much has changed since the last Flation piece, so here it is again! Only slightly updated.]

Along with a lackluster initial claims, which rose some, we also got the PPI (Producer Price Index), which was up a tad, although nothing major. Moreover, the "core" number was downright laggard.

Here's the briefing.com description:
Separately, the Producre Price Index for was flat in August, as had been generally expected. Core producer prices increased by a mere 0.1%, though. A 0.2% increase had been expected.

This time, briefing.com's note didn't mention that PPI (whole) was 0, 0, 0.

Despite what the Right Wingnuts have been braying for what is now *years*, the stimulus and TARP and all that other money has been funnelled to the 1%-ers, who don't spend much, if any, of this largess slathered over largess. Regular folks, who the Tea Baggers should be supporting (but don't, since Tea Baggers are the pawns of the .1%-ers), aren't getting the $$$, so the $$$ doesn't make it to the spending stream.

What the Usual Class of Pundits is ignoring: the inflation inherent in food and fuel is *Cost Push* (i.e., shortage) and their knee jerk "raise interest rates before the sky falls" will only hasten the fall, and make it that much worse. Figure out how to increase supply of shortages, morons. There was a story in a recent NY Times about farmers switching from useful crops (well, useful as food, anyway) to fuel crops. D'oh!!!

Obambi is such a waste of time. If I were Biden, and had to sit through his speech, I'd have fallen asleep, too.

13 September 2011

Batshit, Ponzi, and Little Ricky

Rick "Batshit Boy" Perry has had fun labeling Social Security as a Ponzi scheme. The dim bulb Red Staters applaud. They are dumb. As I wrote back in July, Social Security is not, never has been, nor should ever be, an investment scheme. That's just a waste of money. It's a current account program, just like most of what the Federal government does. To do otherwise wastes money in administrative overhead (moving, and accounting for, money from one pocket to another), and leaves government in an untenable position; can it prosecute malfeasance in the market if doing so diminishes its "return"? And the survey says: government's proper role is to protect the citizens from malfeasance. End of story.

12 September 2011

Nouriel, Karl, and Me

Not so surprisingly, I don't read the Wall Street Journal; I suppose I should, if only for the opposition research value of doing so. But the batshit Tea Baggers lie so fulsomely, that I can no longer abide it. I do, however, dabble with Mr. Market, and today was a link on one of those sort of pages to a write up of Roubini's recent WSJ interview. Here's the version that was linked to.

Near as I can tell, Roubini was and is a capitalist fanatic. Yet, here he is making the same argument I (and others, I'll acknowledge) have been making from the start of this endeavor: "It's the Distribution, Stupid". I shudder to think what it means to have Dr. Doom on my side of the coin.

04 September 2011

Rave Reviews

I admit it: I always gloat a bit when the mainstream pundit class finally catches up. Today's NYT Sunday Review section has the Reich piece, which digs into the data to demonstrate the thesis that you don't grow an economy by making the middle class (and those below) yet poorer. My only quibble is that he didn't j'accuse to Reagan and the Bush Boys. Stop being so prissy.

The second piece, which shares the full double page center spread with Reich, is a similar take to the urbanization thesis. Not so surprisingly, the author is at "The Economist". Europeans, having lived on that piece of ground for millennia, get it. The Tea Baggers insist on the impossible, that the USofA can conduct itself as it did in the 18th and 19th centuries, when there was this whole fresh continent full of natural resources to squander. Those times are long gone, and we're all European now. If my thesis is correct, either the Tea Baggers stage a coup, a la 2000, and we descend into urban/civil warfare (as Uruguay did in the 60s and 70s, propelled by the same de-industrialization fervor), or the electoral process remains intact, and the Tea Baggers are relegated to the dunce corner.

29 August 2011

Michele, My Devil

Just when I thought she couldn't get any more vile, here she puts her foot up her crotch. What she ignores: God has been quite cruel to those living in the Bible Belts. Texas is turning to desert. Most of Irene's damage happened south of Mason-Dixon. Please, please be the candidate!!! This country needs to decide once and for all whether it has any intelligent life.

24 August 2011

Pushing a String

You can't push a string. I've heard that phrase many times, even when I was active as an economist. I don't remember who first said it, but memory says it was some general, perhaps Patton. One source, be still my heart, attributes it to Keynes! Who knew? I still think it first came from a general; the phrase originally referred to leading troops into battle.

In any case, while looking for the source, I also came across this story. Note the date, and that it cites a Fed researcher. I hadn't read the piece when I composed the first entry in this blog. (Which, it turns out, meant that I was concentrating on the wrong thing. If I'd put gobs of money into the market on 22 March 2009, I'd be very much richer. As it was, I remained concerned with explaining the situation while looking for the next database assignment. Let that be a lesson.) The point of this missive is to wonder what Fetchit and Bernanke must be thinking. Big Bold Ben must know that he's been trying to push a string neigh onto three years, and the only "success" is inflation in the stock market.

While unemployment, as described by the BLS number of record, is a bit lower, much of that is due to expiring benefits. Not on the dole, you're not counted as unemployed. Yesterday the market went up by more than 300 points, and today, a bit before the open, it looks to be giving much of that back.

Monetary policy can only try to push the string, on the way up. On the way down, easy as pie, as Volker demonstrated. As I've written in the Flation Series, monetary policy only works when there is demand pull inflation; which means lots mo money in the hands of consumers. That isn't happening. Given population surging and the BRIC countries demanding our profligate lifestyle, inflation is, and will be, driven by physical shortage of materials. Strangling an economy with monetary policy under that condition will only make matters worse for the vast majority. It'll be fine for those Fatmen in Famine, however.

And you know who the Fed really represents.

19 August 2011

Viagra At Home

A bit of R. I've mentioned a few times that I "knew" we were headed into the ditch around 2003. I don't recall that I'd read Shiller at that point (or even that I was aware of him), it was just obvious that house prices were outstripping median income. The raw data is available (no idea how long it has been), so here's a picture worth a few words. The data run from 1890 to 2009.




Where's my little blue pill???