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???

12 August 2011

Only The Stupid Die Young

Today's NY Times has two pieces worthy of notice, so far as this endeavor goes.  I'll leave you to hunt out Floyd Norris's column, if you like.  You should, of course, since he echoes much of what I've been writing.  The article I'll explore is a subject close to my heart:  only the stupid die young.  (It seems that the map was first published a few days ago, although I only saw it this morning in my dead-trees-with-croissant moment.)

More than once, I've taken the Tea Baggers to task (not many read this blog, I'd wager) for their insistence that Gummint is Evil, and so on.  In the course of those musings, I've pointed out that, were it not for FDR, the South would still be living a 19th century existence.  No piped water.  No piped waste.  No electricity.  In other words:  shitting in the backyard, next to the hand pump, and may be a kerosene lamp or two at night.  That's no joke.

Still and all, the Southern embrace of Fascism has its price.  This map makes it quite clear. 

You can go here for median income data.  Sort it South, so to speak.

And here for smarts.  The bottom quartile is almost all South; California and Hawaii likely due to non-English native language issue.

Cerebral Density [UPDATE]

There's been some continuing confusion, so in the immortal words of  Roseanne Roseannadanna:  "Claaaaaaaaaaaaaaaaaaaas!"

Time for some review.

1) "Wall Street", the metaphor means stock brokering.
2) "Wall Street", the physical location, is a collection of streets/avenues in lower NYC constituting a financial district; more than just stock brokering goes on there, but so what?
3) stock trading, whether by two humans, two computers, or one of each, is a zero-sum, non-productive endeavor.  With the exception of buying of Public Offering shares, which are in the noise over any given time period, and are exactly 0 most days of a month.  The fact that "studies" have determined that 70% to 80% of trades are between HAL-9000 computers engaged in price arbitrage in time/space, only strengthens the argument.
4) the supply siders continue to argue only from their perspective:  I want X% interest earned on my money (that's my rate of time preference).  My in this case is the explicit lender, who generally is distinct from the saver(s) whose money is lent.  From the demand perspective, justifiable interest eventually is determined by the increase in physical production (real economic growth) by the most productive use.  This is the upper limit, as not all borrowers will/can engage in this Activity A, since to do so would flood the market with Widget Q, thus lowering its price and removing some, possibly catastrophic, amount of the return.  Ruinous competition, as the Robber Barons used to say.  Interest on home mortgages is not a productive use of capital, since the financial capital is not used to produce some Widget V over the life of the "house".  Housing is just consumption over time.  The interest paid is justified only by the demand by lenders for "some" return; otherwise they could put the money into companies engaged in Activity A.  Lenders can attempt to increase X%, but will be stopped by the maximum productivity growth endeavor.  And that's an asymptotic limit; it will never be reached, since if all borrowers undertake the endeavor, they flood the market with the Widget Q, driving down both its price and the return on the physical investment made to produce them.  The point being:  the interest rate is ultimately determined by physical engineering/science, not by quants on Wall Street, despite what they may think.

Point 4) leads to a problem manifest in the Great Recession:  since so much of the USofA's financial capital was put, not into physical investment, but fiduciary instruments, the return on that capital was tied explicitly to the rise in cash incomes of the borrowers.  There is no other source of cash to pay the interest.  When the interest payment exceeded cash income's carrying power, as was inevitable since median income was falling during BushII, the Ponzi melted.   There is no new plant or machinery bought with the fiduciary capital to make more/better Widget Q.  Those that still refuse to understand this, can spend some quality time with their favorite search engine.  This is well known among academic economists, and published.  Likely also well known among Wall Street affiliated economists, but they're not about to rat out the hand that feeds them.

To further point 3):  yes, there are Public Offering shares in some day's trade.  No, those shares are not sold, at the initial asking price, in regular trades.  They are distributed by the underwriters to the subscribers.  At that point they can, subject to any restrictions in the PO, be traded *between the initial owner and any computer or human* just like the rest of the shares on its exchange, because they are now just trading shares.

11 August 2011

A Good Havana

I guess it was Freud who said (or so the folklore says):  "Sometimes a cigar is just a cigar".  Freud smoked them by the boxful and they killed him.

Mark Cuban, on the other hand, hasn't killed anybody (that I know about).  He has, however, been quoted, thus: "Wall Street has nothing to do with creating capital for businesses, its original goal."

He doesn't quite get to the main point:  stock buying and selling is utterly non-productive.  But that's really what he means.  Further, since the activity is no more productive than betting on horses at the OTB, tax the income the same way as other gambling winnings.  Sauce for the goose, sauce for the gander.  It is gratifying to read that someone else gets it.

09 August 2011

Mother's Little Helper

Yes, I know I owe you folks the details of the YDI, which don't yet exist.  Due to my increasing fascination with statistics (my first love, truth be told), and the R stat language, I keep finding interesting bits of R out there.

Today's installment is why the YDI came into my head.  (It's linked from an R blog posting, but he's said to use R in his method.)  This is just one example, and recent.  But it shares the common characteristic of such efforts:  it ignores the driver of depression, collapsing demand.  The money guys, whether banks or brokers or funds, view the economy through their narrow currency (as opposed to production) peephole.  No, not pee hole.

They also ignore what's been the problem since Reagan:  concentration.  Both of wealth, and corporate control.  Adam Smith (the real one) made clear that an economy, if it be successful, has to be such that power is diluted equally among all participants.  That wasn't true in 1776 (a common Trivial Pursuit question) either, but the Tea Baggers do love to romanticize.

07 August 2011

Payback's a Bitch [UPDATE]

Hope springs eternal, in that I've left the following on the White House comment site.  Praise God!!

You now have the opportunity to demonstrate that you really, really do have a pair of gonads.  You do that by making (with additional rhetoric, perhaps) the following statement:

"My administration will not be extorted or blackmailed by the Banksters and their lackies, the credit raters.  Together, they conspired to send this country into a Great Recession after extracting billions of dollars from ordinary Americans.  They, with the connivance of the Lunatic Right in Congress, have blocked all efforts at financial service reform, since reform will eliminate many illegitimate revenue streams.

American fiscal policy will not be determined, or even swayed, by corrupt corporate interests."

Demonstrate that voting for you was not a complete waste.

Nice to know I got there first (so far as I know).  Today's Times has this op-ed piece

04 August 2011

And The Survey Says...

As my dive into stats, and possible departure from RDBMS as the site at the end of the Yellow Brick Road, continues, I came across a ruby library called fechell.  My inital thought:  "shouldn't that be fechall, as in Fetch All, Fetch Ell.  What does that mean?  Well, D'oh!  The normal name for the code is FECHell.  Ah, much more to the point.

I found two posts, by way of R-bloggers by the person who developed the library.  Here's the post where he develops the use of the data and the library.  He references a Part 1 post with the background.

This intrigues me not a little bit.  Suppose, just for grins, that you're the campaign manager for a state wide (or larger) candidate.  That is, one where monies are allocated to distinct locations.  Further, suppose that you have this data in close to real-time, and you also have data measuring "outcome" for the use of these monies, say polling data.  And let's say that the two maps, monies and outcomes, are congruent.

Could one make predictive decisions about monies allocations?  Well, it depends.  The naive' answer is: abso-freakin-lutely!!!!  The real answer:  not so much.  The naive' notion is that money well spent is indicated by winning the election (which is kind of too late for allocation decisions) or some upward movement in polling data.  Ah.  Let's spend where the spending works.  Superficially, makes a lot of sense.

The only problem:  stat studies invariably show little correlation between money and winning.  I know, Liberals in particular are worried about the Citizens United effect, where corporations have gobs more loot than anybody else.  They'll just buy the elections.  And they well might.  This would not make me smile.  But, the studies of the data show that the effectiveness of campaign ads is less grounded in their expense, rather their content.  Sometimes, may be often, attack ads work.

Here's an academic attempt to find out.

And yet another.

A quote from the second story (not, that I know yet, cited from the study):
"While we see an influence of the campaign ad in the short-run, in the long run the ad loses its effectiveness. This finding begs the question: how cost effective is it for politicians to spend millions of dollars on campaign ads which have little long-term effect on voter opinion?"

StatMan to the rescue!!!  The problem is that it's now August, 2011, and any application being written as I write (assuming that folks have started) need to be up and running by January.  In order to be worth the time and money expended, the application has to have *predictive* value.  FECHell data passed through some software is only retrospective.  Political ops should know enough about their candidates and opponents to design ads that work.  Making a simplistic leap from $$$ to polling/winning is a waste of that time and money.  The retrospective data needs to be run through some multi-variate hoops (either multiple regression or ANOVA, most likely; PCA and MDS are less applicable here) to identify the attributes, besides money, which move the bar toward higher polling or winning. 

The problem with the simplistic model is that the knee jerk reaction to positive feedback in some campaign is to toss yet more money to that campaign.  But that's likely a waste of money.  The goal is to use the data to identify those trailing candidates today who'll win tomorrow if they get more $$$ and *spend it on what works*.  Pouring money into a winner is a loser.  Pouring money down a rat hole is, too.  The latter case is more obvious, but the former is just as wasteful.

Economists refer to "opportunity costs"; I can spend $1 on toothpaste or candy.  I can't have both.  In the short run, candy is dandy.  In the long run, toothpaste wins.  Campaigns don't, generally, last as long as the toothpaste's long run, but you get the point.  Money is finite, and should be spent on those activities/goods/services which gain advantage to the goal.  In the case of FECHell data, the goal is winning elections.  Looking retrospectively only at $$$ and winners is just the wrong goal.

02 August 2011

Putin His Finger on The Problem

Vlad, the Impaler, is a half wit.  That is to say, he's witty, and half right. "They are living like parasites off the global economy and their monopoly of the dollar", is what he said. 

The problem, as this endeavor has made its main theme, is that It's the Distribution, Stupid.  Without the USofA sucking up all that widget production from the Third World (and Russia is very Third World), all those oligarches and autocrats would have no place to dump all those widgets.  Fact is, the relationship is symbiotic. 

I'll repeat the quote, extended:
As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth ... to provide men with buying power. ... Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. ... The other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.
-- Marriner Eccles

Services, of course, as I've penned a bit about recently, are difficult to value.  They also tend to be bought by corporations, and less by consumers.  Is one systems analyst worth one iPad 2 or three?  I wonder whether anyone would really trade any service for physical product.  Ask yourself.

For those who don't recall, Eccles was FDR's Fed chairman, and later founded a think tank.  A digression:  follow the Bretton Woods link in his article, and you will find this juicy bit, "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 other words, we gave Europe the Marshall Plan, and we took control of the planet's money.  This fact has irritated many for more than half a century.  And this Gerrymandered system is largely what made America Exceptional, until 1973 when the Arabs figured out that the au courant currency was black gold, Texas Tea.

I suspect what gets in Putin's craw is that much of the production in the Third World (and China is very much Third World) is owned by American (titularly, anyway) corporations.

01 August 2011

He Stepped in It

Well, Obambi has left the White House.  He's sent in his successor, Stepin Fetchit.  You knew this was coming.