28 June 2012

I Want My Maypo!! [update 2]

For those of a certain age, and place of rearing, the title of this piece is familiar. Markey Maypo demanded a helping of his favorite hot cereal, right now damn it!, and so this short piece will be an instant analysis of the Obamacare ruling. I've assiduously avoided anything other than the straight reporting of the ruling. I await developments among the Standard Pundits; perhaps they will reach my conclusion, perhaps not. In the former case, they're really smart; in the latter, a bunch of knuckleheads.


No, Roberts didn't all of a sudden get stare decisis religion. Far from it. If he had, he'd have hung the ruling on the commerce clause, but he chose tax authority. Crafty bastard. He has, with the flick of a pen, dug razor edged rowelled spurs into the flanks of the Tea Party Trojan Horse, already munching on acres of locoweed. The Right Wingnuts haven't a prayer of changing or repealing the commerce clause, but they're all for limiting tax authority. They now have their banner. Onward, Christian Soldiers!!!

The first Standard Punditry:
"My own sense, from reading the Roberts opinion, is that it was written as a majority opinion in all of its drafts, and that various justices joined or dropped off," [Lyle] Denniston [SOCTUSblog] told Yahoo News. "I think he was determined to try to uphold some key parts of the law, if he could find a way, partly because ... he has grown concerned about the public perception that his court is a partisan-driven court."

[update 2]:
From Slate, read the bottom two paragraphs.

24 June 2012

The Poverty of Price

It's now conventional wisdom that ObamaCare is dead; Roberts and company will apply the garrote. What's the likely effect? Not what the Right Wingnuts expect, in the medium to long term.

The Wingnuts expect that the 1% will be graced with cheaper healthcare, with the hoi polloi removed from access. They're quite wrong. While real world data may be lurking out there somewhere, we don't need it to explain what will really happen. The result, simply put, is that the 1% will price themselves out of healthcare, too.

It is insurance company propaganda that the point of insurance is to both share risk and manage unusual outcomes. For-profit insurance companies do neither. What they do is attempt to capture consumer surplus. The WikiPedia article does an adequate job of explaining the notion. What's key to understanding the stupidity of the Wingnuts is that insurance companies extract the consumer surplus through market segmentation, and that by killing the individual mandate this process reaches the limit, i.e. the far left-hand point on the demand curve. This point is minimum supply and maximum price.

Why will this happen? Because it's what the insurance companies want (all the money), and there's nothing to stop them.

Let's think about MRI. I'll concoct some numbers for specificity, but they'll only differ from reality by some magnitude, not effect or kind.

# of MRI procedures: 1,000
Cost/procedure: $100
# of MRI machines/year: 100
Cost/MRI machine: $100,000

# of MRI procedures: 10
Cost/procedure: $10,000
# of MRI/machines/year: 1
Cost/MRI machine: $1,000,000

As time goes by, the number of MRI procedures and machines produced will diminsh as more and more folks get priced out while the insurance companies push the supply back up the supply curve.

The reason for the individual mandate is quite simple: insurance is, by definition, both pooled risk and not current consumption. Buying healthcare directly, which is what some of the Wingnuts mean when they say, in essence, that the young and healthy should be allowed to opt out "until they get sick". Nick Gillespie, self named libertarian but just another Wingnut, played that standard line on Maher's Friday show. Healthcare isn't consumption, anymore than auto insurance is. The Wingnuts always do the cockroach sidle when that is pointed out. The morons will cut off their noses to spite their faces.

18 June 2012

We're All Running Backs Now

It is widely understood that NFL running backs have a very short worklife one source says, 2.57 years. After that, worthless and off to the scrap heap. One part of the Right Wingnuts' meme is that if only folks had appropriate skills (from for-profit "schools", of course!), they'll get rich. Well, sort of. While I can't recall specific cites, there've been studies done since about 1980 debunking the American Dream, upward mobility for all, myth.

Recently, Joseph Stiglitz (smarter than Krugman and with more bite) published this book. Have a look at the Table of Contents, and you'll see that the last 100 pages is notes, including data sources. There have been a host of reviews. Try this one on for size.

What all this has to do with NFL running backs? First, running backs are very well paid, but are a vanishingly small percent of the population; dedicating an education regime to "empower" ghetto kids to be running backs doesn't make much sense; nor for any low count job. Education, which isn't the same as vocational training, is said to be the solution to the mess, but consider that all too many 40-plus professionals have found their careers ended by cheap, young Indians. Why would an 18 year old not see that handwriting on the wall? Society will fracture even further if the army of the unemployed is better educated, and done so on the promise of upper-middle class prosperity. In fact, the number of math and science majors (proportional to population) has declined. Here's a story dealing with part of the issue. And this is a Time magazine piece.

Second, age discrimination is rampant. In the late 19th century, shops had signs, "No Irish Need Apply". Now, it's "No Adults Need Apply". We're all running backs; you have to make a lifetime's worth of income before you're 30. I wish they told me that when I was 20.

Even that Right Wingnut bastion, "The Wall Street Journal" adds some fuel to the fire. "Although the number of college graduates increased about 29% between 2001 and 2009... The number with computer and information-sciences degrees decreased 14%." It shouldn't come as any surprise; IT jobs are among the most off-shored. One Kiddie Koder of my acquaintance noted that his age-mates were bailing from IT, or not entering at all, back in 2005. We worked at a Fortune 100 company that was shedding Americans for Indians at breakneck pace. Kids notice; they aren't quite as stupid as some think. Another quote: "'If you're a high math student in America, from a purely economic point of view, it's crazy to go into STEM,' says Anthony Carnevale, director of the Georgetown center."

These articles also touch on something I've noticed, again, in quant texts: rather than take an apprenticeship tack (here's how to do X, then how to do Y, and so on), there is this need to build a "foundation" of disconnected principles, which may or may not be connected (among themselves or even to the vocation being studied) sometime much later. After a couple of classes of this, they bail. If they want to get rich, they become banksters. I've mentioned a few times that my historical profession, economics, was overrun by failed PhD mathsters starting as far back as the 1970's. Not sure that being an associate econ professor is the road to riches, but an unfinished math PhD is worth much less.

So, we get to the nub. I read this article when it came out, but didn't get around to writing about it. In fact, I've been worried about just such attacks for sometime. The "Don't Bother Me with Reality" forces are evil. Now's the time. The Cheney "we don't need no reality" meme will get implemented if Mitt is It. The only way to shut up guys like Stiglitz is to shut off the data. The Right Wingnuts will do it. With no data, the argument devolves to propaganda, and the Wingnuts have shown that they're better at it than Democrats.

15 June 2012

World War III

My regular read should recall that I've been channeling the revery of Edgar Cayce for a while now. For review: Cayce prophesied that Germany would be involved in three world wars, and would lose two. Ergo, the next one will find Germany winning. Further, these essays have pointed out that Germany is bludgeoning its trading partners, after having sucked the value out of them.

I just returned from my morning read of the Times, and Floyd Norris has the chronology, complete with conspiracy addenda. For those not wishing to stray over there, these are some quotes that dovetail with earlier musings here.

"Imagine for a moment that two decades ago, a newly unified Germany set out to take over the European Continent, as the previous unified Germany had tried and failed to do half a century earlier. This time it would use money, not guns, to accomplish the goal."

"...a currency union could help German exports if the euro's value were held down by less competitive economies."

"Ultimately, deeply indebted countries would face a crisis, one that they could solve only if they acquiesced to German policies and surrendered a large part of national sovereignty."

"Its exports boomed as European neighbors used borrowed money to buy German goods. German banks helped to finance housing bubbles in the periphery -- usually not directly, but through loans to other banks."

"In hindsight, the critical moment in the crisis may have been when Ireland's banks failed in early 2009. Had the Irish government taken the position that it would stand behind deposits, but that loans made to the banks would be allowed to default, German banks would have been in trouble, and probably would have needed to be bailed out by the German government."

"A new German mark would no doubt be much stronger than the euro is now, making life a lot harder for German exporters. That reality has led some in Europe to think that Germany is bluffing, and that it will continue to pay the bill even if it cannot get what it wants."

All hail Der Fuehrer. And I'll bet you thought the problem was China.

Pretty Beads

Have you been paying attention to the new-ish Apple computers? They've become disposable cell phones; nothing is replaceable or upgradeable. These devices go for nearly $3,000, and can, I gather, only be repaired by Apple. This became clear with the Retina Display Mac Book Pro as can be seen here. All the bits are either Apple only connections/forms or soldered in. For those with long memories, the original Compaq machines would only accept Compaq pieces.

When I was a kid, Vance Packard was already well known and widely published. I knew of his writings from yellowed paperbacks. His most famous is likely "The Hidden Persuaders", but he also dealt with the process of planned obsolescence with "The Waste Makers". In the 1960's, and certainly 1970's, American auto makers were pilloried, and warned, that their obsession with churning their product base was dangerous and market threatening. And so it came to be. If one looks at a current American auto, most of the engineering and design of that car originated in either Europe (where engineers know what they're doing) or Japan (ditto).

Europeans and Japanese understand what engineering means: make the most of the least. Until the 1973 Oil Embargo, American design and engineering was about profligacy; who could implement it most thoroughly. Not so much, now.

Apple is behaving like the Big Three Autos. The difference is that Apple, emboldened by a totally hosed patent system, has been able to constrict competition. Jobs fancied himself a Buddhist. I wonder what his bhikkhu would think?

Sounds a bit like what happened with Manhattan, which was ceded for some pretty beads. Apple wants your soul and freedom for about the same.

14 June 2012

Dee Feat is in Dee Flation, Part 19

Well, the Flation Numbers came out this week. And, as usual, the Prosperity Through Austerity And Inflation's The Issue folks can't be happy. Here they are:
Core PPI 0.2%
Core CPI 0.2%
PPI -1.0%
CPI -0.3%

I'll leave it to the reader to see the forest and the trees. All that free money from the Fed sure ain't getting into the hands of people who spend. That's why there's no inflation. As the planet runs out of arable soil and hydrocarbons, with an exponential population growth, prices will rise due to shortage. The Idiots of the Central Banks will be too stupid to see this, and immediately raise interest rates, hoping beyond hope to play the role of Volker the Saviour. But they will only make matters so much worse. A Confederacy of Dunces, I'll say.

13 June 2012

A Stitch In Time

... saves nine. Now, that aphorism, dating from at least the 18th century, means about the same thing as "an ounce of prevention is worth a pound of cure". To wit: if one takes pains to do the small things early on, one is saved from the trouble of major problems later. Or, just being smart. On the other hand, taking just the first phrase, "a stitch in time", alone, one could ponder a meaning in the context of the fabric of space-time. It could mean that one finds time, events from one point, merging with events from another point. Guess which way this essay will go?

My regular reader knows that I am among those who view The Great Recession as largely a replay of The Great Depression.

So, we have Eccles observation: "As mass production has to be accompanied by mass consumption; mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery."

Then, we have my continuing fascination with Bermuda as a real life Social Darwinist Experiment, as described in the pages of The Royal Gazette. Today's episode echoes much of what I've been spewing in this endeavor, and in letters and comments (pseudonymously). Here's the piece, and here's the relevant quote: "It must be noted that Bermuda is different from most countries in the sense that it has a tiny domestic economy, with a small agricultural sector and virtually no manufacturing. It is instead a service economy which depends solely on two foreign exchange earners international business and tourism -- to enable it to import almost everything else." I've argued, since I returned from my visit a few years ago, that Bermuda's problem (not making any *things*) is also the USofA's problem; it's just that the USofA is so large and controls to a significant extent the international money system, that our chickens have not yet roosted. They will.

And then, we have the obit of a Nobel winning economist (who actually wasn't), Elinor Ostrom. Read the obit, and you find that she re-introduced the "political" in political economics, using real data from real life. That, and the fact that her training was poli-sci didn't endear her to many (most?) mainstream economists. What she discovered, although not explicitly stated in the obit, is that rational people are Socialists, if left alone.

Finally, the spectacle of Germany making war on its trading partners in Europe. Capital hasn't more demand on income than labour, it's that simple. Without consumer demand, capital is worthless. The Dark Ages proved that.

In other words: long term survival of the species requires that we all recognize that we're all in this together. Not the 99.9% indentured to the .1%.

05 June 2012

What's a Cubit?

My parents took a simple approach to child rearing: as soon as a child could step, then that child would fetch. I was a juvenile when cigarette smoking was nearly universal and ubiquitous, which meant that smokers were everywhere. Not only that, but nobody paid much attention to who was smoking. Letterman will show the clip of the Asian kid doing a French inhale, as if it's unusual. Not when I was that age.

One of the early tasks I had was fetching packs for Mom and/or Dad when the carton went empty. Down to the corner store, a Mom & Pop White American establishment not part of some conglomerate by the way, to get whatever packs were needed. Mom stuck with Viceroy for years. Pop switched around frequently. Old Gold was one of those on rotation. They're still made, by Lorillard, but are now a "discount" brand.

So, there's old gold and new gold. The nutball monetarists, Ron Paul and such, regular monetarists, Friedman and acolytes, all have a zealot's attraction to the old style, which is to say that yellow metal. The problem is that there's new gold out there, and it's called the American Dollar. And that's a problem.

For those with short attention spans, when the Europeans got wacky (mostly a German gestalt experiment), all that bond hunting money went to dollars.

[The above was written in Dec. 2011 (to be titled "Old Gold, New Gold"), but I let it go, and never finished or posted. The story continues below.]

Today's Nocera column offers up this quote: "... the explosion in executive pay and what he calls 'the financialization of the economy,' which has enriched one small segment of society at the expense of everyone else." He's quoting from a new book, (reviewed, here) 'The Great Divergence', by Timothy Noah and at Amazon. I can prove that I've pressed the financialization button for quite a while. For those who want a longer form discussion, this looks to be the book.

The tie-in with the beginning of the post is my contention, not cited in either Nocera's column or the book review, that the whole point is the financialization (Noah, according to Nocera, doesn't make this the center of his argument; here, I disagree). This is the cause, not the effect. Both Nocera and the reviewer take Noah at his word that the key to fixing the problem is better education. Tell that to the American professionals (IT, particularly) outsourced to India and such. They quite know better. No offense, but Indians aren't smarter or better educated. Just cheaper. The Service Economy is, by definition, non-productive; it's overhead. The problem isn't that we don't have enough smart people, it's that we don't have an accepted mechanism to distribute the fruits of capital in a self-sustaining way. American companies have off-shored smart work to poor countries just as they did with shoes, and textiles, and baseballs. Making a bigger bunch of highly educated Americans with no way to employ them doesn't solve the problem.

Cheaper? And how does that happen? It happens because the Powers That Be (monetarists and goldbugs and Right Wingnuts) want the American Dollar as New Gold. That requires a monetary policy which props up the value of the Dollar, and by simple arithmetic devalues foreign currencies. This devaluation is what entices American corporations to outsource. Nothing personal, just business. Now, international exchange rates are supposed, and alleged, to level the playing field between economies. After WWII, the USofA extracted by extortion a regime of monetarism which favored itself over the former Allies and the Axis Powers; basically the rest of the civilized world. And all was peachy keen until the banjo eyed love affair with Israel blew up with the 1973 oil embargo. Since then, not so much.

The other side of the equation, capital holders, is also to blame. Since capital is simultaneously cash and means of production (plant and equipment, in econ jargon), holders of capital have the option to "bet" on currency or physical production. If holders of capital can control (and they do) the rules of finance, but can't control the economic power of physical investment (they can't), guess what their gambit is? Financialization, of course. Play the game where they can make the rules. It isn't a coincidence that the vehicle of The Great Recession, residential housing, is a non-productive asset (asset viewed broadly, I must say); paying the vig has to come from rising incomes. They weren't, of course, since "investing" in housing doesn't bring new or better product to market.

The Great Recession was, at its root, about capital holders seeking extraordinary returns (blame Greenspan for setting the snowball rolling down the mountain), and getting them; on paper. They seek to enforce these gains through manipulation of contract law. Remember the AIG problem? It boiled down to the enforceability of contracts. Nothing more. AIG wasn't, isn't, a sovereign; just a company. It's one of those many cases of the tail wagging the dog. Spain is just such a victim; it was in surplus before the crash, and the debt was wholly private. The Main Stream Pundits never mention this, content to spout the Right Wingnut line of 'Spain equals Greece'. Baloney.