EclectEcon

Duck Update #3

Sadly, it appears the mother duck has given up and abandoned what few eggs she had left. She wasn't there this morning when I checked on her, and there were only maybe two or three eggs left in the planter. As I said in my initial post, when you see how few eggs hatch, with the ducklings surviving to maturity, it becomes clear how powerful natural selection can be.

Related articles

Ducks and Natural Selection

Duck Update

Duck Update #2

Miguel Cabrera, Baseball God?

There have been very few baseball batters who have hit as well as Miguel Cabrera. There have been some for sure. Ted Williams and Babe Ruth come to mind, and I expect there are plenty of others, too. 

But I just realized that if the opposing pitchers had walked Miguel Cabrera every single time they faced him, he would have a lower OPS than he does now. Wow!

What Would You Ask a Federal Reserve Bank President?Rocky Mountain Economic Summit, 003

At the Rocky Mountain Economic Summit, I will likely have the opportunity to spend some time with Charles Plosser, President of the Philadelphia Fed, and Jim Bullard, President of the St. Louis Fed.

I will be attending the Summit with journalist credentials and in that capacity will be able to interview these two speakers (and others) while I am there. What should I ask them? Here are some ideas I now have, but I don't know how deep we can get or how much time I will have. I am eagrely searching for other suggestions.

• What is the likelihood the Fed will monetize substantially more of the US debt, leading to future inflation?
• Given the massive and growing US debt (and the possibility of future inflation), what is your outlook for the term structure of interest rates? 
• Put differently, why are long-term interest rates so low?
• Why does the velocity of money appear to have declined so much over the past decade or so?
• There was an intriguing chart from the St. Louis Fed back in about 2008 showing a massive increase in "high-powered money". What happened to all that monetary base, and why didn't it have more of an impact on the real economy?
• How important was the liquidity created by the shadow banks, and its subsequent collapse, in causing the 2007 financial implosion?
• Why on earth did the Fed decide to pay interest on bank reserves held at the Fed at the very time it was trying to stimulate the economy? That sounds painfully like the "soaking up excess reserves" mistake made by the Fed back in the 1930s.

I welcome your suggestions/refinements either via email or in the comments.

My attendance at the summit is supported by several sponsors, including the Department of Economics at The University of Regina.

Related articles

Rocky Mountain Economic Summit, 001

Bullard Says Fed Should Maintain 'Effective' QE Program - Bloomberg

The Fed: Philly Fed's Plosser: Slow, then end, bond buys

Converting "Too Big to Fail" into "Too Small to Save"

Three Fed Presidents Call to Phase Out Mortgage Bond Buys - Bloomberg

Rocky Mountain Economic Summit, 002

Duck Update #2

I just returned from checking on the duck that has nested under a spruce tree along Dundas Street in downtown London, Ontario (for previous postings about the duck and eggs, see the links below).

The two eggs that were on the outer edge of the pot and readily visible have now disappeared. The mother duck has changed position several times. But oddly, on the other side of the tree trunk from where she has been nesting this entire time, there are at least three eggs, uncovered, in a deep hollow. 

I wonder if there was another mother duck nesting on the other side of the tree. Given the territoriality I've seen in ducks, that seems unlikely. At the same time, I can't imagine this mom pushed some eggs of her own over there, but maybe...

Anyway, here is a really crappy photo I tried to take of theDuck and Eggs situation. The mother duck is on the left edge of the photo. You can barely make out half of her. The eggs are under a branch on the right side of the trunk.

 More updates to follow.

Related articles

Duck Update

Ducks and Natural Selection

Ring the Bells Loud and Clear: Anti-semitism Is Gone sarcasm from Howard Jacobson

According to too many people, it isn't anti-semitism to hate Israel to the point of hypocritical, illogical, and inconsistent boycotts, etc. I'm skeptical of this position, quite obviously. 

British novelist makes the point so well here. An excerpt:

To those who ask why Israel alone of all offending countries is to be boycotted, the answer comes back loud and clear from boycotters that because they cannot change the whole world, that is no reason not to try to change some small part of it, in this case the part where they feel they have the most chance of success, which also just happens to be the part that’s Jewish. That this is, in fact, a “back-handed compliment” to Jews, John MacGabhann, general secretary of the pro-boycott Teachers’ Union of Ireland, made clear when he talked of “expecting more of the Israeli government, precisely because we would anticipate that Israeli governments would act in all instances and ways to better uphold the rights of other”, which implies that he expects less of other governments, and does not anticipate them to act in all instances and ways better to uphold the rights of others. And why? He can only mean, reader, because those other governments are not Jewish.

I’d call this implicit racism if I were a citizen of those circumambient Muslim countries that aren’t being boycotted – a tacit assumption that nothing can ever be done, say, about the persecution of women, the bombing of minorities, discrimination against Christians, the hanging of adulterers and homosexuals, and so on, because such things are intrinsic to their cultures – but at least now that we have got rid of anti-Semitism, tackling Islamophobia should not be slow to follow.

 

Rocky Mountain Economic Summit, 002

The Economic Summit I will be attending will be held in Jackson Hole, Wyoming, July 11-13. It is their 5th annual such get-together. Details are here at their website.

It appears I will be there with the expectation that I write about and report about what transpires. Well, of course! As much as I love to consume economics, I also love to talk about it and write about it. This will be a perfect fit!

My attendance at the summit is supported by several sponsors, including the Department of Economics at The University of Regina.

Related articles

Rocky Mountain Economic Summit, 001

Austerity and Growth

Sponsorship at the Ballpark

Sponsorship in professional sports is big money, even at the minor league level. I recently had a Facebook exchange with some local friends about sponsorship at the local ballpark back in the days when I was Doc Palmer, doing play-by-play of the London Werewolves. Here is a summary I wrote for some friends.

Following some discussion on FB yesterday about promotions and 

sponsorships at sporting events, I wrote that John Kuhn, when he 

was general manager of the London Werewolves [Frontier League, 

baseball], once told me that he had a fantasy of having every pitch 

in a game sponsored, as in "the next pitch is brought to you by..." 

but likely much more creative than that. John then wrote to me via 

FB [reproduced here with his permission]:

22:22
John Kuhn
Doc,
If only to test the limits of one's patience.
"This crotch grab brought to you by Crüex--the brand real men 

choose when they have jock itch.."

22:24
John Palmer
May I pass this on? I love it!

Today

06:10
John Kuhn
Yes, you may Doc and thank you for asking.
True, I did once want to do a Promotional Gluttony night. 

I believe folks would rebel by the 2nd inning.

John was an amazing, creative entrepreneur while he was here.

Rocky Mountain Economic Summit, 001

I have been invited to attend the Rocky Mountain Economic Summit in Jackson Hole in mid-July. This is not THE big Jackson Hole monetary economics conference (that one is scheduled for August), but it will have a number of well-known, well-informed, bright people whose brains I am looking forward to picking (see below).

Fortunately several sources, including the Department of Economics at The University of Regina, will be supporting my attendance there. In return, I'll be live-blogging the presentations, to the extent possible, blogging the preliminary work, blogging post-summit reactions, and presenting a seminar in August at The University of Regina about the Summit. 

Some of the speakers there will include:

John Silvia, Chief Economist, Wells Fargo (TBC)  

Julian Callow, Head of International and European Economics, Barclays Capital

Axel Weber, Chairman of UBS, former President, Deutsche Bundesbank and visiting professor, Booth School of Business at the University of Chicago

W. David Hemingway, EVP & Chief Investment Officer, Zion Bank Corp

Charles Plosser, President, Federal Reserve Bank of Philadelphia

Jim Bullard, President, Federal Reserve Bank of St. Louis

I am really excited about this opportunity and am grateful to the Summit sponsors and to The University of Regina Economics Department for making my attendance possible.

The Great Emu War of 1932

I had never heard of this until a few days ago: The Great Emu War of 1932. [h/t Rebekah]. It is a classic example of how private citizens, responding to incentives, outperformed gubmnt employees. From Wikipaedia,

Following World War I, large numbers of ex-soldiers from Australia, along with a number of British veterans, took up farming within Western Australia, often in marginal areas. ...

The difficulties facing farmers were increased by the arrival of as many as 20,000 emus.^[3] Emus regularly migrate after their breeding season, heading to the coast from the inland regions. With the cleared land and additional water supplies being made available for livestock by the West Australian farmers, the emus found that the cultivated lands were good habitat, and they began to foray into farm territory...

Farmers relayed their concerns about the birds ravaging their crops, and a deputation of ex-soldiers were sent to meet with the Minister of Defence, Sir George Pearce. Having served in WWI, the soldier-settlers were well aware of the effectiveness of machine guns, and they requested their deployment. ...

Summarizing the [highly unsuccessful] culls, ornithologist Dominic Serventy commented:

“

The machine-gunners' dreams of point blank fire into serried masses of Emus were soon dissipated. The Emu command had evidently ordered guerrilla tactics, and its unwieldy army soon split up into innumerable small units that made use of the military equipment uneconomic. A crestfallen field force therefore withdrew from the combat area after about a month.

[For the second foray]: Taking to the field on 13 November 1932, the military found a degree of success over the first two days, with approximately 40 emus killed. The third day, 15 November, proved to be far less successful, but by 2 December the guns were accounting for approximately 100 emus per week. Meredith was recalled on 10 December, and in his report he claimed 986 kills with 9,860 rounds, at a rate of exactly 10 rounds per confirmed kill. In addition, Meredith claimed 2,500 wounded birds had died as a result of the injuries that they had sustained.^[2]...

In spite of the problems encountered with the cull, the farmers of the region once again requested military assistance in 1934, 1943 and 1948, only to be turned down by the Government.^[2] Instead, the bounty system that had been instigated in 1923 was continued, and this proved to be effective: 57,034 bounties were claimed over a six-month period in 1934.^[6]

 

 

Will Graphene Really Change Desalination?

Desalination (and other processes to derive potable water) are expensive and use a great deal of energy. If the process of using graphene can be perfected, the cost of producing potable water will plummet. People will be better off, especially those who live in areas where fresh water is both scarce and under-priced and salt water is plentiful. Here is a recent article about the possibility of using graphene in desalination filters. An excerpt:

Graphene researchers won the Nobel Prize in Physics in 2010 for developing the wonder-material.

In addition, the film is super thin — just a single atom thick — so that the water simply "pops through the very, very small holes that we make in the graphene and leaves the salt behind," said Stetson [of Lockheed, which is working on the project].

Lockheed anticipates that their filters will be able to provide clean drinking water "at a fraction of the cost of industry-standard reverse osmosis systems," their press release says. Water-poor regions of the world will be the first to benefit.

... Perforene isn't a game-changer, yet. Lockheed is still in the prototype stage. One challenge is figuring out how to scale up production. Graphene is cheap but it's very delicate because of its thinness, also making it difficult to transfer.

There is undoubtedly much to perfect yet, and this announcement from Lockheed may well be unduly premature. But here's hoping. Something like this would really benefit the poor of the world. And it would be a game-saver for Florida, California, Hawaii, and probably the US Southwest, indirectly. Is it real, or will it go the same way as the various attempts to revive the steam automobile?

Addendum: I really doubt that using graphene-based water filters would do much to alleviate the low-water-level problems in the Great Lakes, however.

Related articles

Lockheed Patents Graphene Water Desalination Filter

Graphene with nanometer holes could be super efficient for desalination and drop in replacement at existing desal plants by the end of 2013

Lockheed Martin Moves Closer to Affordable Water Desalination

The Future of Desalination: Graphene and LENR?

Duck Update

Last week I posted about a duck and her eggs in downtown London. I am happy to report that all seems well so far. 

I have walked by the nesting place nearly every day since then, and the mother duck is still alive, quiet, alert, and nesting. One of the eggs that was outside the nest seems to have disappeared, but amazingly one is still there.

Clearly I am not the only one to have noticed her. There is a little plastic container inside the tree, possibly to capture water for her or possibly to hold food someone might have been providing (or who knows? maybe it was there before she began her nesting, but I don't remember having seen it there initially). 

Yesterday noon during my walk to McDonald's, I checked on the situation again. I was initially quite concerned when I saw that ALL the other evergreens had been removed from their huge planters (something I don't understand. I liked them). But the shelter tree for the mother duck and her eggs had been left in place. Here's a photo of two of the other planters, showing the trees removed.

So someone on the city works/parks crew is doing their best to leave her undisturbed and protected. 

Can you imagine this situation during the depression less than 100 years ago? What are the odds the duck and her eggs would have been left alone then? My guess is they wouldn't have survived there. As our society becomes wealthier, we tend to forgo hunting and foraging for food like this. I guess there's a positive income/wealth elasticity of demand for "Awww....".

Related articles

McDonald's: You're Back on My List

Ducks and Natural Selection

McDonald's: You're Back on My List

Over five years ago, I posted that McDonald's was no longer my favourite restaurant:

Over the years, though, I find that I go to McDonald's less and less. Partly that is because I just cannot eat the way I used to. But my past two visits to two different outlets were more than disappointing. Both times, the burgers were far too salty. And both times the McFlurries (which are nowhere near as good as DQ Blizzards anyway) tasted really awful — sort of sour or something. And, now that I think about it, the shakes have tasted off lately at other times, too.

Because I am now on a low-carb diet, I haven't been to a McDonald's for quite some time. But because today is McHappy Day, and McDonald's is giving a dollar to Ronald McDonald House for every large-ish item ordered, I decided to give them a try. I went to the one near where we live, in downtown London. I was very pleasantly surprised.

• That particular McDonald's is in a fairly undesireable part of the city. People claim that corner is the major centre for drug deals here. Inside, in the past, the customers and the wait staff have been surly, slow, unpleasant, etc. This time was different. The wait staff were cheery, friendly, and amazingly quick. I think their brightness spilled over, and the customers there seemed to be enjoying themselves more than I remember from the past.
• The burgers were good again. They weren't too salty, and the cheese didn't taste like some putrid  concoction. 
• And now that they've computerized the special orders, we got what we ordered: double quarter-pounders plain, double Big Mac with no sauce or pickles. (we throw away the buns to reduce the carbs).
• And, to top it all off, Ronald McDonald House is a really decent charity.

From the Prez of University of Regina

In my email today, I received a message stating that the University of Regina will [hallelujah!] a have balanced budget this year. In part the message said,

The 2013-14 Saskatchewan provincial budget provided a base operating grant increase to our University of 1.9 per cent plus funding for the third year of the Nursing program. Even with this investment, the University had to find savings to maintain a balanced budget. As a result, budget reductions of 3 per cent, totaling $3.5 million, have been requested of, and achieved by, all academic and administrative units.

Funny, the university is receiving more money but has made all units take budget reductions. What??

• They must have some massive deficits from the past to work off, and/or
• They're still adding far too much to the adminstrative overhead. 

Either way, this doesn't sound like much to be happy about.

And to get those reductions? They have eliminated twenty posiions. I have no idea how many (if any!) administrative positions have been cut; my guess is that they came from the teaching faculty. 8-(

Scarcity and Death Panels: the economics of medical care

We absolute must face the reality that because of scarcity, we will not all receive "the best medical care possible". There simply is not enough to go around. Jonathan Kay nails it:

 Even the wealthiest societies, no matter what the funding model for their health systems, have finite resources available to treat the human body’s potentially infinite medical needs. Someone, somewhere has to make a decision about where those finite assets go.

Such decisions seem horrifying to most of us because life, in most contexts, is too precious to be captured with dollars and cents, or even with the ordinal rankings used to assign transplantable organs. And utilitarianism can, indeed, be taken to monstrous extremes on the fringes of bioethics. But where the day-to-day business of critical-care medicine is concerned, some measure of soulless cost-benefit analysis is an absolute necessity — because every dollar (or organ) used on one patient within a public or private insurance network usually is, in effect, taken from another.

If we don't understand this simple truth, we are doomed to misallocating health resources.

A summary of too many people's view of the Canadian health care system is:

Better that one rich person be denied care so that 50 poor people can stand in line hoping to get it.

... which of course completely ignores both supply effects and the beneficial rationing effects of the price system.

Related articles

Scarcity, Economics, and Medical Care

Would I Look Younger with Dark Hair? (as if it matters)

People who have seen me with dark hair tell me it takes years off my appearance.  Here is one example:

So maybe there's hope? From Gabriel,

"For generations, numerous remedies have been concocted to hide gray hair," said Dr. Gerald Weissmann, the editor-in-chief of The FASEB Journal, "but now, for the first time, an actual treatment that gets to the root of the problem has been developed. While this is exciting news, what's even more exciting is that this also works for vitiligo. This condition, while technically cosmetic, can have serious socio-emotional effects of people. Developing an effective treatment for this condition has the potential to radically improve many people's lives."

I expect none of this stuff will be commercially viable while I'm alive. Or if it is, I'll probably be too old to care. Oh well, the rest of you have so much neato stuff to look forward to.

Related articles

Aging and Life Expectancy

Gray hair and vitiligo reversed at the root

Graying of hair can now be reversed - Zee News - Zee News

The Best Teapot Ever!

Some years ago, on the recommendation of Bill Sjostrom who was then an active blogger, Ms. Eclectic and I bought a round, clear-glass teapot that held a stainless-steel basket as an infuser. We bought a cheap one (perhaps something like this one only smaller and probably not as good), but it worked just fine until last week when we discovered that the plastic cradle/handle was seriously cracked. 

Before checking Amazon, we visited a couple of local shops and on an impulse bought a Bodum Tea Infuser. It is fantastic! I gather from the reviews that other people also love this type of tea pot/infuser, but that it is fragile and one must handle it with a bit of care.

What do I like so much about it? Very simply, the basket that holds the tea leaves is designed so that once you press down on the Bodum plunger (i.e., once you "Bodum-ize" the tea leaves), the steeping process stops. The tea doesn't become at all bitter, a major complaint I have had with the tea at some places that serve afternoon tea. See my reviews here. 

The tea Bodum-izer system works so well, I have even re-used the tea leaves for a second and even a third pot of tea, and there is still absolutely no bitterness in my lapsang souchong tea (which is prone to bitterness if over-steeped). 

I love this teapot. If you're a tea-drinker, you probably will, too. At the very least, consider getting one like it and make sure you can stop the steeping easily. We have the 34-ounce size and find it is just the right size for us. 

. .

Where IS This Place?

I have never been there, and it is already my favourite restaurant.

Never Again! this frightening nonsense needs to be countered constantly

A blatantly anti-semitic rally took place in Hungary [h/t Tom Palmer].

Several hundred supporters took part, despite attempts by the government to prevent it going ahead.

Jobbik said the rally was a protest against what it said was a Jewish attempt to buy up Hungary.

The party, which says it aims to protect Hungarian values and interests, is the third largest in parliament.

It regularly issues anti-Semitic statements.

It is maddening and frightening that this party is the third largest in Hungarian Parliament. Also be sure to check out the links along side that story.

Facebook and Friends

A long-time friend and former student asked me the other day about Facebook [he is not on FB...yet]. Here is my reply:

I think I have over 600 FB friends. Here is a VERY rough guess of the breakdown of where they come from (the numbers won't add up, it's rough):

• Theatre and music: 120
• Huron County (where we lived for 15 years before moving back to London, Ontario): 50
• Former students: 160
• Former colleagues (not many from UWO. these are mostly from Regina and England): 30
• "Met" through blogging (rarely in person): 40
• "Met" through libertarian interests (again rarely in person): 70
• Geocaching: 20
• Childhood, grade school, high school friends: 90
• "Who on earth are you and why did I accept your FB friend request?": 50
• Sports: 20
• Economics n.e.c. 10 [He's a stats guy, so he know this means "not elsewhere covered"]
• Others: 20

I see the numbers add up to more than 600. That is likely because there is some overlap; also these are very rough guesses.

Mostly I love keeping in touch with former students, especially those who have sought me out on FB. Also important are the childhood and school friends; we enjoy reminiscing. And I'm thrilled to be keeping in touch with so many "friends" I've never actually met in person.

Most of my FB friends are not very active on FB, if at all. Others are way tooooo active; there is a way to use FB to limit how much I see of their status updates, but I don't trust the FB algorithm/decision-rule, so I don't much use it. 

Overall I love FB. It is a great way to keep in touch and to keep up with others and what they are up to. In some instances it's like a mini-blog, with people posting links to articles/columns they like. 

Recall that I joined facebook nearly six years ago under some pressure from Scoop and his friends. At that time I think there was one other person from my high school graduation class (class size = 574) and maybe two others from my undergraduate class (class size ~ 300?) on Facebook. I have unfortunately lost touch with several of my friends from Chicago Theological Seminary and have been unable to locate them on Facebook.

Related articles

Facebook: I'm an Anomaly

A Serious Request: What Is the Most Convenient Way to Cook Bacon?

Ms. Eclectic and I often have bacon and eggs for breakfast. We don't much like frying the bacon first in the frying pan, so I've taken to microwaving it while I'm cooking the eggs. I put two sheets of paper towel on a plate, then the bacon, then one more sheet of paper towel over it to control the spatter. This method has worked pretty well most of the time. I just throw away the paper towels and wash the plate, and I quite like the way the bacon comes out.

Lately, however, perhaps because we keep changing brands of bacon and/or brands of paper towel, the paper towels have been sticking to the bacon. If they peeled off neatly that wouldn't be a problem, but sometimes they don't. And bacon with paper bits isn't as good as bacon without the paper bits.

So what is the most convenient way to fix bacon. Don't tell me the healthiest or most environmentally friendly or best-tasting or whatever. Just the most convenient. Thanks.

Side note to all my Facebook friends (Jim, Rod, Butch, Rebekah, et al): yes I like bacon; I just detest having it wrapped around my tenderloin steaks or mixed with chocolate ice cream, etc.

UWO Economics PhD Named Governor of the Bank of Canada

But it isn't Tiff Macklem. It's Steve Poloz. I knew them both when they were at UWO as grad students and actually spent time talking with them both at different times in the past ten years. 

Ducks and Natural Selection

The first summer I taught at Herstmonceux Castle (2006), there were three different mother ducks who made nests and laid eggs in the courtyard.

The first batch to hatch included 13 ducklings, 11 of whom survived the summer being well-fed by profs, staff, and students, and somehow avoiding attacks from the jackdaws. The second batch was smaller. I'm not sure if any of them survived, but the first mom and her ducklings were so well-developed, they pretty much fought the second batch into oblivion. The third batch didn't even hatch; the mom laid them in a somewhat open area, and the jackdaws got the eggs.

Every year there is also a duck who lays her eggs in a planter outside the castle tearoom. Some of her ducklings seem to survive much of the time.

There were several possible insights from those experiences:

• The first batch of ducks to hatch is more likely to survive. Ducks that mate and nest early are more likely to have surviving progeny and to extend their gene pool. 
• Ducks with well-hidden nests are more likely to have surviving ducklings.
• Many, many ducklings and eggs do not survive very long.

It was these memories that affected me when Ms. Eclectic and I saw these two eggs under an evergreen in a huge planter in downtown London last week.

I was saddened by the fact that the eggs had been abandoned, but knowing how few eggs and ducklings survive, it seemed part of the order of nature.

Last night I walked past the same planter and the eggs were still there. That puzzled me. I had expected that some animal or some hungry person would have taken them. 

So I investigated further (albeit from a distance). Sure enough, very well-camouflaged inside the evergreen is a mother duck. I'm guessing she laid so many eggs she can't incubate them all, so these were pushed out of her nest. But that's just a guess. Anyway, here's a photo of her that I tried to take with my smartphone (it is cropped; I didn't really get this close). 

You can just about make out her head and body in the photo. Nesting mother ducks really know how to lie still and blend in with their surroundings.

Let's suppose she is able to hatch a bunch or even several of these eggs. What will happen to the ducklings? That looks like a fairly hefty drop to the sidewalk in the first photo. Will the ducklings survive, or will Londoners have to pull a Spokane here and catch them as they fall?

And if/when the ducklings survive until they reach the sidewalk, it's a several-block walk to the river from their nest. Will Londoners stop traffic for them? And even if that happens, will they survive attacks from crows, hawks, racoons, etc.? Updates to follow.

Related articles

Mother, ducklings lead group on downtown goose chase

Toronto's Honda Player of the Month for April?

I just received the following announcement:

TORONTO BLUE JAYS 1B EDWIN ENCARNACION has been named the HONDA PLAYER OF THE MONTH for April by the TORONTO CHAPTER of the BBWAA. ...

ENCARNACION, 30, earned his third consecutive award dating back to last season and fourth since the beginning of 2012. The right-handed hitter batted .238 with a team leading nine home runs and 20 RBI. ...

I don't know who the members of the Trono chapter of the BBWAA are, but I question their judgement. Arencibia had an OPS that was only 10 points lower than Encarnacion's and he is a catcher, a much more valuable defensive position than 1B/DH. Granted, Arencibia could do well to improve his OBP (a BIG plus for Encarnacion), but overall they're mighty close on offense, and Arencibia contributes so much more on defense.

Converting "Too Big to Fail" into "Too Small to Save"

The cronyism in the financial sector that led to "too big to fail" must be dealt with. The Dallas Fed recommends (and I agree) that banks must instead be "too small to save". 

If commercial banking and investment banking could be kept separate within the same corporate shell, that would probably be okay. But when risk-taking in investment banking is implicitly subsidized by deposit insurance on the commercial banking side of the business, then bankers and investors have strong incentives to take on too much risk, knowling that the taxpayers will eventually bail them out. 

The Dallas Fed recommends incorporating more market discipline into investment banking and making sure that deposit insurance does not subsidize risk-taking.

To address this situation, we have proposed confining access to the federal safety net—the Federal Reserve’s discount window and federal deposit insurance protection—to traditional commercial banks. Further, we advocate that customers and creditors of companies affiliated with commercial banks sign a disclaimer acknowledging their understanding that there is no federal guarantee underpinning their relationship with these nonbank units or with the parent of any banking company. We believe these two steps would reduce the perverse incentives stemming from the implicit—but widely recognized—creditor protection offered to TBTF [Too Big To Fail] institutions. These two changes would help realign incentives to better resemble those faced by customers of smaller banks whose unsecured creditors and equity shareholders are exposed to losses. In short, our proposal would revive the inhibited forces of market discipline. [Emphasis added]

The piece cited here is a bit short on details of how to implement the transition, but it is clearly on the right track.

Addendum: My former classmate from Iowa State (and KC Fed Prez for years), Tom Hoenig had this to say about the failure of "too big to fail". His position (too briefly summarized) is that banks should be allowed to fail and that priority rules in bankruptcy must be observed. But be sure to read the last few pages at this link; they spell things out in greater detail. Tom is now a director of the FDIC.

Austerity and Growth

One of the best summaries of the current argument raging in the economics profession is here. This table is pretty compelling:

The debt-to-GDP levels are given in the left-hand column. The next two columns show the annual economic growth rates estimated by Reinhart and Rogoff and then by the challenging economists from the University of Massachusetts. (They are Thomas Herndon, Michael Ash and Robert Pollin; Reinhart and Rogoff are both at Harvard.)

Debt/GDP	Annual economic growth, 1945-2009
	Reinhart/Rogoff	UMass economists
0-30%	4.1%	4.2%
30-60	2.8	3.1
60-90	2.8	3.2
90+	-0.1	2.2

The impact of a difference of 1% or 2% on economic performance 10 or 20 years from now is LARGE. This is an important issue, even using the revised numbers.

Facebook: I'm an Anomaly

I am on Facebook quite a bit. I love having been able to stay connected (and get reconnected) with childhood friends, former co-workers and colleagues, and with current and former students. I also love getting to know current acquaintances better, especially friends from the theatre and music.

But I think I'm an outlier (according to this piece in the NYTimes). I note three things from that article and graph:

1. Not so many old(er) people are on Facebook. And if they are, my guess is that they have a few family, neighbour, and former co-worker friends, but not hundreds.
2. Take a look at the scatter plot below called "a detailed look at how people meet friends on Facebook".   There are a lot of connections made through summer camp, but there seem to be so few made through work that they don't even show up. 
3. Many of my newer FB friends are from the theatre, where we work intensely for a few months and then go our separate ways. These are probably what the graph refers to as one-time events (and analogous to summer camp?).

These results make sense for younger people. They see people at work everyday; there is less need to FB-friend them, too, to maintain contact with them. But when they change jobs, that's when FB-friending becomes important, sort of like summer camp: you enjoyed being with many of them, and you don't want to lose touch with them. FB is a great way to stay in contact. 

Wait 'til other "under-90"s join FB and begin to dominate it. 

Related articles

Social Media and Summer Camps

Subsidized Prices Lead to Shortages. Whoda Thunk It?

From The Washington Post via Daily Alert:

Egypt Running Out of Money for Subsidies - Abigail Hauslohner
Mini-tankers of illegal diesel fuel have become ubiquitous in Egypt. Egypt's rapidly expanding black market for fuel, foodstuffs, and other commodities may be the most tangible illustration of just how badly its economy is failing. The prices of basic goods, like fuel and flour, have been fixed for decades, with Egypt pouring roughly a quarter of its GDP into a bloated and deeply inefficient national subsidy system each year. After two years of political turmoil, the government is quickly running out of money to foot the bill, and the supply of subsidized goods is drying up.
    Cairo drivers say they spend up to four hours waiting in line ! at state-subsidized gas stations that are almost sure to go dry by the afternoon. "Sometimes they will only sell half of what they have, and then they'll take the other half and sell it on the black market," said taxi driver Rafaat Mahmoud. Since waiting in line also means losing money, Mahmoud does what many other Egyptians do: He pays 22% more to buy diesel on the black market.
    Economists say the government of President Morsi has only enough cash to fund the subsidies for a few months. But it lacks the political support needed to carry out the massive spending cuts that economists say are necessary to keep Egypt afloat and secure a $4.8 billion IMF loan. (Washington Post)

When prices are set below the equilibrium price, the quantity supplied declines and the quantity demanded increases, leading to shortages. This is basic stuff that politicians cannot overrule or legislate out of existence, no matter how much the voters might want them to.

Related articles

Egypt: Diesel Shortage Revives Black Market in Egypt

Egypt faces food crisis over wheat shortage

A paralysed city: The diesel fuel crisis

Size Matters: Addendum

In my previous post, I opined that "Size is important".

It is. I like having a bigger screen for my smartphone than is offered by Apple. The Note2 by Samsung is as large as I might want, though. It is not too big for most of my shirt pockets, but it is perhaps a bit too big to hold for long periods for reading or for taking self-portraits using the screen-side camera. 

Given these considerations, I would probably NOT be interested in this larger Samsung "Mega 6.3" [h/t MA]. I would love the larger screen, but that size might be too big for my shirt pockets (MA says I should buy shirts with bigger pockets then; in fact if I wore only cargo pants or sportcoats, a phone that big might not be a problem.). 

At the same time, keeping in mind the sizes of some of the early cellphones that many of us used back in the late 1980s and early 1990s, I see nothing wrong with using a phone that is larger. My Note2 is considerably smaller than my early Sony phone or any of the early Motorola phones. A current phone is large? That means the screen is more readable and easier to use.

The Future for Apple

Jack sent me this article from Forbes, dissing Apple pretty seriously. Its title is,

7 Reasons Apple is More Doomed Than You Think

I have little knowledge in this area, so take the rest of this in that vein. As you know, I'm upset with Apple because they didn't have the good sense to come out with a smartphone the size of the Galaxy S3 (or the rumoured slightly larger S4). And I have seen nothing in the rumour mill indicating that they will move in that direction soon.

They will... eventually. But by then, Apple will be playing catch-up to Samsung and HTC. I still haven't adjusted to my Samsung Note2 and Android, but size is important!

So knowing that's my only take on Apple (other than the fact that I recently bought a MacBook Pro instead of and Window-based machine), you may not want to pay too much attention to these forecasts. 

I looked at the price of Apple stock earlier today. It was about $403US, up $5 for the day, but down about 28% from its peak. My guess (forecast or prediction is really too strong, despite my having used "forecasts" in the previous paragraph) is that in two years Apple stock will sell for $210 and in five years it will sell for $125. 

If I had any confidence in these guesses, I would short the socks off Apple. But given my lack of confidence in these guesses, and given my generally strong risk aversion, I'll settle for just making the guesses public.

Turn Off Your Cellphone?

I hate listening to other people's phone conversations. Too many people seem to think it is okay to have cellphone conversations anytime, anywhere; and they generally seem to think they need to speak more loudly into a cellphone than in person. Ugh.

But what's wrong with texting and checking your email on a flight? Not much unless it distracts you in case of emergencies. Here's an insider's report:

Turning off our electronic devices: How necessary is it, really?
Flight attendants everywhere will hate me for this, but ... having your electronic device on below 10,000 feet is not an immediate danger to the flight. How do I know? Pilots are the worst offenders of this rule. Not on purpose, of course, but when we're flying all day, sometimes we forget to turn our phones off. I've received a phone call everywhere from the takeoff roll to 18,000 feet over the Rockies and the airplane has never had an adverse reaction.

That said, it's still important for you to listen to the flight attendants and follow their instructions to turn off your electrical devices. It is their job to enforce the rules, no matter how dumb they are. If you want to give someone an attitude or an earful, please direct your worst to the hypocritical politicians who do not comply with the rule while on their private jets.

I've heard phones go off or text signals as planes are landing. As with the pilot who wrote that statement above, it's never been a problem.