http://online.wsj.com/article_email/SB10001424052748704541004574599981936018834-lMyQjAxMDA5MDEwNjExNDYyWj.html
As Santa gets his sleigh ready for his worldwide efforts this week, we want to wish our regular readers the happiest of holiday seasons! For those who celebrate as we do: Merry Christmas and Happy New Year!
Looking down at Earth from Santa's galactic perspective, Howard Bloom helps with a little Earth history in order to bring us some current perspective on what is and is not relevant about the two week meeting that just took place in Copenhagen. Of course, the short answer is that there is "nothing" relevant that took place in Copenhagen but we know those involved were sincere people so we'll be sincere too.
And, we'll set aside what we thought we heard was $100 billion offered by a representative of the U.S. (could that have been Hillary Clinton - perhaps she was confused about the asking price of her next book deal, but I digress) as good faith money for developed countries to offer developing countries to help move their climate efforts forward. It would appear that throwing money at the problem is seen as a way of showing sincerity.
Bloom's perspective is that we've been the beneficiaries of a stroke of luck: "In the over two million years during which we climbed from stone-tool wielding Homo erectus with sloping brows to high-foreheaded Homo urbanis ... we underwent 60 glaciations, 60 ice ages. And in the 120,000 years since we emerged in our current physiological shape as Homo sapiens, we've lived through 20 sudden global warmings. In most of those, temperatures have shot up by as much as 18 degrees within a mere 20 years."
All this took place without Al Gore.
Bloom defines our "stroke of luck" as the sheets of ice we lived with "peeling back some 12,000 years ago" leaving today's planet. But, this "weather standstill", as Bloom refers to it, has held on for an "abnormally long amount of time."
So, as our planet "wobbles" thru its solar system orbit, it produces weather alterations we cycle thru every 22,000, 41,000, and 100,000 years. This is called the Millankovich cycle, named for the Serbian engineer and geophysicist who discovered it.
In addition, the sun is going thru a cycle: as a result of maturing, the sun is 43% warmer today than it was when the Earth was first formed 4.5 billion years ago.
Bottom line: "Weather changes and the occasional meteor have tossed this planet through roughly 142 mass extinctions since life began 3.85 billion years ago. That's an average of one mass extinction every 26.5 million years. Where did these die-offs come from? Nature. There were no human capitalists, industrialists or cultures of consumerism to blame."
As Bloom says, we don't want to be the victims of one of these "extinctions", but we do need to prepare for more than just the changes "we" think we make. Bloom calls it preparing for "fire and ice." The big stuff is not caused by your neighbor's SUV.
The next time our global temperatures go up 18 degrees in 20 years, it won't be because we didn't convert to electric cars fast enough ...
Happy Holidays!
Monday, December 21, 2009
Friday, December 18, 2009
Health Care
http://www.nytimes.com/2009/12/18/opinion/18krugman.html?emc=eta1
Once again, we find ourselves in good company with Paul Krugman whose post today, entitled "Pass the Bill", is completely in line with our thoughts!
As we have said in other prior posts, the current Senate bill would do two things: first, it would prohibit discrimination by insurance companies on the basis of medical condition or history (no denial of health insurance based on a pre-existing condition), and second, your insurance can't get canceled because you got sick, or you got too sick. Krugman includes the second as part of the first but we feel it deserves an appropriate spotlight. Krugman designates the second most important thing (and our "third") as the bill would provide substantial financial aid to those who don't get insurance through their employers, as well as tax breaks for small employers who do provide insurance.
We don't care what else is in the bill because, pragmatically, we know that some senators need some things in order to make it a "win" for them.
All of this would be paid for in large part by the first serious effort to rein in rising health care costs.
The result would be, as Krugman says, "... a huge increase in the availability and affordability of health insurance, WITH MORE THAN 30 MILLION Americans gaining coverage, and premiums for lower-income and lower-middle-income Americans falling dramatically."
Because he has studied this issue, Krugman assures that the history of social insurance programs is that the coverage gets better and more comprehensive as the years go by. While we hoped for that, it is nice to see someone of Krugman's stature reassures us.
While nobody will be completely happy with what's on the table, isn't that how politics (or labor negotiations) works? We like Krugman's quote, "... rejecting an imperfect deal in the hope of eventually getting something better is a recipe for getting nothing at all."
So, let's pass the bill and take note of those senators who sought to block it. Those senators should be easy to run against!
Once again, we find ourselves in good company with Paul Krugman whose post today, entitled "Pass the Bill", is completely in line with our thoughts!
As we have said in other prior posts, the current Senate bill would do two things: first, it would prohibit discrimination by insurance companies on the basis of medical condition or history (no denial of health insurance based on a pre-existing condition), and second, your insurance can't get canceled because you got sick, or you got too sick. Krugman includes the second as part of the first but we feel it deserves an appropriate spotlight. Krugman designates the second most important thing (and our "third") as the bill would provide substantial financial aid to those who don't get insurance through their employers, as well as tax breaks for small employers who do provide insurance.
We don't care what else is in the bill because, pragmatically, we know that some senators need some things in order to make it a "win" for them.
All of this would be paid for in large part by the first serious effort to rein in rising health care costs.
The result would be, as Krugman says, "... a huge increase in the availability and affordability of health insurance, WITH MORE THAN 30 MILLION Americans gaining coverage, and premiums for lower-income and lower-middle-income Americans falling dramatically."
Because he has studied this issue, Krugman assures that the history of social insurance programs is that the coverage gets better and more comprehensive as the years go by. While we hoped for that, it is nice to see someone of Krugman's stature reassures us.
While nobody will be completely happy with what's on the table, isn't that how politics (or labor negotiations) works? We like Krugman's quote, "... rejecting an imperfect deal in the hope of eventually getting something better is a recipe for getting nothing at all."
So, let's pass the bill and take note of those senators who sought to block it. Those senators should be easy to run against!
Tuesday, December 15, 2009
Copenhagen Results
http://online.wsj.com/article_email/SB10001424052748704517504574589952331068322-lMyQjAxMDA5MDEwNTExNDUyWj.html
We haven't posted on "Climategate" or the "Copenhagen Collapse" in at least two weeks so we feel remiss. Today we received a very nice note from someone and they reminded me about what's not going on over there. By "over there", we mean the world climate conference taking place over this two week period in Copenhagen (the conference is now in its second week). Coincidentally, we heard an interview with Bjorn Lomborg (who is at the conference) on National Public Radio this morning. Lomborg is the "enemy" of the global warming police. He is also the Director of the Copenhagen Consensus Center, a think tank, and author of "Cool It: The Skeptical Environmentalists Guide to Global Warming" (Knopf, 2007). Among other things, Lomborg had the novel idea last year of putting together several Nobel Prize winning economists and other experts to prioritize what should be done to "fix" the earth. His approach: we give you $10 billion, $50 billion, $75 billion - what is the most important thing to do for the 6.7 billion (plus or minus) people who live on the planet today? And, his group came up with a ranking of those things.
Where did "global warming" come in on the list? Roughly, 30th. Why? There's a simple answer and a way for the climate fanatics to coexist with more rational souls. Continued economic growth will keep people, and especially children, from starving. Stealing money meant for that in order to move carbon capture up the list of important things to do, will increase starvation and disease. Lomborg has a creative and relevant recommendation: radically increase spending on R&D for green energy - to 0.2% of global GDP, or $100 billion. That's 50 times more than the world spends now - but still twice as cheap as anything being considered now by the carbon posse. Wait, and, it would have a real chance of working! What a concept!
We have attached Lomborg's 12/14 "OPINION" post in the WSJ. Please refer to his calculations on, for example, the European countries' plan to divert $50 billion in development aid budgets to repackage them as climate-change assistance. Look at the trade off between what that buys in climate change and what the world loses in children that stand to starve "now" if that's done.
Today's NY Times had an editorial that indicated nothing was accomplished in the first week of Copenhagen. Nothing will be accomplished in the second week either because China and India have no interest in sacrificing economic growth because Al Gore has a "cause". Good for them!
We haven't posted on "Climategate" or the "Copenhagen Collapse" in at least two weeks so we feel remiss. Today we received a very nice note from someone and they reminded me about what's not going on over there. By "over there", we mean the world climate conference taking place over this two week period in Copenhagen (the conference is now in its second week). Coincidentally, we heard an interview with Bjorn Lomborg (who is at the conference) on National Public Radio this morning. Lomborg is the "enemy" of the global warming police. He is also the Director of the Copenhagen Consensus Center, a think tank, and author of "Cool It: The Skeptical Environmentalists Guide to Global Warming" (Knopf, 2007). Among other things, Lomborg had the novel idea last year of putting together several Nobel Prize winning economists and other experts to prioritize what should be done to "fix" the earth. His approach: we give you $10 billion, $50 billion, $75 billion - what is the most important thing to do for the 6.7 billion (plus or minus) people who live on the planet today? And, his group came up with a ranking of those things.
Where did "global warming" come in on the list? Roughly, 30th. Why? There's a simple answer and a way for the climate fanatics to coexist with more rational souls. Continued economic growth will keep people, and especially children, from starving. Stealing money meant for that in order to move carbon capture up the list of important things to do, will increase starvation and disease. Lomborg has a creative and relevant recommendation: radically increase spending on R&D for green energy - to 0.2% of global GDP, or $100 billion. That's 50 times more than the world spends now - but still twice as cheap as anything being considered now by the carbon posse. Wait, and, it would have a real chance of working! What a concept!
We have attached Lomborg's 12/14 "OPINION" post in the WSJ. Please refer to his calculations on, for example, the European countries' plan to divert $50 billion in development aid budgets to repackage them as climate-change assistance. Look at the trade off between what that buys in climate change and what the world loses in children that stand to starve "now" if that's done.
Today's NY Times had an editorial that indicated nothing was accomplished in the first week of Copenhagen. Nothing will be accomplished in the second week either because China and India have no interest in sacrificing economic growth because Al Gore has a "cause". Good for them!
Financial Regulation 2
http://online.wsj.com/article_email/SB126080843481590571-lMyQjAxMDI5NjEwNTgxMDU4Wj.html
http://roomfordebate.blogs.nytimes.com/2009/12/14/banks-real-reform-and-pitchforks/?emc=eta1
As a follow up to our most recent post, we want to add that the "Bank CEOs" yesterday pledged to push for re-regulation (WSJ attached) while they acknowledged to President Obama that their behavior was, at minimum, disingenuous and probably outright deceitful. How? The CEOs agreed that the work of their lobbyists to weaken any new financial rules was not consistent with their public support for new stronger regulations. This practice was made especially more onerous when one realizes that the lobbying involved was being paid for by the very same public that stood to be protected by the new regulations - so paying back TARP money was not just about freeing up executive pay, it was also about lobbying against the public interest with public money!
As many people have said throughout the worldwide financial crisis, any institution that is deemed "too big to fail" is: TOO BIG!
As Lawrence Summers said over the weekend, a $300 million banking industry lobbying push to "gut" financial market re-regulation is "frankly a bit rich."
Of course, the next question is how likely is the prospect of significant regulation of the banking industry from Washington? The House passed a banking regulation bill last week, and the Senate is working on its own version. The NY Times "Room for Debate" forum (attached) presents us with some opinions on the odds of significant regulation. See especially Edward Harrison who says we are unlikely to see substantive changes that will prevent another crisis in the financial arena. That sums it up.
http://roomfordebate.blogs.nytimes.com/2009/12/14/banks-real-reform-and-pitchforks/?emc=eta1
As a follow up to our most recent post, we want to add that the "Bank CEOs" yesterday pledged to push for re-regulation (WSJ attached) while they acknowledged to President Obama that their behavior was, at minimum, disingenuous and probably outright deceitful. How? The CEOs agreed that the work of their lobbyists to weaken any new financial rules was not consistent with their public support for new stronger regulations. This practice was made especially more onerous when one realizes that the lobbying involved was being paid for by the very same public that stood to be protected by the new regulations - so paying back TARP money was not just about freeing up executive pay, it was also about lobbying against the public interest with public money!
As many people have said throughout the worldwide financial crisis, any institution that is deemed "too big to fail" is: TOO BIG!
As Lawrence Summers said over the weekend, a $300 million banking industry lobbying push to "gut" financial market re-regulation is "frankly a bit rich."
Of course, the next question is how likely is the prospect of significant regulation of the banking industry from Washington? The House passed a banking regulation bill last week, and the Senate is working on its own version. The NY Times "Room for Debate" forum (attached) presents us with some opinions on the odds of significant regulation. See especially Edward Harrison who says we are unlikely to see substantive changes that will prevent another crisis in the financial arena. That sums it up.
Monday, December 14, 2009
Financial Regulation
http://www.nytimes.com/2009/12/14/opinion/14krugman.html?emc=eta1
There's an old saying from a Bob Dylan song that "Denial is not just a river in Egypt!" Krugman's post in today's NY Times (attached) refers to the subject of "denial" as it relates to financial regulation. Nothing could get me to yawn quicker than a discussion of financial regulation but the potential disaster we face if it is not properly handled can effect everyone.
It was probably logical that the more years that passed by after the Great Depression, the more pressure would mount to "deregulate" again. After all, for 40 years everything was OK. So, as Krugman points out, we deregulated with Ronald Reagan and got the savings-and-loan crisis of the 80s. That didn't seem to phase us so we went on to scrap one of the great pieces of Depression Era legislation in 1999 (Glass Steigel) so that (literally) Citicorp could merge with Travelers creating the great monstrosity: Citigroup.
And, of course, in this decade, we had Alan Greenspan admitting that he was wrong about the ability of the financial markets to police themselves (in addition to having no idea, as it was happening no less, that the sub-prime lending situation was as extensive as it was!).
With all of this as background: "...last Friday in the House of Representatives...with the meltdown caused by a runaway financial system still fresh in our minds, and the mass unemployment that meltdown caused still very much in evidence...every single Republican and 27 Democrats voted against a quite modest effort to rein in Wall Street excesses."
So, as Krugman points out, it will be up to the Democrats in the Senate to get behind financial reform. If they don't learn from the lessens of history, then we will all be condemned to repeat them. It is an old saying but one that continues to be true. As George McGovern said in the Washington Post over the weekend, Afghanistan is looking a lot like Viet Nam.
There's an old saying from a Bob Dylan song that "Denial is not just a river in Egypt!" Krugman's post in today's NY Times (attached) refers to the subject of "denial" as it relates to financial regulation. Nothing could get me to yawn quicker than a discussion of financial regulation but the potential disaster we face if it is not properly handled can effect everyone.
It was probably logical that the more years that passed by after the Great Depression, the more pressure would mount to "deregulate" again. After all, for 40 years everything was OK. So, as Krugman points out, we deregulated with Ronald Reagan and got the savings-and-loan crisis of the 80s. That didn't seem to phase us so we went on to scrap one of the great pieces of Depression Era legislation in 1999 (Glass Steigel) so that (literally) Citicorp could merge with Travelers creating the great monstrosity: Citigroup.
And, of course, in this decade, we had Alan Greenspan admitting that he was wrong about the ability of the financial markets to police themselves (in addition to having no idea, as it was happening no less, that the sub-prime lending situation was as extensive as it was!).
With all of this as background: "...last Friday in the House of Representatives...with the meltdown caused by a runaway financial system still fresh in our minds, and the mass unemployment that meltdown caused still very much in evidence...every single Republican and 27 Democrats voted against a quite modest effort to rein in Wall Street excesses."
So, as Krugman points out, it will be up to the Democrats in the Senate to get behind financial reform. If they don't learn from the lessens of history, then we will all be condemned to repeat them. It is an old saying but one that continues to be true. As George McGovern said in the Washington Post over the weekend, Afghanistan is looking a lot like Viet Nam.
Friday, December 11, 2009
Krugman on the Fed and Job Creation
http://www.nytimes.com/2009/12/11/opinion/11krugman.html?emc=eta1
When we referenced Galbraith at UT in our "Thinking Big" post on 12/9, we mentioned his back of the envelope perspective that we'd need 250,000 new jobs per month for 60 consecutive months to make up for the 7 (or8) million jobs lost (and the 15 million currently unemployed) since the recession began. Krugman raises the ante in his post today about what the Fed could or should be doing: "I don't think many people grasp just how much job creation we need to climb out of the hole we're in. You can't just look at 8 million jobs that America has lost since the recession began, because the nation needs to keep adding jobs - more than 100,000 a month - to keep up with a growing population. And that means that we need really big job gains, month after month, if we want to see America return to anything that feels like full employment."
Krugman continues: "How big? My back of the envelope calculation says we need to add around 18 million jobs over the next 5 years, or 300,000 jobs a month. This puts last week's employment report, which showed job losses of 'only' 11,000 in November, in perspective."
Krugman has said all along (with Warren Buffet) that the stimulus package was too small to begin with. He sees the measures proposed by President Obama earlier this week as definite "job creators" but far short of what the economy needs. That leaves the Fed. If Bernanke "believes", then his own forecasts should lead him there: the Fed's forecasts predict that unemployment will remain punishingly high for the next THREE years.
Krugman adds that a study done at the Petersen Institute, based on the prior work of Bernanke himself, strongly suggests that the Fed should expand credit by buying a further 2 trillion in assets. Do we think Bernanke knows that?
In the strongest words I've seen Krugman use, "But there's also, I believe, a question of priorities. The Fed sprang into action when faced with the prospect of wrecked banks; it doesn't seem equally concerned about the prospect of wrecked lives."
Aside from the fact that we join more people in the world reading Krugman's blog than any other (Thomas L. Friedman is #2) just because we are interested, his "posts" can cause the entire world of finance to take note (this would include Bernanke).
So, Krugman's last words from today's post urge the Fed to lose its complacency and start lending a hand to job creation. There is no question he was "heard" - now lets see what happens.
When we referenced Galbraith at UT in our "Thinking Big" post on 12/9, we mentioned his back of the envelope perspective that we'd need 250,000 new jobs per month for 60 consecutive months to make up for the 7 (or8) million jobs lost (and the 15 million currently unemployed) since the recession began. Krugman raises the ante in his post today about what the Fed could or should be doing: "I don't think many people grasp just how much job creation we need to climb out of the hole we're in. You can't just look at 8 million jobs that America has lost since the recession began, because the nation needs to keep adding jobs - more than 100,000 a month - to keep up with a growing population. And that means that we need really big job gains, month after month, if we want to see America return to anything that feels like full employment."
Krugman continues: "How big? My back of the envelope calculation says we need to add around 18 million jobs over the next 5 years, or 300,000 jobs a month. This puts last week's employment report, which showed job losses of 'only' 11,000 in November, in perspective."
Krugman has said all along (with Warren Buffet) that the stimulus package was too small to begin with. He sees the measures proposed by President Obama earlier this week as definite "job creators" but far short of what the economy needs. That leaves the Fed. If Bernanke "believes", then his own forecasts should lead him there: the Fed's forecasts predict that unemployment will remain punishingly high for the next THREE years.
Krugman adds that a study done at the Petersen Institute, based on the prior work of Bernanke himself, strongly suggests that the Fed should expand credit by buying a further 2 trillion in assets. Do we think Bernanke knows that?
In the strongest words I've seen Krugman use, "But there's also, I believe, a question of priorities. The Fed sprang into action when faced with the prospect of wrecked banks; it doesn't seem equally concerned about the prospect of wrecked lives."
Aside from the fact that we join more people in the world reading Krugman's blog than any other (Thomas L. Friedman is #2) just because we are interested, his "posts" can cause the entire world of finance to take note (this would include Bernanke).
So, Krugman's last words from today's post urge the Fed to lose its complacency and start lending a hand to job creation. There is no question he was "heard" - now lets see what happens.
Thursday, December 10, 2009
Conversions and Economic Recovery
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2396
Knowledge@Wharton published an article yesterday that summarizes their discussions with a few professors, economists and company bosses in a range of industries on which economic indicators they plan to watch during the final quarter of 2009 and what they are waiting to see in 2010 that would convince them the economy is turning around. On the macro side, from retail to real estate, finance to factories, the central theme was "EMPLOYMENT". Retailers linked it to consumer confidence, real estate watchers to office space, bankers to loan losses, and manufacturers to product demand.
If we follow the logic of Susan Wachter (a Wharton real estate professor), high unemployment will persist thru 2010, impacting the real estate market. Now, although the residential real estate market is turning around, the commercial real estate market is the "next shoe to drop", and that isn't going to turn around until employment does. To quote Wachter: "Commercial is a lagging indicator, and it follows employment. Employment itself is a lagging indicator. Probably six months after we see employment improving we'll see commercial improving, and we won't see employment changing in 2010."
In business generally, one number we always tried to keep low was employee turnover. Of course, management accomplishes that with progressive employee relations policies that cause company loyalty and innovative thinking. However; low turnover can be an indicator of potential problems: as Arkadi Kuhlmann, president and CEO of ING Direct, pointed out to the K@W people, his company's annual turnover rate is usually about 18%. For the past year, it's been about 3%. Normally, 3% is great, but in this case it means that there aren't any jobs available out there. Now, Mr. Kuhlmann has other problems if his "normal" turnover rate is 18% - somebody calculate how long it takes his company to turn over 100% of it's population at 18% compounded - but the overall point is valid.
As we pointed out in a prior post, and K@W echoes, November's official numbers brought hope for an economic thaw. But, "jobs" are a lingering concern.
During the holiday season, the retail industry will be watching comparable store sales to see if shoppers spend more than they did in the same period last year. Retailers will also be watching "conversions": that is, how many shoppers who walk into a store actually buy something instead of just looking around.
So, during the holiday season, we have to get people into the malls, then get them into the stores, and then get them to "convert"! This is modern economics in America!
Knowledge@Wharton published an article yesterday that summarizes their discussions with a few professors, economists and company bosses in a range of industries on which economic indicators they plan to watch during the final quarter of 2009 and what they are waiting to see in 2010 that would convince them the economy is turning around. On the macro side, from retail to real estate, finance to factories, the central theme was "EMPLOYMENT". Retailers linked it to consumer confidence, real estate watchers to office space, bankers to loan losses, and manufacturers to product demand.
If we follow the logic of Susan Wachter (a Wharton real estate professor), high unemployment will persist thru 2010, impacting the real estate market. Now, although the residential real estate market is turning around, the commercial real estate market is the "next shoe to drop", and that isn't going to turn around until employment does. To quote Wachter: "Commercial is a lagging indicator, and it follows employment. Employment itself is a lagging indicator. Probably six months after we see employment improving we'll see commercial improving, and we won't see employment changing in 2010."
In business generally, one number we always tried to keep low was employee turnover. Of course, management accomplishes that with progressive employee relations policies that cause company loyalty and innovative thinking. However; low turnover can be an indicator of potential problems: as Arkadi Kuhlmann, president and CEO of ING Direct, pointed out to the K@W people, his company's annual turnover rate is usually about 18%. For the past year, it's been about 3%. Normally, 3% is great, but in this case it means that there aren't any jobs available out there. Now, Mr. Kuhlmann has other problems if his "normal" turnover rate is 18% - somebody calculate how long it takes his company to turn over 100% of it's population at 18% compounded - but the overall point is valid.
As we pointed out in a prior post, and K@W echoes, November's official numbers brought hope for an economic thaw. But, "jobs" are a lingering concern.
During the holiday season, the retail industry will be watching comparable store sales to see if shoppers spend more than they did in the same period last year. Retailers will also be watching "conversions": that is, how many shoppers who walk into a store actually buy something instead of just looking around.
So, during the holiday season, we have to get people into the malls, then get them into the stores, and then get them to "convert"! This is modern economics in America!
Wednesday, December 9, 2009
Thinking Big
http://roomfordebate.blogs.nytimes.com/2009/12/06/should-public-sector-jobs-come-first/?emc=eta1
http://economix.blogs.nytimes.com/2009/12/08/obamas-job-proposals/?emc=eta1
Paul Krugman recently called for an emergency program, perhaps a small-scale version of the New Deal's Works Progress Administration that would offer low paying public-service employment. A large share of the current stimulus package has gone to state governments, with the aim of preventing more layoffs among public sector workers and in public education. Should saving these government and education jobs be a priority? Is there a way to establish a public program quickly enough to employ the newly jobless? Would this be an efficient way to stimulate job creation?
The NY Times "Room for Debate" blog is first attached and asks some heavy hitters what they think about this issue. The responses are interesting. Read especially James K. Galbraith, an economist at UT Austin (and the son of John Kenneth Galbraith) who typically has his feet on the ground and finds some satisfaction in what we're doing to save the economy now relative to what his father advocated.
We have also attached a refreshingly brief summary of the Obama job proposals from the NY Times "Economix" blog. Within the "bullets", one can click on various perspectives of economists like Mark Zandi (much listened to and rightly so) and/or institutions with an interest in those proposals.
A moment on Galbraith: his perspective is that, as economics, the stimulus is working, but as politics, it is failing because in politics "part-way doesn't count." With 7 million jobs lost and 15 million people now out of work, people care about VISIBLE RESULTS - and they've not seen them yet. The question isn't whether we've turned a corner. It's how do we get all the way back to high employment, even in 5 years? We'd need nearly 250,000 new jobs every month for 60 months!!
So the problem isn't how best to choose between revenue sharing, infrastructure, public jobs and a payroll tax holiday. It's how to get all those things done - and also how to support small business and non-profits, to help students and to ease older workers into retirement.
There is a "Read more..." drop down that allows further review of Galbraith's comments and we strongly recommend what he has to say there about human resources and making "...no little plans."
Our fear in prior posts has been that we're back in 1937 and we haven't done enough (for those of you who are economic historians). World War II saved the economy then (with huge sacrifices) so things did not get back to growing until 1945, 8 years later. Obama's Chicago Booth School behavioral economists know that. That's why we have the new job proposals.
The American educational system needs more (and better) teachers. We can't spend too much on that. Saving a teacher's job or adding teacher jobs is "priceless". If that is any part of further stimulus, it should be applauded.
http://economix.blogs.nytimes.com/2009/12/08/obamas-job-proposals/?emc=eta1
Paul Krugman recently called for an emergency program, perhaps a small-scale version of the New Deal's Works Progress Administration that would offer low paying public-service employment. A large share of the current stimulus package has gone to state governments, with the aim of preventing more layoffs among public sector workers and in public education. Should saving these government and education jobs be a priority? Is there a way to establish a public program quickly enough to employ the newly jobless? Would this be an efficient way to stimulate job creation?
The NY Times "Room for Debate" blog is first attached and asks some heavy hitters what they think about this issue. The responses are interesting. Read especially James K. Galbraith, an economist at UT Austin (and the son of John Kenneth Galbraith) who typically has his feet on the ground and finds some satisfaction in what we're doing to save the economy now relative to what his father advocated.
We have also attached a refreshingly brief summary of the Obama job proposals from the NY Times "Economix" blog. Within the "bullets", one can click on various perspectives of economists like Mark Zandi (much listened to and rightly so) and/or institutions with an interest in those proposals.
A moment on Galbraith: his perspective is that, as economics, the stimulus is working, but as politics, it is failing because in politics "part-way doesn't count." With 7 million jobs lost and 15 million people now out of work, people care about VISIBLE RESULTS - and they've not seen them yet. The question isn't whether we've turned a corner. It's how do we get all the way back to high employment, even in 5 years? We'd need nearly 250,000 new jobs every month for 60 months!!
So the problem isn't how best to choose between revenue sharing, infrastructure, public jobs and a payroll tax holiday. It's how to get all those things done - and also how to support small business and non-profits, to help students and to ease older workers into retirement.
There is a "Read more..." drop down that allows further review of Galbraith's comments and we strongly recommend what he has to say there about human resources and making "...no little plans."
Our fear in prior posts has been that we're back in 1937 and we haven't done enough (for those of you who are economic historians). World War II saved the economy then (with huge sacrifices) so things did not get back to growing until 1945, 8 years later. Obama's Chicago Booth School behavioral economists know that. That's why we have the new job proposals.
The American educational system needs more (and better) teachers. We can't spend too much on that. Saving a teacher's job or adding teacher jobs is "priceless". If that is any part of further stimulus, it should be applauded.
Saturday, December 5, 2009
Good News
http://online.wsj.com/article_email/SB125993225142676615-lMyQjAxMDI5NTA5NTkwMzUyWj.html
Over the last two years (from that dismal November/December, 2007 period) there has not been much in the way of "good news" on the economy. Yesterday's much anticipated announcement by the BLS was some solid good news. The color graphs in the article we've attached from today's WSJ do an excellent job of highlighting the key positives:
Job Losses Slow - November data showed 11,000 jobs lost. Some analysts actually thought that was a misprint (thinking it had to be 111,000)! Obviously, that is the fewest jobs lost since the recession began 2 years ago. In addition, upward revisions showed that 159,000 fewer jobs were lost in September and October than were previously thought.
Temporary Hiring Picked Up - November data showed temporary hiring up 52,400. That is the 4th straight month for that key indicator.
Average Workweek - The length of the average workweek expanded from 33 to 33.2 hours. That this key indicator expands at all is important.
The overall unemployment rate dropped from 10.2% to 10% but that number may be an erratic one as the economy comes back (some economists expect it to get as high as 10.5%) because other key rates that affect it could bump it back up. The closely watched U6 rate (unemployed plus discouraged) dropped in November from 17.5% to 17.2%, a very good sign. But, if some of those formerly "discouraged" workers who are now back on the market don't find work, they'll be bumping the active unemployed numbers up.
Overall, November marked the 23rd straight month of overall job losses. There were 15.4 million Americans unemployed in November, more than twice as many as when the recession began.
So, while Stephen Stanley of RBS refers to these data as a "game changer" that should fundamentally alter perceptions regarding the economy, we prefer to be cautiously optimistic.
Over the last two years (from that dismal November/December, 2007 period) there has not been much in the way of "good news" on the economy. Yesterday's much anticipated announcement by the BLS was some solid good news. The color graphs in the article we've attached from today's WSJ do an excellent job of highlighting the key positives:
Job Losses Slow - November data showed 11,000 jobs lost. Some analysts actually thought that was a misprint (thinking it had to be 111,000)! Obviously, that is the fewest jobs lost since the recession began 2 years ago. In addition, upward revisions showed that 159,000 fewer jobs were lost in September and October than were previously thought.
Temporary Hiring Picked Up - November data showed temporary hiring up 52,400. That is the 4th straight month for that key indicator.
Average Workweek - The length of the average workweek expanded from 33 to 33.2 hours. That this key indicator expands at all is important.
The overall unemployment rate dropped from 10.2% to 10% but that number may be an erratic one as the economy comes back (some economists expect it to get as high as 10.5%) because other key rates that affect it could bump it back up. The closely watched U6 rate (unemployed plus discouraged) dropped in November from 17.5% to 17.2%, a very good sign. But, if some of those formerly "discouraged" workers who are now back on the market don't find work, they'll be bumping the active unemployed numbers up.
Overall, November marked the 23rd straight month of overall job losses. There were 15.4 million Americans unemployed in November, more than twice as many as when the recession began.
So, while Stephen Stanley of RBS refers to these data as a "game changer" that should fundamentally alter perceptions regarding the economy, we prefer to be cautiously optimistic.
Friday, December 4, 2009
Oil Supplies
http://www.washingtonpost.com/wp-dyn/content/article/2009/11/20/AR2009112002619.html?referrer=emailarticle
Now that we have the Al Gore pretenders on the run, perhaps we can go back to oil and a responsible search for it that can be accomplished closer to home without harm to the environment.
Every time we read that we're running out of oil, or we're polluting when we're trying to find it, or we're polluting when we're using it, my suggestion is that someone needs to slow down the debate and use some facts. Thanks to the government stimulus programs, we are protecting the "marsh mouse" in, or near San Francisco so we can all feel comfortable that the ecosystem is politically protected. We are living on a life line of container ships that, as Dr. Lawrence Redlinger so brilliantly pointed out last week in one of our seminars, ply the seas back and forth to other continents while using the dirtiest (cheapest) form of diesel oil for power. That's an easy example of what can be fixed - upgrade the power plants of the ships that service the U.S. by retrofitting, if that's even necessary, to use clean diesel power and require new container ships to use other versions of cost effective power plants. For example, we already have jet engines powering the largest luxury cruise ships to great effect (those ships are faster and more maneuverable while burning cleaner). But don't add to the government bureaucracy to "police" the power plants of container ships
George Will's article attached refers to the correlation between the natural momentum of government to creep toward further regulation and people's fears that they need protection. To quote Will: "Today, there is a name for the political doctrine that rejoices in scarcity of everything except government. The name is environmentalism."
Let's go to oil. Canada has (by some estimates) more oil than Saudi Arabia. Their oil sands pollute. Canada supplies more oil to the U.S. than any other country. What should the U.S. do? We'll leave that question open ended. The U.S. has more natural gas and coal than it needs for the next 50 years (at least). And, while U.S. politicians worry about the dangers to the "marsh mouse" of pumping oil off the east or west coasts, China is drilling 22 miles away from Miami. Modern technology is such that potential spills are far less problematic than they used to be.
So, the EPA announces this week that it's going to get the carbon by regulating CO2. This announcement was just in time for Copenhagen. Now, I'm not one of those fancy climate scientists, but my thought is that we exhale CO2 when we "breathe". So, what's next, no soda because we have an obesity epidemic?
Now that we have the Al Gore pretenders on the run, perhaps we can go back to oil and a responsible search for it that can be accomplished closer to home without harm to the environment.
Every time we read that we're running out of oil, or we're polluting when we're trying to find it, or we're polluting when we're using it, my suggestion is that someone needs to slow down the debate and use some facts. Thanks to the government stimulus programs, we are protecting the "marsh mouse" in, or near San Francisco so we can all feel comfortable that the ecosystem is politically protected. We are living on a life line of container ships that, as Dr. Lawrence Redlinger so brilliantly pointed out last week in one of our seminars, ply the seas back and forth to other continents while using the dirtiest (cheapest) form of diesel oil for power. That's an easy example of what can be fixed - upgrade the power plants of the ships that service the U.S. by retrofitting, if that's even necessary, to use clean diesel power and require new container ships to use other versions of cost effective power plants. For example, we already have jet engines powering the largest luxury cruise ships to great effect (those ships are faster and more maneuverable while burning cleaner). But don't add to the government bureaucracy to "police" the power plants of container ships
George Will's article attached refers to the correlation between the natural momentum of government to creep toward further regulation and people's fears that they need protection. To quote Will: "Today, there is a name for the political doctrine that rejoices in scarcity of everything except government. The name is environmentalism."
Let's go to oil. Canada has (by some estimates) more oil than Saudi Arabia. Their oil sands pollute. Canada supplies more oil to the U.S. than any other country. What should the U.S. do? We'll leave that question open ended. The U.S. has more natural gas and coal than it needs for the next 50 years (at least). And, while U.S. politicians worry about the dangers to the "marsh mouse" of pumping oil off the east or west coasts, China is drilling 22 miles away from Miami. Modern technology is such that potential spills are far less problematic than they used to be.
So, the EPA announces this week that it's going to get the carbon by regulating CO2. This announcement was just in time for Copenhagen. Now, I'm not one of those fancy climate scientists, but my thought is that we exhale CO2 when we "breathe". So, what's next, no soda because we have an obesity epidemic?
More Stimulus
http://online.wsj.com/article_email/SB10001424052748704107104574570331372941594-lMyQjAxMDA5MDAwMjEwNDIyWj.html
We have chronicled in prior posts (note the "plural") how Paul Krugman and Warren Buffet have concluded separately that more money needs to be pumped in to the economy, that the "stimulus program" was not enough. Others joined them in that position. One needs to look no further than an unemployment rate of 10.2% (or an "underemployment rate of 17.5%) to see that the potential for a "double-dip" recession is there.
When the Federal Government begins to conclude this, we see articles like the one attached authored by Christina Romer who is Chair of the President's Council of Economic Advisers. Dr. Romer's article was written to "position" the President's White House meeting yesterday on employment. As opposed to Lawrence (don't call me "Larry") Summers, for whom many (including this author, the entire female faculty at Harvard, and others) have little use, Christina Romer has the respect of most people even though she practices the dismal and imprecise science of economics.
Dr. Romer suggests in her remarks that the the stimulus did, indeed, turn around the economy as evidenced by the majority of "professional forecasters" agreeing with her position (these would be the same people who did NOT predict the financial collapse). More importantly, she quotes the Congressional Budget Office (no friend to the White House or either political party) as concluding that 3rd quarter GDP was up 1.2% to 3.2% over what it would have been had there been no stimulus. In addition, she quotes the CBO as in agreement that between 600,000 and 1.6 million jobs were created by stimulus money (directly or indirectly). While there is some dispute about the jobs numbers, there is little dispute about the GDP numbers.
However; Dr. Romer goes on to point out that, despite these successes, the job market remains weak. She sees American businesses as hesitant to hire while producing more with fewer workers. She is, as she says, looking for large and small businesses to come in off the sidelines to "boost job creation." She mentions that the government could provide "incentives" to help small businesses invest, grow and create jobs. This would include measures to restore the flow of credit for small businesses and targeted tax cuts. Her whole position, with these and other suggestions that she has, is that moderate and targeted investment by the government might be leveraged into significant employment gains and purchasing power by small businesses.
She should be applauded for her position and, hopefully, something will come of it. As we said in our prior post, small businesses and new businesses are where most job creation takes place.
The original stimulus program (inclusive of all the money that was spent beyond the $787 B) was
not enough. The original stimulus program was supposed to keep unemployment at 8% or less. It did not. Dr. Romer's suggestions provide a way to supplement that stimulus without appearing to go back to Congress and admitting to failure. Most importantly, her ideas do something for employment.
We have chronicled in prior posts (note the "plural") how Paul Krugman and Warren Buffet have concluded separately that more money needs to be pumped in to the economy, that the "stimulus program" was not enough. Others joined them in that position. One needs to look no further than an unemployment rate of 10.2% (or an "underemployment rate of 17.5%) to see that the potential for a "double-dip" recession is there.
When the Federal Government begins to conclude this, we see articles like the one attached authored by Christina Romer who is Chair of the President's Council of Economic Advisers. Dr. Romer's article was written to "position" the President's White House meeting yesterday on employment. As opposed to Lawrence (don't call me "Larry") Summers, for whom many (including this author, the entire female faculty at Harvard, and others) have little use, Christina Romer has the respect of most people even though she practices the dismal and imprecise science of economics.
Dr. Romer suggests in her remarks that the the stimulus did, indeed, turn around the economy as evidenced by the majority of "professional forecasters" agreeing with her position (these would be the same people who did NOT predict the financial collapse). More importantly, she quotes the Congressional Budget Office (no friend to the White House or either political party) as concluding that 3rd quarter GDP was up 1.2% to 3.2% over what it would have been had there been no stimulus. In addition, she quotes the CBO as in agreement that between 600,000 and 1.6 million jobs were created by stimulus money (directly or indirectly). While there is some dispute about the jobs numbers, there is little dispute about the GDP numbers.
However; Dr. Romer goes on to point out that, despite these successes, the job market remains weak. She sees American businesses as hesitant to hire while producing more with fewer workers. She is, as she says, looking for large and small businesses to come in off the sidelines to "boost job creation." She mentions that the government could provide "incentives" to help small businesses invest, grow and create jobs. This would include measures to restore the flow of credit for small businesses and targeted tax cuts. Her whole position, with these and other suggestions that she has, is that moderate and targeted investment by the government might be leveraged into significant employment gains and purchasing power by small businesses.
She should be applauded for her position and, hopefully, something will come of it. As we said in our prior post, small businesses and new businesses are where most job creation takes place.
The original stimulus program (inclusive of all the money that was spent beyond the $787 B) was
not enough. The original stimulus program was supposed to keep unemployment at 8% or less. It did not. Dr. Romer's suggestions provide a way to supplement that stimulus without appearing to go back to Congress and admitting to failure. Most importantly, her ideas do something for employment.
The New Normal: Jobless Recoveries
http://online.wsj.com/article_email/SB10001424052748703735004574574311468146726-lMyQjAxMDA5MDAwNDEwNDQyWj.html
We began this decade with a post 9/11 jobless recovery and we're ending it the same way. James Bullard, who is president of the St. Louis Federal Reserve Bank, says this is the third consecutive "jobless recovery". As Mark Gongloff argues in the article attached, companies fired workers too aggressively this time, but they show little inclination to rehire, even though the recession has supposedly been over for 5 months. Obviously, globalization and technology have made it increasingly easy for companies to slash labor costs.
As we have indicated in prior posts, the job market is getting "less bad" but we are still losing 125,000 jobs per month (current estimate). The BLS (Bureaus of Labor Statistics) data scheduled for release today should have unemployment holding at 10.2%. If we accept that the current recession began in November, 2007, job losses since then amount to 7.4 million (other estimates are as high as 8 million).
A record 9.3 million people are working part time because there is nothing else available. Since May, more than a million people have left the labor force.
Given all of this, there are 3 numbers that Wall Street will be watching closely in today's BLS announcement:
Temporary Services: Employers added 34,000 temporary jobs last month, the third srtaight month of rising temporary employment. Temps are generally seen as a leading indicator of job market turnaround because they are the last thing employers do to avoid hiring full time employees.
"U6": This is the measure of unemployment that includes people who have stopped actively searching for work, or are working part-time because they can't find full-time work. This number hit 17.5% in October. This is the government's broadest measure of labor underutilization.
Average Work-Week: Like "temps", this is considered a forward looking gauge of the labor market. In both September and October, the average work-week has stayed at 33 hours - that's the lowest level since World War II. Again, employers would rather add to the hours of current employees than hire new ones.
Something could show up in today's BLS numbers that would show more of a positive trend (as has been the case with temps). Looking at average work-week hours could be a clue.
In the meantime, where do the new jobs come from? As we have emphasized in earlier posts small businesses (or new businesses) lead the way but it is hard for them to do that with tight credit. While the White House yesterday was holding a meeting on the job situation, the Treasury Department could have emphasized easing credit to small business ahead of saving the big banks over the past year.
And, on the subject of saving our too big to fail financial institutions, doesn't it seem strange that those same institutions are using and have used bail out money to lobby Congress NOT to pass new regulatory oversight bills? Do we have any idea what we're doing in government?
Have any new oversight agencies been created? Maybe "jobs" could be created in new oversight agencies - there's a concept!
We began this decade with a post 9/11 jobless recovery and we're ending it the same way. James Bullard, who is president of the St. Louis Federal Reserve Bank, says this is the third consecutive "jobless recovery". As Mark Gongloff argues in the article attached, companies fired workers too aggressively this time, but they show little inclination to rehire, even though the recession has supposedly been over for 5 months. Obviously, globalization and technology have made it increasingly easy for companies to slash labor costs.
As we have indicated in prior posts, the job market is getting "less bad" but we are still losing 125,000 jobs per month (current estimate). The BLS (Bureaus of Labor Statistics) data scheduled for release today should have unemployment holding at 10.2%. If we accept that the current recession began in November, 2007, job losses since then amount to 7.4 million (other estimates are as high as 8 million).
A record 9.3 million people are working part time because there is nothing else available. Since May, more than a million people have left the labor force.
Given all of this, there are 3 numbers that Wall Street will be watching closely in today's BLS announcement:
Temporary Services: Employers added 34,000 temporary jobs last month, the third srtaight month of rising temporary employment. Temps are generally seen as a leading indicator of job market turnaround because they are the last thing employers do to avoid hiring full time employees.
"U6": This is the measure of unemployment that includes people who have stopped actively searching for work, or are working part-time because they can't find full-time work. This number hit 17.5% in October. This is the government's broadest measure of labor underutilization.
Average Work-Week: Like "temps", this is considered a forward looking gauge of the labor market. In both September and October, the average work-week has stayed at 33 hours - that's the lowest level since World War II. Again, employers would rather add to the hours of current employees than hire new ones.
Something could show up in today's BLS numbers that would show more of a positive trend (as has been the case with temps). Looking at average work-week hours could be a clue.
In the meantime, where do the new jobs come from? As we have emphasized in earlier posts small businesses (or new businesses) lead the way but it is hard for them to do that with tight credit. While the White House yesterday was holding a meeting on the job situation, the Treasury Department could have emphasized easing credit to small business ahead of saving the big banks over the past year.
And, on the subject of saving our too big to fail financial institutions, doesn't it seem strange that those same institutions are using and have used bail out money to lobby Congress NOT to pass new regulatory oversight bills? Do we have any idea what we're doing in government?
Have any new oversight agencies been created? Maybe "jobs" could be created in new oversight agencies - there's a concept!
Tuesday, December 1, 2009
Sustainable Energy
http://www.washingtonpost.com/wp-dyn/content/article/2009/11/23/AR2009112303966.html?referrer=emailarticle
There has to be some middle ground in the efforts we all make to support an energy future. Nobody wants to pollute. While we have pointed out here that the global alarmists need to be controlled lest they drain more money from world economies that could be used to create jobs and feed the starving, we want a future where energy can be created with less pollution.
We were touched by a video that debuted over the weekend about Peter Burns and the work he is doing at the University of Notre Dame's Energy Frontier Research Center. It is part of the University's "What Would You Fight For?" series: http.//video.nd.edu. Burns has developed an approach to convert nuclear waste into clean energy. Clean energy that won't pollute.
What we are willing to support here is nuclear energy. We think it's time has come and we think we need to encourage its use. As the chart in the Washington Post article we have attached shows, 76% of the electrical supply in France is "nuclear". Here in the U.S., its 19%. While we are building wind energy sources, which we also support, we need to build nuclear plants. While the world has suffered Chernobyl and, closer to home, Three Mile Island, today's technology (and training) is more sophisticated.
It has been 13 years since the last nuclear power plant was built in the U.S. An Environmental Protection Agency analysis of the Waxman-Markey bill passed by the House shows nuclear energy more than doubling in the U.S. by 2050 if the legislation is made law. Groups like the Sierra Club, the Environmental Defense Fund and others have backed off their opposition to "nuclear" because they see it as a "clean" alternative.
Of course, some leading environmental figures like Al Gore remain skeptical of nuclear's promise, largely because of the high cost of building plants and the threat of proliferation. If anything convinces me that my position on this issue is right, it is that Al Gore opposes it. Gore did tell the Washington Post Editorial Board, "I am not anti-nuclear (is that a double negative?), but the cost of the present generation of reactors is nearly prohibitive."
Perhaps more nuclear and less coal?
There has to be some middle ground in the efforts we all make to support an energy future. Nobody wants to pollute. While we have pointed out here that the global alarmists need to be controlled lest they drain more money from world economies that could be used to create jobs and feed the starving, we want a future where energy can be created with less pollution.
We were touched by a video that debuted over the weekend about Peter Burns and the work he is doing at the University of Notre Dame's Energy Frontier Research Center. It is part of the University's "What Would You Fight For?" series: http.//video.nd.edu. Burns has developed an approach to convert nuclear waste into clean energy. Clean energy that won't pollute.
What we are willing to support here is nuclear energy. We think it's time has come and we think we need to encourage its use. As the chart in the Washington Post article we have attached shows, 76% of the electrical supply in France is "nuclear". Here in the U.S., its 19%. While we are building wind energy sources, which we also support, we need to build nuclear plants. While the world has suffered Chernobyl and, closer to home, Three Mile Island, today's technology (and training) is more sophisticated.
It has been 13 years since the last nuclear power plant was built in the U.S. An Environmental Protection Agency analysis of the Waxman-Markey bill passed by the House shows nuclear energy more than doubling in the U.S. by 2050 if the legislation is made law. Groups like the Sierra Club, the Environmental Defense Fund and others have backed off their opposition to "nuclear" because they see it as a "clean" alternative.
Of course, some leading environmental figures like Al Gore remain skeptical of nuclear's promise, largely because of the high cost of building plants and the threat of proliferation. If anything convinces me that my position on this issue is right, it is that Al Gore opposes it. Gore did tell the Washington Post Editorial Board, "I am not anti-nuclear (is that a double negative?), but the cost of the present generation of reactors is nearly prohibitive."
Perhaps more nuclear and less coal?
Climategate
http://online.wsj.com/article_email/SB10001424052748703499404574562123968802420-lMyQjAxMDA5MDMwMDEzNDAyWj.html
http://online.wsj.com/article_email/SB10001424052748703939404574566124250205490-lMyQjAxMDA5MDMwMDEzNDAyWj.html
http://online.wsj.com/article_email/SB10001424052748703939404574567423917025400-lMyQjAxMDA5MDMwMDEzNDAyWj.html
There is always the temptation to gloat when one sees pompous, self serious and self important people proved wrong. Fortunately for those of us who are like-minded on the subject of "global cooling", both pure data and efforts to "cover up" data (on the part of what were thought to be world class scientists) lead to the inevitable conclusion that little, if any, science supports global warming.
Perhaps that's a start. As Bjorn Lomborg points out (attached), the lack of water for the poor in the shadow of the Himalayas (in this case, Nepal), has been used by Al Gore and others to argue for short term cuts in carbon emissions. Climate activists argue that there is a "link" between melting glaciers in the Himalayas and water shortages elsewhere.
This hypothesis has not been supported by a new report released in November by the Indian government which indicates that the majority of these glaciers are stable or have even advanced. Jeffery Kargel, a glaciologist at the University of Arizona, declared in a November 13 article in "Science" that these extremely provocative findings were consistent with what he has learned independently.
Two things: (1) there is a growing body of knowledge from respected scientists that the world's glaciers are NOT melting; and (2) spending money on helping the poor to keep them from going hungry comes ahead of fancy schemes to get the carbon.
Now, moving on, we find that some of the world's leading scientists have worked in tandem to block freedom of information requests, blackball dissenting scientists, manipulate the peer-review process, and obscure, destroy or massage "inconvenient" temperature data - this after the disclosure of thousands of emails from the University of East Anglia's Climate Research Unit, or CRU. This is the heart of "Climategate" (attached).
To put it bluntly, there was a direct correlation between the research money brought in to the CRU and their conclusions that global warming was occurring from various sources. According to estimates by the HSBC Bank, $94 billion will be spent globally this year on what is called "green stimulus" - largely ethanol and other alternative energy schemes - of the kind from which Al Gore and his partners at Kleiner Perkins hope to profit from handsomely.
Relying on the "dismal science" ("Economics", for those of you who have not heard the term) for a moment, supply creates its own demand. So, for every additional billion in government-funded grants, universities, research institutes, advocacy groups and their various spin-offs have emerged from the woodwork to receive them. And, as the WSJ "Climategate" article so aptly points out, these groups form a kind of "ecosystem" of their own. So, while the Sierra Club and Greenpeace (and so many others) are sincere in their beliefs about what needs to be changed (and soon), the very "science" that backs them up is, to quote one of their own scientists: "garbage".
Here's the best we can say about "climate science": it isn't settled and claims that climate change is accelerating are bizarre. Richard Lindzen is a meteorologist at MIT. His perspective makes sense and it is well expressed in the article attached (WSJ Opinion). Lindzen points out that there is reason to be concerned about what global warming measures are being used because those measures are imprecise: the Global Average Temperature Anomaly (GATA) is always changing. There is general support for the assertion that GATA has increased by about 1.5 degrees Fahrenheit since the middle of the 19th century. But, the quality of the data is poor. Several of the emails from the CRU dealt with how to manipulate the data to maximize apparent warming changes.
The general support for warming, according to Lindzen, is based not so much on the quality of the data, but on the fact that there was a "little ice age" from about the 15th to the 19th century. Thus, it is not surprising that temperatures should increase as we emerged from this episode. With the advancement of the modern industrial age, CO2 has added to warming but not to any major extent.
And, the "environmental models" that did not predict the "...absence of warming for the past dozen years..." are now being modified to justify what they missed and they now predict warming will resume in 2009 (aren't we in 2009?), 2013 and 2030, respectively.
The temptation here is to be sarcastic because it is just not a fair fight but we won't be. Rather, we will follow Lindzen's perspective as he points out that the East Anglia scandal is greater than just the hacked emails from the CRU: namely the suggestion that the very existence of warming, or the greenhouse effect, is tantamount to catastrophe. To Lindzen, it is the grossest of "bait and switch" scams. To him, the notion that complex climate "catastrophes" are simply a matter of response to a single number, GATA, represents a gigantic step backward in the science of climate: many disasters associated with warming are simply normal occurrences whose existence is falsely claimed to be evidence of warming. And, all these phenomena are dependent on the confluence of many factors.
So, what do we have? We have a bunch of scientists looking to manipulate their data to show global warming is the cause of of my aunt's headaches so they can get research grants. And, the mere fact that the scientists think they need to manipulate the data to show warming trends kind of shows, as one of them so correctly stated, that their data is "garbage."
Is there a return policy on Al Gore's Nobel?
http://online.wsj.com/article_email/SB10001424052748703939404574566124250205490-lMyQjAxMDA5MDMwMDEzNDAyWj.html
http://online.wsj.com/article_email/SB10001424052748703939404574567423917025400-lMyQjAxMDA5MDMwMDEzNDAyWj.html
There is always the temptation to gloat when one sees pompous, self serious and self important people proved wrong. Fortunately for those of us who are like-minded on the subject of "global cooling", both pure data and efforts to "cover up" data (on the part of what were thought to be world class scientists) lead to the inevitable conclusion that little, if any, science supports global warming.
Perhaps that's a start. As Bjorn Lomborg points out (attached), the lack of water for the poor in the shadow of the Himalayas (in this case, Nepal), has been used by Al Gore and others to argue for short term cuts in carbon emissions. Climate activists argue that there is a "link" between melting glaciers in the Himalayas and water shortages elsewhere.
This hypothesis has not been supported by a new report released in November by the Indian government which indicates that the majority of these glaciers are stable or have even advanced. Jeffery Kargel, a glaciologist at the University of Arizona, declared in a November 13 article in "Science" that these extremely provocative findings were consistent with what he has learned independently.
Two things: (1) there is a growing body of knowledge from respected scientists that the world's glaciers are NOT melting; and (2) spending money on helping the poor to keep them from going hungry comes ahead of fancy schemes to get the carbon.
Now, moving on, we find that some of the world's leading scientists have worked in tandem to block freedom of information requests, blackball dissenting scientists, manipulate the peer-review process, and obscure, destroy or massage "inconvenient" temperature data - this after the disclosure of thousands of emails from the University of East Anglia's Climate Research Unit, or CRU. This is the heart of "Climategate" (attached).
To put it bluntly, there was a direct correlation between the research money brought in to the CRU and their conclusions that global warming was occurring from various sources. According to estimates by the HSBC Bank, $94 billion will be spent globally this year on what is called "green stimulus" - largely ethanol and other alternative energy schemes - of the kind from which Al Gore and his partners at Kleiner Perkins hope to profit from handsomely.
Relying on the "dismal science" ("Economics", for those of you who have not heard the term) for a moment, supply creates its own demand. So, for every additional billion in government-funded grants, universities, research institutes, advocacy groups and their various spin-offs have emerged from the woodwork to receive them. And, as the WSJ "Climategate" article so aptly points out, these groups form a kind of "ecosystem" of their own. So, while the Sierra Club and Greenpeace (and so many others) are sincere in their beliefs about what needs to be changed (and soon), the very "science" that backs them up is, to quote one of their own scientists: "garbage".
Here's the best we can say about "climate science": it isn't settled and claims that climate change is accelerating are bizarre. Richard Lindzen is a meteorologist at MIT. His perspective makes sense and it is well expressed in the article attached (WSJ Opinion). Lindzen points out that there is reason to be concerned about what global warming measures are being used because those measures are imprecise: the Global Average Temperature Anomaly (GATA) is always changing. There is general support for the assertion that GATA has increased by about 1.5 degrees Fahrenheit since the middle of the 19th century. But, the quality of the data is poor. Several of the emails from the CRU dealt with how to manipulate the data to maximize apparent warming changes.
The general support for warming, according to Lindzen, is based not so much on the quality of the data, but on the fact that there was a "little ice age" from about the 15th to the 19th century. Thus, it is not surprising that temperatures should increase as we emerged from this episode. With the advancement of the modern industrial age, CO2 has added to warming but not to any major extent.
And, the "environmental models" that did not predict the "...absence of warming for the past dozen years..." are now being modified to justify what they missed and they now predict warming will resume in 2009 (aren't we in 2009?), 2013 and 2030, respectively.
The temptation here is to be sarcastic because it is just not a fair fight but we won't be. Rather, we will follow Lindzen's perspective as he points out that the East Anglia scandal is greater than just the hacked emails from the CRU: namely the suggestion that the very existence of warming, or the greenhouse effect, is tantamount to catastrophe. To Lindzen, it is the grossest of "bait and switch" scams. To him, the notion that complex climate "catastrophes" are simply a matter of response to a single number, GATA, represents a gigantic step backward in the science of climate: many disasters associated with warming are simply normal occurrences whose existence is falsely claimed to be evidence of warming. And, all these phenomena are dependent on the confluence of many factors.
So, what do we have? We have a bunch of scientists looking to manipulate their data to show global warming is the cause of of my aunt's headaches so they can get research grants. And, the mere fact that the scientists think they need to manipulate the data to show warming trends kind of shows, as one of them so correctly stated, that their data is "garbage."
Is there a return policy on Al Gore's Nobel?
Saturday, November 21, 2009
Copenhagen's Collapse
http://online.wsj.com/article_email/SB10001424052748704431804574540002267533772-lMyQjAxMDA5MDEwNzExNDcyWj.html
As the WSJ Editorial Board points out attached, President Obama has bowed to reality and admitted that little of substance would come from the climate change summit in Copenhagen next month. This would contrast with the President's promises over the past year to create a binding international carbon-regulation treaty, but instead negotiators from 192 different countries now hope to reach a preliminary agreement that they will sign such a treaty when they meet in Mexico City in 2010.
Wait for it: the "environmental lobby" is blaming Copenhagen's pre-emptive collapse on the Senate's failure to ram thru a "cap-and-trade" scheme like the House did in June, arguing that the world won't make commitments until the U.S. does.
Is that right? Well, as the WSJ editors point out, China and India have no intention of limiting their economic growth because of the West's climate neuroses. And, why should they? Then, of course, there's Europe which appears to be ready to agree with emissions quotas only if they don't have to be "met".
China has, however, expressed a willingness to help us with our climate neuroses by agreeing to build a wind farm in West Texas (with the aid of U.S. government green subsidies). For those of us that support "wind", we're glad to see somebody finally doing it. However; we kind of hoped for the jobs and the profits from such enterprises to stay here. Evidently, there was such an "outcry" over this that the China-based company agreed to build one wind spar (the blades for the wind turbines) plant here.
And, thank you China.
The WSJ editors go on to point out that the pointlessness of Copenhagen will now become part of President Obama's arguement that the Senate must inflict cap and tax on the U.S., in addition to the EPA's "nondemocratic" carbon crackdown via clean air regulation (see our prior posts on the EPA's handling of its own staff and its determination to "get the carbon"). However; if the Senate is consistent, and just behaves as it normally does, it will fail to act. The EPA acted so precipitously (and, again, inconsistently relative to its own staff) that it is very likely to get tied up in court (which is good and certainly why we have a democracy). This, of course, will be very helpful to the U.S. economic recovery since we will not be facing higher energy taxes anytime soon.
My thought on this situation is that "economic growth" comes ahead of "climate change". Why don't we resolve to reexamine the "get the carbon" situation when the unemployment rate in the United States drops from 10.2% back down to it's long term equilibrium (4%/5%)? Perhaps we can reconsider a "carbon police state" in 18/24 months. At that point, perhaps, the issue of "global cooling" might also be brought to the for since it would appear that the first decade of the 21st century has watched the planet get "cooler." Even better, we could suggest a "twin cities" approach to climate: say Minneapolis and St. Paul or Dallas and Fort Worth. Here the approach would be to "split" the 192 countries mentioned above that will be meeting in Copenhagen next month (probably to hear from Al Gore about 2012): half of the countries would meet in one city to talk about "global warming" and the other half would meet in the sister city to talk about "global cooling". Once they have consensus, representatives of the two country groups could meet on "neutral ground" (say Arlington) to devise a compromise approach to saving the planet - something like smoking on alternative Mondays, or certain auto license plate numbers can fill up with gas on smoking Mondays, and certain other license plate numbers can only fill up with gas when it rains! We actually had something like this during the U.S. wage and price controls during the early 1970s. We had gas lines based on license plate numbers.
Certainly, the "carbonistas" (my dictionary says that's not a word) would be willing to compromise and listen to reason. Oh wait, I forgot, we're talking about the global warming alarmists.
As the WSJ Editorial Board points out attached, President Obama has bowed to reality and admitted that little of substance would come from the climate change summit in Copenhagen next month. This would contrast with the President's promises over the past year to create a binding international carbon-regulation treaty, but instead negotiators from 192 different countries now hope to reach a preliminary agreement that they will sign such a treaty when they meet in Mexico City in 2010.
Wait for it: the "environmental lobby" is blaming Copenhagen's pre-emptive collapse on the Senate's failure to ram thru a "cap-and-trade" scheme like the House did in June, arguing that the world won't make commitments until the U.S. does.
Is that right? Well, as the WSJ editors point out, China and India have no intention of limiting their economic growth because of the West's climate neuroses. And, why should they? Then, of course, there's Europe which appears to be ready to agree with emissions quotas only if they don't have to be "met".
China has, however, expressed a willingness to help us with our climate neuroses by agreeing to build a wind farm in West Texas (with the aid of U.S. government green subsidies). For those of us that support "wind", we're glad to see somebody finally doing it. However; we kind of hoped for the jobs and the profits from such enterprises to stay here. Evidently, there was such an "outcry" over this that the China-based company agreed to build one wind spar (the blades for the wind turbines) plant here.
And, thank you China.
The WSJ editors go on to point out that the pointlessness of Copenhagen will now become part of President Obama's arguement that the Senate must inflict cap and tax on the U.S., in addition to the EPA's "nondemocratic" carbon crackdown via clean air regulation (see our prior posts on the EPA's handling of its own staff and its determination to "get the carbon"). However; if the Senate is consistent, and just behaves as it normally does, it will fail to act. The EPA acted so precipitously (and, again, inconsistently relative to its own staff) that it is very likely to get tied up in court (which is good and certainly why we have a democracy). This, of course, will be very helpful to the U.S. economic recovery since we will not be facing higher energy taxes anytime soon.
My thought on this situation is that "economic growth" comes ahead of "climate change". Why don't we resolve to reexamine the "get the carbon" situation when the unemployment rate in the United States drops from 10.2% back down to it's long term equilibrium (4%/5%)? Perhaps we can reconsider a "carbon police state" in 18/24 months. At that point, perhaps, the issue of "global cooling" might also be brought to the for since it would appear that the first decade of the 21st century has watched the planet get "cooler." Even better, we could suggest a "twin cities" approach to climate: say Minneapolis and St. Paul or Dallas and Fort Worth. Here the approach would be to "split" the 192 countries mentioned above that will be meeting in Copenhagen next month (probably to hear from Al Gore about 2012): half of the countries would meet in one city to talk about "global warming" and the other half would meet in the sister city to talk about "global cooling". Once they have consensus, representatives of the two country groups could meet on "neutral ground" (say Arlington) to devise a compromise approach to saving the planet - something like smoking on alternative Mondays, or certain auto license plate numbers can fill up with gas on smoking Mondays, and certain other license plate numbers can only fill up with gas when it rains! We actually had something like this during the U.S. wage and price controls during the early 1970s. We had gas lines based on license plate numbers.
Certainly, the "carbonistas" (my dictionary says that's not a word) would be willing to compromise and listen to reason. Oh wait, I forgot, we're talking about the global warming alarmists.
Friday, November 13, 2009
EPA Censorship: Cap and Trade?
http://online.wsj.com/article_email/SB10001424052748703683804574532022758745200-lMyQjAxMDA5MDEwMjExNDIyWj.html
Kimberley Strassel did an excellent job this past spring recounting how Dr. Alan Carlin, a 37 year veteran of the EPA, was "muzzled" for a report poking holes in the science underlying the theory of manmade global warming. At that time, his superior, Al McGartland, complained that Carlin's paper did "not help the legal policy case" for "Team Obama's" decision to regulate carbon. Carlin was told to move on to other issues and forbidden to discuss his conclusions outside the office. Do we have questions about this behavior? It doesn't seem to be very open, supportive or reinforcing. Some people might even call it very "Republican" - but, we stay out of politics here.
Now, we have Laurie Williams and Alan Zabel who are married and have 20 years each working at the EPA. They too are dismayed at the Democrat's approach to climate, though for different reasons. Dedicated environmentalists, they created a 10 minute YouTube video arguing Congress's convoluted "cap-and-trade" bill was a "big lie" that is too weak. They instead propose imposing taxes on fossil fuels. Ironically, they got permission from the EPA before they did it. But, then they did an op-ed in the Washington Post which got the agency nervous. The EPA reversed itself and said the couple had to take the video off unless they substantially altered it.
As Kimberly Strassel so aptly puts it, "Meet the Obama EPA, and its new suppressing, paranoid style. It was the President who once ripped the Bush administration for silencing scientific critics, and it was EPA Administrator Lisa Jackson who began her tenure promising the agency would operate like a "fishbowl." But that was before the EPA realized how vastly unpopular is its plan to usurp Congress and regulate the economy on its own, based on its bizarre finding that CO2 is a danger to health." Evidently, Mrs. Jackson's goal now is to rush the agency regulations thru as quickly as possible, squashing threatening dissent and deflecting troublesome questions.
Back to Alan Carlin. It's hard to keep track of which side of the climate issue is being suppressed since Carlin's point was that climate science hasn't proved anything. Now, Williams-Zabel come along and claim that cap-and-trade is a big lie and too weak. Both sides are being suppressed. Trauma!
Dr. Carlin says he has been treated "relatively well" since his problems this past spring, yet he has been forbidden from working on climate or attending climate seminars.
It would seem to me that between the suppression of Dr. Carlin's position and the Williams-Zabel problems, there are issues which underline the gap between the agency's transparency rhetoric and reality. Worse, the effort by the EPA to hold down debate on both sides of the climate issue suggests that global warming itself is, at best, an imprecise concept unsupported by very precise science. I don't think Al Gore's conviction can carry that issue no matter how many Nobel Prizes he has.
Kimberley Strassel did an excellent job this past spring recounting how Dr. Alan Carlin, a 37 year veteran of the EPA, was "muzzled" for a report poking holes in the science underlying the theory of manmade global warming. At that time, his superior, Al McGartland, complained that Carlin's paper did "not help the legal policy case" for "Team Obama's" decision to regulate carbon. Carlin was told to move on to other issues and forbidden to discuss his conclusions outside the office. Do we have questions about this behavior? It doesn't seem to be very open, supportive or reinforcing. Some people might even call it very "Republican" - but, we stay out of politics here.
Now, we have Laurie Williams and Alan Zabel who are married and have 20 years each working at the EPA. They too are dismayed at the Democrat's approach to climate, though for different reasons. Dedicated environmentalists, they created a 10 minute YouTube video arguing Congress's convoluted "cap-and-trade" bill was a "big lie" that is too weak. They instead propose imposing taxes on fossil fuels. Ironically, they got permission from the EPA before they did it. But, then they did an op-ed in the Washington Post which got the agency nervous. The EPA reversed itself and said the couple had to take the video off unless they substantially altered it.
As Kimberly Strassel so aptly puts it, "Meet the Obama EPA, and its new suppressing, paranoid style. It was the President who once ripped the Bush administration for silencing scientific critics, and it was EPA Administrator Lisa Jackson who began her tenure promising the agency would operate like a "fishbowl." But that was before the EPA realized how vastly unpopular is its plan to usurp Congress and regulate the economy on its own, based on its bizarre finding that CO2 is a danger to health." Evidently, Mrs. Jackson's goal now is to rush the agency regulations thru as quickly as possible, squashing threatening dissent and deflecting troublesome questions.
Back to Alan Carlin. It's hard to keep track of which side of the climate issue is being suppressed since Carlin's point was that climate science hasn't proved anything. Now, Williams-Zabel come along and claim that cap-and-trade is a big lie and too weak. Both sides are being suppressed. Trauma!
Dr. Carlin says he has been treated "relatively well" since his problems this past spring, yet he has been forbidden from working on climate or attending climate seminars.
It would seem to me that between the suppression of Dr. Carlin's position and the Williams-Zabel problems, there are issues which underline the gap between the agency's transparency rhetoric and reality. Worse, the effort by the EPA to hold down debate on both sides of the climate issue suggests that global warming itself is, at best, an imprecise concept unsupported by very precise science. I don't think Al Gore's conviction can carry that issue no matter how many Nobel Prizes he has.
Thursday, November 12, 2009
Al Gore's Economics
http://online.wsj.com/article_email/SB10001424052748704402404574527572868084330-lMyQjAxMDA5MDEwMDExNDAyWj.html
Holman Jenkins has a perspective on Al Gore's investment in global warming (or, rather, the prevention of same) that starts out with a reference to Tennessee Rep. Marsha Blackburn's question to Gore during a House hearing: did his investments in green energy mean he would benefit personally from cap and trade? Jenkins' perspective is that Ms. Blackburn was a little late since Gore had long ago jumped over to the side of "salesmanship" by whatever means. As far back as 1989, he insisted there was no dispute worthy of recognition about the danger of man made climate change. And, of course, he now titularly heads a vast establishment with a stake in one side of the argument.
So, Jenkins goes on to point out, after a decade in which the "EARTH APPEARS TO HAVE STOPPED WARMING" and even cooled, global warming advocates have rushed to embrace a computer simulation that predicts "cooling" and allows for future cooling, even while assuring that the world is destined to face disastrous "warming" anyway. This would be not dissimilar to prognosticators of doom who have, over centuries, adjusted their forecasts when the deadlines pass. Further, Gore's own predictions of a climate catastrophe have not lessened, and, every time he opens his mouth, the costs of meeting the emergency become easier and easier to swallow. According to Jenkins, they are not even "costs" anymore, they are "profits" (this is the new math from Gore's new book).
Mr. Gore points out that he has poured his own money into two climate action nonprofits, but, whatever his motives, aren't these nonprofits functionally propaganda arms (i.e., advertising) that benefit his for-profit investments?
Jenkins feels, and I agree, that evidence of man's impact on climate is maddeningly elusive, in part because man's impact on climate is so small as to be hard to disentangle from natural variability. Mr. Gore disagrees, but the case for action has become less "closed" since he pronounced it closed in 1989, if only because of the huge sums of money and manpower poured into the subject to little avail.
Now, even climate activists recognize a need for evidence from the real world. The endless invocation of computer models wasn't cutting it. For a while, the media could report evidence of warming as if it were evidence of what "causes" warming. Inconveniently (is that a good word?), however, just as temperature-measuring has become more standardized and disciplined, the warming trend seems to have faded from the recent record.
Fortunately, Jenkins alludes to the fact that Western societies (or Brazil or India or China) were never going to sacrifice economic growth for the uncertain benefits of fighting climate change.
For those of us who agree with the Jenkins' position, we might ask what will come of the upcoming discussions in Copenhagen where world leaders will be expected to do something about the issue? My guess: a strong statement that something needs to be done. That would be reasonable and very inexpensive.
Holman Jenkins has a perspective on Al Gore's investment in global warming (or, rather, the prevention of same) that starts out with a reference to Tennessee Rep. Marsha Blackburn's question to Gore during a House hearing: did his investments in green energy mean he would benefit personally from cap and trade? Jenkins' perspective is that Ms. Blackburn was a little late since Gore had long ago jumped over to the side of "salesmanship" by whatever means. As far back as 1989, he insisted there was no dispute worthy of recognition about the danger of man made climate change. And, of course, he now titularly heads a vast establishment with a stake in one side of the argument.
So, Jenkins goes on to point out, after a decade in which the "EARTH APPEARS TO HAVE STOPPED WARMING" and even cooled, global warming advocates have rushed to embrace a computer simulation that predicts "cooling" and allows for future cooling, even while assuring that the world is destined to face disastrous "warming" anyway. This would be not dissimilar to prognosticators of doom who have, over centuries, adjusted their forecasts when the deadlines pass. Further, Gore's own predictions of a climate catastrophe have not lessened, and, every time he opens his mouth, the costs of meeting the emergency become easier and easier to swallow. According to Jenkins, they are not even "costs" anymore, they are "profits" (this is the new math from Gore's new book).
Mr. Gore points out that he has poured his own money into two climate action nonprofits, but, whatever his motives, aren't these nonprofits functionally propaganda arms (i.e., advertising) that benefit his for-profit investments?
Jenkins feels, and I agree, that evidence of man's impact on climate is maddeningly elusive, in part because man's impact on climate is so small as to be hard to disentangle from natural variability. Mr. Gore disagrees, but the case for action has become less "closed" since he pronounced it closed in 1989, if only because of the huge sums of money and manpower poured into the subject to little avail.
Now, even climate activists recognize a need for evidence from the real world. The endless invocation of computer models wasn't cutting it. For a while, the media could report evidence of warming as if it were evidence of what "causes" warming. Inconveniently (is that a good word?), however, just as temperature-measuring has become more standardized and disciplined, the warming trend seems to have faded from the recent record.
Fortunately, Jenkins alludes to the fact that Western societies (or Brazil or India or China) were never going to sacrifice economic growth for the uncertain benefits of fighting climate change.
For those of us who agree with the Jenkins' position, we might ask what will come of the upcoming discussions in Copenhagen where world leaders will be expected to do something about the issue? My guess: a strong statement that something needs to be done. That would be reasonable and very inexpensive.
Tuesday, November 10, 2009
Doctors' Pay
http://www.nytimes.com/2009/11/08/business/economy/08view.html?emc=eta1
As Robert Frank points out attached, the United States spends twice as much per capita on health care as many other nations, yet achieves inferior outcomes by such varied measures as life expectancy, preventable deaths from specific illnesses, and infant mortality. Much of that performance gap stems from the fact that many of the nation's 45 million (there's that disputed number again!) uninsured fail to receive needed care.
The spending gap stems largely from a conflict inherent in how American physicians are paid. Elsewhere, most doctors are salaried. But, under most American health plans, including Medicare and Medicaid, doctors are reimbursed according to how many tests and procedures they perform. As Frank points out, we all believe doctors recommend only those tests that they sincerely believe to be in their patients' best interests but we also know that additional tests, in the interest of being "thorough," will provide more income which can lean us in the direction of my relative: moral hazard. Moral hazard is not just a place we find at the big banks.
Frank quotes an article in the NY Times where Atul Gawande described an entrepreneurial subculture in McAllen, Texas in which doctors prescribe roughly half again as many tests and procedures as those in otherwise similar Texas communities. McAllen, he argued, is where American health care is heading.
And, the good news is that Dr. Gawande identified some health plans, like that of the Mayo Clinic in Minnesota, that have sidestepped the incentive problem by putting doctors on salary and operating their own hospitals. Such plans, which provide superb care and high patient satisfaction at significantly lower cost than conventional fee-for-service plans, would become more attractive under proposed legislation (I'll have to go along with Frank's position on that because I have no interest in reading 1174 pages of the proposed bill or bills).
It was my privilege to have been a part of annual executive physical process at the Mayo Clinic which was paid for by the company I worked for and it was exceptional. It was also my privilege to have served on the Board of the UT Southwestern Medical Center (one of this country's Top Ten hospitals) for the last 22 years. In both cases, the commitment to patient care is exceptional.
So, why hasn't the Mayo model caught on? One factor against quick expansion of the Mayo model is that many current doctors chose their profession hoping to earn lucrative pay, which they might not be able to do in a nonprofit clinic. But there is hope for more doctors who choose to view their profession as a "calling" working in nonprofit clinics. The incentive, aside from the exceptional reputation of places like the Mayo, is that doctors at such clinics can spend more time healing patients and less time fighting insurers.
According to Robert Frank (who is both an economist at Cornell University and co-director of the Paduano Seminar in Business Ethics at the Stern School of Business at New York University), any of the current health reform bills would encourage movement toward a Mayo approach. I'll take his word for it!
As Robert Frank points out attached, the United States spends twice as much per capita on health care as many other nations, yet achieves inferior outcomes by such varied measures as life expectancy, preventable deaths from specific illnesses, and infant mortality. Much of that performance gap stems from the fact that many of the nation's 45 million (there's that disputed number again!) uninsured fail to receive needed care.
The spending gap stems largely from a conflict inherent in how American physicians are paid. Elsewhere, most doctors are salaried. But, under most American health plans, including Medicare and Medicaid, doctors are reimbursed according to how many tests and procedures they perform. As Frank points out, we all believe doctors recommend only those tests that they sincerely believe to be in their patients' best interests but we also know that additional tests, in the interest of being "thorough," will provide more income which can lean us in the direction of my relative: moral hazard. Moral hazard is not just a place we find at the big banks.
Frank quotes an article in the NY Times where Atul Gawande described an entrepreneurial subculture in McAllen, Texas in which doctors prescribe roughly half again as many tests and procedures as those in otherwise similar Texas communities. McAllen, he argued, is where American health care is heading.
And, the good news is that Dr. Gawande identified some health plans, like that of the Mayo Clinic in Minnesota, that have sidestepped the incentive problem by putting doctors on salary and operating their own hospitals. Such plans, which provide superb care and high patient satisfaction at significantly lower cost than conventional fee-for-service plans, would become more attractive under proposed legislation (I'll have to go along with Frank's position on that because I have no interest in reading 1174 pages of the proposed bill or bills).
It was my privilege to have been a part of annual executive physical process at the Mayo Clinic which was paid for by the company I worked for and it was exceptional. It was also my privilege to have served on the Board of the UT Southwestern Medical Center (one of this country's Top Ten hospitals) for the last 22 years. In both cases, the commitment to patient care is exceptional.
So, why hasn't the Mayo model caught on? One factor against quick expansion of the Mayo model is that many current doctors chose their profession hoping to earn lucrative pay, which they might not be able to do in a nonprofit clinic. But there is hope for more doctors who choose to view their profession as a "calling" working in nonprofit clinics. The incentive, aside from the exceptional reputation of places like the Mayo, is that doctors at such clinics can spend more time healing patients and less time fighting insurers.
According to Robert Frank (who is both an economist at Cornell University and co-director of the Paduano Seminar in Business Ethics at the Stern School of Business at New York University), any of the current health reform bills would encourage movement toward a Mayo approach. I'll take his word for it!
Where the Jobs Are
http://norris.blogs.nytimes.com/2009/11/06/where-the-jobs-are-2/?emc=eta1
We have continued to suggest that bad economic times are when it is appropriate to look at sectors of the economy and institutions within them (profit or non-profit) that continue to grow and hire. While the Floyd Norris list attached is not exhaustive, it covers sectors where jobs have continued to grow since December of 2007.
While we continue to recommend to undergrads that they stay in school and get a graduate degree because the job market is just not there (plus the extra degree helps to differentiate them as a "product"), some of the growth categories that Norris points out are:
Home Health Care Services: Up 10.8%
Oil and Gas Extraction: Up 7.4%
Pipeline Transportation: Up 6.7%
Hospitals: Up 3.8%
Computer Systems Design &
Related Services: Up 3.4%
These, and the other job categories listed by Norris provide a clue to what's "secure" in a bad time for jobs. Just as Sarbanes has provided an instant job market for audit students, so also have the markets represented in these sectors provided continued opportunity in down times.
Last, I've kept the Federal Government (which is on the Norris list) until last because I want to promote it as a safe place to work until the economy comes all the way back if you have the right skills. The Norris list shows "Federal Government Except Postal Service" up 9.3%. Resisting the temptation to comment on the "Postal Service" aspect of that list, the government is a safe place to hide while looking for more lucrative places to land.
We have continued to suggest that bad economic times are when it is appropriate to look at sectors of the economy and institutions within them (profit or non-profit) that continue to grow and hire. While the Floyd Norris list attached is not exhaustive, it covers sectors where jobs have continued to grow since December of 2007.
While we continue to recommend to undergrads that they stay in school and get a graduate degree because the job market is just not there (plus the extra degree helps to differentiate them as a "product"), some of the growth categories that Norris points out are:
Home Health Care Services: Up 10.8%
Oil and Gas Extraction: Up 7.4%
Pipeline Transportation: Up 6.7%
Hospitals: Up 3.8%
Computer Systems Design &
Related Services: Up 3.4%
These, and the other job categories listed by Norris provide a clue to what's "secure" in a bad time for jobs. Just as Sarbanes has provided an instant job market for audit students, so also have the markets represented in these sectors provided continued opportunity in down times.
Last, I've kept the Federal Government (which is on the Norris list) until last because I want to promote it as a safe place to work until the economy comes all the way back if you have the right skills. The Norris list shows "Federal Government Except Postal Service" up 9.3%. Resisting the temptation to comment on the "Postal Service" aspect of that list, the government is a safe place to hide while looking for more lucrative places to land.
Friday, November 6, 2009
Krugman: Great Depression/Great Recession
http://krugman.blogs.nytimes.com/2009/11/03/the-story-so-far-in-one-picture/?emc=eta1
Krugman calls this the story so far in one picture. It's world industrial production then and now. It's very interesting to look at the 08 trend line below the 29 trend line for a period of months and it's heartening to look at the two trend lines separating now.
Krugman calls this the story so far in one picture. It's world industrial production then and now. It's very interesting to look at the 08 trend line below the 29 trend line for a period of months and it's heartening to look at the two trend lines separating now.
GDP Growth @ 3.5%
http://www.nytimes.com/2009/11/07/business/economy/07jobs.html?emc=eta1
http://online.wsj.com/article_email/SB10001424052748704013004574517303668357682-lMyQjAxMDA5MDAwNjEwNDYyWj.html
Here's the good news: third quarter GDP grew by 3.5%. Here's the good news in the bad news: nonfarm payrolls dropped 190,000 last month which is a substantial improvement over January's 741,000 drop. More good news in the bad news: U.S. worker productivity has "surged" (one study had it at 6.1% in the third quarter) but only because, where the economy is coming back, employers are reluctant to hire (causing many to settle for part-time work because companies won't hire full time). More bad news: the "underemployment rate", which includes part-time workers, the jobless, and those who have given up on searching, was 17.5% in October (the highest since 1994). More bad news: the official unemployment rate has broken the 10% barrier on its way up to 10.2%, 5.3 percentage points higher than December 2007 with the actual number of unemployed up 8.2 million people since then. More good news: manufacturers added jobs for the first time in 15 months in October (largely by bringing in temporary workers or recalling laid off workers). More good news: the first sign of a recovery in jobs is when companies begin bringing in temporary workers (seed previous "good news").
So, where is the consumer in all of this? Answer: unemployed. What drives the U.S. economy? Consumer demand. Many economists use "job creation" as the measure of how well the economy is doing, and, in the past, 100,000 to 150,000 jobs per month ("created") is about what the economy has needed to reflect healthy growth. Right now, the 190,000 negative number mentioned above has got to get back to a positive 100/150,000 (jobs created) monthly. That would be a positive job swing of 290/340,000 jobs per month to get back to a "plus" 100/150. Where's that going to come from and how soon?
And, while we don't talk politics here, we're not sure that President Obama's trip to get his Nobel (for "promoting peace"?), or his trip to Copenhagen to appease the "global warmers", should come ahead of something real like: are people employed, and do our economic policies promote that. As we have indicated here before, "unemployment" is the lagging indicator.
As was pointed out in the WSJ "Opinion" article attached, nearly all net job creation since 1980 occurred in firms less than 5 years old. A recently released Kaufman Foundation report shows that two-thirds of jobs created were in such firms. Given this, without new businesses, job creation in the American economy would have been "negative" for a significant number of years.
However; there are many young companies that never expand or get off the ground because of regulatory or economic barriers. Policy makers should be eliminating these barriers and creating incentives to foster the creation and growth of new businesses. Here are four suggestions:
* Welcome immigrants seeking scientific training at our universities (between 1995 and 2005, immigrants founded or co-founded 25% of all U.S. high tech firms);
* Unleash America's academic entrepreneurs (currently, university professors are limited in their technology licensing efforts);
* Provide easier access to capital (a fundamental revision of bank capital standards is needed from both a regulatory and an innovative point of view);
* Make it easier for companies seeking capital to go public (Sarbanes-Oxley has made it far more expensive for smaller companies than was originally intended).
As the stimulus money makes its way thru the economy, something real has to replace it. If most of the jobs are being created in young innovative businesses, then simple measures to "deregulate" around those businesses could be an inexpensive and highly productive way to create jobs.
http://online.wsj.com/article_email/SB10001424052748704013004574517303668357682-lMyQjAxMDA5MDAwNjEwNDYyWj.html
Here's the good news: third quarter GDP grew by 3.5%. Here's the good news in the bad news: nonfarm payrolls dropped 190,000 last month which is a substantial improvement over January's 741,000 drop. More good news in the bad news: U.S. worker productivity has "surged" (one study had it at 6.1% in the third quarter) but only because, where the economy is coming back, employers are reluctant to hire (causing many to settle for part-time work because companies won't hire full time). More bad news: the "underemployment rate", which includes part-time workers, the jobless, and those who have given up on searching, was 17.5% in October (the highest since 1994). More bad news: the official unemployment rate has broken the 10% barrier on its way up to 10.2%, 5.3 percentage points higher than December 2007 with the actual number of unemployed up 8.2 million people since then. More good news: manufacturers added jobs for the first time in 15 months in October (largely by bringing in temporary workers or recalling laid off workers). More good news: the first sign of a recovery in jobs is when companies begin bringing in temporary workers (seed previous "good news").
So, where is the consumer in all of this? Answer: unemployed. What drives the U.S. economy? Consumer demand. Many economists use "job creation" as the measure of how well the economy is doing, and, in the past, 100,000 to 150,000 jobs per month ("created") is about what the economy has needed to reflect healthy growth. Right now, the 190,000 negative number mentioned above has got to get back to a positive 100/150,000 (jobs created) monthly. That would be a positive job swing of 290/340,000 jobs per month to get back to a "plus" 100/150. Where's that going to come from and how soon?
And, while we don't talk politics here, we're not sure that President Obama's trip to get his Nobel (for "promoting peace"?), or his trip to Copenhagen to appease the "global warmers", should come ahead of something real like: are people employed, and do our economic policies promote that. As we have indicated here before, "unemployment" is the lagging indicator.
As was pointed out in the WSJ "Opinion" article attached, nearly all net job creation since 1980 occurred in firms less than 5 years old. A recently released Kaufman Foundation report shows that two-thirds of jobs created were in such firms. Given this, without new businesses, job creation in the American economy would have been "negative" for a significant number of years.
However; there are many young companies that never expand or get off the ground because of regulatory or economic barriers. Policy makers should be eliminating these barriers and creating incentives to foster the creation and growth of new businesses. Here are four suggestions:
* Welcome immigrants seeking scientific training at our universities (between 1995 and 2005, immigrants founded or co-founded 25% of all U.S. high tech firms);
* Unleash America's academic entrepreneurs (currently, university professors are limited in their technology licensing efforts);
* Provide easier access to capital (a fundamental revision of bank capital standards is needed from both a regulatory and an innovative point of view);
* Make it easier for companies seeking capital to go public (Sarbanes-Oxley has made it far more expensive for smaller companies than was originally intended).
As the stimulus money makes its way thru the economy, something real has to replace it. If most of the jobs are being created in young innovative businesses, then simple measures to "deregulate" around those businesses could be an inexpensive and highly productive way to create jobs.
Tuesday, November 3, 2009
"SuperFreakonomics"
http://online.wsj.com/article_email/SB10001424052748704335904574495643459234318-lMyQjAxMDA5MDIwNjEyNDYyWj.html
Steven D. Levitt is a professor of economics at the University of Chicago and a recipient of the John Bates Clark Medal, awarded to the most influential economist under the age of 40. He, along with Stephen J. Dubner, wrote the 2005 best seller "Freakonomics". The sequel to that book is "SuperFreakonomics" which has just been published.
Dubner and Levitt made the mistake of including a chapter in their sequel on "global warming". This egregious error has stirred the "Al Gore Forces" (the AGF, as we like to call them) into action. It would seem that the AGF, led by Al Gore himself, object to observations in the sequel like "...belching, flatulent cows are adding more greenhouse gases to the atmosphere than all SUVs combined." They also note that sea levels will not rise much more than 18" by 2100, which is less than the twice-daily tidal variation in most coastal locations. Further, they observe that "not only is carbon plainly not poisonous, but changes in carbon-dioxide levels don't necessarily mirror human activity." They quote Nathan Myhrvold (former Microsoft Chief Technology Officer) as saying that Gore's doomsday scenarios "don't have any basis in physical reality in any reasonable time frame."
And, as the WSJ points out, more subversively Levitt and Dubner indicate that climatologists, like everyone else, respond to incentives in a way that shapes their conclusions. "The economic reality of research funding ... rather than scientific consensus, leads the [climate] models to approximately match one another."
Again from the WSJ, "Perhaps their biggest sin, which is also the central point of the chapter, is pointing out that seemingly insurmountable problems often have cheap and simple solutions." In this case, a helium balloon, several miles of garden hose, and a harmless stream of sulfur dioxide being pumped into the upper atmosphere. The basic idea is to engineer effects similar to those of the 1991 mega-eruption of Mt. Pinatubo in the Philippines, which spewed so much sulfuric ash into the stratosphere that it cooled the earth by about one degree Fahrenheit for a couple of years.
Worse than the AGF criticisms, we have Paul Krugman blasting "SuperFreakonomics" for "grossly [misrepresenting] other people's research, in both climate science and economics." I never thought I'd see Al Gore and Krugman on the same side of a sophisticated arguement but I would suppose there is a first time for everything. My thought on this is that Krugman needs to stick with what got him his "economics" Nobel (which itself has been devalued lately), unless, of course, he has political aspirations. Krugman would also be wise to remember that people like Dubner and Levitt always check what they write with those they interviewed to be sure of accuracy. Regardless of what opinions I might have of the "dismal science" (economics, for those who have not heard that term before), climate science would seem to me to be something open to debate. Straining my aging memory, it seems to me that I've read consistant reports that the earth has been "cooling" for the past ten years (see our recent "Global Cooling" post).
"SuperFreakonomics" will outsell anything Krugman has written lately. Perhaps that's Krugman's problem. Gore's problem is a much larger one. "Proof" of warming is difficult when everything is cooling.
Steven D. Levitt is a professor of economics at the University of Chicago and a recipient of the John Bates Clark Medal, awarded to the most influential economist under the age of 40. He, along with Stephen J. Dubner, wrote the 2005 best seller "Freakonomics". The sequel to that book is "SuperFreakonomics" which has just been published.
Dubner and Levitt made the mistake of including a chapter in their sequel on "global warming". This egregious error has stirred the "Al Gore Forces" (the AGF, as we like to call them) into action. It would seem that the AGF, led by Al Gore himself, object to observations in the sequel like "...belching, flatulent cows are adding more greenhouse gases to the atmosphere than all SUVs combined." They also note that sea levels will not rise much more than 18" by 2100, which is less than the twice-daily tidal variation in most coastal locations. Further, they observe that "not only is carbon plainly not poisonous, but changes in carbon-dioxide levels don't necessarily mirror human activity." They quote Nathan Myhrvold (former Microsoft Chief Technology Officer) as saying that Gore's doomsday scenarios "don't have any basis in physical reality in any reasonable time frame."
And, as the WSJ points out, more subversively Levitt and Dubner indicate that climatologists, like everyone else, respond to incentives in a way that shapes their conclusions. "The economic reality of research funding ... rather than scientific consensus, leads the [climate] models to approximately match one another."
Again from the WSJ, "Perhaps their biggest sin, which is also the central point of the chapter, is pointing out that seemingly insurmountable problems often have cheap and simple solutions." In this case, a helium balloon, several miles of garden hose, and a harmless stream of sulfur dioxide being pumped into the upper atmosphere. The basic idea is to engineer effects similar to those of the 1991 mega-eruption of Mt. Pinatubo in the Philippines, which spewed so much sulfuric ash into the stratosphere that it cooled the earth by about one degree Fahrenheit for a couple of years.
Worse than the AGF criticisms, we have Paul Krugman blasting "SuperFreakonomics" for "grossly [misrepresenting] other people's research, in both climate science and economics." I never thought I'd see Al Gore and Krugman on the same side of a sophisticated arguement but I would suppose there is a first time for everything. My thought on this is that Krugman needs to stick with what got him his "economics" Nobel (which itself has been devalued lately), unless, of course, he has political aspirations. Krugman would also be wise to remember that people like Dubner and Levitt always check what they write with those they interviewed to be sure of accuracy. Regardless of what opinions I might have of the "dismal science" (economics, for those who have not heard that term before), climate science would seem to me to be something open to debate. Straining my aging memory, it seems to me that I've read consistant reports that the earth has been "cooling" for the past ten years (see our recent "Global Cooling" post).
"SuperFreakonomics" will outsell anything Krugman has written lately. Perhaps that's Krugman's problem. Gore's problem is a much larger one. "Proof" of warming is difficult when everything is cooling.
Wednesday, October 28, 2009
Efficient Markets
http://online.wsj.com/article_email/SB10001424052748703573604574491261905165886-lMyQjAxMDA5MDIwODEyNDgyWj.html
Wherever the Wharton School at UPENN is currently ranked in the various business school surveys (and that's usually somewhere in the Top 3), their Finance Department continues to be number 1 by consensus. And the number 1 professor in their Finance Department is Jeremy Siegel who has authored the article attached.
Siegel nicely summarizes the positions of those who feel that Efficient Market Theory (or EMH: Efficient Market Hypothesis) is the basic cause of the financial crisis. Siegel's definition of EMH is that the prices of securities reflect all known information that impacts their value. The hypothesis, again according to Siegel, does not claim that the market price is always right. He goes on to allow that EMH is not an "excuse" for the failures of CEOs and regulators who did not see the risks that sub-prime mortgage backed securities posed to the financial stability of the economy.
With the housing boom in this decade boosted by historically low nominal and real interest rates, the development of the securitized subprime lending market was inevitable. According to data accumulated by Professor Robert Shiller of Yale, in the 61 years from 1945 through 2006, the maximum cumulative decline in the average price of homes was 2.84% in 1991. In this environment, the credit quality of home buyers was secondary because it was thought that underlying collateral - the home - could always cover the principal in the event the homeowner defaulted. These models led credit agencies to rate these subprime mortgages as "investment grade." But this assessment was faulty since national home prices rose 88.7% from 2000 to 2006 (versus a 1% rise in median household income) totally out of sync with incomes and GDP growth.
This should have sent up red flags and cast doubts on using models that were based only on historical declines to judge future risk. With few exceptions (Goldman Sachs being one), financial firms ignored these warnings. CEOs failed to exercise their authority to monitor overall risk to the firm. And, the Fed never saw the signs.
A theory doesn't cause a crisis. Actions taken or not taken cause a crisis. Siegel rightly points out that blind faith in EMH did not "cause" the crisis. And, again, Siegel rightly points out that the "risks" have not disappeared. His analogy that, just because automobiles are safer today than they were years ago, does not mean that you can drive 120 mph, works perfectly. Ergo, our financial firms drove too fast, our central bank failed to stop them, and housing deflation crashed the banks and the economy.
Regardless, Siegel goes on to point out that neither the rating agencies' mistakes nor the overleveraging of the financial firms in the subprime securities is the fault of the Efficient Markets Hypothesis. The fact that yields on these mortgages were high despite their investment grade rating indicated that the market was rightly "suspicious" of the quality of the securities, and this should have served as a warning to to prospective buyers.
Wherever the Wharton School at UPENN is currently ranked in the various business school surveys (and that's usually somewhere in the Top 3), their Finance Department continues to be number 1 by consensus. And the number 1 professor in their Finance Department is Jeremy Siegel who has authored the article attached.
Siegel nicely summarizes the positions of those who feel that Efficient Market Theory (or EMH: Efficient Market Hypothesis) is the basic cause of the financial crisis. Siegel's definition of EMH is that the prices of securities reflect all known information that impacts their value. The hypothesis, again according to Siegel, does not claim that the market price is always right. He goes on to allow that EMH is not an "excuse" for the failures of CEOs and regulators who did not see the risks that sub-prime mortgage backed securities posed to the financial stability of the economy.
With the housing boom in this decade boosted by historically low nominal and real interest rates, the development of the securitized subprime lending market was inevitable. According to data accumulated by Professor Robert Shiller of Yale, in the 61 years from 1945 through 2006, the maximum cumulative decline in the average price of homes was 2.84% in 1991. In this environment, the credit quality of home buyers was secondary because it was thought that underlying collateral - the home - could always cover the principal in the event the homeowner defaulted. These models led credit agencies to rate these subprime mortgages as "investment grade." But this assessment was faulty since national home prices rose 88.7% from 2000 to 2006 (versus a 1% rise in median household income) totally out of sync with incomes and GDP growth.
This should have sent up red flags and cast doubts on using models that were based only on historical declines to judge future risk. With few exceptions (Goldman Sachs being one), financial firms ignored these warnings. CEOs failed to exercise their authority to monitor overall risk to the firm. And, the Fed never saw the signs.
A theory doesn't cause a crisis. Actions taken or not taken cause a crisis. Siegel rightly points out that blind faith in EMH did not "cause" the crisis. And, again, Siegel rightly points out that the "risks" have not disappeared. His analogy that, just because automobiles are safer today than they were years ago, does not mean that you can drive 120 mph, works perfectly. Ergo, our financial firms drove too fast, our central bank failed to stop them, and housing deflation crashed the banks and the economy.
Regardless, Siegel goes on to point out that neither the rating agencies' mistakes nor the overleveraging of the financial firms in the subprime securities is the fault of the Efficient Markets Hypothesis. The fact that yields on these mortgages were high despite their investment grade rating indicated that the market was rightly "suspicious" of the quality of the securities, and this should have served as a warning to to prospective buyers.
Wednesday, October 21, 2009
James Bond vs Al Gore
lMyQjAxMDA5MDIwMDEyNDAyWj.html
http://online.wsj.com/article_email/SB10001424052748704107204574475181433552914-
http://online.wsj.com/article_email/SB10001424052748704500604574482191245495128-lMyQjAxMDA5MDIwMTEyNDEyWj.html
Those of us who are hidden away from the Al Gore Forces (AGF) have some allies. We try to keep a low profile so that we won't be attacked and discredited. First attached, we were given access to a conversation between James Bond and Felix Leiter on how many feet above high tide the Thames River would have to be before it floods London. While Bond's original reaction to Leiter's question was that "SPECTRE" must have some plot to make that happen, Leiter informs him that it is part of CIA Director Leon Panetta's newly launched "Center on Climate Change and National Security" where the CIA has been tasked to evaluate potential threats to the U.S. from climate change. Quoting Panetta, "Decision makers need information and analysis on the effects climate change can have on security."
Of course, Bond's reaction to all of this is that nobody listens to Al Gore but Leiter informs Bond that the CIA is not allowed to question the science. Leiter goes on to explain to Bond that it's really not the CIA anymore, it's the "CYA".
At the risk of offending the AGF, I'll go with Pete DuPont (second attached) who sees "global" and "warming" as the two most important words used to justify the approaching governmental control of the U.S. economy. DuPont's "reality" is that global warming is barely occurring: in the 30 years starting in 1977, warming amounted to 0.32 degree Fahrenheit per decade, and, in the next 100 years, it is estimated to be about half a degree per decade. So, global warming looks like something that does not merit the extreme control currently being contemplated in Congress. The new Boxer-Kerry Bill is the Senate version of the Waxman-Markey House bill. The Boxer-Kerry bill looks to require a 20% reduction in greenhouse gas emissions by 2020.
This 20% reduction would mean getting back to 1977 levels of emissions which would require fairly draconian measures: for example, car and truck miles would have to be reduced by one-third (over 10 years). Who volunteers to go first with that one? And, what's the impact of that on our very weak economic recovery? Oh, and there is a return to "protectionism" with a new "border adjustment program" where we in the U.S. can apply "tariffs" on goods imported from countries that do not adopt acceptable environmental standards. Acceptable to whom, the AGF?
Both the House and Senate bills would allow "emitters" to claim they were hitting reduction targets (while actually emitting more carbon) by investing in projects that reduce carbon. There is no "cap-and-trade" system that really works - Europe tried it.
High cost policies with low impact results are not in America's best interests. While the AGF look to change how we approach improving our environment, hiding behind radical approaches and threatening opponents is not the way to do that. Improving the environment while having a progressive approach to economic growth and jobs is the only way to go.
http://online.wsj.com/article_email/SB10001424052748704107204574475181433552914-
http://online.wsj.com/article_email/SB10001424052748704500604574482191245495128-lMyQjAxMDA5MDIwMTEyNDEyWj.html
Those of us who are hidden away from the Al Gore Forces (AGF) have some allies. We try to keep a low profile so that we won't be attacked and discredited. First attached, we were given access to a conversation between James Bond and Felix Leiter on how many feet above high tide the Thames River would have to be before it floods London. While Bond's original reaction to Leiter's question was that "SPECTRE" must have some plot to make that happen, Leiter informs him that it is part of CIA Director Leon Panetta's newly launched "Center on Climate Change and National Security" where the CIA has been tasked to evaluate potential threats to the U.S. from climate change. Quoting Panetta, "Decision makers need information and analysis on the effects climate change can have on security."
Of course, Bond's reaction to all of this is that nobody listens to Al Gore but Leiter informs Bond that the CIA is not allowed to question the science. Leiter goes on to explain to Bond that it's really not the CIA anymore, it's the "CYA".
At the risk of offending the AGF, I'll go with Pete DuPont (second attached) who sees "global" and "warming" as the two most important words used to justify the approaching governmental control of the U.S. economy. DuPont's "reality" is that global warming is barely occurring: in the 30 years starting in 1977, warming amounted to 0.32 degree Fahrenheit per decade, and, in the next 100 years, it is estimated to be about half a degree per decade. So, global warming looks like something that does not merit the extreme control currently being contemplated in Congress. The new Boxer-Kerry Bill is the Senate version of the Waxman-Markey House bill. The Boxer-Kerry bill looks to require a 20% reduction in greenhouse gas emissions by 2020.
This 20% reduction would mean getting back to 1977 levels of emissions which would require fairly draconian measures: for example, car and truck miles would have to be reduced by one-third (over 10 years). Who volunteers to go first with that one? And, what's the impact of that on our very weak economic recovery? Oh, and there is a return to "protectionism" with a new "border adjustment program" where we in the U.S. can apply "tariffs" on goods imported from countries that do not adopt acceptable environmental standards. Acceptable to whom, the AGF?
Both the House and Senate bills would allow "emitters" to claim they were hitting reduction targets (while actually emitting more carbon) by investing in projects that reduce carbon. There is no "cap-and-trade" system that really works - Europe tried it.
High cost policies with low impact results are not in America's best interests. While the AGF look to change how we approach improving our environment, hiding behind radical approaches and threatening opponents is not the way to do that. Improving the environment while having a progressive approach to economic growth and jobs is the only way to go.
Tuesday, October 13, 2009
Jobs, the HR Hurdle, and Housing
http://wwwom/2009/10/11/jobs/11search.html?emc=eta1.nytimes.c
http://www.nytimes.com/2009/10/11/business/economy/11view.html?emc=eta1
At the recent G-20 summit in Pittsburgh, world leaders agreed that getting Americans to save and produce more while encouraging the Chinese to consume more is essential to placing the global economy on a stable footing. Well, you see, there it is - the solution was staring us in the face all along and it was in Pittsburgh! Who knew?
Most striking, on average, 6.3 unemployed job seekers are trying to fill each open position (Labor Department figures) in the U.S. economy. When the recession started in December, 2007, 1.7 people were competing for each open slot.
This makes it an employer's market right now, so the issue is what to do about it? The NY Times article attached addresses a perspective on that situation. And, they rightly point out that HR people, faced with hundreds of faceless online applications, have one main goal: to weed out as many people as they can. However; establishing personal contact with someone on the inside (sounds like networking to me) can help make a person's case. As the article says, job seekers who don't fit all the requirements (some of which are deliberately unrealistic) "need to go around the gatekeeper; they need to find another door." When someone that a hiring manager "knows" introduces them to a candidate, there's a trust link there that can make an opportunity happen. Many times, your personality will sell you when a two dimensional "career summary" won't. Having spent a career in human resources and, ultimately, with the responsibility for it as a part of larger responsibilities, I can endorse this perspective. I can also add that humility and the espoused ability to act as a team player are critical to creating a positive impression.
From December, 2007, when our friends the economists were busy telling us there was no recession (until, of course, they could retroactively declare one following two consecutive quarters of negative GDP growth), "housing" was what to watch and "housing" is what to watch now. We said then (and since) that, when the housing market rights itself (or, put differently, when the housing inventory overhang snugs up), the recession, and its most critical "lagging indicator" - JOBS - will come back. Robert Shiller (at Yale) created the Case-Shiller Home Price Index 20 years ago (Case is at Wellesley) to keep track of the housing market. Their just completed 2009 surveys (article attached) show the sharpest upturn that Shiller has ever seen! The suddenness of this shift surprised even Shiller. Good news like this has been hard to find. Certainly, it could be short term, but their own (Case-Shiller) home price index has stabilized. So, there is hope.
Whenever there is "hope", we must mention Nouriel Roubini, the Great Recession "predictor", who has the capacity to find the negative in anything. His most recent contrarian outlook (Reuters, 10/08/09) stated that U.S. housing prices may still fall more than 10%, killing an incipient recovery, as demand from first time buyers fades. He goes on to add that massive losses in commercial real estate loans will add to the problem, forcing banks to raise more capital. This was part of Roubini's presentation to the World Economic Forum.
In spite of all of this, Roubini sees a greater chance of a "U-shaped" recovery in developed economies, with a 20 to 25% chance of a "double-dip"(recession).
Catherine Rampell, writing in the Times "Economix" blog, has discovered the most recent unemployment numbers from across Europe with some striking "outliers". So, while the 27 member European Union is at 9.7%, both Spain and Latvia were nearly double that. If a "convoy" is only as fast as its slowest ship, one wonders where Europe's numbers are going.
So jobs, our lagging indicator here in the U.S., could come back consistently with housing, or Roubini could burst another hope by being right again (this time about commercial real estate). However; even Roubini sees, as indicated above, the possibility of light at the end of the tunnel. We have to drag him along kicking and screaming, but that's OK. Every 25 years Roubini will be right, as he was with his prediction in 2007. Meanwhile, we have hopeful signs.
http://www.nytimes.com/2009/10/11/business/economy/11view.html?emc=eta1
At the recent G-20 summit in Pittsburgh, world leaders agreed that getting Americans to save and produce more while encouraging the Chinese to consume more is essential to placing the global economy on a stable footing. Well, you see, there it is - the solution was staring us in the face all along and it was in Pittsburgh! Who knew?
Most striking, on average, 6.3 unemployed job seekers are trying to fill each open position (Labor Department figures) in the U.S. economy. When the recession started in December, 2007, 1.7 people were competing for each open slot.
This makes it an employer's market right now, so the issue is what to do about it? The NY Times article attached addresses a perspective on that situation. And, they rightly point out that HR people, faced with hundreds of faceless online applications, have one main goal: to weed out as many people as they can. However; establishing personal contact with someone on the inside (sounds like networking to me) can help make a person's case. As the article says, job seekers who don't fit all the requirements (some of which are deliberately unrealistic) "need to go around the gatekeeper; they need to find another door." When someone that a hiring manager "knows" introduces them to a candidate, there's a trust link there that can make an opportunity happen. Many times, your personality will sell you when a two dimensional "career summary" won't. Having spent a career in human resources and, ultimately, with the responsibility for it as a part of larger responsibilities, I can endorse this perspective. I can also add that humility and the espoused ability to act as a team player are critical to creating a positive impression.
From December, 2007, when our friends the economists were busy telling us there was no recession (until, of course, they could retroactively declare one following two consecutive quarters of negative GDP growth), "housing" was what to watch and "housing" is what to watch now. We said then (and since) that, when the housing market rights itself (or, put differently, when the housing inventory overhang snugs up), the recession, and its most critical "lagging indicator" - JOBS - will come back. Robert Shiller (at Yale) created the Case-Shiller Home Price Index 20 years ago (Case is at Wellesley) to keep track of the housing market. Their just completed 2009 surveys (article attached) show the sharpest upturn that Shiller has ever seen! The suddenness of this shift surprised even Shiller. Good news like this has been hard to find. Certainly, it could be short term, but their own (Case-Shiller) home price index has stabilized. So, there is hope.
Whenever there is "hope", we must mention Nouriel Roubini, the Great Recession "predictor", who has the capacity to find the negative in anything. His most recent contrarian outlook (Reuters, 10/08/09) stated that U.S. housing prices may still fall more than 10%, killing an incipient recovery, as demand from first time buyers fades. He goes on to add that massive losses in commercial real estate loans will add to the problem, forcing banks to raise more capital. This was part of Roubini's presentation to the World Economic Forum.
In spite of all of this, Roubini sees a greater chance of a "U-shaped" recovery in developed economies, with a 20 to 25% chance of a "double-dip"(recession).
Catherine Rampell, writing in the Times "Economix" blog, has discovered the most recent unemployment numbers from across Europe with some striking "outliers". So, while the 27 member European Union is at 9.7%, both Spain and Latvia were nearly double that. If a "convoy" is only as fast as its slowest ship, one wonders where Europe's numbers are going.
So jobs, our lagging indicator here in the U.S., could come back consistently with housing, or Roubini could burst another hope by being right again (this time about commercial real estate). However; even Roubini sees, as indicated above, the possibility of light at the end of the tunnel. We have to drag him along kicking and screaming, but that's OK. Every 25 years Roubini will be right, as he was with his prediction in 2007. Meanwhile, we have hopeful signs.
Friday, October 9, 2009
WSJ Consensus Forecast
http://online.wsj.com/article_email/SB125494927938671631-lMyQjAxMDI5NTA0OTkwNDk5Wj.html
The new WSJ consensus forecast (attached) shows an estimated GDP growth for the just ended third quarter of 3.1%. That's a full percent better than this group of 48 economists projected at year start. On average, the economists don't expect unemployment to fall below 6% until 2013. On average, the economists expect unemployment to peak at 10.2% this coming February.
At the end of the cover article for the survey data, there is an excellent graph depicting the "Long Road Back". The graph displays how long it would take to regain the job level at the start of this recession (December 2007) : assuming the average monthly pace of the most recent expansion, it would take 86 months, or not until December 2016. From a "jobs" perspective this is an awfully heavy load for a recovering economy to shoulder - the "numbers" look more like a double-dip recession. Where is the "consumer"? In many cases, the consumer is unemployed or underemployed. In addition, Roubini points out that there is a vast negative potential currently in the economy from commercial real estate. That observation, while accurate, should be tempered by the fact that Roubini can find the negative in anything.
"Consensus" amongst economists is a scary thing, but I'm going to go with the positive GDP projections because part of any recovery is confidence.
The new WSJ consensus forecast (attached) shows an estimated GDP growth for the just ended third quarter of 3.1%. That's a full percent better than this group of 48 economists projected at year start. On average, the economists don't expect unemployment to fall below 6% until 2013. On average, the economists expect unemployment to peak at 10.2% this coming February.
At the end of the cover article for the survey data, there is an excellent graph depicting the "Long Road Back". The graph displays how long it would take to regain the job level at the start of this recession (December 2007) : assuming the average monthly pace of the most recent expansion, it would take 86 months, or not until December 2016. From a "jobs" perspective this is an awfully heavy load for a recovering economy to shoulder - the "numbers" look more like a double-dip recession. Where is the "consumer"? In many cases, the consumer is unemployed or underemployed. In addition, Roubini points out that there is a vast negative potential currently in the economy from commercial real estate. That observation, while accurate, should be tempered by the fact that Roubini can find the negative in anything.
"Consensus" amongst economists is a scary thing, but I'm going to go with the positive GDP projections because part of any recovery is confidence.
Tuesday, October 6, 2009
Jobs, the Economy, and Climate Change
http://www.nytimes.com/2009/10/04/weekinreview/04norris.html?_r=1&emc=eta1
Thanks to my followers whose comments on my "Global Cooling" post brought a smile! I believe the "polar bears" are safe, at least for another century. I believe that President Obama had opportunities to fly to Copenhagen twice this year: once was to promote Chicago as an Olympic venue, and once coming up to talk "climate" with the G-20 countries. His first trip was probably one he should not have made (see Goerge Will on that) but his second one might be time well spent if he pays attention to the "economics" of climate (here, he could probably use a "tutorial" from Bjorn Lomberg and the Copenhagen Consensus*).
Specifically, what does global climate mitigation do for worldwide economic growth? While I could be wrong, I believe it was the Bill Clinton presidential campaign that coined the phrase: "It's the economy stupid!" Well, right now, it's "jobs stupid!" The Great Recession has brought the world the curse of massive unemployment (and/or underemployment). So, raising prices and taxes to pay for various cap and trade schemes will help economic growth (which usually correlates with "jobs") how?
If we use the Floyd Norris summary (NY Times, 10/4/09 attached) of employment decline (click on his chart), with current revisions, 8 million jobs have been lost since December, 2007 in the U.S. If I could summarize for a moment: the most recent monthly BLS unemployment report showed 263,000 jobs lost which, while a slight blip up from the prior month, is part of a significant trend down from the early months of the year when roughly 700,000 jobs per month were disappearing. This would be consistent with the economic consensus that GDP growth is returning. Some experts are now predicting that the 2% per quarter GDP growth predicted by the WSJ Economist Survey will be exceeded by 1 to 1.5% for coming quarters. That's the good news. Now, how long will it take the U.S. economy to re-employ the 8 million unemployed from the most recent estimates? Remember, the 263,000 referred to above is less jobs lost. For this economy to function properly, between 100,000 and 150,000 net jobs have to be "created" each month.
The lagging indicator that is so problematic is unemployment. What's interesting with current economic thinking is that those same people who think that GDP has the possibility of growing at 3 to 3.5% over coming quarters also think that "employers" overdid it with layoffs as the Great Recession initiated. If that is the case, then it is possible that an economic comeback will be faster and stronger than was anticipated by economists previously. So, if there is "good news" in the "bad news", that's it.
While the potential for GDP growth over coming quarters is that it will be higher than anticipated, I know of no economists that think unemployment will be under 9.5 to 10% (average) for 2010. Attacking unemployment is the near term priority problem for the U.S. economy, NOT climate change.
If I could refer back to President Obama (and his economic "team") for a moment, the "economic stimulus" was proposed (the $787 billion, or, that plus all the other programs that add up to significantly more money) by the administration in conjunction with an "estimate" that implementation of said stimulus would keep unemployment below 8%. What happened to that?
Just speculating here, China's commitment to renewable energy (already declared and backed up by "incentives") will probably do more for worldwide climate improvement than all the cap and trade programs Europe and North America can create in the coming years.
And, if George Friedman is right about "The Next 100 Years", new energy technologies will mitigate climate problems even further.
_____________
* Interestingly enough, for those who may be unaware, the Copenhagen Consensus Center has, and continues to address the economics of what would do the most good for the most people in the world - in 2008, their blue ribbon panel of economists, including 5 Nobel laureates, weighed what would be the top priorities in the world if $75 billion was put on the table for distribution by cost/benefit rank (#1 to #30). Number1 was a $60 million expenditure for providing vitamin A and zinc that would help some 112 million children in sub-Saharan Africa and South Asia. Number 30 was global climate mitigation (of any kind): $800 billion (a reasonable estimate of what it would take to install current cap and trade schemes worldwide) could, over 100 years, reduce temperature increases by 0.4 degrees Fahrenheit by the end of this century. Putting the rich world's political cause du jour, global warming, ahead of poverty, disease and economic growth (Jobs!) is, at best, foolish!
Thanks to my followers whose comments on my "Global Cooling" post brought a smile! I believe the "polar bears" are safe, at least for another century. I believe that President Obama had opportunities to fly to Copenhagen twice this year: once was to promote Chicago as an Olympic venue, and once coming up to talk "climate" with the G-20 countries. His first trip was probably one he should not have made (see Goerge Will on that) but his second one might be time well spent if he pays attention to the "economics" of climate (here, he could probably use a "tutorial" from Bjorn Lomberg and the Copenhagen Consensus*).
Specifically, what does global climate mitigation do for worldwide economic growth? While I could be wrong, I believe it was the Bill Clinton presidential campaign that coined the phrase: "It's the economy stupid!" Well, right now, it's "jobs stupid!" The Great Recession has brought the world the curse of massive unemployment (and/or underemployment). So, raising prices and taxes to pay for various cap and trade schemes will help economic growth (which usually correlates with "jobs") how?
If we use the Floyd Norris summary (NY Times, 10/4/09 attached) of employment decline (click on his chart), with current revisions, 8 million jobs have been lost since December, 2007 in the U.S. If I could summarize for a moment: the most recent monthly BLS unemployment report showed 263,000 jobs lost which, while a slight blip up from the prior month, is part of a significant trend down from the early months of the year when roughly 700,000 jobs per month were disappearing. This would be consistent with the economic consensus that GDP growth is returning. Some experts are now predicting that the 2% per quarter GDP growth predicted by the WSJ Economist Survey will be exceeded by 1 to 1.5% for coming quarters. That's the good news. Now, how long will it take the U.S. economy to re-employ the 8 million unemployed from the most recent estimates? Remember, the 263,000 referred to above is less jobs lost. For this economy to function properly, between 100,000 and 150,000 net jobs have to be "created" each month.
The lagging indicator that is so problematic is unemployment. What's interesting with current economic thinking is that those same people who think that GDP has the possibility of growing at 3 to 3.5% over coming quarters also think that "employers" overdid it with layoffs as the Great Recession initiated. If that is the case, then it is possible that an economic comeback will be faster and stronger than was anticipated by economists previously. So, if there is "good news" in the "bad news", that's it.
While the potential for GDP growth over coming quarters is that it will be higher than anticipated, I know of no economists that think unemployment will be under 9.5 to 10% (average) for 2010. Attacking unemployment is the near term priority problem for the U.S. economy, NOT climate change.
If I could refer back to President Obama (and his economic "team") for a moment, the "economic stimulus" was proposed (the $787 billion, or, that plus all the other programs that add up to significantly more money) by the administration in conjunction with an "estimate" that implementation of said stimulus would keep unemployment below 8%. What happened to that?
Just speculating here, China's commitment to renewable energy (already declared and backed up by "incentives") will probably do more for worldwide climate improvement than all the cap and trade programs Europe and North America can create in the coming years.
And, if George Friedman is right about "The Next 100 Years", new energy technologies will mitigate climate problems even further.
_____________
* Interestingly enough, for those who may be unaware, the Copenhagen Consensus Center has, and continues to address the economics of what would do the most good for the most people in the world - in 2008, their blue ribbon panel of economists, including 5 Nobel laureates, weighed what would be the top priorities in the world if $75 billion was put on the table for distribution by cost/benefit rank (#1 to #30). Number1 was a $60 million expenditure for providing vitamin A and zinc that would help some 112 million children in sub-Saharan Africa and South Asia. Number 30 was global climate mitigation (of any kind): $800 billion (a reasonable estimate of what it would take to install current cap and trade schemes worldwide) could, over 100 years, reduce temperature increases by 0.4 degrees Fahrenheit by the end of this century. Putting the rich world's political cause du jour, global warming, ahead of poverty, disease and economic growth (Jobs!) is, at best, foolish!
Friday, October 2, 2009
Global Cooling
http://www.washingtonpost.com/wp-dyn/content/article/2009/09/30/AR2009093003569.html?referrer=emailarticle
I have decided that I will call this thing that the "Al Gore Forces" are pushing "Global Cooling" because that is what it is. Fortunately for me, I have a low profile so I can share my thoughts with those who want to read my "posts" and I'm safe from attack because: (a) I make sense; and (b) I'm invisible to the AGF (Al Gore Forces).
George Will occasionally holds forth (article attached) on Global Cooling (GC) as he did yesterday when he reacted to a NY Times headline about the frustrations of the AGFs over the fact that global temperatures have "plateaued".
The "difficulty", to quote Will quoting the NY Times, "... is building momentum for carbon reduction when global temperatures have been relatively stable for a decade and may even drop in the next few years." As Will goes on to point out, a "few years" became "...the next decade or so..." later in the article. But wait, it might even be two decades in which temperatures cool according to one scientist.
By asserting that the absence of significant warming since 1998 is a mere "plateau", the Times assures readers who are alarmed about climate change that the paper knows the future and that warming will continue: quoting Will, "Do not despair, bad news will resume."
Will, again quotes the Times quoting "scientists" saying that 11 years of temperature stability has "no bearing" on long term warming. So, "...cool stretches are inevitable". I'm guessing that these "scientists" are secret members of the AGF. According to the Times, "... a short term trend (11 years) gives ammunition to skeptics of climate change."
Back to George Will: "Actually, what makes skeptics skeptical is the accumulating evidence that theories predicting catastrophe from man-made climate change are IMPERVIOUS TO EVIDENCE (my caps)."
It would appear that warnings about cataclysmic warming increase in stridency as evidence of warming becomes more elusive.
It strikes me that the AGFs are very similar to Thomas Malthus whose basic theory was that we would run out of food on the planet. Malthus lived to see that he was wrong because he didn't factor in technological advances. George Friedman's much anticipated new book on "The Next 100 Years" gives us a scientifically feasible scenario on how the world's energy problems will be solved and, as an unintended consequence, global warming as well. It would be interesting to see how the AGFs attack that.
I have decided that I will call this thing that the "Al Gore Forces" are pushing "Global Cooling" because that is what it is. Fortunately for me, I have a low profile so I can share my thoughts with those who want to read my "posts" and I'm safe from attack because: (a) I make sense; and (b) I'm invisible to the AGF (Al Gore Forces).
George Will occasionally holds forth (article attached) on Global Cooling (GC) as he did yesterday when he reacted to a NY Times headline about the frustrations of the AGFs over the fact that global temperatures have "plateaued".
The "difficulty", to quote Will quoting the NY Times, "... is building momentum for carbon reduction when global temperatures have been relatively stable for a decade and may even drop in the next few years." As Will goes on to point out, a "few years" became "...the next decade or so..." later in the article. But wait, it might even be two decades in which temperatures cool according to one scientist.
By asserting that the absence of significant warming since 1998 is a mere "plateau", the Times assures readers who are alarmed about climate change that the paper knows the future and that warming will continue: quoting Will, "Do not despair, bad news will resume."
Will, again quotes the Times quoting "scientists" saying that 11 years of temperature stability has "no bearing" on long term warming. So, "...cool stretches are inevitable". I'm guessing that these "scientists" are secret members of the AGF. According to the Times, "... a short term trend (11 years) gives ammunition to skeptics of climate change."
Back to George Will: "Actually, what makes skeptics skeptical is the accumulating evidence that theories predicting catastrophe from man-made climate change are IMPERVIOUS TO EVIDENCE (my caps)."
It would appear that warnings about cataclysmic warming increase in stridency as evidence of warming becomes more elusive.
It strikes me that the AGFs are very similar to Thomas Malthus whose basic theory was that we would run out of food on the planet. Malthus lived to see that he was wrong because he didn't factor in technological advances. George Friedman's much anticipated new book on "The Next 100 Years" gives us a scientifically feasible scenario on how the world's energy problems will be solved and, as an unintended consequence, global warming as well. It would be interesting to see how the AGFs attack that.
Monday, September 28, 2009
The Obama Tire Tax
http://online.wsj.com/article_email/SB10001424052970204488304574431641244584198-lMyQjAxMDA5MDIwODEyNDgyWj.html
So, history teaches us that it was "Tariffs" (Smoot-Hawley ?) that were the final straw that pushed the world into the Great Depression. If, indeed, President Obama feels that the U.S. economy is far enough "out of the woods" from the Great Recession that things are safe, then I guess it's "OK" to drop in a tariff - especially since it will appease some of his union backers. My problem is that "tariff" is almost a synonym for short sighted. As the WSJ Asia points out (copy attached), the 35% tariff will cost the economy 20,000 jobs in the tire distribution and retail sector while "saving" only 1,000 jobs at domestic manufacturing plants. U.S. consumers will pay $330,000 in higher tire prices for each of those 1,000 jobs.
OK class, let's review: President Obama (getting advised by his Chicago Booth School behavioral economists) imposes a 35% tariff on tires imported from China this month. Prices for tires from U.S. wholesalers have already increased 15% to 28% as a result. The only reason those prices have not gone up the full 35% is because the "wholesalers" have some cheaper inventory on hand. Low income Americans will bear the brunt of the pain because Chinese tire makers sell the cheapest tires, retailing for about $50 a piece at the lowest. So, at $70 a piece (nominally), will some people drive a little longer on the tires they have, perhaps out of "thrift" and/or annoyance?
President Obama has done all this for the United Steelworkers because_______. I have difficulty with filling in the blank there. The jobs trade off looks pretty clearly negative so I'm sure there must be something else that I can't see. As the WSJ Asia says, "The reality is that industry margins are so thin and consumer budgets are so tight that even a 35% tariff will hurt the economy. Mr. Obama's first big trade-policy call is turning out to be a very expensive mistake."
And, for the Chicago Booth economic team, WE know about the "Wal-Mart Effect", don't YOU? It goes like this: "For every dollar taken from drivers' pockets at the pump in the form of higher prices ... low cost exports from China and elsewhere have put $1.50 back in the form of cheaper retail goods."
So, history teaches us that it was "Tariffs" (Smoot-Hawley ?) that were the final straw that pushed the world into the Great Depression. If, indeed, President Obama feels that the U.S. economy is far enough "out of the woods" from the Great Recession that things are safe, then I guess it's "OK" to drop in a tariff - especially since it will appease some of his union backers. My problem is that "tariff" is almost a synonym for short sighted. As the WSJ Asia points out (copy attached), the 35% tariff will cost the economy 20,000 jobs in the tire distribution and retail sector while "saving" only 1,000 jobs at domestic manufacturing plants. U.S. consumers will pay $330,000 in higher tire prices for each of those 1,000 jobs.
OK class, let's review: President Obama (getting advised by his Chicago Booth School behavioral economists) imposes a 35% tariff on tires imported from China this month. Prices for tires from U.S. wholesalers have already increased 15% to 28% as a result. The only reason those prices have not gone up the full 35% is because the "wholesalers" have some cheaper inventory on hand. Low income Americans will bear the brunt of the pain because Chinese tire makers sell the cheapest tires, retailing for about $50 a piece at the lowest. So, at $70 a piece (nominally), will some people drive a little longer on the tires they have, perhaps out of "thrift" and/or annoyance?
President Obama has done all this for the United Steelworkers because_______. I have difficulty with filling in the blank there. The jobs trade off looks pretty clearly negative so I'm sure there must be something else that I can't see. As the WSJ Asia says, "The reality is that industry margins are so thin and consumer budgets are so tight that even a 35% tariff will hurt the economy. Mr. Obama's first big trade-policy call is turning out to be a very expensive mistake."
And, for the Chicago Booth economic team, WE know about the "Wal-Mart Effect", don't YOU? It goes like this: "For every dollar taken from drivers' pockets at the pump in the form of higher prices ... low cost exports from China and elsewhere have put $1.50 back in the form of cheaper retail goods."
Friday, September 25, 2009
Being "Green"
http://www.nytimes.com/2009/09/25/opinion/25krugman.html?emc=eta1
For those of you who have enjoyed following my posts, I've been away for a while and I want to welcome you back. I've had a hectic start to fall classes and the support programming for this "Blog" broke. So, I'm back now and I'm hopeful that things keep rolling.
Evidently, the "Al Gore Forces" have gotten to Paul Krugman, my "guru" for all things economic. Krugman was kind enough to let us know today that one can fight global warming (gw) cheaply. And, anyone who doesn't want to fight gw is kidding themselves. Could someone ask Paul if it has gotten "warmer" or "cooler" during this decade? I guess the battle against the "Al Gore Forces" is down to George Will and those of us who support him. Well, of course, there is the Copenhagen Consensus (that group of Nobel Prize winning economists, and other experts) that has shown, objectively, that a dollar spent on greening the world would be better spent on hunger, medical care for the poor and other more immediate problems.
The House has already passed a fairly strong cap-and-trade climate bill, the Waxman-Markey act, which would eventually lead to sharp reductions in greenhouse gas emissions. But, the sticking point will be the Senate. Here, after Krugman dispenses with the "deniers" (those who think that gw hasn't been proven) as fools, he wants to let us know that claims of immense economic damage from climate legislation are as bogus, in their own way, as "climate-change denial."
How do we know these things? First, we waste a lot of energy now burning large amounts of coal, oil and gas in ways that don't actually enhance our standard of living (easy to agree here). Second, even deep cuts in greenhouse gas emissions would impose modest costs on the average family (a CBO analysis of the effects of Waxman-Markey estimated a cost to the average family of $160 per year). Once again, easy to agree.
Krugman's bottom line: the claim that climate legislation will kill the economy deserves the same disdain as the claim that global warming is a hoax. The truth about the economics of climate change is that it's relatively easy to be green.
As always, Dr. K is very convincing. Who am I to contradict? But, a thought about cap-and-trade: who would get the "credits" and how would that be administered, and what would be the cost to the taxpayer of government administration? I honestly think that Krugman could make better economic arguments AGAINST cap-and-trade just on the basis of those questions than he has in favor of it. So, thank you Dr. K for letting us know how "cheaply" we can fight gw, but could you get back to us after you've calculated the overhead involved in administering all that carbon trading?
Meantime, life goes on with the EPA banning carbon dioxide and the Copenhagen Consensus suggesting we spend money more effectively someplace else.
For those of you who have enjoyed following my posts, I've been away for a while and I want to welcome you back. I've had a hectic start to fall classes and the support programming for this "Blog" broke. So, I'm back now and I'm hopeful that things keep rolling.
Evidently, the "Al Gore Forces" have gotten to Paul Krugman, my "guru" for all things economic. Krugman was kind enough to let us know today that one can fight global warming (gw) cheaply. And, anyone who doesn't want to fight gw is kidding themselves. Could someone ask Paul if it has gotten "warmer" or "cooler" during this decade? I guess the battle against the "Al Gore Forces" is down to George Will and those of us who support him. Well, of course, there is the Copenhagen Consensus (that group of Nobel Prize winning economists, and other experts) that has shown, objectively, that a dollar spent on greening the world would be better spent on hunger, medical care for the poor and other more immediate problems.
The House has already passed a fairly strong cap-and-trade climate bill, the Waxman-Markey act, which would eventually lead to sharp reductions in greenhouse gas emissions. But, the sticking point will be the Senate. Here, after Krugman dispenses with the "deniers" (those who think that gw hasn't been proven) as fools, he wants to let us know that claims of immense economic damage from climate legislation are as bogus, in their own way, as "climate-change denial."
How do we know these things? First, we waste a lot of energy now burning large amounts of coal, oil and gas in ways that don't actually enhance our standard of living (easy to agree here). Second, even deep cuts in greenhouse gas emissions would impose modest costs on the average family (a CBO analysis of the effects of Waxman-Markey estimated a cost to the average family of $160 per year). Once again, easy to agree.
Krugman's bottom line: the claim that climate legislation will kill the economy deserves the same disdain as the claim that global warming is a hoax. The truth about the economics of climate change is that it's relatively easy to be green.
As always, Dr. K is very convincing. Who am I to contradict? But, a thought about cap-and-trade: who would get the "credits" and how would that be administered, and what would be the cost to the taxpayer of government administration? I honestly think that Krugman could make better economic arguments AGAINST cap-and-trade just on the basis of those questions than he has in favor of it. So, thank you Dr. K for letting us know how "cheaply" we can fight gw, but could you get back to us after you've calculated the overhead involved in administering all that carbon trading?
Meantime, life goes on with the EPA banning carbon dioxide and the Copenhagen Consensus suggesting we spend money more effectively someplace else.
Friday, September 18, 2009
Calculating Lost Output
http://krugman.blogs.nytimes.com/2009/09/15/macro-situation-notes/?emc=eta1
So, what have we lost in GDP since the Great Recession started? Comparing actual GDP since the recession began with what it would have been if the economy had continued growing at its trend (from 1999 to 2007), we're 8% below where we should be (Krugman attached). That translates into lost output at a rate of well over a trillion dollars per year (as well as mass unemployment).
At the risk of suffering the Nouriel Roubini (he of the Great Recession prediction and the consistent "gloom and doom" forecasts) label, a double dip recession could just make all that worse - Krugman's trend lines for the last recession are pictured and they make the point that, once inventory replacement is out of the way, the bulk of the fiscal stimulus won't be there to rescue the economy. His other trend lines on actual versus "trend" simply picture the trillions we are short in GDP growth.
Let's get back to unemployment. It's that nasty "lagging indicator" that most economists feel will average 10% for 2010. Krugman said in a speech overseas this week that the unemployment problem won't be solved until 2011 (ie. start to come down). I therefor surmise that this little mini comeback that we are experiencing (quarterly GDP growth plugging along at 2%) will not be enough to deflect the much larger drag of "underemployment".
Krugman, Buffet and significant others have consistently taken the position that we need MORE stimulus, not LESS. Doesn't a pernicious unemployment rate above 10% prove that point?
So, what have we lost in GDP since the Great Recession started? Comparing actual GDP since the recession began with what it would have been if the economy had continued growing at its trend (from 1999 to 2007), we're 8% below where we should be (Krugman attached). That translates into lost output at a rate of well over a trillion dollars per year (as well as mass unemployment).
At the risk of suffering the Nouriel Roubini (he of the Great Recession prediction and the consistent "gloom and doom" forecasts) label, a double dip recession could just make all that worse - Krugman's trend lines for the last recession are pictured and they make the point that, once inventory replacement is out of the way, the bulk of the fiscal stimulus won't be there to rescue the economy. His other trend lines on actual versus "trend" simply picture the trillions we are short in GDP growth.
Let's get back to unemployment. It's that nasty "lagging indicator" that most economists feel will average 10% for 2010. Krugman said in a speech overseas this week that the unemployment problem won't be solved until 2011 (ie. start to come down). I therefor surmise that this little mini comeback that we are experiencing (quarterly GDP growth plugging along at 2%) will not be enough to deflect the much larger drag of "underemployment".
Krugman, Buffet and significant others have consistently taken the position that we need MORE stimulus, not LESS. Doesn't a pernicious unemployment rate above 10% prove that point?
Wednesday, September 16, 2009
Freshwater Rage
Freshwater Rage
Krugman has weighed in on the response from the Chicago economic team (only one of whom was willing to be identified) to his essay on how the economists got it wrong and I like what he said because it was "cogent" (see attached - and thank you Dale for fixing my blog site so that I can attach articles again!).
Before I add my 2 cents on Krugman's post, I want you to think about the vituperative nature of Cochrane's attack inclusive of three separate comments on Krugman's use of "cartoons." Krugman didn't put the "cartoons" in his article - the NY Times editorial staff did. Cochrane was foolish and hysterical in between showing us all that he knows "economics." Whatever your position on the Chicago team's thoughts, it's a "TKO" for Krugman just on the quality of what he wrote versus the hysterics in between textbook quotes from Cochrane. I frankly also could not believe that Cochrane defended the position that fiscal stimulus is a zero sum game (so, such infrastructure as "bridges" and "roads", and the wages we pay people to build those, adds up to "zero"?). Has this guy ever met a payroll?
On to Krugman: his point that freshwater economists dismissed the work of all Keynesians over the past 30 years with "sneers" strikes me as the truth as I've heard that observation from many others before Krugman. He goes on to talk about "active purges" of competing views - students were not exposed to alternatives. Again, easily believeable. There is a logic to temporary fiscal expansion that the "Chicagos" refuse to see. And, as Krugman says, freshwater macro will get even more insular and people will pay even less attention.
Krugman has weighed in on the response from the Chicago economic team (only one of whom was willing to be identified) to his essay on how the economists got it wrong and I like what he said because it was "cogent" (see attached - and thank you Dale for fixing my blog site so that I can attach articles again!).
Before I add my 2 cents on Krugman's post, I want you to think about the vituperative nature of Cochrane's attack inclusive of three separate comments on Krugman's use of "cartoons." Krugman didn't put the "cartoons" in his article - the NY Times editorial staff did. Cochrane was foolish and hysterical in between showing us all that he knows "economics." Whatever your position on the Chicago team's thoughts, it's a "TKO" for Krugman just on the quality of what he wrote versus the hysterics in between textbook quotes from Cochrane. I frankly also could not believe that Cochrane defended the position that fiscal stimulus is a zero sum game (so, such infrastructure as "bridges" and "roads", and the wages we pay people to build those, adds up to "zero"?). Has this guy ever met a payroll?
On to Krugman: his point that freshwater economists dismissed the work of all Keynesians over the past 30 years with "sneers" strikes me as the truth as I've heard that observation from many others before Krugman. He goes on to talk about "active purges" of competing views - students were not exposed to alternatives. Again, easily believeable. There is a logic to temporary fiscal expansion that the "Chicagos" refuse to see. And, as Krugman says, freshwater macro will get even more insular and people will pay even less attention.
Tuesday, September 15, 2009
Freshwater Economists Return Fire!
While I would like to attach the blog post from the NY Times ("Economix") which clicks to John Cochrane's response to Krugman's article on "Freshwater/Saltwater" economists and how they all got it wrong, alas, the "attachability" feature on my blog site is on strike! So, go to "Economix", 9/11/09, "Freshwater to Saltwater" and click on Cochrane's full text.
Cochrane has responded to Krugman's article as a representative of his colleagues at the University of Chicago Booth School of Business but does not wish to name them for fear of what, reprisals (see his footnote on page 1)? Seriously!
While I have not re-read Krugman's original article (and, I continue to feel it is the finest article he's ever written and a true education for all of us on where economists went wrong), he suggests that the Chicago School economists are going to move from the periphery to the center of economic thought to try to sort all this out. I'm not sure why Cochrane (and his unnamed colleagues) takes offense at this since Krugman is ceding "leadership" to them, but I'm willing to bet it has something to do with egos and taking one's self seriously.
Cochrane's implication that Krugman is saying that everything that has been done in the field of economics since the 1960s is "...a complete waste of time", sounds about right. Evidently Cochrane feels a certain insecurity in that thought. Message to Cochrane: Keynes was right. Deal with it. Also, learn how to spell "Keynesian". If you can't spell it right, you certainly can't write about it.
Krugman's original article and Cochrane's response to it are as good as any course in economics - maybe better. They certainly are making the "dismal science" more interesting.
Parenthetically, I think Cochrane has something against cartoons - he attacks the cartoons in Krugman's article three times! This is troubling. It's almost as bad as his "...you should think Bernie Madoff is a hero" analogy.
Cochrane has responded to Krugman's article as a representative of his colleagues at the University of Chicago Booth School of Business but does not wish to name them for fear of what, reprisals (see his footnote on page 1)? Seriously!
While I have not re-read Krugman's original article (and, I continue to feel it is the finest article he's ever written and a true education for all of us on where economists went wrong), he suggests that the Chicago School economists are going to move from the periphery to the center of economic thought to try to sort all this out. I'm not sure why Cochrane (and his unnamed colleagues) takes offense at this since Krugman is ceding "leadership" to them, but I'm willing to bet it has something to do with egos and taking one's self seriously.
Cochrane's implication that Krugman is saying that everything that has been done in the field of economics since the 1960s is "...a complete waste of time", sounds about right. Evidently Cochrane feels a certain insecurity in that thought. Message to Cochrane: Keynes was right. Deal with it. Also, learn how to spell "Keynesian". If you can't spell it right, you certainly can't write about it.
Krugman's original article and Cochrane's response to it are as good as any course in economics - maybe better. They certainly are making the "dismal science" more interesting.
Parenthetically, I think Cochrane has something against cartoons - he attacks the cartoons in Krugman's article three times! This is troubling. It's almost as bad as his "...you should think Bernie Madoff is a hero" analogy.
Friday, September 11, 2009
Retroactive Economics
http://www.nytimes.com/2009/09/11/opinion/11fri1.html?emc=eta1
http://www.nytimes.com/2009/09/11/business/11bailout.html?emc=eta1
http://online.wsj.com/article_email/SB125259099642699581-lMyQjAxMDI5NTEyMTUxOTEwWj.html
According to the Census Bureau's annual snapshot of living standards, median household income has continued to get worse: adjusted for inflation, it fell 3.6% last year to $50,303 - the steepest drop in 40 years. The poverty rate has continued to climb (now 13.2%) and about 700,000 more people didn't have health insurance in 2008 versus the year before (WSJ 9/11/09, attached: click on the "interactive graphic" within the article to look at the 20 year trends). In Texas, the number of uninsured has crept up to more than 25% of the state population.
As today's NY Times editorial states, the overall number of uninsured rose from 45.7 million in 2007 to 46.3 million in 2008 (NY Times 9/11/09, attached). See our 8/24 post on how those health insurance "numbers" break down.
According to Bruce Meyer, an economist at the University of Chicago, "It's striking how fast and how far the incomes of the typical family have fallen...and things are almost certainly going to get worse." The Census Bureau's report captured only how Americans fared in the first year of the recession, which began in December, 2007 ( economists denied, at the time, that a recession had begun because the U.S. GDP growth rate had NOT gone down for two consecutive quarters - two quarters later, it had gone down so a recession was declared: we call this "Retroactive Economics". It's like "Behavioral Economics", only backwards.). Figures for 2009 will be worse.
Oh, and was that Timothy Geithner testifying before congress (NY Times 9/11/09, attached) this week that the administration is comfortable with backing off some of the stimulus efforts because the economy is "coming back?" So, the lessons of 1937 (when Franklin Roosevelt did that and things got worse) were lost on the understaffed Secretary of the Treasury?
Perhaps the 2.6 million people who were added to the official "poverty level" population last year (earnings under $22,000 for a family of 4) would be interested in discussing this issue with the Obama administration. According to the census, about 54 million people were living under 125% of the poverty line.
So, that pernicious "lagging indicator" (the jobless rate), which will be up in 2010, won't have as much "fiscal stimulus" chasing it if Secretary Geithner takes the actions he told congress he would. If, for the sake of argument, unemployment averages 10% for 2010 (and it will), that would be 2% above the unemployment rate the Obama administration said, when it went to congress for "bailout money", would be the maximum: in other words, the "stimulus" money would keep unemployment from rising above 8% according to Lawrence (don't call me "Larry") Summers and the Obama economic team. So, unemployment is now, or will shortly be, 10% (or more), which is 2% above what the original stimulus proposal was supposed to cap it at. And, we're going to cut back on stimulus spending because we don't need it as much now. I'm guessing this means that there is an economic model someplace that says the way to achieve the number you missed because you didn't spend enough is to spend LESS!
Since I'm not an "economist", I don't have to get all confused with "fuzzy math" and economic models that I'm sure explain the difference between 8% and 10%. Perhaps it has something to do with retroactive observation: sort of like not declaring a recession until we observe two consecutive quarters of negative GDP growth. I'm sure that the economists could explain that old saying about closing the barn door after the horse was already out. It's probably some sort of retroactive deal again.
http://www.nytimes.com/2009/09/11/business/11bailout.html?emc=eta1
http://online.wsj.com/article_email/SB125259099642699581-lMyQjAxMDI5NTEyMTUxOTEwWj.html
According to the Census Bureau's annual snapshot of living standards, median household income has continued to get worse: adjusted for inflation, it fell 3.6% last year to $50,303 - the steepest drop in 40 years. The poverty rate has continued to climb (now 13.2%) and about 700,000 more people didn't have health insurance in 2008 versus the year before (WSJ 9/11/09, attached: click on the "interactive graphic" within the article to look at the 20 year trends). In Texas, the number of uninsured has crept up to more than 25% of the state population.
As today's NY Times editorial states, the overall number of uninsured rose from 45.7 million in 2007 to 46.3 million in 2008 (NY Times 9/11/09, attached). See our 8/24 post on how those health insurance "numbers" break down.
According to Bruce Meyer, an economist at the University of Chicago, "It's striking how fast and how far the incomes of the typical family have fallen...and things are almost certainly going to get worse." The Census Bureau's report captured only how Americans fared in the first year of the recession, which began in December, 2007 ( economists denied, at the time, that a recession had begun because the U.S. GDP growth rate had NOT gone down for two consecutive quarters - two quarters later, it had gone down so a recession was declared: we call this "Retroactive Economics". It's like "Behavioral Economics", only backwards.). Figures for 2009 will be worse.
Oh, and was that Timothy Geithner testifying before congress (NY Times 9/11/09, attached) this week that the administration is comfortable with backing off some of the stimulus efforts because the economy is "coming back?" So, the lessons of 1937 (when Franklin Roosevelt did that and things got worse) were lost on the understaffed Secretary of the Treasury?
Perhaps the 2.6 million people who were added to the official "poverty level" population last year (earnings under $22,000 for a family of 4) would be interested in discussing this issue with the Obama administration. According to the census, about 54 million people were living under 125% of the poverty line.
So, that pernicious "lagging indicator" (the jobless rate), which will be up in 2010, won't have as much "fiscal stimulus" chasing it if Secretary Geithner takes the actions he told congress he would. If, for the sake of argument, unemployment averages 10% for 2010 (and it will), that would be 2% above the unemployment rate the Obama administration said, when it went to congress for "bailout money", would be the maximum: in other words, the "stimulus" money would keep unemployment from rising above 8% according to Lawrence (don't call me "Larry") Summers and the Obama economic team. So, unemployment is now, or will shortly be, 10% (or more), which is 2% above what the original stimulus proposal was supposed to cap it at. And, we're going to cut back on stimulus spending because we don't need it as much now. I'm guessing this means that there is an economic model someplace that says the way to achieve the number you missed because you didn't spend enough is to spend LESS!
Since I'm not an "economist", I don't have to get all confused with "fuzzy math" and economic models that I'm sure explain the difference between 8% and 10%. Perhaps it has something to do with retroactive observation: sort of like not declaring a recession until we observe two consecutive quarters of negative GDP growth. I'm sure that the economists could explain that old saying about closing the barn door after the horse was already out. It's probably some sort of retroactive deal again.
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