Let’s spread the word that inflation is growth

I noted here a response to a Kids Prefer Cheese post in which Yglesias explained his expert business-and-economics-correspondent view that market actors are required to be indifferent between economic growth and price growth (i.e. inflation). They should, and therefore will, treat them both indistinguishably, and make decisions accordingly. Hence, ‘NGDP’ is all we need to care about.

Kids Prefer Cheese has now responded to Yglesias’s post, pointing out that, in reality, market actors actually don’t behave that way: investment growth correlates to GDP growth but has no meaningful correlation with inflation. It seems that market actors haven’t gotten Yglesias’s memo that they are supposed to perceive anticipated inflation as just another sort of coming ‘growth’ that automatically militates for increased investment.

I kinda wonder what happens next. We know that Yglesias is Reality-Based, because he told us so years ago. But Reality doesn’t seem to be cooperating here; people are apparently refusing to be homo economicus yglesias. So this confounds the parallel Yglesias mandate to argue for whatever appears to be ‘Keynesian’ i.e. involve the government spending and inflating as much as possible. Why won’t market actors just behave how Matthew Yglesias has figured out a priori they should! Argh.

Probably what needs to happen next is that Yglesias just needs to blog harder about it. Or maybe a Kickstarter project to buy up copies of Yglesias’s undergrad econ texts to send to CFOs and the like. Well, I for one can’t wait to see how it turns out.

Links: CDX, NGDP, and the LC

Lots of folks reacted with surprise that the next HY index would include names that don’t trade, but I’m nonplussed. How is this really different from all the previous indexes and vintages that contain tons of names that basically don’t trade? (And no I’m not counting a name that dealers ‘quote’ with a 200bps bid/offer as a name that ‘trades’.) Now sure, this complicates the matter of settling a credit event if/when one of those things happens, but practically the whole credit derivatives business – i.e. the business of making bets contingent on credit events – seems to have gone through its adolescence on the simplifying assumption that there would be virtually no credit events. (Which, you have to admit, made the whole thing easier, infrastructure-wise, etc.) So again, that’s nothing new.

Kids Prefer Cheese on the idiocy of NGDP-based analysis, citing that NGDP smooshes a price and an income quantity together. Yglesias, drawing no doubt on his many years’ experience as a corporate CFO or similar, has a response that amounts to saying that at the margin market actors can’t and/or shouldn’t distinguish between the two, between inflation and economic growth. If you’re wondering whether to buy the marginal sprocket-making machine, and you’re told by God that inflation will soon make your cash worth much less, you’re supposed to think of that in the same terms as if you were told by God that the economy, including the sprocket business, is due to for a boom. So there. Now personally, I don’t know: if I were told by God that inflation would eat away at my cash, and without genuine economic growth, I might be buying TIPS, or gold. What’s so special about the sprocket machine? Besides, under an inflation no-growth scenario am I even sure the sprocket business market share doesn’t (relatively) suffer – which would argue for some belt-tightening and layoffs? (Surely such a thing could affect the market’s buying habits in a non-uniform way – it couldn’t?) So this raises the question: What if market actors, all the homo economicus yglesiases out there, don’t behave precisely as Yglesias’ college texts said they must? Well, that’s unpossible.

Captain Capitalism will not recycle and, to me, has a great argument: “Want to rummage through my garbage? Go ahead.” One of the indicators of progress is how we dispose of our trash. Used to be, people would dump human waste out their window into the back alley (which I assume they still do in vulgar, backwater places like France), and piles of trash outside of town or down the hill. Most Westernized places then progressed to using trash-collection systems, increasing both convenience and sanitation. That progress has ceased and reversed in the past couple decades however, because for some reason society has decided to devolve some of its trash-sorting and -processing functions back onto the household, which is a setback both in terms of convenience and of sanitation. It’s no different really from a ‘green’-led mass movement insisting that rather than centralized water-purifying we all should be forced to purify our own water of bacteria after it comes out of the tap. Kids being given pamphlets at school extoling the virtues of Boiling Your Own Water To Save The Earth, etc. Face it, I don’t know this isn’t coming.

Economist Garett Jones points to some startling economic findings by economists that paying people to be unemployed increases the number of people who are unemployed. Astounding. A real head-scratcher. I’m not sure I believe it. It’s just so outlandish.

South Bend 7 starts out talking about ‘Modern Family’ which I take to be some sort of TV show that everyone is required to pretend to like now, but of course has a larger point:

This is why Obama will win. It does not matter what he does or says. He can say and do exactly the same things Romney does (which he will do, depressingly often) but his supporters will love him for it because he is Cool and Romney is not. Obama was elected in 2008 because he was Cool. That has not changed since then, so he will be re-elected in 2012.

As you know, I agree 100%.

Thomas Hoenig of the FDIC has put forth a better alternative to Basel capital rules, based on ‘tangible equity’, which at first glance sounds good. And it appears to also satisfy tireless Per Kurowski‘s (and my, if no one else’s) longrunning complaints about how risk-weighting distorts credit allocation and perpetuates a false ‘safety’ illusion. But I think it has approximately 0% chance of being implemented, in part because the Basel approach means lots of high-paying jobs (regulation is a white-collar jobs program; a point also made here by Sober Look) but also, crucially, because the approach is not named after some sophisticated-sounding European city. Smart People are just never gonna adopt some set of risk rules not named after some sophisticated-sounding European city. Free tip from me to you, Thomas Hoenig.

Gormogons does the math on the Obama ad campaign involving a daughter asking her mom for $18,000 to pay for birth control. This whole thing is probably too stupid on too many levels to even think about further but what confuses me is why the daughter thinks she needs to pre-fund all her birth control purchases in particular. Why isn’t she also asking her mom to borrow for, oh I don’t know, $25,000 for lattes (say, budgeting them at 2-3 lattes a week, so $10/wk x 50 weeks x 50 years)? Or for that matter $1+mm for her housing? Surely she’s gonna need housing the rest of her life. Here’s the other issue: given that the Obamacare tax is now projected to be costing folks – including the girl’s mother – an extra $2-3k per year, as long as the mother thinks she’ll live more than another 5-10 years or so, isn’t she supposed to jump all over this deal? Oh nevermind. JUST VOTE FOR OBAMA.

I was honestly surprised to read that Judge Strikes Down a Dodd-Frank Trading Rule. I didn’t really know that judges could strike down regulations. It just doesn’t seem to happen. Are we sure they can do this?

If you’re distressed by my relative lack of non-BS output recently (I know you’re out there) you can blame Pastorius, who pointed me to this series on the Laurel Canyon music scene that I’ve been devouring. It’s sort of the Rosetta Stone of internet conspiracy theories. (That link is part I; the rest can be accessed here in the ‘Inside the LC’ section.) I love the whole thing, even down to the ’90s-vintage site design and awkward navigation. Really takes me back to when the whole internet was like this. I feel infinitely wiser and only a little bit dumber for having read it all.

It’s not that pollsters are biased, it’s just that elections are stolen

One of the odder aspects of this pre-election polling season has been the mystery of the Party-ID. As I have only learned this year, current Best-Practices Polling Methodology apparently involves (a) polling people, (b) asking what party they’re in, and then (c) re-weighting the answers from (a) according to what the pollster believes the ‘real’ party makeup of the electorate (as opposed to those he polled) is.

[SLIGHTLY DEVASTATING UPDATE: After actually reading up on poll methodology some, rather yhan just (R) complaints about it, I'm not at all sure the above is the case. It seems like what most polls do, rather, is build a demographic model of what they think the electorate is like, and try to sample so that the demographics match that model? If the resulting sample ends up D+10 that's how the cookie crumbles. In a way this is still weird but differently so, and still amounts to baking a fudge factor into their polling - but depending on whether you buy that you may or may not consider the rest of the post, which I'm leaving intact, even more BS than my usual.]

[UPDATE 2: Just for completeness, here's one of the articles that made the rounds claiming explicitly that pollsters weight results to match a turnout model, and here's one saying no they don't, that's only the cheap ones, the good ones weight results to match a demographic model. I just. I don't know what to think now.]

Importantly, the ‘real’ party-makeup of the electorate is gauged by looking at the results of prior elections.

Now, I am not a statistician or pollster but this is truly weird to me. Naively, it is not how I would have ever designed a poll from scratch. It seems to insert an extra moving-part, an extra thing that you have to model, into your statistics for no good reason. Instead of estimating f(x) they have decided that f(x)=g(h(x)): and now they have to estimate both g(*) and h(*). Needless to say, errors can pile up quickly when you do this sort of thing. (Why stop at party-ID for example? Why not also ask whether the people you polled are left-handed or right-handed, and then ‘correct’ for the handedness-breakdown not matching that of the country? There’s virtually no end to the ‘corrections’ one could come up with.)

And this is not a small effect either. It is now routine to hear claims, from conservatives desperately seeking some cause for comfort (and also from Borepatch), that due to the Party-ID Problem, all the polls that show Obama 3-5 points up are ‘really’ showing Romney 3-5 points up, if you re-weight the party ID properly (or undo the pollsters’ weighting). In other words, this fuzzy Party-ID re-weighting procedure, whatever it is, seems to be be capable of generating not 1- or 2-point swings as one might have imagined to be tolerable, but for 8- or 10-point swings.

That is insane. Especially considering that all these polls advertise having a ‘margin of error’ of 3 points or some such. When the Party-ID correction can cause such a swing you may as well throw the actual poll out the window because it is just some random noise you are throwing on top of a model of Party-ID that you have built. And when we hear about these ‘poll results’, what we are really being shown is more or less just the result of them hitting F9 on their dynamic Party-ID model. I have never, in any prior election season, heard of such a big effect stemming solely from the Party-ID correction. So what is going on here? Is there a method to this madness? I think there is.

Conservatives of course think it traces to bias. The pollsters and media are all in the tank for Obama, and want to demoralize conservative voters, so they are cooking the books. One problem with this theory is that (even if that’s what the biased pollsters/media are trying to do) who’s to say the outcome would be ‘demoralize’ rather than ‘fire up’? The bigger problem with this theory though is that it sounds insane.

But the problem with just saying the theory is insane is that modern-day poll methodology virtually asks for such a theory. Because (unless I am misinterpreting) it really does seem to be the case that all these pollsters use models which contain an arbitrary, internal dial – how/whether to re-weight for Party-ID – that as far as I have been able to tell, pollsters can tweak however they like and whose details they don’t share, or perhaps even consider proprietary. If your polling methodology amounts to: ‘we poll a small group of people, and then multiply the results by a secret factor whose provenance we respectfully decline to explain’, all I can say is don’t come complaining to me with ‘they’re attacking SCIENCE!’ when people accuse you of cooking the results, because I’m not going to be very sympathetic.

But I don’t for one second believe all the pollsters are ‘biased’ nor do I think they are stupid, either. If they were this would have led to severe poll vs. election mismatches that would have come out in prior elections. I do recall some noise that Bush v. Gore deviated from pre-election polls, but nothing like the Party-ID effect we’re seeing here. We would have seen a much bigger effect than that if the Party-ID correction were such a problem. So in fact, when pollsters say (as I’m sure they would) that they need the party-ID correction to get their poll predictions to match the outcome, I guess I’m inclined to believe them. There may be some amount of overcorrection going on right now due to over-fitting to the 2008 election, which was an outlier (lots of people expressing disgust for Bush, (R) voters suppressed, lots of voters voting for Obama so they could prove how non-racist they were, etc.) But I doubt it’s anything so dramatic as could turn an Obama 3-5 point “polling” (i.e. polling model) advantage into a Romney 5+ point victory.

After all, keep in mind, I do still expect Obama to win in November. After the votes are counted, I mean.

So (if I’m right) we seem to have a situation where every single pollster, whenever they do a poll, needs to ‘correct’ all their (D) results upward and their (R) results downward by, let’s say, 5% each. They all think they need to do this because the (D) vs. (R) breakdown they observe in their polls doesn’t match what they saw in 2008/10 and (therefore) what they expect to see in the election. And let’s ditch the insane-sounding theory that they’re all doing this intentionally because they’re in the tank for Obama. This gives rise to a mystery.

To spell out the mystery, this would mean that when pollsters randomly sample ‘likely voters’, they consistently get one sort of (D)/(R) breakdown, but whenever elections are actually held – and presumably in November this will happen too – they get a significantly different (D)/(R) breakdown. Every time. So predictably, and so significant, that they need to include it as an explicit correction in their model. And again, let’s assume they’re not doing this just because they’re biased; they really are trying to construct the most accurate polls they can.

But why, and how, could there be such a consistent and persistent mismatch between every random sample of LVs in every poll and the likely party-ID makeup of the electorate as counted after the election?

I think it can only mean that the pollsters have refined their polls so effectively that they are picking up the effect of election cheating.

Think about it. If all your random unbiased samples of likely voters come out 50-45 in favor of the (R), but then the ‘election turnout’ (i.e., after the votes are ‘counted’…) ends up being so different from your samples that the (D) wins 45-50, i.e. a 10-point swing, the most likely explanation is the very simple and straightforward one that the election was stolen via cheating in the vote-counting process. Somewhere between likely voters becoming actual voters, and those votes being counted, surely at least some cheating – ballot-box stuffing, ‘lost’ ballots, votes misregistered, etc. – took place. That cheating more or less causes an 8-10 point swing in party-ID each election (i.e. between actual voters and the results after they’ve been ‘counted’), and this is what we’re seeing all modern polls having to ‘correct’ for. Simple.

These polling models are picking up (albeit inadvertently) the effect of this cheating via the fact that their polled samples never seem to match their predicted election results when it comes to party breakdown. But of course they don’t match. The election results come from ‘vote counting’, and cheating takes place when votes are counted. Now before you protest, yes surely there is cheating on both sides, but nowadays and in the current environment it would appear the (D)s effectively have perhaps a baked-in 8-10 point advantage in the cheating arms-race and so all election-outcomes (vs. unadjusted polls) have to reflect that. In particular, the party-ID breakdown you see when you look at election results reflects this cheating asymmetry. And as it turns out, (D)s just plain cheat better than (R)s right now. This could change at any time of course, and then we would see the Party-ID correction break the other way.

So it’s really very simple: there is no giant conspiracy among pollsters and media, and ‘bias’ isn’t unduly affecting their results. They are, in the main, conscientiously trying to build and update models of the election outcome that are as accurate as possible. It’s just that the election outcome will have cheating in it while all these polls don’t, not really (what would be the point?). So pollsters have to correct for that to be accurate. What they are calling a Party-ID correction would probably be more accurately termed a ‘election-cheating fudge factor’, but we can forgive them this polite terminology.

The bottom line is, conservatives aren’t wrong to think it ‘looks weird’ that all polls need to be corrected D+5 or D+10: they are just misdiagonising and overthinking the reason. The reason is just election cheating that tends to give (D)s a 5-10 extra points or so. Whenever you see a poll with that correction in it, just mentally treat that correction as the poll’s implicit prediction of how much one party will successfully cheat by. Nowadays polls appear to predict a 5-10 point advantage in cheating for the (D)s. Once you understand that everything then becomes clear and simple.

So, now you can sleep better at night knowing that. You’re welcome.

It’s always been a big government, so it’s ok

Looks like I may not have been the only one confused by this Yglesias post where he excuses, or downplays, or debunks, or something the richness that’s been flowing to DC. That’s because, instead of just moving on to write about his condo or whether there’s enough local hipster bars for him to go to or something, he decided to uncharacteristically follow it up and clarify with a whole separate post.

And full credit to him, because I understand his point now. Yes, more money has been flowing to DC, but it’s not due to any recent ‘big government’ policy change or anything. It’s just that everyone has finally figured out the stakes involved in the ‘big government’ we already had and so they’ve been ramping up their influence-peddling to match accordingly.

So, good point, as far as that goes. Sure, it could totally be the case that the inequality and money flow into the DC area is just due to elites playing catchup with the big government monster they had built up. What I can’t figure out though is what Yggie thinks that’s a counterargument against.

After all, if we all agree then that DC is getting richer mostly due to all the lobbyists and lawyers that sprung up like mushrooms to feed off all the laws and regulations that incentivize massive influence peddling, then regardless of how we got there or which specific ‘policies’ caused it, you’d think a lefty might think that’s a bad development and at least frown on it a little. But nope, not Yggie! If we can’t point to a recent policy change that caused this bifurcated society of a bubble-zone DC siphoning money from the rest of the country, then well, that’s just the way the cookie crumbles. We should all just make our peace with funding DC to support the lifestyle to which they’ve (only recently) figured out they’d like to become accustomed, and that’s that. Thus speaketh Yglesias, DC-area resident and political pundit.


  • In just about the daftest commentary I’ve ever seen on this topic (which is saying a lot), William Cohan tries to talk himself into thinking that the ‘London Whale’ lost JP Morgan depositors’ money. (HT Dealbreaker) Of course if he were to try to produce any single depositor that actually lost money as a result of this action that (supposedly) lost depositors’ money he would fail. Sneaky London Whale, he lost their money in such a subtle and intricate way that everyone still has all their money. What Cohan is really (I guess) saying is that the loss weakened JP Morgan’s capital position vs. it not happening, and so that increases, by whatever infinitesemal amount, the probability of a default on their deposit liabilities in the event of a bank run etc. etc. bla bla. That is perhaps ‘true’ but the same exact thing happens any time a JP Morgan loses money on anything, similarly, when they make money their balance sheet & credit presumably becomes that much better. But unless their depositors have been taking and conscientiously-updated a counterparty-risk provision against their deposit accounts none of them will see any of this as any kind of loss or gain. It’s as if the author has just discovered the concepts of counterparty risk, deposits as liabilities, the fractional-reserve banking system…
  • David Friedman makes the good point that in the global warming debate, the two sides disagree about whether certain choices are costs or benefits. This clearly confounds any attempt at an objective, definitive cost-benefit analysis, when folks can’t even agree on the sign. And as I probably wrote in one of my various global-warming magnum opus pieces, when different groups of people are working from different cost functions, the issue becomes automatically ‘political’, not purely scientific.
  • I’m sure the title of this Yglesias post, Washington’s Riches Are About Politics, Not Policy, is supposed to mean something, but I’ve read it 10 times and I still can’t figure out what. What is the difference between ‘politics’ and ‘policy’ to him? I’m sure there is one, but my eyes glaze over trying to parse it. As far as I’m concerned the title could have been, equally accurately, “Washington’s Riches Are About Policy, Not Politics”. Well anyway, sometimes you just gotta call a post something. The piece is equally confusing, he seems to acknowledge the ‘rising affluence’ of Washington DC while at the same time denying that it can possibly have anything to do with the federal government. His key question seems to be, “But I’d like to hear these gentlemen spell out in detail what changes in government policy they think have this impact [=making DC richer]. In most respects it seems to me that the American economy is much less politicized in 1972 than it was in 2012…”. As if, absent spelling out such ‘changes in government policy’, the enriching can’t have occurred, or we needn’t notice it, or something. I think what’s really going on is that guys like Yglesias have a mental model of society as a sort of stationary random process in a kind of equilibrium that gives us a controlled science experiment that responds in predictable ways to inputs: if such-and-such inputs caused such-and-such effect at time 1, they will also cause that same effect at time 2. Similarly, if you see an effect at time 2, and there were some inputs, but those inputs were there and didn’t cause the exact same effect at time 1, then those inputs can’t have caused the time-2 effect. Needless to say, this is all very foreign to how I think of human society, and I now think that’s why a lot of lefty retorts sort of go over (or under, rather) my head.
  • Credit – Zemblanity, long read but interesting.
  • Bob Murphy explains why Scott Sumner is insane.
  • The Fed owns 27% of all duration. Or as an Yglesiocrat might put it, ‘the market is still willing to lend to us at really low rates so we should borrow even more and us it to do a bunch of infrastructure’.

Half-baked ideas I could never back up for posts I’m never going to write

Home Alone 2 is just a thinly-disguised reimagining of Midnight Cowboy.

There should be no field goals allowed in football overtime. A football game that ends on a field goal is a disgrace.

Kids used to be funnier on TV in the late ’70s-mid ’80s.

‘Smartphones’ and iPods/Pads have made society fundamentally more girly.

A positive side effect of iPods, of course, is lower crime.

If you’re making a commercial with a lot of people in it, there can be a white guy, but he has to be a nonthreatening hipster.

Hipsterism of course is the ‘safe’ white guys’ way of reasserting their whiteness without being tarred as racist skinheads.

It should be illegal for schools to assign ‘homework’. To study and work is why we send them to school for N hours per day; ‘homework’ is an admission of failure in their basic mission.

Attack Ads, Circa 1800

I’ve waxed poetic about the negative campaigning of yore and many thanks to reason for proving that I wasn’t just imagining things:

Purple Sneakers

Hi-Fi Way was the best $1 bargain-bin CD I ever bought. (Note to kids: this was back when you had to buy music, and carry it home in your backpack encoded on a physical object.)

Revolution TV show review

My rating, on a scale of 0 to infinity, measured in minutes: 11. (That’s about when I stopped watching)

The premise made my head hurt. So ‘electricity stopped working’? Electrons stopped flowing, or e.g. metals stopped conducting them? Huh? How? Don’t various processes in our bodies rely on electrons flowing? If electrons don’t flow through stuff is magnetism also screwed up? Is the earth’s magnetic field ok, because I assume not, which means solar radiation is wreaking havoc on everyone right? If electrons don’t flow through metal are the bonds ok because I’m guessing not? Why aren’t steel buildings crumbling to dust?

Combustion doesn’t work either? A fuel plus an oxidizer no longer can undergo that reaction? How are they lighting fires or aren’t they? How are stars staying lit in the same way?

I’m probably only scratching the surface of the problems with the whole thing, but I’m pretty sure the only way this could ‘really happen’ in a real universe is if it were accompanied by various universal constants instantaneously changing in such a way that gravity etc. would be totally different, with stars and planets breaking apart and (though this is but a minor side effect in the grand scheme) everyone and everything on Earth turning to unrecognizable goo. That might be a more interesting show…but only briefly.

In any event it soon enough became clear that the whole setup was mostly cooked up to get a teenage girl into a Hunger Games-style post-apocalyptic future so that she could run around with a bow & arrow like Katniss. Because, never put it past J.J. Abrams to try to cash in on a billion dollar pop culture phenomenon.

Stupid Bush legacy II: “surge” calculus

Yesterday we were regaled with headlines like these:

Last of US surge troops leave Afghanistan, officials say

Last of U.S. surge troops out of Afghanistan

US Surge Troops Out of Afghanistan

I blame Bush.

I’m sorry but what in the hell is a “surge troop”? Is that a different sort of troop from a regular troop? Do the specific troops designated as “surge troops” wear little name tags reading HI MY NAME IS Johnny I AM A SURGE TROOP MAY I HELP YOU?

The United States has a troop presence in Afghanistan. As it has in many other countries. People (I assume) are flying back and forth all the time. For example when they get hurt or are on leave. The number of troops there is not a physical, universal constant. Why in God’s name are we keeping special count of only some of them as “surge troops”?

This retarded “surge troop” concept came in with the Bush Presidency, when we “surged” in Iraq and there was a giant debate about it. I hated it then too. What was there to debate? That the Commander-in-Chief was going to make the number of troops stationed in Iraq be Y instead of X? So what? Lots of people were “opposed to the Surge”. They hated the Surge! The Surge was a big issue for them! This was so, so idiotic. Don’t get me wrong: I understood someone not wanting troops to be there at all. But once that ship had sailed, what in the hell did anyone care whether the number became Y instead of X? Why was X ok but Y not? What was so special or intolerable about those extra Y-X? What was there even to debate? Prior to that moronic debate I had always assumed that Presidents and generals routinely adjusted troop presences upward or downward as they saw fit, to little fanfare let alone gigantic public announcements subject to public debate and approval/disapproval. It had never occurred to me that each added increment of soldiers being stationed or not stationed somewhere would be discussed and thought of by everyone as if they were a whole second thing.

Trying to taking the ‘surge’ concept seriously raises so many questions it makes my head hurt. Yesterday’s articles all tell us breathlessly that the “surge troops”™ numbered 33,000 and now with them having gone, the number of U.S. troops stationed in Afghanistan is back down to the “pre-surge number” of 68,000. What’s so special about the “pre-surge number”? Why is 68,000 the magical, Normal Number Of Troops To Have Stationed In Afghanistan and why is 101,000 considered to be the Normal Number, Plus A ‘Surge’? Who calculated 68,000 and where is their Excel spreadsheet, because I’d like to take a look at it. Does it stay 68,000 forever?

What about the 33,000 “surge troops”, are they kept track of separately? Like if you were sent there as a “surge troop” back in 2009 or whenever, then you remain a “surge troop”? Aren’t soldiers (or at least units) more or less fungible? I mean did they bring back the actual specific 33,000 guys they had sent there when they “surged”?

If so, what about the “non-surge troops” and who speaks for them? I feel so sorry for them because no one cares about them it seems. The 33,000 “surge troops”, it’s so important to pay attention to them and keep track of whether ‘they’ (the specific guys, I gather!) are still there, and bringing them home makes the news, and is considered a victory. When you’re a “surge troop” it’s last in, first out – everyone knows that. But the 68,000 “non-surge troops”, who gives a f**k about them? They can stay there and rot for all we care. We’re supposed to have them stay in Afghanistan because 68,000 is the Magical Number and well, sorry, but that’s what they signed on for. Once a “non-surge troop”, always a “non-surge troop” I suppose. No: no one shall weep or shed a single tear for the 68,000 “non-surge troops”. That’s the “pre-surge number” and so it’s totally normal and unremarkable that we’re just leaving them there.

Could we perhaps ramp that down to, say, 67,000 and bring back maybe like 1,000 guys along with the “surge troops” NO!!! IT MUST BE 68,000. WE CAN’T BRING BACK A NON-SURGE TROOP ARE YOU CRAZY!!! THEN THE TERRORISTS WIN!!!

But the “surge troops”, tie a yellow ribbon. I was worried about them (specifically: not the “non-surge troops” but the “surge troops”) so much this whole time that now with them home I can breathe a sigh of relief and forget about Afghanistan altogether.

As long as we maintain the Normal Number Of Troops there (which is exactly 68,000 no more no less) indefinitely.

Do you see how stupid this all is yet? Because if not, I could keep going.

Thanks a lot, Bush.

Left’s latest shocking discovery: righties disagree with them about stuff

Amusingly, and right on cue, the leftopundits are now busily furrowing their brows, activating scare-quotes, and feigning incomprehension that the right could be, like, against ‘redistribution’. It’s all so bizarre and surprising!

This comes on the heels of their shocking and startling discovery of a few days ago that the right worries about too many people becoming dependent on vs. contributing to government funding.

Next up for the feigned-shock-and-furrowed-brow treatment, I can only assume: wanting a smaller government; wanting a big military; liking the flag; liking country music. Are we really going to be walked through all these issues one by one, and be treated to the punditocracy-equivalent of soccer players taking a fall & hoping to draw the ref’s whistle on each?

It’s as if the left is encountering, for the very first time, each of the most basic, banal, fundamental and widespread bullet-points of their local Republican Party’s leaflet as edited by their conservative mainstream-(R) uncle. “Why, this doesn’t match what my Brown professor taught me at all! It’s almost as if these folks disagree with me about all these things! I just can’t understand it!”

You’d think that all these Smart People would have, at some point in all their storied-and-celebrated travels and learnings, obtained at least some familiarity with the basic tenets of mainstream rank-and-file Republicans. Instead, it is a deep, dark and incomprehensible mystery to them all.

How Romney needs to be more like Jimmy Carter

Some conservatives are hoping that this election turns out to be like Carter-Reagan, pointing to (I gather) late leads that Carter held at the equivalent stage of the campaign. By the well-known transitive property of punditry, for some this sets up an analogy between Romney and Reagan in many other respects that one therefore feels free to indulge in and fantasize about.

But I’m wondering if Romney is more like the opponent, an (R) version of Jimmy Carter.

My sixth-grade-textbook understanding of 1976 politics suggests that Carter got elected in ’76 following a Nixon/Ford regime that was perceived to have sullied the good name of our great land, particularly after Ford ratified that verdict by pardoning Nixon, thereby sullying his own good/goofy name as well. Things were Fundamentally Wrong in the good old U. S. of A., rotten to the core, going on the wrong track. But we had to put that behind us and now was the time. We were out of Vietnam. It was the Bicentennial. What’s Happening! had just premiered. The country seemed ready. What was needed was a cleansing agent to atone for our early-’70s sins.

Along came Jimmy Carter, some low-profile state governor, a ‘peanut farmer’, and (most importantly, in this story) a devout and almost pathologically-moral-by-reputation guy who was humble, soft-spoken, and honest. Just what the country needed. And so, he won.

It’s not obvious that anyone particularly liked or even knew what Carter’s full beliefs or specific policy proposals were back in 1976, but that had little to do with it; he was the antidote to the Nixon Disease and that was enough.

To Romney supporters anyway, Obama is a very analogous figure to Nixon: illegitimate, taking the country in the wrong direction, his regime and way of doing things rotten to the core. They are also similar in that despite being portrayed as opposite-wing ideologues by their opponents, in some ways they act like worst-case caricatures of their own ideological enemies: Nixon had wage/price controls and created things like the EPA, Obama is in practice a de facto warmonger who personally chooses drone targets, parties with stars like a Roman emperor, and bails out bank fatcats and connected cronies.

The particular sins, and therefore atonements, do differ. Nixon’s sin was dishonesty and being a crook, so the curative had to be an angelically-moral and honest figure. Obama’s sin, meanwhile, is stubbornly tin-ear economic management and indulgence in personal hobby-horses that hobbles the economy, keeping unemployment high and people poor.

What is needed as the antidote to that, clearly, is a Serious Businessman.

The point of the analogy is that in neither the Carter nor Romney case do the candidate’s particular ‘ideas’ or policy proposals as such actually matter to their appeal – or what is supposed to be their appeal anyway. What matters is how well they – in their personae, in who they embody – fulfill the curative role that (their supporters think) the country needs. Because of this, for the Curative Candidate to go into a bunch of specific details about his policies and ideas is actually counterproductive. What he needs to focus on is playing the part. Carter’s part was a likable guy with ‘navy officer’ on his resume but who was also a humble devout peanut-farmer, and he evidently played it well, to victory. (This lack of detail about actual ideas helps explain why the fact that Jimmy Carter had – as we would later discover, particularly after his Presidency – absolutely godawfully stupid ideas about a lot of things – didn’t matter in the slightest in 1976. It just wasn’t part of the equation.)

Romney then, in this analogy, needs to just be the Serious Businessman, the adult in the room who controls the conference table, the CEO who knows when to say noncommittally what people want to hear, but also knows when to keep carefully silent.

If you buy any of the above at least a little, stay with me. Because this is where I think Romney is faltering: he’s departing too much from the Serious Businessman persona that he’ll need to call upon in order to have a chance at winning. Sometimes this just means knowing when to shut up. Sometimes it means mealy-mouthed language that blunts opposition. But what it doesn’t mean is going into a bunch of specifics and being backed into a lot of defensive interviews where he gets pinned down on this or that issue. The CEO is supposed to be above all that.

This is where the ‘gaffes’ are hurting him: not because they are serious ‘gaffes’ in themselves, but because by leaving himself exposed to the ‘gaffe’ charges at all he undermines his claim to Grownup CEOness. The true Serious Businessman would issue a contrite memo apologizing if anyone was offended and then switch back to radio silence because he’s got a business to run. Team Romney, take note.

Links: What Pulp Fiction taught us about LIBOR

  • Steven Landsburg weighs in on a discussions of the many-worlds hypothesis that (without drilling into all the links) looks for all the world as if it would be briefer if the people involved would read David Deutsche.
  • Stationary Waves, Everyone Must Change Except Uncle Sam
  • Garrett Jones reminds the weirdly-amnesiac panickers of 2007-2008 that standard textbook finance and law already had an alternative to TARP-style bailouts in place. Not that anyone cares about what the laws actually are anymore.
  • Basel III will confine banks to conventional, low-risk lending says Fitch. I cite this not because I am pro or against this development necessarily but just to emphasize that banks’ behavior is going to be incentivized in this direction by the (intended? unintended? inadvertent?) effects of putting a capital regime in place, not by deliberate choice. Do we want banks to be confined to ‘conventional, low-risk lending’? If so, why, and when did we have that discussion? If not, why are we cool with the formulas, risk weights, and spiderweb rules that we call Basel III? Did the sage crafters of Basel III think about this consequence, anticipate it, and inform everyone? File under: unintended consequences of regulation.
  • That said, Streetwise Professor on why simplicity in regulation is no panacea.
  • Ever since being informed by one of my Learned Betters that my economics was ‘Austrian’, and subsequently being informed by Noah Smith that all ‘Austrians’ want to ban fractional-reserve banking, I have been in a funk somewhat akin to when Seinfeld feared becoming an ‘orgy guy’: does this mean I have to grow a moustache and get all kinds of robes and lotions…and rant about gold and the Fed? So you can imagine my relief when I encountered this giant Brad DeLong post debunking fear of fiat money and fractional-reserve banking, and not only (I think) understood it, but mostly agreed with it (after mentally factoring out the raw-meat thrown in for the lefties). Although, do read Aziz’s comment near the end.
  • I got a chuckle out of the Huffpost headline screaming that a ‘secret survey’ reveals that interest-rate manipulation extends far beyond LIBOR. Me, I’m waiting for the results of the double-secret survey. Anyway, with these things I find it’s best to keep in mind the old adage about never assuming a conspiracy where incompetence suffices. When you set up a process where ultimately some kid on a desk somewhere has to send in the day’s newly-updated 11-year Bangladeshi-currency bank lending rate or whatever, just don’t be so surprised that you get the garbage you asked for, is all I’m saying. To paraphrase a great religious thinker, if the answers frighten you, you should cease asking scary questions.

My Perfect Cousin

My cousin wrote this song. I wonder who it’s about. FULL DISCLOSURE: No I’m not thrilled with that joke.

There’s no such thing as ‘permanent’ tax rates

The concept of ‘temporary tax cuts’, or tax cuts that are scheduled to sunset, is one of the most damaging aspects of Bush’s legacy. Essentially for the short-term gain of getting a tax cut bill through, in a maneuver that I never even understood why it was necessary, he threw us a ticking time bomb that now has everyone scrambling what to do about the so-called ‘Bush tax cuts’ (i.e. tax rates being what they are right now but scheduled to change to something else under current law). The two sides battling over whether to go ahead and let them sunset and create a weird ‘cliff’, or ‘renew’/extend them, or some clever benchmarking/triggering mechanism.

There appears to be a general confusion and muddleheadedness about the way all this is discussed, so I propose that everyone remind themselves that all tax rates are always ‘temporary’. There’s just no such thing as a ‘permanent’ set of tax rates. As far as I can tell Congress could revisit and alter tax rates every single year, or whenever they felt like. They could take the current tax rate percents and add 2*(rand()-.5) to each number. They could flip some coins. They could use a Ouija board. If they then passed the new set of tax rates, those would be the new tax rates. Why do people ever think of any of these numbers as ‘permanent’?

A ‘temporary’ tax change, then, is a law that says ‘let’s make the tax rates X for the next few years, but then back to Y after that’. Needless to say, that’s a dumb law. Why ever do that? If you want the tax rates to be X just change them to X. If, in a few years, changing them back to Y seems like a good idea, sure, go ahead. But why bind yourself to it beforehand?

So: If there’s a good reason for the tax rates to change from what they are now, to what they are scheduled to become, then by all means let’s just let it happen. Is there? I don’t think there is one. So essentially we have a law in place that binds our economy to a dumb shock for no good reason that anyone can justify. Um, let’s just remove the law (=make the tax rates next year what they are this year, or in the IDIOTIC parlance of our times, make the ‘Bush tax cuts’ ‘permanent’) and remove the unnecessary shock? Anyone?

I mean, if we don’t want any such shock or ‘cliff’ – which, of course, would also be an ‘austerity’ policy! – and see it as a problem, there’s really no cleverness needed, all Congress need do is pass a normal tax-rate law just making the tax rates what they are currently. Or if they want, use their smartness to figure out a more ideal set of tax rates and make the tax rates be those. Whatever.

But can we please stop talking about ‘Bush tax cuts’ and how/whether to ‘extend’ them or let them ‘sunset’? Whatever the taxes were in 1999 and then became over the course of the years 2000-2002 really has no more to do with our life today than what all those numbers and brackets were in 1961.

The myth of redistribution

Yglesias made a mini-splash in some circles by opening the kimono to reveal the obvious underpinning of lefty philosophy in a tweet:

The concept of “redistribution” falsely implies that the existence of property is prior to the existence of the state. #mythofownership

This may have been semi-tongue in cheek or snark or an attempt to reference whichever book(s) have that title or just plain trolling or some combination (it’s impossible to tell on twitter). But it’s safe to say that on some level this sort of thing is a prerequisite belief for most on the left, and especially, for their wunderkind pundit class.

This has always given me the sense that I am in a dialogue like the following**:

LEFTY PUNDIT: Ownership is a ‘myth’. It couldn’t exist without the state. That means the state can take stuff arbitrarily. Not that it would, cuz we’re in charge, and we’re nice and all. But we could. So when we decide to, shut up.

ME: Uh, at this point I feel the need to note that you’re actually a very coddled upper middle class overachiever who by all appearances is destined to be pretty wealthy. So this principle applies equally to you and your stuff, and your kids and their fancy upbringings and educations?

LEFTY PUNDIT (not out loud but subconsciously): Theoretically yes, but that’s ok because me and all my friends control all the levers of taking other peoples’ stuff, and we’ll just rig it all. We know how to game it and I have plenty of connections so I’m pretty sure my stuff’ll be fine. And I’ll deserve it too, because of how ‘progressive’ I am in advocating the state could take everyone’s stuff. (Except mine, it turns out, because again, I can say all this virtually secure in the knowledge that that’ll never happen. Actually, ironically, I’m destined to be rather richly rewarded for saying all this, and I won’t give much of it to charity either.)

Again, that last part isn’t out loud. But it’s there. It’s always there.

**adapted from a private email discussion

FACT CHECK: Yes, Biden has been a good Vice President

Joe Biden says “I’m a good Vice President” and you know something? I can find nothing wrong with that statement. STATUS: Zero Pinocchios!

Mind you, it might be a different story if the job of Vice President had meaningful powers or responsibilities of some sort. But as it stands, he’s been a damn good Vice President in my book. In fact, if it weren’t for the succession issue, Joe Biden would be pretty much the ideal person for society to be slotting into the Vice Presidency – to safely firewall them off from actual power so that they can’t affect or damage anything actually important, I mean.

The 47 Percent Gaffe

The latest media feeding frenzy is over a secret video of Romney gaffe’ing the biggest gaffe in the history of gaffery, reciting the line about how 47% don’t pay taxes etc yawn.

This is a good case study in young-lefty-pundit hackery for the following reason: there is absolutely nothing new, newsworthy, interesting, or earth-shattering about the 47% meme**. Lefty journolists may shriek in horror at the gauchery of it all but the fact is that concern over the possible development (and size increase) of a class of net-receivers is a true staple of righty politics. It has been around for years if not decades. It has especially cranked into high gear during the Obama years.

These facts are well-known and patently obvious to anyone with a passing familiarity with righty discourse and thinking. So upon seeing these hysterics from some lefty pundit getting the vapors, we are left with two options:

1. He has no familiarity with righty thinking whatsoever, thus is commenting on things he knows diddly-squat about.

2. He knows very well that this concern forms the backbone of righty fiscal thinking, but has decided to feign ignorance so he can play it up for maximal gaffe effectiveness. Meaning, he’s a cheerleader hack.

I really can’t think of a plausible third option.

The other juicy point to gnaw on here is that the lefty journalist corps is now busily writing up their pieces for people to read tomorrow whose premise is going to be that when Romney asserted such and such number of people receive more than they pay from Daddy Government, he was insulting those people. But where’s the insult? one is tempted to ask innocently. So what if some people make use of popular progressive programs? Isn’t that good?

Anytime one gets ‘progressives’ to unanimously (if backhandedly) acknowledge there is shame involved in government assistance, right-minded people have got to consider it a win.

**I suppose it’s possible that some of these leftopundits are aware of all of the above but that what actually bothers them is the “47%” number specifically. Like, they think it’s “really” 46% or 42.5% or whatever and are incensed he’d say 47. As if the specific number is what matters. This seems such a silly nit to pick that I had discounted it, but on second thought in this age of spreadsheet-armed youngsters having somewhere gotten the idea that autism-level “fact-checking” alone is what constitutes good journalism, you never know. But if that’s the basis for all the hyperventilating, shouldn’t they just be calling him a “liar” instead of painting it as an insulting gaffe? Would the gaffe content have gone away had he stated the ‘correct’ number whatever it is?


Some of these links are catch-up. I now seem to be operating on 3 timescales: 1. blogs (on average I’m about 4 days behind real life), 2. twitter (maybe 30 mins ago), and 3. real-life/news (incomputable since I don’t follow the news).

  • Stationary Waves, Things That Used To Be Legal
  • Kudlow says QE3 proves Obamanomics has failed. I guess I agree though good luck making that part of the narrative as long as Obama is hip, slim, black, and lefty.
  • The email that Kweku Adoboli wrote to his bosses at UBS is a really great, harrowing read. “First of all the ETF trades that you see on the ledger are not trades that I have done with a counterparty as I have previously described. I used the bookings as a way to suppress the PnL losses that I accrued through off book trades that I made.” And it gets worse from there. Yikes.
  • Popehat is worth reading on that idiot professor who wanted ‘Sam Bacile’ arrested.
  • Epaminondas on why QE won’t work. It’s puzzling that QE/stimulus isn’t more widely recognized as ‘trickle-down’ economics. This policy has helped – first and foremost – bond traders and more generally banks, and the ‘left’ is pleased as punch.
  • I am so utterly bored by the debate over whether Woodford, in laying the groundwork for QE3, was influenced by Scott Sumner’s blogging, that I’m not going to link to any of the posts I flagged about it. Sorry.
  • Jay Nordlinger on others killed by Islamists and the people who got away with it to great applause by people like, oh to name one name, Jimmy Carter. Interesting tidbit near the end on Condoleezza Rice refusing to answer a question about Arafat’s role in the assassination of one of our ambassadors. When faced with this sort of seemingly inexplicable behavior on the part of elites my thoughts turn, as they often do, to blackmail.
  • Kevin Drum says it’s ‘not really a matter of opinion’ that “in-person voter fraud doesn’t exist”. That last is a direct quote from his article, but as I now know, we are supposed to understand it to be a stand-in for the larger argument, “yes, it does exist, in some numbers, but those numbers are below some mental threshold I have set but am not going to share with you, and I know the numbers are below that threshold due to some information/evidence/proof/logic I have but am not going to share with you, so we should just behave as if in-person voter fraud doesn’t exist”. I can only say that this argument is exactly as convincing and impressive as it has always been.
  • protein wisdom on Obama/Libya, and Andrew Sullivan (heh) was worth a chuckle
  • Sober Look (via CS) says QE3 is all about the Fed selling vol.
  • Pejman Yousefzadeh has a hot tip for the fact-checkers. Unfortunately, it is about Obama so I’m pretty sure it doesn’t count.
  • Borepatch on the state of global warming if you only look at good-quality data. SPOILER: it doesn’t seem to have happened.
  • Bill Frist, Why my doctor hates Obamacare. The comments on added bureaucratic box-ticking and paperwork/overhead are especially important. Anyone who has worked in the field of health care (like myself) will recognize the truth therein; those who haven’t – well, some of them drafted Obamacare, and others have bumper stickers on their car reading ‘I LIKE OBAMACARE’, apparently driven by some pathological emotional need to express their ‘LIKE’ for a law that hasn’t had any measurable effect on their lives yet, except in the diffuse sense of suppressing the economy.
  • This takedown of V for Vendetta (the comic) is so complete it almost makes me feel sorry for the author and (by association) the Wachowski brothers for making the movie version. The bottom line being, I now feel compelled to admit that I didn’t hate it (the movie). It was not great but it was ok.

Random blog post

Comments too long for tweets but too half-baked to be blog posts of their own:

Been suddenly hearing the phrase ‘Lehman moment’ a lot recently. As in, ‘four years ago we had the Lehman moment’, or, ‘was this Romney’s Lehman moment?’ Maybe I was asleep when everyone voted this phrase into our lexicon but I have literally never heard it before and have no idea what it’s supposed to mean. Absent other info I have to assume it means the straightforward thing, which is that a Lehman Moment is what happens when you had stupidly bailed someone else (e.g. Bear Stearns) out a while back, thus for some reason convincing all the Smart People that you were required to bail everyone out forevermore no matter what, leading to moral hazard and lazy behavior, and then when another bailout candidate/temptation/PR campaign comes along (e.g. Lehman), you (wisely, for once – in fact almost inexplicably) decide not to, and so all the Smart People freak out that it’s going to be the end of the world because of the commercial-paper market going illiquid and as a result CP traders don’t know how to mark their book or what to tell their desk-heads about their P&L (i.e. the end of the world, like I said). Granted that all seems a little overly specific and strange to have turned into a useful phrase so if that’s not what Lehman Moment means feel free to let me know, but the problem is that no matter how I parse it, it just doesn’t really work for me as connoting anything besides that. Meanwhile, haven’t figured out what the connection to Romney is supposed to be (Lehman = his dog?) but I’ll work on it.

Another trope being bandied about is the “3 a.m. phone call”. As in, Romney has shown he’s not ready for the “3 a.m. phone call” because he made Obama-critical comments following the embassy attacks. I have no problem generically with this phrase as a talking-point in a Prez campaign, the interesting thing to me is how it’s being used here. First it treats words/’comments’ as a form of action in their own right, which is telling. It’s not as if Romney sent fighter jets anywhere; he made some press comments. It’s not as if those comments had any tangible effects on anything or killed or harmed anyone – other than (apparently) some reporters’ delicate and fragile sensibilities regarding their beloved, Biracial-Angel President. But the other telling thing is that President Obama, as far as anyone can explain, has done diddly-squat in the wake of the embassy attacks, and made no meaningful decisions whatsoever – and yet I gather we’re all supposed to be totally comfortable with his “3 a.m. phone call” readiness as a result! Yup, that President Obama, he took that 3 a.m. phone call, and then went back to sleep, and then he went to Vegas. That should give us all comfort. The guy’s a rock! He did nothing! That just shows how much America can trust him with the 3 a.m. phone call! But Romney, he made negative COMMENTS to REPORTERS about OBAMA – that’s supposed to be totally scary to us all, an illustration of how irresponsible and erratic he is. It’s all very odd, though here I will damn with faint praise by saying it’s refreshing to see the left inadvertently backed into being a cheerleader for the government doing nothing, for once.

Sharp-eyed RWCG-watchers will no doubt have observed and filled up threads on all the RWCG discussion boards marveling that I haven’t been joining in the chorus over whether the Obama administration received ‘warnings’ about the embassy attack and what they did about them. I think this is mostly because equivalent complaints about the Bush administration & 9/11 are still fresh in my memory, as is how dumb they (and the resulting conversations) always were. This is not to say that if there were specific warnings that an attack would happen on such-and-such day, and someone from Obama’s staff said ‘let’s put in additional security over there’, and Obama said ‘naw, let’s not and say we did’ and the guy said ‘but sir!’ and Obama said ‘I said NO, I don’t want that place protected, now one more peep and you’re fired!’, I wouldn’t be upset or view it as an irresponsible decision. But one immediate problem is that even if that is how it went down, we are likely to never hear about it. A bigger conceptual problem though is that (unless you’re some hack internet commentator, which I try to be no more than my quota of 98% of the time) it’s just very hard to judge (a) how specific/’actionable’ any of these ‘warnings’ are, (b) how often they get such ‘warnings’ – weekly? daily? and thus how often they don’t amount to anything, and (c) what if anything they were supposed to do about it. In the Bush-9/11 case this is especially vivid because the ‘warnings’ basically amounted to: Bad Guys Are Gonna Do Something Bad, and unless Bush was supposed to just say “Ok then let’s lock down the entire country indefinitely, including all airlines and airports”, to complain that 9/11 still ended up happening just never made any coherent sense. I don’t know for sure whether the ‘warnings’ in this case were any more meaningful and so until I hear they were (which is possible, of course) I’m withholding judgment.

And aside from the fairness/dumbness issue itself, the other problem with getting bogged down in a ‘were they warned?’ debate is that it almost forces the Administration’s hand: they now find themselves needing to double down on ‘we actually had no idea!’ and ‘it was all spontaneous anyway!’ line, in order to save face. This has two bad effects, one is that it makes us look like idiots (especially if the perpetrators are watching this, and know they planned it in advance). The other is that it forestalls and crowds out any chance of what might be an actual constructive debate, namely: what to do about it right now, and going forward. If the administration is now wedded to the ‘we didn’t know’/’spontaneous’ position, that binds them only to strategically-pointless acts like cracking down on weirdos who post things to Youtube. And so here we are.

Speaking of the great Youtube crackdown, I am also withholding my outrage about the First Amendment violations involved and so forth, pending clarification as to whether the guy in question somehow isn’t as much of a creep and a criminal as he seems to be. If the administration’s excuse for trashing the Constitution and grabbing this guy in the night is ‘well, he has an outstanding warrant’ or ‘violated his parole’, I know this won’t win me any Constitutional-purity points but I have to admit it does kind of blunt my outrage a little if those statements are entirely plausible.


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