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Saturday, January 13, 2007

KERRY REINVENTS HIMSELF AGAIN (AND BLOWS IT AGAIN)   Al Gore must be laughing at the latest attempt by John Kerry to reinvent himself -- or rather to assume another false identity that he believes will make him pleasing to the public. Just got this postcard, sent to me as an occasional attendee at the "City Arts and Lectures" series in San Francisco. For Kerry, the "war hero" thing didn't work. The "anti-war activist" thing didn't work. So let's gear up that tin ear for the public pulse and try again. Now Kerry (and his wife) are "The New Pioneers of the Environmental Frontier" -- having a "conversation" about "This Moment on Earth." How unoriginal can you get? Gore already owns this political "position" -- he even wrote a book about it -- Earth in the Balance -- and long before the current global warming craze. The best Kerry can do is steal for the name of his "conversation" the title of another book, Gregg Easterbrook's 1995 A Moment on the Earth, which, ironically, argued that the environmental movement ought to declare victory and back off a bit (but that was before the movement reinvigorated itself with the global warming scare).

Can this guy ever do anything original? Anything right? Anything principled? Anything that isn't stupidly embarrassing in its sad quest for public acceptance?

Posted by Donald L. Luskin at 2:10 PM | link   


Friday, January 12, 2007

NOW I GET IT   The opening line from a New York Times editorial:
The tax system in the United States is supposed to mitigate inequality.
I agree with reader Richard Elwood, who says,
Funny, I thought the US tax system was supposed to raise revenue for the government. No wonder I've never been able to get the hang of those 16,845 pages of rules (according to the US Government Printing Office).

Posted by Donald L. Luskin at 11:13 PM | link   

I HAVE SINNED!!   In my SmartMoney.com column today on oil prices, I mentioned en passant that I don't believe in global warming. The mail from readers is starting to pour in. Obviously I've violated a big-time article of religious faith. Here are two...
I just read your article about oil prices, and I am not going to say you are wrong on your analysis of the economics of oil. I haven't read your previous columns on oil prices - that is to say that I either haven't read them or I don't remember them - but I do agree with your current analysis.

However, I was alarmed to hear you say in a public setting that you don't believe in global warming. I am surprised that even though you seem to be quite educated on many subjects, you seem to be unable or perhaps unwilling to acknowledge that there are changes going on in global climate patterns.

Politics aside, making statements like that is detrimental to the public good and will delay the public realization of the truth on this.

I am no expert on meteorology either, but I do know what I don't know, and I look to those that do in areas where I am not proficient. I think there is little doubt among the scientific community - a group of people whose job it is to research and understand these things - that climate change is occurring, and we are causing it.

I respect your right to say what you feel, but I do hope that you take the power of your words more seriously in the future. Taking a stance of ignorance only delays the public's understanding and consequently the public's action.

And another...
I'm a big fan of your columns and I really like what you say. I have just one strong suggestion...don't write you "don't BELIEVE in global warming." It's frighteningly the same thinking process of people who don't BELIEVE in evolution. Doesn't mean it's not true. Watch "Inconvenient Truth."

However, if by any chance you also don't believe in evolution...ignore this email.

Update [1/13/2007]... I've gotten an amazing number of emails from readers on this post. Here's one of the best from
J. O. Keener in Alaska:I've got not problem with your disbelief in global warming. To me, there is no debate about climate change.I am a professional geologist and I conduct much of my work studying the consequences of Pliocene to Holocene (from ~6M years ago to the present) climate change and I can assure you that there is ample evidence for awesomely dynamic climate variation. I have my doubts about anthropogenic climate warming, but I can't exclude that possiblity. My beef is with the political forces behind global warming scare-mongering. It's been happening most recently, for at least 13,000 years! It occurs in fits and starts and is defined by extreme events. Frankly, I'm grateful that it's happening during this period in human evolution (while I'm alive). A warm climate allows us tremendous benefits in increased yields of natural resources and progeny, thus enabling rapidly accelerating intellectual and technological advancements. All the better for us to prepare for the inevitability of future climate change and the accompanying cataclysmic events. Nevertheless, I find the notion that humankind can stop this force by modifying our behavior is pitifully, human. It is a primitive form of thought that seeks to appease a larger, misunderstood force through contrition. For humans to survive, we must do what we do best and that is -- adapt. The climate will change. It will get warmer before it gets colder. Get ready for it.

Posted by Donald L. Luskin at 12:00 PM | link   

TRADESPORTS SCREWS UP YET AGAIN   Tradesports has introduced a new online futures contract on whether or not the US will go into recession in 2007. On opening day of the new contract, the implied probability is about 25.5%.

Sadly, we have another case of Tradesports screwing up the rules that determine how a contract will be settled (remember their North Korean nukes scandal?). The news announcement of the new contract says,

For expiry purposes a recession is defined as two successive quarters of negative real economic growth. Expiry will be based on figures released by the United States Department of Commerce and reported in three independent and reliable media sources.

The contract will be expired once the 2007 fourth-quarter figures are released (may not be until 2008). If however the 2007 third-quarter figures show positive growth the contract will be expired at 0.

But the actual statement of rules for the contract is substantively different (missing word-spaces in this quotation are per the original):
Forexpiry purposes, a recession is defined as two successive quarters of negativereal GDP growth.

Expirywill be based on the data reported by the U.S. Department of Commerce (Bureauof Economic Analysis, Table 1.1.1, "Percent Change From Preceding Periodin Real Gross Domestic Product") as reported by the BEA as of February 15,2008.

If the table asreported at that time indicates that any two consecutive quarters between (andincluding) 2006:Q4 and 2007:Q4 are negative, then the contract will expire at100. Otherwise, the contract willexpire at 0.

Consider the contradictions between these two versions of the rules.

The news version says that data from the Commerce Department as of a single date is the arbiter of the expiry value. Simple enough. But...

The news version includes an additional arbiter (emphasis added): "figures released by the United States Department of Commerce and reported in three independent and reliable media sources." What if you are long the contract and the Commerce Department data proves you the winner, but for some reason it's not reported in the media? Who wins? Which set of rules prevails? If Tradesports' history on this kind of thing is any guide, they will claim the official contract rules prevail -- but why publish two contradictory sets of rules and confuse people? Why create this risk?

The news version also includes an additional expiry condition not mentioned at all in the contract version: "If however the 2007 third-quarter figures show positive growth the contract will be expired at 0." Huh? First, that contradicts (or at least supercedes) the one and only expiry arbiter given in the contract version. Second, but related, it seems to ignore the possibility of a backward revision in the February 15 2008 data release -- the release that the rules version enshrines as the sole dispositive arbiter -- possibly downward-revising the previously released positive growth numbers to negative (large revisions are frequent events). What if a long sees that third-quarter data, which would be released in October 2007, and demands expiry at 100? Would Tradesports cite the "official" rules and keep the contract alive until February 2008? What if the data in February 2008 contradicts the data in Octoer 2007? Who wins?

What the hell is going on at Tradesports? How can they be so sloppy and disorganized as to publish what amount to two entirely different sets of rules for what should be an emminently simple contract definition? This is basic stuff. Really disappointing.

Posted by Donald L. Luskin at 11:03 AM | link   

KRUGMAN VOTES FOR IT, AT THE SAME TIME AS HE VOTES AGAINST IT   It's been so easy for liberals to articulate what have seemed like clear, princpled opinions about everything -- well, clear at least -- since for six years all they've had to do is unflinchingly oppose anything advocated by the Bush administration. Now with Democrats in control of congress, they have to play the harder game of actually deciding whether to be for or against some particular policy. So this morning we see Paul Krugman, normally a fortress of self-assured certainty about every idea he's ever expressed, shimmying about trying to neither support nor oppose Arnold Schwarzenegger's idea for universal health coverage in California.
So am I for or against the Schwarzenegger plan? That’s a tough question. As a practical matter, however, I suspect that the real question is what to do after the plan founders from its own complexity.
I get it. He thinks it will fail, but he's not against it. At least there are some eternal verities that we can always count on from Krugman. From the same column, this axiom, critical to all analyses of health care policy:
Remember, almost 25 percent of Texans are uninsured.

Posted by Donald L. Luskin at 10:14 AM | link   

HMMMM...   Here's a strange little piece of pre-election positioning. Rudolph Giuliani and Newt Gingrich co-author an op-ed for the Wall Street Journal on how to pacify Baghdad. Rudy and Newt, together again for the first time, advising the nation on Iraq policy two days after the president has already set that policy. Not a word about that policy here. The words "surge," "troop" or "president" do not appear. Instead, advice on creating a WPA, Iraq-style.

Posted by Donald L. Luskin at 9:35 AM | link   

A LITTLE MORE PAYOLA FOR AL GORE   The Wall Street Journal reports on the SEC's and the US Attorney's criminal and civil probes in options backdating at Apple Computer. It seems there are falsified documents involved, and that a number of key players in the matter have mysteriously left the company over the last several months. My sympathy is always with the "corporate crooks" in matters like this -- innocent until persecuted guilty, as far as I'm concerned. But I hate it when political influence is involved. Al Gore is on Apple's board, and he was one of a two-man committee that exonerated Apple CEO Steve Jobs of any wrong-doing. Gore is only on Apple's board as thanks for leading the charge in the Microsoft antitrust prosectution when Gore was vice president. And now here's another pay-off. Here's Steve Jobs demo-ing the iPhone at the Consumer Electronics Show in Las Vegas:
10:23am - "I can double-tap and it'll zoom in -- I can make this text bigger if I want to, and there it is. Isn't this cool? There is the New York Times. Unbelievable. You can look at multiple web pages as well, I just push this button in the corner, shrinks it down, and I can add a new page. Let's go to Amazon. I like looking at what DVDs are selling -- I like especially when Disney DVDs are on top."

10:24am - Page is loading, albeit a bit slowly. "And here we are, and there's a section over here, and these are the top sellers. Oh look, Al's "An Inconvenient Truth" is number one. Now I can go back to the NYT if I want, I can get rid of these by just hitting the X." Looks a bit like the UIQ browser, but much more slick.

Russell Roberts at Cafe Hayek muses,
When he just happened to check out DVD's and just happened to find Al's DVD (love that first name basis!), I thought he was pandering to the environmentalist in all of us to show how he's a good guy. But no. It's was a little thank you to Al. I wonder if Gore was happy to see his DVD touted or whether he cringed.

Posted by Donald L. Luskin at 9:15 AM | link   


Thursday, January 11, 2007

ANOTHER HISTORY LESSON FROM PROFESSOR GRANT   James Grant is an engaging writer and a wise market historian, though his personal moral abhorence of debt in all its forms makes him a perma-bear in our debt-fueled world. He earns his living forecasting interest rates (always higher, it seems -- all that debt, you see). Yet in this morning's Wall Street Journal he trashes the rate forecasting industry:
You will scan the Forbes 400 in vain for the names of the captains of the interest-rate forecasting industry. The omission speaks volumes. Just answering correctly the simple question "up" or "down" over a couple of moderately volatile years in the financial-futures markets would put a successful forecaster in the way of untold wealth. Yet, try as they might, the economists can't seem to get fabulously rich.
But I knew that by the time I got to the end of the article, there I would find -- wait, no... let's write that as Grant would. You will scan his article in vain for abstinence from forecasting (that's more like it). The failure of omission speaks volumes. As usual, it's "higher" -- and as usual, it's draped in a history lesson:
Interest rates are low, and the premium of risky rates to government rates is tight. True, long-dated U.S. government bond rates have been much lower than they are today. Since 1870, in fact, they have averaged just 3.5%. But up until 1914, there was no Federal Reserve. In that halcyon time, prices tended to fall in peacetime and rise in wartime (or when new gold discoveries augmented the world's monetary base, as they did after 1900). Since the institution of the Fed, inflation has been the rule, in peace as in war. And since 1971, when the dollar was cut loose from the last frayed hawsers of the gold standard, long-term Treasury yields have averaged 8%, a sizable premium to today's 4.76%.
Now whatever I may think of Grant, fact is I happen to agree with him right now that rates are going higher -- and for just the reason cited in his little history lesson. It's not about the mountains of illicit debt in world. It's about inflation, and about inflation's source: the Fed.

Posted by Donald L. Luskin at 9:59 AM | link   

KUDLOW REPLAY   Here it is, via YouTube, in which I am accused of torturing an explanation!


Posted by Donald L. Luskin at 9:19 AM | link   

JOKE OF THE DAY  

Posted by Donald L. Luskin at 1:40 AM | link   


Wednesday, January 10, 2007

JOKE OF THE DAY   A musical tribute of sorts to John Maynard Keynes.

Posted by Donald L. Luskin at 2:58 PM | link   

BLAME AMERICA FIRST, PART N   The Times does it again, as Venezuelan strong-man Hugo Chavez announces the nationalization of several key industries. From the editorial page, we learn for the first time that "State control is rarely an efficient way to run companies." Someone should tell Paul Krugman that, and perhaps efficiency isn't really an important issue, anyway, in relation to the principles of property rights in play here. But the real message is in the last graf:
Mr. Chávez’s latest moves serve as yet another reminder of why America needs to curb its insatiable appetite for oil. The United States is the biggest buyer of Venezuelan petroleum products. If a powerful Hugo Chávez is against U.S. interests, we should stop paying for his Russian fighter jets and helicopters — and his nationalizations — with our gas-guzzling cars and trucks.
My DC lawyer/lobbyist friend adds,
The NYT editorial writer weaves across three lanes of traffic to slam into America and Bush for the predictable nationalization move of a socialist. Does the NYT believe Bush aggravated Chavez into being what he always has been? Wasn't Jimmy Carter the wet nurse on duty when Chavez's was born? How come he wasn't mentioned? Will the NYT-owned Boston Globe now campaign to take down the Citgo sign over Fenway? (So the drivers of Boston don't inadvertently fill up their SUVs with socialist carbon.)
Update... Rick Gaber notes sagely,
I think it still needs emphasizing that "nationalization" is a spinword designed by collectivists to glorify theft by politicians.

Posted by Donald L. Luskin at 8:59 AM | link   


Tuesday, January 09, 2007

DEMS SCREW THE UNIONS, AND DON'T EVEN SEEM TO KNOW IT   Senators Byron Dorgan (D - N. Dakota) and Olympia Snowe (R - Maine) have introduced a so-called "net neutrality" bill that would slap massive regulations in Internet infrastructure providers, gutting their future profitability and reducing their incentives to build infrastructure in the first place. Here's the proposed legislation... here's a description of it on Dorgan's web site (there's no mention at all on Snowe's site, probably due to insufficient net neutrality)... and here's the inside word from my DC lawyer/lobbyist friend:
Dorgan is hard corps for every regulatory mandate ever conceived. Snowe is a populist lost cause. There's not much of an economy in either of their states but what little promise their citizens have is delivered by the distance-erasing power of the internet. Just try explaining that actual intellectual concept to either of them. (I've tried.)

IRONY ALERT: The interest group most hurt by this issue, if it ever passed, is the telecom union, the Communications Workers of America. CWA reps most non-management employees of AT&T, Verizon and Qwest.

Virtually every tech company supporting NN is non-union (e.g. Microsoft, Ebay, Amazon, Google, and so on).

Why are the Dems for NN? They get the populist kudos from MoveOn.org and the no-nothing media and the $$ from the techs -- and they whisper to the CWA, don't worry it won't pass. There is one big desire the CWA wants, which the Dems support.

Ever heard of "card check"? That's what CWA cares about. It will allow their organizers to legally intimidate employees who have not (yet) signed a postcard ballot to authorize a union-election of a non-union company. Verizon Wireless, unlike Cingular, is mostly non-union.

Welcome to the new Washington.

Incidentally (and no coincidentally), the S&P Telecommunications Sector Index was down 1.28%, the worst performing sector in the S&P 500.

Posted by Donald L. Luskin at 11:40 PM | link   

UH, WELL, ACTUALLY, NO FOUNDATION AT ALL   Don Boudreaux has such a way with reductii ad absurdum:
Here's a question for everyone -- Lou Dobbs, Paul Craig Roberts, Pat Buchanan, Sen. Sherrod Brown, etc. -- who believes that government should use force to reduce the amount of money domestic consumers voluntarily spend on goods and services offered for sale by foreign producers:
Do you believe that a consumer who has long patronized a corner bakery is morally obliged to continue patronizing that bakery? Do you believe that government would be acting justly if it told that consumer "You must not take your patronage from this bakery. We do not care if you no longer care for baked goods or if a new bakery across town offers you a better deal. Because the owners and employees of this bakery have depended upon you for some time now to help keep their business and incomes afloat, you would harm them if you stop buying from them, or even if the amount you buy from them is substantially reduced"?
If you don't believe that any such consumer is morally obliged to continue patronizing the corner bakery, on what ethical foundation do you rest your case for "protectionism"?

Posted by Donald L. Luskin at 9:41 PM | link   

AT LAST -- DISSENT WITHIN THE LEFT   Now that the Dems control congress, they can afford to be seen as bickering among themselves. Here's Joe Klein going after previously invulnerable liberal truth-giver Paul Krugman:
I’m afraid I’m going to get cranky about this: The Democrats who oppose the so-called “surge” are right. But they have to be careful not to sound like ill-informed dilettantes when talking about it.

The latest to make a fool of himself is Paul Krugman of the New York Times, who argues that those who favor the increase in troops are either cynical or delusional. Mostly the latter. Delusional neocons like Bill Kristol and Fred Kagan, to be precise. But what about retired General Jack Keane–whom Krugman doesn’t mention–and the significant number of military intellectuals who have favored a labor-intensive counterinsurgency strategy in Baghdad for the past three years? They are serious people. They may be wrong about Iraq now, reflexively trying to complete a mission that has been lost, but they are not delusional. The counterinsurgency doctrine they published in 2006 is exactly what the U.S. military should be doing in places like Afghanistan...

Liberals won’t ever be trusted on national security until they start doing their homework.


Posted by Donald L. Luskin at 10:17 AM | link   


Monday, January 08, 2007

THE GLORIOUS GREEN FUTURE   I almost -- almost! -- feel sorry for the poor fools at the New York Times after this thrashing by economist George Reisman. He critiques a January 6 article praising Japan for its government-enforced conservation policies, with the subhead "Japan Offers a Lesson in Using Technology to Lessen Energy Consumption." Japan, according to the article, forces "households and companies to conserve by raising the cost of gasoline and electricity far above global levels. Taxes and price controls make a gallon of gasoline in Japan currently cost about $5.20, twice America’s more market-based prices." The response has been technology such as the "home fuel cell" which the article claims delivers electricity "at a fraction of regular utility costs."

Now Reisman goes to work. He notes that the "home fuel cell" costs $9,100 -- and if it weren't for a government subsidy, would cost $51,000. Reisman says, "I hope I will be forgiven for failing to see the intelligence of a policy that makes people pay twice the price for energy in order to provide funds to make possible the production of electricity at a sharply higher cost."

Then Reisman lets the article destroy itself simply by quoting it, on the subject of exemplary energy conserver Mr. Kimura:

Mr. Kimura says he, his wife, and two teenage children all take turns bathing in the same water, a common practice here. Afterward, the still-warm water is sucked through a rubber tube into the nearby washing machine to clean clothes. Wet laundry is hung outside to dry or under a heat lamp in the bathroom. The different approach is also apparent in the layout of Mr. Kimura’s home, which at 1,188 square feet is about the average size of a house in Japan but only about half as big as the average American one. The rooms are also small, making them easier to heat or cool. The largest is the living room, which is about the size of an American bedroom.

During winter, the entire family, including the miniature dachshund, gathers here, which is often the only room heated. Like most Japanese homes, Mr. Kimura’s does not have central heating. The hallways, stairwell and bathrooms are left cold. The three bedrooms have wall-mounted heaters, which are used only when the rooms are occupied, and switched off at night.

The living room is kept toasty by hot water running through pipes under the floor. Mr. Kimura says such ambient heat saves money. He says the energy bill for his home is about 20,000 yen ($168) a month. Central heating alone would easily double or triple his energy bill, he says.

“Central heating is just too extravagant,” says Mr. Kimura, who is solidly middle class.

The government has tried to foster a culture of conservation with regular campaigns like this winter’s Warm Biz, a call to businesspeople to don sweaters and long johns under their gray suits so that office thermostats could be set lower.

Resimans coup de grace:
So there you have it: the Green party line presenting poverty as technologically advanced, as the wave of the future, and as morally virtuous. We can supposedly all look forward to the day when we will be as advanced as the Japanese and energy will cost us twice as much as it now does. When we too will be unable to afford central heating and will have to live in houses half their present size. When we will have to gather our entire family into the one heated room in the house. When we will have to follow one another into the same bathwater, and then use that bathwater to wash our clothes, which we will have to dry outdoors, as our great-grandparents did. When we will have to wear long underwear and sweaters to keep warm indoors. What a glorious, green future!

Posted by Donald L. Luskin at 4:26 PM | link   

ANOTHER "STUDY" FOR THE TIMES TO DISTORT   A typical slanted New York Times story on taxes. The headline:
Tax Cuts Offer Most for Very Rich, Study Says
The text:
The study offers ammunition to supporters and opponents of Mr. Bush’s tax cuts...
From the headline, it's pretty clear which one the Times is. My DC lawyer/lobbyist friend writes,
Here's the headline the New York Times did not run:
40% of all Americans -- and 100% of the Poor -- Pay No Income Taxes, Get Money Instead, says CBO
Increased revenues from middle and upper income taxes make it possible -- Bush gets credit!
Money quote from the story:
...families in the bottom 40 percent of income earners, those with incomes below $36,300, typically paid no federal income tax and received money back from the government. That so-called negative income tax stemmed mainly from the earned-income tax credit, a program that benefits low-income parents who are employed.
Sum it up this way: rich families were the undisputed "winners" from President Bush’s tax cuts, but people in the bottom half of the earnings scale were not paying taxes anyway (they'd already won).

Posted by Donald L. Luskin at 3:15 PM | link   


Sunday, January 07, 2007

IT'S A WONDERFUL LIFE  

Posted by Donald L. Luskin at 9:17 PM | link   

REYNOLDS TRIUMPHANT -- GAME OVER!  

In the true spirit of science, in which competing researchers test each other's hypotheses and experiments in search of a higher truth, Alan Reynolds -- author of Income and Wealth -- has been doing brilliant work in investigating the widely held hypothesis that income inequality has increased steadily over the last 20 years. Yes, that is just an hypothesis, though it is so widely believed and frequently quoted as to have the air of fact. What makes Reynolds' work so powerful is that he's patiently and systematically demolished the apparent experimental evidence behind that hypothesis, and dared to stand nearly alone against the conventional wisdom of economic science. When it comes to income inequality, Reynolds is a modern Galileo.

Liberal economist Mark Thoma has followed Reynolds' work over the last several months, and his website has become a forum for debating it. In a posting today, Thoma begins with a reprise of the key documents in the debate, which anyone interested in this subject ought to read in order.

Thoma then reproduces Reynolds' op-ed from the Washington Times in which he responds to all his critics. It's a brilliant and patient defense. Point by point he explains not only why his arguments are correct, but reveals the McCarthyesque nastiness of his critics' unwarranted and illegitimate accusations against him. At the end, Thoma -- who has done a public service by hosting this debate, but at the same time has clearly sided with the liberal attackers -- is reduced to what amounts to stunned silence. He has nothing to say after Reynolds' virtuosic defense but to splutter that the income inequality hypothesis is nevertheless believed by many reputable economists. Which is about like saying, "Don't confuse me with the facts, Mr. Galileo. All of the finest minds say the universe revolves around the Earth."

Posted by Donald L. Luskin at 12:40 PM | link   


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