The power of self-fulfilling stories in financial markets

Soros, the new Citizen Kane? (Credits: mindfully.org)

On December 2009, the euro traded at $1.51. Today, it trades at $1.35. What can explain this 11% downfall in little bit more than 2 months? An avid reader of the Wall Street Journal or the Financial Times will eloquently explain that it just reflects the faster recovery of the US economy out of the crisis vs. Europe, amplified by fears that Greece may default on its sovereign debt. End of story? Not so fast. A closer look will reveal the perfect case study for the power of self-fulfilling stories in financial markets.

Deeply ingrained in our collective subconscious is the fear that we are getting manipulated by higher forces. Not so long ago, people questioned the power of mass media and how Rupert Murdoch or Silvio Berlusconi could bend reality with their editorial lines rather than reporting it. I will argue that hedge fund managers and other leading investment bankers have become the new Citizen Kane, shaping reality with powerful storytelling. Financial markets have slowly but surely built a very advanced language that now allow them to communicate and broadcast complex stories. Puts, call, credit-default swaps and other derivatives constitute the building blocks of their vocabulary. Traders have become the journalists that put those words together, following the editorial line dictated by their fund manager. The assets under management, the equivalent of circulation, provide more or less clout to the fund editorial line.

Smart investors like Jim Rogers or George Soros know how to leverage stories to sway the market in a given direction. Of course, they cannot build a story from scratch; they need facts the same way journalists do. However, people overestimate the power of facts and underestimate the craft behind story telling. Soros and co. do not need good stories; they need story that sticks in the market players’ mind and then self-fulfills. This reminds me of a book “Made to Stick” where Cheap and Dan Heath laid down the six attributes that makes an idea stick. Let’s use the shorting of Euro as an example to illustrate them. Simplicity: Soros stripped the idea to the core when he publicly warned that if the European Union does not fix its finances “the euro may fall apart.” Unexpectedness: this story shatters the Euro dominance over the dollar slowly built across recent years. Concreteness: avoid complex math, Greece will default on its debt. Credibility: Soros is credited with predicting the British Pound collapse in 1992 – leading to a $1bn profit according to certain traders. Emotional: emphasize the drama, “even if [the Euro] handles the current crisis, what about the next one?” (Soros in an article he wrote for the Financial Times on February 22nd). Stories: while Soros could have just “written” this story through financial operations using derivatives and let the advanced financial community pick it up and amplify it, he knew he also needed to translate his financial story in plain words and thus reach mainstream investors. What a better way to do so than an op-ed in the Financial Times entitled “The euro will face bigger tests than Greece.”

How powerful are those stories? Judge by yourself. On February 8th, a couple of hedge fund managers got together in a Manhattan private townhouse for an “idea dinner.” According to the Wall Street Journal, during this dinner, one manager shared his story on how Greece will default and create a domino effect. By the week of the dinner, the bets against the fall of the euro had risen to a record 60,000 future contracts – highest since 1999. Three days after the dinner, a new wave of selling pushed the euro below $1.36. While we can argue about causality or correlation, coincidence is to be ruled out. It is also said that the fate of Lehman Brothers was sealed during one of those small gatherings.

Where does that leave us? Hedge funds are thriving in very chaotic environments. In the short-term, we can thus expect one or two financial crisis resembling the one we just faced – maybe this time it will involve sovereign debt or even credit card debt. Yet, we all know that in chaotic kingdoms, kings do not last long. So, I would not be surprised if those funds did not survive those coming crises. One or two major failures like LTCM would trigger a massive withdrawal of the assets under management. This will then mark the end of the financial story-tellers like the decrease in circulation announced the slow decline of the printing press.

[Via http://vitaminsforfutures.com]

In The Papers: Open Source Economics

The economics of open source software is a topic of interest to me.  Without a sound understanding of economics, you might be tempted to believe that collaborative software in which you give away the end product for free simply cannot exist in a market-based society as such, and must instead be a proto-socialist endeavor.  Eric S. Raymond wrote a very powerful book, drawing on Hayekian themes, to counter this notion, and there is a basic explanation of how it can be in the self-interest of developers to contribute to open-source software (here’s the trick:  think about the services, not the software).

Michael Schwarz and Yuri Takhteyev take a slightly different tack in Half a Century of Public Software Institutions:  Open Source as a Solution to Hold-Up Problem.

Abstract:

We argue that the intrinsic inefficiency of proprietary software has historically created a space for alternative institutions that provide software as a public good. We discuss several sources of such inefficiency, focusing on one that has not been described in the literature: the underinvestment due to fear of holdup. An inefficient holdup occurs when a user of software must make complementary investments, when the return on such investments depends on future cooperation of the software vendor, and when contracting about a future relationship with the software vendor is not feasible. We also consider how the nature of the production function of software makes software cheaper to develop when the code is open to the end users. Our framework explains why open source dominates certain sectors of the software industry (e.g., the top ten programming languages all have an open source implementation), while being almost none existent in some other sectors (none of the top ten computer games are open source). We then use our discussion of efficiency to examine the history of institutions for provision of public software from the early collaborative projects of the 1950s to the modern “open source” software institutions. We look at how such institutions have created a sustainable coalition for provision of software as a public good by organizing diverse individual incentives, both altruistic and profit-seeking, providing open source products of tremendous commercial importance, which have come to dominate certain segments of the software industry.

One of the things that the authors point out is that “open source software” is a lot broader than we might imagine.  To the average person who has heard of the term, that person thinks Linux.  What they don’t usually think is Apache, the server of choice for more than half of the internet.  They don’t think BIND or one of the thousands of other vital tools for big corporations, even those big corporations which are not themselves open-source organizations (like Yahoo!, who support open source development, but don’t release many such tools).  Another point the authors bring up is that “employees of just five companies (Red Hat, IBM, Novell, Intel and Oracle) jointly contributed 32% of the changes for a recent release of the Linux kernel” (3).  The players have changed over the past five decades, and so have their motives, so a simple understanding of current motives (like I alluded to above) doesn’t do enough.  As they point out, even IBM has changed—they were a big open source company in the 1950s and 1960s, but for a different reason.

The authors’ theory is that “proprietary software causes underinvestment in complementary products and technologies due to the fear of hold up.”  They use this to explain “why open source software dominates some sectors of the industry, while playing [a] negligible role in others” (3).

What they mean by a “hold up” scenario is as follows:  when you purchase a piece of software from Company X, you may buy it for your own use, or for furthering your business.  In scenarios in which people buy business software, there is the fear that the company may be forced to lock in to Company X, and cannot go to a competitor.  At that point, Company X basically has a monopoly, in the sense that the cost of switching to Company Y’s software offerings is just too high.  Your company has, by that point, built a lot of processes and maybe some additional software around Company X’s offerings, and to switch it all over to what Company Y has would simply be too expensive to consider.  But the business needs of your company will likely change over time, and so you need Company X to remain responsive to you.  Unfortunately, “the exact nature and cost of such future modifications often cannot be foreseen ex ante.  Their price and quality must therefore be negotiated ex post” (5).  If you are concerned that Company X will screw you over later, once you need changes and are locked in, you either will not be as willing to pay as much for the product (or your own alterations), or you simply will forego the product.  In either event, there is a net loss, as the product and your modifications would allow you to provide services to your customers more easily, but it would not be worth the anticipated hold-up price.  Instead, you have in-house developers write software—vertical integration, as it’s called in economics.

There are a few other justifications for considering software purchases a potential hold-up problem, and the authors give some examples of these.  After that, they provide their explanation of how to get around this problem:  make the source code of software available to end users.  By doing that, you ensure that even if you change the way in which things work, your end users will still be able to make any modifications they require.  Maybe they want Module 49 to do something totally different—they could build their own custom version of the code and have that happen.  This also ensures that Company X will not exploit the company’s relationship with your firm later on.

So, given this, why is it that binary packages are the default for pretty much all software?  Because there are considerations that outweigh the problems listed above.  There is a free-rider problem here:  file sharing.  If I get the source code to a game, I can distribute it to others more easily and allow them to obtain the software without charging for it.  I can do the same with binary software, but there are some protections there which make it a bit harder—licensing provisions, etc.  When, then, should we see binary packages versus open source?  The authors “would especially expect this to be the case for software that does not require large complementary investments, is unlikely to need modifications, and is offered to users that have no capacity to modify software even when the source code is offered to them.  Computer games offer a quintessential example of such software:  they are typically used for a limited period of time, rarely require substantial game-specific complementary investments, offer limited opportunities for useful modifications, and are mostly offered to consumers with no programming skills” (9).  In contrast, web servers, database servers, and the like require significant complementary investments, and as a result, are more likely to see this solution to the hold-up problem.

The rest of the article is an interesting discussion of various solutions over the past 50 years, from IBM’s SHARE association (a number of IBM clients providing source code for various applications for each other) to ARPANET, and AT&T (and BSD) to Netscape and GNU.  It’s an entertaining history of some of the economic motives behind business and legal decisions, and worth a read.

[Via http://36chambers.wordpress.com]

Japan in India

Japan in India

Amongst the several national themes that kept our minds busy, “Japan in India” is one that appeared consistently throughout legs 1 and 2, and would at times surface when we least expected it. Aside from the routine Honda car showroom, Sony outlets, and Yamaha motorcycles parked outside nearly every dhaba/tea vendor we visited, the presence of Japanese companies and culture in India is palpable.

During our visit to Ludhiana (India’s manufacturing hub) in Leg 1, we were fortunate to have visited the factory of Rajnish International, which specializes in the manufacturing and export of diesel fuel injection spares and other components for the auto industry. While Rajnish takes pride in having developed the vast majority of its production technology in-house, we were shown one Fanuc machine that performs an aspect of the steel cutting process that is too intricate for the domestic technology.

in-house technology at Rajnish Int'l

Fast forward to our trip to Kolkata, where we visited the manufacturing facility of formal menswear brand, Success, and learned that all of their polyester is imported from Teijin Fibers. The Japanese textile manufacturer’s product is described as superior to its cheaper Chinese counterparts in fabric quality and dye (particularly black), and this gives Teijin its edge. In Aizawl, we spotted DVD’s of Japanese soap operas being sold on the street (although Korean dramas were more popular) and L&T-Komatsu construction equipment at work on the road from the airport to the hotel. In Bodhgaya, we visited Japanese shrines and encountered several hotels and restaurants with signs catered to the hoards of Japanese tourists. Even at home in Mumbai, TATA Hitachi machinery can often be seen at construction sites and the annoyingly catchy tune of TATA DoCoMo ads has us reaching for our remotes during commercial breaks.

Japanese sign in Bodhgaya

Komatsu building Mizoram

Aside from private ventures, projects are being undertaken on a government-level to strengthen economic ties: the USD 90 billion Delhi-Mumbai Industrial Corridor being in the spotlight. In September 2009, the Indian Union Cabinet approved an INR 17,700 crore (USD 3.7 billion) conditional loan from Japan to help build the western arm of the corridor. The condition is simple: give the biggest contracts to Japanese companies. As mint points out, the conditions officially state that 1/3 of the total contracts must go to Japanese firms. However, if India uses Japanese equipment to build a part of the corridor, chances are high that it will have to use Japanese equipment to build the whole thing.

Map of the DMIC, source: delhimumbaiindustrialcorridor.com

In Delhi, we were lucky to meet with Amitabh Kant, Principal Secretary & Special Commissioner, Industries (Government of Kerala) and CEO of the DMIC.  He articulated that the project will be managed by an entity resembling a private company, which will effectively streamline the entire investment process for Japanese companies looking to be a part of the project. This is comforting when picturing a scenario where Japanese delegates and their interpreters have to struggle with local agencies for land acquisition rights or a consistent supply of power and water.

The DMIC will certainly serve as a cornerstone of the economic relationship between the two countries, as mint anticipates it will attract new investments of ~USD 50 billion and create jobs along the corridor for several years. While it took slightly longer to hit news pages in Japan, the project finally received coverage in the Nikkei this month and is gradually gathering excitement in the Far East.

Yukio Hatoyama with Manmohan Singh in Dec. 2009, source: thehindu.com

As Japan copes with soon becoming the world’s number 3 economy, the need to maintain a close economic relationship with India will only get stronger. Demographically, India is the dream partner for a graying Japan who has slowly but surely been running out of gas. On the flip side, Japan has the organizational and technical expertise to create the infrastructural foundation that India needs to reach the next stage of its development. The hope is that more private ventures and projects like the DMIC are implemented and that politics do not get in the way of what can evolve into one of the world’s most powerful and lucrative economic partnerships.

[Via http://theindialog.wordpress.com]

Why are climate sceptics so angry?

I have noticed a surprising number of climate sceptics on things like facebook and Yahoo Answers. Now, the surprise is not that some exist, but that so many are vehemently opposed to any suggestion that there is even the slightest possibility that we are altering the climate. Most don’t even admit that there is any climate alteration in the first place – a flurry of snow anywhere on the globe is, to them, enough to show that Global Warming is a fantasy.

Now, from the general tone, language and references of these violent sceptics it is apparent that most come from the US of A and nearly all of those talk about misinformation and manipulation by liberals and left-wingers in an attempt to take over government & business. They seem to think there is a massive, organised conspiracy to falsify scientific data and rob them of all that is rightly theirs; and since most scientists are long-haired commy weirdos, they are in on it too.

I don’t know if it is fair, but the mental image I get from their posts is of big, burly men in plaid shirts, carrying large knobbly guns and spitting torrents of tobacco. I often hear banjo music too. ooof – shivers down the spine!

Perhaps is has something to do with the capitalist, consumer philosophy that current economic wisdom is based on. This has been pioneered by the US over the last 100 years or so and exported to much of the world with an almost religious zeal. It seems to represent, for some people, the essence of being American and the American Dream.

To accept the ‘green’ message is to accept that classical consumer capitalism is wrong: you cannot live a truly sustainable lifestyle in a system that demands constant expansion and therefore an ever-increasing drain on resources. It is like pyramid selling, which is well documented as making a few people very wealthy before collapsing. So for those people that feel the current economic situation is a core part of their American identity, telling them to plant a few veg in their yard is tantamount to treason or heresy

the Guardianhttp://www.guardian.co.uk/environment/cif-green/2009/mar/09/denial-climate-change-psychologyhas a good article about the psychology of climate denial and why it is still so prevalent, although it doesn’t go into the whole sister-marrying banjo thing.

[Via http://spookymanuka.wordpress.com]

The Campaign for State-owned Banks

This is a campaign whose time has not quite come — but it’s getting here. The article is titled, “Solution to the Credit Crisis? The Campaign for State-owned Banks,” by Ellen Brown.  Her self-description follows:

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her eleven books include Forbidden Medicine, Nature’s Pharmacy (co-authored with Dr. Lynne Walker), and The Key to Ultimate Health (co-authored with Dr. Richard Hansen). Her websites are www.webofdebt.com, www.ellenbrown.com, and www.public-banking.com.

For the article itself, go to http://www.globalresearch.ca/index.php?context=va&aid=17732

[Via http://thehistoricalcontext.wordpress.com]

Global Sovereign Credit Default Pricing as of February 22, 2010

Below is a list of global sovereign CDS pricing as of Monday, February 22, 2010.  All this talk about sovereign credit weakness, sovereign defaults, and downgrades begs the question, if this list is supposedly bad, what do you call the list of major banks when their spreads blew out 3-4 fold over these at the end of 2008?  95% of those large banks that were too big to fail (or to large to succeed) ultimately have and will.

The better question over the next year or so will be which of these countries will be too small to save?

Global Sovereign Credit Default Prices as of 2/22/10 (1 of 4)

Global Sovereign Credit Default Prices as of 2/22/10 (2 of 4)

Global Sovereign Credit Default Prices as of 2/22/10 (3 of 4)

Global Sovereign Credit Default Prices as of 2/22/10 (4 of 4)

Below is a most recent view on Greece’s CDS prices in chart form.  Is the worst behind them?

Greece Credit Default Price Chart as of 2/22/10

And if this list of issuers represents the safest havens in the world, well then the new normal just got a whole lot more volatile.  I suppose the bond vigilantes can’t do much with tons of cash still on the sidelines in a deleveraging world.

[Via http://greenewable.wordpress.com]

On the Limitations of Science

I just finished reading a fabulous piece in The New Yorker on “How Paul Krugman found politics.” One section in particular caught my attention, as it touches on the limitations of the scientific method, an issue I have been discussing in relation to the God question.

When Krugman began to develop his theory of new economic geography in a 1991 paper, many economists found it “deeply disturbing and troubling” due to its acceptance of seemingly arbitrary factors like history and accident in understanding international trade. Economists like rationality because it produces neat, mathematical models that are often — not always! — a powerful analytical tool in describing market behavior. (For more on this, see my forthcoming review of Justin Fox’s “The Myth of the Rational Market.”)

Krugman’s analysis, as summarized in the article, may appear anything but exotic:

Once an industry started up in one place, for whatever reason (the carpet industry in Dalton appears to have its origin in a local teen-ager who in 1895 made a tufted bedspread as a wedding present), local workers became trained in its methods, skilled workers from elsewhere moved there, and related businesses sprang up close by. Then, as more skilled labor became available, the industry could grow and benefit from economies of scale. Soon, as long as it didn’t cost too much to transport the industry’s products, the advantages of the place would be such that it would be impractical for someone to open up a similar business anywhere else.

Seems obvious, doesn’t it? Yet for years mainstream economists disregarded the idea, which did not fit into existing models: it was too “arbitrary.”

The article goes on to cite a related example in which sixteenth century cartographers neglected to include features of interior Africa due to rising standards as to what constituted knowledge:

Sixteenth-century maps of Africa were misleading in all kinds of ways, but they contained quite a bit of information about the continent’s interior—the River Niger, Timbuktu. Two centuries later, mapmaking had become much more accurate, but the interior of Africa had become a blank. As standards for what counted as a mappable fact rose, knowledge that didn’t meet those standards—secondhand travellers’ reports, guesses hazarded without compasses or sextants—was discarded and lost. Eventually, the higher standards paid off—by the nineteenth century the maps were filled in again—but for a while the sharpening of technique caused loss as well as gain.

Now, at one level, there is nothing extraordinary about the advance of economic and cartographical knowledge I have just described. No one is accepting anything on faith, and both Krugman and nineteenth century cartographers were eventually able to bring commonsensical notions in line with the scientific method’s more rigorous demands. It is, moreover, obviously an imperative of the scientific method to replace existing models with newer and more sophisticated ones — precisely what has happened in the cases of mapping interior Africa and describing international trade.

On another level, these examples point toward the limitations of the scientific method. At any given time, there will be phenomena – often understood through commonsense, “secondhand travellers’ reports,” or “guesses hazarded without compasses or sextants” — that existing models have not yet caught up with. The tendency for those laboring under the yoke of Enlightenment rationalism — or, for that matter, existing academic orthodoxies — will be to simply dismiss such phenomena as unreal. The most virulent attacks will be reserved for phenomena that present the greatest challenge to existing models: particularly, anything possessing the “arbitrary” characteristics associated with history, culture, geography, and religion.

These apparent limitations may, of course, turn out be nothing more than a sign of how much science and its proponents have yet to learn. There may come a day when neuroscientists and evolutionary biologists are able to fully explain religious phenomena, without merely reducing religion to a series of chemical reactions in the brain or an aspect of the survival instinct. (While it is clear that existing models do in fact “explain” religion, those models have yet to account for all of the evidence — namely, religion as a widely experienced existential reality.)

In the meantime, should we dismiss religious experience as “unreal” simply because it does not fit into existing models? Wouldn’t it be wiser to acknowledge the limitations of the models, and the possibility that there may be more in heaven and earth than is dreamt of in natural philosophy?

[Via http://innocentsmithjournal.wordpress.com]

My take on the Stimulus ...

The Washington Post says:

PRESIDENT OBAMA’S argument with Republicans over the effectiveness of the $862 billion American Recovery and Reinvestment Act — a.k.a., the stimulus bill — is not an easy one for him to win.

With unemployment at 9.7 percent, he has to make the counterfactual case that things would be even worse if he and congressional Democrats had not administered this dose of deficit-financed tax cuts and spending.

It does not help him that joblessness is well above what it was when the act went into effect a year ago — and higher than the administration predicted it would be after a year of stimulus.

Nevertheless, at its core, the president’s argument is correct.

You cannot inject $300 billion — an amount equal to about 2 percent of U.S. gross domestic product — into the economy without stimulating some short-run economic activity that would not have occurred otherwise.

But, the precise number of jobs that this additional demand “saved or created” –  is not provable.

Nor is it simple to disentangle the Recovery Act’s impact from the trillions of dollars worth of support from other sources, mostly the Federal Reserve.

But it’s churlish to assert flatlythat “not one net job” has been created. The country is better off because of the bill.

http://www.washingtonpost.com/wp-dyn/content/article/2010/02/18/AR2010021804662.html

* * * * *

Ken’s Take: 

No surprise, I wasn’t a big fan of the bailouts or the fiscal stimulus program.  And, suffice it to say, empirical evidence hasn’t given me any reason to jump on the wagon now.

Here’s are the key points that framesmy thinking:

• Christine Romer – chair of the President’s Council of Economic Advisers — made her academic reputation on research that convincingly proved that fiscal stimulus doesn’t work.  Her recent conversion makes me a tad suspicious, to say the least.
• Adding almost $1 trillion to the national debt — the price tag of the stimulus when all the dust settles — is simply a transfer of resouces out of the private sector (eventually) to the public sector (now).  In other words, there will be a subsequent depressing effect on the economy.
• A big chunk of the stimulus money (around $120 billion) went to extending unemployment benefits, food stamps, etc.  On one hand, I’m ok with helping  folks in tough times.  On the other hand, is it any surprise that the BLS reports record numbers of unemployed people who have stopped looking for work.  It’s called moral hazard, and economists have written about it for decades.
• About 1/3 of the stimulus was “tax relief for 95% of workers”.  That’s true (I guess), but what was it?  Obama’s $400 rebate checks.  First, evidence seems to suggest that many folks used the money to pay off bills –  that’s certainly not stimulative.  And, I don’t understand why taxpayers (like me) should be paying off somebody else’s overextended credit card balance.  Even if you look at the tax rebate as a stimulant, how much stimulating can a person do with an extra buck-a-day in their wallet?
• Another chunk of the stimulus actually went towards jobs.  As near as I can tell, about 3/4  of that (around $150 billion) went to preserving the jobs of government workers in states and locales that were spending way beyond their means.  Again, why should folks from fiscally responsibile places bail out some irresponsible local governments, fund marginal teachers hanging on (maybe they should be fired), and preserve bloated government bureaucracies?  I don’t get it.
• Now, we’re down to the spending on things like roads and bridges and turtle crossings and fast trains between Disneyland and the Mirage (about $50 billion in total).  Even if those are all good things , the administrtion’s numbers say that the bill is over $100,000 for each associated job.  Give me a break.
• Finally, they said: “Give us $787 billion and we’ll keep unemployemnt uner 8%”.  They didn’t do it.  Period.  Don’t give me “jobs saved or created” — they set the metric and failed to achieve it.

That’s my POV …

[Via http://kenhoma.wordpress.com]

Obama Plan to Cap Health Insurance Premiums Is Foolish

President Obama is set to propose limits and rollbacks on health insurance premium increases this week. This is stupid policy for a lot of reasons. For starters, insurers have to pass along increases in what they pay in claims. The way to reduce those claims isn’t to cap premiums but to encourage more efficiencies in the healthcare system.

I get it that people are pissed off about paying more in premiums. But insurance companies are in business and have to make a profit. Their profits aren’t obscene — they operate on slim margins as it is.

Capping the limits will lead to consequences that Obama and his economically-retarded advisors won’t want. Insurers will have to use even more scrutiny in paying (make that denying) claims. They’ll also have to be more cautious about risks they assume, meaning they’ll tighten underwriting so that it’s more difficult to get coverage unless you’re in perfect health. Or even, where states allow them, adjust benefits accordingly — which means decreases in the amount of coverage and increased liabilities to the insured.

Judge these things by the results, not the intentions. Just as when state officials try to cap the price of any good or service, the result isn’t good for consumers — it invariably leads to a shortage. In this case, it will be a shortage of claims payments, benefits, or even available coverage for people with “routine” maladies for which underwriting otherwise wouldn’t be problematic. That’s no way to get more people covered in this country.

It’s time for the Democrats to get over their bizarre obsession with trying to micromanage our healthcare system and our health insurance sector. When are they going to do something meaningful to create an environment in which people actually want to grow their businesses and expand our economy?

[Via http://lucky13global.wordpress.com]

Threading the Needle of Financial Regulatory Reform

The evolution of the financial crisis in the last 2 years is congealing consensus around both a more efficient regulatory structure and the corresponding institutional structure to overhaul government regulations and institutions pertaining to the financial markets. The ongoing debate is healthy and collegial and has matured from the status quo mindset of the ‘90s of an outright rejection of the need for any reforms to the acceptance of at least having to reform the Government Sponsored Enterprises (GSEs) during the Bush years.

The agony of economic reality, not merely in the last couple of years but for the foreseeable future if nothing is done, has opened up the economic establishment from the academics in Boston to the policymakers in Washington to reforming the Washington Consensus itself, unlike the necessary but not sufficient transparency reforms the International Monetary Fund (IMF) went through after the Asian Crisis about a decade ago. Then it was the IMF’s fault and the United States was perfect. Now, the United States must change, if not for the IMF, for its own sake because the health of the republic is at risk.

Senators Dodd and Shelby deserve kudos for their extraordinary sensibility, along with their colleagues on the Senate Committee on Banking, Housing and Urban Affairs for taking their sworn obligation to oversee the Fed (and its relationship with the Treasury) seriously. And so do representatives Barney Frank and Ron Paul. The Congress has acted to making financial regulatory reform happen by getting the ball rolling in the right direction in spite of the usual interest group politics in Washington to dilute any and all serious change for the better. There is room for sensible compromise among all the stakeholders, including the interest groups, but the moment to get it all done right is now, not gradually over time.

Representative Paul is correct in that the Fed is not necessary as a separate institution. It had not come into being until 1913 but the country grew rapidly as an industrial power without it, with the Fed’s star rising because of the two world wars after its founding by President Wilson and the Congress. What is indispensable is sound money and the lessons in the nearly 100 years since the Fed’s founding can ensure that that is feasible without the Fed. It can be done by the Treasury using an explicit numerical inflation targeting range written into law and changeable with the explicit consent of the Congress when circumstances warrant, but within reason.

The financial markets have also evolved considerably since the Great Crash of 1929. It is the government that needs to do the catching up. The alphabet soup of government agencies overseeing the rapidly expanding activities of U.S financial markets since FDR can all be streamlined and consolidated under the Treasury to both enforce regulations and do data collection and analysis that monetary policy needs to do its job more thoroughly. There is no reason why any financial instrument must be traded outside of exchanges in the markets and no reason why private financial institutions should not countercyclically save for a rainy day with the government in lieu of Basel. Both these legislative changes will greatly enhance the transparency of the financial markets.

The world of Obama and his Facebook presidency is technologically a far cry from the fireside chats of FDR. Since the advent of plastic, more Americans today do not need hard cash either in their wallets or jingling in their pockets. It is time for the United States to move to a more robust electronic currency and payments system to more effectively complement the financial surveillance function of the Treasury.

The consolidation of financial regulatory policy and all macroeconomic policy instruments by adding monetary policy to the current responsibilities of the Treasury for budgets, taxes and trade will enable more transparent economic policymaking and make it more accountable and time consistent through the constitutional checks and balances of the separation of powers, besides ensuring strategic coherence (which is now the job of the National Economic Council in the White House). Economic forecasts made for the purposes of monetary policy could then be made available to the public in real time for them to be debated and vetted by policymakers, academics, press and the people in a manner no different from how the Congress currently makes legislation or the Executive branch formulates and implements policies.

It may seem on the surface that such a massive consolidation of government institutions and functions can be very disruptive. The reality is that it changes none of the current routine bureaucratic operations of any of the government agencies involved. The council of regulators being considered by the Senate to be led by the Secretary of the Treasury would be a good start to begin that consolidation at the level of the decision makers to change bureaucratic processes to conform to the new legislation, without either the need to move personnel or remake facilities. The consolidation process must be subject to a timeline presented by the council to the Congress and preferably completed by December 2013, the 100th anniversary of the Federal Reserve.

The essence of reform is the legislation and the presidential stroke of a pen.

[Via http://ctamirisa.wordpress.com]

A cart-wheel for every donation? Maybe...

It’s not pretty. That’s for certain. But to celebrate MyWHaT’s first Pay Pal donation a cart-wheel along 8th St. was in order–yeh!!!  The form should improve with every new donation.

The editor doing a very humble cart-wheel along 8th St. (Thanks A&J)

Thank you everyone for your support. It has been great!

A big question in the beginning was: “Would anyone read it?“.

In 2 months, MyWHaT has generated more than enough energy to keep it moving forward–mostly through the use of magic… but the over 6000 views, almost 200 comments and many new friends has been a key component.

It’s approaching a time when the scale of the BLOG will either need to scale down or generate some revenue for the combination of daily posting, researching and general mischief.  A plan is developing that should be ready by March, but in the meantime gestures of support— comments, offers of lunch and donations through Pay Pal are really appreciated.

I will continue to do to attempt cart-wheels in appreciation (just off film).

“In creating, the only hard thing’s to begin; A grass-blade’s no easier to make than an oak.” -James Russell Lowell

Pay Pal

One question I have: Do you read MyWHaT daily, occasionally, or wait for a weekly round-up?

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[Via http://mywheelsareturning.com]

Ron Paul vs. The Fed: The First Small Victory

In the gargantuan arm wrestling contest that has been going on between Ron Paul and the Fed, it looks like the Congressman, and with him the public, has had its hand to within a millimeter of the hot coals of inflation, with the Fed ready to cry victory. But suddenly we notice that hand has raised up and rebounded, albeit not by much. But it is the first victory for Ron Paul and the public of savers in America in a very long time.

For that victory consists in the Fed having had to raise the discount rate for the first time in three years, and by doing so, they are showing that they can no longer play the “milk the savers for all they are worth” game the Fed and the big banks have been playing for the last few years. They finally realize that it is the disposable incomes of the retired generation that create so much of the discretionary spending that kept the economy humming, and now the Fed has cut the rates to the absurd under 1% level, they now perceive that they have, in one sense, gained a Pyrrhic Victory, because in cutting rates that low, they have cut the throats of the retired savers by massacring their interest incomes, and those savers were one of the key engines of the economy. They also know that the anger of those savers is one of the key elements of the Ron Paul swathe of the Tea Party Movement, and they dread an election where anti-inflationists and transparencyists would be swept into office en masse, as will occur next November.

But Ron Paul’s constant hammering away at the Fed, and the rising voices of support, like Senators DeMint and Bunning, have finally brought such pressure to bear on the Fed that they have been forced to take a move, however minuscule, that is counter-inflationary in order to calm the roiled waters of the markets.

Just as the Fed was about to slam Dr. Paul’s hand onto the coals and give him and his supporters a good singeing, the doctor and his supporters have started to pull the fat out of the fire.

One small step backward for the Fed, one giant leap forward for Ron Paul and the savers of America.

The struggle continues.

Hoooooooooooooooooooooooowwwwwwwwwww! — Silverwolf

[Via http://lobobreed.wordpress.com]

Modern, Postmodern, or Amodern?

A few points of clarification might be in order for those wondering what the fuss is all about in the contrast between the modern and the postmodern (and the amodern, which is really what we ought to be about).

The modern world view takes its perspective from the foundational works of the European Enlightenment and the Scientific Revolution. One of its characteristic features is often referred to as the Cartesian duality, or subject-object split, in which we (the subjects) enter the previously-existing objective world as blank slates who deal with reality by adapting to the facts of existence (which are God-given in the full Christian version). Many Marxists, feminists, and postmodernists see modernism as a bastion of white males in positions of political and economic superiority oblivious to the way their ideas were shaped by their times, and happy to take full advantage of their positions for their own gain.

Postmodernism takes a variety of forms and has not yet really jelled into any kind of uniform perspective; in fact, it might not ever do so, as one of its few recurrent themes has to do with the fragmentation of thinking and it local dependence on the particular power relations of different times and places. That said, a wide variety of writers trace out the way we are caught up in the play of the language games that inevitably follow from the mutual implication of subject and object. Subject and object each imply the other in the way language focuses attention selectively and filters out 99% of incoming stimuli. Concepts originate in metaphors that take their meaning from the surrounding social and historical context, and so perception and cognition are constrained by the linguistic or theoretical paradigms dominating the thoughts and behaviors of various communities. We cannot help but find ourselves drawn up into the flow of discourses that always already embody the subject-object unities representing in speaking and writing.

When we choose discourse over violence, we do so on the basis of a desire for meaning (Ricoeur, 1974), of an inescapable attraction to the beautiful (Gadamer, 1989, 1998), of a care that characterizes the human mode of being (Heidegger, 1962), of a considerateness for the human vulnerability of others and ourselves (Habermas, 1995), of an enthrallment with the fecund abundance of sexual difference (Irigaray, 1984), of the joy we experience in recognizing ourselves in each other and the universal (Hegel, 2003), of the irresistible allure of things (Harman, 2005), or of the unavoidable metaphysical necessity that propositions must take particular forms (Derrida, 1978).

All violence is ultimately the violence of the premature conclusion (Ricoeur, 1974), in which discourse is cut off by the imposition of one particularity as representative of a potentially infinite whole. This reductionism is an unjustified reduction of a universal that precludes efforts aimed at determining how well what is said might work to represent the whole transparently. Of course, all reductions of abstract ideals to particular expressions in words, numbers, or other signs are, by definition, of a limited length, and so inevitably pose the potential for being nonsensical, biased, prejudiced, and meaningless. Measures experimentally justifying reductions as meaningfully and usefully transparent are created, maintained, and reinvented via a balance of powers. In science, powers are balanced by the interrelations of theories, instruments, and data; in democracy, by the interrelations of the judicial, legislative, and executive branches of government. Just as science is continuously open to the improvements that might be effected by means of new theories, instrumentation, or data, so, too, are democratic governments continuously reshaped by new court decisions, laws, and executive orders.

An essential idea here is that all thinking takes place in signs; this is not an idea that was invented or that is owned by postmodernists. C. S. Pierce developed the implications of semiotics in his version of pragmatism, and the letters exchanged by William James and Helen Keller explored the world projected by the interrelations of signs at length. The focus on signs, signification, and the play of signifiers does not make efforts at thinking futile or invalidate the search for truth. Things come into language by asserting their independent real existence, and by being appropriated in terms of relations with things already represented in the language. For instance, trees in the forest did not arrive on the scene hallmarked “white pine,” “pin oak,” etc. Rather, names for things emerge via the metaphoric process, which frames new experiences in terms of old, and which leads to a kind of conceptual speciation event that distinguishes cultural, historical, and ecological periods from each other.

Modernists interpret the cultural relativism that emerges here as reducing all value systems to a false equality and an “anything goes” lack of standards. Unfortunately, the rejection of relativism usually entails the adoption of some form of political or religious fundamentalism in efforts aimed at restoring bellweather moral reference points. One of the primary characteristics of the current state of global crisis is our suspension in this unsustainable tension between equally dysfunctional alternatives of completely relaxed or completely rigid guides to behavior.

But the choice between fundamentalism and relativism is a false dichotomy. Science, democracy, and capitalism have succeeded as well as they have not in spite of, but because of, the social, historic, linguistic, and metaphoric factors that influence and constitute the construction of objective meaning. As Latour (1990, 1993) puts it, we have never actually been modern, so the point is not to be postmodern, but amodern. We need to appropriate new, more workable conceptual reductions from the positive results produced by the deconstruction of the history of metaphysics. Though many postmodernists see deconstruction as an end in itself, and though many modernists see reductionism as a necessary exercise of power, there are other viable ways of proceeding that remain to be explored.

The amodern path informs the trajectory of my own work, from the focus on the creation of meaning in language to meaningful measurement (Fisher, 2003a, 2003b, 2004, 2010b), and from there to the use of measurement and metrological networks in bringing human, social, and natural capital to life as part of the completion of the capitalist and democratic projects (Fisher, 2000, 2002, 2005, 2009, 2010a). Though this project will also ultimately amount to nothing more than another failed experiment, perhaps sooner than later, it has its openness to continued questioning and ongoing dialogue in its favor.

References

Derrida, J. (1978). Structure, sign and play in the discourse of the human sciences. In Writing and difference (pp. 278-93). Chicago: University of Chicago Press.

Fisher, W. P., Jr. (2000). Objectivity in psychosocial measurement: What, why, how. Journal of Outcome Measurement, 4(2), 527-563 [http://www.livingcapitalmetrics.com/images/WP_Fisher_Jr_2000.pdf].

Fisher, W. P., Jr. (2003a, December). Mathematics, measurement, metaphor, metaphysics: Part I. Implications for method in postmodern science. Theory & Psychology, 13(6), 753-90.

Fisher, W. P., Jr. (2003b, December). Mathematics, measurement, metaphor, metaphysics: Part II. Accounting for Galileo’s “fateful omission.” Theory & Psychology, 13(6), 791-828.

Fisher, W. P., Jr. (2004, October). Meaning and method in the social sciences. Human Studies: A Journal for Philosophy and the Social Sciences, 27(4), 429-54.

Fisher, W. P., Jr. (2005). Daredevil barnstorming to the tipping point: New aspirations for the human sciences. Journal of Applied Measurement, 6(3), 173-9 [http://www.livingcapitalmetrics.com/images/FisherJAM05.pdf].

Fisher, W. P., Jr. (2009, November). Invariance and traceability for measures of human, social, and natural capital: Theory and application. Measurement (Elsevier), 42(9), 1278-1287.

Fisher, W. P., Jr. (2010a). Bringing human, social, and natural capital to life: Practical consequences and opportunities. Journal of Applied Measurement, 11, in press.

Fisher, W. P., Jr. (2010b). Reducible or irreducible? Mathematical reasoning and the ontological method. Journal of Applied Measurement, 11(1), 38-59.

Gadamer, H.-G. (1989). Truth and method (J. Weinsheimer & D. G. Marshall, Trans.) (Rev. ed.). New York: Crossroad (Original work published 1960).

Gadamer, H.-G. (1998). Praise of theory: Speeches and essays ( Foreword by Joel Weinsheimer, Ed.) (C. Dawson, Trans.). New Haven, Connecticut: Yale University Press.

Habermas, J. (1995). Moral consciousness and communicative action. Cambridge, Massachusetts: MIT Press.

Harman, G. (2005). Guerrilla metaphysics: Phenomenology and the carpentry of things. Chicago: Open Court.

Hegel, G. W. F. (2003). Phenomenology of mind (J. B. Baillie, Trans.). New York: Dover (Original work published 1931).

Heidegger, M. (1962). Being and time (J. Macquarrie & E. Robinson, Trans.). New York: Harper & Row (Original work published 1927).

Irigaray, L. (1984). An ethics of sexual difference (C. Burke & G. C. Gill, Trans.). Ithaca, New York: Cornell University Press.

Latour, B. (1990). Postmodern? no, simply amodern: Steps towards an anthropology of science. Studies in History and Philosophy of Science, 21(1), 145-71.

Latour, B. (1993). We have never been modern. Cambridge, Massachusetts: Harvard University Press.

Ricoeur, P. (1974). Violence and language. In D. Stewart & J. Bien (Eds.), Political and social essays by Paul Ricoeur (pp. 88-101). Athens, Ohio: Ohio University Press.

[Via http://livingcapitalmetrics.wordpress.com]

Mankiw on Hypocrisy

Greg Mankiw defends Republican congressman who opposed the stimulus but are bragging back home about directing stimulus money to their districts. He points out that it is not logically inconsistent to both oppose government spending as a means to fight a recession, and to also direct such spending it to their constituents in the event that there is inevitably going to be stimulus.

I won’t disagree with the claim that the position is logical; once there’s definitely going to be a pie, it’s not wrong to fight for your share, and that’s important to point out. Furthermore, Mankiw admits, as will I, that he’s not familiar with the details of these supposed congressional hypocrites. I’ll go a step further though, and say that the details matter here, and without them you can’t really defend the congressmen.

For instance, when celebrating the greatness of a local stimulus project, a congressman owes the local constituents a disclaimer that if he could have things his way, he would rather this project not exist. Also, if he’s going to praise all the jobs created by it, he should probably point out that he believes the project on net is going to destroy jobs. If that’s logically consistent enough to please their constituents, then great. But to omit those points is to imply more support for the project than is accurate. Did the congressmen make those disclaimers?

Another problem I have with his defense is this metaphor of his:

Many Democratic congressmen opposed the Bush tax cuts… But once these tax cuts were passed, I bet these congressmen paid lower taxes.  I bet they did not offer to hand the Treasury the extra taxes they would have owed at the previous tax rates.  Would it make sense for the GOP to suggest that these Democrats were disingenuous or hypocritical?  I don’t think so.

A more apt metaphor would be if Democratic congressmen who opposed the Bush tax cuts then went to their home towns and made stump speeches bragging about the jobs those tax cuts were going to create. Would it make sense for the GOP to suggest that these Democrats were disingenuous or hypocritical? I think Mankiw would agree that it would.

[Via http://modeledbehavior.com]

Metrosexual Prof

I usually don’t blog about profs unless I’m complaining, but Metrosexual Prof (MProf for short) is just too amusing not to write about.  The first time I met him, I figured he was either a)your stereotypical gay, b) metrosexual, c)high.  I went with metrosexual because it seemed to fit best.  I’ve since discovered that he’s not any of the above, but the name just has a certain ring to it.

The first thing we, as a class, noticed about MProf is his ADDness….he’s literally all over the place.  He’ll be saying something, then cut off to have another conversation before returning to the original point, and if you ask a question, you really just want to be like “focus, prof, focus” because he’ll interrupt you and get distracted and go off on all kinds of tangents.  It’d be annoying if it weren’t so amusing.

The second thing we noticed was his complete addiction to Diet Coke.  Our class is 1 hour 15 minutes long.  He drinks two cans of Diet Coke every single class, without fail.  The one day he forgot his backup can, he had to leave the class to go buy a Diet Pepsi, and then had to keep going back to how “some people would see Coke and Pepsi as substitutes, but those people would be wrong….”  Then today he was a little late for class because he just flew in from Florida, and he was going through his bag muttering “oh no, oh no, oh no,” and we’re just like “you forgot your Diet Coke, didn’t you?”  He did, and he was freaking out.  His addiction is really quite amusing.

The most amazing thing about MProf is that even with his ADDness and general out-there attitude, I actually learn in that class, unlike some of my classes where the profs are really well qualified and really well focused, etc, etc.  I guess the fact that he makes it fun makes it way easier to pay attention and learn.  Yay for MProf!

[Via http://mojraj.wordpress.com]

Clueless...

That’s how I would describe Obama’s presidency so far. Obama’s most recent bout of cluelessness is his plan for a high speed rail. I’ve written about this in recent posts, and I have yet to see any concrete evidence that this makes any sort of economic sense. The most recent editorial in The Wall Street Journal continues to highlight how asinine this proposal is. All it will do is increase the budget deficit and create further spending obligations for all levels of government to subsidize a rail system that likely will not pay its own way. We don’t need more useless spending. We need less, especially less of the kind that creates recurring burdens on our budgets for the foreseeable future. Obama just doesn’t get it…

High-Speed Spending

This train is going to Disney World no matter what it costs.

Next to national health care, no liberal dream has lingered longer in the nation’s public policy than high-speed rail. No surprise that it hit the ground in President Obama’s State of the Union speech.

Like health care, the justifications shift with the political winds. High-speed rail’s current rationale, needless to say, is jobs. Unlike real jobs created by the private sector, taxpayers get to pay for those in high-speed rail. Let’s look at the Orlando-to-Tampa proposal.

Start with the number Mr. Obama attached to an Orlando-Tampa high-speed railway: $1.25 billion. That’s a lot but cannot possibly be the bottom line. With rail, it never is. Florida voters know it too.

High-speed rail has a long history in Florida dating to 1982 when the governor established a development committee. Florida has since nixed high-speed rail three times because of costs. In 2004, voters repealed a 2000 ballot initiative requiring the state to build a high-speed rail system because they didn’t want to foot the bill.

You would think this nearly 30-year history of rejection would send a signal to the train lobby, but with the Obama revival, it’s back. The Florida Department of Transportation estimates the Tampa-Orlando project will cost $3.5 billion. But according to a 2009 GAO report, new high-speed rail projects in France, Spain and Japan average $51 million per mile. You read that right—$51 million per mile. That would put the cost of the Tampa-Orlando line at $4.28 billion. Which means the state will be on the hook for $3 billion.

The president of Florida Transportation Builders Association Bob Burleson has said the state legislature doesn’t have much appetite for building and maintaining a high-speed rail system just now, as it already has cut funding for transportation projects this year.

The private sector doesn’t want to invest because of uncertainty about costs and ridership. The state projects ridership at between 1.9 and three million a year, but as the GAO dryly notes, “a systematic problem and incentive to be optimistic may exist” in forecasts of profitability based on ridership and costs.

Internationally, only two high-speed railways have managed to pay off their capital costs with ticket revenue, and Europe and Japan are better suited for intercity high-speed rail than the 84-mile stretch between Tampa and Orlando. The Congressional Research Service doesn’t even list the Tampa-Orlando line as one of the top 12 city-pairs for potential ridership. High-speed rail in Florida hasn’t left the station because its economics make no investment sense for companies or taxpayers.

Vice President Joe Biden says the Orlando-Tampa $1.25 billion is merely “seed money” and that “more funding is going to come in the future as progress is made.” Sounds to us like this project is on track to be too big to fail.

Printed in The Wall Street Journal, page A12

[Via http://ml106.wordpress.com]

Measuring Poverty (5): The Mystery of the Feminization of Poverty

Regular readers of this blog know that we strongly believe in the importance of accurate data and numbers on human rights violations. This is perhaps even more the case for the rights violation that is called ”poverty”: one can assume that, to some extent, poverty can be tackled more efficiently with adequate government policy, compared to other types of rights violations which perhaps are relatively more dependent on cultural and religious factors that are resistent to government intervention. (Which doesn’t mean poverty can’t have cultural causes, or that the cultural causes of other types of rights violations have to be accepted fatalistically). And adequate government policy depends on good statistics.

Regular readers also know that we believe that the importance of human rights statistics is matched by their lack of quality. One example of this is the often quoted but baseless claim that 70% of the world’s poor are women. This is a number that seems to have come from nowhere yet it has taken on a life of its own. The reason is probably that it has some intuitive appeal. Theoretically, the claim that being female places someone at a greater risk of being poor is convincing. Gender discrimination – which is a deceptively neutral term meaning discrimination of one gender only - is a widespread problem and it’s highly probable that women who suffer discrimination are more likely to be poor and to remain poor. They

• receive less education
• receive lower wages
• cannot freely choose their jobs in some countries
• have less inheritance rights than men in some countries
• perform the bulk of the household tasks making it relatively hard to accumulate income
• often are responsible for the household income (men are often culturally allowed to escape into leisure and get away from the burdens of poverty)
• suffer disproportionately from some types of violence
• and face very specific health risks related to procreation.

All these problems faced by women who suffer discrimination make it more likely that they are relatively more burdened by poverty, compared to men who usually don’t suffer these types of discrimination.

Moreover, when young women begin to enjoy better education and employment we often see that the discriminatory features of the family structures and patriarchal systems in which they live make fresh appeals to their newly found human capital. As a result, their improved capabilities only serve to push them more into poverty. Poverty, after all, isn’t merely a question of sufficient income and capabilities, but is also determined by the availability of choice, opportunities and leisure.

So it’s obvious that men and women are poor for different reasons, and that some of the reasons that make women poor make them relatively more poor compared to men.

This is the intuitive case, but it appears that it’s very difficult to back this up with hard numbers. The “70%” claim is unlikely to be correct, but if we agree that discrimination skews the distribution, then how much? And how much of it is compnesated by factors that skew the distribution towards male poverty (e.g. male participation in wars). The problem is that poverty data are usually available only for households in aggregate and aren’t broken down by individuals, sex, age etc. So it’s currently impossible to say: “this household is poor, and the female parent/child is more poor than the male parent/child”. In addition, even in households that aren’t poor according to standard measures, the women inside these households may well be poor. Women is non-poor households may be unable to access the household’s income or wealth because of discrimination.

Given the problems of the current poverty measurement system, I think it’s utopian to expect improvements in the system that will allow us to adequately measure female poverty and test the hypothesis of the feminization of poverty.

[Via http://filipspagnoli.wordpress.com]

Budget must address the huge problem of property booms

I’m no great shakes when it comes to understanding micro-economics and fiscal stuff. (Macro-economics for that matter too.) But several people have asked me what I’ve thought of the New Zealand government’s recent pre-budget announcement, particularly in relation to tax. So here goes.

I may be a bit strange, but I tend to look at budgets more in terms of fairness to all and what will make the citizenry better able to face the future, not so much in terms of how much better or worse off I will be. My long-term thinking is that the fairer and more sustainable the way our representatives collect and spend tax money, the happier most people will be and therefore the more pleasant and positive-thinking the community I live in will also be. If this happens, I win in the end even if my financial wealth status is down a bit.

Which it will be, in all probability. Being “older” and dependent on superannuation plus releasing money I saved over the years, my tax bracket is so low now (it wasn’t once, mind) that I doubt I’ll get much of a boost from any tax cuts. But it appears I will still be paying extra GST that will be compensated for only in the component of my income that comes from NZ Super.

However, although I do sympathise with people who are really struggling and simply cannot tighten the belts any further, I see the GST rise as being pretty minor in proportion to the general money coursing around the economy these days. I’m more concerned about the fairness of tax rules for those who are comfortably off, and how these may affect the ability of our economy to settle at a more sustainable state than it was in during the last property bubble.

Meaning what? Meaning that for years I, like quite a few others, have been particularly concerned at how the tax loopholes in favour of property investment (over savings or investing in something that actually benefits the country) have skewed our way of life so much that we are now collectively in so much debt. And I’m now equally concerned that the people who indulged in property trading (“climbing the property ladder”) and renting out in order to get fast tax-free capital gains, and use ludicrously unreal depreciation rules to get rich quickly, at the expense of people doing productive work who were/are being priced out of owning a house.

If any of these unfair and unequal uses of tax rules are actually implemented come budget time, to anywhere near a reasonably fair system, then certainly there will be lots of people hurt as a result – both property investors and people forced to rent. And house values will probably drop again.

But I think that that’s something we have to face as part of a move to an ultimately more sustainable and fair system. A one-off hit for a few years. In recent decades (particularly the last), property investors have in the main done very well indeed, thank you very much, at the expense of the rest of us. All tax changes hurt some people and sectors and please others. Until now tax rules have operated to please investors and hurt people trying simply to own a home. It seems this is about to change, and I’m glad of it.

I’ve always been comfortable with GST as a tax mechanism, as it forced tax dodgers to actually contribute to paying for the public goods and services they use. It’s not perfect – GST does constitute a much higher proportion of the disposable income of poorer people than the very rich – but it’s better than PAYE and Company tax mechanisms alone (spoken as someone who until the mid-80s paid PAYE with no ability to dodge it).

GST percentage changes are for most people only marginal changes. But the tax dodges allowed and encouraged through property investment have been having an absolutely huge impact on our economy through the recent property boom, so much so that when the property bubble looked like popping (though it looks like it only deflated a bit), the result was a huge wave of fear and insecurity through the rest of the economy. So if we don’t take action to address this, by changing property tax rules, then I believe it is inevitable that we will soon re-live the recent past, to our greater detriment in the medium-term future.

I would much rather see property prices hold for as long as they can, or even drop quite a bit, and reach a sustainable equilibrium that’s fair to all, than to see everything go back to property boom days. I’ll support any taxes that will make this the number 1 priority – even if it means that some now-well-off property investors take a big hit.

[Via http://imaybewrongbutnz.com]

The Power of Money... it's Your Vote

In my last post [Democracy is Dead... Capitalism Reigns] I discussed my lack of faith in our political system and its leaders to do the right thing.  The world leaders of our most developed nations are far more concerned with issues relating to their economy than about anything else, including the global climate crisis.  Many world leaders have accepted that climate change is one of the greatest challenges of our time, and yet they are not willing or able to create significant change in this regard.  Many of our world leaders view global climate and environmental issues as separate or ‘external’ to their more pressing economical issues.  The truth is that the environment is not an externality,  climate change is not separate.  Without a healthy, sustainable planet, there will be NO economy.

Alright, so what do we do with this knowledge?  We need to understand the power of our vote.  And by that I do not mean our vote in our systems of Democratic government – as I’ve said – true democracy is dead.  We need to realize the power of our vote in the reigning system of Capitalism.  In this system we vote virtually every day, but with a different ballet known as the dollar.  We vote every time we exchange capital.  Every time that we hand over money or credit, we are voting for that product.  We are saying that we want that product, that we support that company, or that we support that industry.  We need to think very carefully about how we spend our money.  Many of us are simply voting too much, on things that we don’t need or really even want.  We are often voting for things that do not even make us feel good about ourselves.  This is rampant consumersism, this is capitalism.  This is the power of our vote.  The system of capitalism is more powerful than our systems of government.

Again, can we do with this knowledge?  We need to accept that quick and important changes are needed for our survival.   And we need to accept that we are in control.

[Via http://ryanflood.wordpress.com]

Video

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Foreign debt and Haiti

From a personal perspective, I have followed the developing country debt debate for many years now.  In my Economics degree I majored in Economic Development and International Economics where the “debt problem” formed part of both courses.  In those days in the early 1980’s, Susan George and Therese Hayter were loud critics of the way in which developing country debt was unfolding.

On the other side of the political fence, some economists were concerned about developing countries not paying their debt (in Latin America in particular) and what such an outcome this would have on the lenders.  Some readers may recall that there was an international “debt crisis” that lasted between 1975-1985 that threatened the very fabric of the emergent global economy.

Cut to the 2ist century and journalist Naomi Klein, very much in the mould of Hayter and George, campaigns from the Left about the perceived injustices that befall developing countries through rich-country policies and actions.  Klein is the author of the book “No Logo”, among other critical works of global capitalism. In this latest article in the The Guardian from the UK she writes about Haiti and foreign debt.

Klein writes that while it may seem a positive step forward for the outstanding country debt in Haiti to be written off in the light of the catastrophic recent earthquake, there is more to the issue than simple debt forgiveness.  Klein highlights four key reasons as to why it is the West that owes a debt to Haiti:  slavery, US occupation, dictatorship, and climate change.  The detail is in the article.

The thinking point here is whether Klein’s four points are  really valid and realistic.  How much is the historical legacy something to be paid for by the generations of today?  Such a question is important for many societies, especially where settler societies have impacted upon indigenous populations.  And what is the responsibility of rich countries for the negative economic and social impacts of future climate change, a situation unresolved at the Copenhagen Climate Conference only a couple of months ago? And finally, how much responsibility do rich countries have for the economic position of developing countries after so many decades of developing country independence?

The questions may be emotionally charged and extreme, but they are indeed worthy of thought amongst readers of the global development literature.  Often, the development literature takes a rather bland look at real-life situations that affect real people.  Mostly, this is the context in which the development literature is written.  But sometimes it is worth looking at articles with plenty of emotion, lots of conjecture and debate, and some real opinion-making.  As such, I will be using selected newspaper reports to highlight some emerging issues that are likely to effect the development “literature” world in the coming years.  As such, the opinions and perceived biases remain with the original articles.  Thinking about and debating these articles is the purpose of the week’s news stories.

[Via http://tksausaid.wordpress.com]

Commercial Real Estate Development Sees Slow Recovery

The economic fall-off of the past two years has likely bottomed out, but the fall-out hasn’t been fully felt, and the coming rebound is likely to be slow in taking shape. That was the message delivered by a panel of experts to the 250 attendees of NAIOP New Jersey’s Annual Meeting and Real Estate Forecast .

Locally, Patrick O’Keefe, director of economic research for J.H. Cohn, applauded NAIOP New Jersey’s advocacy in Trenton for its impact on getting measures passed that helped stabilize the industry. 

In the larger sense, “a recession technically ends when things stop getting worse but they’re not necessarily getting better,” O’Keefe explained. “GDP grew in the third quarter of 2009, and other indicators are trending upward. But the problem is that we’re still losing jobs.”

How will recovery proceed? “Because it was largely caused by a financial crisis, we expect it to happen slower and take longer than past recessions,” O’Keefe predicted. “For non-residential real estate, 2010 will not be a good year because of the slow job growth. Employment will be the driver for what those in commercial real estate want to do.”

And for New Jersey in particular, he predicted a similar scenario of rising GDP but lagging employment, with non-residential construction lagging throughout the year.

[Via http://pegroup.wordpress.com]

Back to the Drawing Board

In just about every speech at their 2008 convention, Democrats promised voters that a change in the White House would, in Barack Obama’s formulation, restore “our moral standing” in the world. Replace the unilateralist cowboy at the top with a humbler multilateralist, and the path would finally be cleared to fix vexing international issues such as curbing carbon emissions and dealing with the mullahs in Iran. Like many of the party faithful’s long-nurtured beliefs, this hope has disintegrated on contact with reality.

via Back to the Drawing Board – Reason Magazine.

[Via http://inzax.us]

Perdagangan : Memotret Kegagalan Ekonomi Pasar

Memotret Kegagalan Ekonomi Pasar

Koran Jakarta, Rabu, 10 Februari 2010

Judul : Transformasi Besar: Asal Usul Politik Ekonomi Zaman Sekarang

Penulis : Karl Polanyi

Penerbit : Pustaka Pelajar

Tahun : I, 2009

Tebal : 363 halaman

Harga : Rp 37.500

Karl Polanyi adalah sejarawan ekonomi modern terkemuka abad ke-20. Beberapa karyanya menyoroti mata rantai perkembangan pemikiran ekonomi modern yang berkembang di Eropa Barat.

Buku Transformasi Besar: Asal Usul Politik Ekonomi Zaman Sekarang (Origins of Our Time: Th e Great Transformation) merupakan adikarya pertama dari Karl Polanyi, dosen sejarah ekonomi di Bennigton College dan University of Columbia, Amerika Serikat.

Buku ini memotret sejarah periode awal transformasi ekonomi di Inggris yang pada akhirnya memengaruhi belahan dunia lain, Eropa Barat, bahkan Asia, yang belakangan juga ikut terseret arus besar ini.

Tesis utama dari buku ini adalah kritik terhadap kapitalisme modern yang menurutnya adalah anomali sejarah.

Polanyi mengkritik ekonomi modern yang menurutnya telah mengubah relasi-relasi sosial dengan mendefi nisikan sistem relasi sosial dengan relasi-relasi yang bersifat ekonomi.

Menurut Polanyi, pada masa sebelum lahirnya kapitalisme, pengaturan-pengaturan ekonomi justru sebaliknya, tertanam dalam hubungan sosial.

Buku ini terbagi dalam tiga bagian. Pertama, Polanyi melakukan tinjauan terhadap realitas perubahan relasirelasi sosial yang terjadi di Inggris dan Eropa Barat.

Kemunculan ide tentang self regulating market (pasar swatata) telah mengubah relasi sosial, pola industri, dan paradigma sosial di kawasan tersebut.

Lewat pemotretan yang cermat, Polanyi mengambil suatu kesimpulan bahwa self regulating market merupakan sebuah utopia. Dalam bagian ini, Polanyi juga menyinggung tentang perimbangan kekuatan antarnegara.

Kedua, Polanyi dengan lugas mengkritik ekonomi pasar dan kegagalan fi lsafat liberal dalam memahami permasalahan perubahan di era itu.

Dengan tegas Polanyi menyatakan liberalisme telah salah dalam membaca sejarah revolusi industri. Basis kegagalan liberalisme adalah sikap bersikukuh untuk menempatkan dan menilai peristiwa-peristiwa serta relasi-relasi sosial melulu dari cara pandang ekonomi.

Di bagian ini, Polanyi memotret sejarah dampak revolusi industri serta dominasi paham utilitarian ortodoks dan pengaruhnya terhadap relasirelasi sosial di Inggris dan Eropa Barat pada saat itu.

Polanyi berpendapat dalam masyarakat kapitalistik (di bawah dominasi paham utilitarian ortodoks), pemerintah tidak lebih sebagai pelayan kapitalisme dan membantu memajukannya lewat produk undang-undang, regulasi, bahkan kekuatan militer.

Pada bagian akhir buku ini, Polanyi membicarakan tentang mekanisme yang mengatur perubahan sosial dan perubahan di tingkat negara pada masa itu (pascaperang dunia I). Polanyi juga mengemukakan munculnya permasalahan masyarakat pasar, yaitu intervensionisme dan mata uang.

Peresensi adalah Fahmi Alatas, Koordinator Komunitas Saung Buku

[Via http://jakarta45.wordpress.com]

On Smart Growth Conference

This is a re-posting to the blog entry I wrote for Sustainable Seattle about the Smart Growth Conference that just wrapped up on February 6, 2010.

For the original posting please go to:

http://sustainableseattle.blogspot.com/

Smart Growth Conclusions

The Smart Growth Conference ended on Saturday in one of the most inspirational ways with a powerful speech by former King County Executive and current Deputy Secretary of HUD Ron Sims.

In a wide ranging speech from the immediacy of combating Climate Change to the revitalization of our Urban centers, which Mr. Sims defined as any gathering of people with a semblance of central population and industry, Mr. Sims brought a reverential tone to the closing ceremonies. Many in the audience were shouting out agreement, clapping and nodding their heads. Many times the speech would be humorous and laughter would erupt suddenly to disperse as Mr. Sims slammed home a truism.

He spoke of sustainability and livability as two sides to the same argument often pairing the two terms in a quick slur of a phrase repeatedly. The two terms were then tied to the process of social justice and fair treatment. He made the point numerous times that nothing of consequence will change until we realize that we are all in this together and what happens to your neighbor does affect your own happiness. If there is no social justice everywhere there is no social justice anywhere.

Social Justice is an integral part of sustainability and there must not be a wall between the rich and the poor and a wall between the classes. We need to make the aspect of equality reach every section of our sustainable theories and practices. Make equality a means and an end.

The speech was a call to action for the three hundred or so crowd who gathered in the Convention Center Ballroom. It was practical and far reaching. It sent goosebumps at times with a silenced crowd when Mr. Sims talked about the struggles his parents went through and the incredible amount of personal strength it took them to be dehumanized in front of their children. The struggle of civil rights and fair treatment was used as an example of an idea that seems self evident in hindsight, but was unheard of when it began. He challenged us to again challenge the status quo and the expected outcomes.

“Think like a movement,” Mr. Sims said, “Give up your single interests and your silos. Everything is connected whether you are a builder, a planner, a teacher, or an advocate.”

A major theme in the speech was the power of diversity and terminology. “Begin to realize the power of terms. Terms have power.” He wanted us to realize that the actions that take place in the communities we are trying to reach will fail if we do not frame the issues in terms the community will understand. We need to find the terms that are accessible and precise. We need to stop using our acronyms and jargon and connect the meaning back into our talk.

“The United States is the great human experiment. We are the first nation in history to be an economic power, a military power and a social power without a common ancestry. Our diversity of cultures, peoples, and backgrounds is what gives us our strength. Can you communicate with the people who look different than you?”

“Ignorance creates terrorism, disease, and war. We need to break the chains of ignorance.”

“You may have a big house, but if you can’t even talk to your neighbors, you are lonely.”

“Poverty will not keep us apart.”

The listening crowd was paying attention. They were not tapping on Blackberries or checking their Facebook status. They were looking and leaning forward. They stood up when called to and the ovation was genuine, positive and energized. Now the challenge is to keep going.

“In a relay teamwork matters and it doesn’t matter how big a lead you have if the baton doesn’t get passed on. You are the person I hand the baton to. Now, how are you going to win?”

[Via http://endithinks.wordpress.com]

Vote for the Dynamite Prize in Economics

Those who are not entirely enthusiastic with the dominance of neoclassical economics might enjoy to vote for the “Dynamite Prize in Economics”, to be awarded to the three economists who contributed most to enabling the Gobal Financial Collapse (GFC).  In addition, the “Noble Prize for Economics” is going “to be awarded to the three economists who first and most cogently warned of the coming calamity.”

Here an excerpt from the announcement by the organizers, the Real World Economics Review Blog:

It is accepted fact that the economics profession through its teachings, pronouncements and policy recommendations facilitated the GFC. We also know that danger signs became visible long before the event and that some economists (those with their eyes on the real-world) gave public warnings which if acted upon would have averted the human disaster.

With other learned professions entrusted with public confidence, such as medicine and engineering, it is inconceivable that their professional bodies would not at the very least censure members who had successfully persuaded governments and public opinion to ignore elementary safety measures, so causing epidemics and widespread building collapses.

To date, however, the world’s major economics associations have declined to censure the major facilitators of the GFC or even to publicly identify them. This silence, this indifference to causing human suffering, constitutes grave moral failure. It also gives license to economists to continue to indulge in axiom-happy behaviour. Nor has the economics establishment offered recognition to those economists who were not taken in by fads and fashion and whose competence, if listened to, would have prevented the collapse.

These two silences reveal a continuing moral crisis within the economics profession. The Dynamite and Noble Prizes for Economics are being offered as small first steps towards a cure.

[Via http://doingphd.wordpress.com]

A new model in technology innovation: "Search and Development"

Source: today.ucf.edu

Cleantech is on its way to potentially become the next transformative wave of innovation. As often, anticipating what the future will hold is about understanding how the past unraveled. Indeed, there is much to learn both in terms of investors’ mental models and potential analogies from past waves like the Internet and Biotech.

The emergence of Information technologies marked the triumph of the VC-backed model. The business and mainstream media helped build the myth of the geeky tech entrepreneur and the all-powerful venture capitalist. The lesson we all learned was that an idea could quickly move from concept to a reality – potentially unleashing millions of dollars while doing so. Of course in the process, numerous shaky business plans were funded; people saw value where there was just wind. Yet, tech entrepreneur/VC tandem survived the bubble and still embodies in our subconscious the perfect combination to generate technology innovation.

As a consequence, people still believe that this is the model to go for the next technology innovation. That is why, you see cleantech entrepreneurs and VC striving to walk the cleantech “revolution” along the same path i.e. funding, IPO, etc. However, savvy investors and business pundits raise some valid concerns as to the validity of the analogy. The beauty of the IT revolution was, and still is, that the development costs to reach scale are very limited. On the contrary, most of the cleantech requires longer development lead time and thus funding up to 10 times what was necessary for the proof of concept in the IT world. How many firms can realistically raise 100 million of dollars through the VC world to develop a conclusive prototype? The analogy falls short and begs for another point of reference.

The biotech wave took longer to reach our shores. Decades passed between the first academic discoveries in the 1970s and the arrival on the market of biotech drugs. One of the reasons is that many start-ups with great ideas and sometimes tremendous academic brainpower learned the hard way that developing a drug was a long, risky and thus very expensive process. Despite the lure of blockbuster-like profits, few biotech start-ups made it to the final line on their own like Genentech or Amgen. Contrary to biotech enthusiasts’ predictions, Big Pharma stood strong and barely felt the pressure from the herd of hungry start-ups. Proud of its R&D pipeline that brought so many blockbusters, Big Pharma believed in its capacity to invent its way to growth. Knowing how precious a potential candidate drug out of the research pipeline is, Big Pharma focused on building the most optimal development and sales pipeline to get the maximum return on their research investment. Despite all their efforts, Big Pharma research pipeline soon became too institutionalized: optimal to find incremental gains but less for leap-frogging results. When the pipeline started to dry up, the deep-pocketed Big Pharma realized that it may be time to look at the biotech start-ups as a pool of out-of-the-box innovation rather than a pool of potential competitors. A recent article from Reuters revealed the extent to which Big Pharma evolved from a R&D powerhouse to some kind of Pharma PE/VC firm able to assemble portfolio of candidate drugs through partnerships with start-ups and academic research labs. Some mid-size companies like Shire or Forest Laboratories even brand themselves as “search & development” company. Pfizer, AstraZeneca and others seem to also believe that slashing your research department is also the way to go – Pfizer plans to cut its research budget by $2-3 billions by 2012.

Thus, success in cleantech will rely on the ability of investors and entrepreneurs to leverage the right analogy. Software-based cleantech solutions will still thrive through the usual VC-backed channels. On the other hand, any entrepreneur with a technology requiring hundreds of millions for development should look for partnerships with deep-pocketed industrial groups. As a matter of fact, the limited number of IPOs for hi-tech hardware solutions corroborate this assumption – A123 , Vestas and others being exceptions to the rules. However, industrial groups are sometimes miles away from having the right mental model for a “search and development” approach. Thus, a lot of education will need to happen in those groups to make cleantech a reality faster than it took for biotech. In the future, we should see more established groups embracing an ambivalent model with a R&D department working hand in hand with a VC-type of entity. Actual VC will then play an interesting role of referral – connecting the dots in the long-awaited networked future that Tom Malone painted in his book the Future of Work.

[Via http://vitaminsforfutures.com]

A disgusting display of bureaucratic force from the Chicago Department of Public Health

Lynne Kiesling

This is so vile, so disgusting that I am literally nauseated at my desk as I write. One of the ways that independent chefs, caterers and confectioners economize on their substantial fixed costs is by sharing kitchens. In Chicago, the business license treatment of such kitchens from the Chicago Department of Public Health has been uncertain: does the kitchen owner have to be the one with the license, or does each user of the kitchen have to have a separate license?

Last night, due to a paperwork miscommunication and Kafkaesque bureaucratic process of trying to sort this out, the Chicago Department of Public Health destroyed organic fruit purées that Flora Lazar of Flora’s Confections prepared over the summer and preserved to use in her much-touted and anticipated Valentine’s Day confections. These officials tore open the bags and bleached the food so that it could not be put to any use. I’m going to quote Chicago Tribune reporter Monica Eng here at length, because she was there, and her post illustrates exactly how senseless and appalling this destructive CDPH behavior is, but there is more at her post, so please do go read more there.

In a sad struggle that unfolded in a West Town kitchen Thursday night, Department of Health inspectors seized, slashed open and poured bleach over thousands of dollars of local peaches, pears, raspberry and plum purees owned by pastry chef Flora Lazar. She’d purchased the fruit from Green City Market farmers last summer and had planned to use it to make local fruit gelees for her business, Flora Confections.

More than $1,000 of food owned by the Sunday Dinner Club caterers was also destroyed by health department inspectors.

Inspectors cited no health problems with any of the food. They even encouraged Lazar’s son to eat the confiscated granola bars from Sunday Dinner Club. They only said the food was prepared by chefs who didn’t have the proper business licenses to prepare and sell it. …

The destruction of organic artisanal granola bars and local fruit from Klug Farm and Hillside Orchards is heartbreaking to any local food advocate. But for Flora Lazar, this setback, the week before Valentine’s Day is devastating.

“This puts me out of business for six months,” a despondent Lazar said. “I have done everything by the rules. Instead of making the food at home, which I could easily do, I sought out and rented space in a licensed kitchen. When they finally said we could apply for a separate license, I did that. I paid my $600 and invited the inspectors here today.”

If Lazar had been less transparent and left her cooler in her car during the inspection, she would probably be cooking today. Inspectors were mostly destroying food that had been prepared before their arrival. But she estimates that her honesty and attempt play by the rules just cost her $6,000 in revenue. She says the fruit purees, harvested at the peak of Midwest ripeness, are “irreplaceable.” …

But until recently the city had no clear policy regarding shared use kitchens, says Kitchen Chicago owner Alexis Levering. When she secured her latest space she said she confirmed with the Department of Licensing that it was zoned for shared use. The department further assured her that as the licenseholder, she would be responsible for any food safety issues associated with her clients, she says.

Later, though, Licensing said her clients would all need to apply for their own licenses, and with each application they’d need to get a new health inspection, giving the little niche kitchen exponentially more inspections than the busiest restaurants in Chicago.

But when Kitchen Chicago users went to the department, they were told again that they couldn’t apply for the license because it was at the same address as Levering’s license. The confusion continued for months until recently, Levering said, a department representative told her that now he would make sure that renters could apply for the licenses. He further told her, however, that any violations committed by one chef would mean a ticket for every cook who rents space in the facility, meaning possibly thousands of dollars reaped by the city for a minor infraction by one cook the others might have never met.

“That’s like giving everyone in the car their own ticket when a driver is stopped by the police,” she said.

This week, it seemed as if the kitchen was finally making progress with the department and, indeed, two of the businesses, Sunday Dinner Club and Flora Confections, had their license applications accepted, paid their fees and were told the inspectors would come Thursday.

The inspectors arrived at 9:30 a.m. and didn’t leave until nearly 5 p.m., when their final act was to destroy hundreds of pounds of local, organic, often unopened cheese, cassoulets, granola bars, frozen fruit purees, baking ingredients and more with a gallon of bleach.

Officials never said that the food posed a health risk. At best it was a victim of paper work confusion among city bureaucrats who couldn’t agree on a policy. But since no one at the city will comment on the situation, part of the story remains unclear.

Francis Guichard who is the CDPH food protection director called this morning to say that her inspectors could not allow the food to move from the building because they could not ensure where it was going. Licensing has still not commented on the issue.

At one point, one of the cooks suggested that the unopened food at least go to the Greater Chicago Food Depository rather than being destroyed. That request was denied. Watching the destruction of all of this perfectly edible food, you’d never know we live in a state where one out of 10 households doesn’t have enough food to eat.

The Health Department inspectors are expected back at the kitchen today to destroy the rest of the food they deem unlicensed.

These so-called “protectors of public health” destroy the inputs into an entrepreneur’s business in her busiest season, despite acknowledging that the destroyed food poses no health risk. These so-called “protectors of public health” destroy perfectly healthy food instead of even giving to hungry, needy people. On what grounds can these so-called protectors of public health have any legitimate claim to be doing valuable work on behalf of the people of Chicago? And I pay how many thousands of dollars in taxes every year to support this kind of wasteful, counter-productive, aggressive, megalomaniacal activity?

If these City of Chicago employees are indicative (and I think they are) of the attitude of city government toward entrepreneurship and toward the value of meaningless bureaucratic gestures that keep income out of the pockets of entrepreneurs and food out of the mouths of people, then I am truly ashamed and embarrassed to call this my home. It adds insult to injury that I pay such high taxes for the privilege of living in such a despotic city. Yes, I mean despotic; we Chicagoans know that there are many dimensions in which such a word is not hyperbole.

I also sympathize with the first commenter on Monica’s post:

And the Government still doesn’t think the Revolution is coming?

[Via http://knowledgeproblem.com]