Chris Butler_

A New Productivity Revolution

First of all, thanks for the article Jeffrey. But I take exception with a previous comment from AmericanWorker. He's confused on a few points. (1) He writes, "If you worked in business..." The author's bio very explicitly informs us that he is in the investment management business. (2) "Americans are worked to death." And exactly how was this conclusion arrived at? Because one organization says Americans live, on average, a year less than the most healthy European nation? Since the average American life expectancy has done nothing but go up, by this logic, shouldn't Americans be working less over the last 100 years? Or, maybe all that nasty work has led to innovations which keep us living longer. (3) "Corporations have taken advantage of the current job market and cut head count." I'd hardly classify this as "taking advantage of" a bad economy. If hiring more people, or keeping the current workforce was profitable, I'd say they've made a terrible mistake. However, the goal of a business is to make profit - it's not to hire people. These businesses were forced to lay off workers as a means of survival. They obviously thought (and probably correctly) that retaining current employees was not contributing to that goal of survival. (4) Finally, and most importantly, AmericanWorker missed the point entirely. Productivity has very little to do with the number of people working. It's a ratio of output per unit of input, where labor is an input. This ratio does not have to get smaller in a recession, but usually does (I presume) because more is expected of less, which ends up hurting productivity, whether the input is labor or machinery.

Tyler Cowen's Thoughts on America's Energy Policy

Wow. One thing about this article is clear. Apparently, many people actually do sit around all day and think about ways to make energy less affordable. So here's my contribution to that effort: let's pay a couple million unemployed people to drill the rest of the earth's oil, pay another couple million unemployed to build and load rockets full of the oil and send it to some far away planet. At that point we have a policy choice: (1) we either pay more unemployed people to ship it back to earth, thereby increasing the cost of bringing oil to market, and thereby driving up its price, or (2) we blow up the far away planet, thereby reducing the supply of oil to nil, which would of course drive the price of oil to infinity. I'm leaning toward (2) if someone can assure me that we can put another couple million unemployed to work to blow up the planet.

The Economy Now: A 5-Point Summary

Nice summary. Thank you for the post. But I beg to differ with your point that "hubris in finance led us into this crisis." I don't know that hubris in finance led us here. I think several factors led us here, including the hubris of politicians that sought to put anybody with a pulse into a home. How about the hubris of the Fed that thought holding Fed Funds rates at 1% for a full year would escape unintended consequences. Now if by "hubris in finance" you mean the arrogance that goes with constructing mathematical models inteneded to "manage risk," I agree such hubris was a trigger to the current crisis. Somehow, though, I don't think this was your point.

Further I question what kind of "progress" we get by having the current administration "fix" any of our problems (like helathcare and other "reforms"). These are the same people that contibuted to our current problems. These are the same people that didn't see this crisis coming. No, I don't think we need their "fixes" or their "reforms."

Bond Auction Final Words and the Importance of Macro Thinking

First, great post. Thank you. I agree that the deflation scenario proffered by Denninger is a little off the mark. The Fed has articulated its inflationary intentions in about as many different ways as they possibly can. They will err on the inflationary side and they should. China, for one, clearly does not buy the deflation thesis. Not that their CB is any more prescient than any other, but they're a huge buyer of of our debt. They have put some of their money (at least) where their mouths are. I would be interested to know how much of the 30-year paper they took. If they took a fairly large piece, I may have to rethink my own thesis.

Why Wal-Mart Hirings Do Not Help U.S. Economy

This drivel was painful to read. I lost 10 IQ points start to finish. I'll just point out one thing. I'm not sure what the "government inquiry" looked at (source link?), but giving WM tax incentives to open a store is not done without the expectation of getting something back. Think about it. 200 or so people who had no job or income prior, now do. They spend it somewhere. Where they spend it, somebody benefits. Others benefit from Wal-Mart's low prices. Wal-Mart bashing is the most mindless leisure activity since someone first got high on paint thinner.

Brazen Bank Tunneling and Inflation

If I were a bank, I too would like to "participate in the upside" and have my donwside covered by other people. I'd also like to thumb my nose at the prospect of raising capital. After all, that money should be going to me and my banking homeys - call it "salary" or call it "bonus." I'd leave that up to you. Who wouldn't want this deal? The problem is not that banks *want* this deal. Everybody thinks they're worth more to an enterprise than they really are. Everybody feels entitled.

The problem is that only one institution can give it to them - the Feds. Why blame the bankers who are acting like bankers have acted since Midici? Blame the enablers! Blame the people who will not let the free market kick these guys to the curb. The free market wanted to give these guys their one-uppance and Paulson, Geithner, Bush, Obama and Bernanke wouldn't allow it. Too much economic pain, we were told.

Bankers need to be bashed - don't get me wrong. They made some epic bad decisions. But the absence of enabler bashing is really starting to bring me down. These bureaucrats are putting the clown suit on all of us. And we're helping them by whining about banker behavior. We might as well help them put the big floppy clown shoes on our feet and put the big red noses on for ourselves.

Recession Still Going but Market Is Headed North

While I acknowledge the possibility of a conspiracy with MS and GS, I think it's more likely that most analysts are simply not that good at what they try to do. Even the weatherman is dealing with the physical world, making his or her task comparatively easier than those forecasting human behavior. Also, let's not forget that most of these folks think as a stock sinks toward $0 per share, it's becoming more of a value. So, you tell me. Conspiracy? Or is it more likely the result of poor logic, ineffective tools (math), erroneous assumptions and the difficult nature of the job to begin with? For me, it's easier to believe the latter. Still, a nice SEC investigation wouldn't hurt my feelings.

With Backwardation, Higher Gas Prices This Summer

Excellent analysis. Thank you for the post.

Short-Selling Hedge Funds Started the Fire

I stopped reading after "Everybody seems to agree that the ultimate cause is greed..." Not everybody agrees that greed was the ultimate cause. I don't.

Personally, I hope that the executives of each and every one of my stocks is greedy. I hope they make hay while the sun shines because tomorrow may be overcast. This isn't a game. Real companies making real goods to satisfy real consumer wants and needs compete every day for every last dollar of profit. If they stumble in any number of ways, they go bust (and get a taxpayer bailout - but that's a different beef). Again, what kind of game do people like you think this is where, like in a game of Monopoly, you decide to take it easy on your little brother because you've already got some choice properties? In the real world, missteps cost people jobs and money.

The day any one of the companies I own decides they've had enough profit for one day is the day I sell them short, move to Texas and hope for secession.

Fed, Treasury Propose the Dissolution of Capitalism

notsosmart-

"Wall St. greed & fraud caused all this"? Really? How so? Bernie Madoff is one fraud I'm aware of. Are you holding out on us? What other frauds can you cite? And what's the total amount of loss/damage caused by each? I assume you're talking about investment banker fraud.

Greed? Nice one. That's such an amiguous term these days that all non-thinking people are swallowing it whole. Exactly what greed caused this? Profit-seeking? And exactly how has this decade's profit seeking been qualitatively different from the profit-seeking of generations before? Do you really want me to believe that people are greedier today than they were ten years ago? I don't even think profit-seeking *is* greed. Aren't profits good? If you've got a problem going after profit, you don't have a problem with wall street - you've got a problem with capitalism so just spit it out.

Come on man. Why is it so hard to believe that bankers made bad bets while going after profit? Isn't this the simplest answer? Oh, and dare I forget the bubbling up of our economy on credit? I wonder what greedy bastards caused that? Oh. Right. That was the consumer, which of course is us. And who was the enabler? Right. The Fed. Your government.

Get off the "wall street done us wrong bandwagon" unless you've got more ammo than "greed." Who gave you your talking points, anyway? Your Sunday school teacher?

Great article, Moon! Spot on, my friend.

Not the Tax Clawback I Had in Mind

After I saw "I think a good tax clawback..." I stopped reading. Using the tax code as a political hammer is now and will forever be bad policy and bad precedent. Remember, the very politicians who voted for the clawback were the ones who wanted AIG to stick around in the first place. I didn't. I wanted the market to punish them - as in force a bankruptcy. But, AIG, we were told, was too important to let die. The world's fate hung in the balance. If true, AIG executives should get a raise. They've now got exponentially more responsibility, taking care of the entire planet and all. I've just purchased a bumper sticker that says "I (heart) AIG executives". I'd like to clawback all Congressional pay for the past 15 years and give it to AIG as a token of my appreciation for making my planet safe for finance again.

Core PPI Still Rising - A Positive Sign

First of all, CPI has been so tampered with that the term "core" no longer has any useful meaning. Second, exactly how is inflation a good thing again? I think I missed that part.

CNBC's Specious Reporting on the Housing Plan

mediapro-

You write that:

"The top 1% control 40% of all financial wealth in the U.S. The top 20% another 52%, leaving the rest of us (80%) America's financial wealth at a whopping 8%."

The point that well-meaning socialists like yourself fail to address when quoting this tired statistic is your (unexamined) first premise. I assume you think that it's wrong that so much wealth be controlled by so few people? If so, why is this distribution "unfair" or otherwise repugnant to you?

What makes wealth (if not inheritance, which you point out in your second point)? Could it be talent? Ingenuity? Luck? Risk-taking that others will not engage in?

Or are we to believe that it's because the top 1% of financial wealth owners stole it, or came to it by fraud? If this is your take, please provide some evidence to support your claim.

If the cause of wealth is any of the four possibilities mentioned above, then I think we have to conclude it was a "fair" distribution.

Don't get me wrong - I love soicalists/liberals. They make me laugh. They provide entertainment to issues otherwise deemed too "dark" to be entertaining. At the risk of losing that comedic element, I'd like to see them explain their first premises more often. It is not a foregone conclusion that a skewed wealth distribution is "unfair" or not desireable.

Why Capping Pay Is Likely to Work

First, Felix keeps confusing the notion of "anyone with a pulse" willing to work for $500,000 versus "talendted executives" willing to work for $500,000. Which point are you trying to make?

Yes, you will be able to find housewives, homeless people and 5th graders to be the CEO of a large, multi-national bank. But, no, experienced, talented executives will *not* choose that job if they're offered considerably more to work for any other industry or non-capped bank. What's a poor government to do in that case? Cap all pay everywhere?

Further Felix, define "work" when you say "Why Capping Pay Is Likely to Work." That's such an ambiguous title when precision is necessary. Work for who? Clients of the bank, the taxpayers, Congress, or the "Re-Elect Obama 2012 Campaign"?


Further, commenter Chris B notes that "If someone thinks they're too good to work for $500k, that in itself demonstrates an attitude of arrogance and hubris. How can we expect individuals with a messianic complex to make good decisions? The evidence says they don't." Are you high? Seriously. Are you stoned? Just for argument let's just go ahead and assume your bong-induced comment that good decision-making and arrogance are mutually exclusive.

You seriously want to assert that anyone shunning a $500,000 compensation package is hubristic? Good for you, sensei. It sounds to me like *you've* got the messianic complex. You know the exact nature of the problem and its precise cure-all, don't you, my msnmoney-quoting freind? Even though markets are complex multi-variable systems, capable of evolution and adaptation, you've been so endowed with wisdom to have placed your divine finger on what ails us. Thank God (for your presence in the midst of our ignorance)!

Go ahead Chris B (previous poster, not to be confused with me - Chris Butler) - tell free agents in the NFL that they're all arrogant. In fact, every professional athlete in the big three sports here in America are arrogant. They are all so hubristic to think they can make more for another team. And then they go out and confirm their arrogance by getting it. It seems that GMs are willing to pay more for more perceived talent. That same thinking is flawed in banking, apparently.

OK, so you say entertainers don't count. Fine. Heart surgeons? Egotistical b*st*rds! Who do they think they are earning more than half a million! Hell, I've heard a few of them actually killed patients! Sure, they perform a few menial tasks like curing the terminally ill, but they actually think they're deserving of hefty compensation packages! For killing people, no less! They must all think they're God or something.

Enough sarcasm. If you can't see that such an important policy intervention into the private sector would have unintended consequences (perhaps both good and bad), then in my opinion, you either cannot see at all, or refuse to. Either way, you'd be better off just admitting what you already know - people make mistakes. Investment and commercial banks made huge mistakes and had the governmnet let it go, the free market would have punished them severely. And yes, the real economy would have been punished. I dare say, however, we would have learned a hard lesson, adapted, and moved on.

Banks: Nationalize, Cleanse and Get It Over With

Number one, why is "stability" in any market so important? Markets are inherently unstable because the components of these markets - human beings - are not inherently in any kind of equilibrium! "Stability" is a pipe dream.

Number two, why is it so important to have a "comprehensive solution" at all? How about this comprehensive solution: bank that should fail, fail? What happens after that, happens. The system will rebuild and we will learn from previous mistakes.

Number three, if we're scared we'll lose trust in our banking system, the question should not be "how do we restore that trust in these poorly run banks?" but, rather, is the current lack of trust warranted? The answer is "yes." People learn, they move on. If they pull their money out of all banks, and all banks fail, perhaps there was a problem with the current banking model. I bet a better model would be borne from this collapse.

Finally, you state that "we risk a loss of confidence among the rank and file" if we don't go full-bore nationalization. I disagree. Complete nationalization of the banking industry would immediately result in a lack of confidence among the rank and file. Look at thow markets reacted from nationalization fears coming out of Europe yesterday.

Bottom line, if you think bureaucrats can run banks better than the free market, why not let these same bureaucrats run everything? The thing about free markets that people don't quite get is that "free" also means "free" to make mistakes. Either we retain the freedom and allow for the all-too-human propensity to err, and accept the pain that some of these mistakes lead to, or we allow our "mistake free" government to try their best to do a better job by usurping freedom and accept their mistakes that were never supposed to happen. How well do think a central planner can anticipate the next move in a complex adaptive system like our economy? We need only look to the success of economic forecasts in the past. Wethermen have better records.

Sorry, I'll take my mistakes with a heavy does of personal freedom, thank you very much.