Rebane's Ruminations

Culture Collapse Continues

George Rebane

News report - Jdimytai Damour, 34, was crushed as he and other employees attempted to unlock the doors of a Long Island, New York, store at 5 a.m. Friday, police said.  "This incident was avoidable," said Bruce Both, president of the United Food and Commercial Workers Union Local 1500, the state of New York's largest grocery worker's union. "Where were the safety barriers? Where was security? How did store management not see dangerous numbers of customers barreling down on the store in such an unsafe manner?  This is not just tragic; it rises to a level of blatant irresponsibility by Wal-Mart," he said.

Henceforth retailers will be required to erect livestock fences and issue cattle prods for customer control.  Remember the days when your mom and teachers taught you not to crowd or take cuts?

Ruminations – 28nov2008

George Rebane

Every day the economists and analysts are surprised when their quarterly predictions on various economic indicators are off by miles.  Now this same crowd has started drinking the climate change modelers’ kool-aid, and are making predictions about how the 2030 GDP will be affected by various carbon cap-and-trade policies.  No kidding; these yokels actually claim to understand our complex economy so well that they can tell you the precise impact that such admittedly byzantine policies will have.  The left-wing New Republic has an article in which the cost of cap-and-trade is soberly reported as just “shaving off three hundredth of a percentage point off the country’s annual GDP growth.” Dear Reader this means that these turkeys actually believe their models can make straight-faced statements about our country’s economic growth rate down to 3 parts in 10,000.  What unadulterated bovine scat is fed to the innumerate sheep as part and parcel of the climate change hysteria!!  And not only do we lap it up, but we lick the plate clean.

Cracks in our façade are becoming obvious to outsiders.  Now a leading Russian academic who studies the United States has gone on record.

Igor Panarin, a professor at the Diplomatic Academy of the Russian foreign affairs ministry, said the economic turmoil in the US had confirmed his long-held belief that the country was heading for extinction in its present form. (more here)

Some of us longtime students of the American scene have been seeing the fissures grow for some years.  Apparently they’re now visible enough to be also seen from afar.  The good professor blames the current economic woes to be the shake-up that promises things coming apart.  I’m not sure that a financial crisis is really needed to make people look for another political arrangement on this continent, for that has been going on for some time already.  We seem to be the only country in the world which, as a body politic, does not recognize the destructive effects unassimilated diversity.  Even the EU is beginning to realize, perhaps too late, that it has now diversified itself into what promises to be a catastrophic fall of the greatest macro-culture the world has seen.  My own views on the next twenty years were summarized last year and can be seen here.

OK, enough with the serious stuff.  To lighten up, please make yourself comfortable, turn up the volume, and listen to ‘The Mom Song’ - absolutely hysterical, but you gotta pay attention.

 

A Tie That Still Binds Us

George Rebane

Jo Ann and I wish all of our readers a day of joyful reflection on all the received blessings of family, friends, and this wondrous land - Happy Thanksgiving.

 

Politics and Ponzi Policies

George Rebane

Here all along I thought that California was going to be the first state to cancel its payment to its government employees pension fund CalPERS.  And now that uppity model of eastern fiscal responsibility, New Jersey, beat us to it.  NJ has lost so much in the collapsing markets this year that its unfunded liability (UL) is currently about $60B.  Not to worry, with its portfolio slated to earn 8.25% annually, New Jersey will be in there again in 2012 making its regular payments.  Yeah, right.

But the most interesting part of the report (here) is what it quietly highlights.  The state government considered raising property taxes as an alternative.  Every taxpayer should know that government unfunded liabilities are exactly that, financial liabilities that the government has to ultimately pay with monies of last resort which come out of our pockets as additional taxes.

Yesterday I had lunch with one of our elected leaders and we discussed the way that governments pile up financial obligations that follow-on governments are saddled with.  An alternative, of course, would be for a jurisdiction to adopt a ‘pay as you go’ policy for compensating staff.  Under such a policy the government agrees to pay out ALL of its known financial obligations to an employee during the employee’s term of employment.  When the employee leaves –quits, retires, … - then that employee’s account is paid up.  Both of us thought it would be a breath of fresh air if, say, a city council passed a resolution stating that it would henceforth proceed on a ‘pay as you go basis’ with current and new employees; or instead resolve that they would adopt a ponzi policy so as to pile on debt obligations to their successors.  Either way, just make the policy explicit so that it can be voted on and then strapped to the wall of the council chambers.

Today almost every government (federal through local) has an unstated ponzi policy in place - we’ll take our takings now and let someone else pay for it tomorrow.  Mike McDaniel is continuing to cover the details on the local UL scene (here) and Russ Steele brings UL into perspective with the self-inflicted financial impact of the climate change fiasco (here).

Plan or a Goal, Which is it?

George Rebane

‘Tis the season of planning on how to achieve goals, and setting goals that requires planning.  The politicians can be expected to confuse the two simply because precision in thought and word is not a job requirement.  But you would expect our journalists to be able to sort out the difference and report accordingly.  Well, it turns out that they also don’t know a plan from a goal if sampling recent media reports gives any measure.  I’m sad to see that even at the vaunted WSJ, our language has no staunch friends.

From the dictionary –

Goal (n) – the result or achievement toward which effort is directed; aim; end. (technically, an end state)

Plan (n) – a scheme or method of acting, doing, proceeding, making, etc. developed in advance. (technically, an algorithm to achieve an end state)

In short, we set a goal and make a plan to achieve it – the first is a desired endpoint and the second is one of several specific ways of getting there.  These are very important distinctions especially when we listen to and try to make sense out of political hot air.

When in response to the current financial crisis a politician says he “plans to create three million new jobs”, he is really stating a goal or objective.  He makes no claim that the plan already exists to create those jobs.  Why is understanding this distinction important to the rest of us?  Well, because we may all nod approvingly about having three million new jobs in the economy, but whether we know it or not, our nods come conditionally. 

A conservative might only accept that goal if the plan for achieving it would include sustainable economic growth through tax cuts.  On the other hand, a liberal might accept the goal only if the jobs were government designated and funded through additional taxes on the rich.  The goal and its attendant plans are different.  Setting broadly acceptable goals is easy and relatively cheap; designing feasible and broadly accepted plans for their achievement is hard and expensive.  And having a plan and executing it are different still, but that’s another story.  Journalists should know the differences and make those clear in their interviews and reports.    

Ruminations – 24nov2008

George Rebane

To add more local information to the developing story of Nevada County’s unfunded liabilities, please see ‘Who will bail out our local employee pension plans?’ by Mike McDaniel.  This piece emphasizes the points made in ‘Gold, Groceries, and Guns’ and underlines that the financial rot runs right down through the states to the counties and towns.  As a free-market capitalist I am red-faced that the suits in the private sector thought they also could follow the government model and borrow themselves to prosperity.

On the same theme, a local correspondent points out that KNCO is reporting that gun sales are up over 25% in the past few months (here).  He adds, “As a form of protest against the new socialist order I did my part by purchasing ammo on election day.”

Let’s end this on a more humorous item from the ‘We’re from the government and we’re here to help’ file.  It seems that the churches of New York City have gone above and beyond acceptable levels of compassion by opening up their facilities to the homeless on particularly cold nights.  You see, the city has its own homeless housing program and will brook neither competition nor interference from such God-fearing folks (report here).  It has ordered the houses of worship not to shelter any freezing homeless unless they also comply with certain regulations like having to operate the facility at least five nights a week – it’s the “all or nothing” rule.  Again, I wish I were making this up.

Gold, Groceries, and Guns

George Rebane

The usual plots of federal debt in dollars showing a percipitous climb during recent years is meaningless.  What we care about is the debt as a percentage of the country’s earning power as represented by its GDP.  The Peter G. Peterson Foundation has compiled that information from government data into the above graph which is part of a compelling report 'The State of the Union's Finances'.  The graph shows that we now owe about 75% of current GDP, a fraction we exceeded only during the very expensive years of conducting WW2.

But the scary part is yet to come.  RR readers know that the total unfunded liabilities of the nation in the coming years is somewhere north of $60,000,000,000,000 ($60Trillion).  For reference, keep in mind that our current GDP is about $14T, and the total annual federal take (excluding state and local taxes and other fees) is a little north of 20% of GDP which is about to go up under Obamanomics.  Now look at the right end of the plot as we go into future years.

This plot graphically shows why the dollar must be destroyed.  There is no conceivable way that the US government can meet its obligations by paying them off with dollars that have their current buying power.  Soon we will not be able to even pay the interest on the dollars we have borrowed.  As Christopher Wood writes in ‘The Fed Is Out of Ammunition’ (24nov08 WSJ),

In this respect the present crisis in the West will ultimately end up discrediting mechanical monetarism -- and with it the fiat paper-money system in general -- as the U.S. paper-dollar standard, in place since Richard Nixon broke the link with gold in 1971, finally disintegrates.

The catalyst will be foreign creditors fleeing the dollar for gold. That will in turn lead to global recognition of the need for a vastly more disciplined global financial system and one where gold, the "barbarous relic" scorned by most modern central bankers, may well play a part.

We All Fall Short

George Rebane

Jeff Pelline, the editor of our beloved Onion and self-anointed paragon of our community’s virtues, has recently riddled the comments of several local blogs with references to the celebrated Four Way Test of Rotary International.  A careful perusal of these entries reveals that Jeff believes himself to be an exemplar of the test, passing it with flying colors.  However, the objects of his directed remediations are seen to fall not only short of the specified ideals, but to actually cross the boundary of hypocrisy.  Serious allegations indeed.

To the reader not acquainted with the Four Way Test, it is revealed below.  Satisfying its tenets is a goal of all interactions and relationships entered into by Rotarians.

Of the things we think, say or do
1. Is it the TRUTH?
2. Is it FAIR to all concerned?
3. Will it build GOODWILL and BETTER FRIENDSHIPS?
4. Will it be BENEFICIAL to all concerned?

We Rotarians remind ourselves of this test by repeating it during the formal part of our meetings.  And try as we each may in our daily dealings, each of us admittedly falls short in their fulfillment.  We all know it and depend on the more encompassing grace of God to pardon these shortcomings within the greater purview of the mandates specified for us in the Good Book.

Recently, upon reflection, I discovered that the famous Nobelist Kenneth Arrow has absolved us from the second and fourth tenets of the Four Way Test.  He was awarded the coveted prize for showing that it was indeed impossible to always supply satisfactory benefices when more than two parties are engaged in such egalitarian pursuits.  A wider acquaintance of this result would profitably inform larger populations such as our own electorate.  However, our politicians, abetted by the state’s teaching monopoly and the, perhaps unwitting, cooperation of the Fourth Estate, would have none of it.  And therefore, to this day, we are taught the error that in the public square it is possible to come up with policies (laws, regulations, ordnances, …) which can deliver justice, fairness, and the essential benefits to all in equal measure.  But I digress.

In light of the above, Mr. Pelline presents himself, firmly embedded in the Onion, as the well-meaning county conscience, which upon closer inspection, shows him still about half a bubble off plumb.

Going Green is Such a Deal

George Rebane

Steve Monaghan is a sober man and a good county department manager, but his recent piece in The Union left my head spinning. Therein Steve states –

Nevada County now utilizes 11 hybrid vehicles to conduct business. It purchased its first all-electric, zero-emissions truck this month. This truck was 65 percent funded through a grant from the Northern Sierra Air Quality Management District. It will be able to reach 13 county facilities and has a 40-mile range per single electric charge.

An electric truck driven 5,000 miles per year at an estimated cost of $100 for electricity, realizing a $1,600 savings per year as compared to a gas-powered vehicle.

Let’s see now, $100 of electricity divided by 5,000 miles means that it will cost two cents a mile to drive that truck.  Wow! where can I get me one of them trucks?

And if that saves $1,600 over a gas powered truck, then driving the 5,000 miles now costs $1,700 or 34 cents a mile.  At $2/gallon (today’s price), this means that the county’s truck gets about six miles per gallon.  Over the past year at a more normal $3/gallon, the truck would get about nine miles a gallon.  Well OK, it’s a mite of a gas guzzler, but we’re not talking about a Prius here.

But it seems more than remarkable that the conversion from gasoline to electricity will yield a seventeen fold (94%) savings.  This means that the county is getting one hell of a deal from PG&E on electricity, or someone at the Rood Center has been taking their smoking breaks in the Evidence Room at the Wayne Brown Correctional Facility.

No matter, let’s get some more of those trucks that are 65% funded by the good people of Ohio, and plug them into those great PG&E subsidized power outlets.

Journalist Jokers (24nov08 update)

George Rebane

Today the professional journalist is in a sorry state of his own making.  Polls show that the public holds the journalist in very low esteem indeed, somewhere down there with lawyers and politicians.  Perhaps it’s time to start a new department that highlights one or two of the abundance of follies they foist on us daily in the name of being society’s self-appointed ferrets and trumpets of truth and light.

Tonight on NBC’s evening news a typical stupid joke was pulled on the viewers when the anchor Lester Holt stated with a straight face that Obama had come up with a new plan to salve the economy.  This was announced at the beginning of the broadcast as a bullet point to get you to stay and watch, and again as the intro to the segment about “Obama’s plan”, how he was going to “put millions back to work”.  The apparent intention of this MSM outlet was to continue the hype about our new president-elect and that he’s got things well in hand even before he puts that hand on the Good Book.  Well, it turned out to be a non-item.  Obama has no plan whatsoever about how to put millions back to work.  But we were told instead that he wants to put millions back to work, and that he’s instructed his economic team to try and figure out a way to put millions back to work. 

And that is how it was left when the segment ended.  Either these clowns are just butt stupid and don’t know the difference between a plan and the fervent desire to have one, or they were continuing to practice puffery and intending to fool the folks.  In this case I gave them the benefit of the doubt, and assumed that the journalists (news editor, anchor, and segment lead) were all just comically ignorant.  But I bet 99% of the viewers now believe that Obama is a clever guy who has already figured out how to put millions back to work.  In the end, this is unfair to the president-elect who already has a lot of balls in the air, and the premature raising of expectations will help no one outside the beltway.

(The astute reader knows that there are about 150 million in the American workforce which today is about 6.5% unemployed.  A developed country counts ‘full employment’ effectively occurring when the "natural unemployment rate" drops below about 4.5%.  That means that Obama is seeking to return around three million workers to jobs by taking money from the Peters to pay the Pauls.  As economists have told us for decades, this means that the Peters cannot spend that money to create the really needed jobs, and we must all trust that this time around the government knows how better to deploy the workforce than does private industry.  In any case, as FDR demonstrated seventy years ago, there will be no net jobs created through any such policy.)

[23nov08 update]

  ABC News announced tonight that President-elect Obama will seek to "restore" 2.5 million jobs.  While that's close enough to my predicted 3 million jobs, I will stick with the higher number because things will get worse before they get better and Obama will up his target.  What we should keep in mind during all this is that these "restored" jobs will be advertized falsely as net new jobs.  Instead, whatever number actually created will be jobs displaced from the private sector by the government using both fiat money and fiat tributes to make people do work they deem to be most important.  The previous program that did this under FDR was called the National Recovery Administration which extended the Great Depression so that a world war was required to set things right - a high price to pay for meddling in the markets.  Stand by for another spate of Fireside Chats.

[24nov08 update] More recent research (here) has been announced on how FDR's policies extended the Great Depression and how Obamanomics may be preparing to take around that barn again.

Debate is Henceforth Forbidden

George Rebane

The following is taken from NCFocus, the blog of Anna Haynes, a local grassroots global warming activist and true believer.

Note: Please comment *only* if you share the mainstream view that climate change is happening, the evidence strongly indicates humans are causing it, and it's urgent that we address it now - comments from the fringe *will* be deleted.

This was appended to a long listing of pro-climate change URLs and an invitation to comment about a local radio station (KVMR) presenting a speaker skeptical about anthropogenic global warming as part of a balanced discussion.  For true believers the debate is not only over, its ressurection is forbidden.  This is now the message of the climate change political juggernaut from the top down to the foot soldiers in the field.

(RR will continue linking to NCFocus so that our readers may keep all the fringes in plain sight.)  

Ruminations - 20nov2008

George Rebane

Millions once moved to California for its boundless promise, but time has not been kind to the Golden State, so starts Joel Kotkin’s ‘Sundown for California’ in the Nov/Dec issue of The American.  He details the history of our beloved state and jewel of the world from its unbelievable beginnings as a land of opportunity to its arrival as a land that now prepares itself to be destructive to all the creative and productive juices that flow in the veins of those who can.  And to think that once we shook our heads at the primitive Polynesian cultures who turned archipelagos of paradise into taboo ridden inkblots of misery dotting the blue Pacific.  Attempting to get the word out on this gives one all the pleasure of relieving oneself on the windward side of a sailing vessel.

Pirates and the Decay of the West.  The pirate attacks and seizures off the Somali coast are the most recent indication of the rot that is now at the core of western civilization.  The pirates are averaging one merchant ship attacked in international waters every four days.  And although we have the technical and military assets to secure our shipping, we have neither the political nor moral will to defend our interests in international waters against the world’s lowlifes.

Since Vietnam we have possessed the means to make shipping safe against the threat of fast small boats launched from slow mother ships.  We also have the means to deny the pirates their safe havens on the government-less Somali coast.  Given the presence we already have in the Arabian Sea and Diego Garcia, we have all the necessary resources to make those waters among the safest in the world.  The marginal cost would be minimal.

Instead, we are told of our concern about what laws apply to defending ourselves.  We worry about what to do with any pirates that we may capture and therefore capture none; French president Sarkozy is worried about turning them over to Muslim governments that might chop off their hands or heads.  Britain is worried whether we will have to establish another Guantanamo in which to jail them, and on and on.  Meanwhile over $100 million in ransom has already been paid to them this year and the Somali lawless continue to see it as the best game anywhere.  Here is a tale told by two lawyers who today worry about the lack of a proper legal framework for protecting commerce on the high seas (I’m not making this up).

Nevertheless, yesterday an eastern government knew what to do.  An Indian frigate encountered what appeared to be a pirate mother ship that launches the fast boats, and it sank the pirates.  Oppose this with our response of sending teams of lawyers to do research in online libraries, and see if there is anything that would permit us to respond as did Thomas Jefferson in the days of the Barbary pirates.  In the spirit of global co-operation, maybe we should contract with the Indian navy to keep the sea lanes of commerce open for us.

If in the coming years our Marines survive as a fighting force, I wonder with what kind of lyrics they would have to replace “to the shores of Tripoli”.  Perhaps something appropriate about filing suit at the International Court of Justice in The Hague would serve.  All the while the Somali pirates are in apoplexy laughing their you-know-what off.

Multiverses All the Way Down

George Rebane

The existence of an Intelligent Creator (IC), aka God, is so abhorrent to some scientists that they are willing to jump through any number of hoops to avoid satisfying at least one of the pillars – Occam’s razor - on which science claims to rest (the other is Falsifiability).  Instead they are advancing tenuous theories that satisfy neither.

Tim Folger in his ‘Science's Alternative to an Intelligent Creator: the Multiverse Theory’ tries to put his arms around the debate so that it is accessible to the intelligent reader, and, I think, does a creditable job.  Here’s the problem – our Universe is constructed in such a way as if it anticipated our coming.  This construction is now accepted by all the scientists, those who do and don’t accept the IC as the progenitor of everything that is.  However, the ones who are determined to deny the existence of an IC have a burr under their blanket that will not go away.

The non-IC scientists are now frenetically invoking very complex, and (so far) untestable theories of physics to argue that our universe is just one of an uncountable number of different kinds of universes.  And ours just happens to be one in which the laws of physics and the physical constants were such that gave rise to life on this planet, and probably many more of them out there.  In sum, the fact that we’re here to discuss such ideas is just dumb luck because in the many more universes ‘out there’ there is no life – so there!

Political Phollies Phuse with Physics

George Rebane

 

Worldwide lunacy is achieving new heights.  The Europeans are launching a major multi-decade project to create a practical energy source using fusion.  This project will cost megatons of money – some will undoubtedly even come from the US – and seek to create energy independence from carbon based fuels.  The story is told by Peter Glover in the TCS article ‘Fusion Energy: Europe’s New Holy Grail’.  In it he outlines the HIPER (High Power Laser Energy facility pictured above) program to demonstrate that humans can create a slowly exploding hydrogen bomb in a controlled space that outputs more energy than is required to sustain the explosion.

Fine and good, and some day we will, no doubt, have fusion energy.  But even with HIPER, the attainment of practical fusion power is not expected for decades.  Leading U.S. atmospheric physicist S. Fred Singer questions this rush for a goal that seems to satisfy no argument for or against global warming.

"Do we really need fusion?" Singer points out, "We [already] have the standard nuclear fission reactor based on uranium. It is relatively cheap, it is safe, and it works." He explains, "Estimates vary but most experts agree that uranium will be a viable source of energy, and perhaps the best one available, for thousands of years. It becomes a matter of semantics whether an energy source than can be relied on for, say, 10,000 years or more is sustainable. But it is an empty argument. The point is we can do it now with available technology."

A Visit to McCloud

George Rebane

Last Friday Jo Ann and I put the cats in solitary, jumped into the Cherokee, and were on our way to discover McCloud.  This town of about 1,600 sits on Highway 89 less than ten miles east of where it joins I-5.  The dominant landscape feature of the surrounding territory is Mt. Shasta whose 14,000+ft peak looms more than two miles above the town.  We pulled into McCloud about 3pm as the sun was already dipping below the tall pines that are by far the most numerous residents of that country.

Our reservations were at the century-old McCloud Hotel located on Main St. right across from what used to be the railroad station.  The dinner train on the track was being provisioned for the evening’s round trip to the neighboring town of Mt. Shasta.  That train is the community’s last commercial hurrah, everything else over the years has pretty much closed down.

After settling in at the hotel – a no mean feat since Jo Ann had to look at three separate rooms/suites – we did our usual exploration of the environs with map and Carli (our anthropomorphized GPS) to guide us.  The hotel manager was surprised to learn that we did not come to McCloud to ride the dinner train.  And we were surprised that she was surprised, since during these months the train makes the trip in the dark, and the spectacular landscapes, framed by the big snow-covered volcano, are visible only to the extent of the lights that shine out of the dining car windows.  But such surprises went a long way to explain the fortunes of the town.

Instead, we had dinner at the River Grill & Bar which was reputed to be the best place to eat in town that was not on wheels.  This steak and potatoes haven looked like it mostly served the locals (the ribeye steaks we ordered were excellent).  The wait staff was friendly, attentive, and without any airs about this being a locale for fine dining.  We actually figured that out as soon as we saw the naked formica tables with mis-matching chairs that filled a small dining room with booths on one side.  The room adjoining was the bar with a roaring fireplace, and a covey of folks settling in for a comfortable Friday night in McCloud.  In the distance we could hear the whistle of the mostly-empty dinner train starting its downhill run to Mt. Shasta.  It was already dark.

Election Reflections

Mike McDaniel

In all the election hoopla surrounding the socialists push for our "new hope" my focus was on the first question on the Massachusetts ballot.  "Question 1" as it was described on ads and radio waves would have abolished the MA state income tax (full disclosure; I contributed financially to the cause).

The proposition failed by a slim margin.  The opponents of the prop were anyone that derives their income from taxpayers.  Perhaps the most vocal were the teacher employee unions.  They spent over $7,000,000 fighting question 1.  It would appear that teachers don't think they would be employable elsewhere... and more importantly that the MA government would not make cuts elsewhere to the budget in order to fund education.
 
The forces behind "Question 1" have found several silver linings from the campaign quoted from Michael Cloud:

• "The $7,268,816 we forced the Teachers Unions to spend to keep the state income tax is $7,268,816 they could NOT spend elsewhere to raise property taxes and other taxes."
• This year, the Massachusetts state legislature and Governor postponed
government spending increases, announced spending cuts – and did NOT
increase taxes. Our Ballot Initiative and our campaign for it are a key
reason why.
• Hundreds and hundreds of advertisements by the Teachers Unions
claimed:“YES on Question 1 = Raising Property Taxes.” These ads aroused and reinforced opposition to raising property taxes. The Teachers Unions campaign against our tax cut just might stop their 2009 campaigns for property tax increases."

For some time now I have made a hobby of "following" tax payer funded defined benefit pensions plans here in California.  On election day a major voice (yell) was heard on the public employee pension issue.  Taxpayers in Orange County voted overwhelmingly to relieve the Board of Supervisors from making future pension plan pay raises (HERE). In the future all pension plan pay increases will be voted on by the taxpayers.

The taxpayers of Orange County have paved the way for taxpayer funded pension plan reform in other communities.   It is apparent that present and past leaders across this great nation need voter help in being stewards of tax revenues.  It is refreshing to have leaders in Orange County design a solution which taxpayers overwhelmingly supported to start solving the unfunded liability crisis.   Does your community have any such leaders?

[gjr - Mike McDaniel is a financial professional in Nevada County and contributes to this blog from time to time.]

Progressive Tax Rates Reality Alert

George Rebane

What happens when progressive taxation schemes make about 0.5% of the workers, who are taxed at the margin, pay 20% to 30% of the total income taxes for a state, and those workers go away?  This important question is about to be answered in New York as its financial industry now collapses and then rebuilds.  But the rebuilt industry will be regulated to remove opportunities for risk and its attendant high incomes.  The socialists have with one side of their mouths decried the ‘greedy rich’ while with the other side put in place policies that fund more and more of their government growth and spending programs from the pockets of the very same rich.  Now we Californians get to watch how New York handles the aftermath of its progressive tax rates.  But we have to watch very closely because the MSM will not want to highlight this particular story.

Ruminations – 11nov2008 (updated)

George Rebane

Today we quickly look at two peas in a pod - the ‘we’re from the government, and we’re here to help’ pod.

The federal government’s bailout program has failed miserably from the gitgo – it was supposed to be a fast-acting fix that would keep the trouble from spreading across the globe.  Well, it's been neither fast-acting and the financial crisis is now worldwide.  Donald Luskin, chief investment officer at Trend Macrolytics LLC, reports in the 17nov08 National Review that

The fact that the government agencies that should have been rescuers became destroyers instead – and the utter uncertainty about how and when these agencies would exercise their power – caused investors’ confidence to collapse.  Federal agencies unintentionally created an incentive structure that rewarded investor behavior that would exacerbate the crisis and punished behavior that would mitigate it.

It looks like Paulson and crowd may have learned a lesson from the carnage they created and will now inject the next $250B to actually help troubled banks weather about $2.5T of shakey assets, instead of using the money to continue zeroing out the investors they are trying woo, and make a fortune for short sellers.  In industry we usually call this a ‘learn while you earn’ program.

Meanwhile here in the Sierra foothills the Grass Valley City Council has learned nothing from its first try at implementing Sacramento’s Affordable Housing mandates.  The program has been an utter failure, and adds to the long and unimaginably expensive (in human and dollar costs) trail of government failures in the housing markets.  (See SESF report ‘Affordable Housing’) 

Now the council honorables are planning another tilt at the windmills, calling their last attempt a “noble” effort.  When that effort launched, most of the Nevada County’s residents immediately saw that their mandates and regulations for the developers would lead to nowhere. These well-intentioned but terminally challenged people still don’t understand the difference between affordable housing (a political definition) and low cost housing (market defined). 

If a market for low cost housing exists in Nevada County, then the developers will be the first to find out how to satisfy it for profit.  In the past, local politicians have actually had the hubris to blame the developers for not coming up with affordable housing proposals that satisfied government regulatory dictates.

Having five council members now listen to a roomful of city renters (who really want rent controls), before coming up with their next version of obstacles, is nothing but the same song, different verse.  But oh do they love to sing.

[update] And finally, if you’re a conservative or free market libertarian like me, then do your penance and read P.J. O’Rourke’s mea culpa, and take it head on, standing up – no whining! 

Nevada County’s Power Future?

George Rebane

Hyperion Power Generation, Inc. in New Mexico has developed a small nuclear powerplant that can power 20,000 homes from a unit measuring a couple of meters on a side.  This generator with no moving parts will cost about $25M in place which is about twenty feet underground.  The technology is very mature with no chance of Chernobyl type accidents.

This is called a leapfrog technology since it can immediately start powering small, remote communities worldwide without having to lay in long and expensive power grids and distribution systems.  The whole thing can be delivered on a truck, put in place with normal contractor equipment, and not bothered with again for about ten years or so when it needs to be refueled with non-weapon grade uranium.

The cost of the units will, of course, come down as more companies begin to deliver them.  Today one of these could power all of western Nevada County.  The only thing that will stand in the way is the usual cadre of emotional environmentalists and community activists. They will want to study the impact of each installation into the next century, putting the cost of such clean, safe power out of reach of most US communities that would benefit.

The rest of the world will install these small nuclear units to power homes, manufactories, water purification systems, and sewage treatment plants.  In the meanwhile we will have a chance to attend free anti-nuclear songfests and sit-ins at the fairgrounds.

Broken Windows and California’s Greenhouse Gas Plan

George Rebane

The jury is in on California’s syndicated columnist Thomas Elias – his acumen in economics is about a bubble out of plumb.  The man’s 4nov08 piece ‘Greenhouse gas plan might green state economy’ in the San Diego Union (repeated in today's Onion) was full of the liberal drivel that government funded make-work programs will somehow again revitalize California’s lethargic economy.  The plan he’s referring to is CARB’s Cap and Trade Scope Plan to implement AB32 recently passed by our politicians in Sacramento.  Californians will now joyously accept money from the feds to develop technologies designed to reduce greenhouse gases whether they need reducing or not.

None of these new ‘green businesses’ will be able to make it on their own.  Instead, if they follow government diktat and play like they’re real companies selling into real markets, products which are really desired by customers, then they and everyone in the pipeline will get money.  Our own little county will do its best to also belly up to the trough as part of its economic development hopes. 

Where will the money come from?  Well, a bunch of it will come from the good folks in Ohio (my favorite state for transfer payments to California), because we can’t tax ourselves enough to fund such tomfoolery.  And if you really sharpen your accounting pencil, the money will actually come out of thin air – the honorables in Washington will just print more of the stuff.  We must always remember that our country is broke as far as funding any of these marginal bamboozles like bank bailouts and carbon footprint eradication programs.

And yes, once government starts pouring money into this newest ersatz industry and guaranteeing its profits, investors will pile on because there will be enough of the new greenbacks for everyone on this gravy train.  So what’s not to like?

Singularity Signposts – 9nov2008

George Rebane

Imagine a bicycle seat connected by mechanical frames to a pair of shoes for an idea of how the new wearable assisted-walking gadget from Honda works.

The experimental device, unveiled Friday, is designed to support bodyweight, reduce stress on the knees and help people get up steps and stay in crouching positions.

Honda envisions the device being used by workers at auto or other factories. It showed a video of Honda employees wearing the device and bending to peer underneath vehicles on an assembly line.

So starts an article sent by a correspondent that describes the next steps (pun intended) toward the Singularity.  My rejoinder was that this kind of contraption may let me run a marathon on my 90th birthday.  Bit by piece in the coming years we’ll replace our innards and our outards, in the process becoming something we know not what.

Honda’s envisioning the target consumers being factory workers is a bit of stretch (aka all wet).  Japan’s aging population (followed by EU’s and America’s) will be walking around on these while the factory workers are replaced by even more technology.

The question that comes to many minds at this point is – then who’s going to earn the money to pay for such gizmos used by non-working people?  Who indeed?  Stay tuned.

The Late Great California

George Rebane

This weekend Paul Krugman in the NYT ( ‘The Obama Agenda’ ) tells half the country that there’s something wrong with them because they were not teary-eyed when Obama was elected.  He also advises the president-elect to go forward with his big socialistic plans – damn the torpedoes and all that.  And he is quite sanguine about next year’s deficit exceeding $1,000,000,000,000 (yep, that’s a trillion) even after the ‘rich’ are taxed to give tax cuts to the class in which most people don’t pay income taxes.  Somehow it will be all paid for by an economy that will grow on the basis of public funding of infrastructure projects.  One wonders what is the real basis for getting a Nobel Prize in economics.  But then I’m still wondering about similar laurels heaped on Al Gore and Yasser Arafat.

East coast Krugman should take a look across the country at the left coast to see what all this taxing, no spending cuts, and growth of government will do.  California, as usual, continues to lead the way.  In the Nov/Dec issue of The American, Joe Kotkin describes the ongoing fall and decay of our golden state (‘Sundown for California’).  In the last decade or so, the rush to California has slowed down, reaching about even in 2000.  Seven years later the net movement of people is an annual out-migration of 260,000.  And the folks who are leaving aren’t the ones with their hands out.

Consensus Science??!!

George Rebane

Dr. Michael Crichton M.D., the Harvard educated physician and one of the greatest techno-thriller authors of all time, died yesterday.  Besides leaving a string of page-turners that were technically accurate/plausible, the man was also a bit of a philosopher of science.  At this time of mass hysterias over incomprehensible topics sweeping an under-educated world, it is appropriate to highlight Crichton’s thoughts on how junk science is now sold to the masses.

The most impactive science-related hysteria today is, of course, global warming and particularly anthropogenic global warming.  While there are reams of evidence and cadres of reputable scientists who dispute the UN’s IPCC conclusions, the AGW scare is made real in the public mind by the notion of ‘consensus of scientists’ and ‘consensus of scientific thought’.  From the MSM nozzles this drizzles in our ears day in and day out.

Michael Crichton gave a speech about five years ago at Caltech in Pasadena that is abstracted in today’s WSJ – ‘Aliens Cause Global Warming’.  In it he warned about consensus science and computer models.  About the first he said

I want to pause here and talk about this notion of consensus, and the rise of what has been called consensus science. I regard consensus science as an extremely pernicious development that ought to be stopped cold in its tracks. Historically, the claim of consensus has been the first refuge of scoundrels; it is a way to avoid debate by claiming that the matter is already settled. Whenever you hear the consensus of scientists agrees on something or other, reach for your wallet, because you're being had.

Let's be clear: The work of science has nothing whatever to do with consensus. Consensus is the business of politics. Science, on the contrary, requires only one investigator who happens to be right, which means that he or she has results that are verifiable by reference to the real world. In science consensus is irrelevant. What is relevant is reproducible results. The greatest scientists in history are great precisely because they broke with the consensus.

There is no such thing as consensus science. If it's consensus, it isn't science. If it's science, it isn't consensus. Period. . . .

Security and President-Elect Obama

George Rebane

No matter what our individual political or ideological stripes are, no true American wants any harm to come to their duly elected leadership.  We are first a nation of laws and not of vigilante vengeance.  Because of his mixed racial background, President-elect Obama’s security coverage presents special concerns that will soon be picked up by the MSM.  Here is a short heads-up and to-the-point analysis by Stratfor on this issue that concludes with

Presidential security is a serious national security matter. A successful (or even unsuccessful) attack on a president causes instability in the United States and in the wider world. And given the especially delicate balance that the United States, Russia and countries of the Middle East are striking right now, an attack on the president would destabilize U.S. foreign policy and have a heightened impact on national security. Domestically, the assassination of the country’s first black president would run the risk of devastating race relations — and white supremacist movements see themselves as substantially benefiting from racial strife.

Ruminations – 6nov2008

George Rebane

Sad to read Light on Nevada County and Dixie Fix, both reporting on the closing of more sales tax generating retail establishments.  Buy locally and often whenever you can.

Heard that our beloved Onion has shut down a prominent blogger on its Election 08 section.  Wonder what mortal sin was committed this time to cause such ire.

Still haven’t heard anything from the Registrar about the multiple ballots sent out to multiple people.  Now that the McClintock/Brown race is coming down to the ‘hanging chad’ phase, I hope that the poll watchers are keeping an eye on how multiple ballots from a single voter are caught.  The system that handled the outgoing had a glitch or two in it, we hope the system that handles the incoming will do better.