patrick.net

It's 4:30, I'm not tired, I want to insulate my attic with Cocoon(TM), I have 4 weeks of work on my desk waiting for me that I am trying to work up the inspiration to attack, oh yeah, and

"I'd like to save the world, but I don't know where to start."

Jesus Stan, you post prompted two quick turn ins.

I'm gonna start calling you "threadkiller"

Don't invite this guy to the blarty.

:)

Stan,
I've seen a documentary on the slaughter of the people migrating to California.
How/why did you learn "their whole deal much better than they...?"

I like the concept of private accounts. I don't know why there was such "outrage" over this...perhaps there really wasn't outrage as opposed to, perhaps, ambivalence...which is not good either when looking for support for such a drastic change to such a large program. My understanding was that participation would be somewhat voluntary. One less cookie jar to dip into, I suppose, it what explains a lot of the (political) opposition.
I like your stated idea of gradual ramp up.

Stanman wrote . . .

I don’t know why there was such “outrage” over this…perhaps there really wasn’t outrage as opposed to, perhaps, ambivalence

What can you say to that? I feel bad for people who think the Government is a better guardian of their money then are they.

Unintentional bold, but I like it.

Test

Test

Test

Test

Test

Test

test

test

. . .
Final test

Stanman,

I'm far from a social liberal, but label me as you will. The proofs--which are just economic proofs, admitedly, not preeminant facts--are all nicely summarized in Mankiw, Macroeconomics. This includes Keynes, Friedman, and opposing theories as well. It includes labor efficiency, labor mobility, and immigration/emmigration theories.

My arguments are indeed in the labor-mobility camp. First, I never said anything about New Hampshire, lol. There is an important difference between nations, at least economically--and we're talking about immigration insofar as it serves free market forces. Intramigration within a country is requisite, at least according to many theories. This is the great strength of the US, and a weakness of the emerging EU.

My point about immigration and diversity was that one risks creating adverse effects when they try to use policy to "pick the winners". Immigration should be regulated and controlled, _but_ equal. We must be careful about picking those we want from those we don't and make sure that we only use truly objective criteria for such selection. Skin color, religion, geographic origin, etc. are dangerous criteria. One need only look at the contributions to science and technology and the last names of many of those people will reveal their origin was not within the European/Christian region of the world. Nonetheless, their contributions accrue to the US economy and further power our growth and prosperity. And, many of them came here as children of labor-class parents, so even socioeconomic selection can be difficult.

Finally, such diverse immigration has been one of the great catylsts driving the American economic engine for the past 200 years. I'm open to well reasoned contra-proofs to this statement; I've yet to see one.

Yustas,

THe plans I've read all have a minimum mandatory investment percentage in risk-free assets, primary T-bills/bonds. Many here know more about the details on the plans. If those became wortheless, then all bets are off. Actually I have a problem because I think fixed percentages are troublesome; I'd rather see some basic portfolio theory applied--or at least an option for more sophisticated investors to choose appropriate asset mixes. Regardless, any of these plans will outperform the current system of insanity.

“Hey Randy H, please point out my inconsistencies as you see them!”

So here is one I didn't argue about last night. We were debating unmarried pregnancy rates in Sweden and the US, both of which are about 50%. You claimed that we have to eliminate US teenage pregnancy from this because it makes a more direct comparison on a socio-economic basis, which is true enough.

But, we were arguing about the causality or correlation between this variable given the underlying economic system. If we elminate anthything from either data set then there is a risk that we inadvertantly break a causual link. That is, their system produces their results, and ours produces its results, which itself may be a product of the economic systems (or may not), but you cannot be sure you haven't skewed the aggregate statistic when you make arbitrary "adjustments". Again, I, like you, believe that unmarried pregnancies are bad in the US--I think that nuclear families work better for a number of reasons here. But we cannot make comparative analyses on this basis...at least not very easily. Sometimes with these things "only time will tell", and yours and my inclinations may be proven true, but proving we're right about this now is hazardous.

from what I heard, currently SS tax money are not invested at all,

This is not true. The current SS funds are invested, just not by the individuals paying in but by the government. The government borrows against the SS funds to invest in government spending projects, then uses later proceds to pay recipients. From an National Income Accounting perspective, this is pure investment activity. Those in favor of private accounts contend that individuals can invest more efficiently than the government.

I'll not argue the merits of the original system, where what you stated was true. I could argue that such a system (SS lockbox, or whatever), won't work today because the economic dynamics have changed quite a bit. I also don't argue that sometimes the government can't invest at a greater return than individuals can achieve, but these tend to be massive infrastructure spending projects which should be funded by general fund taxation. Things like highways, University systems, space projects, basic scientific research, etc. But SS funds generally get pissed away on things that should be left to the private sector, or should never occur at all (like subsidies for tobacco farmers).

Young should provide at least minimal support for the old today.

We are living in the midst of the greatest systemic transfer of wealth from young to old that has ever occurred in US society. Maybe this is ok, but you are then relying on some very optimisitic projections about future GDP growth, dramatically increasing birth rates (which generally comes from poorer class immigrants), and neverending super-productivty growth. Any of these things (or others I'm not smart enough to invoke) prove to be false and the scheme will simply break down.

What keeps me up at night is that such large scale mismangement of the economy typically ends with a big war, or the decline of the society, or both.

Randy H, please disabuse me if I'm wrong here.

The SS money coming in goes to one of two place . . .

1. To pay current SS expenses.
2. The rest goes into the general fund. The "SS fund," or whatever it is called, has IOUs in it from the government.

Because the U.S. Feds are running at a 200+ billion dollar deficit each year, it is improper to say the SS $ in the general fund are being invested. They are being spent on highway bills and energy bills and welfare.

What's incorrect?

Can this technology be adopted for home — if you miss two mortgage payment, you can not enter home just kidding

Or it will turn on A/C in the winter and heat in the summer. Toilet will also refuse to flush.

Because the U.S. Feds are running at a 200+ billion dollar deficit each year, it is improper to say the SS $ in the general fund are being invested. They are being spent on highway bills and energy bills and welfare.

If the SS funds which entered the general fund were carefully earmarked and spent on only high-return infrastructure spending, then I'd have no problem--in theory. But, instead the funds are mixed and not accounted for as such (at least in my reading of the situation). Even if the SS funds are invested in positive NPV projects, I still contend that this should be raised through general taxation, not SS, because the infrastructure projects benefit everyone, not just workers. Worse, use of SS funds reduces the opportunity costs for tax-generated funds which creates an incentive for the government to spend those unwisely. In other words, the current system distorts the true cost of capital for our tax and SS dollars.

Again, I'm not the expert on this (or much else), just relying on my first-principles to guide me here. I'd be delighted for a real SS expert to enlighten me (not that that's not you, I just like to see the real accounting before I trust what people/policy makers say).

...and just because we're running a deficit doesn't mean the dollars aren't being invested. it just means the investment dollars are leveraged.

ok Randy H. I'm no expert for sure, but I've read in several places that excess SS money gets dumped on the pile with income taxes, estate taxes, and so on.

As far as I'm concerned, the U.S. Government shouldn't be "investing" in anything until the deficit is 0 and the National Debt is 0. Putting money toward those two things is the best investment we can make.

As far as I’m concerned, the U.S. Government shouldn’t be “investing” in anything until the deficit is 0 and the National Debt is 0. Putting money toward those two things is the best investment we can make.

We're close to complete agreement, but I think that the government should continue investment to replace necessary depreciated capital stock regardless of the deficit or debt. Neglecting the infrastructure will only ensure that we never pay down either.

A couple of my favorite pro-nuclear power factoids:
--Living by nuclear reactor safer than living in Denver Colorado in terms of radiation exposure (thin atmosphere).
--If your brought a coleman lantern mantle into nuclear power plant it would set off radiation detectors (trace thorium content).
Favorite NE bumper sticker:
"Another Environmentalist for Nuclear Power"

Randy H -

"Oil Shock! It now appears that the US will suffer another severe blow to its oil refining infrastructure. With this being the second major shock to the supply-side of energy in less than a month, and with oil, gas and petrol being major inputs into the US economy, how could this affect the overall US economic situation."

Just to let everyone know, preliminary reports (from CNN) say that Rita didn't cause any major damage to pipe lines or refineries. Again, these reports are very preliminary so no one really knows for sure what damage there is, if any. I think Rita was more or less a disruption for the oil industry.

However, there is some major cleaning up to do because of the severe flooding. What kind of strain this will put on an already strained economy is a question better suited for someone other then myself.

Here's a link regarding the oil industry:

http://www.heraldsun.news.com.au/common/story_page/0,5478,16715130%255E1702,00.htm

Stanman, Does that mean conservative on fiscal issues and possibly don’t know on social issues?

I know exactly how I stand on social issues; it's just that I don't fit neatly into one of the Fox-News labels. Most would probably put me in the Libertarian camp, but I would use the small "l", not the big "L", because I think the L party is just plain terrible. I say rationalist because I subscribe to classic Objectivist rational philosophy. We don't have a party at the moment (and probably never will).

A great portion of the European influx you refer to as positive wasn't viewed so at the time due to what, at the time, people thought were dramatic religious differences. That is, most of the newcomers were Catholic and poor; most of the incumbents were Protestant and not so poor (or at least they were land-owners). Columbia University has a great compilation of newspapers and such from the period (NYC focussed) which shows just how resistant people were to incoming Catholics. Many of the arguments against allowing so many Catholics into the country echo those being made today , and at least back then they turned out to be unfounded. That doesn't mean you're right, it just means that I'm not convinced on logical grounds you're right.

I'm just skeptical about who's going to "do the picking" when it comes to which cultures will compliment the US and which won't. The problem with such things is that we each personally "know" what is best, but we can't so easily hammer out concensus. For example, I don't want either Pat Buchanan nor Hillary Clinton making those choices about my country's future. If they ever ask me to do it, I'll call you guys in on my team.

This is not a minor point (risking being long winded again). I think that we all here are having informed political debate, whether we agree or not. This is something that ultimately yields good policy (at least better policy), not the crap we have today. I don't see this level of debate going on in the public sphere, and that is the real tragedy.

How many of you guys can actually afford to buy a house?

Many of us own, or recently sold and are waiting to buy back in. Some of us still have a primary residence and are selling 2nd homes and investment properties. Some are rentors, some aren't. What's the difference? I don't have to be a professional baseball player to have an opinion about the Cincinnati Reds.

Well HZ, we can differ . . .

The pessimist eats well when the hunger strikes march in. The opptomist hopes that the bread lines will be short.

Sound far fetched?

Of course! If it didn't sound far fetched, then it wouldn't be an issue.

Ask around in the late 20s. Do you think anybody would have predicted bread lines in few years?

Pessimists!!

And, building on DC...

There is a marked difference between pessimism and skepticism. I'd say that we're skeptics here, most of us aren't pessimist, although we are cynical about a great many things. I for one plan to buy another primary residence to replace the one we just sold, probably before the absolute bottom; and I'll feel very good about that decision, regardless of the outcome, so long as I make the decision given a reasonable airing of the facts.

On the topic of the original thread: It does appear as if this second Oil Shock will be less than the worst predictions. Does this help much? At all?

I still think that the US has sufferred a significant, even if not doomsday severe shock to energy supply which will put inflationary pressure on the economy. I think volatility has also increased due to the other geopolitical events we discussed.

I maintain that there is threat of future inflation, and perhaps stagflation. Time will tell; and not that much time.

This will pop the RE bubble, one way or the other (either through higher rates as the Fed fights inflation or through inflation eating away at real incomes and increasing volatility and damaging consumer sentiment).

Unfortunately, I think that a bigger shock would have hastened the RE correction, but with only smaller shocks the correction will still occur, but play out over a much longer horizon.

Just my 0.02USD (nominal, unadjusted for future expected inflation).

I figure I spend about an extra $10 a week on gas right now, it's not breaking the bank so the prices at the pump are not bothering me. It's the rising cost of everything else, especially to heat the house, that I'm concerned about. That will affect my spending more.

DubbleHubble

How long ago did you buy and what kind of loan did you use?

Randy H - Oil isn’t going to do anything to change people’s consumption patterns.

Bubba

*boggle* Ok, then "there is no inflation", keep repeating. Last I checked energy inputs are among the most penetrating in the economy.

I figure I spend about an extra $10 a week on gas right now, it’s not breaking the bank so the prices at the pump are not bothering me.

The problem is that those 10 marginal dollars you won't spend on other consumption. If you multiply that out by the entire consumer economy, it's many billions of marginal dollars lost to inflation. And, there is a multiplier effect to inputs like energy...I think petrol is a multiplier of something like 5-6 if I recall correctly, so that $10 is more like $50 when considering the increased prices to everyone in the supply chain, depressed incomes, depressed earnings, etc. A little adds up fast, that's why AG is such an inflation hawk. Inflation is the devil.

"...but if you are making a marginally salary ($100K or less) and can’t even afford a house, i suggest moving on and not wasting so much energy."

Well, exactly where is $100K a marginal salary? Oh, yeah--SF BA, where we whip ourselves for not making enough to purchase a house that people elsewhere buy with half the salary.

There are two classes: The haves, and the have-nots.

Nice. One could also say: there are those who feel entitled, and those who work for it.
Despite owning several pieces of property (yawn), I prefer to fall in the latter group.
Wealth is an illusion if you wish too hard for it.

And, while I'm not as diplomatic as Jack, I agree 100%.

"...will most likely get to see firsthand if a 100K reduction makes any difference or not in this market. "

Interesting...what's that--3BR? Keeps us in the loop, that's real data. :)

Does DubbleHubble remind you of anyone?

Could be his dad, trying to "set us straight" ;)

The problem is that those 10 marginal dollars you won’t spend on other consumption. If you multiply that out by the entire consumer economy, it’s many billions of marginal dollars lost to inflation. And, there is a multiplier effect to inputs like energy…I think petrol is a multiplier of something like 5-6 if I recall correctly, so that $10 is more like $50 when considering the increased prices to everyone in the supply chain, depressed incomes, depressed earnings, etc. A little adds up fast, that’s why AG is such an inflation hawk. Inflation is the devil.

I was so focused on the rising cost of other things due to oil prices that I forgot about the impact that $10 could have. But you're right, it might be one less cup of coffee or fast food lunch, but that is going to have an impact if everyone starts cutting back on the little things.

Jack

I was just guessing, but do you think DubbleHubble would take such an attitude for no reason? I doubt it. IMO people usually lash out because of fear.

So far I haven't been able to determine that it's someone we know, but all they'd have to do is use someone else's computer. If the pointless posts keeps coming in, then we'll have a good indication of who it is.

Randy,
Will the Fed have the gumption to keep the rate hike going? The long bond market has either been emasculated by foreign central banks and is not playing any disciplinary role.[...]

I don't really know; there are some other folks here who know the bond market here (like HARM) way better than I. I do think AG will probably continue with rate hikes to check inflation, so the Greenspan Put is a safe bet. But Greenspan ain't gonna be there forever, in fact for not much longer. And, I think I sense that there is increasingly political pressure being put on the Fed. I hope that I'm wrong about that and the Fed remains independent.

I worry less about the foreign reserve problem; but others have made very good arguments to the contrary. I don't worry too much about China because of my reasoning before, but China isn't the only foreign central bank holding a ton of greenbacks, so maybe foreign held debt is a bigger problem than I have concluded.

So far I haven’t been able to determine that it’s someone we know, but all they’d have to do is use someone else’s computer. If the pointless posts keeps coming in, then we’ll have a good indication of who it is.

Some fresh blood for the trolls? ;)

People automatically assume that renters rent and rant because of affordability issues. Gotta love it.

People automatically assume that renters rent and rant because of affordability issues. Gotta love it.

Yeah, that post is interesting to me for that reason. I don't feel bad about renting at all. I pay half as much for my house as I would if I bought it. There was also an interesting article in the NYTimes, http://tinyurl.com/csajh, that basically states that right now renting is a better option than buying for most people. The article goes on to say that there is a misconception that the tax benefits of owning make purchasing a better option, at least when the P/E ratio is so disconnected like it is now.

The article goes on to say that there is a misconception that the tax benefits of owning make purchasing a better option, at least when the P/E ratio is so disconnected like it is now.

People hate taxes so much that they are willing to pay more just to get a deduction.

If having higher interest rates and high oil price ( > $60 per barrel) is going to impact your style of living, then you were not leading the life that have earned..you were probably leading the RE bubble life.

Very well said.