Saturday, February 28, 2009

I was very bad staff last night

This morning The Mighty Fang woke me up in much the same manner as above, starting with the meowing, then the kneading, then the patting of my face, but no baseball bat (he has not yet developed thumbs, thankfully!). I was baffled, because I feed my kittehs at night so they have plenty of food. After a while of him pestering me, I finally got up and headed over to the food bowl and...

bone dry empty.

Yep, I'd forgotten to feed my poor kittehs last night!

Today I mostly spent playing with my new Yaesu VX-8R. For a tiny little thing it works surprisingly well. I spent a fair amount of time listening to the Palo Alto repeater while getting APRS set up and working. I did discover that I have better ears than I have mouth, only about one in four of my APRS packets managed to make it through. Oh well!

- Badtux the Nerdy Penguin

Friday, February 27, 2009

Friday night Youtubery

Great Irish song by a great American songwriter (!). Yeppers, this here be a song written by Steve Earle. A version of it by Irish singer Mundy and Irish musician Sharon Shannon (the accordion player in this video) was the #1 single in Ireland last year.

Would type more, but my keyboard is malfunctioning. It's covered by cat paws, complaining I am not being proper staff.

-- Badtux the Music Penguin


I just don't feel like doing anything today.

-- Badtux the Sleepy Penguin

Thursday, February 26, 2009

Quit pickin' on Piyush!

Over at Why Now, Bryan says quit being mean to Piyush "Bobby" Jindal.

Which reminds me of this video:

Poor Piyush is doing the best he can, bless his heart. I mean, he has to work at dumbing himself down, that’s the only way he can ever get elected in Loserana, and so he didn’t do that good a job of dumbing himself down (making it obvious), so what? He’s trying, at least! Just like those ridiculous shots of him preening with a shotgun with a brace of dead ducks at his feet, okay, so duck hunting is about as natural for Piyush as saying 'yall' and eating turnip greens and cornbread (i.e., not very), but at least he tries! People need to just quit being mean to Piyush, he’s doing the best he can and can they do better? I mean, you try bein' a Republican today, bless their tiny black shriveled hearts. It can't be easy bein' that evil and that stupid combined!

So yeah, Piyush is Ivy League educated and a Rhodes scholar and about as redneck as a Volvo station wagon. But for some reason Louisianians have adopted him as an “honorary redneck” anyhow. Oh, they know he’s not *really* a redneck. But he tries, bless his heart. And they appreciate it, they do, bless their hearts.

- Badtux the Tongue-in-beak Penguin

The toll

In Iraq:

1.6 Million Deployed, 4,232 Killed,
30,981 Wounded, 180,633 Disability Claims, 2,095 Compensated.

The 30,981 wounded figure is those that the DoD officially recognizes as being wounded "in combat". The actual figure is more than four times that total. If you lose your arm because you were driving a supply truck and an IED went off next to the truck, you are not listed as being wounded "in combat" because you are not a combat soldier and nobody was shooting at you (being blown up, apparently, does not count as being shot at). Similarly, if you were in the loo at your base and a mortar shell falls near you and blows off all three of your legs, you aren't counted as "wounded in combat" because you weren't "in combat" -- you were in the loo. The DoD has been using all sorts of stratagems of that sort to deny veterans the compensation and medical care they deserve for serving in a war zone. It's important to know that, when you look at the difference between wounded, disability claims, and compensated in the numbers above. It is a disgrace and should be front-page news in every newspaper in America, yet for some reason, is not...

-- Badtux the Military Penguin


No real point to this post. Ran across the above pic when searching for a picture of zombies to use for my zombie bank posting, and liked it for some reason. I'm a male penguin. Go figure.

-- Badtux the Easily Entertained Penguin

Wednesday, February 25, 2009

Not up to much

Over at Moto-Tux, I talk about the end of an era -- I'm prepping my KLR-650 to be sold as soon as I get it in good shape for that (mostly a matter of repairing a couple of things that I see wrong and un-installing some stuff that I'm going to sell separately). Meanwhile, my search for the "right" ham radios is ongoing. At the moment it looks like the Kenwood D710 mobile and Yaesu VX-8R HT are the best radios I can buy for what I intend to do, so I might as well just skip buying all the radios I'll just sell a few month slater and get those two radios (one for the Jeep, one from away from the Jeep)...

And: Two deadlines at work. One this week, one next week. So I'm busy there too. Sigh.

- Badtux the Busy Penguin

Tuesday, February 24, 2009

Quote of the day

Having the party of Bush lecture you about out of control spending is like having a heroin addict chide you for putting too much sugar in your coffee.


-- Badtux the Easily Amused Penguin

Wingnuttery in action

So I find out from Wing Nut Daily ("An Insane Press for an Insane People") that Obama is a "Communist usurper" who "must be stopped", and that soldiers are being urged to refuse to obey the orders of their constitutionally-mandated Commander-in-Chief. WTF? Treason? Death threats? Encouraging a coup against the lawful government of the land? Have the Wingnuts gone completely insane?

Oh wait, I forgot. They can't go insane if they already were insane.

Alrighty, then!

-- Badtux the Insanity-spottin' Penguin

Attack of the zombies

The U.S. banking system right now is a collection of zombies, insolvent empty shells that are not performing the most basic functions of a bank. As a response, there is a call on the part of some to just let them go bankrupt and collapse the way any other bankrupt company would be dissolved in Chapter 13.

There's one problem with that: A capitalist system requires a stable money supply, a money supply that maintains price stability and wage stability. Money has value only insofar as it can be traded for things you can eat or drive or wear or live in. If you change the amount of "stuff" that you can trade money for, you render a lot of contracts broken. A loan contract, a contract to buy fuel oil for your trucking fleet, etc. all assume dollars that buy a fixed amount of "stuff". If you expect them to be paid in deflated dollars that buy more "stuff", then you've broken the contract in favor of the lender. If you expect them to be paid in inflated dollars that buy less "stuff", then you've broken the contract in favor of the borrower. The problem is that our legal system is based around the notion that dollars have a constant value, thus doesn't know how to deal with this situation other than to enforce contracts that now are unfair to either the lender or borrower. The legal system could be repaired, I suppose, to deal with the changeable nature of the value of a dollar, but it's far easier to simply maintain the value of a dollar at the amount predicted at the time the contract was written -- which is around 2% inflation per year.

So what does that have to do with zombie banks and why we can't just allow them to take Chapter 13 dissolution, you ask? Well, it's simple. Banks are unlike any other business in that they print money via the action of fractional reserve lending. So if you simply dissolve a bank, you basically un-print all the money which it has printed. That causes deflation -- the same amount of "stuff" in the economy but less dollars, meaning each dollar can buy more "stuff". Which, as pointed out in the previous paragraph, is unfair to borrowers and can result in a deflationary spiral if the borrowers cannot repay their debts in the now-deflated dollars, therefore defaulting and causing yet more banks to collapse and un-print the money they printed, wash, rinse, repeat, until we're all living in cardboard boxes except for the rich and wealthy who will own everything, purchased for pennies on the dollar.

In short, simply allowing the entire banking system to collapse will trigger a deflationary spiral that will impoverish the debtor class (us) and enrich the creditor class (the wealthy). So the only solution has to be to take over the banks, write down all the bad stuff to what it's really worth (e.g. all those CDS's? $0 value. All those non-Freddie-Fannie MBS's? Write'em down to $0. all those ARMs that will reset to 25% interest? Nope, worthless, either write'em down to 5% interest and value them at what they're really worth, or just write them off entirely) and toss'em off to a "bad bank" 100% owned by the government which can then collect whatever (if anything) ever gets collected on them, and fit the skin of the zombie around a fresh newly-capitalized bank that is 100% solvent. For that matter, all those ARM's and balloon mortgages? Pass a law outlawing ARM rate resets and extending balloon mortgages to 30 years at the same time you pass the law nationalizing the banking system, and revalue the loans accordingly when you transfer them to the "bad bank". The ARM's are worthless if you let the rate reset anyhow, if you foreclose on the house you can't sell it for anything near the value that you'll get from the un-reset ARM, so it's time for the investor class to just take their lumps and move on.

So the next question is: Where does the money come from to do this? Won't doing this impoverish all of us anyhow just as much as the zombie banks collapsing would? Well... the Federal Reserve possesses this marvelous technology called the printing press. Yeppers, they can just print fresh money to replace the money un-printed by collapsing all those bad debts into the "bad bank". But won't this cause inflation, you ask? Well, you need to go read Ben Bernanke's speech from last Wednesday again (previously linked). The Federal Reserve has many mechanisms for monitoring the money supply and inflation rate, and many mechanisms for un-printing money if necessary, ranging from market operations to increases of reserve requirements to raising interest rates. So this doesn't necessarily end up with runaway inflation. But I'll just point out that inflation is not the worst thing that can happen for you and I, members of the debtor class, anyhow. Inflation has the effect of reducing the real value of our debts (that is, the amount of "stuff" buyable with the money we owe), and thus makes them easier to pay off. In the long run inflation kills an economy because it encourages spending rather than saving and investing, but in the short run a little inflation may be just what the doctor ordered for the economy.

So one final question: Why bother putting the zombie skin around new banks? Why not just create new banks from whole cloth? Well, the problem there is that people have deposited their money at specific banks. Putting the zombie skin around the new banks lets those people handle their money transparently as if "their" bank still actually exists, rather than having to figure out where their money went to when their bank was taken over by the "good bank". It's simply less disruption than just throwing out the zombie skin. And less disruption is a good thing when we're talking about something as important to the country as a functional banking system. Capitalism requires a functional banking system, a dank dreary island nation ruled the world for almost 100 years because it was the first nation to create a modern banking system (yep, banks literally created the British Empire, since it allowed leveraging current income to purchase an empire that more than paid back the loans that created it), and making sure we have one and that it operates smoothly has to be one of the most important goals of the next couple of years. Capitalism sucks, but everything else sucks worse because chaotic systems such as an economy cannot be modeled by any algorithmic processes and thus use of a token system to "train" the economy to produce the goods and services most valued by the populace is the only really effective means of matching goods and services with the demand for goods and services. But that token system only works if a) the rules used to train it are fair to all participants (which has been a problem recently), and b) the tokens used to train it -- money -- have a constant or predictable value. The latter of which requires a functioning banking system. Which sucks, but so it goes.

-- Badtux the Economics Penguin

Mardi Gras

Today is Fat Tuesday, the last day to eat, drink, and make merry before Ash Wednesday and the start of the Lenten fasting season. In most Catholic countries (and in Louisiana, which might well be a Catholic country) this is a holiday called "Carnival" or, in the U.S., "Mardi Gras", where the only people who are at work are the people selling food and drinks to the revelers. And, I might add, this is an official Louisiana state holiday -- don't try to contact any Louisiana state or local government offices today. They're all closed.

Mardi Gras in New Orleans today is but a shadow of what it was before the Federal Flood in the aftermath of Katrina destroyed most of the city, but it is still "the" U.S. Mardi Gras celebration. For all those who made your way to New Orleans today, cheers.

-- Badtux the Louisiana Penguin

Monday, February 23, 2009

Indecent proposals

When it comes to health care, it seems that the cry of the Rethuglican and the "moderate" Democrat is, "separate but equal". That is, poor people will get health care through government programs, while wealthier people will get health care through their employer or individually purchased health insurance (for those who can afford it).

For the "separate but equal" Demopublicans, "universal health care" means providing government health insurance for those who are too poor to afford to buy their own health insurance -- but *only* for those too poor to afford their own health insurance. So there will be two health care systems if the Demopublicans get their way: The privately funded health care system for people of means, and the public health care system for people who can't afford their own health insurance.

Of course, this is "separate but equal". Everybody is equal in Demopublicanland, even if there's two separate health care systems. Just like everybody was equal in Segregationland, even though there was two educational systems, one for blacks and one for whites.

Of course, in Brown V. Board of Education, the U.S. Supreme Court struck down "separate but equal" laws regarding education, noting that "separate but equal" was inherently unequal because the people with the least power would end up getting the least resources. And indeed, black schools were grossly inferior to white schools in the segregated South. Just as in Demopublican Health Care, the public health care system even today is grossly inferior to the private health care system. For example, most hospitals and doctors in California will no longer accept Medi-Cal, leaving those patients to go to grossly over-crowded county health clinics and county health centers (the ones that have not been closed due to the gross inadequacy of Medi-Cal funding, that is) where patients often must wait for over 24 hours in the waiting room to see a doctor and where patients regularly die in the waiting rooms while waiting to see a doctor. That's what "separate but equal" does for health care -- it kills people. And Demopublicans have no problem with that, because the people being killed are poor people or old people, rather than campaign contributors.

The only way to have a fair health care system for all Americans is to have one health care system that applies to everybody, whether rich or poor, white or black, rural or urban, young or old. "Separate but equal" is just as inherently unequal and inherently un-American as it was in 1956 when the U.S. Supreme Court made their ruling in Brown v. Board of Education, and it is shameful that nobody calls the Demopublicans on this. Medicare For All is the only way of making sure everybody is on an equal basis when it comes to the right to live, the most basic right of all. A health care system which kills some people for the crime of being poor, while cures others for no other reason than that they have money, is a health care system which is legalized murder, and no caring or righteous man could ever sanction or condone any such thing. Alas, in the land of America caring and righteous men, men of honor and ethics, are few and far between...

-- Badtux the Health Care Penguin

Sunday, February 22, 2009


In response to the collapse of stock prices, the crash of major banking institutions and a freeze-up of global lending, millions become unemployed and millions more see their incomes fall. Major states see a huge fall in sales and income tax revenues take a bite out of their budgets and themselves lay off hundreds of thousands of workers or impose major wage cuts.

The result (clicky for biggy picture):

Deflation. Capacity utilization plummets. Inventory piles up. Companies are liquidated and their goods flood the market at ever-lower costs, seeking buyers who are reluctant to spend because they're expecting things to get worse before they get better. Debts taken out in cheaper inflated dollars are unpayable in the more expensive deflated dollars, causing further deflation, which causes further debt inflation, wash, rinse, repeat.

End result: The Great Depression. At least, in 1930 that's what the end point was.

Except notice the end point on the above graph. It's *JANUARY 2009*, not January 1930. And it shows the CPI dipping below 0% -- i.e., DEFLATION.

To which I can respond with only two words: "Oh shit."

-- Badtux the Gloomy Penguin


Up to my ears in ham radio gear reviews trying to figure out what would work best for communications when the fit hits the shan. My amateur radio license (Technician class) supposedly happens a bit after noon tomorrow, when it hits the FCC database. The Internet makes this both easy and hard... now that the Internet makes it so easy to sell used gear via eBay, for example, you can't get used ham radio equipment for cheap anymore :-(. Or at least not anything modern and functional. You want a 20 year old 2meter HT that's missing the rubber duckie and battery? Fine. You want something that, like, actually works? Might as well buy it new, you won't save much by buying it on eBay :-(.

-- Badtux the Hammy Penguin

Saturday, February 21, 2009

Fort Worth Blues

I know I've had this one up here before, but I was playing this again today and added it into my repertoire. It is amazing how Steve Earle can write sad songs without a single minor chord anywhere to be found. This is straight GCGD with CGD on the alternate verses, though he capos up to the 5th fret to fit his vocal range (I capo to the 3rd or 4th to make it fit my vocal range, which would wreck havoc with a backing band, but this is a solo guitar song).

-- Badtux the Music Penguin

Friday, February 20, 2009


A black cat on a black stripe is pretty well camouflaged. Well, other than the Pink Tongue of Mass Grooming hard at work, that is...

-- Badtux the Cat-owned Penguin

Coming up...

I'm going to post photos of last week's trip to Moto-Tux. It's really long (about 20 photos), and Moto-Tux pretty much is unused at the moment, so I'll post a link to it here and you can go see or not.

Also tomorrow, I'm going to head over to the Redwood City Library and take the test to become an amateur radio ("ham") operator. Some of the folks I travel with have been hassling me to put a 2M portable rig in my Jeep so they don't have to listen to the snap crackle pop of old-skool CB radio, and I found, taking sample tests on the Internet (drawn from the real test pool), that I passed easily just on general background and exposure to so many amateur radio operators over the years (starting over 20 years ago). They don't require you to learn morse code anymore, or I wouldn't bother. So it goes...

- Badtux the Random Penguin

The greatest threat to America is...

What? You thought Osama bin Laden? Global warming? Terrorism? Economic collapse? Unsecured borders? No! The greatest threat to America is... gays. At least, according to Senator Chris Buttars of Utah.

Apparently that dastardly super-villain, The Gay Agenda, is going to fly around with his Gay Ray of Gayness and Queer us all! The horror! Oh the horror! Our hair will be immaculately coifed, our apartments will be decorated just MAH-velously, and we'll all live the gay life forever!

Well, at least in Chris Buttar's imagination. Can anybody say "suppressed homosexuality"? Wouldn't surprise me if he didn't do twosomes with Larry Craig in airport glory holes. I mean, Buttars. Heh.

-- Badtux the Snarky Penguin

Below: That dastardly supervillain The Gay Agenda flies the skies with his Gay Ray of Gayness, threatening to queer us all! The horror! Oh the horror!

Thursday, February 19, 2009

Ben Bernanke's speech yesterday

Ben Bernanke, chairman of the Federal Reserve, gave a speech yesterday.

Ben is a relatively clear communicator, insofar as economists go. He knows his sh*t and is using all the tools available to a central bank (i.e. monetary policy) to try to prevent a total deflationary spiral and economic meltdown. Note some of the things he mentions that I've mentioned previously:

Some observers have expressed the concern that, by expanding its balance sheet, the Federal Reserve will ultimately stoke inflation. The Fed's lending activities have indeed resulted in a large increase in the reserves held by banks and thus in the narrowest definition of the money supply, the monetary base.1 However, banks are choosing to leave the great bulk of their excess reserves idle, in most cases on deposit with the Fed.
I've previously noted that monetary policy isn't working because of deflationary expectations, i.e., the expectation on the part of banks that any loans they give out today are likely to default in the future and most of their current loans are also going to default (thus requiring their reserves to cover the loans) so they give out loans only to the most exceptional of borrowers. Bernanke verifies this observation on my part. Banks have basically turned all that dough into "mattress money", stuffing it under their collective mattresses because they believe it will be more valuable in the future, thus monetary policy has failed to increase the money supply despite all of "Helicopter" Ben's frantic printing press operations.

Also note that Helicopter Ben has a plan for preventing inflation once the economy starts turning up and banks start lending out some of that "mattress money":

However, at some point, when credit markets and the economy have begun to recover, the Federal Reserve will have to moderate growth in the money supply and begin to raise the federal funds rate. To reduce policy accommodation, the Fed will have to unwind some of its credit-easing programs and allow its balance sheet to shrink. To some extent, this unwinding will happen automatically, as improvements in credit markets should reduce the need to use Fed facilities. Indeed, where possible, we have tried to set lending rates and other terms at levels that are likely to be increasingly unattractive to borrowers as financial conditions normalize.

And finally:

Policy innovation has been necessary because conventional monetary policies, which focus on influencing short-term interest rates, have proven insufficient to overcome the effects of the financial crisis on credit conditions and the broader economy.
Helicopter Ben basically is saying that conventional mechanisms for increasing the money supply have failed and now we're in "oh shit" territory where drastic things must be done to prevent a total collapse of the money supply. He is a central banker and it would not be appropriate for him to comment directly upon the need for fiscal policy to do what monetary policy has failed to do, but reading between the lines he's saying "we need fiscal policy as well as monetary policy to get out of this."

In another post I'll do a reminder of why we need a stable value for our currency and thus why both deflation *and* more than a minor amount of inflation are bad for a free market system -- basically, capitalism cannot work without a stable currency. More in that post.

-- Badtux the Economics Penguin

Right wingers are terrified of liberal ideas

That is the only thing I can figure. They purchased government monopolies on the public airwaves (I am *NOT* allowed to broadcast my views on the public airwaves, right-wingers have purchased a monopoly on all use of the public airwaves in my area), then scream and shout "free speech!" whenever anybody suggests that government-granted monopolies should be required to broadcast *all* viewpoints, not just right-wing viewpoints.

Note my point that THERE IS NO FREE MARKET ON THE PUBLIC AIRWAVES. All radio and television stations broadcasting on the public airwaves are GOVERNMENT-GRANTED MONOPOLIES. I cannot simply grab a microphone and start broadcasting my own ideas, I would get hauled away to jail. Talk radio today is dominated by right-wingers NOT because they out-competed me in the free market. Talk radio today is dominated by right-wingers BECAUSE RIGHT WING BILLIONAIRES PURCHASED GOVERNMENT MONOPOLIES AND PURSUE ME WITH GUNS AND PUT ME IN PRISON IF I DARE TRY TO COMPETE WITH THEM.

This is wrong. My views have as much of a right to be heard on the public airwaves as the views of Rush Limpdick and Michael Sewage-mouth. But I can't get my views heard because the billionaire supporters of these people have purchased GOVERNMENT-ENFORCED MONOPOLIES over all possible radio stations in my area and will have me arrested and put in jail if I try to broadcast my own views on the PUBLIC AIRWAVES.

There is only one thing that will allow my ideas to be heard on the public airwaves: regulation of these GOVERNMENT-GRANTED MONOPOLIES so that if Rush Limpdick is allowed to spew his drivel, then I (or similar like-minded liberals) should be given equal time to rebut him (i.e., the "Fairness Doctrine" that Ronnie Ray-gun repealed). Why are Rush Limpdick and the right-wingers so terrified of liberal ideas that they refuse to give equal time to them, indeed, have purchased government-granted monopolies over the PUBLIC airwaves in order to keep liberal ideas off of the public airwaves? Why are Rush Limpdick and the right wingers so absolutely TERRIFIED of my ideas that they would USE THE GOVERNMENT TO PUT ME IN JAIL if I *DARE* use our *PUBLIC* airwaves to broadcast my own ideas? There is only one reason, and one reason only, that they purchased these government monopolies and now use government guns to terrify and put into jail anybody who would dare broadcast liberal ideas: RIGHT WINGERS ARE TERRIFIED OF LIBERAL IDEAS. Why else are they fighting so hard, spending so many billions of dollars buying GOVERNMENT MONOPOLIES over the public airwaves, if they weren't so terrified of us?

-- Badtux the (sometimes) Liberal Penguin

Wednesday, February 18, 2009


I just learned from the wingnuttosphere that old-time progressives just lurved them some fascism. Why, I didn't know that, but in their history books apparently the progressive President Franklin D. Roosevelt signed a peace treaty with Nazi Germany and embargoed all arms shipments to Britain, rather than re-arming Britain after Dunkirk destroyed all their war-fighting equipment (ignore the left-wing commie web site at that link, they obviously are biased for left-wingers -- I mean, everybody knows the NRA is a buncha lefty pinkos, right?!). And fascist General Francisco Franco in Spain was apparently beloved by America's leftists, rather than America's leftists forming some "Abraham Lincoln Brigade" to go fight him.

Yessiree, I just learn SOOOOO much history from wingnuts! FDR loved fascists, as did the American left. Go figure!

-- Badtux the Snarky Penguin

A reminder

Interest rates fall at weekly Treasury auction.

That was yesterday's Treasury auction, but the interest rate on Treasuries has been effectively 0% for the past three months. So any "economist" who says that government spending "invariably" competes with and crowds out private spending is an idiot. If private spending was competing for that money, the U.S. Treasury would have to pay people to buy Treasuries (i.e., interest rate would be above 0%). Instead, people are buying Treasuries basically as a substitute for stuffing the money under their mattresses. And frankly, I'd prefer the money going to Treasuries (at which point it goes to pay the salaries of government workers, pay for bridges and roads, and other stuff of that sort and makes it back into the economy fostering at least *some* increase in the amount of goods and services flowing within the economy) than sitting under a mattress somewhere. At least it's doing *something* to move goods and services then. Money under a mattress is effectively funny-shaped toilet paper -- it just isn't doing anything. It might as well not exist, as far as the economy is concerned.

When interest rates at Treasury auctions start going above effectively 0%, *then* I'll start believing that government spending is crowding out private spending. But not one second before that. Because it just isn't true, the people saying that nonsense know it isn't true, they're just lying for their own political benefit because they think that if the current administration fails it means that they'll come back into power and be able to loot the Treasury for their own benefit again. And we know what to do about liars, right? I.e., call them lying bastards and ignore them. I mean, if they're wrong about something this easily verifiable, if they're lying about something so easily disproven, why should we expect them to be right or to tell the truth about anything else?

-- Badtux the Economics Penguin

Tuesday, February 17, 2009

Decade at Bernie's

Paul Krugman sort of backs in to what I've mentioned earlier: the current crisis is a solvency crisis. I.e., banks can't lend money because they're insolvent. People can't borrow money because they're insolvent and don't meet the basic criteria to borrow money. People can't buy stuff because they're insolvent. And the insolvency, by deflating incomes because other people aren't buying stuff due to their own deflationary expectations, inflates the debt load of Americans, causing further insolvency as further people become unable to service their debt load.

I've previously hypothesized that nothing less than a national declaration of insolvency -- i.e., much easier access to bankruptcy protection, and the complete re-structuring and re-capitalization of the banking industry -- will get spending back up and going again. The desired end game, remember, is to achieve a level of supply and demand that results in near-full employment, which is necessary in order to prevent social unrest and maximize output of goods and services in the economy in order to provide a better life for the majority. If nobody is buying, there are no jobs. If there are no jobs, then people aren't buying. This solvency trap is hell to get out of, and anybody who thinks the economy can get out of it without massive government intervention has to be smoking crack or hillbilly heroin or both.

-- Badtux the Economics Penguin

More on inflationary and deflationary expectations

Now, in a prior posting I mentioned the fact that economic cycles naturally lead to creation and destruction of money via the normal actions of bank lending. That is, in an up cycle with inflationary expectations, banks lend money and reduce their cash reserves (reserve ratio), which in turn creates money via the action of fractional reserve banking (lower reserve ratio = more money in the economy, going from 15% to 10% reserve ratio increases the money supply by 150%). Banks expect that lending money will create much profit for them, and thus lend money. They have inflationary expectations -- i.e., that in the future the money they have in their vaults will be worth less, so they might as well lend it out now. Potential borrowers also have inflationary expectations -- they see themselves as having higher income in the future and see that any money they have now will be worth less in the future, so they spend money they've previously saved (thereby reducing the effective reserve ratio and increasing the money supply) and furthermore they might as well borrow money now and pay it off with tomorrow's higher income. By having inflationary expectations, they make it happen -- the money supply is inflated.

Now let's contrast with today's cycle. Banks have deflationary expectations -- they believe that their money will be worth more in the future than what they can get by lending it out now in a down economy, thus they don't lend. Similarly, borrowers have deflationary expectations -- they believe they will have lower incomes in the future, so they don't spend money or borrow money, they save it instead. If they save it in the bank, the bank isn't lending it out so they're increasing the reserve ratio and thus deflating the currency. If they store it under their mattress, the money is no longer in circulation buying goods and services so again they're deflating the currency.

All of this is not some vast conspiracy. All of this falls out of the entire concept of fractional reserve lending. The money supply inflates as banks lend, until people are all borrowed out and start defaulting on loans. Banks slam the brakes on lending then because they have deflationary expectations, which then causes people to have trouble buying stuff like cars and houses, which in turn causes lost jobs which cause other people to have deflationary expectations. Sans government intervention, the usual result in the past was massive transfer of assets from the middle class (the debtor class) to the upper class (the investor class, which bought the assets of the middle class at bankruptcy or foreclosure auction for pennies on the dollar), and then years of misery as the now-impoverished populace tries to survive despite there being no jobs or anything. The only reason the nation survived this cycle prior to government intervention was because of two factors -- first, massive gold and silver strikes resulted in re-inflation of the money supply at critical junctures (this back in the days when gold and silver were used as money), which then led to inflationary expectations and the resumption of bank lending and borrowing which in turn reduced the effective reserve ratio and re-inflated the money supply even further, and secondly, the US was largely a nation of farmers prior to the 1900's and farmers could simply wait out the downturn -- they weren't going to starve to death, and their capital equipment wasn't going to decay to uselessness in the few years before the next big gold or silver strike re-inflated the currency and caused inflationary expectations once more.

Nowdays, money isn't gold or silver and the money supply can't get re-inflated simply by a gold strike happening. Instead, money has to be printed and re-injected into the economy in a way such that it gets circulated rather than just disappearing under a mattress or into a bank vault where it does nobody any good (see my previous mattress money discussions). Even buying gold or silver bullion gets the money back into the economy, so if you want to buy gold or silver coins and stash them under your mattress, there is no macroeconomic bad effect -- you're not hurting the economy in any way, indeed, by increasing the incomes of gold and silver traders who then increase the incomes of salesmen who sell you this stuff over the phone and so on and so forth, you're helping the economy. Now, on the microeconomic side buying gold or silver right now is a bone-headed move because the whole point of buying commodities is to buy low, sell high, and if you buy now you're buying high and will probably end up selling low in the future, but from a macroeconomic point of view buying gold or silver isn't hurting the economy (assuming there is not a shortage of gold for use in the electronics industry and elsewhere due to your actions). Of course, there's the downside that any offers you find to sell gold or silver to you are probably scams, but that's another story entirely, and will be addressed in "You can 't eat gold, Part III" at some point in the future...

-- Badtux the Economics Penguin

Monday, February 16, 2009

Well, at least it wasn't a barbecue

This is from the disciplinary handbook for a "Christian" college. Back in the old days, folks like the ones that run Clearwater Christian College would burn you at the stake for being a witch. Nowdays, they just expel you. Progress!

A "Christian College" of this sort is sorta like a "non-alcoholic beer". It leaves out anything that makes the experience worthwhile, and adds nothing to your life other than the ability to say, "I survived four years of Christian College" or "I survived drinking a non-alcoholic beer". You're not any smarter or anything at the end of the experience, you just have a piece of paper that says BS on it, or an empty non-beer can.

Think about it. Faith, for the evangelical Christians who found these kinds of colleges, is about, well, not asking questions. Education is about, well, asking questions. A "Christian college" is inherently a contradiction in terms and the result can be called "education" only in the same way that a non-alcoholic "beer" can be called beer.

-- Badtux the Snarky Penguin

I'm back!

More later, I'm a bit tired from my four-day weekend. Got to see some interesting geography and some interesting history. The cats were happy to see me when I got home, and they hadn't even shredded anything while I was gone! I took a nap when I got in, and The Mighty Fang crawled up under the covers with me and snuggled up to me and Mencken took the other side. Maybe the fact that it was 65F inside my apartment when I came in had something to do with that too, I didn't bother to turn the heat on until I got up from my nap (when you've been sleeping on the ground for a few days in below-40F weather, 65F is almost toasty!).

-- Badtux the Vacationed Penguin

Fear the fierce

If you don't behave while the penguin is on vacation, The Mighty Fang will come to your house and EAT YOU ALIVE. You thought he got that fat by eating kitteh kibble? Nope. He got that fat from eating people who misbehave on the penguin's blog!

-- Badtux the Fat-cat-owned Penguin

Sunday, February 15, 2009


Behave yourself while the penguin is on vacation, or the kibble monster will get you.

-- Badtux the monster-owned Penguin

Saturday, February 14, 2009

The most effective forms of stimulus

I posted a chart here a few days ago showing that the most effective forms of stimulus in an economy with deflationary expectations were a) food stamps, and b) infrastructure spending, and the least effective was tax cuts or direct cash to consumers. The question is, why?

The answer is pretty simple: Mattress money. Note that physical mattresses are not required, if you give it to a bank and the bank doesn't lend it out, it's basically mattress money at that point too, it's just the bank stuffing it into a virtual mattress at that point. The deal is that money has value only insofar as it is used to trade for goods and services in an economy. Money has no inherent value other than as oddly shaped pieces of toilet paper. So mattress money is literally toilet paper as far as the economy concerned, doing nothing at all to foster the movement of goods and services in the economy (it is the goods and services in the economy, not money, that has actual value).

So anyhow, if you give money to people when they're facing deflationary expectations (i.e., expectations that their income is going to be less in the future), they're going to stuff it in a mattress. If they give it to a bank and the bank is facing deflationary expectations, then the bank is going to just let it sit on account rather than lend it out, in hopes that when the economy turns around so that people's incomes are rising then they can loan it out with a higher rate of return than if they lend it out while people's incomes are declining. In short, giving money to people is an effective way to stimulate the economy when people have inflationary expectations -- the money will be worth less in the future so might as well spend it now -- but it stimulates very little spending when people have deflationary expectations, they'd rather save it because it'll be worth more to them in the future (when they lose their job or whatever).

So if you're wanting to promote the flow of goods and services in the economy, and thus employ people to provide those goods and services, and your population has deflationary expectations, you cannot simply hand out the money. You have to hand it out with strings attached. And that's what food stamps and infrastructure spending have -- strings out the yin-yang. You guarantee that the money will take at least one turn through the economy buying goods and services. Today's food stamp program uses a credit card thingy and you have to spend the balance in a month. No spend, it goes away. So people will buy food in it, which will employ grocery store clerks and stockers and truckers and food processors and so on and so forth, so it has a very high multiplier effect -- that money touches a *ton* of hands before it finally ends up under someone's mattress.

Infrastructure money has the same kinds of strings attached. If you get money to build a bridge, you can't just stuff the money under your mattress. You damn well have to build that bridge. You have to buy steel, hire riggers, buy concrete, and the steel companies have to buy coal and ore and pay truckers to carry the steel to you, the riggers have inflationary expectations for the duration of the contract to build the bridge (which may be several years) so are more inclined to spend the money rather than stuff it under a mattress and will spend the money in bars near the work site and on Harleys and shit, the concrete company has to hire more workers to make all the concrete needed and hpay truck drivers to haul the concrete to your site, and once again that money touches a *lot* of hands before it ends up under someone's mattress. And each time it touches someone's hands, it's adding value to the economy because that's a transaction that would not have occurred except for the initial infrastructure spending.

So anyhow, that's why food stamps and infrastructure money have a larger effect upon the economy in an era of deflationary expectations than simply giving money away. It's all about mattress money, and keeping that money you're handing out from heading straight to mattresses rather than going towards creating jobs and services in the economy. Thanks for paying attention, class!

-- Badtux the Economics Penguin

The penguin is on vacation. You are reading posts queued up before he left. Please don't trash the place while he is gone!

Friday, February 13, 2009

More on money supply

As for nonsense being spread by the Republicans and Libertopians about how adjusting the money supply via monetary and fiscal policy is the same thing the Soviets did, even Milton Friedman wasn’t that silly. A stable currency is one of the requirements of capitalism, and modern capitalism requires fractional reserve banking, which inherently creates and destroys money as the economy expands and contracts. Even Thomas Jefferson recognized that a stable currency is necessary, though he was ignorant of economics and thought a strict gold standard would prevent the creation and destruction of money by the operation of the banking system (it doesn’t — any system of fractional reserve lending inherently creates and destroys money whether you have a gold standard or not). Even Milton Friedman admitted that there were times that fiscal policy was needed in order to implement his favored monetarism, specifically, when we hit the zero bounds. At the zero bounds, simply printing money ceases to work because freshly printed money turns into mattress money and disappears out of the economy, no more than pretty pieces of toilet paper.

None of this is controversial. None of the real experts (as vs. the pseudo-experts who were wrong about everything) disagree with any of this. What they do disagree with are specifics of the best way to handle fiscal policy to stabilize the money supply. Even there the disagreements are more about subtle things like long-term multipliers and best method to disinflate the money supply once money stops being mattress money and starts increasing the money supply via the operation of fractional reserve lending again, not about the need to do any of this stuff to insure a stable medium of exchange.

Short of outlawing fractional reserve banking and its inherent inflationary and deflationary effects upon the money supply, we’re stuck with government, in other words. Otherwise capitalism simply doesn’t work, because if the token of exchange can be rendered worthless via runaway inflation or rendered so valuable that it can’t be exchanged by deflation, then we end up with the token of exchange being useless — and reduced to barter, which is a lousy way of handling things. And we can't outlaw fractional reserve banking because, well, it's just so damned useful. Like I said, look at the Islamic world. They outlawed lending money for interest, and it pretty much killed commerce in those countries, allowing the primitive Western world to catch up and then surpass the Islamic world and, finally, conquer them. That's the fate of countries that outlaw fractional reserve banking or never establish it due to corruption or whatever -- they fail. Given that, we can't do without government the way Libertopians claim. We at the very least must make sure that there's enough government to insure a stable money supply...

-- Badtux the Monetary Penguin

The penguin is on vacation. You are reading queued-up postings. Discuss.


The Mighty Fang says to behave yourself while the penguin is on vacation. Or else.

-- Badtux the Vacationing Penguin

Thursday, February 12, 2009

Crapflooding and "experts"

One of the things that Party ideologues are fond of saying is that there's lots of experts, so why should we listen to one set of experts over another? The Party commissars then flood the airwaves with their own pet experts, who contradict everything that non-Party experts say.

This is, once again, crapflooding, where truth is crowded out underneath a sea of lying liars. Far be it for me to contradict the Party commissars, but there is a clear answer to figuring out which experts are worth listening to vs. what experts are not worth listening to: Look at their past history. If they have been right in the past, listen to them. Not uncritically, but listen to them, examine whether there is a factual basis for what they are saying or whether they are merely reciting Party doctrine handed down to them by their Party commissars. You may or may not find that they have a point. If they have been largely wrong in the past, ignore them like a steaming pile of dog dung. So I will listen to Paul Krugman, because he was right. I will ignore the Party commissars' pet "experts", because they were wrong -- they said that the economy was fine, peachy keen, needed no help but tax cuts, neener neener! Uhm, right. Which is why 8 years of tax cuts resulted in today's fine prosperity (sarcasm intended, since we lost 1.2 million jobs in the last two months alone).

As for the folks who whine about the magic of markets and such, markets work perfectly when everybody has perfect information and when the value of the dollar stays stable. Unfortunately, when the economy is threatening to enter into a deflationary spiral a' la' 1932, something has to be done to stabilize the value of the currency or the economy slams to a halt because goods and services quit flowing because money disappears into mattresses waiting for deflation to make it more valuable, rather than going into investment in the economy or buying goods or services. This isn't theory. This is fact. We have historical data proving this.

Which brings up the most important role of government in an economy, which is *not* to control the economy, but, rather, to make sure that money has a consistent value. You can't simply print money (whether via tax cuts or simply doing helicopter drops of hundred dollar bills over major cities) when you see the economy entering a deflationary spiral. When there are deflationary expectations, newly-printed money simply disappears under mattresses, where it does nothing to cause goods and services to flow in the economy and might as well be pretty pieces of toilet paper for all the good it does in the economy (remember, wealth is not pretty pieces of toilet paper with pictures of dead white men on it, wealth is goods and services, the toilet paper is merely an exchange token). You have to attach strings to it to make sure it gets spent and therefore causes goods and services to flow in the economy. Like food stamps, where you can't put it under your mattress and hold on to it, you have to spend it on food. Or construction contracts, where you can't put it under a mattress (if you're a construction company), you have to actually spend it on the steel and concrete and workers necessary to build the bridge. Otherwise you're just dumping money into the Marinas trench rather than getting it out into the economy.

Now, does the government control the economy when it's doing this, Soviet-style? No. The government is only controlling the money supply, something which even Thomas Jefferson acknowledged was necessary to do, though ole' Tom didn't know anything about economics (he had absolutely no conception of how the multiplier effect of fractional reserve lending works to expand and contract the money supply, for example) so he didn't have any idea how to do it. When the money supply starts growing again because money is moving out from under mattresses back into the economy, the government can then sell all the securities it bought during the downturn and suck that mattress money back out of the economy as it gets pulled out and dumped into the money supply, and the unit of exchange for goods and services, the dollar, is saved from runaway inflation. But if you don't have a stable unit of exchange -- a currency with a constant value -- markets simply don't work because the unit of exchange either becomes worthless due to inflation or becomes so valuable due to deflation that it disappears under mattresses rather than being available to use to buy goods and services and invest in production.

In short, the proper role of government in a capitalist society is to a) insure the free flow of information so that people sold AAA-rated bonds are being sold real AAA bonds, not trash backed by liar loans, and b) maintain a monetary unit of exchange that has a consistent value despite the normal fluctuations caused by market-based activities (specifically, fractional reserve lending) that ordinarily print and destroy money during the normal operation of economic cycles. And that is all I have seen thus far from Washington D.C.... folks who start screaming about "socialism!" etc. need to adjust their tin foil hats, because what is largely being done (aside from some pork here and there) is entirely adjustments of the money supply via either monetary or fiscal policy.

Note that none of this is particularly controversial by any economist willing to look at facts rather than blinded by Party ideology. Even Milton Friedman admitted that the above was true. Economists can argue about the best way to pump money into the economy during downturns in order to keep the value of the monetary unit stable as money is un-printed due to reserves increasing (fractional reserve lending, remember?), but none of them will argue that it's necessary to keep it stable. Heck, even Thomas Jefferson knew that.

-- Badtux the Economics Penguin

Happy national wingnut freakout day!

Today is the birthday of Abraham Lincoln, who won the War of Northern Aggression against the Treasonous Rebels who fired upon their lawful government, and of Charles Darwin, who the Catholic Church has no opinion about (the Church: "That's a matter of science, not of faith, and thus not an issue we're interested in") but the other tighty righties are absolutely convinced that Darwin was Satan incarnate.

The tighty righties insist that anybody who acknowledges evolution is an atheist. Uhm, no. Until I converted to Tuxology I was a Catholic, and I was taught evolution in the Catholic schools. See above opinion of the Catholic Church about evolution.

-- Badtux the Religious Penguin

Setting the bar low

One of former President GWB's staffers tells the press, "First off, President Bush does know how to read."

Talk about setting the bar low. I mean, we already knew that. The question wasn't whether he knows how to read. The question is whether he has ever bothered reading anything more complex than My Pet Goat.

-- Badtux the Snarky Penguin

Jihad fail

Fucking moron can't even spell the name of the people he wants to kill. Oh well, I guess that's the advantage of free speech. It lets you see just how fucking stupid the haters really are, and treat them accordingly.

-- Badtux the Free Speech Penguin
H/T to Wok3

Comcraptastic goes Cocks

Cocks Internet (Cox) blocks outgoing port 25. I just got an email from Comcast that they're blocking port 25 now too, but only for folks like me who actually use port 25 to go outside of Comcast's network (i.e., to any server other than Comcast's). Which I do because I route all my outgoing email through to make sure it gets properly logged and archived. Comcraptastic! Now I gotta go figure out how to make Exim4 on Debian listen on something other than port 25 (I am *not* going to send email via Comcraptastic's SMTP server, I found out the hard way that Comcraptastic's SMTP server drops half the email that it gets into the bit bucket, apparently using some hyper-vigilant algorithm that detects many ordinary emails as "spam" or "viruses").

Oh well, at least now hopefully the other people on my neighborhood segment aren't going to overload our upstream with zombie porn spam anymore. Note that I run a Mac and have my WiFI on my Airport Extreme secured with the most secure encryption, so I know I wasn't the source of any spam (no viruses for Mac, remember?). But I certainly saw a spike in virus traffic last week that was probably zombifyin' machines all over Comcraptastic's network... made things here on the penguin's iceberg pretty goddamned craptacular until Compost got the morons cut off. Looks like their algorithm for "probably a spammer" can't tell the difference between a buncha spam going to lots of servers, and a few emails going to a single server. Morons. But what can you expect from folks who've outsourced everything and thus have only a few dozen people who know anything who keep the whole craptacular piece of shit network they run up and going somehow and thus haven't a second's amount of time to, actually, like, *think* about the craptacular code they wrote in the five seconds between solving one problem that threatens the whole network and solving another problem that threatens the whole network? It's all about how corporate management can squeeze their employees for more profit by replacing competent people who know their shit with idiot contractors who can't find their ass from a hole in the ground, and nothing about customer service, unless your definition of "service" is what a stallion does to a mare.

-- Badtux the ComCrapilated Penguin

I followed the directions for configuring exim4 at:

with the exception that I authenticate against SASL rather than against Courier since I don't run Courier, I run Dovecot. So I un-commented the SASL section of the configuration file rather than the Courier section of the configuration file. But that was done years ago (been prohibiting relaying w/o name and password on port 25 for years, have never allowed "bare" relays for obvious spammer control reasons), so all I had to do was configure my keys, set the SSL enable at the top, and change last line of /etc/default/exim4 to say

SMTPLISTENEROPTIONS='-oX 465:25 -oP /var/run/exim4/'

and after restarting, voila. Now listening for SSL on port 465, and non-SSL on port 25 (for things destined for that mail server which also hosts my Badtux domains). Tested it, and it works with both Thunderbird and AppleMail (I run a Mac, remember?).

Wednesday, February 11, 2009

Becoming ordinary

I haven't been able to ride my KLR in over a month because I injured my leg and can't trust it to not be re-injured by mounting and dismounting the KLR (which requires stepping on the footpeg to get over the seat due to its height). I also have to face facts that I'm several hundred years old in penguin years and simply don't bounce like I did when I was young :-(. I like the Wee-Strom as a sport-tourer, but its care and feeding is somewhat expensive and its value as a commuter is low because of the amount of time it takes me to put my safety gear on and off, it takes over 5 minutes before I get on the bike, and over 5 minutes at the other end, and my commute is only 15 minutes in the first place. And like I said, I don't bounce like I did when I was young (and my commute is at high speeds on freeways), so doing without the safety gear isn't something I'm interested in.

If I do away with the motorcycles, I can empy all the motorcycle crap out of my garage, which frees it up for non-motorcycle crap, and keep the Jeep there full-time. I can also move to an apartment downtown when my current lease expires in May 2010, I extended my lease on the current place because the downtown apartment didn't have room for both my motorbikes and my Jeep in its garage (and there is no additional parking available -- it's downtown, duh). The downtown apartment is right by the train station and close to two different light rail stations and pretty much eliminates the need for a second vehicle, which is why it's not a big deal that there is only space for one vehicle in its garage. And also, this makes me much more portable and mobile. If I have to get out of town, I don't have to worry about possessions left behind, I just pack what I need, toss the rest or put it in storage, and drive off into the sunset.

Problem is, then I'm well on the way to becoming ordinary. Just another penguin with a Jeep. Sigh...

-- Badtux the (Motorcycling? Jeeping) Penguin

Don't let the door hit ya on the way out

I got an EMAIL from World Nut Daily that was titled, "Coulter says goodbye to America". I opened it hoping to find that Mann Coulter had taken her screeching lies and hate to some other nation more suited for what she wants America to be like, such as Mexico. Alas, opening it found that she insists that we're going back to the Bad Old Days of the Clintonistas. Really? Does that mean we get full employment, economic growth, and balanced budgets? I'll take that!

Methinks that if Mann Coulter don't like America, that she just leave. Her low-tax paradise, Mexico, awaits her. Oh wait, only tighty righties are supposed to be able to say that. Alrighty, then!

Oooh, more wingnuttery!

Wow. Just wow. What more can I say? I think the photograph of wingnut headgear sez it all!

-- Badtux the Snarky Penguin

More Wednesday "We are so, so fucked" Blogging

Deflation, here we come. For why that's bad news, read my two articles on deflationary spirals from my compendium of economics theory. Also read my comment on Brad Delong's posting, it explains about why the dollar remains a viable reserve currency despite U.S. economic problems and why Milton Friedman style monetarism, as done by Fed chairman Bernanke, isn't working (i.e., because we are pushing on a string).

And in other "we are so fucked" news, the economy declined further in the 4th quarter than was originally calculated. GDP declined by over 5%. To find another year where the GDP declined by such a huge amount you have to go back to 1946, when the U.S. industrial machine suddenly shut down to re-tool from making tanks and bombs to making cars and sewing machines, and that was a very special circumstance. Before then, you have to go all the way back to 1932 to find such a decline. (Statistics courtesy of the U.S. Bureau of Economic Analysis). To find a worse quarter, you have to back to the second quarter of 1980, which effectively killed Jimmy Carter's chances of re-election, and before that, the first quarter of 1958. But those were short, sharp shocks in the economy from which the economy swiftly recovered. It seems unlikely that the economy will swiftly recover from the 4th quarter's steep drop, given that the economy has been declining since December 2007.

-- Badtux the Fucked Penguin

Idiocy and ignorance

Here's some things I've seen idiots saying:

  1. This crisis is created by the Federal Reserve, a PRIVATE bank
  2. We should let the banks fail.
  3. We don't need a banking system
  4. Treasuries aren't backed by anything and are worthless
  5. We should bail out ordinary people, not banks
  6. The Federal Reserve is just *printing* money, and it's going to cause runaway inflation
Okay, so here's my responses:
  1. The Federal Reserve does not have supervisory capacity over banks to keep them from making risky loans and bad investments and such, which is the root cause of this problem. That's the Comptroller of the Currency. The Federal Reserve is "private" in much the same way that the U.S. Postal Service is "private". I.e., only vaguely and on paper. The Federal Reserve can only buy and sell assets and lend money to banks, that's the extent of their power over the economy. Blaming such a limited institution for the current problems are ridiculous.
  2. We can't let the banks fail because that would evaporate 90% of the money in the U.S. economy. Read my article on deflationary spirals (see the "Important Posts" section in the right margin).
  3. A banking system allows borrowing money to create an addition to the economy, and then use the output of that addition to the economy to pay back the borrowed money. We now have 300 years of experience to show that a banking system is necessary for a modern economy. London's banks are why the United Kingdom became the British Empire upon which the sun never set -- they were the first to create a modern banking system. The Muslim world did not have a banking system because Islamic law prohibits lending money at interest, and you know how well that worked. Without a banking system, economic activity slows down drastically, both because of the borrowing/lending aspect and because all commercial transactions must take place by moving heavy bails of physical cash around rather than via electronic funds transfers in bank ledgers. To recap, we simply do not have a modern economy if we don't have a banking system -- what we have is a Dark Ages economy where we end up reduced to poking each other with sharp sticks to steal each other's meagre rations of turnips and gruel.
  4. Treasuries are backed by the economy of the United States of America. As long as that economy is strong and can be taxed to pay off Treasuries, Treasuries have value. There has never, in the history of the United States of America, been a default on Treasuries -- even the Revolutionary War debt, which was ten times larger than the GDP of the United States of America at the time, eventually got paid off. The oanswer to the worth of Treasuries is that they are worth exactly what people will pay for them. Right now so many people want them that they're returning effectively 0% interest. This is not a sign of a worthless asset. As long as people want to pay for them, they have value.
  5. The problem is that if the banks fail, their assets get sold at auction for pennies on the dollar. Their assets including all those mortgages. Thing is, 90% of the money just evaporated out of the economy, 90% of the money that could be used to pay off those mortgages. Which means that that pretty much every house with a mortgage on it becomes foreclosed and thus the property of a small set of very wealthy and ruthless men. Now, I do agree that ordinary people need some help, but transferring their houses to a small set of very wealthy and ruthless men does not sound like the sort of help they need.
  6. The Federal Reserve is not "just printing" money. The Federal Reserve is handing out money in exchange for assets -- bonds, Treasuries, mortgages, etc. -- in an effort to prevent deflation. They have very sensitive measures of the money supply, and if their measures show inflation starting up, they can then start *selling* those assets, thereby un-printing the money. But given that tens of trillions of dollars have evaporated from the economy over the past six months due to the collapse of the mortgage industry, lockup of credit markets, collapse of housing prices, etc., the Federal Reserve's efforts are quite appropriate.
The problem is that there's all these idiotic notions out there which have some surface plausibility, but are simply ignorant. All I can figure is that these are the same sorts of people who would try to tell a heart surgeon how to do heart surgery or a rocket scientist how to design rockets. They are ignorant, they like being ignorant, and they believe that their ignorance is a strength, not a weakness, and can be used to solve all of the world's problems. And sad to say, these idiots are the ones who get elected to Congress and/or direct those who are in Congress, too... sigh.

Badtux the "We are fucking fucked big fucking time" Penguin

Tuesday, February 10, 2009

Obama regime repeats Bushevik mistake on banks

Obamatrons will hand out money to banks with no strings attached, just like the Busheviks did.

Stupidity is defined as doing the same thing again that didn't work before. Sigh. I retract my previous statement that the Obamatrons were evil but at least they were smart. Maybe they aren't as dumb as the Busheviks were -- let's face it, the sheer amount of suck coming from the Bushevik regime, it's a wonder that Washington D.C. wasn't turned into a massive black hole -- but it's also clear, now, that they're no administration of Einsteins either. Sigh.

-- Badtux the Disappointed Penguin

Obama regime aids and abets Bush-era coverup

Obama Department of Justice continues use of "State Secrets" privilege to prevent justice from happening. This despite the fact that Obama explicitly promised to end the Bush administration's abuse of "state secrets" to justify dismissing lawsuits.

Which just goes to prove that the Obama regime isn't any less evil than the Bush regime -- just smarter. They're not going to give up this power to hide evil shit that they do because they intend to use it too.

Gotta go, there's a couple of dudes in suits knocking at the door. (Just kidding, our rulers are smarter than that, they understand that idiots like us ranting on the Internets are no threat to their power and that the ranting serves a valuable social purpose by giving us an outlet for our anger against our rulers other than marching on Washington D.C. and slitting throats).

-- Badtux the Governed Penguin

WTF is up with this weather?

It's 38F here in sunny Babylon By The Bay. It was 80F here a week ago. What's with this fuckin' weather, dude? Oh well, I like this kinda weather (fat waddling waterfowl, remember?), but tomorrow it's supposed to start raining again. That's good too, but I was hoping to go Jeeping this extended weekend, and it doesn't look like that's going to happen :-(.

-- Badtux the Weather Penguin

"Poor Customer Service Representatives!"

At one site I was browsing about the scumbags (Chase Bank) below, someone said, "Poor customer service representatives! It must be horrible to have people yelling at you about something you have no control over. I feel sorry for them."

Yeah right. They choose to work for an unethical and immoral company. That is a choice they make. I don't feel sorry for them. There is more honor in walking the streets homeless but honest than in lying for a living. I have thank god never ended up homeless because of me valuing honesty over lying, but it's been close at times, like one summer where I worked census and delivered pizza all for minimum wage, barely enough for gas and food, before I remembered someone who'd called me a few months back about a job, called him, and got an honest job that didn't pay a lot but at least paid for gas for my rusty $850 Chevette with enough left over for food, auto insurance, and electricity and water for my rundown old $2800 mobile home.

So I don't feel sorry for the "poor CSRs" who choose to work for an unethical and immoral company. They choose to enable evil. So be it. I'm not going to yell at them or anything because that's not useful, but I'm not going to pretend that they're these virtuous people that I should feel sorry for either, because they're not. They chose to work for evil. So be it.

-- Badtux the Vicious Penguin

Scumbags of the month: Chase Bank

Read the complaint. My name isn't on that complaint, but these guys have my name, address, and phone number if they need another name to put on a revised complaint.

How it works: a few years back, Chase made an offer to me: transfer a balance to their card, pay a one-time transaction fee, and it would be 3.99% until the balance was paid off. I took them up on the offer and transferred a balance to their card (the balance being basically what it cost me to be unemployed for six months then to move from Phoenix to the Silicon Valley, or roughly $16,000). Since then I have faithfully paid on the balance every month, never a day late, never a dollar short, and the balance is now significantly less than that. I have, in short, lived up to my end of the contract.

Chase, however, has not. They have apparently decided to take that $35 billion of taxpayer money that they got from TARP, and use it to illegally try to kick the "deadbeats" (i.e., those of us who pay our bills every month) off of their books. I can see why they don't want my loan on their books -- while they're getting money at 0% from the Federal government, still, 3.99% sucks as an interest rate. But they made a deal, and now they don't want to live up to it, instead charging a bogus "transaction fee" that is not allowed by the promotional agreement. And oh yeah, they've also accelerated the payment, but that doesn't bother me, I'm paying off my credit cards and all that's doing is shifting which credit card I'm paying off. No big deal. It's the bogus monthly transaction fee that's not authorized by the agreement we had.

I personally don't see much chance of the class action lawsuit succeeding. I'm not a lawyer, but that arbitration provision in the cardholder agreement looks pretty ironclad to me. But that doesn't make Chase Bank any less scumbags. If you have an account with these people, MOVE IT IMMEDIATELY. Unless you're actually costing them money. If you have a no-annual-fee credit card with them, pay it off and then charge a $1.50 soda with it once a month. And then pay your bill via a check and US Postal Service. That way they have to pay mail handling fees, check handling fees, and otherwise spend money on your account. But hey, it's what scumbags deserve :-). In the meantime, my credit cards are going to be paid off by the end of this year (and I have the money to pay off Chase immediate but prefer to put it to use elsewhere). Good riddance to them all.

-- Badtux the Ripoff Penguin

Monday, February 09, 2009

A reminder for the "Crowding out" morons

For those morons who claim that government deficit spending "crowds out" private spending by sucking up investment money out of the economy:

  1. U.S. Treasury bonds are at effectively 0% interest right now. They would probably be at negative interest if not for mattresses. What that means is that there's a lot of excess money just sitting around doing nothing in the economy, effectively stuffed under mattresses at 0% interest. Why shouldn't we suck some of that money into treasury bonds and spend it on useful job-creating infrastructure and other such social needs rather than have it stuffed under mattresses? In short, I will listen to the "crowd out" morons once the U.S. Treasuries rise above 0%.
  2. The government has this neat technology called the printing press. The government could print money and spend it if government spending started to crowd out private investment.
Basically, if we had a shortage of investment income in the economy, borrow-and-spend would be the worst thing we could do. But we don't. There's plenty of investment income stuffed under mattresses all over the country (or into Treasuries, whatever, same deal). And if we had inflation in the economy, print-and-spend would be the worst thing we could do. But once again, we don't -- every day you hear of job losses and salary cuts and the price of housing is going down, down, down like a rocket, what we're facing right now is deflation, which is a Bad Thing, as I've mentioned multiple times in the past, due to the fact that deflation is effectively debt inflation and thereby renders debt unpayable.

So yes, there do exist economic conditions where you do not want to do deficit spending on the scale we're currently doing. But those economic conditions are not the current economic conditions. Morons who scream "we should never do X or Y or Z" are like the sort of folks who scream "you should never enter an intersection when the light is red!", errm, except that when the light is red, has been red for ten minutes, and you are turning right, just turn, dammit! Point being, there are exceptions for every rule, and the economic conditions we're facing right now are pretty goddamned exception.

-- Badtux the Rude Penguin


Morons without a clue

Executives think $500K/year isn't enough money to live on.

I just read that and shook my head. These people just don't have a clue as to how real people live. They've been living in their high-and-mighty castle in the sky, and the notion that one might manage to make it without a nanny and a personal driver for your limousine simply doesn't occur to them, because, well, they're entitled to those things because, well, because.

But hey, if they can't live on $500K/year, the Indian dude who lives next door to me can probably do their job better, and he would be overjoyed to make $500K/year. If that doesn't work, the Chinese lady who lives above me *certainly* could do their job better, and she'd be overjoyed to do it for $500K/year too. And if all else fails, the Mexican lady downstairs from me doesn't read and write English too well and her math is a bit shaky too, but that makes her different from the current batch running our banking system... how? But oops, I forget, they didn't go to the right school or have the right daddy, so that disqualifies them. And our current oligarchs are different from the French nobility of 1789... how?

-- Badtux the "Remember what happened to the French nobles in 1789" Penguin

Monday Morning Not-a-waif Music Blogging

I don't suggest that whoever she's talking to disobey her. She sounds mean.

-- Badtux the Music Penguin

Sunday, February 08, 2009

Let'em die on the street

That appears to be the right-wing answer to our medical care crisis here in America. Let them die on the streets.

Just as Hitler started with the mentally retarded, the elderly, the infirm, so have our right-wingers. Someone suffering from dementia will not shoot the people who forced him or her onto the street. We're talking low-hanging fruit here. But as this "solution" to our health care crisis is increasingly applied to ordinary people, what our leaders are going to find is that people do not willingly die upon command in the service of an inhumane and vicious ideology that puts money over people. If something is not done, we face the same sort of crisis that faced the nation in 1932, when there were food riots nationwide and the threat of a Communist revolution. Except that, now that Communism has been discredited as a feasible economic system, my fear is that instead we're going to fall for a charismatic fascist dictator instead...

The sad thing is that this nation has the resources to care for everybody who needs medical care. Every other OECD nation with the exception of Mexico and Turkey provide care for everybody who needs medical care, and few of them are as wealthy as the United States. But here in the United States, ideology is more important than people. We are in the thrall of ideologues who will do only what is ideologically correct, who will do only what their Party commissars tell them via the media is the "right" thing to do, and the result is going to be national disaster. "Let them eat cake" simply is not a viable ideology to use to govern a nation. It leads to detached heads every time -- and, unfortunately, not always the right detached heads.

-- Badtux the "Let them eat cake" Penguin

A Parable

Mr. Democrat and Mr. Republican were neighbors who lived an hour away from town by horse and buggy. Mr. Republican owned a horse and buggy. Mr. Democrat, rather than duplicating something Mr. Republican owned, paid Mr. Republican to drive him to town every week to buy supplies.

Mr. Republican's horse was named Economy, and Mr. Democrat noticed that Economy was looking a bit down and sick. As they sat in the buggy and rode towards town, occasionally Economy would halt and pant and lower his head in pain. Mr. Republican would then beat Economy with his stick named Tax Cut until Economy started moving again. Mr. Democrat said, "Economy looks sick. Shouldn't we find out what's wrong with him and get it fixed?" Mr. Republican said "Naw, Economy is just lazy, he just needs more Tax Cut to keep him moving."

One weekend they set out as usual, heading to town, and Economy simply collapsed. As in, dead as a doornail. Mr. Democrat got out of the buggy and verified the horse was dead, and then turned to Mr. Republican and said, "I told you that you should have taken Economy to the vet to find out what was wrong with him!" Mr. Republican shook his head and said, "there's nothing wrong with Economy that more Tax Cut won't fix."

"Uhm, this horse is dead."

"Nonsense! He's just being lazy. All he needs is more Tax Cut!" And with that, Mr. Republican set to beating the corpse of Economy with his stick named Tax Cut. Alas, no matter how much he beat Economy with Tax Cut, Economy never twitched.

As Mr. Democrat walked towards town, he looked back at Mr. Republican, who was still beating the still-deceased Economy with his stick named Tax Cut, and shook his head. Idly he wondered how much it was going to cost him to buy a new Economy to replace the one that Mr. Republican had killed by thinking that Tax Cut was the solution to all of Economy's problems. He would find out shortly, he supposed. He doubted it would be cheap.

-- Badtux the Parable Penguin

Blogger is bloggered

If you're reading this at, that means that Blogger is still bloggered. It isn't properly handling private domains. So instead I'm intercepting it at my name server and forwarding it to

-- Badtux the Helpful Penguin

Saturday, February 07, 2009

A reply to Nathan

A youngster called Nathan replied below, and I decided his points needed more attention than is in the comments section of a blog. So here we go. You may wish to read my compendium of economics articles first, I reference them widely in this article:

That said, I entirely disagree that spending for spending sake helps the economy. If it did, why don't we just pay every American one million dollars to dig a hole in their back yard?

Keynes actually addresses that one and why it will not work, and Paul Krugman and Brad DeLong have both covered that one on their blogs when addressing why the bank bailouts and last spring's tax cuts did not work. The critical factor is what Keynes called the propensity to spend. You can't just give money to people and expect it to be useful. In a down economy such as now, on a microeconomic level the propensity to spend is low -- people are instead saving their money in case they lose their job, thereby causing lost jobs due to the paradox of thrift, or they're paying down debts, both of which are good things to do when there is a shortage of investment money but with U.S. Treasuries at 0% interest right now, it's clear there's no shortage of investment money. So just giving money to people with no strings attached doesn't work. Instead, you have to give money to people in exchange for people doing something of value. There has to be strings to attached. Such as, "we will give you this money if you will build us a bridge to replace the collapsing bridge that was built in 1935 by FDR's NRA." The money then gets spent on steel for the bridge, and on steel riggers who then spend their money on beer at the local restaurants, which then hire waitresses, who then can afford to buy used cars from steel riggers who can now afford to buy new cars, etc. That is why infrastructure spending has a high multiplier rate compared to most other forms of government spending, as shown by this graph (clicky to embiggen it): Which brings up your next point:

So where does loose fiscal policy come in? Easing the tax burden.
See the above graph. The problem is that there's not much room to do anything there. The propensity to spend is not there, so any tax cuts you make right now will simply go under mattresses being saved in case people lose their jobs, rather than being used to buy stuff. And tax cuts to businesses are even worse. Businesses will not expand employment right now because they don't see enough buyers for their goods. They'll just stuff the money in their mattresses too. We've run full speed ahead into paradox of thrift territory . We have a fundamental disconnect between the amount of goods flowing in the economy, and the number of consumers willing to buy said goods. We have sufficient goods, but we don't have sufficient buyers for the goods to keep all the workers employed, and keeping workers employed is one of the fundamental roles of modern economic policy, because unemployed workers are revolting -- literally. There were food riots throughout the United States in 1932, and a real chance of a Communist revolution. Idle hands are the devils' workshop and all that.

So we've hit the end of tax cuts as a useful policy. The United States is already the least-taxed of all the OECD nations other than Mexico, and I doubt you want to see us be Mexico North. Or maybe you do, but if you do, that's the end of this conversation because then we have a fundamental conflict of values similar to the conflict of values I have with the Taliban, where there is no useful discussion possible.

I see about four levers that the government has in combating a recession:
  1. monetary policy
  2. fiscal policy
  3. tax policy
  4. leadership
We have arrived at the limits of monetary policy. With monetary policy we are pushing on a string, pushing money into the system, but not addressing the fundamental disconnect between supply and demand that is causing employment to decline. We have arrived at the end of the usefulness of tax policy, as shown by the graph above -- because of the paradox of thrift, tax policy is also no longer capable of addressing the fundamental disconnect between supply and demand that is causing employment to decline, because any tax refunds are going towards savings, not towards demand. That leaves leadership and fiscal policy on your list. The fundamental task must be to employ the unemployed via whatever means are most effective. Infrastructure spending to employ the hundreds of thousands of people who lost jobs in the construction industry last year would be a gigantic boost. Aid to the poor -- who spend what they get, thus any money sent to them goes directly to spending rather than to paying off debts or savings -- would also be a major boost to demand. Anything targeted at the middle and upper classes simply will have no effect in this current scenario, as far as fiscal policy is concerned.

But personally, I think you are being far, far too conservative on the leadership thing. Our banking system has failed. We need to do a Year Zero on our banking system -- admit that our five largest banks that collectively control over 80% of our banking system are all bankrupt and create a new "Bank of the United States" to take over all their assets. As part of Year Zero, all personal credit card debt would be wiped out, fini, done, and this new "Bank of the United States" would immediately write all mortgages that it took over as part of that transaction down to a reasonable percentage of family income so that people could afford to stay in their homes and would have money left over to spend, rather than sending all their money to the banks in a futile attempt to pay off unpayable debts. This would create an immediate and gigantic boost to spending, because money currently going to paying unpayable debts would then be going towards both consumption *and* savings. Consumer debt would not be easily obtainable in the future after a Year Zero, and mortgages would be harder to get too, with a return to traditional lending standards of 20% down and a maximum of 33% of family income going to your mortgage, but would that be a bad thing?

A leader who proposed something bold like the above would be providing leadership. Our current so-called leaders... meh. So #4 on your list is currently getting a big fat zero from Washington D.C...

So anyhow, that's my response to your economics items. Note that I'm referring to postings that I made some time ago, that often refer to postings that I made some time before them, that address some small but important little pockets of modern economics theory. Next up, we talk health care...

- Badtux the Economics Penguin

A compendium of economics theory

I've written a *lot* of good economics articles over the past two years amongst all the snark and cat photos. Here is a collection of what I believe are my best economics posts, roughly in reverse order. Enjoy!

  1. Why the "Liquidationists" are full of it about the current crisis.
  2. Unemployment is NOT caused by wage levels but, rather, by a shortage of sufficient demand to justify hiring additional workers.
  3. Unemployment is NOT caused by taxes, but, rather, by a shortage of sufficient demand to justify hiring additional workers.
  4. Deficits don't matter during deflation
  5. The Cross of Gold -- more explication of why the gold standard was/is a bad idea.
  6. Rent-seeking behavior on the part of our elites is destroying our economy. Low top marginal rates reward asset stripping and remove the incentive to think long-term and results in bubbles rather than productive use of capital, or, why our foreign competition is whipping our butts.
  7. The reason conservatives fear democracy -- the fear that the productive worker majority (us) that create the wealth, might vote to take wealth away from the leech investor class that merely manages wealth rather than producing it.
  8. Inflation math -- how to do it correctly as vs. right-wingly. Fiscal stimulus is not a zero-sum game, or, that marvelous invention, the PRINTING PRESS.
  9. Why do we need the Federal Reserve? And: a debunk of many of the conspiracy theories about the Federal Reserve.
  10. Why do we need banks, anyhow?
  11. Why (some) inflation is good
  12. The economics of Herbert Hoover. Or: The idiocy of modern-day "liquidationists" who seem incapable of learning from history.
  13. What's the endgame? In which I make a case for (some) socialism.
  14. Attack of the Zombies
  15. The Paradox of Thrift
  16. That marvelous invention, the Printing Press
  17. How bankruptcy "reform" contributes to the current crisis (and why tax cuts aren't working)
  18. Universal healthcare increases propensity to spend and thus economic activity
  19. Why neither pure capitalism nor Communism are the answer and Libertarianism isn't the answer either.
  20. Why the economy is sick, as explained to us by the Chinese.
  21. Why we need a middle class with a propensity to spend
  22. We have now reached the limits of monetary policy (or, the Final Death of Milton Friedman)
  23. Will a job creation subsidy put Americans back to work?
  24. Pushing on a string -- why more money in the banks isn't helping the economy.
  25. On invisible hands and the Big Three. Or: Deflationary spirals are bad.
  26. How to do a stimulus plan that will work. (Hint: It's not the USA doing it).
  27. Who should get tax cuts?
  28. The only -ism we should be concerned about is pragmatism.
  29. Warm up the helicopters! We are in uncharted territory.
  30. Thomas Jefferson was a great political theorist, but a terrible economist
  31. Deflationary spirals, and the need for government intervention
  32. A side excursion on money.
  33. More on why deflationary spirals are bad
  34. You can't eat gold. And, gold scams and the gold standard.
  35. Why a minimum wage hike would be a good thing right about now...
  36. Classic American Liberalism, Part II and, why classic American Liberalism, being based on pragmatism, always wins in the end.
  37. Power dynamics, the free market, and inflation. Or, the guy at the bottom of the power tower always loses.
  38. Bear Stearns, fiat money, and regulation
  39. Is government a "drag" on the economy?
  40. Why modern technological civilization is worth saving
-- Badtux the Economics Penguin