Sunday, February 28, 2010

Income distribution and the employment problem

I have pointed out previously that unemployment in a recession is primarily a demand issue. The demand for goods and services has declined, thus since employers are not charities and are in business to make as much profit as possible, employers lay off workers no longer needed to meet demand. What has confused some people, such as economist Bob Murphy, is this: How can demand decline when GDP is relatively stable compared to prior recessions? That is, why are we getting a doubling of unemployment in this recession, but not in prior post-WW2 recessions?

I think I may have a clue. One thing which economists have been shying away from like cats from a water sprinkler is the question of income distribution. You can literally hear the yowls of terror as you start leading them anywhere towards that question, because the reality that we have two classes of Americans -- the consumer class and the investor class -- is a truth that None Dare Speak Its Name. The investor class profited greatly during the past ten years, to the point where the top 10% of taxpayers make 50% of the income and the top 1% own 70% of all financial assets of America. This inflation of the income of the investor class has resulted in a large overhang of investment money that was malinvested in a bubble (see, the Austrians aren't wrong about *everything* ;-). The consumer class, on the other hand, had their incomes actually *decline* over the past 10 years, thereby drastically impacting their ability to consume -- a decline that was masked by overleveraging for eight of those years, but then it all came crashing down. Any solution that will actually increase consumption and thereby cause an increase in demand that will lead to businesses hiring again will by necessity require placing more money into the hands of the consumer class -- which current quantitative easing programs have *not* done, instead placing yet more money into the hands of an investor class which already has more money than it knows how to profitably invest, thereby driving the interest rates on short-term Treasuries to 0%.

In short, to get demand -- and thus employment -- back on track, we need to either transfer wealth from the investor class to the consumer class, or we need to otherwise put more money into the hands of the consumer class. Current quantitative easing programs do neither. But if we do think quantitative easing could solve unemployment in this recession, perhaps we should go wake up the ghost of Milton Friedman and create a new $1,000 bill, print up a few thousand bales of the things, and drop the loose bills from helicopters over working class neighborhoods in major cities. Hey, it couldn't work any worse than the current quantitative easing program, could it? ;-).

-- Badtux the Economics Penguin

Remember when

"Straight Lines" by Dawn Landes from her album "Dawn's Music". Sort of a folky pop. Not sure that I like it, going to have to view a few more of her videos, hmm...

-- Badtux the Music Penguin

Saturday, February 27, 2010

Why don't I take the Austrian economists seriously?

I've mentioned the Austrian school of economics derisively on this blog before. But why?

Well, basically it's because Austrian economics is a neo-Luddite anti-scientific religious cult masquerading in secular cloak. Austrian economics holds that there are a priori truths, apparently pulled out of their asses, which need not be verified or validated because they are true because, well, because they say they're true. Furthermore, they hold that attempts to validate these supposed truths via the fundamental mathematical methods of science are invalid because, well, because. They reject modern statistical analytical methods, which are a fundamental component of all modern sciences, as somehow "invalid" despite the fact that these methods have been successfully used for everything from the statistical analysis of the location of subatomic particles within an atom (which the Heisenberg Uncertainty Theorem holds cannot be determined exactly, you can only compute a statistical cloud of where they are likely to be) to estimating the number of homeless men in San Francisco, and explicitly reject any attempts at mathematically modeling economic behavior on a macro level, claiming that the only valid mathematical models are microeconomic models of specific economic transactions, anything on a macro level is somehow invalid. You will not find a single equation in the works of Austrian economics' patron saint, Ludwig van Mises, and while you will find some in his acolyte Hayek's work, Hayek still continued the insistence upon a priori "truths" even when said "truths" led to patently absurd conclusions such as the notion that 25% unemployment in Germany in 1932 was caused by lazy Germans voluntarily taking a Great Vacation. Testing his conclusion against the actual reality of Germany 1932 was not necessary for him because his model said it was true, so it had to be true -- he had faith, faith I say, that it was lazy Germans causing 25% unemployment in Germany in 1932!

In short, Austrian economics explicitly rejects the tools and methods of modern science., the most important of which is that you must test your models against reality, you can't simply say they're true because they're pretty models. So why does that lead me to reject Austrian economics as an economic school? Simple: I am a utilitarian. We have ample evidence that the tools and methods of modern science -- the most fundamental of which is that all models must be validated with actual data before being accepted as possibly true -- simply work. You are staring at the evidence of that right in front of your face. The computer you're reading this with could not exist without the scientific method, because it was the scientific method which enabled the researchers who developed the transistor and semiconductors to model the movement of electrons through substrates. Given the demonstrable evidence that the scientific method works -- evidence literally right in front of my face -- how can I accept a school of economic thought which claims that, in fact, the scientific method is bunkum? What next, am I supposed to give serious consideration to the ideas of the Flat Earth Society too?

So anyhow, if you come here and spout Austrian nonsense, I won't delete your silliness. But I *will* point and laugh derisively and make fun of you. So be warned, this penguin has a sharp tongue ;).

-- Badtux the Scientific Penguin

Big cat, small box

I have been performing an experiment where I place progressively smaller shoeboxes upon my futon and wait to see how long it takes for a cat to curl into it. Unfortunately, it appears I have reached the end of the experiment: This box sat on the futon for about a day before Mencken decided to test it out. Mencken tried his best, turning around and around and around in the box, but finally couldn't manage anything but doing the catloaf while hanging his head over the front.

So now you know the limits of what a 14 pound cat can fit in: A sneaker box is it. I have a smaller box that sandals came in, but somehow doubt it will get anything more than a sniff from the feline brigade.

-- Badtux the Cat-owned Penguin


The corn tortillas turned out great. Nothing like a fresh corn tortilla hot off the griddle. The red lentils... bah. I'm doing something wrong, I think. I tried seasoning them up with curry powder and stuff, but can't seem to get them to the point where I feel they're edible. Maybe it's because I'm using olive oil rather than ghee. Hmm.

So if any of you have a recipe for red dhal that is not too difficult, please let me know. Note that I'm mostly trying to get these edible for backpacking, i.e., I'd prefer *not* to have to do it with fresh onions/garlic/ginger/etc. to make it work, just the powdered stuff...

- Badtux the Baffled Cook Penguin

War and arrogance

Low, "Murderer", off of their album Guns and Drums. A quiet but powerful song.

-- Badtux the Music Penguin

Friday, February 26, 2010

Just die quickly

That is the message Republicans have for you if you can't obtain health insurance due to pre-existing conditions. ER doctors should just refuse to treat poor and uninsured people, Minnesota Gov. Tim Pawlenty says, and let them die on the street outside the ER doors.

There's two problems with this scenario:

  1. People do not just voluntarily die on command of Republican assholes. They (or a distraught relative) take somebody else out with them, probably some nurse or minimum wage rent-a-cop who had nothing to do with it, but they won't just go peacefully just because Republicans hate anybody who isn't rich like them.
  2. Doctors aren't in business to kill people. If someone shows up who is in need of medical assistance, they're going do what they can.
Of course, what Pawlenty was really saying was not, "let's kill poor people!". What he was really doing, in the context in which he was speaking, was speaking in code -- "let's kill all them thare suspiciously dusky folks what speak that furriner gabble and takes our jobs!". Plus trying to make an excuse to not give the hospitals the uncompensated care Medicaid money they're due. But really, why aren't people getting the picture yet? If you're not rich, the Republicans hate you and want you to die. How many more Pawlentys do we need saying that before people, like, get the picture? Like Alan Grayson said, the Republicans' health care plan is don't get sick, and if you get sick, die quickly.

-- Badtux the Baffled Penguin

Back in the music bidness

I went shopping this evening. First I stopped by the Indian grocery and bought the bag of red lentils for $3.50 and the box of curry powder for $1.50, then I stopped by the Korean grocery and got all those Korean veggies for around $12 total (that's several meals worth of veggies), then I stopped by the Mexican grocery and got the bag of corn flour for making corn tortillas. Tomorrow I'll probably cook curry lentils and corn tortillas for lunch, with some Korean veggies on the side. I love living in the SF Bay area where you can do fusion cooking of this sort ;).

The final piece of my music puzzle to replace all the blown-up stuff came in today too, the PreSonus Firebox. I hooked it up to the mixer (the Firebox's pre's don't have enough headroom for dynamic mikes without a boost) and to the guitar, and hooked up the MIDI in/out to the keyboard. Then I made sure I could get both my guitar and my vocals mike intoApple Logic (my Digital Audio Workstation or DAW software, used to record music to hard drive). That worked. Then I created a software instrument track and told it to use the external keyboard as its source, and recorded some piano off the keyboard via MIDI, then played it back to my keyboard via MIDI, then re-routed it back to the software instrument and played it back through my mix headphones. And *that* worked. So all that works, but it does look somewhat like a mad scientist's workshop with all that stuff plugged in... The towel on the chair is to catch any cat puke (sitting in cat puke is *ick*!), the towel underneath the keyboard covers the keyboard when I'm not using it for exactly the same reason. And one reason I still have that ratty old desk is because the keyboard tray slides up under the desk when I'm not using it so that my keyboard doesn't serve as a cat puke receptacle. Cats. Sigh!

I also found out today why I've seemed somewhat clumsy recently. I had an eye exam and found that my left eye, my "strong" eye, no longer is. So I was basically seeing out of one eye rather than in full stereoscopic vision, thereby leading to stumbling into things that I didn't realize were so close to me. And there I was, thinking I was just getting old and clumsy... nope, it's my dadburned glasses ain't right! So I'm going to get that fixed, hopefully tomorrow...

-- Badtux the Busy Penguin

Excuse me?

The Mighty Fang contemplates the notion that somehow government spending could be "crowding out" private investment in a world where short-term Treasuries are selling for 0% interest, and appears skeptical about the notion... even a cat, with a walnut-sized brain, isn't that dumb.

-- Badtux the Cat-owned Penguin

Oooh, SHINY!


Regina Spektor performing "Blue Lips" from her album Far.

Regina gets mixed reviews from critics because she's very scattershot. But when she's on, she's on. And she's on for this performance.

-- Badtux the Music Penguin

Thursday, February 25, 2010

The Republican Plan for eliminating tax loopholes

Rep. Paul Ryan (R-Loon) has introduced a sweeping overhaul of the tax code that would eliminate every single tax loophole used by wealthy billionaires. His plan is simple: Eliminate all taxes altogether on billionaires.

Uhm, yeah, that would do it. Alrighty, then!

-- Badtux the Snarky Penguin

Pricing employment

I previously criticized the Glibertarian/Austrian insistence that unemployment is caused by employees keeping their price too high. I've encountered this elsewhere, such as when Hayek said 25% of Germans were unemployed during the Great Depression because German workers chose to consume leisure rather than to work. Apparently, the business cycle folks like Edward Prescott believe that we never had a Great Depression -- instead, we had a Great Vacation, where people voluntarily chose to not work. Says the Glibertarian, "Resources are not slack or idle *as such*, but idle *at some price.*" Thus if a worker is not working, he by god is choosing not to work, because if he really wanted to work he'd simply lower his price!

To say that this is ridiculous is an understatement. Most unemployed people want a job, any job, and aren't finding one regardless of price because price of labor is only half the equation. I now introduce the primary Keynesian critique of classical thought, which is that the classical economists know the price of everything, but the demand for nothing. They know the price of labor, but not the demand for labor. That is, there are two parts to the supply and demand curve: the supply side, and the demand side. If the demand side collapses due to people deciding that their money is better saved than spent (rather than because prices rise), that is, if the entire demand curve shifts downward because people voluntarily choose to save more rather than spend, then employment declines regardless of what prices do.

Keynesian thought requires accepting two things as true:

1) One man's wage is another man's price, and vice versa. That is, if all prices and wages in a system go down (or up), it has no effect upon demand and thus no effect upon employment, since businesses are in business to make a profit, not to serve as charities hiring people they don't need in order to meet demand.

2) Demand can go down (or up) even if neither prices nor wages have changed due to changes in people's propensity to spend -- i.e., changes in how people decide to distribute their wages between savings and consumption.

These propositions agree with actual observed reality over the past 80 years, where e.g. we've had high unemployment during periods of high inflation (see: late 70's, early 80's), and high unemployment during periods of low inflation (see: now) or during actual deflation (see: 1930's) -- wage and price levels on a systemic basis seem completely irrelevant to the question of employment. What matters is demand.

Thus the neo-Keynesian emphasis upon the importance of the demand curve and, specifically, propensity to spend, which moves the demand curve up and down. This appears to comport more closely to reality than Austrian or neoclassical thought, which appear to describe reality in a universe where unicorns are real and cotton candy grows on trees but not reality in our universe, where businesses are not charities and hire only those workers they need in order to meet demand, regardless of how cheap those workers are. If I have a sandwich shop and I need six workers to meet my demand, that's all I hire -- period -- regardless of how cheap the workers are. Any theory that refuses to admit the centrality of demand to the employment problem is a theory that is not worth taking seriously, at least insofar as it pretends to address the employment problem.

-- Badtux the Economics Penguin

Oh love

At Death, A Proclamation" by Phosphorescent from the album Pride.

Matthew Houck does some beautiful music, but man, he is one scruffy looking dude. Which shouldn't matter, but in the world of music, alas, it does...

-- Badtux the Music Penguin

Wednesday, February 24, 2010

The NRA and property rights

The NRA is trying to get laws passed which would force me to allow guns on *MY* property. My property. That I own, that I pay the taxes on, the NRA sez I have to let employees or customers carry guns onto my property. They claim gun rights trump property rights. I call bullshit. I have a right of association guaranteed by the 1st Amendment that trumps any rights granted by the 2nd Amendment. I can choose not to associate with people as customers or as employees who carry guns onto my property, and can choose to indeed order them off of my property and never to return, and that's my right under the Constitution. The NRA with its Communist insistence that I must associate with their members even if I consider their members to be dangerous loons is complete ridiculousness.

I own guns. I know how to shoot guns. I don't carry a gun to work. It's not appropriate, it's not professional, it's not something which reassures my fellow employees or customers, I don't do it and I choose to not associate with others who do haul shootin' irons to work. You have a right to keep and bear arms. I have a right to tell ya, do your keepin' and bearin' someplace else, not on my property. That's my right as an American, and the NRA wants to take my rights away. Well fuck them and the horse they rode in on too. 'Nuff said on that.

-- Badtux the Well-armed Penguin

The incredibly stupid (or dishonest) Robert J. Barro

In the Wall Street Journal, Barro claims that somehow, government spending during a depression crowds out private spending and thus results in a decline in future GDP, and that $1 of government spending results in only 60 cents of GDP growth. But that's utterly ridiculous. Crowding out can occur only if there is a shortage of slack resources in the economy. If there are slack resources in the economy -- an excess of money with a shortage of worthwhile places to invest it due to a collapse in demand, an excess of unemployed people who have a productivity of zero due to a lack of jobs due to a lack in demand -- crowding out cannot occur. We currently have 0% short-term interest rates for Treasuries, demonstrating that there is an excess of money with a shortage of worthwhile places to invest it. We currently have 10% nominal unemployment and 20% combined unemployment/underemployment in our economy, people who want work (or want more work) and cannot find it. Both of these facts add up to no (zero) crowding out caused by government spending in the near term, since for crowding out to occur, government would have to be taking resources from private enterprise rather than taking from a pool of slack resources not currently used or needed by private enterprise.

And let's not forget another factor: The printing press. The printing press adds some interesting variations to this set of equations, especially when the money supply is under severe deflationary pressure because banks are stashing money away in reserves (thereby reducing the fractional reserve multiplier) due to fears of further losses caused by a declining economy, rather than lending that money out. Right now, you can print money and it basically takes one loop through the economy, ends up back in a bank, and ends up right back on the books at the Federal Reserve again, no longer contributing to economic activity and thus no longer affecting prices in the economy (since it has a money velocity of zero once it gets stashed back in the Fed's electronic vaults again). So if we consider monetizing the debt, we can even remove the specter of future interest rate hikes causing slower growth in the future as a downside to increased government spending right now.

In short:

  1. Barro's analysis applies only in an economy with full employment and a shortage of investment capital,
  2. We have neither full employment nor a shortage of investment capital,
  3. We have the ability to monetize a significant portion of the debt such that it does not affect future taxes, and thus
  4. Barro's analysis is not applicable to the current situation.
And then there's Barro's bizarre notion that a construction job building a superhighway for the government somehow adds less to GDP than a construction job building a commercial skyscraper, which is implicit in his notion that $1 of government spending somehow adds less than $1 of value to the economy. This is bizarre. Not only do you have a highway at the end of it, a highway which in all likelihood was built as efficiently as any that could have been built with private money if past experience is the guide, but you've also increased the value of that commercial skyscraper by a tremendous amount, since a commercial skyscraper with no highways going to it is worth, uhm, $0. Even Barros' beloved Saint von Mises never went so far as to ascribe a *negative* (below unity) multiplier to government spending. I cannot find any actual economic data, anywhere, which support such an assertion -- in all of the actual real-life data we have, increased government spending even in wartime resulted in at least a 1.0 multiplier to GDP. Maybe Barro's model says that didn't happen. But if Barro's model disagrees with reality, it is Barro's model, not reality, which is wrong.

-- Badtux the Economics Penguin

Getting older

Madness! Uhm, name of the band, that is. Very old-fashioned pop vibe brought up to date for modern sensibilities. I like.

-- Badtux the Music Penguin

Tuesday, February 23, 2010

The wind is howling

Wind and rain, rain and wind. Nice weather we're having on the Wet Coast right now. I wonder if it has anything to do with my recent spate of bad luck gear-wise... my Lexicon Lambda died, my Behrenger Eurorack mixer died, and now my gigabit network switch died. The network switch was easy to replace -- just a trip to Fry's -- waiting on replacements for the other gear to come in. Siiiigh! But probably it was just old, the mixer was ten years old and had been abused (I took it apart to see where the magic smoke had come out of it a few years back when someone plugged their PA into it the wrong way, and was amused to see input #6's EQ resistor chain for the RC network to damp out various frequencies had turned into a resistor non-chain), the Lambda was four years old and wasn't all that good to start with, and the network switch... shrug. It was a $45 D-Link. Not much you can expect from that kind of cheap gear, it's disposable, I replaced it with a $45 Fry's-store-brand switch.

I have up to March 11th programmed for music because there's nothing else to do right now but listen to music. Well, that and clean house, but I can't do that after 10pm or so because it disturbs the neighbors, me moving things around. I guess I ought to start looking for a new place to live where I don't have to worry about that, but I hate moving, which is why I've been in this apartment for 5 1/2 years now despite every spring saying, "I need to move to someplace bigger and quieter". Siiiiigh!

-- Badtux the Bored Penguin

A question

Let's say you own 100 acres of land. Except, this land has certain problems:

  1. There are no roads for getting to this land, and landowners surrounding this land don't want other people driving across their land.
  2. This land is in an area that has no law enforcement, meaning that you have difficulty keeping trespassers and squatters off of your land without engaging in actual gun battles -- and woe to you if your trespassers outgun you.
  3. There is no water on this land, and no water district to provide water to you.
  4. The courthouse burned down and has never been rebuilt, so all records other than those in your possession which say you own this land have been destroyed. And Joe the Plumber says he has papers saying he owns the land.
To recap: No access, no law enforcement, no water, no clear title. How much is this land worth? Well... in my experience, not much. Maybe $1,000 if that.

Now, let's say that you own this other piece of land. It is 1 acre of land. It is comprised of four lots with city water and sewer already on site. A city street runs in front of it, and it is a few blocks away from a major freeway heading into a major thriving coastal city. The local police department is quick to respond if you report a trespasser or squatter on your land. Your title is dutifully registered in the courthouse and is clear. How much is this land worth? Well, probably around $800,000 or so even in today's rough real estate market, or roughly 80,000 times more per acre than the first piece of land.

So here's a question: given that we have now determined that government can make a piece of land literally 80,000 times more valuable than no government, how in the world can anybody get away with saying "government is a drag on the economy and should be abolished"? Hmm?

-- Badtux the Baffled Penguin

Cat + Box = Naptime

Cat. Box. Fun ensues. The Mighty Fang and Mencken chill. Actually, Mencken sort of decides to kick TMF out of the box from time to time... TMF is bigger than Mencken, but Mencken is older and meaner.

-- Badtux the Boxed Cat Penguin

Transcendental blues

"Lonelier Than This", off of Steve Earle's album Transcendental Blues.

Steve is one of the best songwriters that have graced American music. This song is both simple and deep, a combination that is damned hard to do.

-- Badtux the Music Penguin

Monday, February 22, 2010

The Deflationary Blues

So Krugman has been moaning and groaning recently that we might be going into deflation. At which point, "Yippee", sez Joe the Plumber. "Deflation! Prices go down!" Uhm, really? Actually no. In real terms, prices don't do shit during deflation. Deflation is only nominal where prices are concerned.

For example, let's talk about a sandwich shop. You're trying to sell sandwiches. Your sandwiches were selling for $8 last month. Now they're selling for $4 because of deflation. You had to sell 100 sandwiches to buy groceries and clothes for your family when they were at $200 last month. Now you can buy those same groceries for $100. Question: How many sandwiches do you have to sell this month in order afford groceries for your family?

Yep, 100 sandwiches. STILL. So yes, prices went down. But your WAGES went down too, because you can't sell the stuff you make for as much money, for no gain -- or loss -- at all.

So who benefits during deflation? Well, let's look at your mortgage. You bought your house last month for $200,000. That would have required selling 100,000 sandwiches last month to pay off your mortgage. But now you can only sell your sandwiches for $4 because of inflation, and would have to sell 200,000 sandwiches to pay off your mortgage! So your mortgage debt inflated! As did your rent payments on your store. If you had to sell 1000 sandwiches to pay the rent on your store last month, now you have to sell 2000 sandwiches -- your rents inflated too! (At least until the end of the lease period).

So let's recap:

  1. Real prices -- the number of units of labor it takes to buy the groceries, clothes, etc. it takes to live -- stay constant during deflation. If it took 20 hours of work per week to put food on the table and gas in the car before deflation, it still takes that much after deflation, because lower PRICES means lower WAGES too (by definition, since money you're paying for goods and services is someone ELSE'S wages, and money *they* are paying for goods and services are YOUR wages!).
  2. Debts inflate during deflation, because you took out the debt in cheaper inflated dollars, but now are paying them back in more expensive (harder to come by) deflated dollars. So if prices and wages deflate by 50%, your debts *DOUBLE*. If it took 20 hours a week of work to pay your house note and car note before deflation, now it'll take FORTY hours a week of work to pay them.
  3. Lease payments inflate during deflation, because they are essentially a debt obligation -- you have an obligation to pay that amount of money to the landlord for the duration of the lease, regardless of what happens as far as inflation and deflation goes.
Given all that, who would want deflation? I mean, who amongst us here has no debt, other than that old crank who is sure to spout out now that he bought his land free and clear fifty jillion years ago back when you could buy land for cheap and now he's on Social Security so he doesn't care? If you can afford to buy a car and a house outright, cash upfront, then you don't need to be reading this blog because the only way you can make that kind of dough in our feudal economy is to be a leech (otherwise known as "the executive class" or "the owner class") who leeches off of the workers who actually create the goods and services that you "own". People who make their living by honest work don't get that sort of money in our modern-day economy. Once upon a time they did, but those days are decades in the past now. So if you're an ordinary person with a mortgage and a car note, deflation ought to be scaring the shit out of you.

So who would want deflation? Well, there's one group of people that loves deflation: That above-mentioned investor class. They don't owe money, they own money. So now you know the plan, the end game, why our oligarchs are trying to force the economy into deflation: Their plan is the same as their plan has always been. Since they were the ones with money to begin with, they simply bankrupt everybody in the country, then buy up the actual physical assets -- the land and buildings and machines and so forth -- for pennies on the dollar. Deflation is a way to transfer real wealth (actual *stuff*) from the debtor class -- who are no longer able to repay their debts in deflated dollars -- to the creditor class -- i.e., our Republican overlords.

For example, see 1930's Sheriff's sales of foreclosed farms. Often a 1,000 acre farm would be sold for $20 to the only person who showed up with cash folding money -- generally one of the state's high and mighty, aiming to add more to his empire. In some places the people had enough and gathered at these auctions to make sure that anybody who dared make an insulting bid of that sort would be beat up and terrorized rather than allowed to buy properties for pennies on the dollar, but this was not common, because usually the Sheriff worked for the oligarchs, and protected the oligarchs.

So now you know what happens if our economy goes into a severe deflationary spiral: the oligarchs own everything and the rest of us... serfs. Slaves. Living only where our oligarchs allow us to live, doing whatever job our oligarchs tell us to do, for whatever pay (or not) that our oligarchs feel like offering. We've been moving that way for a long time, but our 1930's experience temporarily moved us away from the brink. But the 1930's experience has been forgotten by today's Americans, who seem all too keen to go sell themselves into serfdom if falsely promised "lower prices!"...

-- Badtux the Economics Penguin

Busy penguin

Well, I was trying to record a new video for you last night and then my EMU0404 halfway through the third take (the one that was going well) decided to crash with a big SCRRRRRRRSSSHHHH! sound in my monitors.GAHHH! I bought a Mac so I wouldn't have to deal with crap like that! It's not the first time that the EMU0404 crashed on me either, its drivers don't work well under Snow Leopard and Creative shows no inclination to fix it. So today I packed it up and sent it back to Musician's Friend (under their 45-day Satisfaction Guarantee), and ordered a Presonus Firebox, which is class-compliant and thus doesn't need any drivers to work under MacOS. It has one known flaw (weak microphone preamps), but I have a preamp and/or mixer that can take care of that.

In other news, I'm looking for a new dentist in the South San Francisco Bay area. If you know a good dentist in the area, one who is experienced at dealing with significant problems and who isn't a sadist in disguise, please drop me a line in email.

And now for a little more pleasant topic, The Mighty Fang is a hard working cat. Here he is making sure that my dirty clothes are properly furred prior to going into the washing machine:

He has such big beautiful eyes... alas, I have to turn off the flash to capture them, thus why the photo is a bit blurred. Sigh!

-- Badtux the Purring-cat-owned Penguin

Bonus: The second take of the video. The third take was the one I did right -- and which the friggin EMU0404 died on, grrr!


Mark Eitzel has a reputation for writing songs that are grim. By those standards, this is a happy upbeat song for him. This is "The Decibels and The Little Pills", from his band American Music Club's 2008 album, The Golden Age.

Mark has a reputation for being, uhm, well, a bit ornery. To the point where Will Oldham refers to him consistently as "Mark Asshole" (though that may say more about Will Oldham than about Mark, but nevermind). And if you read his blog, err, yeah, he's definitely not afraid to state his opinion. On the other hand, that's some good stuff he's singing there. You might want to check out other songs from The Golden Age, and from his new album Klamath, on the YouTube, and consider buying'em -- Mark's getting mighty hungry, because the market for good music that ain't Lady Gaga is shit right now.

-- Badtux the Music Penguin

Sunday, February 21, 2010

Fear Evil

Funny Pictures of Cats With Captions
see more Lolcats and funny pictures

Those glowing eyes would scare the crap out of me...

-- Badtux the Cat-appreciatin' Penguin

Highly technical language

The following is from the manual for the Behringer 1002B mixer:

DO NOT turn the FX knob on that channel up at all! Your sound system will become haunted with screaming banshees.

Yes, that is the actual text on page 7 of an actual manual included with an actual commercial product :).

-- Badtux the Amused Penguin

In the City

Emmy The Great, "City Song", available from iTunes here in the USA or on her album First Love if you're in the UK. This is probably the closest she's ever written to a sad song, and I am in awe of her talent every time I listen to it. That last line... that is some damned good songwriting, peeps.

Yeah, I really do think Emmy is great. She has some real songwriting chops, she can sing, and hey, she's a looker too. She has the whole package, in other words. It will be interesting to see what's going to happen with her in the future.

-- Badtux the Music Penguin

Saturday, February 20, 2010

Do deficits matter during a Depression?

In a word: No.

Deficits are a handy way of printing money during a depression. Normal monetary policy fails during a depression because the freshly printed money (printed to offset money lost due to the contraction of bank lending activity and loss of money to reserves and to under mattresses) is increasing in value (due to the deflation of the circulating money supply as a whole) and thus, rather than getting spent or loaned out and fostering commercial transactions, simply disappears into bank reserves or under mattresses. This leads prices and wages to continue their downward spiral until, at the end, all money has fled into reserves or under mattresses and the economy as a whole has devolved to a very inefficient and misery-filled barter economy. As I previously pointed out, the whole point of money is to serve as the lubricant of commercial transactions in a capitalist economy. No money, no capitalism. Meaning you need money to keep a capitalist economy economy going. Meaning, if you don't have enough money to lubricate commercial transactions, things go to hell in a handbasket.

As previously noted, monetary policy -- simply printing money -- fails during deflation. The only way to effectively print money during deflation is to hand it out with strings attached that require it to be spent -- such as food stamps (where the money must be spent on food and can't be saved), or contracts to build stuff, where the money has to be spent on wages (to the workers building stuff) and materials (the steel and concrete and etc. needed to build stuff). And the spending on materials ends up being spent on on the workers who make the materials, the workers who mine the substances needed to create the materials, and so forth. In short, fiscal policy -- running deficits financed by printing money that is handing out money with strings attached that require it to be spent on *stuff* -- ripples through the economy and gets economic activity jumpstarted again, because the money has to actually do something before it can disappear back under mattresses or into bank reserves. Indeed, any other way of printing money during a depression fails, because the freshly-printed dough simply disappears under mattresses or into bank reserves.

At which point morons chant, “where are you going to get the money?” The printing press was invented in 1440, for cryin’ out loud! Apparently these people live in some alternate universe where unicorns are real, the sky is a fine shade of puce, and the printing press was never invented, because the concept of just printing money to replace the money lost in the collapse of bank lending and the collapse of asset values eludes them. We can print money to pay for all this as long as inflation is below the 2%-4% target rate. At that point the economy will be bubbling along again and we can quit printing and start taxing in order to keep inflation from getting out of control. In our universe, at least. Not in the alternate universe these other people live in, where the printing press was never invented, but why does anybody listen to people whose mindset is so medieval that the printing press is a novel concept to them, anyhow?!

-- Badtux the Economics Penguin

Sexy tape

"Tape Song", by The Kills, off of their album "Midnight Boom". This duo is somewhat minimalist -- a drum machine and a couple of guitars. They were going to make a synth album, but the dude's synth broke right before they were supposed to record, so they made it a guitar album instead. When life gives you lemons... heh.

-- Badtux the Music Penguin

Friday, February 19, 2010

New monitor

I bought a new 24" 1080p widescreen monitor today to replace my six-year-old one. This is a LG Flatron W2486L. I bought it because it has two HDMI inputs and a DVI input. One HDMI input is going to the Macbook Pro, one is going to the $35 upconverting DVD player on the shelf above the monitor, and the DVI is going to that big homebrew server you see at the lower right of the picture. It also uses an LED backlight so that it uses very little power -- the power supply is 36 watts, and the monitor itself uses 24 watts in normal use, despite being quite bright.

As for the review of the monitor - it seems to work okay. It's very blue but luckily Apple provides a way to warm up the colors going out its MiniDisplayPort, so it's quite acceptable. Everything I've tried works. It's somewhat basic in that it doesn't have speakers or anything, but I had to have something that would fit into that space in my computer desk, which is also why I bought a 24" widescreen and not something larger. Yes, my computer desk is starting to look woefully bad due to all the wear and tear on it, but I can't find a new computer desk to replace it that has all the features of this one (the shelves, the slide-out keyboard tray, and so forth). And this particular desk appears to have been discontinued, or at least Fry's Electronics doesn't have it anymore :(.

Oh, that space to the right of the DVD player, between the DVD player and the stapler? That's not an empty space. It has a purpose:

That, of course, is the all-too-critical CAT SPACE, needed to provide my supervisors a place to rest while they supervise my work. Duh!

-- Badtux the Cat-owned Penguin

Expensive butt warmer

The Mighty Fang has a new $2000 butt warmer. GRRRRRRrrrr! (And sorry about the picture quality, I had to take this with my iPhone because the cats run for cover anytime I pull out the real camera nowadays). BTW, that's a normal-sized Macbook Pro 13.3" laptop. TMF is *BIG*!

-- Badtux the Keyboard-furred Penguin

Tappy King

I'm not sure how the heck I missed putting Kaki King up here before. I first encountered this video on a guitar forum where they were discussing guitar gods. Anyhow, the Tegan and Sara post sort of kicked it loose in my head. Song is "Playing with Pink Noise", off of her 2004 album "Legs to Make us Longer". And guys, don't get your hopes up. As you'd guess from the fact that I associate her with Tegan and Sara, guys aren't Kaki's thing.

-- Badtux the Music Penguin

Thursday, February 18, 2010

No pain, no gain

That's a slogan you hear a lot from tighty righties, who borrow it from something they heard from their Neanderthal gym teacher back in high school. They state that the only way to excel is via pain. The only thing is: It's not true, whether we're talking about economics, or about athletics training.

Exercise physiologists have discovered that no pain no gain actually HINDERS athletic adaption. Pain is how the body indicates that you're doing something wrong. If you push yourself to the point of outright pain on a regular basis, as vs. merely exerting yourself to the point where your muscles exhibit some discomfort and are forced to adapt, then you are hindering your athletic training and you will perform less well than someone who listens to his body and pushes hard, but not hard enough to cause painful overtraining effects that interfere with adaptation.

Similarly, if your economy is undergoing real pain -- a large increase in people losing their homes and livelihoods, a large increase in businesses going broke, etc. -- there is no gain to be had. Know pain, no gain. Some degree of "slack" or discomfort is needed in an economy to allow it to adapt. But once you go over that boundary into actual pain, you are hindering the function of the economy. An economy where a significant percentage are underemployed or unemployed is an economy that is not operating at its full capabilities, because those unemployed people are neither producing nor consuming goods and services in the economy. An economy whose businesses are failing at a greater-than-normal rate is an economy that is not employing and providing a livelihood for people. Some mild easily-treated discomfort is necessary to allow economies to adapt to changing conditions. But once you get into outright pain, economic aspirins cease to work properly, and the resulting surgeries to fix the situation could take you out of contention for months or even years -- allowing other people's economies to sprint past yours and make your economy no longer competitive.

In short: some small level of discomfort is necessary in both athletics and economies in order to force the muscles (or supply and demand of goods and services) to adapt to changing conditions. But once you go past that boundary into actual pain, you're doing it wrong. Period. Conservative nostrums of "no pain no gain" simply are not backed by facts. Period.

-- Badtux the Painless Penguin

More than half of Texans are total fucking cretins

More than half of Texans believe that superstition, not science, should be what is taught in Biology classrooms. And why do I think these Christian Taliban aren't going to teach the creation story of the Church of Tuxology but, rather, are going to teach *their* particular superstition instead? Why are they going to teach about some dickwad who sent is own SON out to get tortured for no good reason that I can figure out (I mean, this dickwad is supposed to be the ALMIGHTY, he supposedly can just wave his magic wand or something and make shit happen, why would he need to send his son to get tortured in order to make shit happen?) when they could instead be teaching about the Beatific and Powerful Great Penguin, he of the pleasant rotundity and lazy demeanor, whose role in hatching the egg of the Universe is backed up by science (that "Big Bang"? That was the egg hatching, dudes!) and where the creation story of Man makes much more sense (Mankind being a devolved version of His holy species, penguins).

I mean, c'mon. You'd think these people had never heard of the Sacrament of the Herring. Sheesh!

-- Badtux the Snarky Penguin

Bonus: The ever-popular Texan version of history, in pictures!

Blogrolls and RSS, oh my!

I've now switched my blogrolls to Google Reader, because Bloglines quit updating my feeds. Siiigh! So if I haven't been around your place commenting on your recent postings, it's not because I hate you -- it's because Bloglines hates you. Hopefully Google Reader will be more reliable...

- Badtux the Geeky Penguin

The cure

Tegan and Sara are a Canadian duo, twin sisters, who've been performing for about ten years now. They're 28 now, so that tells you how young they were when they started out. They also happen to be out, but that isn't relevant. What is relevant is that they've been touring and recording pretty much non-stop for those ten years, working their butts off to build a fan base and working their way from every dingy club in the USA to the middle ranks where they're selling out decent-sized theaters and tickets for their shows are going for decent money, and have managed to produce a fair amount of pop-folk music over that time.

For their new album, Sainthood, they've gone for a harder sound than on their previous albums. This particular performance, "The Cure", is probably typical of the new album's sound. Generally there's a lot of banter between the sisters and between Tegan and the audience before the start of the song, but when they do these kinds of promotional shows for television they can't do that. I did look at a couple of videos from live shows that didn't cut out the banter, but the sound quality wasn't there. Oh well. You know how to use the Youtube yourself to search for'em.

-- Badtux the Music Penguin

Wednesday, February 17, 2010

Food for the trail

Looking to broaden my diet when I go camping, so here's a couple of things I'm going to try:

Corn tortillas: These require two ingredients: Corn flour, and water. That's it. Oil your griddle with your choice of oil such as olive oil (and making a usable steel griddle that'll easily slide into a backpack is an interesting exercise for later), heat it up, mix corn flour and water to desired proportions in a bowl or something, toss on griddle for 30 seconds, turn over, wait 30 seconds, done.

Lentils: The problem with most beans for camping is that they take so friggin' long to cook. Unless you're cooking over a campfire and have a *lot* of wood available, that's not acceptable, especially here in the west where wood may be scarce and thus we're stuck with liquid-fueled or canister stoves for the most part. Red lentils (masoor dal) take only 10 minutes to cook after you bring the water to a boil (which takes about 3 minutes with typical stoves) -- acceptable. I just need to find a good recipe that can be done with only powdered spices, since that's all I can carry in a backpack...

Basmatic rice. Regular rice is too dull and dreary. This would go good with the lentils too.

Any other suggestions for what I might do for something from my local Mexican or Indian groceries that's a) easy/quick/little fuel to cook b) has a long lifespan and needs no refrigeration, and c) is easily transportable in a backpack?

-- Badtux the Food Penguin

Stupidity not America-only trait

Australian minister says gamers are scarier than bikers. Because those gamer bars are such terrifying places. Why, you go into one of them, and you see all these pale geeks with huge bulging mouse-clicker muscles hanging around ready to, err, frag you. In a virtual world. In real world, speak harshly to them and they might piss their pants.

Seems to me that South Australian Attorney-General Michael Atkinson is going to have some up close and personal encounters with irate outlaw motorcycle gang members real soon now. Because calling a bunch of hairy malcontent outlaw bikers accustomed to getting into fights in bars and who would sooner knife you than say hello less scary than a bunch of computer geeks with all the muscle tone of a bowl of jello whose sole weapon is a mouse clicker can't be flattering to the hairy malcontents...

Or maybe the jello-muscled geeks actually are scarier than the hairy violent outlaw bikers. In some universe. In some universe where unicorns are real, and fragging can be accomplished merely by shouting Lightning bolt! at the top of your lungs...

-- Badtux the Snarky Penguin

Mood: Curmudgeon.
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On money

One thing I consistently see from right wing "economists" and gold bugs is a fundamental misunderstanding of the nature of money. So let's go back to first principles, okay?

In the beginning, there was no such thing as money. You raised corn. Your neighbor raised peas. Both of you are creating actual real wealth -- you are creating corn, and your neighbor is creating peas. When harvest time came, you agreed to give him a certain amount of corn in exchange for a certain amount of peas. Thus both of you ended up with both peas and corn and had a better diet than if each of you relied solely upon your own production for all of your worldly wealth.

That's what's known as a barter economy -- where you trade some of your economic output explicitly for someone else's economic output. In a barter economy it is impossible to confuse wealth with a token of exchange, because both are the same -- the actual real wealth that adds to your life (i.e., peas you can eat). Unfortunately a barter economy suffers the same problem as Communism: The intermediaries problem. A typical personal computer has about 500 discrete components in it. Each of these components itself requires a huge number of inputs in order to create it. Figure there's about 50,000 inputs to the typical computer sold today. Arranging a system of 50,000 barters to get the components of a single computer all set up together would be practically impossible. This is the intermediaries problem, where, once an economy evolves sophisticated-enough technology, barter breaks down as a method of making sure that what you require for your production is available when you need it. In the rare instances where a barter economy has occurred in modern civilizations, such as rural America during the Great Depression or Russia in the immediate aftermath of the Soviet Union, the result has been basically the cessation of the vast majority of economic activity until the economy is moved back to being a capitalist economy: an economy based on a common token of exchange (call it "money") that can be used to intermediate this complex series of swaps needed to get the inputs for the computer you want to build.

Ah yes, money. By now you should have figured it out from what I said above, but I'll lay it out plain and clear for you:

  1. Money is a TOKEN OF EXCHANGE. Its sole value is what you can buy with it. If you can't buy beans with it, it's not money.
  2. Money is not wealth. What you BUY with money is wealth. Bill Gates probably has less than $200,000 in actual cash in his bank accounts at any given time. His actual billions of dollars in wealth are what he bought with the huge cash flow he got from Microsoft -- the U.S. Treasury bonds, the businesses he bought, the land he owns, and so forth.
  3. When money ceases to function as a token of exchange -- if, say, paper money gets sent through a shredder or converted to mattress stuffing, or metal coins get buried in your garden -- for all practical purposes it ceases to be money as far as the economy is concerned, and instead turns into just lumps of metals with only scrap or dental filling value or fancy toilet paper.
  4. Money is not a store of value. What confuses the gold bugs and conservative "economists" is the notion that money is a store of value. It's not. It's what you *buy* with money that has value. Money itself has no actual intrinsic value except as mattress stuffing, toilet paper, or dental fillings. Money's one and only function is as a token of exchange. Attempts to use money as a store of value are inherently doomed to failure, because the value of money changes as the supply of money circulating in the economy and the supply of goods and services in an economy change.
The last is the biggest most major point. Bill Gates isn't rich because he has rooms of his mansion filled with $100 bills or tons of gold bullion. Bill Gates is rich because of what he owns that was bought with those $100 bills -- the businesses and bonds, the land and the mansions, all of which can be exchanged for money and thence for different assets as Bill requires for his upkeep or investment maximization purposes. Regardless of what happens to the value of money as the supply and demand for money changes, Bill will remain rich as long as the companies he owns (or whose bonds he owns) are healthy enough that he can sell their stocks or get paid off as bonds mature if he needs some actual cash to serve as a token of exchange.

In short: As I've repeatedly pointed out, you can't eat gold. It's what you can buy with gold -- or any other money -- that is what gives it value. And right now you can't buy anything with gold, I can't go into a supermarket and exchange gold for food, gold is just another asset, no different from owning farmland or a chain of restaurants. And it's an asset that has had decidedly bad returns on average over the past thirty years...

One last thought: Money is the fundamental requirement for capitalism. You can have a free market economy without money -- indeed, the first markets were barter-based markets. But you can't have capitalism without, err, capital. And at this point I'll stop, because talking further about the nature of capitalism and how it works as a theoretical system (I say "theoretical" since, like Communism, it is impossible for it to work as an actual practical system and in fact it never has done so) is a subject for another post.

-- Badtux the Money Penguin

Limey metal singer does country

Robert Plant and Alison Kraus, "Please Read the Letter". Robert Plant's been making the rounds lately singing with all sorts of folks you wouldn't imaging him singing with, especially country and bluegrass types. He might be an old fart now, but he still has some pipes, and they've mellowed out over the years so that they work for an entirely different style than what he made his oats doing.

-- Badtux the Music Penguin

Tuesday, February 16, 2010

Fucking with Social Security

Preznit Hopey Changey apparently has said fucking with Social Security benefits is on the table. Excuse me? People pay into this system all their lives so that it'll be there once they retire, and Preznit Hopey Changey wants to yank it right out from under people who are relying on it?

Of course, the right wing's response to Preznit Hopey Changey proposing basically dismantling the core of FDR's New Deal is... well, to call him a socialist, of course. Duh. What, you'd expect applause or somethin' from the Party of No, which has been trying to eliminate Social Security from the very minute that FDR rounded up the votes to pass it?!

-- Badtux the Snarky Penguin

Google's new corporate slogan

... appears to be, "Be Evil". They're supposed to be a public corporation -- as in, a public corporation, with an obligation to release pertinent information to stockholders and potential stockholders (i.e., *US*) -- but they apparently believe that very pertinent information indeed -- information to verify whether they're complying with fundamental employment rights laws of the United States of America (i.e., basic demographic breakdown of their employee base) -- is off limits to us mere peon stockholders. We just have to take their word for it. Because Google would never, ever, lie, right? Right?!

-- Badtux the Snarky Penguin

Of building codes and safety

One of the things I've heard from Glibertarians is, "we don't need building codes, the free market will take care of that." So how did that one work out for Haiti? Seems like Haiti did have building codes that would have prevented much of the damage caused by their recent earthquake... but they were ignored, because the free market said that people who complied with the building codes could not compete price-wise with people who ignored the building codes, and Haiti's perpetually cash-starved and dysfunctional government lacked the capability to enforce them. The result: tens of thousands of deaths, millions homeless.

Okay, next thing the Glibertarians say is, "well, okay, we need building codes, but only for structures being built by contractors, not for a structure that I build for myself, because I know how to build a safe home for myself!" So, uhm... that worked out really well in Haiti too, yes? Most Haitian homes were built by the people who lived in them, and when the earth started shaking, they fell over... onto their neighbor's home, which then fell over onto their neighbor's home, until the whole neighborhood underneath the first home was a pile of rubble down at the bottom of the hill. So even if you were one of the Haitians who built your home carefully to comply with earthquake standards, it didn't matter -- your home ended up smashed by the rubble of the homes around you whose owners didn't comply with earthquake standards!

That's how Glibertarian ideas work out in modern societies. Their ideas work only for yeoman farmers who build homes far from any other homes, and didn't even work well in the rugged frontier American West... for example, the frontier mining town of Pioneer, Nevada, burned to the ground in 1909 because a fire started in one of the wood-frame structures constructed by the people who occupied it and it spread to all the other structures, destroying them all. If they'd had fire codes, that wouldn't have happened. But according to the Glibertarians, that's how we should all live -- in a society where our neighbor's house could fall over or catch on fire and destroy our home at any time. As for me... I'm happy to live in a modern apartment building constructed to post-Loma-Prieta earthquake standards. This thing starts shaking, I have a pretty good notion that it isn't going to fall over and kill me, because our building codes here were enforced. Which, alas, was not the case in that Libertarian hell-hole called "Haiti".

-- Badtux the Construction Penguin


Slaid Cleaves--"Broke Down", off of his album by the same name. Just another singer-songwriter you never heard of who's better than 99.99999% of the folks you hear on the radio.

-- Badtux the Music Penguin

Monday, February 15, 2010

An astounding revelation

One of the things that is amazing about the Internets is the things you learn from reading your email. There you learn things like Obama is a socialist, Saddam's nuclear program would have blown up major cities any minute if we hadn't invaded, and I have been reliably informed that I am a banker who is running a blog solely as a brainwashing tool to brainwash my readers into believing that banks are great and gold bugs are demented idiots.

Needless to say, I am quite shocked, shocked I say, to hear all these things. Here I was, thinking that Obama was basically a moderate Republican what with him signing a bill allowing guns in national parks, continuing the Bush Administration's tax cuts, and so on, and now I learn he's actually the second coming of Vladimir Lenin? Whoa! And I knew something was fishy when the Bush Administration's own hand-picked weapons inspectors filed a report saying Saddam had no WMD... clearly, it's a conspiracy, a cover-up of mass proportions! And the fact that I'm secretly an agent of the Jew-run Federal Reserve out to enslave America... wow. Here I was, thinking I was just a regular old computer geek in the Silicon Valley who spends his days writing cool computer software and his evenings reading economics textbooks and econo-blogs, and I'm actually secretly part of some vast conspiracy to turn Americans into slaves of the New World Order? Cool!

So anyhow, gotta go. My phone's ringing, and I'm sure it's my controllers at Illuminati Headquarters with new instructions for me, probably going to dictate my next economics post so that it puts my masters into proper worshipful light. Bye now!

-- Badtux the Snarky Penguin

X it out!

A reputation for bad customer service got you down? Congressmen are calling your CEO to Capital Hill to testify about the atrocities that your company has committed against the American public? A proposed corporate merger turns into a public relations disaster as every major news network (except one) comes out with guns blazing to blast it as irresponsible and monopolistic?

Yes, times are tough out there, peoples. But never fear, CEO's know what to do when this happens: X it out! If you're a mercenary company called Blackwater under fire because your employees are sociopaths who kill little children just for fun, turn your name into Xe, and presto chango, you're no longer an evil mercenary company called Blackwater under fire because your employees are sociopaths who kill little children just for fun! And if you're a hated evil cable company called Comcast called "Comcrap" because your customer service people are morons and it takes months to get any problem fixed and they censor your Internet connection to keep you from using the bandwidth you're paying for... well, just change your name to Xfinity, and you're no longer a hated evil cable company with poor customer support and censored Internet connections!

Yessiree, it's that magic "X" letter that is the solution to all corporate problems, and Compost has decided to rebrand itself with it to, well, uhm... does anybody here think that Xe's mercenaries have suddenly quit being sociopaths who kill little children just for fun? Or that Xfinity's customer support people suddenly all received brain transplants and no longer get a deer in the headlights look when you point out that your Internet uplink is being swamped by outgoing traffic from one of your neighbors who has been virused by a botnet? Uhm.... alrighty, then!

-- Badtux the Snarky Penguin


"Never the Pretty Girl", by BettySoo.

The best music is from the heart.

-- Badtux the Music Penguin

Sunday, February 14, 2010

Is that Jazzbumpa in the middle?

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-- Badtux the Smiling Penguin

Inflation targets: How much is enough?

Seen on multiple econoblogs today, the IMF's chief economist suggests that a 2% inflation target is too low, and instead it should be a 4% inflation target, because otherwise central banks have insufficient headroom to lower interest rates in the event of an unexpected collapse in asset values.

This is an interesting observation. Ian Welsh made it on my own blog on my post where I pointed out why we want inflation in any economy that has fractional reserve lending. Inflation buffers the action of the business cycle by making it unprofitable to turn money into mattress stuffing. Down cycles are already somewhat deflationary because banks increase their reserves in preparation for borrowers not being able to repay loans, which in turn decreases the effective fractional reserve money multiplier and thus the money supply. Without inflation, the normal action of the business cycle is amplified by money fleeing the system during down cycles (because bank fees and charges exceed the real increase in value caused by inflation) to become "mattress money" and thereby causing even further effective deflation than is explainable by banks increasing reserves during down cycles, since money under mattresses -- AND ITS MULTIPLIERS -- effectively ceases to exist as far as the monetary system is concerned. But inflation keeps money from disappearing under mattresses, and also keeps banks from stashing ridiculous amounts of money into reserves, since money in reserves would be decreasing in value too. I suggested inflation targeting of 2-4%, pointing out that the ECB had a 2% inflation target, and Ian pointed out that at 2% there were still parts of the economy in real deflation, and proposed 4% as a more reasonable inflation target.

Glad to see that there are now some "real" economists who are following up on this observation made by us "mere bloggers". (Note that this observation was *not* original to either of us but has been floating around the econo-blogs for quite some time, it's just now apparently managed to bubble into the open). Now all we have to do is somehow convinced Ben Bernanke that this is a great idea...

Oh yeah, for some critics: First of all, I already explained why we want fractional reserve banking, so let's not go there right now. Let's talk inflation instead. The problem isn't inflation, but, rather, predictability. In a system where inflation is at a known predictable targeted rate, banks and other financial institutions can build it into the rates they pay you for your savings (e.g. if it is targetted at 4%, they can pay you something over 4%) so that savings are not lost to inflation, and they can set the spread on their loans to cover the interest they're paying you. In short, it's not the scale of inflation which is the most important thing here, at least at the levels we're talking about (2-4%). The S&L's failed in the late 70's because inflation became unpredictable and future inflation did not match the inflation rate predicted at the time they issued loans, not because of inflation itself -- if inflation had stayed at the level predicted when they issued the loans, it wouldn't have mattered whether that level was 2% or 4% or 6%.

Now, how do things change between a 2% target and a 4% target? Well, anybody holding mortgages suffers... but not by much. Most of these mortgages were already issued at a greater than 4% target rate -- e.g., I check my bank and mortgages are at 5.5% there -- so while it would cut the spread down drastically, they're still okay. Indeed, history during the 1970's backs that up -- it wasn't until we got past 6% inflation that things started slowly crumbling for the S&L industry.

In short, there's no real reason why not to raise our inflation targets to 4%. Well, other than ideology and stupidity, both of which have been the predominant cause of the current financial crisis, and which I expect will continue to impair any attempts to resolve this situation -- or to prevent it from occurring again in the event that it is resolved. Because if reality contradicts their ideology too blatently, how could they ever get converts to their ideology? Hmm? So they're going to fight anything that doesn't agree with their ideology tooth and nail... and take the rest of us down with them, if they can.

-- Badtux the Economics Penguin

I feel safer

U.S. Customs Service protects me and my children from obscene comic books.

Gosh, this makes me feel just so much safer than before this poor slub got 6 months in jail for ordering some Japanese manga (comic books) from a mainline Japanese manga publisher...

-- Badtux the Snarky Penguin


Year of the White Tiger Geng Yin, 4708.

The above photo was sent to me by an acquaintance in China. The Chinese tiger is now a very high-tech tiger -- said friend is a master project manager for complex computer software products -- and his imagery matches the modern nature of the tiger.

Yes, China predates Christianity by over 1,700 years...

-- Badtux the HNY Penguin

The Tick

Spoooooon! Oops, wrong Tick.

One thing I forgot to add yesterday was that my hip was hurting when I got home. I thought it was just me getting old, but when I pulled all my clothes off to do tick patrol and jump in the shower to wash off the grunge, there it was on my hip -- a tick, having apparently made it past my defenses, probably when I had to dig a cathole and drop trow to take a dump (yes, I know how to shit in the woods). Pulled him off, tossed him in the sink, washed him down with soapy water, gone. But I'm apparently allergic the the blasted things because I have a big painful welt there now, same as the last time I found a tick on me (that one dug in on the backside of my knee a few years back).

At least I know he was the only one, because I don't have a big painful welt anywhere else. I just hope that you can't get Lyme Disease from a tick that was only on you for five or six hours max :(. Yeah, I know they say the tick has to be attached for 24 hours and so forth, but c'mon, these are the same folks who said that anti-depressants are more than placebos despite half of their trials contradicting that assertion...

-- Badtux Ticked-off Penguin

Another sadly underrated artist

Gurf Morlix, "Diamonds To Dust" off his album of the same title. He's most known for being instrumental to Lucinda Williams's early success, not for his own talents. But his own talents are immense both as an individual artist and as a producer -- he produced recent albums by Slaid Cleaves, Romi Mayes, BettySoo, and Porter Davis. He has recently started getting some recognition in the Americana "alt-country" category, but expect to hear him on the radio, like, never. He's old and he ain't purty, boy howdy.

-- Badtux the Music Penguin

Saturday, February 13, 2010


I spent all day hiking in Coe State Park. Any of you who are familiar with it, knows there are two directions you can hike in Coe State Park - uphill, and uphill. GIven that, I guess it's no surprise I didn't rack up a huge number of miles, but I sure got a stair-steppin' workout...

Have an idea for a new song, but want to put new strings on my electric guitar first, because it wants to be slinky, and only my tops are slinky at the moment...

-- Badtux the Tired Penguin


Band is Warpaint, song is "Stars" off their Exquisite Corpse album. Two guitars, a bass, and a hired drummer, and creepy singing from the three ladies who play the guitars and bass. Sort of psych-pop except it's straightforward rock other than the vocals...

-- Badtux the Music Penguin

Friday, February 12, 2010

More bubbly pop-punk

The Dollyrots, "Watch Me Go".

- Badtux the Music Penguin

Thursday, February 11, 2010

Too big to fail, or just right?

As I pointed out on Tuesday, the core operation of a bank is you agree to loan your money to a bank in exchange for a certain amount of interest, the bank then loans out that money to someone else at a greater rate of interest, and the bank makes its money on the spread between what it is paying you, and what its borrowers are paying the bank. Banks don't pay you interest on your money because they like you. They pay you interest on your money because they're loaning it out to borrowers at a higher rate of interest. That is implied in the whole concept of a modern bank. That is an honest business operation. The bank is serving as a means to spread the risk of lending your money amongst multiple borrowers, rather than a single borrower being able to default and cause a 100% loss. In short, when operating properly, a fractional reserve banking system is a means of spreading the risk of loaning your excess capital amongst sufficient people that the risk you'll not be able to get your money back when the loan is due is reduced to a very small amount.

What this implies is that the problem of "too big to fail" is not a problem of bank size, but, rather, of banking regulation. The deal is that the bigger the bank, the less that it will be affected by any single creditor going bankrupt. If a customer that has $100M in outstanding loans goes bankrupt and a bank has 10,000,000 customers and $100B in deposits, that's a $10 loss per customer and 0.1% of the bank's capital gone. If a bank has 100,000 customers and $1B in deposits, however, that's 10% of the bank's capital gone in one fell swoop.

In short, the same efficiencies of scale that result in a health insurance oligopoly mean that a banking system will naturally evolve towards a banking oligopoly because the larger the bank, the smaller the risk to its customers of a default by a borrower unexpectedly defaulting -- and that's what we're seeing.

So why, then, did we see the problems that occurred at the end of 2008 where the big banks had to be bailed out? Well, it's because it was a failure of regulation -- regulators allowed the banks to engage in higher-risk activities, issue higher-risk loans, speculate in higher-risk speculative investment instruments, and the big banks were no more immune to that than any other banks. The answer, then, is to return banks to what they used to be -- retail operations that make their money off the spread between what they pay for money and what they loan money out for -- rather than having banks be gambling institutions that play in the stock markets or collateralized debt markets attempting to make money off of speculative operations. That is how you make "too big to fail" banks really too big to fail -- in the absence of being able to lose spectacularly huge amounts of money via engaging in speculative behavior, the "too big to fail" banks really ARE too big to fail, because there literally is no loan default scenario that would result in them failing. Their risk pool that they spread loans across is literally too big to fail if they aren't allowed to speculate with the money but, rather, must loan money in a sound and safe manner.

Of course, in saying this, I'm puncturing the sacred religions of both right-wing AND left-wing zealots. The right-wingers howl "Regulation! Evil! Heresy! Heresy!", and the left-wingers howl "Banks! Evil! Heresy! Heresy!". So it goes. I'm a rational penguin who looks at the numbers, not at ideology, so I think they're both full of it. We need banks -- there's no other way to keep capital moving through the economy rather than stashed under mattresses where it contributes nothing (zero) to economic activity. Given that, keeping the systemic risks down can be done either by having banks too small to matter, or banks too big to fail, but either way is going to require a lot of regulation -- and too small to matter has its own problem, which is what to do when a too-small-to-matter bank fails and the FDIC can't merge it into another bank because the combined bank *would* be big enough to matter. At that point the whole notion of regulating banks until they're too small to matter fails. Ideology, alas, runs into reality once again. How inconvenient!

-- Badtux the Banking Penguin

I feel safer

The TSA protects America from the flashcards of mass destruction. Nicholas George, 22, of Wyncote PA, was apparently going to inflict deadly, I say deadly, papercuts upon the peaceable denizens of a jet airliner. Or somethin' like that.

Remember, we must stop passengers from carrying suspicious flashcards upon airliners, or the terrorists win! Or somethin' like that.

-- Badtux the Snarky Penguin



This guy in Paris apparently has a series where he gets an artist to walk around the street shouting out a song, while he records it with a minicam. This one is Scout Niblett doing her song "Nevada". Which I've already shown in a different version on this blog, but here she's walking around with a Marshall Mini-stack battery-powered amp and her Fender Jaguar shouting out the lyrics at the top of her voice, and it just seems so right. Scout's touring next month and coming to San Francisco in support of her new album, I'm going to try to be there.

-- Badtux the Music Penguin

Wednesday, February 10, 2010

Morning snark

From EBM:

Sen. Mitch McConnell said that the weather was interfering with the operation of the government. He was probably miffed because that's his job.

-- Badtux the Outsnarked Penguin

Water music

Jessica Bailiff, "Lakeside Blues". Asked if any of the songs on any of her albums could ever be a radio hit, Jessica replied, "I don’t really think any of them could be a radio hit. I wear too many clothes to be played on the radio."

Her music is sort of a psychedelic Joni Mitchell nowadays, so I don't think the clothes bit is the only problem. Still, some interesting stuff there. Right-click the vid and bring it up on YouTube and check out some of the other videos, you might find you like it.

-- Badtux the Music Penguin

Tuesday, February 09, 2010

WTF is going on with cars?!

I talk about the Honda and Toyota recalls over at MotoTux.

What we have here, ladies and gents, is a case where the geeks who programmed these cars have forgotten what the wrenches knew years before the geeks finished kindergarten: cars ain't a place to experiment with shit that could kill people if it goes wrong.

-- Badtux the Auto Penguin

Of gold bugs and ponzi schemes

One thing that gold bugs are fond of saying is that fractional reserve banking is a Ponzi scheme. Err, no. Fractional reserve banking is where you agree to loan your money to a bank in exchange for a certain amount of interest, the bank then loans out that money to someone else at a greater rate of interest, and the bank makes its money on the spread between what it is paying you, and what its borrowers are paying the bank. That is an honest business operation. The bank is serving as a means to spread the risk of lending your money amongst multiple borrowers, rather than a single borrower being able to default and cause a 100% loss. In short, when operating properly, a fractional reserve banking system is a means of spreading the risk of loaning your excess capital amongst sufficient people that the risk you'll not be able to get your money back when the loan is due is reduced to a very small amount.

So why do gold bugs state that an honest business operation is a Ponzi scheme? That's a good question, and I don't know the answer to it. A Ponzi scheme has certain characteristics:

  1. The central defining characteristic of a Ponzi scheme is that a Ponzi scheme pays off prior investors with the money from new investors. But banks don't pay you interest with money from new investors, banks pay you interest with the interest money they get from loaning your money out.
  2. The Ponzi scheme gives unusual or higher than normal rates of return. C'mon, have you had your money in a bank recently? Can you say that any bank is giving you an unusually high rate of return?!
  3. A Ponzi scheme claims to rely on some esoteric investment approach. Uhm, what's so esoteric about paying a low interest to people loaning you money, loaning that money out at higher interest to other people, and then making a profit from the spread?
  4. A Ponzi scheme has a central schemer. There is no central controller of any modern banking system, even the Federal Reserve is as much controlled by banks as vice-versa.
In short, none of the attributes of a Ponzi scheme apply to fractional reserve banking. Any time a gold bug calls this simple business arrangement a Ponzi scheme, said gold bug is either showing that he's an idiot who doesn't know what a Ponzi scheme is, or that he's a liar. Either way, mention the word "ponzi scheme" in the comments on any of my posts in reference to banks and that's a sure way to get your comment deleted -- I don't have patience with either idiots OR liars.

-- Badtux the "Better idiots, please!" Penguin