Wednesday, January 31, 2007

NY Money People Summon Bush to Push War with Iran

President Bush was at the New York Stock Exchange today, dutifully receiving his marching orders for war with Iran. As they say, the mountain doesn't come to Mohammed...

Chavez Gets His Capital D

"The people never give up their liberties but under some delusion." - Edmund Burke

Today Hugo Chavez goes from being a dictator to being a Dictator. He will now embark on an aggressive transformation of Venezuela that will plunge Venezuelans deep into oppression.

Note this passage:
"The law also allows Chavez to dictate unspecified measures to transform state institutions; reform banking, tax, insurance and financial regulations; decide on security and defense matters such as gun regulations and military organization; and "adapt" legislation to ensure "the equal distribution of wealth" as part of a new "social and economic model."

Two of the time tested tactics of subjugating a populace are denying citizens the ability to benefit from installment credit and disarming them. The lack of installment credit quashes entrepreneurial activity and any other source of self-sufficiency making your only source of sustainment the government. The second tactic should be obvious, it is easier to take over someone's home, business or other property if you have guns and they don't.

Venezuela's economic collapse will be hastened and individual freedoms will disappear. Depending on the pace and extent of Chavez's transformation, Venezuela could erupt in chaos and bloody mayhem in a few short years.

I fear for the Venezuelan people, but I don't weep for them, they are getting exactly the government that they asked for. They have fallen for the delusion whereof Burke spoke.

On another note, Rafael Correa isn't wasting any time in Ecuador launching his post-election putsch, and they wonder why so many Ecuadoreans are hightailing it out of there.

American Soccer Mom with SUV=Bad; Saudi Prince with Jumbo Flying Palace=Good (European Jobs)

Wait a second, let me get this straight. European politicians, whose environmental consciousness has set the gold standard for insufferable pomposity, are publicizing the potential purchase of the largest commercial aircraft ever built for use as a "flying palace" to the super-rich? Are these Middle Eastern gazillionaires not moved by Josh Hartnett's scientific expertise combined with his selfless social concern? Shouldn't we be restricting use of these planes just like some seek to restrict the use of SUVs? What would be the harm in telling these two Russians or Saudis or whoever they are they can't have their flying palace? Wouldn't it be just like putting about 675,000 Toyota Priuses on the road or something?

Something tells me there is a degree of incoherence and illogic to what our politicians might be saying about all this global warming stuff....

Productivity Gap?

I certainly hope this is not the latest attempt by the French to revive their economy. Not quite "France Is Open for Business" is it?

Is the Economy Gellin' ?

The economy is so gellin'. Businesses are doing alot of sellin'. Inflation has been quellin' and Janet Yellen says employment is swellin'. The IMF is foretellin' that global growth will be compellin'.

Tuesday, January 30, 2007

What Did You Call Me? Davosian?

I wanted to say it, but let's turn to best-selling author Michael Lewis who says it:

"Davos Is for Wimps, Ninnies, Pointless Skeptics"

Monday, January 29, 2007

Malanga Recalls What Seems Like Ancient History

Let me go ahead and pile on and be one of the many blogs that links to this article in City Journal about the Giuliani years here in the Big Apple. Let me just add my view, a view that was informed by the fact that I lived through it all, that Malanga has it dead right. You really couldn't appreciate how stunning the Giuliani years were unless you experienced how bad the Dinkins years were. They were terrible and made the Giuliani years feel like an unprecedented Golden Age after Rudy brought the city back. The great years brought back so many jobs and opportunities that thousands of young people came back after years where there was not much cause for young people to strike out and make their way in NYC. Sadly, most of these people were freshly-minted graduates who came to believe that the New York City of Rudy Giuliani was just normal, that it was and always will be that way. Au contraire.

Second I hear constantly that Rudy can't win in the red states because of his social views (and the insulting implicit antedeluvian views of red state denizens). Poppycock. Sure, you may find pockets of disgust for a guy like Rudy but I would bet that his appeal is much wider than people know, especially in the increasingly urbanized south and southwest. On my ventures to places like Oklahoma and North Carolina, I detect nothing but open-mindedness regarding a Rudy candidacy. I suspect what is at work here is more of the pundit class's cocoon-generated cluelessness. (Cue the famous Pauline Kael quote.)

Third, I have always thought that there was a huge appetite for a candidate that embodied conservative management ideas but without the oftentimes off-putting social conservatism, call it like a 'tax cuts and stem cells' kind of platform. The punditocracy has always seemed to claim such a demand was out there, at least obliquely as they pour disdain on social conservatism but have to temper their partisanship for appearances. Rudy is that candidate. So why now all the doubters who think that our candidates must come pre-packaged with standard features?

Finally, the cold calculus of electoral politics argues in favor of Rudy. Rudy can be competitive in traditional blue states whereas no other Republican candidate would even come close. Rudy will make New York, New Jersey, Pennsylvania and Connecticut competitive, and I don't think he gives up places like Nebraska or Kentucky to do it. The 2008 election will see the Republicans desperately trying to hold onto some of their traditionally strong states, all the more reason to turn places like New Jersey into toss-ups rather than concede them by nominating McCain or Romney.

Don't forget, when Rudy first ran for mayor here, he ran as an "Independent Republican." It was truth in advertising and the product worked damn well. I think America is ready for fact, America has always been ready for that.

N.B. I might add that Rudy was reviled by garden variety NYC whackadoos for wanting to shut down the last few remaining Peep Show stalls on Eighth Avenue between MSG and Port Authority.

Forbes on the Ethanol Glut

Two weeks ago I said the race is on to have the Great Sausage Factory bail investors out of sinking ethanol investments. This weekend I got my Feb. issue of Forbes and they give a more detailed account of this development.

UPDATE: More on same from Bloomberg.

Friday, January 26, 2007

Reply to the SOTU

Dear President Bush,

Thank you for remaining steadfast in your determination to achieve both the emminently practical objective of denying terrorists another foothold in the Middle East and the idealistic goal of establishing a society that enjoys freedom and democratic government in Iraq. Furthermore, I think it is fantastic that we are now out in the open about killing any Iranians that are messing up the pudding over there. 'Bout time if you ask me.

One thing you forgot to add to your sensible healthcare proposal is the creation of a federal market for health insurance, so that I can escape the horrendous New York state policies of guaranteed issue (same rates for heroin users as non-users!) and loony mandates (mandatory sex changes, wigs, and aroma therapy!).

Finally, this whole thing about oil. Forget it, Bub. I just bought an SUV - 14 MPG city, 20 highway. Don't care. Love it. Gonna drive it to North Carolina in March. Get some Bar-B-Que. I digress. It's beautiful. It weighs about 8000 lbs. and it can haul itself and another 1000 lbs consisting of me, the wife and kids, and all our stuff about 400 miles for about $45!! $45!! We don't even have to grow anything on acres of land that we don't even own. It runs on this sludge that they pull out of the ground!! It's amazing! It's this worthless gunk, but if you heat it and do stuff to it, it can actually propel 9000 lbs. farther in a few hours than most humans who have walked the Earth have ever travelled in their lives! And it doesn't even poop, leaving foul smelly, potentially infectious crap on the side of the road! That alone could save thousands of lives. If everybody could trade in their horses for something like my SUV, millions of people would live so much longer. Sure some people think it may be bad but they can't prove it, they just have these computer programs that think maybe it might be bad. Anyway, it is great, a wonderful achievement of human ingenuity - sludge from the ground made useful. Crazy. What will they think of next? Who knows? If guess if we knew, we'd all be doing it already. So we just have to wait to see what some genius somewhere gives us. So, bottom line...gonna keep on using the stuff. Sorry.


Thursday, January 25, 2007

Tension at Davos?

I ripped this report from Davos off of Instapundit:

This year there is a weird imbalance here between thinkers and doers.

Usually you can count on a healthy tension between the dreamy thinkers (for these purposes, anyone who writes or talks for a living, such as economists, journalists and most politicians) and the pragmatic doers (in Davos, business people).

The former come up with wild theories and grand plans. The latter say it will never work in practice.
But now, not least in Davos, it is the eggheads who are fretting and the men in Brioni suits who are looking on the bright side.

In the dinners and the discussions, the journalists and economists and politicians raise all the questions about inequality between winners and losers, deplore the absence of political leadership and compare this age of globalisation gloomily with the one that collapsed with the first world war.
The business people reply, by and large: “Come off it”.

It is not that they are being complacent, the business people say. Far from it. They are realists. They see things from the ground up. They see progress in each shampoo bottle bought in eastern Europe, in improvements to Africa's health care, in the broadening of choice everywhere.

Maybe after silly pronouncements like this and this, the "doers" are beginning to think the "thinkers" are complete doofuses.

Just Another Caring Gatekeeper Filtering Out What We Needn't Bother Knowing

A Canadian journalist describes the process whereby he makes your decision for you about how to view the debate over global warming and why he is responsible by not giving equal time to both sides.

"I feel I have two main duties as a journalist. The first is to show that there is more than one side to every story. The second is to carefully judge the information I collect, and present to my audience only what I think is based on solid evidence and facts.
I always try to present different points of view on subjects. But the vast majority of the scientific community seems to agree that profound climate change is under way. By comparison, credible climate-change skeptics seem few and far between."

Then he provides silly non-sequiturs that are historically ignorant to justify his view.

"There are certain things in society we don't debate. We don't debate whether or not the Earth revolves around the sun. We don't debate whether feudalism or democracy is a better form of government. We used to debate these things, but eventually one side won the debate because of the evidence."

First of all, only one of these is really a scientific question. I believe the preference for democracy over feudalism is a matter of sociology, politcal science and other disciplines that we call social sciences. We call them social sciences because they are not quite the same as the physical sciences. And yes we do debate whether democracy is preferable over feudalism, it is just that we call feudalism by many different names today, socialism being just one of the names we use. The feudal protagonists of lords, vassals and fiefs just go by their modern names as well, and in certain parts of the world a gigantic debate of historical proportions is raging over what is better, a feudal-like system or democracy. South America comes to mind.

As far the scientific question goes, yes, we don't debate heliocentrism anymore, but we did, for centuries. Over hundreds of years these topics were debated. And even that debate, hundreds of years in the settling, is only just a small step along a further path of understanding where we now know that the sun isn't the center of the universe at all, but a star in a vaster system. So it took us thousands of years to figure out that the Earth wasn't the center of the universe, but our replacement candidate that title, the sun, well, that was wrong too. It is nearly a certainty that our current body of "accepted scientific knowledge" on climate change will be substantially revised or even rejected with time. Even so, the debate over global warming is in its infancy on the historical scale. We do know very little, and too much remains speculation.

Apparently, numerous Canadian scientists agree and just written an open letter stating as such. But I'm sure glad at least the journalists have made up their mind.

The Rub for Healthcare

David Frum isn't an economist but he illuminates the core problem with our healthcare policy better than I've heard any economist do it:

"Tax subsidies have encouraged Americans to demand that their employers buy health insurance for them rather than shopping for themselves. That core error is responsible for almost everything wrong with the health market in the U.S. It dulls consumers' sensitivity to the cost of insurance. It discourages insurers from competing against each other. It tempts state legislators to pile appealing but expensive mandates onto insurance companies. I might want to buy a cheaper policy without acupuncture coverage, but I'm not paying attention and the acupuncture lobby is."

Wednesday, January 24, 2007

Reply to A Commenter

William said...
Wow. What an elitist counterbalance to Kosla. The President last night called for 35 billion gallons of fuel production from alternate sourcs mainly from ethanol (more likely from cellulosic ethanol). At the same time we're pumping an additional 100,000 barrels a day into the Strategic Petroleum Reserve. There is a worldwide effort afoot to replace oil with bio sources because of political instability in the Middle East. The Chinese for example are looking at their rapeseed capabilities today to expand biodiesel production. So are the Europeans. Time in NOT on our side. We need to act quickly regardless of how it benefits Khosla's companies.

First, William, thanks for reading and commenting. Let me respond. I don't begrudge Khosla making money in the least. This blog is ardently capitalist. What I do object to are 1) capitalists who angle for government bestowed advantages to compensate for their lack of success in the marketplace, and 2) the government picking winners in a particular sector. Like Khosla, I too have investments relating to alternative fuels but asking for favors from the government is not part of my investment model. These efforts have to stand on their economic merits. I believe that the ethanol industry could be successful ultimately, but that they are on the margin of economic viability and are cynically relying on government to tip the balance. This is what is called economic rent-seeking and I believe it is an abuse and detracts from the development of a healthy, resilient economic environment.

This blog has always advocated "energy diversity". I want to see many alternative fuels, including ethanol, in use, but only to the extent that they are economically viable. There are many folks who feel that some notion of "virtuousness" ought to be applied to alternative energy. On that score, ethanol doesn't really stacked up well either. I would argue that biodiesel from waste oils and tallow are more "virtuous". But such a subjective notion is problematic in that it is difficult to make rational decisions and you invite a cacophony of competing voices that policy makers cannot possibly sort out. This also invites abuse of the political process. The market is the single best mechanism for sorting out a cacophony of views. I applaud Khosla the capitalist, I do not applaud Khosla the lobbyist; and, make no bones, he is assuredly part lobbyist in his efforts on behalf of ethanol.

Additionally, alternatives must be alternatives, not necessarily replacements. A commitment to energy diversity must also allow for an improvement in the status quo, namely better hydrocarbon fuels. In a few decades we have gone from leaded gasoline to where we now have something called Ultra Low Sulphur Diesel and a host of cleaner fuels. Fuels are getting cleaner and better and we should not hinder this process.

This all gives a moderate nod to the theories of anthropogenic global warming and Peak Oil. It makes good sense to have multiple energy options given these theories, but I don't think we should make policy (other than a policy of non-intervention to promote energy diversity) based on either of them. They both are highly speculative theories that leave ample room for justified skepticism. So when you say, "we are running out of time" I can only assume you are referencing either the Peak Oil notion that we will run out of oil or the global warming notion that we will destroy the earth before long if we don't act. I think you are wrong on both counts if that is indeed what you mean. We do not need to develop alternative fuels because of an imminent shortage of hydrocarbon resources, nor do we need to do it to avoid known and quantifiable negative effects on the climate. We simply need to do it as a matter of prudence.

I Thought I Was Funding Terroirism...

I didn't know I was funding terrorism when I buy wine "aged in French oak barrels."

(HT: Say Anything)

All Together Now Fellow NY Money People..."BwaHaHaHa"

Apparently, "New York money people" are pushing us toward's war with Iran. First, let me say that I am surprised at the degree of my influence, but I'm not complaining. So, does this claim have any substance? Sure I've been mildly bellicose (here, here and here for example), but I wouldn't call it pushing us toward war. I think the accusation is a tad overwrought. As to whether this claim is anti-Semitic, the name Baseball is of Irish origin actually (from a long line of sheep and peat farmers). It was never shortened from Baseballowitz or anything like that, so that too is off-base.

(HT: Instapundit)

Tuesday, January 23, 2007

Putting Iran In Check

"You can bet that Bush will fill up the Strategic Petroleum Reserve to its brim and very likely authorize an increase in its capacity to counter the 'oil weapon.' "

That was yours truly back in August of last year (here). Today comes the news that the President wants the SPR doubled. Regardless of what he says it is for, you can be certain this is a chess move against Iran. And it's a good move. Bravo.

Energy Independence Mismatch

I am not sure if the editors of the WSJ intended on making Vinod Khosla look like a boy among men, but that surely was the result of placing his hopeful view of our ethanol future directly opposite Dan Yergin's rational discussion of "energy independence".

Khosla's view is admirable for his optimism and "can-doism" but it is little more than a call for massive government intervention in energy markets presumably in order to save ourselves, but more likely to save his investments in ethanol that are not looking so good as the price of oil has fallen from $80 to $50. He wants expanded mandates for bio-fuels because he knows that government mandates, not economics, are the only hope for any near term marketplace acceptance of ethanol. He further admits to the economic illogic in touting a policy feature he euphemistically calls a "relief valve" but which is just another government subsidy. All of this is supposedly necessary because of terrorism. 'No oil, no terrorism' is Khosla's reductive logical foundation for turning our entire energy system on its head. True, the Saudis fund the spread of Wahhabism, and the Iranians fund Islamic extremism, and it would seriously hamper their ability to do so were we to stop buying their oil. This leaves out so many other considerations I don't know where to begin. What about the Chinese, will they not buy the oil we shun? Why punish other developing nations whose economic maturation depends on their energy sectors and that don't fund terrorism? Will the lack of oil revenues really blunt the idealogical fervor of Islamists and can't they find other sources of funds to finance their terror campaigns? Khosla doesn't seem to want to go that deep. He wants the government to pick a winner, his ethanol, and throw money at it. Yergin on the other hand calls for a greater reliance on what has served us well to date - technological innovation, competition, and trade openness.

Monday, January 22, 2007

China and Risk in the Same Sentence? Believe It.

Shocking. Some caution on China from the financial community. I can't believe it. About time. China is a fantastic story and their economic growth is an incredibly welcome development, but from an investment point of view, it has been all euphoria without any regard to risk. To invest in China for the long term (I'm not talking about people trying to scalp a tidy gain over a few months or even a year or two), you have to conclude that a few thousand elderly communist men will make few serious economic policy errors. That is a stretch in my book. Granted such men do hire world-class advisors from all over the world to consult on China's ecomonic policy, but the fact remains that economic policy is overconcentrated in the hands of people who are almost destined to make an economically disastrous blunder at some point. This is no different from investing in the US, from an occurence standpoint - as this interview with Milton Freidman points out, we have too much economic policy-making power concentrated in the hands of a few people - but China's version of this risk is vastly greater given the potential impact of economic policy errors. China's political system is not as flexible as ours, we have a greater ability to react and force political institutions to maneuver us out of policy errors. This heightened sensitivity to shock is the main risk that investors face and, to a great extent, it is largely ignored.

None of this has to be the case though. The Chinese people are inveterate capitalists (most executives who do business in China will tell you that the Chinese are the real capitalists, it's us that are the socialists) and if left to operate in a democratic, free market system, their growth would be even more phenomenal and would come at much lower risk. But that would mean different people would be in charge, and there essentially is the sticking point.

McCain for Secretray of State

I'm not a John McCain fan at all, but I like this (via Kudlow):

"I probably would make it more clear to the Russians that this is a determining factor in our relations with the Russians. They're really the only ones in the region that have, as you know, significant influence. And I would not look into Mr. Putin's eyes. I'd stare him in the face, and I'd say, `Look, pal, you've got to help us out here, and otherwise, the consequences will be significant in terms of our relationship.' "

I could definitely get behind John McCain for, say, Secretary of State, in, say, a President Coburn administration!!!

Globonannies Lament Cheaper Oil

The WSJ either initiates or piles on (I'm sure this theme got started elsewhere, but this is the first I've seen it) the latest inanity that lower oil prices are bad. Apparently, when a remarkable technology that improves our lives and raises our standard of living to previously unimaginable heights becomes less expensive to use that is something to lament. I didn't know this. Henceforth I will pine away for semiconductors, fiber-optic cables, laproscopic surgical instruments, pharmaceuticals, and electric arc furnaces to double, triple, even quintuple, in price so that regular people like me will have more limited access to their benefits. Yes, yes, let's all go back to the eras of leaching and bleeding, one-phone households and the Encyclopedia Britannica.

OK, in all seriousness. When the price of oil was higher it made sense to seek substitutes and it still makes sense to explore competitive technologies, because hey, you never know, one of these technologies just might be economically viable and not require massive subsidies mandated by our politicians with our money. The market is merely regulating the flow of capital into the energy sector and at the present time it is tempering the flow into alternatives to one form hydrocarbon energy, oil. It may yet resume signaling a need for more progress on alternatives. But the market price of energy is a mere sideshow for the globonannies. What the enviro-nannies and their fellow travelers, phony and otherwise, are now lamenting is that the market is now not doing their dirty work. When oil was at $80, they were happy with the message that the market was sending and they could avoid having to intervene ever more aggressively on the way we live with bans, subsudies, and higher taxes. However, with oil at $50 and some counting on it going lower, the market's message is not so appealing to our putative betters. Now they will actually have to come out into the light with their massive taxpayer-funded subsidies, restrictions and mandates on the way we live, and run the risk of being seen as exactly what they are by the rest of us.

People like Rich Wagoner shouldn't be bitching about how lower oil prices will inhibit his company's ability to sell alternative fuel technology to us, he should be developing compelling technology that appeals to us regardless of the prevailing price of oil and figuring out ways to market new technologies to the car-consuming public. That inability to forge ahead with one's own smarts and gumption is one reason why GM is a mess. Not so Toyota and Honda.

Ecuador: Chavez Mini-Me on Roids

I had a post all ready to go on Ecudaor after last week's news that they were planning on becoming the newest Latin American deadbeat, but I dithered and Mary O'Grady's column today does the job.

Also, something I didn't know...CANTV, the Venezuelan telephone company that Chavez is expropriating, is 20% of the Caracas stock market. And it is down 20% recently on Chavez's plans. Watching the money flood out of Venezuela is and will be astonishing.

Finally, seems like those lower crude oil prices are cutting into the social spending budget and OPEC members are selling their rainy day funds to keep the balls in the air.

Thursday, January 18, 2007

You Know What They're Thinking

MA: "Dude, $50 oil really sucks. What are we gonna do?"

HC: "Shut up and keep smiling. "

The Truest Vote..Cast by the Feet

Like I've said many times before and before and before and before, the country is moving south and west and alot of it has to do with the oppressive and economically destructive policies foisted on us by our supposed progressive betters. The WSJ does its annual chronicling of this phenomenon today. And don't miss this chart.

George Will on Boeing v. Airbus

George Will turns his eye to the greatest business rivalry on Earth. Not much of what he says is new, although I did find this intriguing:

"...some people think Boeing should allow Airbus to break WTO rules -- and continue to be plagued by political decisions trumping economic rationality. Airbus is illustrating what happens when governments treat commercial enterprises as jobs programs and instruments of national glory."

I discussed this perversion of rationality here. This is an interesting question of corporate strategy. Do you demand clean and fair play or, if say undue assistance is dulling your competitor's edge, do you ignore or even encourage the reliance on assistance hoping for continued erosion of competitive vigor?

N.B. Here is a link to all of my Boeing vs. Airbus posts.

Wednesday, January 17, 2007

A Conversation with Nobel Laureate Edmund Phelps

Here it is loyal readers, the blowout event I shamelessly touted last week in a desperate attempt to drive traffic...

Tonight I was thrilled to attend a "Conversation with Edmund S. Phelps" who, of course, is the 2006 recipient of the Nobel Prize in Economics. While I promised that this would be a stupendous, not to be believed event that would make me a blogging immortal, I clearly overpromised and heretofore is my underdelivery. It was a nice event but the extent to which we got to hear from Prof. Phelps was limited due to two factors. First, there were too many of those tedious ceremonial introductions, particularly the introduction and enumeration of the research interests of nine Columbia Economics Department faculty members in attendence, who were not Ned Phelps. Second was Prof. Phelps's speaking style itself. His speaking style is pensive, deliberative and prone to digression. Clearly he is a deep thinker and not a glib, extemporaneous speaker (after all, why should he be?) so the ground covered in the time alloted was meager.

Nonetheless, obviously he had some interesting things to say.

The first question was posed by some whipper-snapper asset management professional based in New York City who wondered what he thought of Larry Summers's assessment of global capitalism relative to his assessment of capitalism. To begin with, he said, global capitalism is not synonomous with American capitalism, which is consistent with his article in the WSJ. "The working poor suffer more in the European corporatist capitalism than in American capitalism" He went on to doubt that Larry Summers had a large indictment of capitalism in mind but obviously something more nuanced, and then he said something quite interesting. Over time, he said, every group has had its ups and downs with capitalism. Now it may be the middle class that is not experiencing the full benefit yet there have been times when the working poor significantly lagged, and other times when the ownership class have taken a beating - he specifically referenced periods where stocks were depressed and returns to capital were meager. I found this explanation refreshingly odd that he accepted Summers's view but brushed it off as something that works itself out over the long haul. Here he summed up by drawing from his Rawlsian view (more on that later) to claim that "low wage people don't always have a monopoly on deprivation and frustration" and made the claim that depriving the entrepreneurial class an outlet for their expression and fulfilment, as some economic systems do, is also unjust.

Next he tackled productivity, and after some esoteric thoughts about the productivity data and productivity gaps, he claimed that he didn't see a repeat of the way the Europeans closed the productivity gap with the US from the mid 1950s-1970s. "Europe is not very good at coping with novelty," he said, fingering the European consumer as not as willing to try new things and create markets for novelty to the extent that Americans are.

Next, Prof. Phelps was asked what he meant when he said once that we've gotten so wealthy that we've lost the will to work. He went into a technical discussion how the wage rate was not the sole factor in determining the supply of labor, that it was also the income from wealth that had to be factored in. In a typical pattern, he said, a tax cut on wages would prompt more labor to be supplied to the market, a supply-side effect, which would lead to more earnings, greater savings and eventually greater income from wealth. That income from wealth would ultimately dissipate the zeal to supply labor in response to changes in wage rates. Phelps stressed that this was not to be considered too deeply, but I considered it a pretty clear explanation of the American system where many folks rise up the ladder from laborers to owners and over time supply less labor and more capital.

The conversation then moved to that bane of Rubinomics types, income inequality. Here, Phelps was quite direct. He admitted that a preponderence of University professors were egalitarians on this point but that he was a Rawlsian (which you could pick up from his article) and he summed up his view succinctly, "I am not ready to condemn an economy on the evidence of inequality, especially where the poor are constantly doing better." Not to put words in Phelps's mouth, but it was obvious that he views a rising tide lifting all boats as something to be celebrated.

Next we moved on to the role of labor unions and he told an anecdote that stressed his belief that the world of academic economists was and is divided on the role of labor unions, but he did offer that labor unions in Europe had too much power and were inhibiting economic growth there, principally through their participation in corporate governance decisions.

Finally, Phelps addressed the most topical question, that of the new minimum wage proposal's effect on employment should it become law. His first reaction, he said, would be that it would be catastrophic to employment theoretically, but that much higher state minimum wages would mean that such a federal increase's impact would be muted. In addition, he claimed that total employment might not fall as much as expected as employers substitiute mid-level employees for lower wage employees, so that the composition of employment will change. Overall though, he expects the minimum wage law to contract employment. In terms of reducing poverty, he stressed his preference for a "low wage employment subsidy" as a means of reducing poverty over minimum wage laws. It sounded alot like Milton Friedman's negative income tax but we didn't pursue that idea any further...time for cocktails.

That's it dear readers. Keep coming back!


Here are some additional thoughts on subjects that I touch on here:

Jersey Nut covers New Jersey's ongoing attempt to be the most unlivable state in the union. Wrecking the economy is, of course, the first order of business. But being inhospitable to kids is another, tangential, tactic.

An Instapundit reader thinks we are getting Saudi Arabia to wage economic war against Iran and Venezuela. I'm skeptical but not disapproving. I've always said we should cut out the middleman and do this ourselves.

Sunday, January 14, 2007

Oh, the Buzz is Building...

I'm away on business Monday and Tuesday so no blogging, but don't forget about THIS!!!! I actually heard some lady in line at Starbucks talking about it..."what do you suppose this Donny Baseball fellow has in store?" she said to another lady.

Friday, January 12, 2007

A Lesson in Institutional Integrity

Go back to the beginning and compare and contrast the reaction of two institutions to the exploding Duke lacrosse scandal:

Duke University's Richard Brodhead:

“If our students did what is alleged, it is appalling to the worst degree. If they didn’t do it, whatever they did is bad enough.”

Delbarton School's Rev. Luke B. Travers:

“Knowing Reade Seligmann as well as we do here at Delbarton, I believe himinnocent of the charges,” said the Rev. Luke L. Travers...“The hearts and prayers of ourcommunity go out to Reade and his family, the woman who made theaccusations, the players on the Duke lacrosse team and all their families.”

Duke hung their own out to dry and this little school in New Jersey stood by their man. What an embarrassment for Duke to be upstaged and taught a lesson in institutional intregrity by an obscure little prep school in NJ.

Thursday, January 11, 2007

More of That Wonderful Government Paid Healthcare

Speaking of petty tyranny and Japan (that would be a reference to the post just below), check out this article.

Poverty As Progress?

Don Luskin turns us on to this outstanding post on George Reisman's blog taking the NY Times to the woodshed for its moronic blather about energy conservation Japan. Read the whole thing, but here is the distilled essence of Reisman's critique - what the the NYT describes in Japan is not conservation, it is poverty.

Reisman sarcastically praises the glorious, green future that the Times pines away for, but this vision of poverty as progress is not new. In this post, I relate the ideas put forth by Peter Huber and Mark Mills on energy to my own experience to show that less energy means we are poorer, materially and, in a sense, spiritually. Huber and Mills dubbed these 'poverty as progress' types as Lethargists and they expose their illogic as deftly and devastatingly as Reisman does. Huber and Mills:

"Slower trips, dimmer bulbs, smaller refrigerators, and such aren't more efficient; they're slower, smaller, darker - they nudge us toward a less frenetic, peripatetic, and physically expansive way of life. Perhaps it is a good thing. But it is not more efficient, it is more sedentary, calm, and quiet - in short, more lethargic."

Huber and Mills also point out that the Lethargists of the 1970s made no apologies about what they were after; they cared not one iota about efficiency, what they wanted was for us to do less. They wanted us to live simpler, less active, in essence poorer, lives. Do not mistake this for somethig other than what it is - it is our supposed betters' desire to impose a lifestyle and material conditions on us, otherwise known as tyranny, albeit petty tyranny.

Wednesday, January 10, 2007

Blogging Immortality Here I Come

Dear Readers,
I had a great Christmas break (thank you for asking) loading up on trans fats in our beloved heartland where you are still free to do to yourself what you please. Since getting back to NYC however, blogging has been light because I've been busy in the 'bringing home the bacon for Mrs. Baseball and the Baseball chillun' department. Consequently my traffic numbers have stunk. So in an effort to get the numbers back on track (50 page hits per day baby!) I am promising a stunning, world-beating, must-experience experience next week. OK, let me qualify that. It will be stunning, world-beating and must-experience if and only if you are a pro-capitalist, economics geek. That's right ladies and germs, Now Batting for Pedro Borbon will live-blog, or, at the very least, really-soon-after-blog a fabulous event of great interest featuring a figure of great prominence. That's all I can say for now, 'cept "Steve Jobs ain't got nothin' on me!!"
Donny Baseball

Purple Fingers Are Passe, "Fuck Iran" Buttons Are Back

OK, this is a totally banal observation and what the hell do I know, I'm a lowly capitalist pig in New York City, but if the NY Daily News can have a sports columnist comment on geopolitics and the New York Times can have a theatre critic comment on world affairs (talk about synergy!) then what the hell is stopping me?!?! Here goes. For many many moons now Bush has been a total failure because he didn't send enough troops. OK, now he is sending more troops, but that is no good apparently. At some point (and nobody told Bush) sending more troops became bad. It's like you can only have pitching in innings 1 through 5. After the fifth inning good pitching is BAD! TAKE THAT LUPICA!!

One thing I did like about Bush's speech, which was nowhere near as good as his many other excellent speeches (...someday, somebody will do a study as to why Bush's actual speeches were so fantastic but yet in toto he was a lousy communicator), was the bit about Iran and Syria. They're building bombs, hauling them to Iraq and blowing them up. It's going to stop, so says Bush. 'Bout bloody time. I have been way out ahead of the Iraq Study Group in saying we should be talking to Iran. And "You mess with the bull, you get the horns" is what we should have been saying. Granted that is not nuanced, high-sounding rhetoric, but that is the point. Nuance and a desire to elevate political relations beyond its core essence has been the source of problems and resultant misery throughout the ages. So here's hoping that we hear increasing reports of Iranian Revolutionary Guardsmen turning up dead in Iraq, IED factories in Iran turning up daisy-cuttered, and truck convoys carrying men and materiel across the Iran-Iraq border mmmmmeeting with an acccccc...accident (I will buy a beer for anyone who names that movie reference).

Anyway, I wouldn't be surprised if the whole bloody strategy shift was designed with Iran in mind. I believe in the strategy of helping the fledgling Iraqi democracy, but even if it is a lost cause, you have to send a signal to Iran that messing around will not deter us but force us to get in the game more. Idealism is what we should strive for, but failing that and turning to realism, we have to be in Iran's kitchen. They understand nothing more. Iran has made their bed, even if a stable democratic Iraq is unworkable, more troops shows Iran that meddlesomeness will not be rewarded. "Walk softly and carry an amoured tank division, I always say." (That's an easy one, no beer for that one)

Let Us Now Praise Beneficent Big Oil

Well, crude oil prices are dropping like a stone and consequently gas prices at the pump are falling too. The US average price is $2.30/gallon. I see that in NJ you can find gas as cheap as $2.05/gallon. I'm sure out in the midwest you can find it for below $2. This means that pain at the pump is down 23% on average and more in many circumstances. Naturally there are very few stories in the media about the beneficent oil companies or our President's capable, or even benign, economic policies. I don't hear Bill O'Reilly admitting he was wrong about price-gouging and offering apologies to ExxonMobil. Too much to hope for I guess.

In hindsight it is even clearer that what many of us were attributing the spike in gas prices to was correct:
  • Hurricane Katrina wiped out a big portion of the fuel importing/refining/distribution infrastructure.
  • The 2006 energy bill that effectively banned MBTE and mandated more ethanol as of May caused a substantial interuption in the supply chain of fuels.
  • Increased demand from China and India created greater competition for crude shipments.
  • Inflationary monetary policy helped to boost commodity prices.
  • Rampant speculation by traders drove crude oil prices beyond fundamentals

Finally, an amen chorus of Peak Oilers and Global Warming nuts, aided by the media, fueled the hysteria. Even today, as the price of oil stands at $54, many of the supply problems persist. Hugo Chavez's Venezuela is struggling to produce as much as it once did after cashiering massive oil industry know how in the form of PDVSA employees who participated in the general strike of 2003. Nigeria can't seem to stop militant attacks on its oil industry infrastructure. Russia is using oil as a means of diplomacy and restricting shipments to Europe. There is still a premium imbedded in the price of oil that accounts for various and sundry geopolitical messes (sure, throw in Iraq here, if you like).

Many businesses and users of oil had to find energy substitutes when oil was at $80, but with it back at $55 many are all too happy to switch back to the stuff. All those investors in alternative energy are sweating too. Their little green ventures that looked like the next Google when oil was in the stratosphere are going to be losing money every day that oil continues to slide. No doubt Vinod Khosla is moaning to his allies in Congress to give ethanol another political shot in the arm - it is no coincidence that ethanol seems to be getting a fresh push in the halls of the Great Sausage Factory, as is an attempt to permanently ban drilling for oil in the barren wasteland of ANWR.

Oh well, it is a little too depressing for those of us who see hydrocarbon technology as a blessed benefit that has sprung from the creative font of the human mind (and that should be a welcome part of diverse landscape of energy sources). The best that we can hope for is that people remember all of the caterwauling for what it was, a bunch of misinformed blather and phony baloney, the next time we have a spike in fuel prices.

What Part of the Data Do We Want You to Know About?

Two versions of the trade data released today...

Bloomberg: "U.S. Trade Gap Narrows to Smallest Since July 2005"

FT: "US trade deficit with China reaches record $214bn"

Tuesday, January 09, 2007

Hope I Saved You Some Dough

I said to be wary of Latin American stocks. Turns out I was on target.

Monday, January 01, 2007

NPR Looks Into Peak Oil

Regular readers of NBfPB have been kept up to date on the issue of Peak Oil vs. ,well, Reality, and some of the players and arguments et cetera et cetera. Well, bigger and more prominent blogs are now looking into this in point here via Instapundit (I didn't read the article b/c it's late, but the graph that you see above the fold is interesting). Frankly though it should be a little insulting to Dan Yergin that NPR puts Matthew Simmons on a coequal plane.

Some of my previous Peak Oil posts are here and here and here.