2/27/09
Corridor of Shame
Obama's been pretty good at the whole political theater game. See Ty'Sheoma Bethea, from Dillon, SC. Young girl writes well written letter with good rhetoric for Obama to help fix the dilapidated, run down, schools that she and many students in rural South Carolina attend. This shouldn't be something new in the news since it was mentioned at least thirty to forty times during the Democratic Primary in South Carolina. But, well, we can't expect the world to really pay attention to the situation of the poor in South Carolina. Rural people are all dumb crackers who vote republican, especially in the south, except when their not.
In 24 hour news though, it seems that the right has turned into a ADD afflicted 12 year old. There exists a young girl who is being used as a political prop, destroy her. She's black no one will see her as sympathetic. Yeah, write the article. Let's see, HA HA, she thinks Obama is Santa Clause.
But if your going to write an article about how she really didn't need to ask for money because the people of Dillon, simultaneously don't care about the schools, because they didn't pass a bond resolution in 1974, but have actually fixed the problem because they passed a bond resolution in 2007 don't ignore the fact that they haven't gotten any of the money. I know that would destroy the entire thesis of your article but that's what facts do.
The entire article rests on the premise that people don't care about facts, which may actually be the normal reader of the Washington Times. But if anyone where to actually look at the facts, if anyone did a casual google search on the issue and found this;
then it might begin to make sense that a child took the time to ask the president for help, because its not like anyone else has been able to.
In 24 hour news though, it seems that the right has turned into a ADD afflicted 12 year old. There exists a young girl who is being used as a political prop, destroy her. She's black no one will see her as sympathetic. Yeah, write the article. Let's see, HA HA, she thinks Obama is Santa Clause.
But if your going to write an article about how she really didn't need to ask for money because the people of Dillon, simultaneously don't care about the schools, because they didn't pass a bond resolution in 1974, but have actually fixed the problem because they passed a bond resolution in 2007 don't ignore the fact that they haven't gotten any of the money. I know that would destroy the entire thesis of your article but that's what facts do.
The entire article rests on the premise that people don't care about facts, which may actually be the normal reader of the Washington Times. But if anyone where to actually look at the facts, if anyone did a casual google search on the issue and found this;
then it might begin to make sense that a child took the time to ask the president for help, because its not like anyone else has been able to.
2/26/09
I use "and such" too much
I'm mildly curious if any one else uses that phrase rather than etc which from my experience is little used.
2/21/09
Quitting Smoking
I am quitting smoking. And as this is the third or fourth time I've tried, I've come to expect a couple of different things. The first is the constant desire for something. Food satisfies it for a second, water too. But it instantly comes back and so your off for a constant gnawing desire for nothing. The Actual act of smoking, drawing quick droughts of smoke into my lungs, isn't that appealing right now. Nicotine gum isn't that appealing. Nicotine isn't that appealing. But my body with a quiet humming feeling wants something. Its annoying. Don't smoke kids, its fun but a pain to quit.
2/18/09
When Mormons Attack
Why is it that no religion can send to my door someone who knows the finer points of the religion. If I've already told you that I'm agnostic, please don't use personal statement to convince me. If I ask about exactly how the relationship of the father and son is, don't tell me that because the father is the father and the son is the son then the son is god. That doesn't say anything other than that familial relationships create kinship. If I ask how, if Joseph Smith was a prophet, how he says something completely new about metaphysics that no other admitted prophet has said and ask why that is don't give me non answers.
I didn't bring up polygamy because I knew they had a pat answer for that because that would be something they are expecting. And please, the fruit, i.e. the religion I believe in is good, therefore Joseph Smith was good is a meaningless answer.
I didn't bring up polygamy because I knew they had a pat answer for that because that would be something they are expecting. And please, the fruit, i.e. the religion I believe in is good, therefore Joseph Smith was good is a meaningless answer.
2/17/09
2/16/09
Everyone should read this
TN state representative has introduced a bill requiring that every fetus aborted should have a death certificate. Aunt B at Tiny Cat Pants has written the funny.
Go read the entire thing
Hat tip Echidne
It’s really hard, when looking at the legislation Campfield is trying to get passed, as a whole, to not get a sense of my vagina as some ancient, sacred thing–like the Ark of the Covenant in Raiders of the Lost Ark–that Campfield is trying to keep closed except under special ritual circumstances in order to keep it from melting the flesh off people.
How sacred is my vagina?
It is so sacred that parents should be able to keep their children from learning about what it does in school (HB0811). So taboo that advertisements for it should be subject to a 25% sales tax (HB0809) and that, if you want to look at it, you should be charged an “amusement tax” (HB0810). So mysterious and full of danger is my vagina that we must forbid kids from even learning that there are other things you can do with it besides have babies (HB0821).
Go read the entire thing
Hat tip Echidne
The problem of Political Labels
Ross Douthat at the Alantic has an odd post about possible realignments of the our two political parties in reference to a number of posts about a liberal libertarian alliance. He says,
I'm confused by his use of the word populism. The right does have a rhetorical set that constantly inveighs against a so called elite. But it cannot be said that the republicans are truly populist because very few of their policies can be said to be truly populist. Entitlement reform for example under Bush took the form of privatizing social security. That would a massive wealth transfer from the middle class to the financial class. The details never got sorted out but I assume that there would have been a menu of options to invest in with the inclusion of all of the normal fees that mutual funds and such charge for their services.
But the largest problem seems to be a misunderstanding of the voter coalition that the Republican Party has constructed. If we look at the 2004 election, people who made less than $50,000 voted for Kerry way above Bush by 55 to 44. People who made more than $50,000 voted for Bush above Kerry by 56 to 43.
But if what we are talking about is really just a style not an actual voting coalition nor an actual set of policies, then I'm not sure what the point is.
My suspicion though is that Ross has conveniently forgotten about everyone who isn't white. For example even though many people argued that Bush had some sort of rapport with Hispanics he still lost them as a cohort, 53 to 44. His win was entirely based on an middle class and up coalition of whites.
What could happen, instead, is a bigger-tent liberalism - somewhat chastened, perhaps, by some big-government failures in the Obama era - that makes libertarian intellectuals feel welcome, engages them in conversations about smarter regulations and more efficient tax policy, and generally woos them away from their culturally-dissonant alliance with people who attend megachurches and Sarah Palin rallies. This would make for a smarter left-of-center in the short run, but I think in the long run it would be pernicious. It would further the Democratic Party's transformation into a closed circle of brainy meritocrats, and push the Republican Party in a yet more anti-intellectual direction. And it would produce an elite consensus more impervious to structural critiques, and a right-wing populism more incapable of providing them. The Democratic Party would hold power more often, and become more sclerotic as a result; the GOP would take office less often, and behave more recklessly on those rare occasions when it did manage to seize the reins of state.
I'm confused by his use of the word populism. The right does have a rhetorical set that constantly inveighs against a so called elite. But it cannot be said that the republicans are truly populist because very few of their policies can be said to be truly populist. Entitlement reform for example under Bush took the form of privatizing social security. That would a massive wealth transfer from the middle class to the financial class. The details never got sorted out but I assume that there would have been a menu of options to invest in with the inclusion of all of the normal fees that mutual funds and such charge for their services.
But the largest problem seems to be a misunderstanding of the voter coalition that the Republican Party has constructed. If we look at the 2004 election, people who made less than $50,000 voted for Kerry way above Bush by 55 to 44. People who made more than $50,000 voted for Bush above Kerry by 56 to 43.
But if what we are talking about is really just a style not an actual voting coalition nor an actual set of policies, then I'm not sure what the point is.
My suspicion though is that Ross has conveniently forgotten about everyone who isn't white. For example even though many people argued that Bush had some sort of rapport with Hispanics he still lost them as a cohort, 53 to 44. His win was entirely based on an middle class and up coalition of whites.
2/15/09
The Work of the Government
One thing I don't think many people realize is that our economy is not and never has been a natural creation. Our economy is the result of hundreds and hundreds of accumulated decisions by government and individuals over hundreds of years. There is no such thing as a corporation in the wild. There have never been ditties sung about watching the corporations and the antelopes play and not because that phrase doesn't scan.
There is no reason to think that changing the particular features of our economy is in itself wrong. There is no reason to privilege the decisions made 50 or 100 years ago over decisions that could be made today. Today a self styled Burkian conservative would say that the decisions made 100 years ago have obviously sustained themselves in a way that isn't too bad and we have no idea what the totality of effects will be on decisions made today. To which I say, ok we'll think hard before acting. But it doesn't take years of thinking in order to decide that something doesn't work. Burkeians also says that because the information flow is asymmetric, we know and can know more about the effects of an action taken 100 hundred years ago then we do and can about the future effects of an action taken today, that we should be very, very careful about taking action.
That argument though is generally used to say that we should do very little to change our world. That we should be paralyzed by our inability to "know" the future. Andrew Sullivan normally describes himself as a Burkeian conservative. As a gay man though he has a personal interest in changing marriage to include him. He is very quick to make arguments that the change that would happen would be a good change. His arguments and his quickness to believe that the changes would not be horrible while at the same time arguing that we should be very careful to the point of inaction on other issues seems to point to self interest as the deciding factor in actually believing what gets to change and what we need to keep the same. Of course this is true about most of humanity. If something benefits me then I don't want it to change. As the Upton Sinclair said, "It is difficult to get a man to understand something, when his salary depends upon his not understanding it." Or in other words a person will very quickly say that his personal interest and his inclination agree. It is no great shock to see that the constituency for the government doing very little greatly increased during the civil rights movement. What the government was doing was not in the perceived interest of a lot of white people. Feminism was and is not in the perceived interest of men. Why is the republican parties largest constituency white men? Because government action to increase the power of black people and women is fundamentally against the perceived self interest of white men. They comfort themselves by saying that they are not against equality for women and black people they just don't want the government to do anything about it.
People don't generally like change unless they can see how that change helps them. Even people who might be substantively helped by a particular change will argue against that change if it changes their relation to people lower then them in power. People like to say that economics isn't zero sum. Power actually is zero sum.
There is no reason to think that changing the particular features of our economy is in itself wrong. There is no reason to privilege the decisions made 50 or 100 years ago over decisions that could be made today. Today a self styled Burkian conservative would say that the decisions made 100 years ago have obviously sustained themselves in a way that isn't too bad and we have no idea what the totality of effects will be on decisions made today. To which I say, ok we'll think hard before acting. But it doesn't take years of thinking in order to decide that something doesn't work. Burkeians also says that because the information flow is asymmetric, we know and can know more about the effects of an action taken 100 hundred years ago then we do and can about the future effects of an action taken today, that we should be very, very careful about taking action.
That argument though is generally used to say that we should do very little to change our world. That we should be paralyzed by our inability to "know" the future. Andrew Sullivan normally describes himself as a Burkeian conservative. As a gay man though he has a personal interest in changing marriage to include him. He is very quick to make arguments that the change that would happen would be a good change. His arguments and his quickness to believe that the changes would not be horrible while at the same time arguing that we should be very careful to the point of inaction on other issues seems to point to self interest as the deciding factor in actually believing what gets to change and what we need to keep the same. Of course this is true about most of humanity. If something benefits me then I don't want it to change. As the Upton Sinclair said, "It is difficult to get a man to understand something, when his salary depends upon his not understanding it." Or in other words a person will very quickly say that his personal interest and his inclination agree. It is no great shock to see that the constituency for the government doing very little greatly increased during the civil rights movement. What the government was doing was not in the perceived interest of a lot of white people. Feminism was and is not in the perceived interest of men. Why is the republican parties largest constituency white men? Because government action to increase the power of black people and women is fundamentally against the perceived self interest of white men. They comfort themselves by saying that they are not against equality for women and black people they just don't want the government to do anything about it.
People don't generally like change unless they can see how that change helps them. Even people who might be substantively helped by a particular change will argue against that change if it changes their relation to people lower then them in power. People like to say that economics isn't zero sum. Power actually is zero sum.
2/13/09
Swaps and Such
After talking a couple of people who had read my previous post I believe I need to explain a couple more things as relates to credit default swaps.
To maybe explain a little bit better, a general swap is when I make a contract with someone else to give them say 100 dollars a month for two years. If in those two years an asset that I'm holding loses value then I can call in the swap, depending on the particular features of the contract, so that you pay me the original value of the asset and I give you the asset. So in a credit default swap the underlying asset is a bond and the loss of value is defined as a default on the bond. There are a couple of other features of credit default swaps such as automatic reworking of the terms of the swap if the bond is downgraded or the bond yield rises, which means that demand for the bond is down possibly due to fears that it will default.
The largest problem as I explained in the last post was that you don't have to own the underlying asset. Multiple swaps can be placed in relation to one bond, inflating the downside risk of a particular default. Probably the best thing to do for swaps is to make it so that if you create one then you have to own the underlying asset. Then only one swap can exist per asset. Other basic regulations are that there has to be an exchange like a stock exchange where these swaps are sold. If all of the deals are whats called over the counter then knowing the size of the market and the valuation of risk in the economy in real time is much more difficult. One thing that is freezing the banks is the lack of information on what everyone owns and what the actual risk is.
To maybe explain a little bit better, a general swap is when I make a contract with someone else to give them say 100 dollars a month for two years. If in those two years an asset that I'm holding loses value then I can call in the swap, depending on the particular features of the contract, so that you pay me the original value of the asset and I give you the asset. So in a credit default swap the underlying asset is a bond and the loss of value is defined as a default on the bond. There are a couple of other features of credit default swaps such as automatic reworking of the terms of the swap if the bond is downgraded or the bond yield rises, which means that demand for the bond is down possibly due to fears that it will default.
The largest problem as I explained in the last post was that you don't have to own the underlying asset. Multiple swaps can be placed in relation to one bond, inflating the downside risk of a particular default. Probably the best thing to do for swaps is to make it so that if you create one then you have to own the underlying asset. Then only one swap can exist per asset. Other basic regulations are that there has to be an exchange like a stock exchange where these swaps are sold. If all of the deals are whats called over the counter then knowing the size of the market and the valuation of risk in the economy in real time is much more difficult. One thing that is freezing the banks is the lack of information on what everyone owns and what the actual risk is.
2/9/09
So what is the point of "Liquid Assets"
In my previous post I clumsily laid out some ideas which are either wrong or blindly obvious to a first year econ student. My main point was that it seems that cash flow and time horizons are very important for thinking about how people view money at the micro level. It might be fine to look at the total amount of a loan and see whether it is rational for someone to take that loan. But in general when people say that looking at total values is the best thing to do they are using the word should. At times it seems that people think that should has the same logical force as is.
But back to the main point. What seems to be the case in the housing boom and bust is a policy of easy money over an extended period of time when easy money was a bad policy. After 2001 there was an immense stimulus put into the economy by a combination of low interest rates from the fed, large tax cuts for the wealthy, and a lack of suitable investment opportunities. Microsoft kept enormous amounts of cash on hand for years in part because of their regulatory difficulties but also because, as they kept saying, that they didn't have suitable places to invest. That is in part the reason that they were able to release the original Xbox and treat it as a trial run, in order to understand the gaming console market.
With so much money shifting around, and with most equities performing horribly, bond yields at historical lows there had to be somewhere to park all this money to get a decent return. In comes credit default swaps. A credit default swap simply is a contract between two entities that essentially insures the value of a bond or security in case of default. So if I own a bond I can pay you some amount of money over time and if the bond defaults then I give you the bond and you pay me face value of the bond. Or if I don't actually own the bond you can give me the face value minus the market value of the bond. Lets say the market value on a 5 million dollar bond is 15 percent of face value and I don't own the bond, then you would pay me 5,000,000-(.15*5,000,000) or 5,000,000-750,000.
In the first case where I actually own the bond then a Credit default swap is a hedge against default. In the second it is a speculation on the default risk of a particular entity. Since you don't have to own the underlying asset that the CDS then that market is inherently inflationary. I can sell multiple CDS's on the same debt if I believe that the risk of default is low. If the risk is misjudged and mispriced then things like Lehman brothers and AIG happen.
Now what in the world does this have to do with the Mortgage backed securities market. When a bank or mortgage company originates loans it doesn't keep them on their books normally. What they do is throw them all into a trust and sells shares on that trust. This is normally thought of as a good thing because it makes an illiquid asset, a house, into a liquid asset and gives the bank more capitol to produce more loans. The shares are normally broken down on the basis of payment schedules. A total amount of money comes into the trust from payments on the mortgages. You first pay the AAA security holders who receive the least return. Then you pay the BBB holders and then the CCC holders. Each receives a higher payment due the higher risk of not receiving a payment. These are normally considered safe because of general stability of the housing market and the fact that housing defaults were primarily considered a function of the mortgage minus the value of the house. Considering that general housing prices where rising then the total risk of default should be low enough for the pricing of risk.
Now part of the problem is the complete shenanigans going on in the market where BBB tranches where being repackaged as aaa bbb and ccc tranches. But the largest problem is that everyone lost their mind when pricing risk. The total CDS market was sitting at around 60 trillion dollars thats $60,000,000,000,000. The total world economy in 2007 was 54 trillion dollars. That is to say there wasn't enough money in the world to cover all of the credit default swaps. Remember that the swaps where also only covering a certain percentage of total outstanding debt in the world because thousands of people could have a swap on one bond.
If the total value of swaps on 1% of bonds worth $1 is $100,000 then a one percent default rate is a thousand dollars. The risk profile of the total market is hugely magnified.
Other factors to consider are the tax decrease to zero on housing sales around 2000 which significantly changed the yield curve for a buyer and seller combined with the absurd run up in housing prices created incredible liquidity in the housing market.
How does this post and the last one work together. All of the factors involving CDS's and MBS's created a cheap loan environment which allowed for increased liquidity in the housing market making it possible for speculation to occur in a traditionally speculation free environment. Combine that with the limited time horizon of most buyers and sensitivity not to total price but cash flow considerations. It should not be suprising that not only where housing prices becoming absurd but that a fundamental mispricing of risk on both the institutional investor side and the home buyer (which we should actually expect) where the main factors.
But back to the main point. What seems to be the case in the housing boom and bust is a policy of easy money over an extended period of time when easy money was a bad policy. After 2001 there was an immense stimulus put into the economy by a combination of low interest rates from the fed, large tax cuts for the wealthy, and a lack of suitable investment opportunities. Microsoft kept enormous amounts of cash on hand for years in part because of their regulatory difficulties but also because, as they kept saying, that they didn't have suitable places to invest. That is in part the reason that they were able to release the original Xbox and treat it as a trial run, in order to understand the gaming console market.
With so much money shifting around, and with most equities performing horribly, bond yields at historical lows there had to be somewhere to park all this money to get a decent return. In comes credit default swaps. A credit default swap simply is a contract between two entities that essentially insures the value of a bond or security in case of default. So if I own a bond I can pay you some amount of money over time and if the bond defaults then I give you the bond and you pay me face value of the bond. Or if I don't actually own the bond you can give me the face value minus the market value of the bond. Lets say the market value on a 5 million dollar bond is 15 percent of face value and I don't own the bond, then you would pay me 5,000,000-(.15*5,000,000) or 5,000,000-750,000.
In the first case where I actually own the bond then a Credit default swap is a hedge against default. In the second it is a speculation on the default risk of a particular entity. Since you don't have to own the underlying asset that the CDS then that market is inherently inflationary. I can sell multiple CDS's on the same debt if I believe that the risk of default is low. If the risk is misjudged and mispriced then things like Lehman brothers and AIG happen.
Now what in the world does this have to do with the Mortgage backed securities market. When a bank or mortgage company originates loans it doesn't keep them on their books normally. What they do is throw them all into a trust and sells shares on that trust. This is normally thought of as a good thing because it makes an illiquid asset, a house, into a liquid asset and gives the bank more capitol to produce more loans. The shares are normally broken down on the basis of payment schedules. A total amount of money comes into the trust from payments on the mortgages. You first pay the AAA security holders who receive the least return. Then you pay the BBB holders and then the CCC holders. Each receives a higher payment due the higher risk of not receiving a payment. These are normally considered safe because of general stability of the housing market and the fact that housing defaults were primarily considered a function of the mortgage minus the value of the house. Considering that general housing prices where rising then the total risk of default should be low enough for the pricing of risk.
Now part of the problem is the complete shenanigans going on in the market where BBB tranches where being repackaged as aaa bbb and ccc tranches. But the largest problem is that everyone lost their mind when pricing risk. The total CDS market was sitting at around 60 trillion dollars thats $60,000,000,000,000. The total world economy in 2007 was 54 trillion dollars. That is to say there wasn't enough money in the world to cover all of the credit default swaps. Remember that the swaps where also only covering a certain percentage of total outstanding debt in the world because thousands of people could have a swap on one bond.
If the total value of swaps on 1% of bonds worth $1 is $100,000 then a one percent default rate is a thousand dollars. The risk profile of the total market is hugely magnified.
Other factors to consider are the tax decrease to zero on housing sales around 2000 which significantly changed the yield curve for a buyer and seller combined with the absurd run up in housing prices created incredible liquidity in the housing market.
How does this post and the last one work together. All of the factors involving CDS's and MBS's created a cheap loan environment which allowed for increased liquidity in the housing market making it possible for speculation to occur in a traditionally speculation free environment. Combine that with the limited time horizon of most buyers and sensitivity not to total price but cash flow considerations. It should not be suprising that not only where housing prices becoming absurd but that a fundamental mispricing of risk on both the institutional investor side and the home buyer (which we should actually expect) where the main factors.
2/7/09
Liquid Assets
Keynesian economics tells a couple of very important things. Many of his basic points have already been talked about and talked about. Mainly, that when total demand falls and the fed overnight rate falls to zero then a very sick cycle develops. Total demand falls and so supply contracts, which causes a further erosion of demand, which. . .
The thing that is not talked about as much his his idea of employment as it actually exists. The economic theory of the time said that people would withhold their labor if there was a fall in real wages. This is absurd because people don't stop working when inflation goes up. Of course if inflation is very high then people will begin to argue for increased wages and may stop working at a particular place if they can find a better wage at another place. But people react when their personal basket of goods goes up in price. People are very sensitive to increases in prices of food and fuel. They are less sensitive to the cost of say televisions. It seems that people think of their personal money supply as important in so far as it procures them what they've come to expect in terms of goods and services.
Access to cheap credit should be looked on as part of the individual money supply. It has to be paid back but most people think of that as a cash flow issue. I have x number of dollars coming to me every two weeks, if I get a loan for y value which has a pay back of z every month then the loan calculation becomes 2x-z=d if d satisfies my normal expectation of a basket of goods and the utility of the good y buys plus the basket of goods that d buys is higher than the total utility of the of x over a given time frame then it makes sense to take loan y and cash flow d. If credit is cheap and, in the case of many of the house loans taken out oddly cheap, then d will be high.
The problem of basing this on housing prices is two fold. First houses are a illiquid asset. Its not easy to sell or buy a house. Second no one thinks in terms of thirty years. No one. I'm 26, I've changed so much over my life time that I don't know who I'll be at 56, nor do I know what my cash flow will be. So if I were to get a thirty year loan my basic time horizon would probably be at maximum 5 years. y+d if credit is cheap will always have more utility then x for 5 years.
But even this is complicated by the aforementioned fact that houses are an illiquid asset. If the house that Y bought ceases to have the utility it once had because for example I move somewhere else in the country due to getting another job then the utility of y+d may be lower than 2x.
The problem if further complicated by the ability to trade equity for credit on a house. Giving that to everyone is like credit card crack. You still have the utility of what y bought and some fraction of y. Basically you still have a house and a cash flow of d+c where c is the credit from the house. d+c may actually be higher than 2x. But this is only sustainable over the short term. But like I said I don't think anyone thinks of anything over the long term.
Now some people might say that I'm being foolish in saying that people don't think long term. How for example could 401k's exist. I'd say that the actual calculation is if x minus contributions to a 401k satisfies the desire for a basket of goods then people will save. If not then they will not.
I'll write more on this later.
The thing that is not talked about as much his his idea of employment as it actually exists. The economic theory of the time said that people would withhold their labor if there was a fall in real wages. This is absurd because people don't stop working when inflation goes up. Of course if inflation is very high then people will begin to argue for increased wages and may stop working at a particular place if they can find a better wage at another place. But people react when their personal basket of goods goes up in price. People are very sensitive to increases in prices of food and fuel. They are less sensitive to the cost of say televisions. It seems that people think of their personal money supply as important in so far as it procures them what they've come to expect in terms of goods and services.
Access to cheap credit should be looked on as part of the individual money supply. It has to be paid back but most people think of that as a cash flow issue. I have x number of dollars coming to me every two weeks, if I get a loan for y value which has a pay back of z every month then the loan calculation becomes 2x-z=d if d satisfies my normal expectation of a basket of goods and the utility of the good y buys plus the basket of goods that d buys is higher than the total utility of the of x over a given time frame then it makes sense to take loan y and cash flow d. If credit is cheap and, in the case of many of the house loans taken out oddly cheap, then d will be high.
The problem of basing this on housing prices is two fold. First houses are a illiquid asset. Its not easy to sell or buy a house. Second no one thinks in terms of thirty years. No one. I'm 26, I've changed so much over my life time that I don't know who I'll be at 56, nor do I know what my cash flow will be. So if I were to get a thirty year loan my basic time horizon would probably be at maximum 5 years. y+d if credit is cheap will always have more utility then x for 5 years.
But even this is complicated by the aforementioned fact that houses are an illiquid asset. If the house that Y bought ceases to have the utility it once had because for example I move somewhere else in the country due to getting another job then the utility of y+d may be lower than 2x.
The problem if further complicated by the ability to trade equity for credit on a house. Giving that to everyone is like credit card crack. You still have the utility of what y bought and some fraction of y. Basically you still have a house and a cash flow of d+c where c is the credit from the house. d+c may actually be higher than 2x. But this is only sustainable over the short term. But like I said I don't think anyone thinks of anything over the long term.
Now some people might say that I'm being foolish in saying that people don't think long term. How for example could 401k's exist. I'd say that the actual calculation is if x minus contributions to a 401k satisfies the desire for a basket of goods then people will save. If not then they will not.
I'll write more on this later.
2/3/09
Michael Phelps and Pot
Leon Lott, the Richland County SC Sheriff, has come out saying that the police are investigating if any charges should be filed against Phelps due to the recent pictures of him face down on a bright red bong. Now I'm sure that Lott is doing this because it gets his name in the papers for a couple of days and then this will die a quiet death. I can't see the prosecutor's office going along with this unless the entire reason that they are investigating is because the solicitor has asked them to.
And all over the airwaves I heard people decrying Phelps and his effect on the children. Apparently, if you take a lot of money from advertisers then you are automatically a role model for children. I don't know if this is in the contract that you sign but its at least implied, somewhere by someone. But didn't we get passed this sometime ten years ago that the guy who's face is selling you sneakers might not be the best human being in the world. Kids don't buy Air Jordans because they want to be as consistent in their marriage as Jordan was but because the ad said they might be able to play basketball like him. The selling point for anything Michael Phelps sells is that he's a freakish human being in the water. At no point does anyone who see's him hawking a product think well if I smoke pott then I'll be a good swimmer. There is no causation and even kids as young as five get that.
Basically I'm saying who cares. He smoked a bong. That's all that will be provable in court. There's no evidence of what was in the bong. And who cares anyway. He smoked pot. Lots of people have smoked pot. None of them then ran over a girl on a tricycle. God this is dumb.
And all over the airwaves I heard people decrying Phelps and his effect on the children. Apparently, if you take a lot of money from advertisers then you are automatically a role model for children. I don't know if this is in the contract that you sign but its at least implied, somewhere by someone. But didn't we get passed this sometime ten years ago that the guy who's face is selling you sneakers might not be the best human being in the world. Kids don't buy Air Jordans because they want to be as consistent in their marriage as Jordan was but because the ad said they might be able to play basketball like him. The selling point for anything Michael Phelps sells is that he's a freakish human being in the water. At no point does anyone who see's him hawking a product think well if I smoke pott then I'll be a good swimmer. There is no causation and even kids as young as five get that.
Basically I'm saying who cares. He smoked a bong. That's all that will be provable in court. There's no evidence of what was in the bong. And who cares anyway. He smoked pot. Lots of people have smoked pot. None of them then ran over a girl on a tricycle. God this is dumb.
Left Behind
If any of my non existent readers has read the horrible dreck that is the Left Behind series, and if you got past the first one you are either a better man than I or just horribly, horribly in need of words on a page, any words, any words will do, needs to read Slackavists wonderful page by page takedown of the book.
Right now he's going through the movie. But check the archives.
Right now he's going through the movie. But check the archives.
Ethics and Such
This Post doesn't have an explicit policy point and is just a musing on the different ways people think about things.
In general it seems the arguments about health classes and primarily sexual education are misstated on both sides. The conservatives generally it seems believe that to teach about sex will lead young people to have sex and if we just paper over it then every one will go back to having Archie and Betty dates at the local soda shop rather than schlep off to the bridge, ingesting drugs, and engage in sex those conservatives wish they had had when they were young. Or something like that.
Liberals wonder what all the fuss is about because its not like teenagers learn about sex from other people as a concept but rather decide that they want to do things with those of the opposite or same sex that they haven't done before even if they aren't quite sure what it is they want to do. Once they have done it they will realize that it was perfectly fun and should try and do that again and again and again. Better that they have condoms because God knows we can't stop all of them.
The problem is that Health Class is the modern form of the old Ethics class. Health is held up as the necessary condition for happiness. If a person does what the health class tells them then they will be happy. Liberals generally don't see this as an ethics class because they buy into the the basic presupposition. Not that any liberal would say that Health by itself is happiness but that yes to be healthy is better for happiness than to be unhealthy so doing these things is better than doing other things. Ethics is the science of correct action, thus this is ethics.
Conservatives on the other hand don't really believe that health is a good in the same way that say being saved by Jesus is a good. And that good health is in no way a necessary condition for the true good. They then do not have a concern for the possible consequences of sex such as STD's and pregnancy because teenagers shouldn't be having sex in the first place. If they do and the girl gets pregnant then everything is fixed if they get married.
Liberals argue that this is madness if you actually look at what happens when teenagers get married too soon or a girl gets pregnant when she is a teenager. Conservatives say that the facts need to be changed. If they didn't have sex then none of this would be a problem.
So the problem seems to be that liberals don't believe that health class is an ethics class when it is, while conservatives have a completely different conception of ethics.
If we had actual ethics classes in school then health would merely be a subset of that the general ethical teachings. It would be subordinated underneath the actual teaching of true ethics. This is why conservatives believe that schools should teach the bible.
In general it seems the arguments about health classes and primarily sexual education are misstated on both sides. The conservatives generally it seems believe that to teach about sex will lead young people to have sex and if we just paper over it then every one will go back to having Archie and Betty dates at the local soda shop rather than schlep off to the bridge, ingesting drugs, and engage in sex those conservatives wish they had had when they were young. Or something like that.
Liberals wonder what all the fuss is about because its not like teenagers learn about sex from other people as a concept but rather decide that they want to do things with those of the opposite or same sex that they haven't done before even if they aren't quite sure what it is they want to do. Once they have done it they will realize that it was perfectly fun and should try and do that again and again and again. Better that they have condoms because God knows we can't stop all of them.
The problem is that Health Class is the modern form of the old Ethics class. Health is held up as the necessary condition for happiness. If a person does what the health class tells them then they will be happy. Liberals generally don't see this as an ethics class because they buy into the the basic presupposition. Not that any liberal would say that Health by itself is happiness but that yes to be healthy is better for happiness than to be unhealthy so doing these things is better than doing other things. Ethics is the science of correct action, thus this is ethics.
Conservatives on the other hand don't really believe that health is a good in the same way that say being saved by Jesus is a good. And that good health is in no way a necessary condition for the true good. They then do not have a concern for the possible consequences of sex such as STD's and pregnancy because teenagers shouldn't be having sex in the first place. If they do and the girl gets pregnant then everything is fixed if they get married.
Liberals argue that this is madness if you actually look at what happens when teenagers get married too soon or a girl gets pregnant when she is a teenager. Conservatives say that the facts need to be changed. If they didn't have sex then none of this would be a problem.
So the problem seems to be that liberals don't believe that health class is an ethics class when it is, while conservatives have a completely different conception of ethics.
If we had actual ethics classes in school then health would merely be a subset of that the general ethical teachings. It would be subordinated underneath the actual teaching of true ethics. This is why conservatives believe that schools should teach the bible.
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