The German Triangle and U.S. Beer History

The German Triangle, between the cities of Milwaukee, St. Louis and Cincinnati, was the destination of a large percentage of German immigrants in the middle and late 19th century.  When they came, they brought with them their love for beer, especially lager beer. 

Map of German Population in 1900

 So it is not an accident that two of the three cities would become home to the largest breweries in the United States.  All three have a rich brewing history.  Besides being the home of Anheuser-Busch, St. Louis was also home to William J. Lemp Brewery, which brewed Falstaff.  At one time, there were 40 breweries in St. Louis.  Also, Belleville, Illinois, outside of St. Louis was home to Stag Brewery.

Milwaukee was home to Miller, Schlitz, Pabst and Blatz.  At one time they were four of the largest ten breweries in the world.  Over the years, more than 40 breweries operated in Milwaukee. 

Cincinnati was home to Christian Moerlein, Hudepohl, Red Top, Schoenling, Burger and Wiedemann, among dozens of breweries over the years. In 1860, Cincinnati had 36 breweries.Cincinnati also had a prodigious saloon culture:

Taverns-Bars-Saloons-Beer Gardens-Cafes, call them what you will Cincinnati and beer were synonymous with each other in the 1800's and early 1900's. In 1840 Cincinnati had 8 breweries to satisfy a population of 46,000 people. By 1860 there were 36 breweries for 200,000 people. Beer production in 1870 was 354,000 barrels. Ten years later it rose to 656,000 barrels and in another ten years it had soared to 1,115,000 barrels. This equates to a staggering total of  35,700,000 gallons of beer of which a little less than 1/2 was exported. The rest was consumed locally. The per capita consumption of beer nationally in 1893 was 16 gallons. In Cincinnati an incredible 40 Gallons for every man woman and child was consumed. In 1887 there were an amazing 1,837 saloons for a population of 225,000. In 1890 it dropped to only 1,810 for a population of 297,000. This meant since only adult males used saloons there were, in 1890, ONE SALOON FOR EVERY 37 MEN. In 1890 there were 34 saloons on Court St., 41 on Liberty St., 55 on both Walnut and Main Sts. Central Ave. had 100 saloons, but the all time high was Vine St. with 136. On Fifth St. between Main & Sycamore Sts. (1 block) 20 saloons flourished. A corner location was preferred because it gave the bar the most exposure to potential costumers, and if it were illegally selling beer on Sunday, it was easier to spot the police.
  Carrie Nation arrived in Cincinnati in 1901 with her famous hatchet to wage battle with demon alcohol. Most tavern owners knowing Carrie's propensity for taking her ax to glass windows, ordered new glass ahead of her visit. Carrie was asked later why she had not broken any windows was heard to say: "My goodness, child, if I had undertaken to break all the windows of all the saloons on your Vine Street I would have dropped from exhaustion before I had gone a block". Before leaving the Atlantic Garden, a woman lush laid her head on Carrie's shoulder and cried. She then left promising  the temperance leader she would mend her ways and lead a better life. Ten minutes later Carrie noticed that her earrings were missing. Carrie forgave the woman for lifting them.

Unfortunately, today Anheuser-Busch is merged with InBev. Miller is owned by SAB. Hudepohl, Schoenling, Burger and Christian Moerlein are trying to carve out a regional niche, and Pabst, Schlitz and Blatz are shadows of their former glory in a combined Pabst Brewing Company amongst a large number of formerly well-known brands, including Falstaff and Stag.

Redeveloping Old Factories

Waterfront View of Existing Domino Site     Photo:Charles Curkin

The Atlantic:

Across the Atlantic, in Brooklyn, another monumental project on a former industrial site is also finally moving ahead. The Domino Sugar Refinery in Williamsburg sits on nearly a dozen prime acres facing the East River. It’s long been a sentimental favorite—the 40-foot-high Domino Sugar sign, with its jaunty script, sits like a comic-book dialog balloon over a grim Ashcan School tableau. The sugar factory closed in 2004; shortly afterward, it was acquired by the for-profit arm of a nonprofit seeking to build affordable housing. In 2007, the city landmarked the 1880s-era Romanesque Revival sugar refinery at the heart of the complex, and plans for its redevelopment called for residential towers to flank the old factory, much of which would itself be converted to apartments. Missing from the initial designs? The Domino sign. “It just looks empty, like there is a void,” Dewey Thompson, a member of Brooklyn’s Community Board 1, told a New York newspaper after seeing the designs at a meeting. Back to the drafting table: under revamped plans, a refurbished sign will glow again from atop the remodeled refinery.
The London and New York projects have several things in common. Chief among them: Rafael Viñoly, the Uruguayan-born, Argentinean-raised, New York–based architect famed for soaring steel structures such as the Tokyo International Forum and Seoul’s Samsung Jong-ro Tower. In charge of the master plan in both cases, he is designing new edifices for each site. But something else is worth noting: in both projects, Viñoly and his co-developers are trying to map a route through the hazy and treacherous borderlands that lie between architectural history and public nostalgia.

Ohio has plenty of potential redevelopment sites, just nobody interested in developing them, and no demand for the new buildings.

Kasich Still Considering Turnpike Privatization

The Blade:

A section in Governor Kasich's budget proposal would authorize the directors of ODOT and the state Office of Management and Budget to negotiate and enter into a turnpike lease with a private party. No specific private party is named, and Mr. Wray said there have been overtures from several potential bidders for a turnpike concession, if one became available.
While a $3 billion revenue target has come up in discussion, the ODOT director said there is no firm amount for which the turnpike might be leased. He was adamant, however, that the administration is not interested in a lump-sum lease like Indiana's and said the 75-year term Indiana agreed to is too long "in my personal opinion."
Another possibility, he said, is making the turnpike a unit of the Ohio Department of Transportation, rather than maintaining the separate Ohio Turnpike Commission.
If the turnpike were to be leased, the request-for-proposal process could take anywhere from six to 18 months to complete, the ODOT director said.
Mr. Wray pledged that proceeds from any lease would be dedicated to infrastructure improvements such as highway construction and harbor dredging and would focus on northern Ohio, through which the turnpike runs.

I still think it is a bad idea.  At least he must understand where the tolls go now.  If the state brings in a certain amount of income on the turnpike, and they aren't going to allow the bidders to increase tolls much, where does the private company's profit come from?  Won't that just lower the amount of up-front money the state gets?

GAA sports, Not for the Faint of Heart

Anne Laurie also pointed out a Slate story on Irish Hurling.  From the article:

Such is the job of the goalkeeper in hurling, a sport famous for its speed and the bravery (or lunacy) of its participants. Known as the fastest field sport on earth, hurling predates Christianity and is native to Ireland, possibly originating with the Celts. Two teams of 15 players compete to score the most points by hitting the ball, called a sliotar, between the opposing team's goalposts. While rugby-style tackling is prohibited, hockey-style body checks and shoulder charges are common. As in soccer, a player can shoot from anywhere on the field, including directly in front of the goal, and directly at the goalkeeper. One point is earned for a ball that flies between the posts but over the crossbar, while three are awarded for a goal scored underneath the crossbar, where the goalkeeper stands, a kamikaze in shorts and a jersey.

Hurling is a thrilling and dangerous sport, and in Ireland the players are universally admired for their nerves. Within this pool, it is the goalkeepers who are most venerated. "A key requirement to be a goalkeeper in hurling is that you have to be mad," says Feargal McGill, head of games administration and player welfare for hurling's governing body, the Gaelic Athletic Association.* To wit: In 1997, goalkeeper Joe Quaid shattered one testicle, and had to have half of the second removed, when he took a ball to the crotch on a penalty shot. Upon recovery he returned to the sport, and continued playing as a goalie for three more seasons.

I enjoyed the Guinness ad featuring hurling a couple of years back, even though I've never seen the game.

Bill Moyers and David Simon

Guernica features a great interview by Bill Moyers of David Simon, the creator of The Wire (h/t Anne Laurie):

Bill Moyers: But here’s the problem for journalism. When we write about inequality, we use numbers that are profound but numbing. I mean, here’s something I just read: over the past twenty years, the elite 1 percent of Americans saw their share of the nation’s income double, from 11.3 percent to 22.1 percent, but their tax burden shrank by about one-third. Now, those facts tell us something very important: that the rich got richer as their tax rates shrank. But it doesn’t seem to start people’s blood rushing.
David Simon: You start talking about a social compact between the people at the bottom of the pyramid and the people at the top, and people look at you and say, “Are you talking about sharing wealth?” Listen, capitalism is the only engine credible enough to generate mass wealth. I think it’s imperfect, but we’re stuck with it. And thank God we have that in the toolbox. But if you don’t manage it in some way that incorporates all of society, if everybody’s not benefiting on some level and you don’t have a sense of shared purpose, national purpose, then it’s just a pyramid scheme. Who’s standing on top of whose throat?
Bill Moyers: Why do you think, David, that we tolerate such gaps between rich and poor?
David Simon: You know, I’m fascinated by it. Because a lot of the people who end up voting for that kind of laissez-faire market policy are people who get creamed by it. And I think it’s almost like a casino. You’re looking at the guy winning, you’re looking at the guy who pulled the lever and all the bells go off, all the coins are coming out of a one-armed bandit. You’re thinking, “That could be me. I’ll play by those rules.” But actually, those are house rules. And most of you are going to lose.

The whole thing is fascinating.

Naked Capitalism Link of the Day

Today's link: Top Marginal US Tax Rates, from Edward Harrison:

He is discussing Michael Hudson's explanation for why the U.S. had a 90% top marginal bracket under Dwight Eisenhower and goes back to Adam Smith.  The part about rents seemed appropriate for a farmer's blog:

[Adam] Smith argued, its industrial capitalism would have to shed the vestiges of feudalism. Ground rent charged by its landed aristocracy should be taxed away, on the logic that it was the prototypical “free lunch” revenue with no counterpart cost of production. He noted at the outset (Book I, ch. xi) that there were “some parts of the produce of land for which the demand must always be such as to afford a greater price than what is sufficient to bring them to market.”

In 1814, David Buchanan published an edition of The Wealth of Nations with a volume of his own notes and commentary, attributing rent to monopoly (III:272n), and concluding that it represented a mere transfer payment, not actually reimbursing the production of value. High rents enriched landlords at the expense of food consumers – what economists call a zero-sum game at another’s expense.

The 19th century elaborated the concept of economic rent as that element of price which found no counterpart in actual cost of production. and hence was “unearned.” It was a form of economic overhead that added unnecessarily to prices. In 1817, David Ricardo’s Principles of Political Economy and Taxation elaborated the concept of economic rent. Under conditions of diminishing soil fertility in the face of growing demand, value was set at the high-cost margin of production. Low-cost producers benefited from the rising price level. Ricardo helped clarify the concept of differential rent by applying it to mining and subsoil wealth as well as to land. Heinrich von Thünen soon added the more helpful concept of rent-of-location (site value).

The important classical point was that economic rent was produced either by nature or by special privilege (“monopoly”), not labor effort. Hence, it was that element of price that could not be explained by the labor theory of value, except by marginal costs on what Ricardo hypothesized to be “rentless land” as recourse was made to poorer soils. Ricardo’s follower John Stuart Mill explained that being income without labor or other costs, such rent formed the natural basis for taxation.

Yeah, landlords are greedy.  Unless you are my landlord and are reading the blog.

The Perversity of the Bush Tax Cuts

Under current tax law, a married couple with no chidren could receive $86,700 in dividend income in a year, and if it was their only income, they would owe no federal taxes.  If they received $250,000 in dividend income as their only income, they would owe $24,495 in federal taxes, without itemized deductions.

If the same couple was self-employed and earned $86,700 in earnings in a year, they would owe $20,694, including FICA.  If they earned $250,000, they would owe $72,277.

That doesn't make sense to me, does it make sense to you?

Update: Paul Ryan's Roadmap for America's Future released in 2010 would eliminate all income taxes on interest income, dividend income and capital gains income.  Guess who would benefit from that?

This Week's Kentucky Derby Prep Races

We've got the Blue Grass Stakes at Keeneland and the Arkansas Derby at Oaklawn.  Three weeks until the Run for the Roses.

Best Fair Foods

Here.

The one I want to try:

Chicken-Fried Bacon

Texas (bigtex.com)

This ode to bacon won the award for Best Taste at the 2008 Big Tex Choice Awards. Creator Glen Kusak had been a fair vendor for 12 years running, but 2008 marked his first year entering the annual State Fair of Texas food contest.

We fried pickles, oreos, twinkies, hohos, a Snickers bar a peanut butter and jelly sandwich and a piece of cake at a couple of our fish fries this year.  The Twinkies were the best.

The End of Riverfront Stadium

A video of the stadium implosion, just because.



I think I could enjoy building demolition for a while, but the stress of worrying about a screw-up would be tough.

Mmmmmmmm....ctd.

I've noticed that since baseball season has started, several people have searched for "It's a hot dog....No, it's a smoked sausage," and have come across my post on the subject of my favorite old Riverfront Stadium graphic, which is here.  I also found out that there is a Flickr photo of the scoreboard here.

Now I'm just wainting for somebody to post a Youtube video which I can embed, because nothing beats watching the Atari system graphics combined with the silent movie sound track building to the climactic "Mmmmmmmmm".

Life Expectancy

From Early Warning:

,

I'll attribute the difference between the United States and the rest of the developed world to our economic inequality, our heterogenous population, our derision toward social medicine and our national love affair with firearms.

Stuart found this to be notable:

Given the unusually high health care costs in the US, it's interesting that we have a rather low number of doctors for a developed country.

I also am surprised with that fact.  But maybe the scarcity (be it in limited medical school slots or maybe too few visas) is one of the causes of the high health care costs?

Obama vs. Ryan, ctd.

Joe Klein on GOP reactions to Obama's budget (via the Dish):

And so it's painful when reality intrudes. Here is the reality: the Republicans have spent the past 30 years creating deficits and the Democrats have spent the past 30 years closing them. The unimportance of deficits became an article of faith during the second Bush Administration: "Reagan proved that deficits don't matter," Dick Cheney famously said. It has been rather hilarious for those of us with even a minimal grasp of recent history to watch these folks pull fierce 180-degree turns on the issue--and it is even more hilarious to watch them accuse Obama of hyper-partisanship after the dump-truck full of garbage they visited upon his head these past few years.
Indeed, the sheer hatred that Republicans have for Obama has led them to overreach, to latch onto Paul Ryan's well-outside-the-mainstream budget plan. They now face a presidential election where they are completely tied to the idea of destroying the most popular government program out there--Medicare. They are now tied to the incredibly cruel and witless notion that they're going to ask 90-year-olds to make free market choices, with vouchers constantly diminishing in value, in an extremely complicated health market. And most important, as the President said, they are now tied to a slick attempt to make middle class people pay more for Medicare while demanding lower taxes for the wealthy.

Republicans are their own worst enemies.  They are also the worst enemies of the middle class.  As poorly informed as this electorate is, and as bad off as this economy is, Republicans would have a good shot at winning back the White House if they didn't shoot themselves in the foot all the time.  I don't understand why Republicans hate passenger rail, when they are always riding the economic policy crazy train.  It is good to see mainstream journalists call them out on it.

A Little Different

I spent a little time in town last night.  I happened to run into a couple of interesting phenomena.

First, one establishment was hosting a lingerie show and cigar event to raise money for breast cancer research.  Yes, that is correct, a cigar event to raise money for cancer research.  Actually, I think they raised a lot of money, but the irony was thick.

Second, I spoke with a person who thinks a clown in costume should not be drinking where children could see him, after performing at a parish festival, but that it is ok for parents to drink at the same event.  In other words, a clown is considered more of a role model than a parent.  I don't happen to be bothered by either, but it seemed like an odd concern to me.  Especially considering that it still rankled two years after the fact.

Both incidents made me laugh a little bit.

Naked Capitalism Link of the Day

Today's link: Pacific salmon may be dying from leukemia-type virus, at McClatchy:

In Canada's Fraser River, a mysterious illness has killed millions of Pacific salmon, and scientists have a new hypothesis about why: The wild salmon are suffering from viral infections similar to those linked to some forms of leukemia and lymphoma.
For 60 years before the early 1990s, an average of nearly 8 million wild salmon returned from the Pacific Ocean to the Fraser River each year to spawn.
Now the salmon industry is in a state of collapse, with mortality rates ranging from 40 percent to 95 percent.
The salmon run has been highly variable: The worst year came in 2009, with 1.5 million salmon, followed by the best year in 2010, with 30 million salmon. But the overall trend is downward.
Losses were particularly high in elevated river temperatures; warmer water makes it more difficult to deliver oxygen to the tissues of salmon.
Seven of the  last 10 summers have been the hottest on record for the Fraser River. But experts say it's too soon to pin the blame on global warming.
"Clearly, a warming climate is going to produce some new stresses for Pacific salmon," said Daniel Schindler, a professor of aquatic and fishery sciences at the University of Washington in Seattle. "Some of those stresses will certainly be expressed through increased susceptibility to disease, including something like this."
But he added: "The reality is we have very poor understanding of how climate and disease dynamics interact with each other in salmon. We know they're going to be important, but we can't say a lot in detail."

Fisheries are interesting to me, but the future is pretty bleak.

Oil Markets and Currencies

David Kotok, over at the Big Picture:

Today we focused on an issue involving currencies and the current status of oil markets. The issue derives from the fact that oil producers tend to allocate their reserves against an index or other proportion, and plan accordingly in the deployment of their reserves. Since the producers are mostly Middle Eastern or North African, those reserves tend to have some political bias. In some cases, it is against the dollar and in favor of other currencies and assets. The same thing happens with Asian reserves, which tend to lean in favor of the dollar in greater proportion. The difference between the two creates an interrelationship among currencies, their exchange rates, and various levels of economic activity and price change throughout the world.

Picture the condition of a sovereign-wealth-fund manager in the Persian Gulf. The price of oil goes up by 30 dollars a barrel, and in come unexpected additional billions of dollars. On receipt, they raise the allocation of US dollars beyond the typical benchmark index. The portfolio manager then has to sell some of the dollars and redeploy them into another currency, such as the euro, yen, pound, or others. The effect of the sale is to weaken the dollar and strengthen the euro; but because commodity prices are all priced in dollars, the secondary effect raises commodity prices of other items like industrial metals, precious metals, or food.
Market participants then see the weakening dollar, the rising price of oil in USD terms, and the rising price of commodities in USD terms, and the cycle intensifies. Does this mean inflation in the general price level? What is the transmission mechanism that takes a food price or gasoline price and converts it to a rising level of all prices, or most prices, or more than half of all prices? Here is where the concept gets difficult.

Can China Manage a Soft Landing?

Nouriel Roubini on China's latest 5-year plan:

The problem, of course, is that no country can be productive enough to reinvest 50% of GDP in new capital stock without eventually facing immense overcapacity and a staggering non-performing loan problem. China is rife with overinvestment in physical capital, infrastructure, and property. To a visitor, this is evident in sleek but empty airports and bullet trains (which will reduce the need for the 45 planned airports), highways to nowhere, thousands of colossal new central and provincial government buildings, ghost towns, and brand-new aluminum smelters kept closed to prevent global prices from plunging.
Commercial and high-end residential investment has been excessive, automobile capacity has outstripped even the recent surge in sales, and overcapacity in steel, cement, and other manufacturing sectors is increasing further. In the short run, the investment boom will fuel inflation, owing to the highly resource-intensive character of growth. But overcapacity will lead inevitably to serious deflationary pressures, starting with the manufacturing and real-estate sectors.
Eventually, most likely after 2013, China will suffer a hard landing. All historical episodes of excessive investment – including East Asia in the 1990’s – have ended with a financial crisis and/or a long period of slow growth. To avoid this fate, China needs to save less, reduce fixed investment, cut net exports as a share of GDP, and boost the share of consumption.
The trouble is that the reasons the Chinese save so much and consume so little are structural. It will take two decades of reforms to change the incentive to overinvest.

This would really throw a hurt on the world economy.  Commodity prices would be slaughtered.  Australia would also go into serious recession, and the housing bubble there would deflate.

Top Ten Tax Charts

From the Center on Budget and Policy Priorities via Mark Thoma

Free Trade and the Near Extinction of the Buffalo

A pile of American bison skulls in tht mid-1870s (Image via Wikipedia)

Olaf Storbeck on an interesting study from M. Scott Taylor about the extinction of the American Bison:

Never before in the history of mankind had humans destroyed so much nature in such a brief period of time. Over about 15 years, the American bison was hunted to extinction. Up to 1870, 10 to 15 million bison had been living in the American West. Less then two decades later, about 100 animals remained.
For more than 100 years academics have been looking at the causes of this tragedy. Until now, most researchers blamed the American army, the failure of the federal government and the triumph of the railway.
However, all these explanations fall short, as M. Scott Taylor, an economics professor affiliated with the University of Calgary, shows in a fascinating paper.
According to Taylor, the most important driver of the extinction of the American bison was technical innovation, globalisation and unfettered capitalism.

Yet one more example of the effects of unregulated capitalism run amok in the second half of the 19th century in the United States.  Republicans seem to consider this the golden age of America, but I think we are better off with a regulated economy, provided the regulations aren't routinely undermined.

Are Speculators Driving Oil?

Ritholtz:

Fascinating chart above via David Wilson of Bloomberg.
It very much suggests that while Speculators may not have been the prime mover on the 2008 Oil peak, the specs seem to be a very large portion of the current push.
By comparing the net number of contracts owned by non-commercial oil traders (Source: Commodity Futures Trading Commission).
Crude 5.8% the first two days of this week, suggested that speculative demand for oil may be declining.

I can't really go into depth about the markets, but I think the funds were plowing into commodities to take a ride based on fear of QE2.  Since the money is sitting at banks, I would say a lot of the movement is speculation of coming inflation actually creating said inflation in commodity markets.  I would bet that any credit crunch will crush commodity markets just like it did in 2008, when oil plunged back down under $40 for a little while.

After the Robber Barons

At the NYT:

What is the explanation? In all of these cases, the causal mechanism is the same: Unregulated capitalism generates both rapid growth and burgeoning inequality.
In the absence of legal channels for influencing policy, such as the lobbying and campaign contributions in the United States, such attempts manifest themselves as corruption. That was true of the American Gilded Age, and it is true of the BRICs now.
Is it fair to say, then, that corruption and inequality are natural byproducts of the early stages of market-based capitalism? A superficial survey of history, from Bismarck’s Germany to Japan after World War II to East Asia in the 1970s and 1980s, seems to bear this out. Indeed, this might come to be accepted as a social-science theory, like the Kuznets curve, which shows that inequality first rises and then falls with the level of development. It could, in fact, be part of the explanation for this phenomenon.
The American experience also suggests a corollary proposition. Excessive corruption and inequality, by corroding the political process, threaten to delegitimize capitalism and the market system and so create pressures for reform and the redistribution of wealth that then temper the incentive-driven impetus to capitalist growth, which caused the inequality in the first place.

The necessity for redistribution and social policy thus becomes a mechanism for the system to correct itself. In the United States, it took the better part of the half-century preceding World War II for this to occur. The worst excesses of capitalism were reined in only when a middle class backlash led to legislative change, regulatory reform and anti-corruption rules.

The Upper Crust might want to keep this in mind.  If things turn back down, it may be hard to continue to convince the rubes in the Republican Party that it is liberals who are screwing them.

More Tax Information

David Cay Johnson on the grand con that is trickle-down economics:

For three decades we have conducted a massive economic experiment, testing a theory known as supply-side economics. The theory goes like this: Lower tax rates will encourage more investment, which in turn will mean more jobs and greater prosperity—so much so that tax revenues will go up, despite lower rates. The late Milton Friedman, the libertarian economist who wanted to shut down public parks because he considered them socialism, promoted this strategy. Ronald Reagan embraced Friedman’s ideas and made them into policy when he was elected president in 1980.

For the past decade, we have doubled down on this theory of supply-side economics with the tax cuts sponsored by President George W. Bush in 2001 and 2003, which President Obama has agreed to continue for two years.

You would think that whether this grand experiment worked would be settled after three decades. You would think the practitioners of the dismal science of economics would look at their demand curves and the data on incomes and taxes and pronounce a verdict, the way Galileo and Copernicus did when they showed that geocentrism was a fantasy because Earth revolves around the sun (known as heliocentrism). But economics is not like that. It is not like physics with its laws and arithmetic with its absolute values. 

He goes on to show how many tax truisms are just myths perpetuated by the wealthy and their media backers.  His list of the actual truths, which he goes into greater detail on in the article (from Mark Thoma):

1. Poor Americans do pay taxes.
2. The wealthiest Americans don’t carry the burden.
3. In fact, the wealthy are paying less taxes.
4. Many of the very richest pay no current income taxes at all. 
5. And (surprise!) since Reagan, only the wealthy have gained significant income. 
6. When it comes to corporations, the story is much the same—less taxes.
7. Some corporate tax breaks destroy jobs.
8. Republicans like taxes too.
9. Other countries do it better.

Definitely read 1, 2, 4, 8 and 9.

You've Got To Be Kidding Me

So looking at the weather forecast, after today they are calling for a 50% chance of rain or greater for 7 of the next 8 days.  Damn you, La Nina.  This is shaping up to be one long and frustrating spring.  You know, if we were looking at $3.25 corn for fall delivery, I might not get in such a big hurry.  Now we are looking at a wet spring, and I just have this gut feeling that we'll have a very dry summer. Meanwhile, the corn we've already sold could end up being a very high precentage of our fall crop, while prices skyrocket.  I'll be pulling my hair out delivering corn for $5.50 when the elevator is paying $8.50, knowing we've only got half a crop out there.  Please let me be wrong on this, as I am on most everything else.

Naked Capitalism Link of the Day

Today's link: Inside George Soros' "Monstrous Monkey House," by John Cassidy, which reviews the speakers at the Institute for New Economic Thinking Conference hosted last weekend at the Mount Washington Hotel in Bretton Woods, New Hampshire.


Mount Washington Hotel

 From the post:

The conference ran throughout Sunday. It ended with the F.T.’s Gillian Tett interviewing Soros and Paul Volcker, the former Fed chairman. Fittingly enough, Volcker turned to the issue of international-monetary reform, which hitherto hadn’t featured much in the conference despite its location. He recalled joining the Treasury in 1969 as under secretary for monetary affairs at a time when the original Bretton Woods system was still operating but running into problems. Today, he noted, there wasn’t any formal international system but rather a de facto arrangement characterized by a lack of fiscal discipline and huge current account imbalances. “Who would ever sit down and think of designing a system that permitted China to get three trillion dollars worth of reserves, and for the U.S. to happily use all that money to run up housing prices?” Volcker said. “I think there really was a connection between the international monetary system … and the great financial crisis. And nobody has had any interest” in reforming it.

And that, pretty much, was that—save for a not-too-subtle putdown by Volcker of his successor, Alan Greenspan, which in itself was worth the journey to New Hampshire. Asked by Tett to comment on Greenspan’s recent article in the F.T., in which he said financial reform was basically pointless, Volcker said: “On the face of it, without referring to Alan Greenspan, I can simply say I think the markets needed more regulation and the banks needed more regulation.”
Note about the headline: It’s another quote from Keynes, who was originally reluctant to attend the Bretton Woods conference, to which more than seven hundred delegates from forty-four countries had been invited. Keynes (wrongly) feared that nothing would get done and the result would be a “monstrous monkey house.”

I would opine that the nation would be better off if Reagan had reappointed Volcker and not replaced him with Alan Greenspan.  The post features a lot of other people, such as Larry Summers and Gordon Brown claiming they weren't responsible for the meltdown, and had seen the problems building.  I don't buy it.

In Praise of Marx

The Chronicle of Higher Education, via Ritholtz, has an interesting take on Marx:

There is a sense in which the whole of Marx's writing boils down to several embarrassing questions: Why is it that the capitalist West has accumulated more resources than human history has ever witnessed, yet appears powerless to overcome poverty, starvation, exploitation, and inequality? What are the mechanisms by which affluence for a minority seems to breed hardship and indignity for the many? Why does private wealth seem to go hand in hand with public squalor? Is it, as the good-hearted liberal reformist suggests, that we have simply not got around to mopping up these pockets of human misery, but shall do so in the fullness of time? Or is it more plausible to maintain that there is something in the nature of capitalism itself which generates deprivation and inequality, as surely as Charlie Sheen generates gossip?
Marx was the first thinker to talk in those terms. This down-at-heel émigré Jew, a man who once remarked that nobody else had written so much about money and had so little, bequeathed us the language in which the system under which we live could be grasped as a whole. Its contradictions were analyzed, its inner dynamics laid bare, its historical origins examined, and its potential demise foreshadowed. This is not to suggest for a moment that Marx considered capitalism as simply a Bad Thing, like admiring Sarah Palin or blowing tobacco smoke in your children's faces. On the contrary, he was extravagant in his praise for the class that created it, a fact that both his critics and his disciples have conveniently suppressed. No other social system in history, he wrote, had proved so revolutionary. In a mere handful of centuries, the capitalist middle classes had erased almost every trace of their feudal foes from the face of the earth. They had piled up cultural and material treasures, invented human rights, emancipated slaves, toppled autocrats, dismantled empires, fought and died for human freedom, and laid the basis for a truly global civilization. No document lavishes such florid compliments on this mighty historical achievement as The Communist Manifesto, not even The Wall Street Journal.
That, however, was only part of the story. There are those who see modern history as an enthralling tale of progress, and those who view it as one long nightmare. Marx, with his usual perversity, thought it was both. Every advance in civilization had brought with it new possibilities of barbarism. The great slogans of the middle-class revolution—"Liberty, Equality, Fraternity"—were his watchwords, too. He simply inquired why those ideas could never be put into practice without violence, poverty, and exploitation. Capitalism had developed human powers and capacities beyond all previous measure. Yet it had not used those capacities to set men and women free of fruitless toil. On the contrary, it had forced them to labor harder than ever. The richest civilizations on earth sweated every bit as hard as their Neolithic ancestors.

Happy Birthday, Charlie Hustle

Happy 70th Birthday to Pete Rose.  You may not be the brightest guy or the best gambler or the best person at handling public relations, but you were damn fun to watch play baseball.  Hopefully you can work out your differences with the powers-that-be so that you can take your place in Cooperstown.

As a side note, in I believe 1984, my dad found one of these 1964 Pete Rose baseball cards in the bank barn at my grandpa's farm where he grew up, along with a Sandy Koufax and a Juan Marichal.  I thought that was awesome.

The one he found has more dirt and fly poop on it than this one.

I ♥ Boobies Bracelets OK

So says a federal judge:

"I ♥ Boobies" bracelets worn by students in support of breast cancer awareness are not lewd or vulgar, a federal judge ruled Tuesday, ordering school officials in eastern Pennsylvania to lift a ban on the jewelry.
U.S. District Judge Mary A. McLaughlin found the ban by middle school administrators on the popular rubber wristbands was not supported by case law that allows school officials to restrict students' speech when it is lewd or disruptive.
"The bracelets are intended to be … viewed as speech designed to raise awareness of breast cancer and to reduce stigma associated with openly discussing breast health," McLaughlin wrote in a 40-page opinion.
She also found the Easton Area School District failed to prove that teachers and administrators encountered a substantial disruption when students wore the bracelets in school.

I'm glad to know that the federal courts can accept I ♥ Boobies better than Bong Hits 4 Jesus.  I guess we'll have to see if this makes it to the Roberts Court though.

Update: After a little thought, this could pass muster with the Roberts Court, because I can definitely see Clarence Thomas voting for this kind of free speech.

Canadian Election Debate Rescheduled to Avoid Hockey Game

Leave it to the Canadians:

No surprise here: Hockey trumps politics in Canada. Canadian broadcasters are moving the French-language leaders’ debate for Canada’s current federal election up by a day to Wednesday night so it won’t clash with the National Hockey League playoffs, which get under way this week.
A broadcasting consortium representing CBC/Radio-Canada, CTV, Global Television and TVA specifically moved the Canadian leaders’ debate from Thursday night to avoid a conflict with the Montreal Canadiens’ first NHL playoff game against the Boston Bruins on the same night.
The consortium said the scheduling change was made to ensure “debates are scheduled to reach as wide an audience as possible.” 
“The broadcasting consortium believes this schedule modification is in the best interest of the general public,” the consortium added.
The fear was hockey-made fans of the Montreal Canadiens in Quebec would flee the Canadian political debate to watch their team go up against the arch-rival Bruins.

The Safest Bonds in the World

From MarketWatch:

According to the International Monetary Fund, only a handful of countries are really rock solid.
They include Australia and New Zealand, as well as the countries of Scandinavia — Denmark, Finland, Sweden and Norway.
While most developed countries have racked up huge debts, these guys have kept their liabilities small in relation to their economies, according to the IMF. They have well-funded public pension plans. A few have no net debts at all.
The country with the strongest finances? Norway.

I would say that all of those nations are closer to socialism than the United States under President Obama.  New Zealand and Australia show some of the same right-wing tendencies as the Republican Party, yet they still have stronger social safety nets than the United States. They are also commodity exporters. The Scandinavian countries are polar opposites from the GOP, and are well-run. 

I should emphasize that much of America's fiscal problems can be easily laid at the feet of the cut taxes-and-spend Republicans who have dominated U.S. politics since 1981.  The fact that two years after leading this country into a chasm, U.S. voters turned power in the House of Representatives back over to Republicans goes a long way to explaining how we got where we are at.  We as voters tend to get the government we deserve.  Americans are afraid to face the truth: we are living above our means and are profligate with resources, we borrow to maintain our standard-of-living, and we will see a dramatic decline in this standard-of-living if we don't cut back and start to pay our way.  We should hav made changes years ago, but the sooner we change, the better off we'll be.

Are Commodity Prices Set For A Fall?

At Yahoo Finance, from Barron's:

The cure for high prices is high prices. That is the ineluctable logic of the commodity markets, and it is on display in the trading pits.
Commodities took another hit Tuesday after Goldman Sachs' analyst team advised cashing in chips on its winning bets on CCCP — crude oil, copper, cotton and platinum — after a 25% run-up since December.
(Goldman seems to have an affinity for acronyms after having come up with the ubiquitous BRICs, for the emerging economies of Brazil, Russia, India and China, a few years ago. As for CCCP, one presumes the acronym is not out of nostalgia for Soviet Union, given those are English letter analogs for the Cyrillic initials of the USSR.)
High prices cure high prices through "demand destruction" as scarce supplies are rationed to those willing to pay high prices. Goldman contended in a report Monday that was beginning to happen in the U.S. as retail gasoline prices approach $4.00 a gallon.
That also was the view of the International Energy Agency. "There are real risks that a sustained $100 dollars a barrel-plus price environment will prove incompatible with the currently expected pace of economic recovery," the IEA said in its monthly report.
Those assessments followed a downgrade of global growth prospects by the International Monetary Fund in part because of the impact of rising food and energy prices, which take a greater toll on the fast-growing emerging economies, which have led the rest of the world out of recession.

No Space Shuttle for Dayton

DDN:

NASA’s decision Tuesday not to donate a space shuttle to the National Museum of the U.S. Air Force angered members of Ohio’s congressional delegation, who called for a federal investigation.

They urged the U.S. Government Accountability Office to review NASA’s selection process that left out other sites in the country’s interior, including Chicago, Tulsa and Houston.

Four of the 21 competing sites received shuttles. Three of the sites are on the East Coast, and one is on the West Coast. NASA ranked the Air Force museum fifth among its top sites, said U.S. Rep. Steve Austria, R-Beavercreek.

Austria said NASA Administrator Charles F. Bolden Jr. told him the museum met all of NASA’s stated key criteria for permanent display of an orbiter, including science and education programs, accessibility, display plans and climate-controlled location for housing and displaying the spacecraft.

But, in the end, New York City; Los Angeles; Washington, D.C.; and Florida’s Space Coast won out, with their population bases and tourist drawing power. Bolden overlooked the Air Force museum even though it already draws 1.3 million visitors a year.

The Air Force museum is also within a day’s drive of 60 percent of the U.S. population, museum supporters said.

Count me as one who thinks people around Dayton were deluding themselves in the Space Shuttle chase.  How much work did Dayton really do on the shuttle.  Houston didn't get one and the program was based there.  It is estimated that Houston may lose 7,500 jobs from the end of the Shuttle program.

Here's Mike Turner being a good local pol:

Austria, U.S. Rep. Mike Turner, R-Centerville, and others said Bolden’s decision slighted the Midwest and the Air Force, which was an early partner of NASA’s in designing and developing the space shuttle and contributed $8 billion to its development.

“New York and L.A. don’t make a lot of sense. They didn’t make contributions to the program,” said Turner, referring to the shuttle program. “No one in the Midwest is going to have a shuttle.

“We’ll never be New York; we’ll never be Los Angeles. But we’ll always be home to the Wright brothers, to all things aerospace,” Turner said.

I would say that Los Angeles did have a decent amount to do with the shuttle program, as Edwards Air Force Base was the backup landing site for shuttle missions.  New York may not have a great case for getting a space shuttle, but it is also the largest city in the United States, and will see more tourists in a year than Dayton will see in 25 years.  I also think the Smithsonian Institution and Cape Canaveral were obvious picks for a Shuttle.

Ohio is a bastion of the Tea Party, even though this area's economy is kept afloat by Wright-Patterson Air Force Base, the largest single-site place of employment in Ohio.  When the public reacts to such a perceived slight to the region, it only highlights that our economy is extremely dependent on largess from Washington.  In spite of this, the majority of the region denigrates the federal government.  But we are not unique.  The John Birch Society, the Tea Party and other anti-government movements have always flourished in Orange County, California, even though that economy was driven by defense contractors throughout the Cold War.  Why do so many people who depend on work from the government, hate the same institution.  I don't quite understand.

The U.S. Has a Taxing Problem

Daniel Gross (via Mark Thoma):

First, this has every sign of being another round of the long-running fiscal clown show. For the past 10 years, Washington — regardless of who controls the levers of power — has simply shown no inclination or willingness to take the actions necessary to align the government's resources with its revenues. A new Medicare prescription drug benefit with no funding mechanism? Big tax cuts with no offsetting spending cuts? Expensive wars fought off the balance sheet? A big stimulus program? Payroll tax cuts? No problem. So long as interest rates remain low, there was no reason to fret too much about the sustainability of these initiatives.
In the 1980s and early 1990s, Washington antagonists executed a series of deals that included tax increases and spending reductions. But these days, due to a combination of utter Republican intransigence and Democratic wishy-washiness, no such deals are possible. The legislative and executive branches have no problem working together to massively increase deficits — think about 2009's uni-partisan stimulus package or the more recent bipartisan lame-duck to extend Bush tax cuts and enact a new payroll tax cut. But our government has an extremely difficult time making even symbolic spending cuts. Slashing about $40 billion in spending, an amount equal to 2.5 percent of this year's projected budget deficit, spurred the news networks to create shut-down clocks. And revenue enhancements? The phrase doesn't seem to be in official Washington's vocabulary. President Obama campaigned on letting the tax cuts for high earners expire at the end of 2010, swore up and down that he wanted them to expire throughout 2009 and 2010, and then meekly surrendered.
Second, even if Washington were somehow to get serious, I don't think the public is anywhere near prepared for the truth about our fiscal affairs. That's largely because nobody has bothered to tell the Americans that, as much as they feel overtaxed, the federal government, largely by design, has done an extremely poor job of collecting revenues in the past few years. That failure, as much as spending, lies at the heart of our massive structural deficits. Don't take it from me. Go to the OMB's website and check out Table 1.2, which documents spending and receipts as a percentage of GDP going back several decades. For the last 40 years, federal government spending has generally stood somewhere between 19 and 23.5 percent of GDP. In 2009, when the economy shrank and spending on bailouts and stimulus spiked, the ratio soared to 25 percent. In 2010, it shrank back to 23.8 percent. That's still elevated, but it's almost exactly what it was in the third year of Ronald Reagan's first term (23.5 percent in 1983).

I refuse to vote for any Republican who rules out tax increases.  That is stupidity in its finest form.  I probably ought to refuse to vote for any Democrat who is too big of a pansy to raise taxes, but that would leave me with no one to vote for.

Reds Extra-Inning Win Comes at the Expense of Western Ohio Native

The Reds rallied to score 6 runs in the 11th inning off of Mercer County native Cory Luebke to propel themselves to an 8-2 win versus the San Diego Padres.  The Marion Local and Ohio State product suffered the loss to go 0-1 for the season.  A pretty tough night for a young player who almost certainly grew up as a Reds fan.  The night leaves his ERA at 11.37 with a 1.58 WHIP thus far.  Hopefully things will turn around for him after the Reds leave town.

Naked Capitalism Link of the Day

There were several candidates today.  There is a story about honey made from the Manuka tree in New Zealand may be able to prevent the growth of the MRSA super staphylococcus.  There is a story about South Korean groundwater pollution from the mass graves of livestock from a foot and mouth disease outbreak last year.  There is a story comparing economic ideologies to religions, along with a commodity exporter's post with graphs blaming the Fed for commodity price increases. (I think this may be a feature for the Fed, and not a bug, looking to weaken the dollar and increase exports).  But the engineer in me chose this Atomic Power Review post about the problems and mistakes made at Fukushima, titled ARPA Special: Observations on Fukushima. An example of some of the design considerations which must be reassessed:

 Much has been made about the failure of the on site EDG units, which as we now know did run for about an hour between the time of the quake and the arrival of the tsunami. The fact that this natural disaster was of unprecedented scope and size somewhat eases any accusations of fault on the part of the operators. However, at an entirely different plant, much later, it was revealed after a near SBO event that two of the site's three EDG units were disassembled simultaneously for periodic inspections. The addition of this fact, coupled with the tsunami-related failure of all EDG units at Fukushima Daiichi now thrusts Japan's attitude about EDG units, SBO events and their relation to reactor and public safety squarely into the limelight. While staunch pro-nuclear advocates rightly point out the massive natural disaster that took out Fukushima Daiichi's diesels as off the top end of the scale as regards regulatory provisions for events to be protected against, the notion that a reactor plant could have two of three diesels simultaneously disassembled as a matter of normal, natural conduct of business is appalling.

Solutions to this set of problems include more diesels at each site, and placement, construction and water and shock proofing to guard against a duplication of the inundation-related loss of all onsite EDG capacity that occurred at Fukushima Daiichi. Specifically, it may be that diesels should be placed on the top of nearby hills, or placed several stories up and fully enclosed, and must be shock isolated. Further, as in primary equipment there should be the assumption that the first diesel to start fails, so that there must always be at least two available and set for auto start for every reactor plant.

Standardized external power connections are now a must. This situation is hampered a bit in Japan as some areas are 50 Hz and some are 60 Hz, but this is not a problem in terms of the provision of standard external connections and portable generating equipment.

REACTOR PLANT SITE DESIGN In the early days of commercial nuclear power plants, very rarely was consideration given to the idea that a particular site chosen for a nuclear plant might in the future accommodate further plants. Perhaps the first one that was designed this way was Indian Point; the initial plant built there, a Babcock & Wilcox PWR with separate two-unit oil-fired superheater, was not only enclosed in a partially below-grade vapor containment sphere but was also further enclosed by a reinforced concrete structure outside of the sphere to reduce personnel exposure on-site if other plants were built, both from an operating standpoint and from a future potential accident standpoint. (As we know, two further plants were in fact later built there.)

Home Price Chart

Ritholtz:

In 2006, just as the Housing market was peaking, the NYT ran this graphic of the 100-year Case Shiller chart. It showed how radically overvalued Housing had become.
Two years later, TBP reader Steve Barry updated that graphic, including the projected Home Price mean reversion. (See versions for 2008, 2009 and 2010).
Its time to update this for 2011. Note the 2009 tax credit wiggle:

We still have a fair piece to go.  Around here, there are some really cheap homes if you don't mind having crappy neighbors and minor upside appreciation in the future.

Bad Blood Leads To Bad Milk

Boy, these Chinese dairies carry big grudges:

Police in northwestern China announced Tuesday that milk that killed three infants and sickened 36 others was intentionally poisoned with nitrate by a competing dairy farm seeking revenge, according to the New China News Agency.

Nitrate is used for making dyes and curing meat but is not found in dairy products.

A rival diary farmer added the industrial salt to milk because of unresolved business disputes, the report said. Police have arrested two suspects and two farms have been shut down. Most of those who fell ill were younger than 14 and the deaths involved infants younger than 2.

China's dairy industry is still reeling from a milk scandal in 2008 in which melamine-tainted milk killed six infants and sickened 300,000 people.

I would assume the Chinese "justice" system is going to deal harshly with a few people.  I don't think poisoning innocent people is a good way to get back at your rivals.

The Vatican Library

The third segment of this week's 60 Minutes.  There is some really cool stuff in there.

Still Fighting the Civil War

Via Yglesias and others, a CNN poll:

In the CNN/Opinion Research Corporation Poll released Tuesday, roughly one in four Americans said they sympathize more with the Confederacy than the Union, a figure that rises to nearly four in ten among white Southerners.

When asked the reason behind the Civil War, whether it was fought over slavery or states' rights, 52 percent of all Americas said the leaders of the Confederacy seceded to keep slavery legal in their state, but a sizeable 42 percent minority said slavery was not the main reason why those states seceded.
"The results of that question show that there are still racial, political and geographic divisions over the Civil War that still exists a century and a half later," CNN Polling Director Holland Keating said.
When broken down by political party, most Democrats said southern states seceded over slavery, independents were split and most Republicans said slavery was not the main reason that Confederate states left the Union.
Republicans were also most likely to say they admired the leaders of the southern states during the Civil War, with eight in 10 Republicans expressing admiration for the leaders in the South, virtually identical to the 79 percent of Republicans who admired the northern leaders during the Civil War.

Slavery was not the main reason the Confederate states left the Union? Bullshit.  Ok, I guess maybe it was states' rights.  The states' rights to consider people property!  The GOP is an embarrassment.

Prisoners of War-Then and Now

Hendrik Hertzberg (h/t the Dish):

And so, by the tens of thousands, German soldiers were loaded aboard Liberty Ships, which had carried American troops across the Atlantic. Eventually, some five hundred P.O.W. camps, scattered across forty-five of the forty-eight United States, housed some four hundred thousand men. In every one of those camps, the Geneva conventions were adhered to so scrupulously that, after the war, not a few of the inmates decided to stick around and become Americans themselves. That was extraordinary rendition, Greatest Generation style.

The “war on terror” is a very different kind of war, and the prisoners thereof are very different, too. It’s not just that a higher proportion of them appear to have been truly dedicated to the ideology in whose name they were fighting, or that they were unaffiliated with a government. It’s also that their numbers are small—a hamlet compared to the city-size P.O.W. population of 1945. In the nine years since the creation of the purpose-built prison at Guantánamo Bay, Cuba, a grand total of seven hundred and seventy-nine men (and boys—the youngest was fifteen years old when he was captured) have been sent there. It currently holds a hundred and seventy-two. Yet this relative handful of shackled, isolated prisoners has somehow been permitted to engender a miasma of popular fear and political cowardice that contrasts shamefully with the matter-of-fact courage of an earlier and simpler time.

Caving on Gitmo and civilian trials are more Obama failings.  But the Republicans, as on many other things, are even worse.

Making Medicine Better

Ezra Klein reviews Atul Gawande's book, Better:

The chapter on treating injuries of war makes this point nicely. In the Revolution War, 42 percent of the injured died. In the Vietnam and Persian Gulf wars, 24 percent died. But in the current wars, only 10 percent have died. And those gains have come “despite having no fundamentally new technologies or treatments since the Persian Gulf War.” The difference has been the application of things we already knew, not the development of treatments Gulf War-era doctors could never have imagined.
The chapter on childbirth that makes a similar point: “Doctors in other fields have always looked down their noses at their obstetrical colleagues,” Gawande writes. “They didn’t think they were very smart — obstetrics had long had trouble attracting the top medical students to their profession — and there seemed little science or sophistication to what they did. Yet almost nothing else in medicine has saved lives on the scale that obstetrics has ...do those of us in other fields of medicine use these measures anywhere near as reliably and as safely as obstetricians use theirs? We don’t come close.”
One other plug for Gawande: He’s enormously good at explaining why things that seem simple don’t happen the way they theoretically should. The fact that doctors don’t wash their hands enough, despite the fact that doing so could save thousands of lives and billions of dollars, seems insane. But it makes more sense if you understand that washing their hands “enough” would mean “a third of staff time spent just washing hands” — and that’s assuming a swift, minute-long cleanse. Similarly, the fact that cesarean sections don’t show better results than forceps makes the reliance on cesarean sections seem insane. But it makes more sense when you read Gawande’s explanation of how few people are actually able to use forceps effectively, versus how many doctors are capable of performing a cesarean.

Saudi Spare Oil Capacity

Stuart Staniford:

The sharp fall in OPEC output suggests that Saudi Arabia did little or nothing to compensate for the loss of Libyan output. So, as so often, we are left to wonder what the 3.2mb/d of supposed Saudi spare capacity really means if it's nowhere to be seen whenever the world actually needs it. It's sort of the unicorn of the oil world - the horn keeps getting longer in the telling, but we've never actually seen one.

World Economy Facing Peak Oil?

The Economist looks at the new IMF World Economic Outlook:

The most disconcerting part of the IMF analysis is its estimate of the potential impact of declining oil output on world GDP under different output scenarios. In the benchmark case, growth in oil output drops by one percentage point a year and real world GDP two decades from now is about 3 percentage points below where it otherwise would have been. In America, the drop is closer to 4 percentage points. Given greater substitution away from oil, the gap over two decades is closer to 1 percentage point for both the world and the American economy.

But the IMF also considers a more pessimistic scenario in which the annual hit to growth in oil output is 3.8 percentage points. In that case, real world GDP could wind up 10 percentage points below its but-for level. In America, the projected gap is more like 13 percentage points.
That's a serious risk to consider. The dynamics in this market are pretty straightforward: oil is mostly used for transportation, and the key to limiting the impact of increased scarcity is improving the extent to which consumers can substitute away from oil use.
We know what that's likely to entail—greater efficiency, greater reliance on electric transport, greater use (potentially) of biofuels and other petrol alternatives, reduced driving and greater use of transit and other travel alternatives. Some of these shifts can be better facilitated with the aid of public investment. There's no question that substitution would be accelerated by a steady increase in tax rates on oil and petrol. Conveniently, those revenues could be used to fund necessary investments in alternatives.
It's not really that tricky a policy mix. Unfortunately, the attitude in Washington is, for the moment, one of tax aversion, combined with an enthusiasm for cuts in public investments and an embrace of the idea that new drilling can make a meaningful dent in America's appetite for oil imports. That amounts to a big gamble with America's economic future.

Individual and Corporate Taxes

David Cay Johnson, via Mark Thoma:

Those taxpayers with the highest incomes, the top 400, have seen their real income tax rate fall from 30 percent in 1992 to 16.6 percent in 2007. That is a drop of more than two-fifths. Even if you take into account the charitable gifts of the Top 400, their 2007 effective income tax rate was 18.1 percent. A single taxpayer who does not itemize this year will hit an effective tax rate of 18.1 percent at $74,000.
The same pattern of taxes being progressive to a point and then becoming regressive shows up in corporate income taxes.
In 2008, for example, the top one-tenth of 1 percent of corporations paid an effective tax rate of 14.7 percent of their profits, while the next 8,269 corporations with assets between $250 million and $2.5 billion paid 15.2 percent. That both GE and the New York Times Co. are in the top group and pay such widely disparate real tax rates shows how averages need to be viewed in context.
Now what happens when we look at actual cash paid when measured against not book profits reported to shareholders, but taxable profits measured under the code? The disparity between the corporate Gargantuans and the Lilliputians is much greater.
The top one-tenth of 1 percent of corporations paid at a 21.2 percent effective rate, while companies with as little as $500,000 in assets paid more.

An Odd, But Successful, Hedge Fund

Via Ritholtz, New York Magazine looks at Bridgewater Associates:

Dalio, a tall, gaunt 61-year-old man with a swoop of gray hair, is an adherent of �radical transparency,� a management theory that calls for total honesty and accountability. He’s also a longtime practitioner of Transcendental Meditation and has built its precepts on self-actualization into Bridgewater’s office culture. (He’s even brought in David Lynch, the film director and unofficial TM spokesman, to lead a seminar for his staff.) Dalio expects employees to openly criticize not just the cafeteria fare but also each other; behind-the-back gossip is strictly prohibited. �Issue logs� track mistakes ranging from significant (poorly executed trades) to small (one employee is said to have been issue-logged for failing to wash his hands after a trip to the bathroom) and can result in �drilldowns,� intense sessions�one insider compares them to a cross between a white-collar deposition and the Spanish Inquisition�during which managers diagnose problems, identify responsible parties (�RPs,� in Daliospeak), and issue blunt correctives. Other employees can withdraw recordings of these proceedings from the firm’s �transparency library.�


Should Bridgewater employees need a refresher on the house rules, they can consult their copy of Principles, the 110-page manifesto Dalio has written to codify his philosophies about life, work, and the pursuit of greatness. The book used to be given to all Bridgewater employees in paper form and is now distributed via a custom app. Dalio’s axioms are studied with Talmudic intensity at the firm, and conversations with employees tend to be sprinkled with company jargon: �ego-barrier,� �probe,� and the ultimate Bridgewater insult, �suboptimal.�

Manifesto is a word that carries a lot of baggage.

Naked Capitalism Link of the Day

Today's link: Manning, Obama and U.S. Moral Leadership, by Glenn Greenwald:

On December 15, when I first reported the inhumane conditions of Bradley Manning's detention, I did not assign any blame to -- or even mention -- Barack Obama. Although, as Commander-in-Chief, Obama was technically responsible for Manning's treatment, there was no evidence that he even knew about it, let alone planned it. But since then, the Manning controversy exploded into national prominence and Obama has explicitly defended the treatment, leaving no doubt that it directly reflects on who he is as a leader and a person.
For that reason, as The Guardian reports this morning, a letter signed by "more than 250 of America's most eminent legal scholars" that "includes leading figures from all the top US law schools, as well as prominent names from other academic fields" -- featuring "Laurence Tribe, a Harvard professor who is considered to be America's foremost liberal authority on constitutional law"; who "taught constitutional law to Barack Obama and was a key backer of his 2008 presidential campaign"; and "joined the Obama administration last year as a legal adviser in the justice department, a post he held until three months ago" -- not only denounces Manning's detention but also the 2009 Nobel Peace Prize winner's personal responsibility for it:

It is truly embarrassing how Obama is allowing the military to treat Manning.  The entire "War on Terror" has been terrible for civil liberties, and the fact that the U.S. has engaged in torture is criminal.  People in leadership should be on trial.

Farm Subsidies May Face Cuts

WSJ (h/t Jeff):

The hunt for cuts has come to this: Even agriculture subsidies—billions in spending both parties have embraced for years—are on the table. With the farm economy booming and Washington on a diet, a program set up in the 1990s that cuts checks to farmers could be trimmed or eliminated next year when Congress writes a new five-year farm bill.
A group of conservative lawmakers has set its sights on these direct payments, and even farm-state Democrats who like the program say high crop prices make the outlays of about $5 billion a year harder to justify. Recently, the National Corn Growers Association, an industry lobby group, urged Congress to revamp the program, fearing it would be eliminated altogether.
Washington is looking everywhere for savings, even to programs once viewed as sacrosanct, including farm programs and defense spending.
Republican House Budget Committee Chairman Paul Ryan's blueprint for the fiscal 2012 budget puts agriculture subsidies in the cross hairs, seeking to cut $30 billion over a decade—starting when the next farm bill is passed in 2012—out of a total of some $150 billion in total expected spending on farm subsidies.

I'll believe it when I see it. 

Albert Pujols

From 60 Minutes:



This is a heartwarming story. He really comes off as a crazily-driven class act. On the field, his numbers speak for themselves. .330 BA, 409 HR, 1234 RBI and 1905 hits. Wow. Off the field, his actions are louder than words. For the fans in St. Louis, I hope they manage to keep him. As a Reds fan, I hope he goes to the American League.

A Chart to Ponder

Nancy Folbre brings up raising the top marginal rate:

Consider, for instance, the Fairness in Taxation Act introduced by Representative Jan Schakowsky, Democrat of Illinois, which would increase the top federal marginal income tax rate to 45 percent for married couples earning more than one million dollars a year and to 49 percent for billionaires, from the current rate of 35 percent.
Historically unprecedented? Hardly. The top marginal tax rate was 50 percent in the mid-1980s and even higher in the 1950s (as the chart shows).
Such a boost could raise an estimated $78 billion, more than the cuts that House Republicans were seeking in last week’s budget talks.
Even if it fell far short it would avert proposed cuts for many valuable programs, including Head Start, which provides early childhood education, and Pell Grants, which help low-income families send their children to college.

Hopefully this is among the ideas in Obama's proposed budget fix.