Saturday, August 20, 2011

The Coming Resources Crunch?

Green, Green and Grains reviews an NYT profile of Jeremy Grantham:
I'm noting Grantham track record and think he's making a lot of sense.  But I wonder: How many connoisseurs of bubbles have worked to find the controls?  That is, find the historical episodes where there was a rapid market adjustment that may have appeared to be a bubble to the rare connoisseurs but then it turned out not to be a bubble.   After the fact, maybe all bubbles look alike.  But looking at it from hindsight doesn't really count.

But now Grantham is saying this time is different:

So it’s news when Grantham, who has built his career on the conviction that peaks and troughs will even out as prices inevitably revert to their historical mean, says that this time it really is different, and not in a good way. In his April letter, “Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever,” he argued that “we are in the midst of one of the giant inflection points in economic history.” The market is “sending us the Mother of all price signals,” warning us that “if we maintain our desperate focus on growth, we will run out of everything and crash.”
That sounds even more pessimistic than me, especially that last sentence.  Prices will rise, which will keep us from running out.

But while I'm nowhere near as confident as Mr Grantham, it seems very possible to me that the long downward trend in commodity prices has reversed permanently.

The Brewery Revival

Via the Dish:

Friday, August 19, 2011

Battle of Fallen Timbers

August 20, 1794:
The Battle of Fallen Timbers (August 20, 1794) was the final battle of the Northwest Indian War, a struggle between American Indian tribes affiliated with the Western Confederacy and the United States for control of the Northwest Territory (an area bounded on the south by the Ohio River, on the west by the Mississippi River, and on the northeast by the Great Lakes). The battle, which was a decisive victory for the United States, ended major hostilities in the region until Tecumseh's War and the Battle of Tippecanoe in 1811.
Wayne's new army, the Legion of the United States, marched north from Fort Washington (Cincinnati, Ohio) in 1793, building a line of forts along the way. Wayne commanded more than 4,600 men, with some Choctaw and Chickasaw Indians serving as scouts.
Blue Jacket's army took a defensive stand along the Maumee River (in present-day Maumee, Ohio and not far from present-day Toledo, Ohio), where a stand of trees ("fallen timbers") had been blown down by a heavy storm. They reckoned that the trees would hinder the advance of the army, if they came. Nearby was Fort Miami, a British outpost from which the Indian confederacy received provisions. The Indian army, about 3,000 strong, consisted of Blue Jacket's Shawnees and Buckongahelas's Delawares, Miamis led by Little Turtle, Wyandots, Ojibwas, Ottawas, Potawatomis, Mingos, and even some Canadian militia.
The battle did not last long. Troops closed quickly and pressed with the bayonet. The Indians were outflanked by American cavalry and quickly routed. They fled back to Fort Miami, only to find the gates closed. The British commander, not authorized to start a war with the Americans, refused to give shelter to the fleeing Indians. The American troops destroyed Indian villages and crops in the area, and then withdrew. Thirty-three of Wayne's men were killed and 100 were wounded. The victorious Americans claimed to have found 30–40 enemy dead on the field. According to Alexander McKee of the British Indian Department, the Indian confederacy had 19 men killed. McKee's figure may or may not include the casualties of a group of Canadian volunteers under Captain Alexander McKillop, who fought alongside the Indians.
The defeat of the Indians led to the signing of the Treaty of Greenville in 1795, which ceded much of present-day Ohio to the United States. Before withdrawing from the area Wayne began the construction of a line of forts along the Maumee, from its mouth at present day Toledo to its origins in present day Indiana. After Wayne had returned to his home in western Pennsylvania the last of these forts was named Fort Wayne in his honor. Its location is the site of the present day city. Behind this line of forts, Americans [of European ancestry] settled the Ohio country, paving the way for the creation of the state of Ohio in 1803. One veteran of Fallen Timbers who did not sign the Greenville treaty was a young Shawnee war leader named Tecumseh, who would renew Indian resistance in the years ahead.
Notably, the the terms of the Greenville Treaty were as follows:

Moon Over Parma

Hispanic Immigrants Bring Life To The Rust Belt

The Atlantic:
They came in larger numbers than the Italians, Germans or Irish did, dwarfing past numbers of immigrants by a ratio of two to one. Swaths of the Southwest now look more like Mexico than the U.S. More people in Miami speak Spanish than English. And, in the past 10 years, Hispanic immigrants settled far beyond the obvious gateway states of California, Arizona, and Texas, posing vast existential questions of identity, demography, and acculturation for cities as far-flung as Portland, Oregon, and Tulsa, Oklahoma.

Nowhere is this clearer than in the Lehigh Valley, a post-industrial enclave in Eastern Pennsylvania. In just the past decade, the cities of Bethlehem and Allentown, as well as nearby Reading, saw their Hispanic populations explode. The new arrivals tend to keep to themselves, living among their own, speaking Spanish, and generally lending credence to the 2004 warning of Harvard political scientist Samuel Huntington: Hispanic immigration will "divide the United States into two peoples, two cultures, and two languages," he wrote.

But in 60 or 70 or 85 years, few in the Lehigh Valley will remember fear-mongers like Huntington. Even the grandchildren of bodega-owners and Dominican hairdressers might forget, reminded only by family stories like my Aunt Mae's.

"Three generations," declares James Smith, an immigration researcher at the RAND Corporation. "By the time you get to the third generation, you can't distinguish between Americans and Hispanic immigrants. That's how long it takes to look like an American."
This is definitely good news.  I always feel like our economy in Ohio is pretty bad, because we don't seem to attract Hispanic immigrants.  These immigrants can revitalize dying neighborhoods and bring new life to struggling communities.  It is crazy that so many folks are anti-immigrant.  If they can come to the Lehigh Valley, they can come here.

Bill Veeck And The 1948 Cleveland Indians

Sports Illustrated:
Though Boudreau was all of 30 when the 1948 season began and already in his seventh season as both Cleveland's manager and its best player, it seemed impossible that such a creature would be that year's American League's MVP. Hobbled by gimpy ankles, he was about the slowest runner in the league. At the plate, wrote sportswriter Stanley Frank, "Boudreau resembles a man leaning over a fence to read a neighbor's newspaper while in the act of beating a carpet." Yet he had an unheard-of season for a shortstop: .355 average, 98 walks, 18 home runs and 106 RBIs—all while striking out nine times.
It was a surprise that Boudreau was even wearing an Indians uniform that season. The boy manager had nearly been packed off to the St. Louis Browns the previous October by Cleveland's boy owner, 32-year-old Bill Veeck. A fan rebellion made Veeck back down. "Sure, I tried to trade the guy off," Veeck said. "So Boudreau made up his mind then to prove that I was a jerk. That's just what he did."
He did it not only by playing superbly but also by managing well. He eased the American League's first black player, Larry Doby, into the lineup and the league; used ancient righthander Satchel Paige to maximum effect; and, after the regular season ended in a tie, looked past Bob Feller and Bob Lemon to select Gene Bearden to pitch the playoff game against the Red Sox. Managing doesn't get more intuitive than this: In the biggest game of his career, Boudreau turned to a rookie knuckleballer, on one day's rest, throwing from the left side in Fenway Park.
Like everything else that season, it worked. The Indians beat the Red Sox 8-3 and then overcame the Braves in six games to win the World Series. On the strength of Cleveland's success on the field and at the gate—the Indians drew a then major league record 2.62 million fans that season—Veeck unloaded the club for a tasty profit the next year.
A pretty good deal for Veeck, although 2 years later, he'd be bringing Eddie Gaedel to bat for the St. Louis Browns, wearing uniform number 1/8 on August 19, 1951, 60 years ago today:
Gaedel entered the second half of the doubleheader between the Browns and Detroit Tigers in the bottom of the first inning as a pinch-hitter for leadoff batter Frank Saucier. Immediately, umpire Ed Hurley called for Browns manager Zack Taylor. Veeck and Taylor had had the foresight to have a copy of Gaedel's contract on hand, as well as a copy of the Browns' active roster, which had room for Gaedel's addition.
The contract had been filed late in the day on Friday, August 17. Veeck knew the league office would summarily approve the contract upon receipt, and that it would not be scrutinized until Monday, August 20. Upon reading the contract, Hurley motioned for Gaedel to take his place in the batter's box. (As a result of Gaedel's appearance, all contracts must now be approved by the Commissioner of Baseball before a player can appear in a game.) The change to that day's St. Louis Browns scorecard, listing Gaedel and his uniform number, had gone unnoticed by everyone except Harry Mitauer, a writer for the St. Louis Globe-Democrat. The Browns' publicity man shunted Mitauer's inquiry aside.
Gaedel was under strict orders not to attempt to move the bat off his shoulder. When Veeck got the impression that Gaedel might be tempted to swing at a pitch, the owner warned Gaedel that he had taken out a $1 million insurance policy on his life, and that he would be standing on the roof of the stadium with a rifle prepared to kill Gaedel if he even looked like he was going to swing. Veeck had carefully trained Gaedel to assume a tight crouch at the plate; he had measured Gaedel's strike zone in that stance and claimed it was just one and a half inches high. However when Gaedel came to the plate, he abandoned the crouch he had been taught for a pose that Veeck described as "a fair approximation of Joe DiMaggio's classic style," leading Veeck to fear he was going to swing. (In the Thurber story, the midget cannot resist swinging at a 3-0 pitch, grounds out, and the team loses the game).
With Bob Cain on the mound - laughing at the absurdity that he actually had to pitch to Gaedel - and catcher Bob Swift catching on his knees, Gaedel took his stance. The Tigers catcher offered his pitcher a piece of strategy: "Keep it low." Cain delivered four consecutive balls, all high (the first two pitches were legitimate attempts at strikes; the last two were half-speed tosses). Gaedel took his base (stopping twice during his trot to bow to the crowd) and was replaced by pinch-runner Jim Delsing. The 18,369 fans gave Gaedel a standing ovation.

Gaedel later worked for Veeck in Chicago dressed as an alien.

Elwynn Taylor : U.S. Corn To Yield 149

The Iowa State agronomist predicts U.S. corn yield at 149 bushel per acre for 2011, the lowest since 2006.  This should pressure the markets.  With a yield that low, there will be supply issues in 2012.

Darrell Issa Watch

I won't go in completely for conspiracy theories, but there seems to be a lot of news concerning the California congressman.  First, the New York Times has two stories about Issa, one involving his numerous business interests potentially overlapping with his government work, and another about potential mistreatment of minority shareholders in a purchase of one of his businesses by a private equity firm.

Now comes another story (via nc links) about a former Golman Sachs VP who changed his name, and is now a staffer working for Issa on the House Oversight Committee, which oversees government regulators who are charged with financial regulation.

This comes after old reports of insurance fraud, when a building housing a floundering business of his mysteriously burned down.  Maybe liberals are out to get an upstanding man, or maybe he is a major league crook.  I'll withhold my judgement for now, but I will need some real evidence to believe the "media is out to get me" line.

Are Cities Like Human Brains?

Scientific American highlights a recent study which finds real similiarities (via Mark Thoma):
There’s the obvious analogy: neurons are like highways. Neurons are channels that carry information in the form of electric signals from one location within the brain to another, while highways are channels that transport people and materials from one location within a city to another. Cognitive scientists Mark Changizi (web,  twitter) and Marc Destefano (web,  twitter) think that the analogy goes deeper, though: “from the perspective of the city as a whole, the materials and people that highways transport are crucial to the large-scale function carried out by the city, and are, in a sense, signals – that one signal is electric and the other physical may not matter in regards to the fundamental properties governing them.” And that’s not all. They argue that the organization of city highway networks is driven over time by political and economic forces, rather than explicitly planned based on principles of highway engineering – which means that city highway systems may be subject to a form of selection pressure similar to the selection pressure exerted on biological systems. Cities themselves are also under selection pressure to connect with other cities via highways and roads – an inaccessible city can’t survive. Cities are also an appropriate model for comparison with the brain, as they lie on land: a sheet-like structure, just like the cortex.
“Nearly half of Earth’s 6.6 billion people now live in cities,” they write, “and cities are becoming ever larger and densely populated. The proper functioning of a city requires that people and materials be quickly moved throughout it.” City populations tend to increase over time, and at a faster rate than city surface area, meaning that an efficient highway system must continually evolve from pre-existing systems. Cities are starting to sound more and more like brains. Is it possible that city highway systems and the mammalian cortex follow similar scaling laws? If so, it could be that the organization of the brain is just one instance of a more general type of structure found in nature. Changizi and Destefano collected data from 60 cities in the United States, across a wide range of geographic locations and population sizes.
The story goes on to comparing ratios of brain structures to total brain surface area and ratios of city infrastructure to city surface area.  They are amazingly similar.  Overall, it is pretty interesting.

Thursday, August 18, 2011

17th Century English Drinking And Politics

The Awl:
Drunken Whigs, in other words, were billed as the Ted Haggards of their time. Even the Whig commitment to (partial) sobriety worked against them. Here's how the Tories managed that, in one of the most impressively self-sabotaging feats of political spin you're likely to encounter: When Whigs called Tories Catholic (worst possible insult, by the way—for a 17th-century Godwin's law, swap “Papist” for “Nazi”), the Tories retorted that at least they preferred wine to women.
The Tory message, spelled out, is this: we drink too much to get it up, therefore the whoremongers who are destroying society with their working penises are obviously Whigs.
“Sober Whigs,” Jones explains, “threatened respectable wives and daughters with their 'presbyterian itch', and were a danger to good society and to innocent women. Again, the evidence was against them, for any man not in the alehouse or tavern drinking himself incapable, as any loyal subject would be, must be available for whoring—and must, therefore, be a Whig.”
That's right: subjects proved their loyalty by drinking themselves into impotence, and “the refusal to drink a loyal health marked out the seditious and could lead to threats of violence in ballads and in real life.”
Wow. Just wow.  That doesn't seem like a good comeback.  I do like the part about substituting 16th century use of "Papist" for late 20th and early 21st century use of "Nazi."  Ah, merry England, why I hate you. 

Many People Don't Understand Probability

Modeled Behavior (h/t the Dish):
Here is a data point you may want to keep in the back of your mind when discussing financial literacy:
In a recent consumer study, 21 percent of individuals surveyed – including 38 percent of those with income below $25,000 – reported that winning the lottery was “the most practical strategy for accumulating several hundred thousand dollars” of wealth for their own retirement. In addition, 16 percent thought that winning the lottery was the best retirement strategy for all Americans, not just themselves (Consumer Federation of America and The Financial Planning Association, 2006).
Some may be tempted to interpret this as the Death of the American Dream, and evidence that people are hopeless about their economic futures. But winning the lottery as the best retirement strategy for all Americans? I chalk this up to the phenomenon that no matter how stupid a belief is, if you know one person that ascribes to it then a survey will show that 1/4 to 1/3 of the population probably does as well. This includes the existence of witches and werewolves, and the fact that Saddam Hussein planned 9/11. That, and I blame the fact that people don’t understand the concept of a fair bet and thus, of course, an unfair bet.
A friend plays the high odds Keno bets (I think his favorites are the 2 number [1 in16.63 payout] and 5 number [1 in 10.34 payout] bets, the worst odds of all on the game) but claims he wins at a greater rate than the published odds.  I tend to doubt it.  But it is kind of hard to prove when he mainly remembers the games he came out ahead versus the games he was a net donor.  I'll show up at his retirement party when he hits it big, that's for sure.

Unmixing Fluids

A very neat video at New Scientist (h/t nc links).  The explanation:
John DeMoss and Kevin Cahill of the University of New Mexico developed the apparatus shown in this video, which is made up of a hollow cylinder with a rotating tube inside it. In this experiment, the space between the cylinders is filled with corn syrup. Drops of food dye are then added and the inner cylinder is rotated slowly, mixing the layers in an orderly fashion.
But the real fun happens when the cylinder's rotation is reversed. This effectively returns the fluid to its initial state, along with the three drops of different coloured dye.
So how is this possible? When corn syrup - a viscous fluid - is mixed, friction dominates inertia and it maintains distinct layers when it flows. This behaviour can be predicted by its low Reynold's number, a measure of how density, speed, and viscosity relate to each other. The phenomenon - called laminar flow - is exploited in many applications like ventilation systems and hydroelectric plants. Click here for a more familiar form of laminar flow.
Check it out.

Is German Frugality Part Of The Euro Problem?

Yes.  Ambrose Evans-Pritchard:
The problem is deep and structural. These countries were thrown together into monetary union by high-handed politicians before there was any meaningful convergence of productivity, growth patterns, wage bargaining, inflation proclivities, legal systems, or sensitivity to interest rates. The Maastricht rules targeted one variable (debt) but missed all the others.
The damage was compounded by the ECB. It ran a loose monetary policy in the early Noughties, breaching its own M3 and inflation targets year after year, in order to help Germany when Germany was in trouble (for cyclical reasons, obviously)
This greatly aggravated the credit bubbles in Ireland and the South. There are no innocents in this story. All countries share blame. Germany is a sinner in all kinds of ways, not least because it seems to think it can lock in a permanent structural trade surplus, and then order others to stop running deficits.
Dr Merkel, you have a PhD in nuclear physics. You must know there cannot be good imbalances (your surplus) and bad imbalances (the Spanish, Italian, French, Portuguese deficits). The maths have to add up within a currency union.
In the old days these intra-EMU imbalances would have corrected naturally. The D-Mark would have risen. The lira and peseta would have crashed. The drachma would have crashed even more. Problem solved.
That corrective mechanism has been jammed by political forces.
The German savings rate and fear of inflation are helping drive the Euro crisis.  The nation is playing the role of the Republicans in the United States, even though the Republicans are at least resposible for more than half of the problems here.  Each is pushing for tighter money and cuts in government spending, even though there is a problem with demand because of consumer indebtedness.  Yes, government deficits are a serious long-term problem, but drastic spending cuts are going to make things worse.  I'm not sure what the key solution is in Europe, but here in the states we need to cut war expenditures and raise taxes, especially on the very wealthy.  Neither is a significant option in Europe.

Is Gold In A Bubble?

Smart Money on gold (via Ritholtz):
For many experts, of course, this everyman rush to gold is the ultimate contrarian indicator. When hard-core skeptics are converted, so the thinking goes, the market has entered pure bubble territory. In fact, they say it's close to popping: Gold prices fell 2% from their recent high of $1,780 an ounce after the news last week that CME Group, a futures marketplace, is requiring institutional investors to put up more cash as collateral before they can make bets on gold. But those prices have already bounced back, gaining $42 between Monday and Tuesday and settling at a new record of $1,782. "It's very tempting for investors to want to buy things that have gone up recently, but that shouldn't the reason for buying gold," says Gregg S. Fisher, chief investment officer of Gerstein Fisher, a New York based investment advisory firm.
And yet, many gold bugs -- new and old -- remain convinced the precious metal still has new highs to set. Because gold tends to perform well during extended economic downturns or inflationary periods, both still real possibilities in the U.S., some predict gold will continue its upward march this year; it's already up 25% year-to-date. For instance, J.P. Morgan Chase Bank is calling for gold to reach $2,500 an ounce or higher by the end of the year. Adjusted for inflation, that's above the metal's all-time high of $2,400 in 1980.
I'll go with the skeptics.  Gold is in a bubble, but I don't know when it will pop.  If I had to guess, I'd put it at about $2000 or $2100 an ounce.  By that time, people will be predicting $3000 or $4000 an ounce.  I just don't believe the hype that the dollar, and all other currencies are worthless compared to shiny metal which people hoard.  Doesn't seem like a good investment to me.  Honestly, I have purchased gold, and probably won't sell all of it.  But as prices have started moving parabolically, I'm getting awfully tempted to part with it.

Do Republicans Want Deflation?

Simon Johnson:
According to the National Bureau of Economic Research, falling from peak to trough in each cycle took 11 months between 1945 and 2009 but twice that length of time between 1854 and 1919. The longest decline on record, according to this methodology, was not during the 1930s but rather from October 1873 to March 1879, more than five years of economic decline.
In this context, it is quite striking — and deeply alarming — to hear a prominent Republican presidential candidate attack Ben Bernanke, the Federal Reserve chairman, for his efforts to prevent deflation. Specifically, Gov. Rick Perry of Texas said earlier this week, referring to Mr. Bernanke: “If this guy prints more money between now and the election, I don’t know what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treacherous — er, treasonous, in my opinion.”
In the 19th century the agricultural sector, particularly in the West, favored higher prices and effectively looser monetary policy. This was the background for William Jennings Bryan’s famous “Cross of Gold” speech in 1896; the “gold” to which he referred was the gold standard, the bastion of hard money — and tendency toward deflation — favored by the East Coast financial establishment.
Populism in the 19th century was, broadly speaking, from the left. But now the rising populists are from the right of the political spectrum, and they seem intent on intimidating monetary policy makers into inaction. We see this push both on the campaign trail and on Capitol Hill — for example, in interactions between the House Financial Services Committee, where Representative Ron Paul of Texas is chairman of the monetary policy subcommittee, and the Federal Reserve.
It is interesting that the same rural voters who wanted to water down currency in the 1890s now want to return to the gold standard, even though that would "crucify them on a cross of gold" again.  I don't understand the Republicans embracing deflation when the vast majority of people are mired in debt.  Decreasing home values put people further underwater on home loans, leaving default as the only way out for many.  This will only further depress the economy.  What we really need is some inflation which actually causes wages to increase.  Returns to labor must increase before individuals can improve their balance sheets.

Midwest Land Prices Increase

From the Chicago FRB, via Calculated Risk (who also helpfully links to John Mellencamp's Rain on the Scarecrow):
Farmland values for the second quarter of 2011 climbed 17 percent from the level of a year ago in the Seventh Federal Reserve District. The value of “good” agricultural land increased 4 percent in the second quarter compared with the fi rst quarter of 2011, according to a survey of 226 agricultural bankers in the District. Over 60 percent of the respondents forecasted farmland values to stabilize in the third quarter of 2011, yet about one-third still expected farmland values to move higher.

Agricultural credit conditions were stronger in the second quarter of 2011 relative to a year earlier, as illustrated by a decrease to 2 percent in the portion of agricultural loans perceived by respondents as having “major” or “severe” repayment problems. Repayment rates for nonreal-estate farm loans were higher than a year ago, while renewals and extensions of these loans were lower. Funds availability for lending was up relative to the second quarter of 2010. The demand for non-real-estate loans remained weaker than a year earlier. Interest rates on agricultural operating loans and mortgages dropped under the lows set six months ago. The average loan-to-deposit ratio for the District inched up to 70.3 percent in the second quarter of 2011 from 69.8 in the previous quarter.
Land prices have gotten pretty high, and the "investors" are starting to buy land as the one safe investment, so we may be nearing a peak.  This will mainly depend on commodity prices, so if the inflation fear continues to push the hedge funds and pensions into diversifying their portfolios with more commodities, a potential land bubble may inflate some more.

Wednesday, August 17, 2011

Where Do Corporate Profits Come From?

Philip Pilkington gives an explanation for where corporate profits come from (sort of an MMT primer):
As we can see, profits actually come from some fairly unusual sources. Government spending up to the point of full employment actually increases profits, while workers’ savings diminishes them. This ties into the MMT argument that government should offset workers’ desired savings. As we can clearly see from the contemporary situation, this happens in an almost automatic manner; as the private sector saves and pays down debt in the current uncertain environment, the government goes into deficit in order to float profitability.
We should also note that capitalist economies are not perpetual motion machines. Many people seem to have a vague inclination that capitalist economies are somehow ‘self-generating’ and, for example, that government spending or private debt-financing are exogenous or external factors. This is clearly not the case. Money enters the economy through either government spending or private sector indebtedness. These then wash through the economy and eventually turn up as profits. These facts need to be front and centre when public policy is considered.
This is thought-provoking on a worldwide level.  The United States budget deficit and U.S. consumers, along with the PIIGs and the U.K. are providing the market for German and Chinese goods, and offset the German and Chinese citizens savings.  As these countries take austerity measures, what happens to the Germans and Chinese?

Quake Lake

August 17, 1959:
Quake Lake (officially Earthquake Lake) is a lake in southwestern Montana, United States. It was created after a massive earthquake struck on August 17, 1959, which killed 27 people. Today, Quake Lake is 190 feet (58 m) deep (150 feet as of July 2009) and six miles (10 km) long. US 287 follows the lake and offers glimpses of the effects of the earthquake and landslide and allows access to a visitor center. The lake is mostly within Gallatin National Forest.
Hebgen Dam, built in 1917, is a concrete core and rock fill faced structure that sustained severe damage but continued to hold. Repairs were completed on the dam spillway in a few weeks. The landslide, which occurred downstream from the dam, blocked almost all the flow of the Madison River which began to fill in the void upstream from the slide. In less than a month, the waters had created what is now known as Quake Lake. The lack of a reliable water outlet for this new lake forced one of the largest mobilizations of the U.S. Army Corps of Engineers ever commenced in the western U.S. Before the new landslide was breached by the quickly rising waters, a spillway was constructed to ensure erosion and potential failure of the natural dam would be minimized. Within the immediate vicinity of the earthquake and resultant landslide a few dozen cabins and homes were destroyed. Overall damages to buildings and roads were minor with damage costs placed at 11 million dollars in 1959. Aftershocks up to 6.5 on the Richter scale continued for several months.

Texas Politician Job Requirements

ataxingmatter on Texas  (via Mark Thoma):
As Krugman notes, even with the oil and gas prosperity to put a surface gloss on the Texas economy, facts for little folk on the ground are not so nice--one in four lacks health insurance;  more Texans that do work have work that pays only minimum wage compared to other states; and unemployment has lately soared to 8.2 percent.  Perry's approach to government can't be applied at a national level to achieve any good results. As a former Texan (I graduated from high school in Carthage, Texas, a small town just south of the sprawling city of Longview where my family still resides), I must say I feel particularly queasy thinking about Texas Governor Rick Perry's presidential aspirations.  I believe George W Bush will be viewed historically as one of our worst presidents--he oversaw a pullback on regulation and oversight that ensured that bank speculation would move us into the Great Recession, and he capped that with a Treasury Secretary from Wall Street--Paulson--who engineered a huge (and ultimately necessary because of the Bush deregulatory policies) bailout of the Big Banks (and indirectly of their Big Investors) but one with no strings attached!  He led us into two senseless, interminable, and terribly costly --in both lives and dollars--wars of choice, for reasons primarily to do with furthering the military-industrial complex and creating politically useful 'enemies' to replace the anti-communism politics that came in so handy to Reagan and Johnson in their presidencies.
Rick Perry would be even worse.
Partly it's that Texas breeds a very special category of politician--one that is tied much too closely to Big Oil and one that considers business to be nothing less than the central component of the State.  What's good (short-term) for business is what Texan politicians try to provide.
Again, congratulations to Texans for feeling good about yourselves.  But please, quit sending the nation your goofy, not-too-bright governors to campaign for President.  The last one really effed things up.  I sure as hell don't want another.  If I liked what was accomplished in your state, I'd move there.  But I'll move to the damn moon before I move to your state.  Hopefully, some of the spare Tea Partiers here, who think that Rick Perry would make a good president, will move to Texas.  Please, call this guy back home.

Expanding the Panama Canal

The NYT looks at the Panama Canal expansion project (via John Cole):
About a mile long, several hundred feet wide and more than 100 feet deep, the excavation is an initial step in the building of a larger set of locks for the Panama Canal that should double the amount of goods that can pass through it each year.
The $5.25 billion project, scheduled for completion in 2014, is the first expansion in the history of the century-old shortcut between the Atlantic and Pacific. By allowing much bigger container ships and other cargo vessels to easily reach the Eastern United States, it will alter patterns of trade and put pressure on East and Gulf Coast ports like Savannah, Ga., and New Orleans to deepen harbors and expand cargo-handling facilities.
Right now, with its two lanes of locks that can handle ships up to 965 feet long and 106 feet wide — a size known as Panamax — the canal operates at or near its capacity of about 35 ships a day. During much of the year, that can mean dozens of ships are moored off each coast, waiting a day or longer to enter the canal.
The new third set of locks will help eliminate some of those backlogs, by adding perhaps 15 passages to the daily total. More important, the locks will be able to handle “New Panamax” ships — 25 percent longer, 50 percent wider and, with a deeper draft as well, able to carry two or three times the cargo.
That's a pretty cool project.  It will directly benefit trade to and from the United States.  Hopefully, all goes well in construction.

Amazing Bike Tricks In An Abandoned Factory

via the Dish:

I find the abandoned site to be almost as interesting as the bike tricks.

The Case Against The Bush Tax Cuts

Newsweek makes it (via Ritholtz):
Ever since the Bush-era tax cuts of 2001 and 2003, the government has suffered from self-induced anorexia. Those oft-debated but never rescinded tax breaks have steadily drained the Treasury and added to its borrowings. Consider that in 2000, the total U.S. government debt (the net accumulation of its borrowings since the Revolutionary War) was $3.4 trillion. Today it is $11 trillion. This matters now because with the economy slowing again, the debt hugely constricts our options. The normal response to the bad jobs market would be increased deficit spending, but the government is already operating at a $1.5 trillion annual deficit (that’s equal to a tenth of the GDP). It is borrowing half of what it spends. That’s enough to have spooked S&P and reminded the stock market a bit too much of Europe.
You can understand the budget by thinking of two parallel lines, one representing spending, the other revenue. During most of the postwar period, the spending line was a shade higher (the government typically ran small deficits). In 2001, when the budget last was in balance, the government collected roughly 19 percent of the GDP in taxes; it spent slightly less. But since the Bush tax cuts went into effect, the lines have wildly diverged. Spending has soared to 25 percent of GDP. And, alarmingly, tax receipts have crashed to 15 percent of GDP, the lowest level since World War II. Everyone, Democrats included, recognizes that spending must come down. But the Republicans insist that taxes—any taxes—are off limits. Regrettably, Obama has mimicked this position with a populist twist (he opposes reversing the tax cuts except on the “rich,” whom he defines as people earning more than $250,000 a year). Though coated in progressivism, this extends the myth that people can get something for nothing.
It’s hard to overstate the extent to which these cuts have been, and continue to be, the worm in Uncle Sam’s apple. They have cost the U.S. $3 trillion; the stimulus, by contrast, cost $1 trillion. If the cuts are extended, over the next decade they will bleed the Treasury of $5.4 trillion more.
They make the case that Obama blew it by giving in to Republican demands to extend them for 2 years, which I agree with them on.  They should expire as part of a long-term deficit reduction deal, with the tax credits for the middle class phased out over two or three years.

Tuesday, August 16, 2011

To Alcohol

Not Quite The Obama Budget Deficit Crisis

Nouriel Roubini weighs in on the causes of the giant budget deficits, via Ritholtz:
How did we get a $1.5 trillion change in our fiscal condition during Bush's time in office? Roubini lists five factors:

1. We cut taxes.

2. We spent $2 trillion on two unwinnable wars.

3. We doubled discretionary spending. Some conservatives originally aimed to "starve the beast" by cutting taxes in order to force future cuts in spending. But spending grew so out of control in Bush's term that no beast was starved, Roubini said. In fact, the beast was fed.

4. We added entitlement benefits like the Medicare drug benefit.

5. We entered the largest economic and financial crisis ever, which caused a huge increase in the deficit through the "recession deficit" and the cost of bailing out the banks and financial institutions.
No kidding.  If only tea partiers could read and understand this.  I won't be holding my breath.

Hydraulics And Hydrology In Action

If you are going to build a fence across a stream bed, listen to the civil engineers (via nc links):
Amidst recent reports that detail just how harmful the United States border barrier is to local wildlife and their habitats, rainwater knocked down 40 feet of the fence in Arizona last Sunday night. The stretch of fence that washed away was part of a 5.2 mile mesh barrier that was built between 2007 and 2008. Though it is the first time this particular fencing has fallen, it came as no surprise to officials at Organ Pipe Cactus National Monument, where the fence is located. When Organ Pipe expressed their concern with the proposed design for the barricade before its completion, Border Patrol unsurprisingly issued a final environmental assessment that said they found that it would have no significant impact. They added that, despite the claims of Organ Pipe officials, it would not cause flooding. They were wrong.
Lee Baiza, Superintendent of Organ Pipe Cactus National Monument, told the Arizona Daily Star, “The fence acts as a dam and forms a gradual waterfall. … The water starts backing up and going higher. The higher it gets, the more force it has behind it.”
It only took 2.5 inches of rain to wash away the fence, and because Baiza says bursts of strong rain are common in the area, it probably won’t be the last time such an incident occurs. Matt Clark, the Southwest representative for Defenders of Wildlife, says this is an example of consequence of Homeland Security’s disregard for expert advice in an effort to quickly erect border fences.

Scenes From Our County Fair

Our Midway, not exactly swamped with people.

This year was the first year for the Beer Garden, also not very crowded:

They rushed in the harness racing message board from another fair race card earlier in the day:

My wheat made an appearance in the Grange display my neighbor put together:

Despite the addition of the beer, the rest of the fair was disappointing.  Reportedly, there were 29 steers in the steer show, 38 dairy beef feeders in their show and 53 market lambs in the sheep barn.  17 dairy cows made an appearance.  But there were 140 goats and lots of rabbits, chickens and turkeys.  I don't know about the horses, because I don't give a damn about those folks.

More On State Fair Butter Sculptures

USA Today (via nc links):
Other states with butter cows include Illinois, Kansas, New York and Utah, while the Wisconsin and Indiana state fairs feature mammoth cheese carvings.
But Minnesota may come the closest to Iowa in celebration of its dairy sculptures. The state's dairy queen — Princess Kay of the Milky Way — and her court are immortalized in butter busts. Other state sculptures have included Darth Vadar and, in his home state of Illinois, former President Abraham Lincoln.
But it's Iowa where the rich history was born, confirmed Gary Welling, head of the pastry program at Johnson & Wales University in Providence, R.I.
There, sculptor Sarah Pratt works in a cooler where the air lingers in the low 40s, applying 600 pounds of butter over a metal, wood and wire frame to create a slick and fatty cow that's 5-feet tall and about 8-feet long.
The 34-year-old elementary school teacher took over the job in 2006 from the late Norma "Duffy" Lyon, who was Iowa's "Butter Cow Lady" for 46 years. The butter in the cow may have been around longer than Pratt: It can be reused for up to 10 years.
I still would like to have a party where they use the butter for corn on the cob or rolls.

Beanball Death

August 16, 1920:
 Ray Chapman of the Cleveland Indians is hit on the head by a fastball thrown by Carl Mays of the New York Yankees, and dies early the next day. Chapman was the second player to die from injuries sustained in a Major League Baseball game, the first being Doc Powers in 1909.

Rick Perry Calls QE3 Almost Treasonous

Rick Perry on the possibility of Bernanke starting QE3:
 “If this guy prints more money between now and the election, I dunno what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treasonous in my opinion.”
This guy and Michele Bachmann are leading candidates for the Republican nomination?  What a bunch of clowns.  How's that for an independent Federal Reserve?

Monday, August 15, 2011

Dividends And Capital Gains Versus Earned Income

Warren Buffett says we should ask the very rich to share in the budget sacrifices in the U.S. (via Mark Thoma):
OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.
While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.
These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.
Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.
It is important to remember why so many average folks are opposed to raising taxes on the wealthy.  They know how much FICA tax and income tax is taken out of their own checks, and they know that tax rates go up with income.  They don't seem to realize that FICA tax is capped at $106,800, making that tax regressive.  Likewise, they don't realize that capital gains and dividends are taxed at a maximum rate of 15%, which is a crazy low rate compared to the 25% rate charged on earned income over $34,500 for a single person.  No wonder regular folks feel bad for the rich guys, they don't realize that many of them are paying much less than they do.

Sunday, August 14, 2011

From Cattle To Soybeans In The Pampas

LA Times:
As a kid, fifth-generation Argentine cattleman Mario Caceres often dressed up in a beret, bandanna and baggy pants called chiripas to emulate his country's gauchos, the nomadic cowboys who once ruled the Pampas and who still symbolize rugged independence, chivalry and expert horsemanship.

His head full of the romantic tradition of the gaucho, glorified in songs and the epic poem "El Gaucho Martin Fierro," Caceres built a successful ranching business that once totaled 1,600 head of Angus, one of the breeds that made the name "Argentina" synonymous with beef.

"Cattle was never a business to me but a way of being, a philosophy," Caceres, 45, said one morning last month as he greeted a visitor at his ranch 150 miles west of Buenos Aires. "Cattle give you open skies, freedom and nature, and teach you the virtue of patience because the results come slowly. That's something very beautiful."

But Caceres is slowly bidding adios to gaucho ways, swapping his livestock for something safer, faster and vastly more profitable: soybean crops.

The economic reality of the global commodities boom has trumped starry-eyed dreams of a storied past for Caceres and hundreds of other Argentine ranchers. Turns out the same soil and climate conditions that make Argentina ideal for cattle also make it primo soybean terrain. Add in a tripling of global soy prices over the last decade, pushed up by the biofuels market and food demand from Asia, and you have a massive migration to soy around these parts.

Over the last four years, Caceres has converted half of his ranchland to soy fields while reducing his livestock to just 130 head, which he says he keeps for mainly sentimental reasons. The horse and lasso he once used have been swapped for an all-terrain vehicle, which is perfectly suitable for monitoring his inanimate soy crops.
From 1,600 cows to 130, that's a pretty big change.  Of course, farmers in the corn belt learned long ago that it was a lot easier growing crops than raising livestock.  I'm kind of like him in that I have cattle for sentimental reasons, but 8 is a lot less than 130. 

That Is One Big Boar

Des Moines Register:
Tiny of Postville had the right combination of age and youth Thursday to waddle off with the Big Boar title at the Iowa State Fair.

The 1,196-pound boar is 7 years old, at least two years older than his five rivals. But his owner, Des Moines Area Community College welding student Blake Everman, 19, was the youngest escort in the weigh-in competition held at the Swine Barn.
Tiny received hearty applause from more than 500 onlookers at the Swine Barn's center ring before being escorted to the traditional pen of honor on the west side of the barn.

Crowds that an Iowa caucus candidate would envy gathered around Tiny after he was installed in the Big Boar pen.

"He always draws big crowds," said Albert Butler of Lacona, himself a show pig producer who emceed the Big Boar competition Thursday.
1,196 pounds, that's crazy.  I've had first calf heifers that weighed less than that when they calved.  That is one big pig.

Battle of The Yellow Ford

August 14, 1598:
The Battle of the Yellow Ford (Irish: Cath Bhéal-an-Átha-Buí) was fought in western County Armagh, Ulster, in Ireland, near the river Blackwater on 14 August 1598, during the Nine Years War (Ireland).
It was fought between the Gaelic native Irish army under Aodh Mór Ó Néill and Aodh Ruadh Ó Domhnaill and a crown expeditionary force from Dublin under Henry Bagenal.
The crown forces were marching from Armagh town to re-supply a besieged fort on the Blackwater when they fell into an ambush and were routed with heavy losses.
The Nine Years War ended in the defeat of the Ulster chieftains led by the Earl of Tyrone, Hugh O'Neill, and led to the Flight of the Earls and the Ulster Plantation.  The reverberations from this defeat have carried through 400 years of history to the present day.

NASA Photo of the Day

August 13:

Castle and Meteor by Moonlight
Image Credit & Copyright: Tamas Ladanyi (TWAN)
Explanation: Each August, as planet Earth swings through dust trailing along the orbit of periodic comet Swift-Tuttle, skygazers enjoy the Perseid Meteor Shower. As Earth moves through the denser part of the comet's wide dust trail this year's shower peaks around 6:00 UT August 13 (this morning), when light from a nearly full Moon masks all but the brighter meteor streaks. Still, Perseid meteors can be spotted in the days surrounding the peak. Moonlight and a Perseid meteor created this gorgeous skyscape, recorded in a simple, single, 10 second long exposure on the morning of August 12. Below the moonlit clouds in the foreground are the ruins of a medieval castle near Veszprem, Hungary, seen against the Bakony mountain range. In the night sky above the clouds, the Perseid meteor's trail is joined by bright planet Jupiter near the center of the frame along with the lovely Pleiades star cluster at the left.

Could Camden Burn?

Democratic Convention Watch, via nc links:
In Camden, there have been riots before. You could say that while the last actual riots were in 1971, they started in 1967 and smoldered until the city burned in 1971, leading to the final fleeing of Camden's middle class, and white population, out of the city. Today, Camden is an incredibly poor and crime-ridden place. It looks across the river directly at Philadelphia. Assorted sets of statistics place it differently, but normally Camden is considered the most dangerous city in America, or sometimes number 2, and most always in the top 10. These are the 2009 poverty data, and things haven't improved. 36% of the population (and over 50% of all kids) live below the poverty line. Schools are abysmal, and a lot of elected officials end up in jail for extortion, theft, and other crimes against their own city. On top of this, New Jersey has Chris Christie, who has done his level best to make sure that as few pennies as possible end up in Camden's coffers. Especially sad since there is virtually no local tax base.
In January, the Camden police force was cut by half, and the fire department by a third. It has not been pretty. Props to the laid off firemen who actually still show up at the most severe fires just to help. Now, Republican politicians are working to completely dismantle the Camden police force, and replace it with a countywide police department. Some percentage of the county force would be reserved for current Camden cops, who would have to apply. But the force would be deployed countywide. The Camden city government has signed on to this program, since they have virtually no money. The cops are against it. The contention is that local police know what people from the outside do not. And they're right: there is a reason that community policing works as well as it does.
John Timoney has been hired to oversee the police transition. You may remember him from his time in NY, or Miami. I remember him from his time in Philadelphia, especially during the Republican convention in 2000 when he did his best Frank Rizzo imitation and arrested people left and right and stuck them in the Armory. If you don't get the connection, Frank Rizzo was, amoung other things, a Philadelphia cop from the 1940's to the early 1970's, eventually becoming commissioner. In the early 60's he said that he could take a bunch of Philly cops, go down to Cuba and take out Castro. Most people believed he could. He later became mayor of Philadelphia.
Could Camden burn? Absolutely. With a tiny force of cops who know the city, abject poverty, no industry, a non-functional school system, the only choice Timoney will have (and he'll like it, he's practiced in Philadelphia) is thug policing. Which never works for long. It will only take one cop, one misstep, and Camden will destroy the little that is left of it. And Philly will see the flames across the river.
It goes on to discuss the flash mob problem in Philadelphia.  It just bothers me to see the rise in violence and crime which scares the middle class away from the central cities.  Camden is prime real estate directly across from Central City Philadelphia, but it is nearly abandoned.  We need greater density in our cities, and relative progress in the past ten or fifteen years will be blown away by riots and random violence.  We have seemingly been spared the past three years of this Great Recession, but we may now be seeing a return to the days of riot and violence which grew out of the mid 1960s and helped fuel white flight.  Hopefully, the potential danger will pass without releasing, but I don't see any reason to think help is on the way.

The Making of Roger Ailes

Ailes was born in 1940 in Warren, Ohio, a manufacturing outpost near Youngstown. His father worked at the Packard plant producing wiring for GM cars, and Roger grew up resenting the abuse his father had to take from the "college boys" who managed the line. Roger spent much of his youth in convalescence. A sickly child – haemophilia forced him to sit out breaktime at school – he had to learn to walk again after getting hit by a car aged eight. His mother worked, so he was raised in equal measure by his grandmother and TV. "Television and I grew up together," he later wrote.
A teenage booze hound – "I was hammered all the time" – Ailes said he "went to state school because they told me I could drink". In fact, his father kicked him out of the house when he graduated from high school. During his stint at Ohio University, where he studied radio and television, his parents divorced and left the house where he had spent so much of his childhood recovering from illness and injury. "I went back, the house was sold, all my stuff was gone," he recalled. "I never found my shit!" The shock seems to have left him with an almost pathological nostalgia for the trappings of small-town America.
The man seems like a total loon.  He seems like he was born to be the perfect fit for Richard Nixon, with pathological paranoia.  It blows me away that so many people tune into his propaganda to be "informed."

A Lesson For Republicans

Bruce Bartlett explains why Reagan's tax cuts wouldn't work as well now as they did then:
It’s important to remember that inflation was the central economic problem at the time Reagan endorsed the tax plan that had been developed in Congress by Congressman Jack Kemp of New York and Senator Bill Roth of Delaware, which proposed cutting the top income tax rate from 70 percent to 50 percent and the bottom rate from 14 percent to 10 percent.
The Consumer Price Index rose 4.9 percent in 1976, 6.7 percent in 1977, 9 percent in 1978 and 13.3 percent in 1979. At the same time, unemployment was stubbornly high, averaging 7 percent from 1975 to 1979.
One of the key problems that the Reagan-Kemp-Roth plan was designed to deal with was bracket-creep. Since the tax system was not indexed at that time, whenever workers got a cost-of-living pay raise they got pushed up into higher tax brackets even though their real income had not risen. Consequently, the average federal income tax rate on a four-person family with the median income had risen from 7 percent in 1965 to 11 percent in 1978, and the marginal tax rate – the tax on each additional dollar earned – rose from 17 percent to 25 percent.
Unfortunately, Republicans seem to think that tax cuts always stimulate the economy, bring rain, cure cancer and make the blind see.  It would be nice for them to acknowledge that the Bush tax cuts haven't done a damn thing to help this country, and have only made large deficits even larger.  Bartlett has, and that's why he's been kicked out of the wingnut welfare apparatus.

Rain Update

We got a whopping eighth of an inch overnight.  That won't help the crops much.