Observations from a week of Kansas conservative talk radio (the best option available whilst hauling wheat):
It's common to paint Democrats/liberals as intellectuals (which is bad - you'd rather have someone setting policy that you feel comfortable having a beer with, not someone who reads). However, I wasn't aware of how strongly Obama's ego was derided on talk radio. What's interesting is the interplay between this and the egotistical facade expected of major radio talk show hosts. Every episode is a reminder of how they accurately predicted something two years ago, that Nobel Prize winner Krugman is a doofus compared to their downhome understanding of economics, and they know exactly what's going on. Obama is then criticized for 'lecturing us.' Not surprisingly ironic, just interestingly so.
I don't know if it's more intriguing or frightening with how facts are presented on these shows. Fox and MSNBC have their respective 'issues' in how the news is spun, but it's amazing how Hannity will just straight up lie. Some is merely spin, but distortions also exist that no sane person properly equipped with facts would ever agree with. You want to merely dismiss it, but the ideas that oil merely dissipates in the ocean and it's impossible to reliably run machinery on natural gas reach millions of voters everyday. Many more than Air America (which I may begin describing as Al Franken's greatest joke to date).
Tiarht is running one of the most pathetic, rhetorical campaigns ever. We're used to campaigns light on substance, heavy on labels; he's taking it to a whole new level. You encounter an ad for that Senate race about every 20 minutes, with Todd running about two for every one ad Moran puts on. Moran's are 100% defensive in nature (he's obviously taking the 'enjoy your lead and don't do anything stupid to lose it' approach), and simply says he's conservative enough to represent Kansas. I've heard if you do a cross-comparison, they essentially share an identical voting record. The only real difference is that Moran has a spine, which is why he should get your vote in the primary. Your alternative is a man proud of earning Sarah Palin's endorsement.
Tuesday, July 6, 2010
Tuesday, June 15, 2010
Albeit this space typically reserved for saying something insightful (at least at some rudimentary level), it has a different place today. I was looking around this afternoon and saw that the paper I wrote last summer was finally published by the Great Lakes Commission. Feel free to cite to your heart's content.
Sunday, June 13, 2010
Alternative Big XII Scenarios
According to Orangebloods.com, my Wildcats may have a chance of staying in a competitive Big 12(-2) yet. The defections of Nebraska and Colorado threw the conference's future into doubt, and that future runs through Texas. While Texas continues to hold the process hostage, some favorable light shines:
-Colorado was really a parasitic school, and took more money from the Big 12 than it generated.
-The conference gets to renegotiate its TV contract in 2011, and as long as those marquee Texas/Oklahoma match-ups remain, revenues should double.
-That's right, double, putting payouts on par with SEC receipts.
-Texas will be allowed to continue the pursuit of its own college network (a desire that cast a shadow onto the Big XII's future even before the Big 10 mentioned its interest in Mizzou).
So the exodus of the Big XII South and subsequent conference demise may be more exaggerated than first thought. Opportunities for expanding the conference back to 12? The CEO of FedEx is prepared to pay upwards of $10 million a year to a BCS conference that will add Memphis (that's right Texas - even more money!), and the Big XII cements itself at the top of the college basketball world. In my own little fantasy world, we'd either raid Arkansas from the SEC for a second team, or (wait for it)…
take Notre Dame and slap the Big 10(+2) in the face. In examining these options, Arkansas is a natural rivalry and still plays its former Southwest Conference opponents (especially Texas) in pre-conference action regularly. The school also betrayed the SWC in bolting for the SEC in the 90s, demonstrating its willingness to switch sides.
However, I think the Notre Dame option is even more intriguing. It switches from one great basketball conference (Big East) to another, and gets $17-$20 million guaranteed every year for football. The football thing is important, because I don't see NBC resigning a huge contract for a consistent 7-game winner. Additionally, Notre Dame played Washington State in San Antonio in 2009 as a 'home game' in a shameless ploy to enter the fertile recruiting ground of Texas. Joining Texas' conference and establishing a firm pipeline, maybe creating its own TV station, and not having to deal with Big 10 administrators that have been reproving Notre Dame for years? Oh yeah, I think it could happen.
-Colorado was really a parasitic school, and took more money from the Big 12 than it generated.
-The conference gets to renegotiate its TV contract in 2011, and as long as those marquee Texas/Oklahoma match-ups remain, revenues should double.
-That's right, double, putting payouts on par with SEC receipts.
-Texas will be allowed to continue the pursuit of its own college network (a desire that cast a shadow onto the Big XII's future even before the Big 10 mentioned its interest in Mizzou).
So the exodus of the Big XII South and subsequent conference demise may be more exaggerated than first thought. Opportunities for expanding the conference back to 12? The CEO of FedEx is prepared to pay upwards of $10 million a year to a BCS conference that will add Memphis (that's right Texas - even more money!), and the Big XII cements itself at the top of the college basketball world. In my own little fantasy world, we'd either raid Arkansas from the SEC for a second team, or (wait for it)…
take Notre Dame and slap the Big 10(+2) in the face. In examining these options, Arkansas is a natural rivalry and still plays its former Southwest Conference opponents (especially Texas) in pre-conference action regularly. The school also betrayed the SWC in bolting for the SEC in the 90s, demonstrating its willingness to switch sides.
However, I think the Notre Dame option is even more intriguing. It switches from one great basketball conference (Big East) to another, and gets $17-$20 million guaranteed every year for football. The football thing is important, because I don't see NBC resigning a huge contract for a consistent 7-game winner. Additionally, Notre Dame played Washington State in San Antonio in 2009 as a 'home game' in a shameless ploy to enter the fertile recruiting ground of Texas. Joining Texas' conference and establishing a firm pipeline, maybe creating its own TV station, and not having to deal with Big 10 administrators that have been reproving Notre Dame for years? Oh yeah, I think it could happen.
Tuesday, May 18, 2010
Democrats are Wrong, but Republicans are Wronger, and the Senate's Wrongest
There's nothing more fun in politics than pointing out the other side's hypocrisies. Although this does little to further intellectual inquiry, it makes for great political theater. In comparing healthcare and market reform, I will attempt to provide the facade of doing both.
I'm of the personal opinion that Chris Dodd's reform package is about the best you could expect of the Senate. While not perfect, it has some important components. The one component Republicans contend it lacks is eliminating the concept of 'Too Big to Fail.' What's interesting is that few (if any) Republicans are pushing for size restrictions. Rather, they clamor for a provision that says we will not bail out any financial institutions in the future - thus eliminating the moral hazard created by our rush to mollify AGI's asshattery as the sky's falling down.
This pie in the sky fancy is about as disingenuous as the healthcare budget numbers Democrats were peddling earlier this year. A quick recap of what's bothersome: the current tax exemption for health insurance means that, as a general rule, we have an incentive to overconsume health insurance. This is why you end up with the so-called 'gold-plated' health insurance policies. The Senate was too scared to tackle this issue today, and instead wrote in the bill that they would be taxed starting in the year 2018. This tax was then used to calculate the long-term budget impacts of the healthcare bill.
I call this disingenuous because it doesn't take a policy degree to guess the likely future. Come 2017, Congress will come under pressure to amend the legislation and prevent new taxes, it will, and the financial solvency touted by Obama will be thrown out the window.
The same applies with McConnell going to the Senate floor and screaming about the 'institutionalization of bailouts.' It really doesn't matter how much power you give regulators - when shit hits the fan, they'll be on Capitol Hill demanding the power to prevent Citigroup from going under, and (assuming the President has a lick of sense) it will be done. When faced with the prospect of disaster, policy will be amended (regardless of long-term consequences).
I may be giving McConnell too much credit here in pretending he's merely disingenuous - he's lying to advance his party's standing while hurting America. When you look at what happens under the Dodd bill, no institution is saved. The government may take it over and chop it up into little pieces, but it is an entirely different company in which the stockholders lose their shirts. And that's really the crux of the matter - when you understand you'll lose your investment if a company goes under, you'll either search for a safer investment or demand a greater rate of return. Which is what this bill does. Which makes McConnell wrong. Again. Upon review, nothing too earth-shattering in this paragraph.
I still contend derivatives trading contributes absolutely nothing to the economy.
I'm of the personal opinion that Chris Dodd's reform package is about the best you could expect of the Senate. While not perfect, it has some important components. The one component Republicans contend it lacks is eliminating the concept of 'Too Big to Fail.' What's interesting is that few (if any) Republicans are pushing for size restrictions. Rather, they clamor for a provision that says we will not bail out any financial institutions in the future - thus eliminating the moral hazard created by our rush to mollify AGI's asshattery as the sky's falling down.
This pie in the sky fancy is about as disingenuous as the healthcare budget numbers Democrats were peddling earlier this year. A quick recap of what's bothersome: the current tax exemption for health insurance means that, as a general rule, we have an incentive to overconsume health insurance. This is why you end up with the so-called 'gold-plated' health insurance policies. The Senate was too scared to tackle this issue today, and instead wrote in the bill that they would be taxed starting in the year 2018. This tax was then used to calculate the long-term budget impacts of the healthcare bill.
I call this disingenuous because it doesn't take a policy degree to guess the likely future. Come 2017, Congress will come under pressure to amend the legislation and prevent new taxes, it will, and the financial solvency touted by Obama will be thrown out the window.
The same applies with McConnell going to the Senate floor and screaming about the 'institutionalization of bailouts.' It really doesn't matter how much power you give regulators - when shit hits the fan, they'll be on Capitol Hill demanding the power to prevent Citigroup from going under, and (assuming the President has a lick of sense) it will be done. When faced with the prospect of disaster, policy will be amended (regardless of long-term consequences).
I may be giving McConnell too much credit here in pretending he's merely disingenuous - he's lying to advance his party's standing while hurting America. When you look at what happens under the Dodd bill, no institution is saved. The government may take it over and chop it up into little pieces, but it is an entirely different company in which the stockholders lose their shirts. And that's really the crux of the matter - when you understand you'll lose your investment if a company goes under, you'll either search for a safer investment or demand a greater rate of return. Which is what this bill does. Which makes McConnell wrong. Again. Upon review, nothing too earth-shattering in this paragraph.
I still contend derivatives trading contributes absolutely nothing to the economy.
Sunday, April 25, 2010
Bling Bling
I dislike when people wade into subjects they almost passably understand and make definitive comment (think Peace Corps volunteers who know everything about fixing developing nations because they spent two years teaching English somewhere or TFA volunteers who could fix education if just given the reins). I'm also gonna do it right now; prepare to learn why hedging in the stock market is bull, and doesn't help America.
We open the prosecution by calling on Adam Smith. In his famous work The Wealth of Nations, he identifies land, labor, and capital as the three factors of production and the major contributors to a nation's wealth. The stock market hinges on liquidity, and isn't involved in rapid land transactions. It also doesn't deal labor (unconstitutional). Therefore, if we are to assume the body contributes to our national economy, it must be through an infusion of capital.
I buy this to an extent. When a corporation goes public, it allows investors to purchase a portion. The arrangement provides an infusion of cash, allows for the purchase of capital goods and becomes an economic driver. (A simplistic take, but generally correct.) What's problematic is when we treat subprime deals and subsequent betting with equal deference.
Two factors should determine how a loan is calculated: level of risk and transaction costs (operating costs of the lender captured here). Now in our system you can lower your level of risk by taking out insurance on the loan, effectively betting against it (when you're dishonest about it, Goldman Sachs can get in trouble). This decreases the cost of the loan, undervaluing the inherent level of risk. I don't think this is good for America.
An argument exists for supporting this hedging. Economic undertakings are risky, and demand an infusion of capital that isn't guaranteed to pay off. A business start-up that may never have gotten off the ground can be given the chance to flourish because, at the margin, hedging insurance makes the loan just cost-effective enough to work. We all profit as the next Berkshire Hathaway is born.
This fantasy of some economic boon facilitated by lending on the margins is fantasy. Loan fees should reflect the full risk of investment - if the risk of default is too great to grant without insurance, it's probably not a good loan to be making. There's an argument that when you bundle multiple loans and hedges, you can come out ahead (more loans are repaid than default) while capital is still generated. I say even more capital and profits are generated by encouraging safer loans.
The solution must consider who you want to shoulder the burden of the default. AIG obviously failed when everyone started going under and collecting their insurance payments. A bank forced to keep enough in reserves won't have this problem: you can eat the bankruptcy with your reserves! Of course, AIG could've also been forced to keep enough reserves to cover payouts, but not even China has that much money.
I actually wouldn't oppose the idea of hedging with insurance in moderation, much like I support acts of vigilantism on a limited basis. Unfortunately, we both know it's unrealistic to believe moderation would ever be observed if allowed. Limiting bank size is a smart, essential policy. Limiting market insurance of subprime lenders is even more important. At the minimum, it needs to get spread around more. A limit on market share or some other mechanism would be excellent. Would economies of scale make this unreasonable because smaller insurance companies can't shoulder bets on defaults? All the better. Our unemployment rate is still above 10%, and I graduate in less than a week without a job. If a trade-off must occur, you can bet I think growth should've been tempered in favor of sustainability.
We open the prosecution by calling on Adam Smith. In his famous work The Wealth of Nations, he identifies land, labor, and capital as the three factors of production and the major contributors to a nation's wealth. The stock market hinges on liquidity, and isn't involved in rapid land transactions. It also doesn't deal labor (unconstitutional). Therefore, if we are to assume the body contributes to our national economy, it must be through an infusion of capital.
I buy this to an extent. When a corporation goes public, it allows investors to purchase a portion. The arrangement provides an infusion of cash, allows for the purchase of capital goods and becomes an economic driver. (A simplistic take, but generally correct.) What's problematic is when we treat subprime deals and subsequent betting with equal deference.
Two factors should determine how a loan is calculated: level of risk and transaction costs (operating costs of the lender captured here). Now in our system you can lower your level of risk by taking out insurance on the loan, effectively betting against it (when you're dishonest about it, Goldman Sachs can get in trouble). This decreases the cost of the loan, undervaluing the inherent level of risk. I don't think this is good for America.
An argument exists for supporting this hedging. Economic undertakings are risky, and demand an infusion of capital that isn't guaranteed to pay off. A business start-up that may never have gotten off the ground can be given the chance to flourish because, at the margin, hedging insurance makes the loan just cost-effective enough to work. We all profit as the next Berkshire Hathaway is born.
This fantasy of some economic boon facilitated by lending on the margins is fantasy. Loan fees should reflect the full risk of investment - if the risk of default is too great to grant without insurance, it's probably not a good loan to be making. There's an argument that when you bundle multiple loans and hedges, you can come out ahead (more loans are repaid than default) while capital is still generated. I say even more capital and profits are generated by encouraging safer loans.
The solution must consider who you want to shoulder the burden of the default. AIG obviously failed when everyone started going under and collecting their insurance payments. A bank forced to keep enough in reserves won't have this problem: you can eat the bankruptcy with your reserves! Of course, AIG could've also been forced to keep enough reserves to cover payouts, but not even China has that much money.
I actually wouldn't oppose the idea of hedging with insurance in moderation, much like I support acts of vigilantism on a limited basis. Unfortunately, we both know it's unrealistic to believe moderation would ever be observed if allowed. Limiting bank size is a smart, essential policy. Limiting market insurance of subprime lenders is even more important. At the minimum, it needs to get spread around more. A limit on market share or some other mechanism would be excellent. Would economies of scale make this unreasonable because smaller insurance companies can't shoulder bets on defaults? All the better. Our unemployment rate is still above 10%, and I graduate in less than a week without a job. If a trade-off must occur, you can bet I think growth should've been tempered in favor of sustainability.
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