John Droz Jr. has an interesting presentation debunking renewable energy’s potential.
Although he is a PhD the presentation is geared towards non-scientific average citizens.
Read the whole thing… it is loaded with useful comparisons like this one:
Just a thought.. it isn’t JUST the sheer size of the deficit that should cause such concern over our state and federal governmental finances. A real concern should also be how poorly the debt was used. It went to buy votes, not to invest in anything that will yield returns to pay for the loans.
Additionally, interest on the debt will crowd out productive investment in the future.
Trouble looms – on all fronts.
Actual wizard money: worth about as much as defaulted CDOs
Tyler Cowen explains the allure of the financial magic that attracted our financial sector and how minor errors in estimates explode the magical spell:
Suppose that we misspecified the underlying probability of mortgage default and we later discover the true probability is not .05 but .06. In terms of our original mortgages the true default rate is 20 percent higher than we thought–not good but not deadly either. However, with this small error, the probability of default in the 10 tranche jumps from p=.0282 to p=.0775, a 175% increase. Moreover, the probability of default of the CDO jumps from p=.0005 to p=.247, a 45,000% increase!
A bit “mathy” but read it and you will understand how the best intentions (create a bullet proof investment) often go awry. Like so many complicated systems, safety comes from separation and redundancy not aggregation.
Via CalculatedRisk
Over 70% of homes in Nevada have negative equity. Ouch.
I own three homes. They seem to be holding value, down from their peak, but well above what I paid for them. Fingers crossed.
Not that it matters. If I do make money on them, I’m sure my profits will be inflated away or out right stolen. It’s hard to get “excited” about investments when the results are meaningless. It is even harder to find something worth or safe investing in right now.
Literally
The expected list…. drama, fine arts, music, theology… and horticulture.
http://hotjobs.yahoo.com/career-articles-worst_paying_college_degrees-1263
If they counted in benefits, some of these careers (teaching, social work) would be off the list.
Assuming an unlikely 10% savings rate once they start working, most of these graduates would have to save for 12 years to pay for a public college education, and 20+ years for a private school.
In other words… they aren’t math majors.
This isn’t the whole picture. In pure cash terms, trilions are in boxes not shown and paid out to TARP, Fannie Mae, GM and other “off the books” fiscal activities.
Also, not shown, is a box roughly 50 TIMES bigger that represents obligations not backed by savings.
It won’t end well. Obama’s not here to help, just to allocate pain away from his donors.
Not going to end well
Russ Roberts, of GMU, has a cogent take on why we had a financial crisis, and unfortunately, whey they aren’t done yet. Gambling with other people’s money (as provided by government):
How did this happen? Whose fault was it? Some blame capitalism for being inherently unstable. Some blame Wall Street for its greed, hubris, and stupidity. But greed, hubris, and stupidity are always with us. What changed in recent years that created such a destructive set of decisions that culminated in the collapse of the housing market and the financial system?
In this paper, I argue that public-policy decisions have perverted the incentives that naturally create stability in financial markets and the market for housing. Over the last three decades, government policy has coddled creditors, reducing the risk they face from financing bad investments. Not surprisingly, this encouraged risky investments financed by borrowed money. The increasing use of debt mixed with housing policy, monetary policy, and tax policy crippled the housing market and the financial sector. Wall Street is not blameless in this debacle. It lobbied for the policy decisions that created the mess.
In an update he clarifies where we are in the present European mess:
Rescuing Greece isn’t the end of the problem, it’s more akin to the Bear Stearns rescue of March 2008. It’s just the beginning of something that won’t end well.
In the short run this means the US dollar will perk up, but the bond and stock market will be volatile. Why? Much of the market rise of 2009 depended on people leveraged off falsely cheap debt (OPM again!) and arbitraging the dollar. When the dollar rises, they are on the short side of a long bus and have to get rid of something – currently stocks. Arbitrage is fun and can make you occasionally look like a genius, but leverage works in both directions and there is also no limit on how much you can lose. Expect big swings and then….
The whole thing explodes… my guess – Sept 2010.
Leading up to that expect employers, especially ones like me with large export businesses to Europe, to watch the hiring. Unemployment will stay at 10%, mainly do to give ups, and the U6 underemployment index will continue to rise.
As Russ says… It ain’t gonna end well.
Everybody looks at Greece… but could Japan default in 2011? Its governmental debt sits at 227% of GDP and rises rapidly. 59% of tax revenues fund interest ONLY on the debt. And its economy shrunk last year, and expects only 2% total growth in the next 5 years. And their new Democratic (socialist) government has gone on a spending frenzy. It is unsustainable.
"The debt situation is irrecoverable," says Carl Weinberg of High Frequency Economics, referring to Japan. "I don’t see any orderly way out of this. They will not be able to fund their deficit. There will be a fiscal shutdown, a pension haircut and bank failures that will rock the world. It is criminally negligent that rating agencies are not blowing the whistle on this."
So the race is on… will Greece, California, New York or Japan fail first?
This pains me, as my company has managed to grow sales in Japan in recent years. Now I’ll have to plan as if 10% of our revenue could be in jeopardy next year.
GM supposedly paid back $6.7 billion of its bailout loan yesterday.
The White House busily spun it as a success:
First thing this morning, Press Secretary Robert Gibbs alerted his 56,000 followers on Twitter of “BIG NEWS.”:”GM pays back US $6.7 billion used to save jobs,” Gibbs exulted. But he had more.
“BIGGER NEWS,” he trumpeted. “Payment was 5 years ahead of schedule.”
But as usual with this President, the perception was NOTHING LIKE THE REALITY.
What really happened?
GM borrowed $6.7 billion from TARP (the financial bailout fund) and gave it to government as payment on their bailout loan.
I think you can pretty much assume that if Robert Gibbs or Barack Obama are speaking, they are lying. The only question is at what rate.
H/T/ JM
Arnold Kling proposes realistic, workable, solutions to our nations over extended promises. Summed up… cut back, intelligently, on the promises. Read the whole thing.
Professor Kling served time in the belly of he beast – at Freddie Mac and the Federal Reserve, but seems relatively untainted by the experience.
Alas, his simple, workable, correct ideas will go nowhere because they don’t fit our political classes goals of more power, life time employment and corruption.
Their intransigence will force violence, eventually. Their narcissistic goals will ensure we persevere with this doomed system that will collapse and cause upheaval that kills millions.
Put another way, they aren’t interested Professor Kling.
If you can’t track a single source, humungous cloud of ash, why should we trust you with our economy?
“In a word: the US collects enough money organically (via taxes) to cover less than a third of its outlays.”
Tyler Durden
Economist
Put another way, tripling taxes won’t cure the deficit. It would, however, cure wealth – if that is the problem you wish to be rid of.
H/T/ Eric Raymond
Tax witholdings are down.
Below is an update of the most recent US Treasury tax withholding picture. As one can very plainly see it is getting worse, on both a week over week, a YTD cumulative basis, and, probably most relevantly to some readers, on a 4 week running bucket cumulative basis.
For withholdings to increase, workers have to get a pay increase, or more workers have to earn. Neither are happening.
I’m not hiring people, well except for Kay the intern who will work the summer (paid). I’ve no serious plans to invest in new employees that take hundreds of thousands of dollars to pan out and then the government takes half the profit if what they build sells. By minimizing return, they minimize my efforts. They reap what they sow.
They blame me, or anybody else, and will just try and impose a VAT or higher taxes. Because we work for them, not the other way around.
Our system is royally screwed up. Our leaders are narcissistic psychos. Our population dependent and generally stupid.
I feel like we are pretty hosed. Wish I didn’t. But my analytical mind sees nothing good ahead.
