Posts tagged ‘US’

The US Has The Best Rail System in the World, and Matt Yglesias Actually Pointed Out the Reason

Yglesias has a very good article on why passenger rail is not a bigger deal in the US.   In it, he says this (emphasis added):

Instead the issue is that the dismal failure of US passenger rail is in large part the flip side of the success of US freight rail. America's railroads ship a dramatically larger share of total goods than their European peers. And this is no coincidence. Outside of the Northeast Corridor, the railroad infrastructure is generally owned by freight companies — Amtrak is just piggybacking on the spare capacity.

It is a short article, so it does not go into more depth than this, but I have actually gone further than this and argued that the US freight-dominated rail system is actually far greener and more sensible than the European passenger system.  As I wrote years ago at Forbes:

The US rail system, unlike nearly every other system in the world, was built (mostly) by private individuals with private capital.  It is operated privately, and runs without taxpayer subsidies.    And, it is by far the greatest rail system in the world.  It has by far the cheapest rates in the world (1/2 of China’s, 1/8 of Germany’s).  But here is the real key:  it is almost all freight.

As a percentage, far more freight moves in the US by rail (vs. truck) than almost any other country in the world.  Europe and Japan are not even close.  Specifically, about 40% of US freight moves by rail, vs. just 10% or so in Europe and less than 5% in Japan.   As a result, far more of European and Japanese freight jams up the highways in trucks than in the United States.  For example, the percentage of freight that hits the roads in Japan is nearly double that of the US.

You see, passenger rail is sexy and pretty and visible.  You can build grand stations and entertain visiting dignitaries on your high-speed trains.  This is why statist governments have invested so much in passenger rail — not to be more efficient, but to awe their citizens and foreign observers.

But there is little efficiency improvement in moving passengers by rail vs. other modes.   Most of the energy consumed goes into hauling not the passengers themselves, but the weight of increasingly plush rail cars.  Trains have to be really, really full all the time to make for a net energy savings for high-speed rail vs. cars or even planes, and they seldom are full.  I had a lovely trip on the high speed rail last summer between London and Paris and back through the Chunnel — especially nice because my son and I had the rail car entirely to ourselves both ways.

The real rail efficiency comes from moving freight.  As compared to passenger rail, more of the total energy budget is used moving the actual freight rather than the cars themselves.  Freight is far more efficient to move by rail than by road, but only the US moves a substantial amount of its freight by rail.    One reason for this is that freight and high-speed passenger traffic have a variety of problems sharing the same rails, so systems that are optimized for one tend to struggle serving the other.

Freight is boring and un-sexy.  Its not a government function in the US.  So intellectuals tend to ignore it, even though it is the far more important, from and energy and environmental standpoint, portion of transport to put on the rails. ....

I would argue that the US has the world’s largest commitment to rail where it really matters.  But that is what private actors do, make investments that actually make sense rather than just gain one prestige (anyone know the most recent company Warren Buffet has bought?)  The greens should be demanding that the world emulate us, rather than the other way around.  But the lure of shiny bullet trains and grand passenger concourses will always cause some intellectuals to swoon.

Which would you rather pounding down the highway, more people on vacation or more big trucks moving freight?  Without having made an explicit top-down choice at all, the US has taken the better approach.

The Virtues of Short-Selling

Is there anything that rankles populists who are "anti-speculator" more than the ability to short stocks?  From time to time countries that are upset about falling markets will ban short-selling.  But I have defended stock (and other asset shorting) as a critical market mechanism that helps to limit damaging bubbles.  I wrote waaaaaay back in 2008, after the US temporarily banned short selling of certain assets:

At the start of the bubble, a particular asset (be it an equity or a commodity like oil) is owned by a mix of people who have different expectations about future price movements.  For whatever reasons, in a bubble, a subset of the market develops rapidly rising expectations about the value of the asset.  They start buying the asset, and the price starts rising.  As the price rises, and these bulls buy in, folks who owned the asset previously and are less bullish about the future will sell to the new buyers.  The very fact of the rising price of the asset from this buying reinforces the bulls' feeling that the sky is the limit for prices, and bulls buy in even more.

Let's fast forward to a point where the price has risen to some stratospheric levels vs. the previous pricing as well as historical norms or ratios.  The ownership base for the asset is now disproportionately
made up of those sky-is-the-limit bulls, while everyone who thought these guys were overly optimistic and a bit wonky have sold out. 99.9% of the world now thinks the asset is grossly overvalued.  But how does it come to earth?  After all, the only way the price can drop is if some owners sell, and all the owners are super-bulls who are unlikely to do so.  As a result, the bubble might continue and grow long after most of the world has seen the insanity of it.

Thus, we have short-selling.  Short-selling allows the other 99.9% who are not owners to sell part of the asset anyway, casting their financial vote [on] the value of the company.  Short-selling shortens bubbles, hastens the reckoning, and in the process generally reduces the wreckage on the back end.

I am remembering this old post because Arnold Kling links an interesting bit on economists discussing the Big Short, who among a number of interesting things say this:

Shorting the market in the way they did is very risky, and one has to be very confident, perhaps overconfident, in one’s forecast to take such risks. As a consequence, many people who were pessimistic about the housing market simply stayed on the sidelines—which in turn meant that for a while, valuations in the market primarily reflected the beliefs of optimists.

The timing issue is key.  I have been right probably in 4 of out the 5 major market shorting opportunities I have identified in the last 10 years, but have been on average 2 years early with all of them, meaning I lost money on most of them, or made money after enduring some really big paper losses for a while.

Why The Minimum Wage Does Not Make Moral Sense: Unemployment, Not Low Wage Rate, Causes Most Poverty

In response to his new $15 minimum wage in California, Governor Jerry Brown said:

Economically, minimum wages may not make sense. But morally, socially, and politically they make every sense because it binds the community together to make sure parents can take care of their kids.

Let me explain as briefly as I can why this minimum wage increase is immoral.  We will use data from the chart below which was cribbed from Mark Perry in this post.

click to enlarge

The average wage of people who work  in the poorest 20% in the US is already near $15 ($28,417 divided by 2000 full time hours - $14.20 per hour).    This is not that much lower than the hourly earnings of those in the second poorest or even the middle quintiles.  So why are they poor?  The biggest different is that while only 16% of the middle quintile households had no one who worked, and 31.5% of the second poorest quintile had no one who worked, of the poorest 20% of households a whopping 63% had no one who worked.  Only 16.1% of poor adults had a full time job.

The reason for poverty, then, is not primarily one of rate, it is one of achieving full time employment.  Many of these folks have limited education, few job skills, little or no work experience, and can have poor language skills. And California has just increased the cost of giving these folks a job by 50%.  The poor will be worse off, as not only will more of them miss out on the monetary benefits of employment, but also the non-monetary ones (building a work history, learning basic skills, etc.)

Past studies have shown that most of the benefit of the minimum wage goes to non-poor households (ie second and third earners in middle class homes).  The targets Jerry Brown speaks of, parents earning the minimum wage to take care of families, are perhaps only 1/8 of minimum wage earners.

MaCurdy found that less than 40% of wage increases [from a minimum wage hike] went to people earning less than twice the poverty line, and among that group, about third of them are trying to raise a family on the minimum wage.

Of course, the price of a lot of stuff poor people have to buy in California is about to go up.  We are going to have to raise our campground rates by 20-25% to offset the labor cost increase.  But that is another story.

The Trade Deficit is Not A Debt

If you search Coyoteblog for the title of this post, you will see a number of others with the same title.  It seems to be a theme we keep having to come back to.  Here is one example of where I tried to explain why the trade deficit is not a debt.

Take the Chinese for example.  One thing that people often miss is that the Chinese buy a LOT more American stuff than the trade numbers portray.  The numbers in the balance of trade accounts include only products the Chinese buy from the US and then take back to China to consume there.  But the Chinese like to buy American stuff and consume it here, in the US.  They buy land and materials to build factories and trade offices.  They buy houses in California.  They buy our government bonds.  None of this stuff shows up in the trade numbers.  Is it somehow worse that the Chinese wish to consume their American products in America?  No.  How could it be.  In fact, its a compliment.  They know that our country is, long-term, a safer and more reliable place to own and hold on to things of value than their own country.

Dollars paid to a Chinese manufacturer have to get recycled to the US -- they don't just build up in a pile.   If I am a construction contractor in LA and build that manufacturer a new office or a local home and get paid with those recycled dollars, I am effectively exporting to the Chinese, only the goods and services I sold them never leave the country and so don't show up in the trade numbers.  So what does this mean?   In my mind, it means that the trade deficit number is a stupid metric to obsess over.

Another way I think about it is to observe that the US is winning the battle of stuff.   Money as money itself does not improve my well-being -- only the stuff (goods and services) I can purchase with it can do so.   So i t turns out that other countries ship far more stuff to the US than we ship out. And then these folks in other countries take the money they earn from this trade and buy more stuff in the US and keep keep that stuff here!

I am reminded of all this because several other folks are taking a swing at trying to make this point to the economically illiterate.   Don Boudreaux does so here, and Dan Ikensan here.  And here is Walter Williams as well.

Another Trump Triumph -- He Has The Left Defending the American Economic System

The American Left generally spends most of its time telling us how much better things are in Denmark or France.  I can't find a lot of reasons to like Trump, but he has apparently convinced the Left that they need to defend the American economic model against other countries.  This post by Kevin Drum at Mother Jones reasd more like what one might expect from Mark Perry at AEI.

"We're a poor country now." I wonder how many people believe that just because Donald Trump keeps saying it? In case anyone cares, the actual truth is in the chart on the right. There's not a single country in the world bigger than 10 million people that's as rich as the US.

I agree!   In fact, not only are American rich richer, but the American middle class is richer and the American poor are richer.  From an earlier post, here is the purchasing power of individuals across the income spectrum in the US vs. Denmark

click to enlarge

Fifteen Great Swimming Holes

I had to highlight this article on 15 great swimming holes in the US because our company operates two of them, #8 and #9.  As an added bonus, they actually list all 15 on the same page rather than in that clickbait format where you have to press next like 20 times to see the top 15.

Winners in the "Find Coyote A Special Laundry Rack" Contest

A few days ago I asked readers if they could find me a laundry drying rack that could elevate with an electric winch, to take advantage of the limited floor space but 12 foot ceilings in my bizarrely designed laundry room.  These are surprisingly common in Asia but I could not find any for sale in the US.

Several of the early responses found manual ones but missed on the electric/automatic spec  (e.g  here and here).  I may in the end get one of these and motorize it but the contest specified already motorized.

Phil had the first winning entry, finding this Asian model for sale to the US in retail lots.  Its too expensive, and Dwight found one later much cheaper, but the contest was for first email, and did not say anything about price.  I will give Dwight honorable mention because I feel like I searched the Sh*t out of Amazon and somehow missed this.

I decided to give a second award to Neil.  He was the first one to go a little more creative and search beyond laundry to get something with the right functionality but designed for a different application.  It is not the most attractive item in the world but easily has the best price-value ratio of any solution so I awarded a second prize for it.

Finally, while it does not win, Brad gets honorable mention for this closet solution, which is not quite what I am looking for, but might have been made to work if I didn't have other options.

Thanks to everyone.  I'll post a picture when we finally install something.

 

Federal Lands Footprint

Courtesy of the House Committee on Natural Resources comes this map of Federal "footprint", land either owned by the Feds or under some sort of Federal designation that has substantial impacts on property use.

federal-footprint

You can click the map to enlarge it or else just go to the map with layers here.   Click the details button in the upper left to see the legend.  Beware, the map is pretty slow to function for me.  You might find an alternative that works better here.  You won't find a lot of private land west of Denver.

For much of the 19th century, the US had a sensible land policy that promoted homesteading and outright private purchases of Federal land.  Then this policy stopped, and what we have now is most of the land west of Denver managed by special interests who will fight tooth and nail to keep the land out of private hands and in their own control.

The Average Conservative Doesn't Care About Free Markets

For a long time I have hypothesized (and worried) that the average Republican / Conservative's support for free markets was merely tribal -- the team's official position was pro-free market, so individuals supported the team's position without actually, really understanding it.  I have developed this hypothesis after a lot of private discussions with Conservatives who have betrayed many of the same economic mis-conceptions and bits of ignorance that drive much bad interventionist government policy.

Now there is this, from the leading Republican candidate for President:

Speaking at Liberty University today, Trump escalated his rhetoric on Apple's overseas manufacturing, and claimed somehow the US would reclaim those jobs in the future. "We have such amazing people in this country: smart, sharp, energetic, they're amazing," Trump said. "I was saying make America great again, and I actually think we can say now, and I really believe this, we're gonna get things coming... we're gonna get Apple to start building their damn computers and things in this country, instead of in other countries."

So the Republican who is currently leading in the polls (among Republican voters, mind you) supports government intervention in a successful company's manufacturing and sourcing decisions.  Which just reinforces my view that we are dealing with the Coke and Pepsi party.  Heads we get statism, tails we get statism.

Google Fi Review, and (Finally!) International Roaming Rates May be Set to Drop

For years I have been frustrated with the costs of trying to take my cell phone on international travel.  Yes, one can buy cheap sim cards locally, but you obviously lose access to your domestic phone number for the duration (leaving aside dual-sim phones and some tricky and expensive forwarding tricks).  If you wanted to keep your phone number so people can still reach you on the number they already know, you were in for some crazy roaming charges -- particularly on data.  I use Verizon (mainly because my business takes me to out of the way places where Verizon is the last available carrier) but until recently their international rates were awful, charging one 50 cents per text and $25 per 100mb of data in addition to a $25 a month international plan fee.

I use a lot of data when overseas and outside my hotel room, so I really wanted a cheaper data plan  (Google maps is a lifesaver when one is walking streets with signs all written in Thai).  My go-to solution in the past was to have a T-Mobile account I turned on and off on an unlocked phone (an old Nexus 5).  T-mobile has plans that allow unlimited text and data without roaming charges in most countries, and it is still a good international solution, though I met with a few technical irritants in some of the countries I have visited.

A while back, I accidentally killed my old Nexus 5 and bought a new Nexus 5x with the intention of swapping in my T-mobile sim card from the old phone.  However, I saw an article that said the Nexus 5x was one of the couple of phones that would work with the new Google Fi service, so I signed up to try that.  $20 a month unlimited domestic calls and text and unlimited international texts.  Pretty cheap international calling rates and the phone defaults to calling by wifi if possible to save any charges.  Data at $10 per 1GB anywhere in the world, with any unused data credited at the end of the month (so the $10 is pro rated if you use less, essentially).

I used the phone in Thailand, Singapore, and Hong Kong, and not just in large cities -- we got out in the smaller cities well away from the tourist areas of Thailand.   Service was flawless everywhere with one exception (discussed in a minute).  Wifi calling worked fine and I had a good signal everywhere, even in smaller towns.  Charges were exactly as promised.  It was a very impressive service.  It uses the T-mobile network in most places, so I am a little reluctant to make it my full-time service because when I tested T-mobile several years ago, it just didn't reach far enough to the out-of-the way domestic locations I visit, but I plan to try again.  I would really love to be on this service rather than Verizon and believe it would save me a lot of money.

I only had two problems with it.  The minor problem was that I had some issues with wifi calling disconnects in one hotel, though this could easily have been due to the notoriously low-bandwidth of many hotel wifi systems**.  Switching off wifi and making a regular cell call worked fine.  Google says that the service automatically chooses between wifi and cellular based on bandwidth and conditions, but it may be this algorithm needs more work.

The more irritating problem was that the phone would simply not get a cellular data connection in Hong Kong.  I contacted Google service (this was a great process that involved sending them a message and them calling me back immediately, a better process in my mind when travelling internationally).  After some fiddling around, the service agent checked came back to me to say, "known problem in Hong Kong with internet access.  You will need to buy a local sim card.  We know this is a hassle, so we just credited your bill $20 to offset the cost."  It would have been better to not have this hassle -- I was switching sim cards every night to see if I had any texts at my domestic number -- but I thought they dealt with it as well as possible, and they were a hell of a lot more helpful than T-mobile was when I had an international roaming issue with them.

Under the T-mobile and Google Fi pressure (which really means due to T-mobile, since Google Fi is largely possible because of T-mobile), I am starting to see cracks in the pricing of Verizon.   They seem to have a new plan that allows one to keep their domestic data, text, and voice pricing and allowances while roaming internationally for a $10 a day charge.  This is still more expensive than T-Mobile and Google Fi but literally an order of magnitude, and maybe two, cheaper than what they were offering for international travel a year ago.

**Footnote:  I have way more sympathy for hotels and their wifi systems.  We installed a wifi system in a 100 site campground in Alabama.  That system has become a data black hole -- no matter how much bandwidth I invest in, people use more.  Every night it seems like there are 300 people on 100 campsites all trying to stream a movie in HD.  I am not sure it will ever enough, and we get no end of speed complaints despite having an absurd T1 bandwidth into the system.  I can't see myself ever investing in such a system again.

Postscript:  It is a good habit to point out data that is inconsistent with one's hypotheses.  I am incredibly skeptical of US anti-trust law, particularly since it seems to have morphed into protecting politically-connected competitors (e.g. cases against Microsoft and Google) vs. protecting consumer choice.  I will say though that the killing of the acquisition of T-mobile by AT&T seems to be a godsend for consumers in the cell phone business, as T-mobile has become a hugely disruptive force generally benefiting consumers.

Greetings from Thailand

Actually, I am back, but here is me with two of my college roommates carrying .... something or other in a Thai wedding ceremony in Roi Et.

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Some of you may be familiar with the groom, my friend Brink Lindsey of the Cato Institute.  The wedding was amazing and I will try to post some more pictures later.

Thailand was wonderful, and if there is a country that has friendlier people, I have never been to it.  I will post some thoughts on Thailand later, but a few top of head items:

  • Business models can be really, really different in a country with lower-cost labor.  There were dudes in my hotel in Bangkok whose sole job seemed to be to time out my walk toward the elevator and hit the up button at the perfect moment.
  • One sidebar to this is that in restaurants and bars, they have waiters who simply hover around constantly.   They keep the alcohol bottles on a nearby table and essentially every time you take a sip, they fill your beer or scotch back up to the top. It is like drinking from a glass with a transporter beam in the bottom keeping it full.  This makes it virtually impossible to regulate one's drinking.
  • The whole country is like a gentrifying neighborhood in the US.  It is totally normal to see a teeth-achingly modern building right next to a total hovel.

 

Great Moments in US Energy Policy: In the 1970's, The US Government Mandated Coal Use For New Power Plants

What does government energy policy have in common with government food advice?  Every 30-40 years the Federal government reverses itself 180 degrees and declares all the stuff that they said was bad before is now good today.

Case in point:  Coal-fired electrical generation.  Coal is pretty much the bette noir of environmentalists today, so much so that Obama actually pledged to kill the coal industry when he was running for office.   The combination of new regulation combined with the rapid expansion of cheap natural gas supplies has done much to kill coal use (as illustrated by this bankruptcy today).

But many people may not realize that the rise of coal burning in power plants in the US was not just driven by economics -- it was mandated by government policy

Federal policies moved in coal's favor in the 1970s. With the Middle East oil crisis, policymakers began to adopt policies to try and shift the nation toward greater coal consumption, which was a domestic energy resource. The Energy Supply and Environmental Coordination Act of 1974 directed the Federal Energy Administration to prohibit the use of oil or natural gas by electric utilities that could use coal, and it authorized the FEA to require that new electric power plants be able to use coal. The Energy Policy and Conservation Act of 1975 extended those powers for two years and authorized $750 million in loan guarantees for new underground low-sulfur mines. Further pro-coal mandates were passed in the late-1970s.

I was aware of the regulations at the time as I was working in an oil refinery in the early 80's and it affected us a couple of ways.  First, it killed demand for low-sulphur heavy fuel oil.  And second, it sidelined several co-generation projects that made a ton of sense (generating electricity and steam from wasted or low-value portions of the oil barrel) but ran afoul of these coal mandates.

And This is Different from the US, How?

I am out of the country (currently in Thailand for a wedding).  I read this in the local Asian WSJ, an article about money and patronage in the Malaysian political process.  And while I suppose I was supposed to think "wow, Malaysia is sure screwed up" -- all I was really left with at the end of this article was "how is this any different from the US?" How does 1MDB differ from, say, various green energy funds at the Federal level or community development funds at the local level?

Malaysian Prime Minister Najib Razak was fighting for his political life this summer after revelations that almost $700 million from an undisclosed source had entered his personal bank accounts.

Under pressure within his party to resign, he called together a group of senior leaders in July to remind them everyone had benefited from the money.

The funds, Mr. Najib said, weren’t used for his personal enrichment. Instead, they were channeled to politicians or into spending on projects aimed at helping the ruling party win elections in 2013, he said, according to a cabinet minister who was present.

“I took the money to spend for us,” the minister quoted Mr. Najib as saying.

It still isn’t clear where the $700 million came from or where it went. But a six-month Wall Street Journal examination revealed that public entities spent hundreds of millions of dollars on a massive patronage machine to help ensure Mr. Najib’s United Malays National Organization stayed in power. The payments, while legal, represented a new milestone in Malaysia’s freewheeling electoral system, according to ruling-party officials....

The effort relied heavily on the state investment fund Mr. Najib controlled, 1Malaysia Development Bhd., according to minutes from 1MDB board meetings seen by The Wall Street Journal and interviews with people who worked there.

The prime minister, who is chairman of 1MDB’s board of advisers, promised repeatedly that the fund would boost Malaysia’s economy by attracting foreign capital. It rolled up more than $11 billion in debt without luring major investments.

Yet Mr. Najib used the fund to funnel at least $140 million to charity projects such as schools and low-cost housing in ways that boosted UMNO’s election chances, the Journal investigation found.

The minutes portray a fund that repeatedly prioritized political spending, even when 1MDB’s cash flow was insufficient to cover its debt payments.

This illustrates one (of many) reasons why those lobbying to reduce campaign spending are on the wrong track.  Because no matter how much one limits the direct spending in elections, no country, including the US, ever limits politicians from these sorts of patronage projects, which are essentially vote-buying schemes with my tax money.

The reason there is so much money in politics is because supporters of large government have raised the stakes for elections.  Want to see money leave politics? -- eliminate the government's ability to sacrifice one group to another while subsidizing a third, and no one will spend spend a billion dollars to get his guy elected to public office.

By the way, in this current Presidential election we are seeing a vivid demonstration of another reason campaign spending limits are misguided.  With strict spending limits, the advantage goes to the incumbent.  The only people who can break through this advantage are people who are either a) already famous for some other reason or b) people who resort to the craziest populist rhetoric.  Both of which describe Donald Trump to a T (update:  Trump has spent virtually no money in this election, so he should be the dream candidate of clean elections folks, right?)

Is It Dangerous to Be a Police Officer?

I have always thought so, and the danger of the job is a large reason why police get so many special privileges, from outsized pensions to minuscule accountability for people they shoot or kill.

But police are not among the top most dangerous professions -- they are not even in the top 10.  Being a taxi driver is more dangerous ( and in fact for 2015 the #1 cause of death on the job was traffic accidents).  We don't fetishize garbage collectors like we do police but they die on the job at twice the rate as do police.

In fact, the rate at which police are killed by gun violence is not substantially higher than for the average citizen.  In 2015 there were 39 firearms deaths of police (from the source above).  Given the way that firearms stats are reported broadly, these are probably not all killings by other people (some police likely are killed by accidental discharge, etc).  But assuming they are all gun killings, and assuming about 900,000 police (I get a broad range of estimates for this seemingly simple number) gives a rate of 4.3 per 100,000 per year, not much higher than the US gun homicide death number of 3.55 (you may have seen much higher numbers of gun death numbers -- over 2/3 of these are suicides).

Postscript:  The current media model is breaking the Internet.  I have seen the chart a ton of times on the most dangerous professions, so I searched for it.  Do it yourself.  The first 8 or 9 links all turn out to be the stupid new media format of requiring 10 clicks to get through a list.  I simply refuse to ever click on these things.  It is a horrible way to present information.  I suggest you boycott them as well.

Follow-up Thoughts on Immigration "Amnesty" And the Need for a New Category of Legal Presence

A while back I got a LOT of feedback when I asked if Republicans really wanted to create 12 million refugees.  My assumption was that if one opposed substantially liberalizing immigration quotas (ie making the quota near unlimited) and one opposed "amnesty" for the 12 million currently illegal immigrants in this country, the only alternative was to try to deport them all.

I got a lot of responses back from all over the political spectrum, but the one I found the most surprising was to say that I was setting up a false choice.  The only alternative to amnesty was not deportation.  Many advocated for what I would call an "illegal but tolerated" status for these 12 million people, sortof a parallel to how marijuana is treated in many states.  I have a few reactions to this:

  1. Isn't this the status quo?  People got really angry with me in the comments for trying to create a straw man position (deportation) for Republicans by not considering this "illegal but tolerated" status.  But I can say with all honesty it never crossed my mind.  The one theme I get from every Republican candidate and nearly every Conservative pundit is that the current immigration situation is broken and intolerable.  So I am still confused.  If "amnesty" is still intolerable and the current situation is intolerable and deportation is not what they want (or at least not what they are willing to admit to in public) -- then what is it that Republicans want?
  2. To avoid charges of racism or economic Luddite-ism (since both history and most economic studies show immigration to be a strong net positive), immigration restrictionists often argue that what they are really defending is the rule of law.  Immigration is illegal and what they can't abide is seeing so many people flaunt the law.  But what could possibly be more corrosive to the rule of law than an "illegal but tolerated" status?  We give effective amnesties all the time.  Colorado didn't wait to legalize marijuana until every past illegal user had been prosecuted.
  3. "illegal but tolerated" is a license for abuse and harassment.  It is why organized crime flourishes in narcotics and in alcohol when it was illegal but tolerated.  It is why women get abused in prostitution.  It creates unpersons with limited access both to the legal system and to the basic plumbing of the modern world (e.g. banking).  It drives people underground, pushing people who at worst committed a victim-less crime (ie illegal immigration) into crimes with real victims (e.g. identity theft).
  4. I continue to argue that Conservatives are abandoning their free market principles when they advocate for strict limits on immigration.  I have heard folks like Sheriff Joe say that these folks are "trespassing" in the US.  Well, they are only trespassing if we are Marxists and adopt the view there is no such thing as private property and everything belongs to the government.  In a free society, the actual questions involved are whether an immigrant can rent an apartment from me, or work for me, or bank with me, etc.  Those are supposed to be private decisions.   In effect, Conservatives are arguing that I can only hire from or rent to people on a government-approved list.  That does not sound like free markets and small government to me.

I am not blind to the problems that our generous welfare policies have on immigration.  I would argue that what is needed is a new immigration status.  In a sense, those who want 12 million people to be "illegal but tolerated" are essentially arguing for the same thing, but frankly that solution sucks for everyone.  I would argue for institutionalizing a new level of legal presence in this country, well short of "citizen" but beyond "illegal but tolerated."

As an aside, for years the Roman Empire was really good at this, at least in its early years.  It grew and adopted and eventually commanded the loyalty of a broad range of peoples and cultures in part because it was incredibly flexible in thinking about citizenship status.   It had many custom levels, such as Civitas sine suffragio (citizenship without the vote).  Many Conservatives argue that Barbarian immigration brought down the Roman Empire and use that as an argument for modern restrictions.  But in fact, I believe just the opposite -- that it was the Romans losing their knack for citizenship flexibility and integrating new cultures that contributed to their downfall.

Here is a plan I posted nearly 10 years ago for a new, legal, less-than-full-citizen ability to be present in this country.  I am still mostly OK with it:

 

  1. Anyone may enter or reside in the US. The government may prevent entry of a very short list of terrorists and criminals at the border, but everyone else is welcome to come and stay as long as they want for whatever reason.  Anyone may buy property in the US, regardless or citizenship or residency.  Anyone in the US may trade with anyone in the world on the same terms they trade with their next door neighbor.
  2. The US government is obligated to protect the individual rights, particularly those in the Bill of Rights, of all people physically present in our borders, citizen or not.  Anyone, regardless of citizenship status, may buy property, own a business, or seek employment in the United States without any legal distinction vs. US "citizens"
  3. Certain government functions, including voting and holding office, may require formal "citizenship".  Citizenship should be easier to achieve, based mainly on some minimum residency period, and can be denied after this residency only for a few limited reasons (e.g. convicted of a felony).  The government may set no quotas or numerical limits on new citizenships.
  4. All people present in the US pay the same taxes in the same way.  A non-citizen or even a short term visitor pays sales taxes on purchases and income taxes on income earned while present in the US just like anyone else.  Immigrants will pay property taxes just like long-term residents, either directly or via their rent payments.
  5. Pure government handouts, like Welfare, food stamps, the EITC, farm subsidies, and public housing, will only be available to those with full US citizenship.  Vagrancy and squatting on public or private lands without permission will not be tolerated.
  6. Most government services and fee-based activities, including emergency services, public education, transportation, access to public recreation, etc. will be open to all people within the US borders, regardless of citizenship status, assuming relevant fees are paid.
  7. Social Security is a tough beast to classify - I would put it in the "Citizen" category as currently structured (but would gladly put it in the "available to everyone" category if SS could be restructured to better match contributions with benefits, as in a private account system).  But, as currently configured, I would propose that only citizens can accrue and receive SS benefits.  To equalize the system, the nearly 8% employee and 8% employer social security contributions will still be paid by non-citizens working in the US, but these funds can be distributed differently.  I would suggest the funds be split 50/50 between state and local governments to offset any disproportionate use of services by new immigrants.  The federal portion could go towards social security solvency, while the state and local portion to things like schools and medical programs.

It may be possible to earn-in to benefits in #5 and #7 based on some cumulative tax payment history.  For example, unemployment taxes are really close to an insurance policy, such that a couple of years of payments into the system could make one eligible for benefits.   Given how much fraud I see on this from citizens**, I can't believe immigrants would be any worse.

 

 

Are We Really Going to Sell Socialism in This Country Based on the Fact that the Middle Class is Getting Rich?

I present, the shrinking American middle class.  2/3 of the losses were because they moved to "rich".

um-isnt-this-good-news

via Reason

I will add to this that even our poor are materially better off than the poor in European socialist / 3rd way countries. Here is the absolute well-being by income percentile of the US vs. Bernie Sander's beloved Denmark.

click to enlarge

What the Left and Right Have in Common

If Westerners can't do yoga and Cinco de Mayo parties, can we have our polio vaccines back?

With news that even yoga classes are being cancelled due to fears of Westerners appropriating from other cultures, I am led to wonder -- why don't these prohibitions go both ways?  If as a white western male, I can't do yoga or host a Cinco de Mayo party or play the blues on the guitar, why does everyone else get to feed greedily from the trough of western culture?  If I can't wear a sombrero, why do other cultures get to wear Lakers jerseys, use calculus, or even have polio vaccines?  Heck, all this angst tends to occur at Universities, which are a quintessentially western cultural invention.  Isn't the very act of attending Harvard a cultural appropriation for non-Westerners?

I say this all tongue in cheek just to demonstrate how stupid this whole thing is.  Some of the greatest advances, both of science and culture, have occurred when cultures cross-pollinate.  I have read several auto-biographies of musicians and artists and  they all boil down to "I was exposed to this art/music from a different culture and it sent me off in a new direction."  The British rock and roll invasion resulted from American black blues music being dropped into England, mutating for a few years, and coming back as the Beatles and the Rolling Stones.

Or here is an even better example:  the movie"A fistful of Dollars".  That was an American western with what has become a quintessentially American actor, Clint Eastwood.  However, it was originally an Italian movie by Italian director Sergio Leone (it was not released in the US until 3 years after its Italian release).   But Sergio Leone borrowed wholesale for this movie from famed Japanese director Akiro Kurosawa's Yojimbo.  But Kurosawa himself often borrowed from American sources, fusing it with Japanese culture and history to produce many of his famous movies.  While there is some debate on this, Yojimbo appears to be based on Dashiell Hammett's Red Harvest, a classic of American noir fiction.

Three Reasons It May Be Time To Short Automobile Stocks

As always, take this with a grain of salt given my past history of investment advice.  I am frequently correct on my calls to short something, but tend to be really early, such that a person (ie me) can likely be short-squeezed into oblivion before the fall takes place.

That being said, I think autos would be a good short.  Why?

  1. They are riding positive sentiment, based on a strong October.  But October was strong because it had 5 weekends rather than 4 and recent results reflect a lot of channel stuffing.   Shorting means finding the top, and this feels like the top
  2. I would be stunned if the Volkswagen emissions cheating is limited to Volkswagen.  Volkswagen is not unique -- Cat and I think Cummins were busted a while back for the same thing.  US automakers don't have a lot of exposure to diesels (except for pickup trucks) but my guess is that something similar was ubiquitous.  **
  3. Apparently, the recent rebound in auto sales has been driven by a huge spurt of sub-prime lending that looks remarkably similar to the housing market 7 years ago:

This comes against a backdrop of rising US auto sales (see the numbers for October, out earlier today) and it's not difficult to explain the gains. Just take a look at the following data from Experian on the lunatic loan terms being extended to borrowers (from Q1):

  • Average loan term for new cars is now 67 months — a record.
  • Average loan term for used cars is now 62 months — a record.
  • Loans with terms from 74 to 84 months made up 30%  of all new vehicle financing — a record.
  • Loans with terms from 74 to 84 months made up 16% of all used vehicle financing — a record.
  • The average amount financed for a new vehicle was $28,711 — a record.
  • The average payment for new vehicles was $488 — a record.
  • The percentage of all new vehicles financed accounted for by leases was 31.46% — a record.

** Postscript:  The biggest problem with the emission cheating is that it caused the world to under-estimate the cost of emissions mandates.  When performance of cars starts to drop noticeably when emissions cheating is fixed, it will be an eye-opener

Do We Care About Income Inequality, or Absolute Well-Being?

I am going to reprise parts of an article I wrote in Forbes several years ago, because I think the conclusions are particularly relevant given the Democrats' discussion of income inequality and the Scandinavian economic model.

When folks like Bernie Sanders say that we have more income inequality than Sweden or Denmark, this is certainly true. By just about any test, such as Gini ratios, we have a much wider range of incomes.

However, we Sanders implies that this greater income equality means the poor are better off in these countries, he is very probably wrong.  Because the data tends to show that while the middle class in the US is richer than the middle class in Denmark, and the rich in the US are richer than the rich in Denmark, the poor in the US are not poorer than those in Denmark.

And isn't this what we really care about?  The absolute well-being of the poor?

I am not a trained economist or economic researcher, but I have looked for a while for a data source to get at this.  I can find Gini ratios all over the place, but how do I compare the absolute well-being of poor in one country to poor in another?

The first clue that I was maybe on the right track was this chart that actually came from a left-wing group trying to promote the idea of reducing income inequality.  The chart is hard to read (the study is no longer online and all I have is a bad screenshot), but it seemed to show that the poor in the US were no worse off than the poor in Denmark and Sweeden

epi8d (1)

 

So the data had to be there somewhere.  Finally I found a set of data that seemed to does the trick.  I used data from the LIS Cross-National Data Center.  I cannot vouch for their data quality, but it is the same data set used by several folks on the Left (John Cassidy and Kevin Drum) to highlight inequality issues, so I used the same data source.  I then compared the US to several other countries, looking at the absolute well-being of folks at different income percentile levels.  I have used both exchange rates and purchasing price parity (PPP) for the comparison but my feeling is that PPP is a better approach when we are comparing consumer well-being.

You can click through the Forbes article to see all the comparisons, but I will focus here on Sweden and Denmark since they are very much in the policy-making discussion on income inequality.  As usual, you can click to enlarge:

click to enlarge click to enlarge

What does this mean?  If the data is correct, it means that all the way down to at least the 10th percentile poorest people, the poor in the US are as well or better off than the poor in Denmark and Sweden.  And everyone else, including those at the 20th and 25th percentile we would still likely call "poor", are way better off in the US.

All this talk about reducing income inequality by emulating Denmark is thus not about making the poor better off, but just about cutting the rich and middle class down to size.

Chart of the Day: Median Income, US States vs. European Countries

From Ryan McMaken of the Mises Institute, is your state richer than Bernie Sander's dream country Sweden?  The author has used state-level purchasing price parity adjustments, rather than a single US adjustment, due to large variations in state price levels discussed previously here (click to enlarge)

click to enlarge

Investing with Coyote

In short, don't ever ever ever take my investment advice.  However, I will note that when I tongue-in-cheek called the market top on May 27, the S&P closed at 2123 and has not closed higher than 2128 since.

The reason market timing is virtually impossible is because the actual timing can be so skewed .  You can be sure the market is overvalued but it can take years for that to play out, particularly when governments (e.g. US, China) are pumping liquidity into the markets to keep them afloat.

A good example is China.  I (and many other much smarter people) were recognizing the China market was overvalued years ago, but had one shorted the China market back then you would have been short-squeezed into oblivion before the actual crash came about this year.

While fundamental investing isn't worthless, the effects of fundamentals seem to get easily swamped by government actions, such that predicting government actions is far more important to investment success than figuring out corporate fundamentals.  I learned to tear apart company financials from one of the best back at HBS, but I have no ability to figure out when the Fed will or will not stop dumping money into the markets.  So I buy a few index funds and try not to look at them too much.

A Few Thoughts on Branding After Travelling in Europe

In Europe, we stayed several times in rental apartments we found through the invaluable VRBO website.  One advantage of these apartments is that we can cook breakfast, avoiding the high-priced breakfasts at many hotels.

So I found myself shopping for orange juice in Austria, with a number of choices at hand, but none recognizable to me.  Skeptics of capitalism often point to branding and brand-based advertising as particular wastes of resources.  But I would have loved to see an orange juice brand I recognized.  Brands are essentially a guarantee of  predictability -- whether I like the taste or not, I know what a Big Mac will taste like in Omaha or Beijing.  Brands are an enormous aid to shopping and making choices, and in this manner create real value for us as consumers.  I missed recognizable brands when I was in Europe.

PS-  Coca-Cola and Pepsi are obviously the exceptions to this predictability game.  Diet Coke, called Coke Light in Europe, tastes entirely different in Europe than it does in the US -- in fact it tastes more like what Diet Pepsi tastes like in the US.  Which is ironic, and fitting I guess, because Diet Pepsi in Europe tastes a lot like American Diet Coke.

Memo to Vox: You Know How This Prosperity Was Achieved? We Let it Happen.

Vox shares what is perhaps the greatest achievement in human history, the continuing disappearance of absolute poverty:

roser_poverty_shares

 

Readers of this blog will likely  have seen this before (though it may well be new to Vox readers).  Here is the amazing thing about the Vox article:  It never once mentions capitalism, trade, economic freedom, or any synonym.  Here is a sampling of the tone of the accompanying article:

There's still much work to be done: 14.4 percent of the world amounts to 1 billion people who still need to be lifted out of extreme poverty. And making sure everyone's making at least $1.25 a day isn't the end of the fight either. The world's median income is still only $3 to $4 a day. By comparison, the poverty line in the US for a family of four is $16.61 per person per day. Once under-$1.25-a-day poverty is eradicated, the world needs to set about eradicating under-$15-a-day poverty, which will be a substantially harder task.

Vox is treating this like it is the result of some top-down effort, using the same language one might use to describe the eradication of Yellow Fever in Panama.  As if this resulted (and as if future progress depended on) some all-hands-on-deck technocratic government program.

No one "set about" eradicating poverty.  It happened because governments, at least to some extent, got out of the way and didn't stop it.  China is a great example.  Mao "set about" trying to eliminate poverty using many of the approaches likely favored by the Vox staff, and killed a few tens of millions of people in the process.

Here is my theory of the world's accelerating wealth formation that I have written on a number of times before.  This chart largely results from:

  • There was a philosophical and intellectual change where questioning established beliefs and social patterns wentfrom being heresy and unthinkable to being acceptable, and even in vogue. In other words, men, at first just the elite but soon everyone, were urged to use their mind rather than just relying on established beliefs and appeals to authority.
  • There were social and political changes that greatly increased the number of people capable of entrepreneurship. Before this time, the vast vast majority of people were locked into social positions that allowed them no flexibility to act on a good idea, even if they had one. By starting to create a large and free middle class, first in the Netherlands and England and then in the US, more people had the ability to use their mind to create new wealth. Whereas before, perhaps 1% or
    less of any population really had the freedom to truly act on their ideas, after 1700 many more people began to have this freedom.

So today's wealth, and everything that goes with it (from shorter work hours to longer life spans) is the result of more people using their minds more freely.

Short Apple?

Verizon's decision to stop subsidizing smartphone purchases in exchange for 2-year contract lock-ins is going to be a big change in the industry.  It will be interesting to see what happens to handset prices.  A while back someone I know had a Verizon iphone that they lost.  They were talking about going out and buying a new one to replace it.   I said, "uggh, an $800 hit."  They looked at me like I was crazy.  They said they had paid something like $300 for it.  I pointed out that that was likely with a 2-year contract lock-in, and that a replacement would go full price which can run over $800 depending on which version they had.

They did not believe me.  In fact they were almost indignant that I would suggest such a thing.  And went running off the the Verizon store with every confidence an iPhone 6 plus could be purchased for $200-$300.

This situation has obtained for a decade.  It will be interesting to see what happens to iPhone sales when customers are exposed to something closer to the true price.  Since most iPhones without contract go for more (substantially more in fact) than the laptops I am buying my employees, I can't help but think that iPhone revenues will suffer.  (Of course, the result could be everyone who wants a new iPhone switching to AT&T from Verizon  -- it is not at all clear Verizon's new no-subsidy rates are low enough to be a better net deal than the old rates+subsidy).

I use Verizon because my business operates in the boondocks and Verizon is almost always the last carrier standing when I drive out to our locations.  I wonder if Verizon will now be allowing unlocked phones?  I presume this will be the case -- T-Mobile is the other company that ended phone subsidies and I moved my unlocked Nexus to them.

By the way, the current T-Mobile $50 a month plan allows unlimited data and text when roaming in 120 countries, and $0.20 a minute international calls from any of these countries.  This is even better than you can do with the old method of buying an international sim card and switching when you land.   No other US carrier is even in the ballpark.  You have to pay Verizon $20 a month or so to get them to reduce international roaming text costs to 50 cents each with some paltry amount of data.  For international travelers, there is no other choice even close to T-Mobile among US carriers.