Geography Fail

It must be all those extra states that trip 'em up.

The Kansas Stock Exchange

On the grant of a quarter million tax dollars to JCB Laboratories via the Kansas Bioscience Authority, LJWorld commenter* Jimo illustrates a huge problem:

“The only serious financing alternative [to government grants] would be to force companies like this to get backing from Big Pharma -- in return for equity control. That policy would destroy the business model for any small pharmaceutical start up.” 

He is correct, of course – it is the only serious current financing alternative to those companies that cannot get bank loans. That does not make it a good idea.

Giving tax dollars away to favored companies, on marginal bets, opens politicians up to temptations and accusations of corruption while opening taxpayers up to the certainty of loss. There will always be Solyndras, and putting taxpayers dollars into them provides mud for commenters left and right to throw at the ethics and intentions of politicians on the other side. Each side is convinced that the other’s corporate welfare is corrupt. Both of them are probably more correct than their opponents wish to admit. It is the nature of free money to bring out the worst in both givers and receivers.

But on the other side we have the Big Pharma Problem (call it the BPP): if the only way small companies can get financing is to rely on big companies in their industry to bankroll them, we are going to have trouble. You see it in software development all the time: a little company develops something cool, a big company buys it, and it’s never seen again. Big Pharma, like big software, like big defense, has as much incentive to quash innovation as it does to promote it. Big companies find it easier to strangle their competition in the cradle than to compete with them in the market. Government money, like anti-trust law, is perceived as some protection from this necessity. But it's a terrible alternative.

So why don’t we come up with another alternative? Before we try we have to understand that there is a third horn to our dilemma***: the reason the BPP exists is because politicians and their captive regulators have made it a necessity. If you ever wonder why the rich always seem to get the best deals, it’s because the law requires that the poor be protected from the good deals, which are also the high risks. For example, the rich – called “accredited investors” under the Securities Act of 1933 – are able to buy unregistered stock directly from a tiny company. That means that if the company goes ballistic, this rich investor is going to get richer faster than the poor man who was denied, by law, the same opportunity. Don’t get me wrong, the poor do need to be protected from the scamps and the scoundrels as does everyone else. But if they are going to become rich, they have to be given the opportunity to invest as the rich do.

So how do we a) make it possible to get money into worthy companies without using tax money, b) offer options other than “Big Pharma” to do so, and c) keep the poor and ignorant from being wiped out by financial weasels and allow them to get rich at the same time? One option would be a Kansas Stock and Bond Exchange. But don’t let the name fool you, it’s nothing like the NYSE, which exists to move money from the accounts of small investors to the accounts of large ones. This exchange would exist to allow small investors to take small risks that could have big rewards.

The way it would work is this: If the KBA finds that JCB Laboratories has an idea worth putting $250,000 into, rather than writing a tax check, they would authorize JCB Laboratories to raise $250,000 on the Kansas Exchange. The exchange would allow only a certain number of “deals” per year – about the same amount of money as the state is giving away presently. The approved company could then issue unregistered common stock, or preferred stock, convertibles, bonds, whatever they wished, in increments of $50 and with a maximum of $1000 per investor. Those ‘deals’ would be offered over a Kansas Exchange website, where any Kansas resident could invest in any number of Kansas companies, subject to supply. The small investor, by taking a limited risk, might be able to get a 10% return on a preferred stock rather than 1% in a bank account. The lower middle class budding speculator might find a bet that could pay off 1000% over 20 years like the ones Buffet gets. But this is not a ‘trading’ exchange – this is a place for Kansas companies to partner with Kansans to build the jobs of the future. If you want to sell your stock, you would still have to go through the SEC process just like Warren Buffett. If the company calls your preferred stock, they would have to send you a check, just like companies on the NYSE. It offers limited risk, limited cost, and the possibility of unlimited rewards, but it's not a swap meet.

There is a real advantage to dealing in small numbers – Big Pharma is quite unlikely to bother about $1000. On the other hand, if there are a mere 250 people who think JCB can pull this thing off, the money will be raised without a hitch. If there are 1000 such people, even better. But perhaps its greatest advantage is that it puts real wealth – or at least the possibility of real wealth - in the hands and name of the individual Kansan.

When modern Americans “buy stocks” they are usually centralizing wealth in the hands of the wealthy. If you buy a mutual fund, the fund buys, owns, and votes the stock, and they seldom ask your opinion about it. The more you buy, the more the people who control the funds control America’s wealth. It only gets worse as the boomers collectively save for retirement. It would be better for Kansas companies if their real owners lived and worked alongside them. And it would be far better for all of us – companies, investors, and workers – if rather than the government "investing" our money in companies that have promise, they would make it easier for us to reap the rewards of doing it ourselves.

* Yes, FWIW, I'm Fossick of Fossick's Freehold. I retired the non-anonymous** El Borak on LJWorld because I might have to work in Lawrence someday and I don't trust the liberals at KU not to hold my opinions against me.
** Nonymous? 
*** Think of this beast as the Triceratops of Unpleasant Choices.

Never Give up

Thy mother danceth not

And thy father neither rocketh nor rolleth:

Via the AP version:

"Take off your bedroom slippers. Put on your marching shoes," [Obama] said, his voice rising as applause and cheers mounted. "Shake it off. Stop complainin'. Stop grumblin'. Stop cryin'. We are going to press on. We have work to do."

[African-American author Karen] Hunter called the AP's version "inherently racist," ... [and] found it offensive. "I teach a journalism class, and I tell my students to fix people's grammar, because you don't want them to sound ignorant," she said. "For [the AP] to do that, it's code, and I don't like it."

This week's institutional racism* argument is over whether the AP is racist for reporting what the President actually said rather than what the prepared remarks distributed before his speech said he said. When Obama spoke, he purposely dropped his "g"s; of that there can be no doubt. He is perfectly able to speak proper English, and on this occasion he did not, obviously out of deference to his black audience.

I guess I side with the AP because the President purposely spoke as he did, and because they described his change in tone before transcribing his exact words. This is wholly different from fixing his "same tax rate as a Jew," which was obvious goof.

But I'm intrigued by Hunter's assertion that Obama speaking in a way he thought would appeal to his black audience sounds 'ignorant.' If Obama said complainin' because he thinks that is how black people talk, is he the racist? Or is it the black journalist who thinks the way black people talk is stupid?

* Meaning, "We're looking for Kluxers under the bed like Woody Wilson looking for commies."

Save us, Obi-Wan Bernanke, you're our only hope

The CNBC article sports a strange title, "Central Bankers the Only Defense Against Apocalypse: Economist." And the reason it's strange, is that is just sounds like more of the same stuff that's bringing apocalypse in the first place:

The problem according to Carl Weinberg, the chief economist at High Frequency Economics is the lack of urgency in Europe...

“What the central bankers can do in advance of the failure of Greece is move the risk onto their own balance sheets, off the balance sheets of the banking system,” he said.

This could involve buying all Greek government bonds according to Weinberg who believes such a move would not only fix the prices Greece is being forced to pay to service its debt but also remove the entire risk of bank failures.

Such a move would cost $250 billion euros if the ECB paid at face value. Weinberg believes time is not on the policymakers’ side*.

Good God, what a scam. The bankers create money from nothing to lend to the government at interest**.  And it's risk-free, the argument being that the government can always tax people to get more money. Politicians being what they are, overspend to the point that as soon as something they didn't count on comes about, suddenly they can't pay back what they borrowed. Then the banks get worried, because the assets they bought for nothing might become worth nothing.

So they hold a gun to their own heads and scream, "Markets are precipitating a banking crisis," by which they mean that they are being called upon to take the loss from their investments, and since they are overleveraged on what they wrongly thought were risk-free investments, this might destroy their companies. And then how are they supposed to get their Christmas bonuses?

Obviously, this will never do. So the idea becomes to "move the risk onto the [central banks'] balance sheets, off the balance sheets of the banking system," by which they mean, of course, to move the losing bets out of the hands of the private banks*** and into the hands of the "central banks," where they can become the new assets of the taxpayers. This move will not only "fix the rates" that slackers like Greece pay, it will thereby allow them to keep slacking, which will allow them to keep issuing debt, which can then pay interest to the banks, which can dump them back on the taxpayers as soon as their bets turn to losses again. This is called a 'defense against apocalypse.' 

In reality, now that we've have 'saved' companies by centralizing their losses under governments, we are now 'saving' whole governments by centralizing their losses under national and international banks.  Now the International Monetary Fund might itself need a bailout. There is a trend here that politicians are missing on purpose.

I expect it shall not be long before they make three discoveries:

1. banks have centralized all the losses they can.
2. Those losses are still losses, even stuffed into the taxpayers' Christmas stockings.
3. When those stocking are full, the losses will have to be taken all at once.

Then central banks won't be considered the only defense against financial apocalypse. They will rightly be recognized as the enablers if the not perpetrators of it.

* Neither are the bankers on the policymakers' side. "The dwarfs are for the dwarfs." Or is that the gnomes? They all look the same to me.
** Yes, it's more complicated than this. That doesn't change its nature.
*** And no, they will not be returning the interest.

Congratulations to the Vikings

Another amazing performance. In the Brad Childress sense of the word obviously.

Talk to the hand

U.S. President Barack Obama waves while standing with other leaders during the Open Government Partnership event at the United Nations September 20 in New York City. The United Nations General Assembly kicks off September 21, with leaders from around the world attending.

I really, really hope that's not the Chinese Premier that Obama cut out of the picture while needlessly drawing attention to himself.

UPDATE: You gotta love the "This looked shopped*" comments. The word you're looking for is not "shopped." The word is "narcissistic."

* "I can tell from some of the pixels and from seeing quite a few Take Back the Night rallies in my time."

Me gustan

via email:

Hispanics of Today (HOT) will be celebrating Hispanic Heritage Month by selling breakfast burritos for $1 in the oval tomorrow morning. They will begin selling at 8am. 

Not that we want to perpetuate stereotypes or anything.

UPDATE: The mystery meat and potato burritos are awesome. Pero dónde están los gatos?

It's not just economics, it's the law

Marketing for dufuses

So anyway, I have about the lowest tech phone you can buy that still will play the theme from Halloween when it rings*. But among the many features of the phone I routinely ignore are the demo games. Demo games are a really cool idea assuming your screen is big enough to actually play games: you try a game out and if you like it**, you can phone some money to the Sirius Cybernetics Corporation or whomever and they will allow you to download a full version.

But here's the marketing stupidity part. I have 4 demos on my phone, 2 of which I would never, ever play even if I was from Wichita. But they are also locked, non-deletable, and with me (or at least my phone) forever. Surely the main reason they are locked is not a concern someone will steal them. It's because the Marketing Department of the Sirius Cybernetics Corporation is certain that if I cannot delete them, I will eventually submit to the inevitability of playing and then buying them.

I suspect such marketing departments are the only places in the galaxy this makes even a little more than zero sense***.  If your objective is to sell games, and if the means of selling those games is to encourage people to play them, why would you ignore the opportunity afforded by someone throwing your product in the trash?

Instead of locking Vuvuzela Hero on my phone, would it not make more sense to allow me to delete it and then replace it with a demo for Tuba Hero? If I delete that, you could then send me Dijeredoo Hero. You're not losing anything by handing out an unlimited number of demos - to hoard your demos is akin to worrying people will be entertained by watching your TV commercials.  And who knows, if you keep allowing me to try new games, maybe eventually you might sell me one. Besides, I understand Hurdy Gurdy Hero is going to be worth every penny.

* The model right below it weighs 6 pounds, comes with a genuine imitation leather pistol-style holster, and has a crank on the side of it for power. The model below that is a pair of soup cans with a 7-foot piece of string between them.
** Or if you spend an inordinate amount of time in the can, which is about the only time I could imagine one playing "Family Guy" all the way through.
*** There is a reason those mindless jerks will be the first against the wall when the revolution comes.

Little Sister is watching you

(hat tip: Moonbattery)

UPDATE: It didn't take any more than turning myself in to end up on the Obama2012 mailing list. I received my first email today, which was studded with such insights as, "The President has a job to do, so he's asking each of us to take the lead in shaping this effort." If that means anything at all, I'll be strudeled if I can figure out what it is.

Of course I unsubscribed immediately, and when I did I was offered a chance to tell them why. I simply said, "Hillary would be a much better president." I'm not sure if that's true, but it will give them something to think about.

That's it!

I'm reporting myself to AttackWatch.com. It's entirely and completely unfair* of me to post a picture asserting that Obama is a salad dressing dude.

UPDATE: It is rather funny that under the site's submission terms, you have to give the Obama campaign team the right to republish anything you send, and you have to warrant that you have the right to give that right. That means that nearly everyone who reports someone else** for saying mean things about the president is lying simply by sending it in. I submitted this, but all they did was ask me for money.

* and probably unconstitutional to boot
** in other words, Person A is submitting Person B's work and giving the Obama campaign the right to re-publish it.

Technology is racist

Tuesday randomness

I'm sequestered this week writing a 20-page historigraphical paper on the Weimar hyperinflation of 1923*.  Keynes really knew his stuff, it seems, before he went insane** sometime around 1930.

So I'm watching ESPN7 or some related off-network sports channel and I see an announcer who looks vaguely familiar. I can't place the guy until his fellow announcer calls him "Coach." And I'm like, "Coach? Jonathan Coachman? That guy used to be a wrestling 'announcer!'"  He might have been able to get away with being called "coach" on Smackdown, but in football that moniker really ought to be saved for when guys like Bill Parcells or Jimmy Johnson are behind the mic.

Unsurprisingly, Vox Day has won the first round of the PZ Myers Memorial Debate. His arguments were not unexpected, but those of his opponent... let's just say I never expected "mystery butter" to provide evidence against the existence of God or gods. Kudos to Dominic for originality, I think, but I'm not sure it would score.

While the "poverty rate" has risen under Obama, America still has the fattest***, richest poor people in the world. So we've got that going for us.

* Half of 6 or 7 books are written up, another is read and ready, and I'm sitting at 15 pages already. The paper should weigh in at a svelte 25 pages or so. Then I have 5 more on Chancellorsville and related battles to jump in to. It's a horrible life.
**Or got hungry. It seems there will always be work for an economist who gives governments intellectual cover to do what they want to do anyway: spend more than they collect. If it doesn't work, that is evidence they need to spend more.
*** If the government could find a way to incorporate a BMI adjustment to the poverty figure, I suspect our faux poverty would all but disappear.

Barack, how about some more coffee?

It's not the economy, Stupid

It's you:

Nearly one in three Americans who grew up middle-class has slipped down the income ladder as an adult, according to a new report by the Pew Charitable Trusts.

Downward mobility is most common among middle-class people who are divorced or separated from their spouses, did not attend college, scored poorly on standardized tests, or used hard drugs, the report says.

“A middle-class upbringing does not guarantee the same status over the course of a lifetime,” the report says.

First off, anyone who thinks that a middle class upbringing "guarantees" that same class will be held automatically is either an 80-year-old European or mind-bogglingly stupid. The former can be forgiven because they grew up at the tail end of a world where class was a position you were born into. However, "middle class," vague and deceptive as the label is, here merely represents a statistical variable between the top 30% of income earners at a given time and the lowest 30%. To whom but the most benighted is it a revelation that a constantly-changing number, income, might not retain its relative position between two other changing numbers over the course of a lifetime? What we have here is a report trying to make the obvious sound deep, or at least sinister*.

What else is wholly expected is the more popular reasons for falling out of the middle class. The first is divorce, wherein a family, usually with kids, suddenly finds itself without one income or significant familial support or both. Why would not halving someone's income usually drop them vis-a-vis their neighbors? The second - the child didn't go to college - is also an obvious ticket to LowerClassVille. While it is becoming apparent to all except those who sell degrees that a college degree is not enough to keep one middle class**, the lack of a college degree is liable to throw up tough odds in more cases than not. The last two, you're a moron and a meth head, are not very good anchors to middle-class-hood, either.

But as much as I have seen this study quoted in the last 2 days blaming Obama or Bush or Pelosi or immigrants, or any other individual or party, people are generally missing the point***. The economy is what it is, but your relative place in it is based almost entirely on what you, as an individual, do. Or more importantly, what you don't do.

* I especially enjoy when people bold that line like it's saying something insightful.
** It is not even proof that one is educated.
*** or making self-defeating statements like, "The report did not examine the effects of the Great Recession, which presumably accelerated downward mobility." Since the middle class is simply the middle 40% of income earners, even if half of Americans lost half their income, the percentage of people in the middle class would be exactly the same, 40%. For every person who drops out, another rises in automatically.

Anticipation

Despite

You keep using that word:

Bernanke gave a nod toward the notion that the economy has not recovered as quickly as it should have, despite the unprecedented levels of stimulus from both the Fed and Congress.

I do not think it means what you think it means.

UPDATE: the latest little catch phrase that seems to be popping up in relation to Fed action is 'Operation Twist.' Operation Twist is a stragedy in which the Fed buys the long end of the bond market curve and sells the short end in order to flatten the yield curve.  This is supposed to do something or other.  At least it was supposed to do something or other in 1961 when it was first inmplemented. Unfortunately, according to one well-placed source inside the Fed*, "Operation Twist is widely viewed today as having been a failure."

Obviously that does not mean it won't be tried again. Like the Stimulus package, all it probably needs is a new name.

* Ben Bernanke, "Monetary Policy Alternatives at the Zero Bound: An Empirical Assessment."

Take Two

The only thing less competent that re-trying a failed policy with more money is re-trying it with less money. But at least your failure is more affordable that way.

If Obama was smart, he'd sell the new $300b Not-a-Stimulus bill as a $550b spending cut compared to the last one.  Since it will accomplish exactly the same as the earlier, more expensive version, it might be an easy sell under the dome.

The incredible shrinking Congresswoman

Fox News makes Teh Fun:

Republicans have decided they're not going to give a rebuttal to President Obama's jobs speech later this week, a decision House Democratic Leader Nancy Pelosi took as a high affront to the White House.

Pelosi said the party's "silence" would "speak volumes about their lack of commitment to creating jobs."

OK, so the real news is that Obama's speech is expected by the GOP to be so incredibly weak that they need not respond to it, so incredibly strong that they cannot respond to it*, so incredibly unwatched that there's no one watching to respond to it to, or they really just want to get home in time for the game. In any event, there is no doubt that to the GOP, Obama is like Saruman after his ouster from Orthanc**. He may still have some small powers of oratory, but only if you believe him first. No one does anymore, and those who believed the illusion most fervently are now the most disillusioned.

So what has this to do with Pelosi? Absolutely nothing, which is kind of the point.  Pelosi says something, but no one bothers to respond to it because it's not worth responding to. The story quickly moves past her to the actual people who are actually making news. She leads the story, but former Bush speechwriter Dana Perino gets more ink, and he talks about Republicans. It seems that though once the most powerful woman in America or something, Pelosi has been reduced to a hook to get people to read stories that are about people who completely ignore her.

* OK, I'll admit I just put that in to make it sound fair.
** You needn't go with him, Biden Wormtongue. I know of no wrong you have done us.

Look for the union libel

Dufus economics

One guy's got it right:

Figuring out how well the second round of quantitative easing would work* wasn’t difficult, at least for one prominent economist.

Paul Ashworth, senior US economist at Capital Economics, had the Federal Reserve’s easing program, nicknamed QE2, solved pretty much right from the start.

OK, that's not the funny part. Even I, your resident non-economist, had QE2 solved pretty much right from the start. QE2 would accomplish nothing for the same reason QE1 would do nothing and why I'm sure QE3 will have the same non-impact. Unless the foremost economic problem we are presently suffering is high rates**, lowering rates is not going to solve the problem.  But even before Bernanke set about to cure problems cause by debt oversupply by creating more debt***, Ashworth nailed it:

“The Fed’s new program of asset purchases is not going to pull the US economy out of its current malaise because, given the scale of the balance sheet problems affecting household and financial institutions, ...

Ooh, let me guess:

...households cannot afford to take on more debt no matter the rate.  Or maybe it's,
...downsizing of families and an aging population has perhaps permanently lowered demand for oversize houses.  Or maybe it's,
...business is not looking to expand, given the realities of the first two.

Oh, do please tell us why it is that Bernanke's program of lowering rates from the lowest rate in half a century will not cure what's ailing us?

... it is simply too modest,” Ashworth wrote then.

* Or wouldn't work, whatever.
** Unlikely, given that we have the lowest rates across the board since the 1950s or early 60s.
*** Lowering rates was the (failed) goal, taking on more debt was the method through which it was pursued.

They should stop calling it an approval rating

Getting one right

But for how long?

The First Circuit Court of Appeals reached a crucial decision last Friday allowing the public to videotape police officers while they're on the clock.

The decision comes after a string of incidents where individuals have videotaped police officers and were arrested. Police officers across the United States believed citizens didn't have the right to videotape them as they conducted official duties, but issues like police brutality put the issue up for debate.

There is really not much argument available for the police that private citizens filming them in their official duties somehow keeps them from performing them, especially given the pure number of TV shows* where full television crews ride along on beats and even raids. The best they can do is claim that recording is "wiretapping" or "evesdropping**," the latter of which implies that citizens do not even have the right to look at police in their duties.  The fact that all but a very few of these cases have not just been thrown out of court but laughed out ought to say something about the issues at had.

The police don't like people watching and recording them. I understand that.  I also truly do not care. I am not the slightest bit sympathetic to the argument that it's somehow not fair to them, or that people with cameras look like people with guns. Police officers have no right to privacy when they put on the uniform of the state***. They are watchers who need to be watched, period****.

The First Circuit court was certainly correct when they concluded, "Gathering information about government officials in a form that can readily be disseminated to others serves a cardinal First Amendment interest in protecting and promoting "the free discussion of governmental affairs." The only danger I see is that there is not an explicit right to make such a recording - that means the Supremes could still find a compelling government interest in ensuring that people only see the Protection and Service the state wants them to see.

I don't expect the Supremes to find that, though I do expect a number of attorneys general to argue that, especially those from Illinois and Maryland, where state laws specifically ban recording of anyone without consent. So while celebration is in order, it's just a touchdown, not a Super Bowl ring.

* True story: one of my foster kids saw a commercial for one of those shows and then told me, proud as a peacock, "Hey, my dad was on Cops!"  Swear to God.
** Honest, Mr. Gandalf, I wasn't dropping no eves.
*** Or when acting as agents of the state in plain clothes.
**** Saying, "period" and following it with a period makes any assertion true. It's double-true if "period" is a sentence all its own, but I'm not confident enough to write it that way.