I've lately embarked on a disquieting intellectual journey. I'm in a musical that tries to drive home the point "It can happen here!", reading a book describing how it might happen here, and watching a process that looks distressingly like it is happening here.
The musical is Cabaret. I play a customs agent who is basically all that is wrong with Wiemar Republic and a chorus member gleefully oblivious to the horrors endemic in the absolute control required by the Nazis (no, I didn't sing, dance, act or speak German a month ago). If you're in or near South Bend, definitely come see the show. If you have to come from out of town, I'll bake a pie for you.
The book is F. A. Hayek's The Road to Serfdom. As one of the founders of the Austrian School of economics, he warns in great detail that totalitarian regimes arise not because people like giving up freedoms or any particular flaw among the societies which elevate them. Rather, the rise totalitarianism is an incremental process that begins with an earnest and honest desire for a less chaotic, more secure form of prosperity that does not have the apparent waste generated by free markets.
Finally, the big national debate is over how to best employ the government's power to convince people that banks are sound, they will be employed and a disliked minority will be punished. Replace "plan" with "stimulus" in this illustrated version of Hayek's book, and you see why there is cause for concern. The Treasury Department is not, yet, our answer to Gosplan, but today the survival of any particular business depends not on its ability to serve customers, but on its ability to pressure appointed officials into giving it money. Whatever the final form of the government aid to banks, the price of houses in your neighborhood will be an important national security issue, since government revenue will depend on their sale.
When one throws in GM, the relationship between this bank bailout and the future of the economy has potential to get darker. Today, if the Bank of America sends me a letter offering a car loan, I toss it out because I won't borrow money on a depreciating asset. But how should one handle a nationalized bank sending a loan offer to "Buy American!", with an advertisement for the latest "Politcally Popular Car"? Does it now become, in Frauline Kost's words, "my patriotic duty"?
To get really personal here, should I, as a scientist, expect to see my federal grants handled differently if I buy into this part of the recovery effort? Since the NSF draws from the Treasury pool that grows with the value of nationalized assets, funding people who will in turn give their money to those assets is the rational choice. The effect this would have on funding research suggesting the PPC isn't so hot is obvious.
This is what keeps me up at nights, well that and anxiety about research, the dog howling at sirens and waiting for the latest pie to finish baking. The solution, to the extent there is one, has to involve convincing ourselves that an industrial society will always supply more than it can sustainably demand. In the new global village, we're all having to learn that lesson together. So, instead of trying to convince people to live beyond their means, let's try and work out a process that lets everyone's means include food, shelter and the wherewithal to make a pie a week.
Saturday, January 31, 2009
Nutty red funeral pie
While planning the Pie Inaugural Ball, the Pie Cabinet celebrated the life of the great People's Revolution against constitutional and capitalist government with the Nutty Red Funeral Pie.
Funeral pies are a laudable Amish tradition that stems from the fact that raisins are almost always available in the back of a cabinet. They have no dairy products and so can be left on a shelf for hours while more important matters are handled. Ken Haedrich took this a step further and made one using Craisins, and the satiric opportunity was too good to pass up. This recipe is modified enough that I consider it worth posting.
Nutty Red Funeral Pie:
Crust: Whole wheat, double crust
Filling:
2 Cups Craisins
1 Cup orange juice
1/2 Cup sugar
3 T cornstarch
1/4 t ground cloves
1/4 t salt
1 Cup water
1 T unsalted butter
1 T lemon juice
1 Cup chopped pecans (preferably from a Texas Bag of Nuts, see below)
Glaze:
2T milk
1T sugar
(1) Roll out the bottom crust and get it into a 9" pan. Roll out the top crust and set it aside. Preheat the oven to 400F.
(2) In a medium sized (1.5quart) saucepan, combine Craisins and orange juice. Heat over a low flame and stir in the sugar, cornstarch, salt and cloves as the water warms. Bring to a boil and let boil for about 1min, then remove from heat. Stir in butter, then add lemon juice and pecans.
(3) Let the mix cool in a large bowl to the point it won't hurt to spash a little on yourself. Pour into the pie shell, cover with the top crust, and press around the edges with a fork. Cut off any overhang and glaze the top by brushing it with milk and sugar.
(4) Place in the oven and let cook for 40. Rotate as necessary to ensure even cooking.
Texas Bag of Nuts: For those who wonder where I got my sense of humor, my late grandfather was a major influence. He lived near Austin, Texas, and one year for Christmas he bought me a tanned bull scrotum which he intended to fill with pecans, that I might have a real "Texas Bag of Nuts." He died shortly thereafter, and as a memorial of sorts, I hung his gift, filled with nuts, over my desk.
Funeral pies are a laudable Amish tradition that stems from the fact that raisins are almost always available in the back of a cabinet. They have no dairy products and so can be left on a shelf for hours while more important matters are handled. Ken Haedrich took this a step further and made one using Craisins, and the satiric opportunity was too good to pass up. This recipe is modified enough that I consider it worth posting.
Nutty Red Funeral Pie:
Crust: Whole wheat, double crust
Filling:
2 Cups Craisins
1 Cup orange juice
1/2 Cup sugar
3 T cornstarch
1/4 t ground cloves
1/4 t salt
1 Cup water
1 T unsalted butter
1 T lemon juice
1 Cup chopped pecans (preferably from a Texas Bag of Nuts, see below)
Glaze:
2T milk
1T sugar
(1) Roll out the bottom crust and get it into a 9" pan. Roll out the top crust and set it aside. Preheat the oven to 400F.
(2) In a medium sized (1.5quart) saucepan, combine Craisins and orange juice. Heat over a low flame and stir in the sugar, cornstarch, salt and cloves as the water warms. Bring to a boil and let boil for about 1min, then remove from heat. Stir in butter, then add lemon juice and pecans.
(3) Let the mix cool in a large bowl to the point it won't hurt to spash a little on yourself. Pour into the pie shell, cover with the top crust, and press around the edges with a fork. Cut off any overhang and glaze the top by brushing it with milk and sugar.
(4) Place in the oven and let cook for 40. Rotate as necessary to ensure even cooking.
Texas Bag of Nuts: For those who wonder where I got my sense of humor, my late grandfather was a major influence. He lived near Austin, Texas, and one year for Christmas he bought me a tanned bull scrotum which he intended to fill with pecans, that I might have a real "Texas Bag of Nuts." He died shortly thereafter, and as a memorial of sorts, I hung his gift, filled with nuts, over my desk.
Saturday, January 24, 2009
The Pie Cabinet can party!
This past Friday, the Pie Cabinet hosted its first large scale party, and it was a huge success. We celebrated National Pie Day and feted the new, very pro-pie President with:
There are a lot of people who deserve special thanks, most especially the Princess. Given the quasi anonymous nature of this, I won't say more, but you know who you are. Stop by anytime for a slice, it's the least I can do. Also, Mr. President, my challenge stands, even if I have to grow the sweet spuds myself.
- Shortbread cookies (apparently our new First Lady's favorite)
- Poki (celebrating Indonesia )
- Ham and pineapple skewers (Hawaii)
- Hawiian salad in cucumber cups (thanks glenn)
- Bacon and apple, also pear and gorgonzola pizza (Chicago, also glenn)
- Kielbasa
- Pumpkin pie
- Applesauce pie
There are a lot of people who deserve special thanks, most especially the Princess. Given the quasi anonymous nature of this, I won't say more, but you know who you are. Stop by anytime for a slice, it's the least I can do. Also, Mr. President, my challenge stands, even if I have to grow the sweet spuds myself.
Monday, January 19, 2009
An exploration of the GOP's relationship with science.
Much has been made over the last few years about how the GOP got from Regan's "love of ideas" to the current "war on science" stance among many in the Republican base. These articles generally assume that the cause is the rise of the Evangelical Right, personified by Pat Robertson, Jerry Falwell and the 700 Club, as part of a cunning political strategy put together by Karl Rove and his predecessors. If the Evolution Wars were the only issue, then I would agree. The real problem, however, is a deeper shift in the role of science in society.
For many years, advances in the understanding of science led directly to a more prosperous world. Chemistry provides new processes enabling new products. Physics, with some help from the chemists, provides new and interesting ways to capture, store, and release energy for purposes as diverse as lighting, communication and transportation. Aerodynamics helped us conquer the skies and reach into space. Biology led us to new cures for old diseases. Any hard science that existed in 1900 can proudly boast at least one of its discoveries advancing the prosperity of man and the profitability of a manufacturer.
However, in the last forty years or so, the rise of fields such as human ecology have shown us that the marvels enabled by science have steeper costs than we knew. By the 1980's, it became popular to sing about "losing faith" in science and progress, and popular fiction portrayed scientists as persecuted heroes. Science is no longer a solid friend of suburban prosperity, and political groups that rally their support in the suburbs have tended to embrace religion instead of "progress" as their justification. In a recent poll, such politicians explicitly acknowledged that while they believe scientists, the ones who presumably know what's going, believed in anthropogenic climate change, they did not.
The upshot is that the party of personal responsibility and suburban prosperity finds itself confronted by research showing that we are collectively responsible for our well-being and that suburbs are particularly harmful. In that environment, it makes absolutely no sense for a political body to fund or support people who tell their constituents that their policies are fundamentally unsound. One might as well ask Microsoft to fund development of Open Office. However, with the GOP now in opposition nationally, now is perhaps the time for a reapproachment. The party currently in power is having something of a scientific love-in, but you can ask health insurers, military contractors or high energy physicists what happens when one party likes you too much.
When the current administration and Congress' love affair with learning ends, and it will, here's what my colleagues and I ought to be doing to make sure we've got friends on both sides of the aisle:
(1) Be willing to adopt the language of morality. Rick Warren is a good guy and a smart one, and we would do well to copy his style when discussing climate change and other difficult topics.
(2) Never stop making the point that "science" is nothing more (or less) then that which we have not disproven yet. Acknowledge the inherent deism of the assumptions used, and don't allow enthusiastic reapproachers to try and fill gaps in our knowledge with a deity, that hasn't worked out well for anyone. Acknowledge those gaps, and emphasize that what we do is not mystical, but explicity and completely human. My spouse studies theology, and to date we haven't found any inherent conflict between our fields, just like Galileo.
(3) Speak in positive terms about progress towards a Jeffersonian ideal of small farming communities. Don't use "Jeffersonian" unless you're sure the audience has some reverence for this particular founding father, but "small town America" is their support base. This is the part of the country where there's a lot of wind to be harvested and sun for biofuels and direct solar conversion, so the science advocate can be both prophet of doom and "progress".
I'm off to get me a camel hair robe and find a hive frequented by locusts.
For many years, advances in the understanding of science led directly to a more prosperous world. Chemistry provides new processes enabling new products. Physics, with some help from the chemists, provides new and interesting ways to capture, store, and release energy for purposes as diverse as lighting, communication and transportation. Aerodynamics helped us conquer the skies and reach into space. Biology led us to new cures for old diseases. Any hard science that existed in 1900 can proudly boast at least one of its discoveries advancing the prosperity of man and the profitability of a manufacturer.
However, in the last forty years or so, the rise of fields such as human ecology have shown us that the marvels enabled by science have steeper costs than we knew. By the 1980's, it became popular to sing about "losing faith" in science and progress, and popular fiction portrayed scientists as persecuted heroes. Science is no longer a solid friend of suburban prosperity, and political groups that rally their support in the suburbs have tended to embrace religion instead of "progress" as their justification. In a recent poll, such politicians explicitly acknowledged that while they believe scientists, the ones who presumably know what's going, believed in anthropogenic climate change, they did not.
The upshot is that the party of personal responsibility and suburban prosperity finds itself confronted by research showing that we are collectively responsible for our well-being and that suburbs are particularly harmful. In that environment, it makes absolutely no sense for a political body to fund or support people who tell their constituents that their policies are fundamentally unsound. One might as well ask Microsoft to fund development of Open Office. However, with the GOP now in opposition nationally, now is perhaps the time for a reapproachment. The party currently in power is having something of a scientific love-in, but you can ask health insurers, military contractors or high energy physicists what happens when one party likes you too much.
When the current administration and Congress' love affair with learning ends, and it will, here's what my colleagues and I ought to be doing to make sure we've got friends on both sides of the aisle:
(1) Be willing to adopt the language of morality. Rick Warren is a good guy and a smart one, and we would do well to copy his style when discussing climate change and other difficult topics.
(2) Never stop making the point that "science" is nothing more (or less) then that which we have not disproven yet. Acknowledge the inherent deism of the assumptions used, and don't allow enthusiastic reapproachers to try and fill gaps in our knowledge with a deity, that hasn't worked out well for anyone. Acknowledge those gaps, and emphasize that what we do is not mystical, but explicity and completely human. My spouse studies theology, and to date we haven't found any inherent conflict between our fields, just like Galileo.
(3) Speak in positive terms about progress towards a Jeffersonian ideal of small farming communities. Don't use "Jeffersonian" unless you're sure the audience has some reverence for this particular founding father, but "small town America" is their support base. This is the part of the country where there's a lot of wind to be harvested and sun for biofuels and direct solar conversion, so the science advocate can be both prophet of doom and "progress".
I'm off to get me a camel hair robe and find a hive frequented by locusts.
The economic role of science
This will be somewhat more philosophical than most posts, and should start with a couple explicit statements of the premises from which I approach this subject. The first is that I was educated in the Enlightment tradition that includes Thomas Payne, and which generally holds that the legitimate functions of government are the protection of life, liberty and property. This is the theory from which Adam Smith worked in defining The Wealth of Nations, and one which F. A. Hayek argues we must adhere to if we want to avoid the Road to Serfdom.
So, how then do I justify my own life as a scientist, especially one who expects to depend on the largess of the state? The answer is that I believe the only way for the life, liberty and property to be defended is for externalities, positive and negative, to be properly adjudicated, and this must be the function of the state. While I'm generally a fan of the Cato Institute, I disagree with them on this point.
Science is often presented as a "positive externality", providing benefits such as better chemistry for batteries and medicines, the underlying physics for things like GPS, and very fundamental things like thermodynamics and electromagnetics. However, I would argue that the most important role of science is the identification of externalities. The most obvious example involves the study of anthropogenic climate change, which identified that the use of fossil fuels has costs far beyond the local pollution caused by their combustion. Every time there is a product recall, warning from the Centers for Disease Control, or a new regulation to protect a threatened species or community, science is involved. A society in which new products and processes are introduced needs a group of highly trained people to sort out who's actually effected by them. Whether this is accomplished through legislation or lawsuits, scientists are involved.
Beyond regulation and more progressive benefits, science, particularly government funded science, has a strong role to play in education. Knowledge is still power, and the protection of liberty requires that power be distributed broadly. This plays out in two major forms: (1) the training of young scientists to do useful things and (2) providing the public with information that enables them to make well informed decisions in their private lives and at the polls. The first is the reason I coach a FIRST Lego League team. The second is the reason I have this blog and advocate Pie Making Capacity in Nation (PMCIN, pronounced "pumpkin") as an economic metric.
I am in science and happy to do government science because it is essential to the protection of life, liberty and the pursuit of a PMCIN=1 society. Science teaches us what we need to know to advance as a society without killing ourselves in the process. Oh, and there's the whole security enabled by better defense technologies angle, but that's more of an engineering than scientific problem.
So, how then do I justify my own life as a scientist, especially one who expects to depend on the largess of the state? The answer is that I believe the only way for the life, liberty and property to be defended is for externalities, positive and negative, to be properly adjudicated, and this must be the function of the state. While I'm generally a fan of the Cato Institute, I disagree with them on this point.
Science is often presented as a "positive externality", providing benefits such as better chemistry for batteries and medicines, the underlying physics for things like GPS, and very fundamental things like thermodynamics and electromagnetics. However, I would argue that the most important role of science is the identification of externalities. The most obvious example involves the study of anthropogenic climate change, which identified that the use of fossil fuels has costs far beyond the local pollution caused by their combustion. Every time there is a product recall, warning from the Centers for Disease Control, or a new regulation to protect a threatened species or community, science is involved. A society in which new products and processes are introduced needs a group of highly trained people to sort out who's actually effected by them. Whether this is accomplished through legislation or lawsuits, scientists are involved.
Beyond regulation and more progressive benefits, science, particularly government funded science, has a strong role to play in education. Knowledge is still power, and the protection of liberty requires that power be distributed broadly. This plays out in two major forms: (1) the training of young scientists to do useful things and (2) providing the public with information that enables them to make well informed decisions in their private lives and at the polls. The first is the reason I coach a FIRST Lego League team. The second is the reason I have this blog and advocate Pie Making Capacity in Nation (PMCIN, pronounced "pumpkin") as an economic metric.
I am in science and happy to do government science because it is essential to the protection of life, liberty and the pursuit of a PMCIN=1 society. Science teaches us what we need to know to advance as a society without killing ourselves in the process. Oh, and there's the whole security enabled by better defense technologies angle, but that's more of an engineering than scientific problem.
Friday, January 16, 2009
The problem with restrictions on TARP funds
As has become something of a pattern for me on economic issues, consider this little more than a distillation of much more qualified services. There is, however, a lot of indignation about how federal bailout/rescue money is being used, so in the spirit of Defending the Undefendable, I offer this explanation of why more direct oversight and control is at best difficult, and perhaps undesirable.
Problem 1: The cost of accounting
One of my favorite comments on this subject has been: "If I loaned my kids money, I'd want to know what they are doing with it." In this case, the "kids" are about 100 (I think) banks and other lending institutions that need money to continue doing things that banks do like pay off their loans, keep branches open and make loans. However, while it's relatively straightforward for a parent to keep track of minor children's disposition of considerably less than the household income, tracking multiple institutions' use of funds intended to keep them solvent requires a fairly large and dedicated staff, and the decision was made to favor making funds available for use over strict oversight. Plus, no business wants to make its internal workings public knowledge for competitive reasons. The theory was that in order to be effective, this recapitalization had to be embraced by banks before they got into serious trouble, and requiring strict and public accounting for their capital expenditures would discourage banks that should seek help before they became another crisis.
Problem 2: Paying of dividends
The disbursement of chunks of money to shareholders, called paying dividends, is usually associated with profitable companies looking to make their stock more attractive so they can expand. In lean times, such things that boost stock price at the expense of the capital holdings of the company are generally considered bad, doubly so when the capital the company is holding comes from taxpayers.
However, it is precisely the sale of stock at a decent price that allows a company to replenish its capital reserves. So, if you offered a dividend of $.25 when your stock cost $60, your investors got a return of .41%. If your share price falls to $4, investors can now get 6.25% plus any stock appreciation. When equities are offering better return on capital than certificates of deposit, it is much easier for institutions to recapitalize by issuing new shares. Thus, demanding that dividends not be paid, and thus pushing down the stock price, undermines the whole point of a recapitalization program.
Problem 3: Executive Pay
There's a fallacy hard wired into the brain that cost equates to value. Add to this the fact that few people have significant loyalty to their employers and you have the history of executive pay over the last twenty years. So, the fact that the CEO of a company makes 420x the gross income of the lowest paid employee does not mean that his (generally) leadership is worth 420x the input of the peon, but the peon just needs enough to get by while keeping the management team from getting bought means paying more. Thus, right when the industry most needs bright people who have some clue is hardly the time to start paying them less.
On the other hand, a very strong case could be made that the coming transition in banking is going to be as significant as the transition the computer industry made from the days when everyone had to work in assembler to the early days of higher level languages. At that point, almost all of the old staff had to be fired because the new techniques and mentalities were diametrically opposed to the old ("What is this 'commenting' you speak of? Readability, who would ever read code?"). However, that is something markets can decide better than governments, the latter simply being there to ensure the new rules are followed.
Problem 1: The cost of accounting
One of my favorite comments on this subject has been: "If I loaned my kids money, I'd want to know what they are doing with it." In this case, the "kids" are about 100 (I think) banks and other lending institutions that need money to continue doing things that banks do like pay off their loans, keep branches open and make loans. However, while it's relatively straightforward for a parent to keep track of minor children's disposition of considerably less than the household income, tracking multiple institutions' use of funds intended to keep them solvent requires a fairly large and dedicated staff, and the decision was made to favor making funds available for use over strict oversight. Plus, no business wants to make its internal workings public knowledge for competitive reasons. The theory was that in order to be effective, this recapitalization had to be embraced by banks before they got into serious trouble, and requiring strict and public accounting for their capital expenditures would discourage banks that should seek help before they became another crisis.
Problem 2: Paying of dividends
The disbursement of chunks of money to shareholders, called paying dividends, is usually associated with profitable companies looking to make their stock more attractive so they can expand. In lean times, such things that boost stock price at the expense of the capital holdings of the company are generally considered bad, doubly so when the capital the company is holding comes from taxpayers.
However, it is precisely the sale of stock at a decent price that allows a company to replenish its capital reserves. So, if you offered a dividend of $.25 when your stock cost $60, your investors got a return of .41%. If your share price falls to $4, investors can now get 6.25% plus any stock appreciation. When equities are offering better return on capital than certificates of deposit, it is much easier for institutions to recapitalize by issuing new shares. Thus, demanding that dividends not be paid, and thus pushing down the stock price, undermines the whole point of a recapitalization program.
Problem 3: Executive Pay
There's a fallacy hard wired into the brain that cost equates to value. Add to this the fact that few people have significant loyalty to their employers and you have the history of executive pay over the last twenty years. So, the fact that the CEO of a company makes 420x the gross income of the lowest paid employee does not mean that his (generally) leadership is worth 420x the input of the peon, but the peon just needs enough to get by while keeping the management team from getting bought means paying more. Thus, right when the industry most needs bright people who have some clue is hardly the time to start paying them less.
On the other hand, a very strong case could be made that the coming transition in banking is going to be as significant as the transition the computer industry made from the days when everyone had to work in assembler to the early days of higher level languages. At that point, almost all of the old staff had to be fired because the new techniques and mentalities were diametrically opposed to the old ("What is this 'commenting' you speak of? Readability, who would ever read code?"). However, that is something markets can decide better than governments, the latter simply being there to ensure the new rules are followed.
Tuesday, January 13, 2009
Corporate bailouts, explained
A friend of mine recently sent an email asking why TARP funds are being used beyond their intended role of buying up bad mortgages. For a very detailed and thorough coverage of that question, I would refer you to Baseline Scenario, one of my favorite economics blogs. For a more "down to earth" approach, I recomend NPR's Planet Money, which also has a very fun podcast. However, a shorter, less rigorous explaination of the real problem, called "leverage", is helpful to get started.
Here's how it works, approximately:
Bob's Investment House discovers something that gives a 5% return on every dollar that can be poured into it. BIH has $10million of their client's money, and so could be pulling in $500k/yr for the life of that investment, typically a loan to someone like a homeowner, or lots of homeowners in the case of Mortgage Backed Securities. However, $500k/yr is kinda measely if you're trying to run an investment firm in New York, especially since that needs to pay for the staff and give returns to customers.
So to increase their returns, BIH could borrow $100m from a Wall Street Bank (WSB) at 2% interest, and invest the $100m in their oh-so-reliable MBS. Now they are pulling in $5.5m/yr gross, while paying $2m/yr in interest, a net profit of $3.5m/yr, which is enough to comfortably run a small company in NYC and give their investors a comfortable 10% return on their capital.
But, what happens when the MBS stops paying 5%? In theory, as long as no one panics and the MBS can still give a return of 3%, then the system holds together. Bob's customer's get annoyed at their diminished returns, but the WSB gets its 2% and can pay off its loans from other WSBs. However, if the MBS stops paying anything, or worse loses value, then Bob has to find enough money to cover the difference at the same time his customers want their money back NOW! Once enough Bobs stop paying, WSB can't pay its loans and either needs a huge infusion of government cash to pay its loans or it goes bankrupt.
Once the WSBs start going bankrupt, lending stops, and the value of assets purchased with borrowed money declines sharply. In the modern economy, almost all raw materials are bought on credit and then the loans are repaid when the finished goods are sold. No loans means no parts are made, no parts being made means no final products, and no products means no jobs. This is what happened from 1928-1935, and explains how we got to 25% unemployment and almost had a Communitist or National Socialist revolution in the US. The other option is to use public money as a buffer against that level of castastrophe, and, hopefully, slowly unwind the system.
Here's how it works, approximately:
Bob's Investment House discovers something that gives a 5% return on every dollar that can be poured into it. BIH has $10million of their client's money, and so could be pulling in $500k/yr for the life of that investment, typically a loan to someone like a homeowner, or lots of homeowners in the case of Mortgage Backed Securities. However, $500k/yr is kinda measely if you're trying to run an investment firm in New York, especially since that needs to pay for the staff and give returns to customers.
So to increase their returns, BIH could borrow $100m from a Wall Street Bank (WSB) at 2% interest, and invest the $100m in their oh-so-reliable MBS. Now they are pulling in $5.5m/yr gross, while paying $2m/yr in interest, a net profit of $3.5m/yr, which is enough to comfortably run a small company in NYC and give their investors a comfortable 10% return on their capital.
But, what happens when the MBS stops paying 5%? In theory, as long as no one panics and the MBS can still give a return of 3%, then the system holds together. Bob's customer's get annoyed at their diminished returns, but the WSB gets its 2% and can pay off its loans from other WSBs. However, if the MBS stops paying anything, or worse loses value, then Bob has to find enough money to cover the difference at the same time his customers want their money back NOW! Once enough Bobs stop paying, WSB can't pay its loans and either needs a huge infusion of government cash to pay its loans or it goes bankrupt.
Once the WSBs start going bankrupt, lending stops, and the value of assets purchased with borrowed money declines sharply. In the modern economy, almost all raw materials are bought on credit and then the loans are repaid when the finished goods are sold. No loans means no parts are made, no parts being made means no final products, and no products means no jobs. This is what happened from 1928-1935, and explains how we got to 25% unemployment and almost had a Communitist or National Socialist revolution in the US. The other option is to use public money as a buffer against that level of castastrophe, and, hopefully, slowly unwind the system.
Monday, January 12, 2009
Victory Gardens 2.0
As the economist in my place of work, I'm frequently asked for investment advice. These days I just say "land and ammunition", since I think asset growth for the next couple of years will most likely have leaves or fur. Kirstin and I got a 500% return on a squash we bought last year (600% if you include eating the first squash) through seeds in our compost, making it perhaps the best investment of 2008. When one factors in the investments in biofuels relative to the capacity for additional oil production, now priced below its current-consumption-replacement level of $70/barrel, it's not as crazy as it sounds. There's a small but vocal bunch of folks calling for Victory Gardens 2.0, and I don't see a way to both feed and power the nation for another 100yrs otherwise. A change in the tax code to make it easier to hire domestic help would be quite handy in that regard, but I digress.
Anyway, there's some other good reasons to support Victory Gardens:
(1) We are, in case you've forgotten, involved in a two-theater war. A little visible reminder on the home front would be a good thing, whether you support these or not, pretending they aren't there isn't good.
(2) If you like the idea of "small government", take some responsibility for feeding yourself and your family.
(3) Lawns can be pretty, but you can't make a pie out of grass clippings. Butternut squash, pumpkins, strawberries, grapes and raspberries are fairly easy to grow and you can't beat fresh-off-the-vine fresh.
If you want to see the more left-leaning coverage of this, check it out:
http://www.change.org/ideas/view/green_the_white_house
Anyway, there's some other good reasons to support Victory Gardens:
(1) We are, in case you've forgotten, involved in a two-theater war. A little visible reminder on the home front would be a good thing, whether you support these or not, pretending they aren't there isn't good.
(2) If you like the idea of "small government", take some responsibility for feeding yourself and your family.
(3) Lawns can be pretty, but you can't make a pie out of grass clippings. Butternut squash, pumpkins, strawberries, grapes and raspberries are fairly easy to grow and you can't beat fresh-off-the-vine fresh.
If you want to see the more left-leaning coverage of this, check it out:
http://www.change.org/ideas/view/green_the_white_house
Saturday, January 10, 2009
Not quite the Pie Cabinet, but I like it
The "forever" part of my mission statement above is the source of most of the interesting discussions here. Most everyone agrees with the idea that pie making is a good thing, but when confronted with the implications for future pie making of their current life-style, things get interesting. As one who took a 60% pay cut to for a better job and career, I have little sympathy for what I like to call "plasma TV prosperity", the set of social norms that doesn't mind the fact that there is a finite, and roughly known end date for their high living. In all cases, that date is after the next election, and generally past the expected lifetime of the largest voting blocks in Western countries.
However, a good national example of how to live well in tough times by growing your own food, even setting up urban agricultural co-ops would be a very welcome thing. It continues to baffle me that the GOP doesn't get on board with some of this, given all the love they try to show farmers and their talk of "small government." Yes, every entry about environmental topics will end like that.
However, a good national example of how to live well in tough times by growing your own food, even setting up urban agricultural co-ops would be a very welcome thing. It continues to baffle me that the GOP doesn't get on board with some of this, given all the love they try to show farmers and their talk of "small government." Yes, every entry about environmental topics will end like that.
Wednesday, January 7, 2009
Green Tomato Bailout Pie
I could blame myself for getting the plants into the ground a month late or anthropogenic climate change for screwing with the growing season, but this year we had a lot of green tomatoes. Enough that we could both make the traditional family relish and a whole pie. It was made and served to the Pie Cabinet right after the GM/Chrysler bailout was announced, hence the name. That and the fact that many felt it just should not have been. The pie turned out fairly well, we'll see about its namesake.
Once again, this is based heavily based on one of Ken's recipes. Buy his book.
Ingredients:
1 Standard pastry crust, or whole wheat crust, single crust
Filling:
4 1/2 Cups cored, seeded and very thinly sliced green tomatoes
1/2 Cup Craisins
1/3 Cup turbinado sugar
1/3 Cup honey
2 T fresh lemon juice
1 T brown rice vinegar
1/2 t ground cinnamon
1/2 t ground ginger
1/2 t ground cloves
2 T cornstarch (or 3 depending on how wet the tomatoes are)
Crisp Cornmeal Topping:
1/3 Cup all-purpose flour
1/4 Cup fine yellow cornmeal
1/2 Cup turbinado sugar
1/4 t ground cinnamon
1/4 t salt
1/4 Cup unsalted butter
Procedure:
(1) Roll out the pastry and get it into a 9" pie pan. Toss it into a freezer and preheat the oven to 400.
(2) In a large glass bowl, combine the green tomatoes, cranberries, Turbinado, honey, lemon juice and vinegar and mix well. Stir in the spices and cornstarch. Pull the pan out of the freezer and smooth the filling into the chilled shell.
(3) Place the pie in the oven for 30min. Make the topping by combining all the dry ingredients in a bowl, then cut in the butter with a pastry blender.
(4) Lower the oven temp to 375, loosely drape foil over the top to prevent excessive drying. Return the pie to the oven for 10min.
(5) Pull the pie out of the oven, spread the crumbs over the top evenly, then tamp down slightly. Put a pan underneath the pie to contain any spills, and bake until the juices bubble thickly at the edges, roughly 25min.
Let cool on a wire rack for at least 2hrs. Enjoy the really unique and wonderful smells of the spices and vinegar in the house all day.
Once again, this is based heavily based on one of Ken's recipes. Buy his book.
Ingredients:
1 Standard pastry crust, or whole wheat crust, single crust
Filling:
4 1/2 Cups cored, seeded and very thinly sliced green tomatoes
1/2 Cup Craisins
1/3 Cup turbinado sugar
1/3 Cup honey
2 T fresh lemon juice
1 T brown rice vinegar
1/2 t ground cinnamon
1/2 t ground ginger
1/2 t ground cloves
2 T cornstarch (or 3 depending on how wet the tomatoes are)
Crisp Cornmeal Topping:
1/3 Cup all-purpose flour
1/4 Cup fine yellow cornmeal
1/2 Cup turbinado sugar
1/4 t ground cinnamon
1/4 t salt
1/4 Cup unsalted butter
Procedure:
(1) Roll out the pastry and get it into a 9" pie pan. Toss it into a freezer and preheat the oven to 400.
(2) In a large glass bowl, combine the green tomatoes, cranberries, Turbinado, honey, lemon juice and vinegar and mix well. Stir in the spices and cornstarch. Pull the pan out of the freezer and smooth the filling into the chilled shell.
(3) Place the pie in the oven for 30min. Make the topping by combining all the dry ingredients in a bowl, then cut in the butter with a pastry blender.
(4) Lower the oven temp to 375, loosely drape foil over the top to prevent excessive drying. Return the pie to the oven for 10min.
(5) Pull the pie out of the oven, spread the crumbs over the top evenly, then tamp down slightly. Put a pan underneath the pie to contain any spills, and bake until the juices bubble thickly at the edges, roughly 25min.
Let cool on a wire rack for at least 2hrs. Enjoy the really unique and wonderful smells of the spices and vinegar in the house all day.
Tuesday, January 6, 2009
Nuclear energy security in pie chart form.
Okay, there's a pie recipe coming soon. I'm tempted to call it "Bailout Pie" since it involves green tomatoes, and many people thought it just should not be. In related news, I'm thinking of expanding the Fuzzy Wups BBB&B to the Fuzzy Wups BBBB&B, the last B for "Bank", in hopes of getting my slice of the real bailout pie. I might have some more to say about grand strategy soon, but I think I'll let glenn do that today.
Anyway, this post is about the less controversial topic of energy security. Unlike climate change, where the corrective action is both uncertain and contrary to the needs of major government programs such as Social Security (less energy consumption almost certainly means less economic output), most agree that being at least mostly self-sufficient in terms of energy is a good thing. During the recent presidential campaign, the GOP advocated multiple new nuclear reactors as a way to move away from buying our fuel from the unsavory Middle East or Venezuela. Well, according to the US Department of Energy, the GOP must think the Russia and the 'Stans have our best interests at heart.
Do not get me started on nuclear waste disposal. There is no such thing as "safe and permanent" storage, and something that's hazardous for 10k years is not exactly the kind of legacy I would like to leave my descendants. However, something that is very toxic and in the watershed for the Colorado River might do wonders for reducing energy consumption by encouraging people to vacate the desert southwest. Black humor or long term policy? You decide.
But back to energy security. The purpose of energy security is to avoid interruptions in supply, implying either a Mahan-inspired strategy of total sea dominance or generation of energy within one's own borders. The point is that nuclear energy means buying fuel from Canada, which is pretty secure, Australia, which is about as reliable as our Navy is dominant (a good bet for now); and Russia. Ask Ukraine, France and Poland how that's going.
The point of all this is that any mined fuel is a loser in the long term. At current consumption levels, we've got about 100yrs of uranium left. If consumption expands, so will exploration, but heavy metals are very rare, and uranium is always decaying. Sustainable, the GOP needs to learn and soon, is not a bad word, but the only way to actually achieve the "small government" they claim to want.
Anyway, this post is about the less controversial topic of energy security. Unlike climate change, where the corrective action is both uncertain and contrary to the needs of major government programs such as Social Security (less energy consumption almost certainly means less economic output), most agree that being at least mostly self-sufficient in terms of energy is a good thing. During the recent presidential campaign, the GOP advocated multiple new nuclear reactors as a way to move away from buying our fuel from the unsavory Middle East or Venezuela. Well, according to the US Department of Energy, the GOP must think the Russia and the 'Stans have our best interests at heart.
Do not get me started on nuclear waste disposal. There is no such thing as "safe and permanent" storage, and something that's hazardous for 10k years is not exactly the kind of legacy I would like to leave my descendants. However, something that is very toxic and in the watershed for the Colorado River might do wonders for reducing energy consumption by encouraging people to vacate the desert southwest. Black humor or long term policy? You decide.
But back to energy security. The purpose of energy security is to avoid interruptions in supply, implying either a Mahan-inspired strategy of total sea dominance or generation of energy within one's own borders. The point is that nuclear energy means buying fuel from Canada, which is pretty secure, Australia, which is about as reliable as our Navy is dominant (a good bet for now); and Russia. Ask Ukraine, France and Poland how that's going.
The point of all this is that any mined fuel is a loser in the long term. At current consumption levels, we've got about 100yrs of uranium left. If consumption expands, so will exploration, but heavy metals are very rare, and uranium is always decaying. Sustainable, the GOP needs to learn and soon, is not a bad word, but the only way to actually achieve the "small government" they claim to want.
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