SCSUScholars

Moving on, thanks to you

2011-01-11T13:12:00.002-06:00

As has been evident to most of you still checking this blog (readership down 75% the last six months), my life has moved to another place over the last year. Much of this has been the direct result of ideas formed in my by interacting with you here. But I cannot take the time to write here anymore and hold down what will be now two jobs -- one full-time in name, the other full-time in fact -- and still have time to spend with family and friends.

After notifying Janet, I have decided to close this blog. It will be rendered inaccessible to the public over the next seven days, so if there's something you want to save, do so now or write to me later. I will back it up on a hard drive during the next week.

My deepest thanks to everyone who wrote here -- Jack, Jim, Dave, Kevin, Marie, a few one-timers and few-timers, and most of all Janet (who persevered the longest.) All of those people became good friends over the years. My thanks as well to the Northern Alliance friends: Mitch; Ed; Chad; Brian; Scott; John; Michael and the rest. I thank all the MOB friends: Andy; Derek; Nancy ... you know, there's no way I'm going to name them all. So just thanks to all. I'll still hit the MOB functions I can.

Would that which makes me too busy to write now, have been possible without those to whom and with whom I wrote all these years? No, I think not.

I won't completely disappear. The King Banaian Radio Show will still be on Business 1570, Saturdays 9-11. I've decided to adopt a Tumblr blog for that show, and I hope some of my readers will come over and read that and share on the blog. That discussion will be limited to economics and finance, which is kind of what my followers know me for these days. For political commentary, there is my new Facebook page for my legislative office. Would you please follow me there? If you want to hear what I have to say about state politics, that is where you will find official items. (The campaign has a Facebook page for my own promotional posts.) The old Twitter will remain in place as @kbanaian -- I will retire the Scholars brand wherever it is. (UPDATE -- Janet will still blog as the spirit moves at True North and newly installed at Freedom Dogs.)

And with that, I bid you goodbye and my deepest thanks for reading. If you had told me when we started in 2002 that we'd be here in 2011, I'd've laughed. And I am laughing now, for different reasons.

Thank You, King

2011-01-11T13:11:00.001-06:00

What started five years ago as a couple of emails to King regarding an absurd attack on Congresswoman then Congressional Candidate, Michele Bachmann by an English Professor of creative writing at the U of M, grew into an invitation to blog and evolved into a wonderful friendship.

I've learned much from Professor Banaian and not just economics. He granted me a place to voice concerns and make suggestions. We covered writing for each other when one of us was really swamped. But life continues and this phase will be retired.

King starts on his new journey, as MN Representative for 15 B.

Thank you, King, for the opportunity and encouragement to work with you over these years. Best wishes for a productive and rewarding supplement to your already impressive academic career. Congratulations.

Best Said

2011-01-06T22:23:00.003-06:00

This saying sums up much of the phony stuff we have to read today.

Knowledge: knowing a tomato is a fruit

Wisdom: knowing not to put a tomato in a fruit salad.

It's too bad our kids don't get enough knowledge in school to know whether something is phony or real. Knowledge (of facts and data) is a prerequisite to wisdom. We're sorely lacking the latter because we no longer teach the former.

Superrich? Write the Check

2011-01-05T21:00:00.002-06:00

This article in the Weekly Standard is just priceless. It seems that some lefty mega-millionaires and billionaires wrote a letter to President Obama in December requesting that he tax them by letting the tax cuts instituted by President Bush expire for those who earn more than $1,000,000 per year. Very nice.

Quote: We have done very well over the last several years. Now, during our nation’s moment of need, we are eager to do our fair share.

They even launched a website to collect money so they could make TV commercials urging the US Government to make them pay more taxes. Today, it does not appear that the website exists. (They couldn't just pay for the commercials themselves, or better yet, just take that money and give it to the IRS.)

Spare me the phony patriotism. If they really wanted to help with the deficit, they don't need Uncle Sam to tax them. They can write a most generous check directly to the IRS by going here.

Moby - write a check.
Oprah - write a check.
Ben Cohen - write a check.
George Zimmer - write a check.
Mark Dayton - write a check.
Etc. - write a check.

The list is endless.

Why America is STILL the Best Country on Earth

2011-01-02T21:03:00.005-06:00

Last week my husband and I drove to Chicago to visit museums, and just kick back after many months working on election projects. As we so often do, we ask cab drivers where they are from, why they came to American and what they think of their decision after being here a few years.

We interviewed six immigrants: Two from Jordan, one from India, one from Columbia, one from Ethiopia and a server from Bulgaria.

The first Jordanian has been here over 40 years but would never go back to live in Jordan - why? Opportunity. He has his own business, he is free, he can travel. The second Jordanian has been here less than five years. He grew up in a small town where he had zero opportunity to do anything. Here, he drives a cab, has a part-time job at Chase Manhattan Bank, is going to school for his business degree and hopes to have his own business someday. Will he return to Jordan? To visit, yes, to stay, no. Why not? Opportunity.

Our driver from India came from the northern part, near Kashmir. He won't return either. Why? Opportunity (and he recommended the best Indian restaurant near our hotel: The India House. If you go to Chicago, have your driver take you there and go hungry - the luncheon buffet is outstanding!).

Our driver from Colombia was a dad with a wife and three kids. His father had been a farmer in Columbia and as our driver said, "I didn't want to work like that and have to deal with the weather, etc. so I came to America." Why? Opportunity. He never figured he could own a house but then told us about finding a fore-closed house outside Chicago city limits. He borrowed money against has cab license, paid cash for the house, is doing all the repair work himself. "I own a house in America - I never thought I could but I own a house in America!!"

Our driver from Addas Ababa, Ethiopia, had been here about 30 years and was very happy to be here. He has his cab and likes the freedom he has here.

Our Bulgarian server simply loves America. "You are free to choose here. I can be what I want to be."

As you can see, all of these men came for a base reason: Opportunity. In spite of all the global unification talk, making all nations the same America is still the place for people with dreams.. All of these men had to learn another language and work their way through the system. While they love their home nation, the bottom line is all left because whatever they could do "there" was less than they can do "here." They epitomize and summarize the reason America is that rare, still that shining beacon on a hill where those with dreams and a willingness to work can succeed. Easy? No. Possible? Yes. And THAT'S why we must keep the lamp of freedom burning.

Best wishes to all for a wonderful 2011.

Storms happen

2010-12-30T11:30:00.000-06:00

Regarding the previous post, the New York Post is now reporting that there is a deliberate slowdown of plowing in New York City to protest the budget cuts. Mayor Bloomberg insists on investigation. Ed Morrissey is skeptical, and I think rightfully so.

I’m a little skeptical, but mainly because the primary source for the conspiracy theory is an elected official who can expect to be held accountable for the poor performance thus far in the Big Apple. Also, the Twin Cities had the same level of snowfall a few weeks ago, and snow removal was a problem for us, too. Minneapolis/St Paul and the first-ring suburbs have a large amount of infrastructure to deal with heavy snowfalls and about a fifth of the population, and we still have huge piles of snow blocking sidewalks downtown. Heck, we can’t even get the Metrodome fixed; now, the estimate for repair and reinflation is the end of March. I’m not sure that NYC could have done better, with its relatively smaller snow-removal infrastructure, lack of places to put the snow, and population density.

Is it possible that this was a coordinated slowdown effort by public-sector unions to make Bloomberg and city officials look incompetent? Sure, but the simpler answers are usually closer to the truth. The simpler answers here are that this was freakishly heavy snowfall in a city not used to such things, and, well, it has a mayor more interested in salt use in restaurants than on the roads.

As to where to put the snow, NYC has the Hudson River and the nearby ocean, more than Minneapolis' rivers. I think the better point Ed makes is before that -- we don't have the infrastructure because it doesn't make a whole lot of sense to spend billions to prepare for a once-in-a-generation snowstorm.

Would you really want your highway department to have enough drivers and plows to deal with a problem that comes around as often as Haley's Comet? I understand that people died as a result of this blizzard or suffered brain damage from a stroke that would have been avoided if the roads were cleared. But having that much equipment and that many workers is a real cost. It is economically foolish to have enough equipment to meet the demands of a once-a-generation storm. The secret in politics is to not really say this (which it appears Mayor Bloomberg doesn't do very well at.)

Get away from my trash!

2010-12-29T09:16:00.026-06:00

Gregg Easterbrook points out a story that should further warm the hearts of New Yorkers.

Over the last several months, 22,741 New Yorkers contacted the city’s Department of Sanitation and arranged for the pickup of refrigerators, air-conditioners and freezers. In more than 11,000 instances, the machines vanished before sanitation workers arrived in their white trucks to pick them up.

Not sure this is that big a deal. Of course it's a waste for the city truck drivers, but

Scavengers, to be sure, abound in New York, especially during tough economic times. But the sheer magnitude of the thefts — 11,528 appliances, to be precise — over a relatively brief period suggests to some in city government and the recycling industry that a more organized enterprise may be at work as well.

It should by now be clear that the problem is that the broken appliances have real scrap value. People are coming by to grab the metal and sell it. That doesn't make the story interesting to Easterbrook, though.

Set aside whether it's theft to take an unwanted item that has been discarded in a public place. New York City bureaucrats think so; they've instructed police to ticket anyone engaged in recycling without government sanction. Twenty years ago, New York City bureaucrats were demanding that citizens recycle whether they wished to or not, and imposing fines for failure to comply. Now if the average person is caught recycling, it's a police matter.

This issue is not the cleanliness of streets or the environmental benefits of recycling -- it's control of money. The New York City Sanitation Department pays a company called Sims Municipal Recycling about $65 million annually to pick up and recycle metal, glass and aluminum. Notice what's happening here? Recycling is supposed to make economic sense. If it did, the recycling company would be paying the city. Instead, the city is paying the company.

Did you get that? Mayor Bloomberg is paying a private hauler to pick up valuable metal on the street.

New York City pays a company millions of dollars to do something "thieves" will do for free. The "thieves" harm no one, and could save New York City taxpayers considerable money.

The NYT article says some suspect "organized crime." What exactly is the crime here? The market redirecting scrap metal to the highest bidder? Or the contract between the city and the hauler?

And the most hilarious part? From the Times article, "thieves who live by the Sanitation Department’s recycling pickup schedules, listed on the agency’s Web site..."

Probably not able to find those bread crumbs in the snow this week.

Paragraphs to ponder

2010-12-28T12:29:00.000-06:00

Tips can make someone a better writer but not necessarily a good writer. That’s a larger package–a matter of character. Golfing is more than keeping the left arm straight. Every good golfer is a complex engine that runs on ability, ego, determination, discipline, patience, confidence, and other qualities that are self-taught. So it is with writers and all creative artists. If their values are solid their work is likely to be solid.

In my own work I operate within a framework of Christian values, and the words that are important to me are religious words: witness, pilgrimage, intention. I think of intention as the writer’s soul. Writers can write to affirm and to celebrate, or they can write to debunk and destroy; the choice is ours. Editors may want us to do destructive work to serve some agenda of their own, but nobody can make us write what we don’t want to write. We get to keep intention.

I always write to affirm. I choose to write about people whose values I respect; my pleasure is to bear witness to their lives. Much of my writing has taken the form of a pilgrimage: to sacred places that represent the best of America, to writers and musicians who represent the best of their art. Tips didn’t get them there.

Howard Zinsser, thanks to (the other) Craig Newmark for the link.

Alfred Kahn, RIP

2010-12-28T11:36:00.001-06:00

Sadly. (h/t: Tyler Cowen.) We had him in St. Cloud for a Winter Institute many years ago -- I think we still have his talk on tape, I should see if we can get it up on YouTube -- and he was as delightful as he is in the video here (you need to wait to about the 3:30 mark to see him.) There is something really beautiful in this clip (at about 5:40) where taps are played and a bureaucracy is announced to be dead. Would that we could keep that trumpet fully employed!

It is hard for the under-40 crowd to understand the difficulty and high cost of airline travel during the days of the Civil Aeronautics Board. This is kind of interesting as a list of how it's different now than then, but most of these changes can not be laid to increased competition. But the writer's first point, that a plane ticket between Cleveland and D.C. in the 1960s was the equivalent of more than $400 adjusted for inflation, was certainly true. And along with it the attendant changes, like the lack of dressing up for a plane flight -- because back then it was an event. I went to Paris as a 15-year-old in 1973, and I probably remember more about the flights than the visit!

Alfred Kahn was a real part of the reason why these changes occurred. Perhaps you would like to go back to those old days? I don't think so. Nor did he in the interview he did for the clip above,

[With deregulation] the situation changed dramatically. Within a few years we had a flood of new entrants. Instead of some 15 incumbent dominant airlines, we had hundreds now. Most of them disappeared. In fact, in the first wave every one of them ultimately disappeared except for America West. Of the second wave in the '90s, many of them have disappeared, but we still have several [that] continue to operate... That was dramatic. There hadn't been a single new airline formed in the '40s, '50s and '60s and early '70s. And then, of course, what was equally dramatic was the explosion of discounting, facilitated by the happily advantageous circumstance that the airlines had engaged in an orgy of buying new capacity in the later '60s and early '70s. They had all these jumbo jets with empty seats. And once they were free to compete, you began to get super-saver fares and super-apex fares and potato fares and peanuts fares. An explosion of discounting and competition [occurred].

There's no question that with competition has come real problems. The first thing to say is, by the most definitive estimates, consumers are saving $17 to $20 billion a year as a result of the price competition and the explosion of discounting that has occurred. It is perfectly true, second, that that has been accompanied by increased congestion, crowding of planes, longer lines, and poorer service. That is what we wanted. The trouble with the regulated market was that it offered consumers only one option: good service equals high price. A competitive price market offers options. And the option that we ended up giving people, without fully appreciating it, was low-quality, cheap service. And I mean, there is no free lunch. So I regard it a success that 96 percent of all mileage last year was at very deeply discounted fares, average discounts of more than 70 percent. On the other hand, there's no question either that while average fares have gone down, inflation adjusted, more than 40 percent. Full fares have gone up dramatically -- fivefold in monetary terms, and something like 70 percent in inflation-adjusted terms. In part, that is inevitable: [You do have to pay more] for better service, for more origins, for more destinations, for ability to get service at the last moment, to get on insurance lines, to get upgraded to first class. And in order to fill the planes and make possible those bigger planes and the more convenient service you have to offer discount to fill the seats. But it does raise a threat of monopoly exploitation.

The same kind of evidence is clearly visible in trucking and in telecommunications. In the case of trucking, average rates have gone down. In the case of telecommunications, you've had an enormous improvement in rates. The most obvious and important case of that is long-distance services. I can remember when I watched my watch whenever I called long distance. And whenever I visited anybody, I would insist that I would pay. Well, now [I use] long-distance service like tap water. I mean 10 cents, nine cents, eight cents a minute -- that's still well above even the average total cost. And what also has been dramatic is the explosion of all kinds of services. I mean, just think about cellular wireless services as a major example, and now the development of high-speed data service and Internet access. There's just an explosion of services.

I see nothing that changed in the last decade that would have caused Kahn to change his views. It's worth noting that of all the things President Carter did with which conservatives disagree, we do have him to thank for the elimination of the Civil Aeronautics Board.

UPDATE: David Henderson adds a few notes. Here's the banana story in contemporaneous reporting. I had also forgotten entirely that the Ford Administration had re-activated the Council on Wage-Price Stability, which was defunded in the first Reagan Administration, shortly after Kahn left his job as 'inflation czar'. So he may have had a hand in killing off two bureaucracies!

How HSBC does business

2010-12-27T12:05:00.000-06:00

I read (via Hugh Hewitt) Jennifer Rubin's account of the seemingly pro-Iran advertising of international banking giant HSBC. I spent a little time around the bank's Armenia operation when doing a report on remittances in that country. HSBC there is largely a deposit-collection facility, offering citizens a chance to place their money in a well-heeled bank with modern, Western-style services. Lending in the country was pretty small. In some sense it operates like many smaller banks in the U.S., taking stable rural deposits and lending them in nearby regional centers, either directly or by correspondence.

That's not what it does in Iran -- it had an office created in 1999 to do business in the country which did take deposits from Iranian citizens but doesn't seek new clients to U.S. pressure.

The bank has provided various loans to Iranian business over the decade, including a $108 million loan to the National Petrochemical Company of Iran in 2003. Dr. Nasser Homapour, senior representative for HSBC in Iran, said at the time, “The completion of this sizable transaction represents an important step in HSBC’s progressive engagement with Iran in general, and NPC in particular.' Due to pressure by the United States and other governments, the bank announced in 2007 that it would not seek any new business in Iran, but the company continues to maintain an office in Iran and service existing customers. “We will honor all existing binding commitments where permitted,” said HSBC spokesman, Ahmad Othman.

But lending is still possible through Dubai and elsewhere in the UAE (as happens for most other western banks.) This too is under pressure as the U.S. seems to have increased its actions against Iran. The pressure may be working, but it's bad for banks as Iran is now taking deposits out of western banks, perhaps out of fear of further tightening of sanctions.

In the middle of this stands HSBC, which has been accused of helping shuffle money for the Iranian regime.

A senior vice president says HSBC Bank fired him for objecting to the bank's accepting money that came from "trade with Cuba and Iran." Tomas Benitez Rionda says HSBC Bank named him its "Hero of the Year" in December 2007, and flew him to Paris to receive the award, then fired him a year ago because he "objected to and refused to participate in HSBC's having customer account relationships that included the proceeds of trade with Cuba and Iran."

In his complaint in Miami-Dade County Court, Rionda, whom HSBC hired in 2000 as a senior vice president, said he noticed that "certain clients were funneling large amounts of money that originated or passed through such countries via their HSBC domestic accounts, in violation of federal law."

Rionda says he informed his supervisor and HSBC's compliance department, and his supervisor told him "to do nothing."

HSBC is subject, as all banks that operate in the U.S are, by a regulation known as "Know Your Customer." Rionda seems to have been following those rules against money-laundering. And in October HSBC settled an investigation from regulators that found it in violation of KYC and other anti-money laundering rules. (I think this is the investigation Rubin refers to in her article, but I'm not sure.)

Rubin is correct that HSBC will continue to argue all is well. Banks have always operated in a world where sanctions and even wars do not always deter their ability to provide services to both sides, and even non-payment of deposits to descendants of people displaced by war (think of the 1996 Volcker Commission report on Swiss banks in WW2.) And wherever we find sanctions, we always find ways banks and countries work around them. It should come as little surprise that while the front office claims they obey the law and abhor the Iranian regime, they will continue to find places out of the sunlight where commerce continues.

Would paying college football players change the offense?

2010-12-27T01:08:00.032-06:00

It takes me almost all week to get to the bottom of a TMQ, but I persevere because it's almost always with a few observations that get that audible hmmm sound out of me at the laptop. Last week's was no exception.

Running quarterbacks dominate college football and are atypical in the pros. The main reason is longevity. Most successful college quarterbacks start 20 to 30 games in their careers. Cam Newton will jump to the pros after 14 career starts. More than 40 college starts is rare. In the NFL, the best quarterbacks have 100 to 200 career starts. If you're playing a lot more games, as the pros do, the quarterback just can't expose himself to pounding by rushing the ball any more than once in a while.

This is partly financial. NFL teams might invest $20 million to $50 million in the starting quarterback -- you don't want a $50 million investment going off tackle. Colleges, by contrast, invest almost no money in their quarterbacks -- Newton got the same amount of scholarship funds as Auburn's third-stringers. Colleges want their quarterbacks to be healthy, of course. But if the college quarterback gets injured, no capital investment is lost.

That's not necessarily so -- the athlete generates some difference in outcome, as Ohio State will find out next year. Gregg Easterbrook however focuses too much on the cost than the revenue, and too much on the total than the marginal. True, NCAA football athletes don't cost you much in direct cost but they cost you a good amount in lost opportunity cost when they don't play well. And that doesn't seem to matter so much when you are a college player -- there's a heavily-recruited sophomore behind your starting junior QB. The reduction in performance isn't as large as the drop in efficiency in your two-minute NFL offense when Matt Flynn replaces Aaron Rodgers.

And unless you hit the mother lode of the BCS, you don't do terribly well. (Read Mark Yost's excellent Varsity Green if you aren't convinced.) The rents are dissipated, as Stephen Karlsson writes so well, and the coach gets very little of them.

...the supposed return on investment to successful coaches must be weighed against the much smaller return on investment to unsuccessful coaches. Do the math: thirty-some bowls, somewhere in the neighborhood of seventy head coaches, salaries justified for the year, but for each bowl representative there exists five or six also-rans, whose coaches earn a comparable salary, unless they're fired for failure to make a bowl game, and the return on those investments is not so large. There's also a reason marginal revenue product is tricky to compute in practice: some of those bowl proceeds must be laid off against the debt service on the locker room cum study hall and media center, and the also-rans are also making those investments.

So shifting the rents towards players will just reduce the rents made elsewhere, and it's not like the coach will be any more motivated with the paid versus the unpaid player. It is much more the case of the N-period problem: You only have the player for 30 games. The same holds for college pitchers in baseball, where complaints of overload were commonplace ten years ago. Coaches there may become wiser, but remember in baseball the player can get into the pros without waiting. Not so the NFL.

Governor Pawlenty - A Pre-Farewell

2010-12-26T14:22:00.004-06:00

Recently I attended a packed breakfast where Governor Tim Pawlenty spoke. He began with a showing of his humorous side (I paraphrase): "I just turned 50. Mary [his wife] brought in the mail recently and called to him, 'Tim, your AARP membership card just arrived!.'"

In seriousness, though, his talk focused on: Lessons learned, reflections and perspectives. Here are some notes from each: Note [words in brackets are mine]:

First, "Thank you, MRW, for starting meetings with acknowledging God. Our Founders, both national and in MN, believed in the importance of God and incorporated God into their respective founding documents. For Minnesotans, "We the People of MN, grateful to God for our civil and religious liberties endowed by our Creator......" Our reading that morning was from Chronicles, [we need a faith in God].

Second - the Economy. After faith, we need family, we need activities and jobs. A pro-quality of life orientation (vs. pro-business or pro-corporation) requires that legislators do things to make "my" business grow in a stable, predictable environment. Between 1960-2002, MN experienced a 21% increase per biennium in spending. The average spending from 2002-2010, under Governor Pawlenty was .8%.

Why is this key? The real answers to job growth [which promotes family, faith, etc.] are found with the job providers [not people who exist permanently at the public trough].

Third - Our nation became a great country because we got people involved in civic engagement, charitable giving, volunteering, church attendance - at which MN's attendance is higher than any other state in the country. Freedom can be threatened by external and internal threats. Internally, our government, at all levels, is out of control. When government interferes there is a loss of freedom. Now freedom is being stifled by government at incremental rates.

Fourth - We cannot spend more than we have [earn - in government speak, tax].

Fifth: Human behavior is very predictable: Watch it at a wedding with a cash bar versus an open bar. [He used this example somewhere out east and they had no clue what a cash bar for a wedding was....... this in itself says a lot!].

In summary, our side must win - if not, we become government centric. This cannot come to pass. [Either we're bureaucratic centric or Constitution centric].

Thank you, Governor Pawlenty for all you've done for our state. None of us will ever agree with anyone 100% of the time - you played goalie very well. For that, we are quite grateful.
Best wishes in your next endeavor.

Merry Christmas to All

2010-12-24T18:39:00.003-06:00

Christmas - I love it! This year MN is particularly beautiful - fresh snow this morning, lights are everywhere and in spite of the hassle of last-minute shopping, every place I went showed people to be patient and in a very good mood.

We are extremely fortunate to live in a country where freedom to practice most any belief system is key. I've lifted a couple of paragraphs from The Heritage Foundation - quotes that are particularly applicable now. See, we often forget what got us to where we are.

Christmas, 1776.

Summer had begun with strong declarations of noble ideals, but by winter the cause of liberty seemed to be at low ebb. Having suffered defeat after defeat, many had all but given up hope. It looked like freedom would succumb yet again, as it had throughout history, to the forces of authoritarianism and tyranny.

Then, on Christmas Day, 1776, a small band of colonial forces under the command of Gen. George Washington, having retreated all the way from New York, again crossed the Delaware River and brought battle at Trenton, New Jersey. Washington not only won the battle but regained the initiative and turned the war in the patriots’ favor. One week later, Washington defeated the British at Princeton and forced the enemy to withdraw, preventing its advance on Philadelphia, seat of the Continental Congress.
What accounts for this monumental success? The founding of the United States was indeed revolutionary. But not in the sense of replacing one set of rulers with another, or overthrowing the institutions of society. John Adams queried:
What do we mean by the American Revolution? The revolution was in the minds and hearts of the people. . . . This radical change in the principles, opinions, sentiments, and affections of the people, was the real American Revolution.

Our revolution was about the ideas upon which a new nation was to be established. Permanent truths “applicable to all men and all times,” as Abraham Lincoln later said, proclaimed that principle rather than will would be the ultimate ground of government.

Hopefully people will reflect on the blessings we have. Yes, we have made mistakes but we corrected them - a rarity among nations today and for sure in the past.

Best wishes for a Happy Holiday, Happy Hanukkah, and a Merry Christmas.

A reminder

2010-12-20T13:34:00.000-06:00

Via Don Boudreaux. The website provides some books to read.

I'm still at the point where mail to me with "The Hon." before my name causes embarrassment. If I lose that feeling, it's time to leave.

Brrrr - It's Cold

2010-12-19T12:59:00.002-06:00

From my brother in Cincinnati:

Janet,

Here's the situation. We are now nine inches above average for snow fall, twenty some degrees below average for temp. I don't like this!

Here's the proposition: You have an extensive mailing list for politics. I know this because I'm on it. Would have helped with the last recount, but I knew I would be out of state (Minn.) at the time. But I digress. What I want you to do is get everyone on your list to turn on their fans and aim them to the north-west. Do this and you may be able to keep this cold which people up there claim to enjoy and away from here. I'm not alone in my dislike of the stuff. Say you're doing this because of global warming. I know it doesn't make sense, but then neither does global warming. It may endear you with the liberals, which don't make much sense either.

If this works, I promise to come up there for the next recount. Considering what I've seen of your politics, I'm sure you will have more.

Must get off and go out there and push that disgusting white stuff around.

Hope all is well.

Money dribbles

2010-12-17T11:21:00.000-06:00

This isn't a big deal to most folks, but it made the USAToday this morning so I am deciding to post it.

Kobe Bryant's two-year endorsement deal with Turkish Airlines has enraged some Armenian Americans who are threatening to boycott the Los Angeles Lakers star.

Turkish Airlines says Bryant will appear next year as its "global brand ambassador" in advertisements promoting the March start of nonstop flights between Istanbul and Los Angeles, according to a story Thursday in the Los Angeles Times.

Fox11 in LA has more:

There are about 750,000 Armenian-Americans in the LA area, and having spent time there I can tell you the Lakers are a pretty big deal in that community. The Lakers are also a big deal internationally, including in Turkey. These endorsement deals are pretty common. What does bother Armenians, however, is that Kobe in 2008 was willing to speak about the genocide in Darfur. Meanwhile, the Turkish government that owns 49% of his sponsor lets the president of Sudan come to its country as a guest.

It would be too easy to pass this along as simply a greedy athlete story. As the Turkish diplomat says in the video, the Armenian genocide (in case anyone has forgotten, my father is a first-generation Armenian-American) is a historical argument now. But it does point out for me the need to keep this history in the limelight whenever we get a chance. I am glad Kobe took the deal -- he now has a chance to learn about the first genocide of the 20th Century, and given his interests in international affairs (stemming from living in Italy as a child) he may in fact make a fine ambassador for both an airline and a nation. One can at least hope this ends up being about more than money.

Yikes

2010-12-13T16:55:00.000-06:00

Just realized it's been two weeks since we posted here. As the process of getting ready for the Legislature continues I realize it will be harder to write here. Yet I think we need communications between our leaders and the governed (with whose consent we do what we do.) So I am working on ideas to move us to something that fulfills this.

One thing that will not be changing is NARN. I can give you the news that the King Banaian Radio Show is slated to return after the holidays, on January 8th. For those of you unaware, KBRS is a show on Business 1570 in the Twin Cities and focuses on economics and finance. You will not hear politics on there -- that's not its focus. I will be speaking on the NARN news programs on AM1280 more often and local listeners in St. Cloud will hear me again more often on KNSI and WJON. But KBRS is meant to be a show unlike what I ever did on the Patriot, and if you missed it (perhaps because of the puny antenna that broadcasts it) we can start anew next month. Details on that will evolve over the next week or two.

Congratulations, King!

2010-11-30T08:30:00.003-06:00

A day late but not a dollar short - King, congratulations on your win!! It's official - it's over - it's yours.

Your understanding of the trade-offs involved in economic decisions will be extremely valuable as MN works its way through the budgetary issues we face as a state. Your thoroughness in your analyses of these decisions will help all involved in making the tough choices.

We cannot continue to spend money we don't have - your expertise will guide us.

Congratulation, friend!!! May the best be yet to come.

KING ADDS: Thank you, Janet, and thank you everyone. I'm not even sure the words express what I really mean -- there is a gratitude that goes beyond thankfulness, and that's what I feel now but not quite able to capture it. It will take a week or so for me to get everything lined up for 2011, and within that time I have some fairly substantial decisions to make, including blogging and radio. Please watch here for announcements.

Happy Thanksgiving

2010-11-25T11:41:00.006-06:00

To All,

King helped with a Thanksgiving post today and said I would, too. It's here.

Yesterday, on my way back from some key volunteer work, as with many, I had to stop for the traffic jam to work itself clear. For a change, I was listening to the classical music station. The snow is falling, my car is working, and I'm smiling while recalling why I am grateful.

In my personal life, my husband, who is an absolute gem! He has helped me in immeasurable ways. Next, our son, home safely from Iraq and home for Thanksgiving and Christmas for the first time since 2007. Then there's the ability to be comfortable enough to have the time to volunteer for what is important and critical to our lives.

I'm enormously thankful I live in a country that still is free and has avenues for people to express their beliefs. The "Rule of Law" concept, while developed and tweeked by other cultures, was best defined and implemented by our Founders. It still is the basis of our nation - it is what has made us as successful and attractive (and envied) by others. Sure, there are the constant naysayers who only want "their" interpretation to be law. They may win, but if they do, we all lose. I hope they will come to realize this.

Today, I wish all of you to have a wonderful day whether it be with family, friends, or doing something for others. As with many, we will see our kids and grandkids. For all of you, Happy Thanksgiving.

A quick thanksgiving note

2010-11-25T09:05:00.000-06:00

Janet normally writes our Thanksgiving post, and I bet she does yet, but just to say thanks to all of you who've hung around while we both have been exploring new worlds in politics. I wrote to some supporters a few weeks back a note titled "I've already won", based on how many new friends we had made during the campaign, and how we had done something nobody thought possible -- true regardless of the recount's results. As I sit with Mrs. S's extended family this noontime, I will be thankful for the great opportunity to talk to so many friends there, and hopefully back here in the future. I wish to you a great day of friends and family, and I pray thanks for the harvest that brings so much good food in front of us.

Off to burn a few calories in anticipation of those to be consumed.

We warned you this could happen

2010-11-24T12:33:00.002-06:00

To the shock of no economist that thought about this in the 1990s, we are seeing a two-speed Europe pull at the seams of its monetary union.

Markit's Eurozone Flash Services Purchasing Managers' Index, made up of surveys of around 2,000 businesses ranging from banks to hotels, bounced to 55.2 in November from a final reading of 53.3 in October.

The index comfortably exceeded consensus expectations in a Reuters poll, which were for it to fall to 53.1. The services PMI has now been above the 50.0 mark that divides growth from contraction since August 2009.

"They surprised to the upside largely due to the strength of the core of the euro area, in particular Germany," said Ken Wattret at BNP Paribas.

"Although we inevitably focus on the euro zone as a whole, I think we are seeing a persistent divergence between the core countries and those on the periphery, and that is here to stay."

There was an excellent paper by Jonung and Drea on U.S. economists' reaction to the plan. They remind us of the late Rudy Dornbusch's categorization of our reactions as one of three: “It can’t happen”; “It’s a bad idea”; and “It can’t last.” Academic economists were focused on whether it was a good thing, and our reaction was the inability to make fiscal transfers between nation-states in the union was going to be a difficulty. Clearly Ireland is an example of this.

The Economist noted this a few months ago:

When the euro was being designed, its creators decided, in effect, not to rely on market discipline alone. They assumed that without rules fiscal laxity by one member would impose costs on all. One concern was that deficits would boost spending and so put upward pressure on inflation, and thus on the zone’s interest rates. Another, chiefly German, worry was that unchecked deficits would build pressure on the ECB to monetise public debts. A related German nightmare, that countries with sound finances would be forced to bail out the profligate, came true.

The architects of the euro at least predicted such problems, even if they could not solve them. The “stability and growth pact” was supposed to limit each country’s budget deficit to 3% of gdp and public debt to 60% of GDP. It failed, in part because France and Germany refused to abide by it—and even rewrote the rules when they breached the deficit limit.

In contrast, the problems that arose because different economies responded differently to the zone’s common monetary policy were underestimated. The sudden drop in real interest rates on joining the euro in Greece, Ireland and Spain fuelled huge spending booms. (Portugal had enjoyed its growth spurt in the late 1990s in anticipation of euro membership.) Rampant domestic demand pushed up unit-wage costs relative to those in the rest of the euro area, notably in Germany, hurting export competitiveness (see chart 2) and producing big current-account deficits.

The article goes on to downplay the problems with the optimal currency area story this account tells, but it's exactly what we told you 15-20 years ago.

Ring that bell six times

2010-11-22T19:22:00.000-06:00

Gary Gross reminds me that he started blogging in 2004 on this day, and that our first interactions were about Ukraine and the Orange Revolution. You'll note that his header has a picture of a young Orange Revolution supporter along with those in Iraq and Lebanon. Sigh. Here's my November 2004 archive, when it seemed all things were possible. Painful to read now with what has transpired since.

Anyway, the start of one of my most beautiful friendships from this blog began this week. Please go over and congratulate Gary on six fine years of blogging.

The cross-pat-down elasticity of demand

2010-11-22T17:12:00.000-06:00

Scott Beaulier wonders why the Obama Administration has its heels stuck in on the TSA pat-downs:

The obvious explanation that he's worried about being viewed as weak on security was offered up and rejected. Then, came one that may seem far-fetched at first but more plausible the more you think about it: Obama's also in favor of high-speed light rail. By making it costly to fly, he's helping prop up demand for this government alternative. And, his Homeland Security Secretary, has been pretty blunt about how people should put up or shut up. Therefore, he's not going to budge on TSA screening policies and may even support more invasive techniques in the future.

And this PM's report seems to back this up.

The White House on Monday defended the use of body scanners and aggressive pat-downs to screen air travelers as necessary against current terror threats as officials sought to quell a firestorm of complaints before the busy Thanksgiving travel weekend.

Yet even as it stood by the new policies, White House Press Secretary Robert Gibbs said, the Obama administration constantly is reevaluating security techniques, saying they "have to evolve."

...Gibbs, who said he himself has been through a full body scanner, noted how security has evolved in response to new threats.

"Just in the past few weeks alone, we've seen an effort by Al Qaeda in the Arabian Peninsula to bring down an airplane using explosives in cargo," he said. "So we must do everything that we can to protect the public."

TSA = Totally Subjugating Americans, says David Henderson. If you want to do everything to protect the public, just stop them from getting on any plane, anywhere. But of course then the cost-benefit analysis doesn't work, right? So where's the cut-off point?

Poundization

2010-11-19T13:52:00.000-06:00

Daniel Hannan, the conservative MEP from the UK, offers some advice to Ireland:

Denied the ability to devalue, undercut by sterling and obliged to borrow even more money in order to participate in the Greek bail-out, Ireland’s position has become calamitous: debt and unemployment are rising, prices and incomes are falling. GDP is down by an almost unbelievable 20 per cent from peak. And here’s the really bad news: these problems will carry on for as long as Ireland is in the euro. Bailout or no bailout, Eire’s economy diverges cyclically and structurally from Continental Europe: save by occasional and fleeting coincidence, its interest rates and exchange rates will always be wrong.

Alright, so the euro was a disaster. How, though, does Ireland get out of it? If it were simply to reissue its own currency, that currency would devalue, pushing up its debt level even further. This might be a lesser evil than continued euro membership, of course, but it is an evil none the less. Is there any solution?

Yes. Ireland could adopt the pound and treat its loans as having been issued in sterling. Immediately, Eire would be able to start exporting its way back to growth. And, because the UK and Ireland move in a synchronised, mid-Atlantic cycle, trade substantially with one another and have similar economic profiles, the problem of inappropriate monetary policy would disappear.

Mr. Hannan is arguing, of course, that the EU is not an optimal currency area, and of course many people said this when the union was formed. What is interesting is that Hannan's solution is not to have the country go independent, but to switch to tying the Irish pound to Britain. I cannot think of a time when a country switched exchange rate regimes between foreign-currencies-as-legal-tender in the middle of a crisis off the top of my head. (There are several dollarization stories, most notably Ecuador in 2000, but these replaced domestic currencies, not other foreign ones.)

The biggest obstacle in the Irish rescue is its government's insistence on maintaining a low corporate tax rate. What better way of offering an Anglospheric alternative to the Eurocrats than for the Cameron government to step forward and say yes to a currency union without pre-conditions on tax rates? What would prevent them?

Paragraph to ponder

2010-11-18T11:48:00.000-06:00

In the end, Bernanke's behavior baffles me. He abandoned his own intellectual positions without explanation, humiliated himself, sparked a terrible recession, set a long list of dangerous precedents, and pushed the U.S. and the world down the road to serfdom. My best guess is that he simply didn't have the backbone to tell people like Paulson and Bush that they didn't know what they were talking about. Whatever the reason, though, the crisis forced me to rethink my optimism about the Fed. Bernanke and company ignored their own research, got predictably bad results, and pleaded impotence. Instead of playing the voice of reason, they acted like they'd believed in bailouts and fiscal stimulus all along. I expected better. I was wrong.

Bryan Caplan, a former Bernanke student. There's a lot that many of us were wrong about, including me. I wonder if, when Bernanke writes his memoirs, he will tell us what he discovered he was wrong about. I am still hopeful he will write a more reflective book than Greenspan. But I'm not sure why I hope that.