Negative Railroad

The local food co-op had blueberries on discount. Organic, of course. But they were grown in Chile.

“Eat local” isn’t a strong commandment, just a nagging slogan. When hipsters want organic blueberries, the market will find a way to satisfy them, climate be damned!

I bought some. Have not tried them yet; hope they were worth the trip.

Global politics and global economics are interwoven. The way the warhawks talk about Iran, one would think it is just another primitive society. It isn’t.

MaxedOutMama looks at the GDP data for the two most recent quarters:

We didn't fall into a recession - we fell into a depression. …

• Real spending on food dropped 2.6 billion.
• Clothing and footwear dropped 4.4 billion.
• Gas & fuel dropped 3.5 billion.

This economy is not improving. This is structural on real incomes.

Although I prefer measures of physical quantities (tons, yards, barrels), dollar-based statistics are not subject to much shenanigans over a recent short term.

Tam looked at the landscape a week ago and saw the same thing:

Driving out 38th Street to get to MCF&G the other day was bleak. The road is lined with shuttered big box stores, deserted strip malls, and boarded-up chain restaurants. A fun 21st Century travel game is trying to tell the Chili's from the TGI Friday's from the Applebee's by the architecture with all the corporate signage gone.

Dan from Madison shares this video of “How to fold a suit”:

Lexington Green comments:

He makes it look easy. I always respect and admire practical, physical skills like this. Once the whole economy was composed of people who each knew hundreds of tricks of the trade.

Industrialization, specialization, and the division of labor into ever-smaller tasks enables each worker to produce more for his efforts. It allowed us to get off the farms and amass the wealth that enabled us to reach the moon.

The flip side of specialization is that nobody knows how to make an entire thing themselves. Each only knows a step in the production process, worthless without others doing all the other steps.

Northeast Minneapolis is not a rich part of town. It is, however, a haven for upwardly-mobile Progressive hipsters and University of Minnesota employees who do all they can to hide their six-figure incomes. Those demographics hate chain stores. Shopping local is part of their identity and a point of civic pride.

Any development proposal that might include an anchor tenant like Starbucks faces organic opposition. Similarly, any business required by zoning codes to receive a conditional use permit had better be some kind of cutesy shop and not a convenience store that would attract poor people. Never mind that lower-income households are in the numeric majority.

The combination of City codes and organized neighborhood vigilance on permit applications makes it more expensive to open and operate business that would benefit poor people. Such businesses, too, would provide low-skill flexible-schedule employment that is one of the first rungs on the ladder out of poverty. 7-11 isn’t local, but 7-11 jobs are.

Borepatch saves me the trouble explaining why I will vote for the current President if the Republicans foist Mitt Romney on me:

Here's the problem: it's not Obama, it's Obama's world view. He's just particularly ruthless in pushing it aggressively. Obama isn't alone: he has the entire Intelligentsia on his side, the MSM, the European Elites, the international Non-Governmental Organizations (NGOs). They're all in the same tribe, which believes that things should be run by them, with a strong, interventionist government in charge (run by them, 'natch), and with the peons givering deference where it's due (to them, 'natch).

Romney's in that tribe. So's Newt, and probably Santorum. And 60% of the Republican Party. Only Ron Paul explicitly rejects that world view.

Essentially, it's the Blue State model - although we need to recognize that all of Europe is deeper Blue than even Massachusetts. Here's the crisis: the Blue model is collapsing.

The Social Secuity Trust Funds are one of many topics where political factions talk past one another. Some say that there is no money in the funds, that the FedGov has spent them on other things. The response insists that the Trust Funds are invested in Federal securities, as required by law. It would be silly, says the responding faction, to leave piles of cash under a mattress in Washington, earning no interest. And to invest the Trust Funds in the private markets would represent a higher risk and create incentives for Wall Street to rip off the public, since the FedGov still has to redeem the investment even if the its market value goes down.

Turns out the Social Security Administration has a pretty good FAQ on the Trust Funds:

The Federal Government’s new rules requiring health insurers to offer contraception is sparking a lot of chatter. A lot of people seem to think that the popularity of contraception among Catholics is a fair justification for the mandate. Our fetishization of democracy has led folks to think that G-d’s law is subject to a vote.

Official and ancient Catholic doctrine opposes contraception. It has been argued and reasoned for centuries among the faithful. The doctrine is not subject to whim. The reported majority of Catholics who disagree with the Church would be well-advised to reconsider whether they are actually Catholic. The catechism is not a la carte.

The Obama Administration has opened new debate not only only the separation of church and state, but on the Church itself. And the Church has some conflicts:

Jonathan at Chicago Boyz writes:

Part of what’s happening is that the economy is recovering, to some degree because the Fed is signaling that it’s going to keep suppressing short rates and buying up long-term govt debt for the foreseeable future. This is an insane policy that funnels money to Obama’s Wall Street cronies while killing low-risk investment opportunities for middle-class retirees. It seems likely to lead eventually to significant inflation. Romney, as the likely Republican nominee, should be hammering the Fed for ineptitude and corruption, for running an unsustainable monetary policy and trying to goose the markets into the election. He should be hammering Obama for trying to reinflate the credit markets to buy votes. (The residential real estate market seems to be picking up, perhaps to some degree in response to Obama’s mortgage-subsidy vote-buying scheme. But it may also be that people see inflation coming and want to exchange cash, especially borrowed cash, for real assets.)

Obama has been very bad for the country. His high tax, high regulation, high cronyism, high uncertainty policies suppress productive investment and throw vast amounts of private capital down politically favored sinkholes. Conservative and moderate/uncommitted voters alike yearn for a Republican candidate who forthrightly defends free enterprise and the opportunity society against Obama’s decadent, stratified socialist ineptocracy. Romney, the great businessman, the man who has been running for president for six or seven years, is tongue tied.

I disagree with Jonathan and the popular view of Romney’s business career. The short version is that Romney evolved into a a vulture capitalist, using debt to buy earnings and cashing out before the debt wiped out the earnings of the companies Bain Capital targeted.

Mitt Romney has been unable to articulate a detailed explanation of his two terms at the helm of Bain Capital. His campaign rhetoric has not dealt with the charges against Bain’s debt-fueled “vulture capitalism”. Instead he has attempted to adopt the mantle of business and capitalism itself. He repeats that profit is a good thing, and that he will not apologize for his success.

That stuff works in a stump speech. Profit is, indeed, a good thing. Romney alludes to Adam Smith’s words:

It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

To a wider audience, one not already convinced of the virtue of self-interest and deeply mistrusting of the agents of corporatism, Romney’s endorsement of profit is the echo of Gordon Gekko:

Watch Lady Thatcher cut down the false problem of income inequality:

As the questioner framed it, “relatively less well-off” is not “absolutely less well-off”.

Economic activity is not a zero-sum enterprise. Every willing transaction makes all parties better off. Even if only 1% of the gain went to the poorer trader, the trade still makes him 1% better off.

There are two methods to ensure all parties benefit equally. Prohibit unequal outcomes, or forcibly equalize gains after the transaction. Either method reduces the number of possible transactions. Fewer trades mean less gain to be be divided. And as Thatcher says, “That way you will never create the wealth for better social services.” If you truly care about the poor, care about the poor, do not envy the rich.

I came of age with Reagan. Perhaps Thatcher was the bigger lion.

Amidst the continued chicken-little bleating about the U.S. Federal debt, I submit this:

Japan’s credit rating was cut for the first time in nine years by Standard & Poor’s as persistent deflation and political gridlock undermine efforts to reduce a 943 trillion yen ($11 trillion) debt burden.

The world’s most indebted nation is now ranked at AA-, the fourth-highest level, putting the country on a par with China, which likely passed Japan last year to become the second-largest economy. The government lacks a “coherent strategy” to address the nation’s debt, the rating company said in a statement.

The problem is more than the sheer sum of debt. It is also the absence of a plan to reduce that debt.

If When Congress raises the debt ceiling, they will have addressed only half the problem. The prospect of a voluntary default will be delayed, but the structural failings endure. They’re adding another layer of cement to a bridge with under-engineered and cracked supports.

The Sunday night headlines tell me there is no agreement to raise the U.S. government’s debt ceiling. The left end of my radio is convinced that a failure to keep borrowing means defaulting on the debt. They’re wrong:

assuming we have $150 billion (I'm a pessimist) in revenue to spend [for the month of August].

First, there's what we must pay.  That's $29 billion in interest.  We have $121 billion left.  Everything else is, legally, a choice.

[emphasis in the original]

Denninger works through the choices, and somebody—or bodies—will not get what they are expecting. But fully funding the raft of Social Security and VA benefits, plus paying the troops and returning zero-interest loans to the IRS tax refunds leaves more than $12 billion.

Debt at the government level has become the accumulated losses for a society that refuses to confront its problems.

Quoted from: Commentor “Roundtine” at Vox Popoli

The Enterprise, from Star Trek, was a government vessel. In the 1960s it would have been fantasy to think a privately-owned company could boldly go where no man had gone before.

Fifty years later, it isn’t a fantasy. I’m acquainted with Virgin Galactic. But that’s more an vertically-oriented amusement park ride than a serious industry. Enter SpaceX:

SpaceX was founded in June 2002 by PayPal co-founder Elon Musk who had invested US$100 million of his own money by March 2006. On August 4, 2008, SpaceX accepted a further US$20 million investment from the Founders Fund.

SpaceX has nearly doubled in size every year since it was founded in 2002. It grew from 160 employees in November 2005 to more than 500 by July 2008, to over 1100 in 2010.

Musk believes the high prices of other space-launch services are driven in part by unnecessary bureaucracy. He has stated that one of his goals is to improve the cost and reliability of access to space, ultimately by a factor of ten.

Motor fuel prices—gasoline, to the ordinary folk—have risen to a headline-making level. Many people who mock those with doubts about the current President’s birth status are willing believers in some shadowy conspiracy by oil speculators. Scapegoating speculators is an indication of ignorance.

The short version is that speculation may be able to rise prices for a short time. But it cannot keep prices up. That’s because the method speculators use is futures contracts, which are paper agreements to deliver some physical commodity on a given date at a given price.

Speculators can’t take physical delivery. Even if they have the money, there’s nowhere to put the oil. Our storage tanks are full. Which is a product of past speculation; people bought oil and held it thinking the price would rise. It did, and that led to more oil being delivered than was consumed.

That’s the law of supply and demand at work. When prices are rising, it inspires greater supply and reduces demand. And fills the oil storage tanks.

Gold is trading at record-high prices, above $1500 per ounce. Oil is trading around $110 per barrel ($2.60 gallon, to put it in terms similar to retail gasoline).

The politicians and pundits and current President have opinions and policy proposals regarding the price of oil. The touts and investment gurus are using the record gold price as reason to suggest buying gold. Buy high, sell higher!

Nobody outside the trading and investing universe seems to realize that the prices of gold and oil are relative. Not to each other, directly. But they’re both priced in terms of dollars, so the trading prices of those commodities are a reflection on the value of the dollar itself.

Oil and gold are fetching high prices due to not just the supply and demand of oil and gold, but also due to the supply and demand for U.S dollars.

If a policy maker wanted to reduce the price of oil, he could do so without screwing with energy or environmental policy. Instead, use monetary policy. Make the dollar worth more, and a barrel of oil could be had for fewer dollars.

Steven Landsberg comments on the current President’s tax return:

Now we learn that on an income of $1.7 million, the Obamas paid $450,773 in taxes, taking full advantage of the Bush tax cuts. I think it is fair to ask: If the President believes that people like him ought to be paying more, then why didn’t he pay more? There is absolutely no rule against sending in more money than you owe.

Some voice on lefty radio said that such voluntary payments wouldn’t work because the IRS isn’t set up to take in a mess of checks. Non-stop comedy on that end of the dial, I tell you.

Anyone who has read through the tax instructions would have seen that the IRS is, in fact, set up to receive what they call “voluntary contributions to reduce the public debt”. They rake in between one and two million bucks per year.

Back to the Obamas’ failure to voluntarily contribute:

It’s Tax Day. Both ends of my radio dial can talk about little else. But I didn’t hear them explain why it was moved back from April 15th. Tax Day was postponed because a District of Columbia holiday (Emancipation Day) fell on the Fifteenth this year.

It’s interesting to me that today is also Passover, but the Jews do not get any official holidays. Even after decades of multiculturalism and diversity worship. Anyhoo…

If I could make only one point about taxes, it would be this:

Every nickel a government spends is a tax.

The spending may be a nickel that was taxed away last year and deducted from the government treasury. Or it may be a nickel borrowed from the private economy which will need to be taxed away at some time in the future to settle the debt.

There are many interesting arguments to be had about tax rates and tax policies. And that’s what the radio has been doing. Everyone is obsessed with the current tax scheme. And it is important, as it affects costs and prices and ultimately changes the shape of economic activity.

The now-demolished Great Northern Depot in downtown Minneapolis could inspire many posts on railroads, how changes in transportation technology changed the role of railroads, and how that allowed planners to re-purpose land at the core of cities, specifically Minneapolis, since this depot stood at the gateway to Northeast Minneapolis. Those changes were driven by economics and politics.

But I’m not ready to launch into any of those. I just happened across an archive of photos of the Great Northern Depot from the 1970s. It was one of those times where I was following the intertracks without a destination in mind, and found a treasure. For railfans and history buffs, at least.

Mainstream preservationists and historians—if that’s not an oxymoron—seem mostly interested in façades. I’m more fascinated to understand how the buildings worked.