Negative Railroad

The popular tone seems to be that banks are not lending to small businesses. There are counter-examples, and bankers insist they are making loans to those who can offer both some decent collateral and a reasonable prospect of making payments. I conclude that the problem—if it is a problem—is that banks have tightened their underwriting standards.

Banks have to do this because they can’t afford more bad loans. The Federal Reserve requires bankers to hold some small fraction of real assets against all the promises of payment (loans) they hold.

Maxed Out Mama, who always looks deep into the data, sees cause for optimism:

If one tried, one could make a case that the economy will continue decent growth in 2010, or one could make the case that the economy would subside once more in the later part of 2010. There are indications both ways. Usually, that is an encouraging sign.

I won't try to make any case. In my view this is somewhat fragile and the final trajectory for 2010 depends most on government policy and fuel prices (which will control a lot about spending power).

Income tax withholdings (WIET) are up compared to this period last year. But, last year was horrible. It appears Main Street is no longer collapsing. That’s the good news.

The bad news is that Main Street is still in a fragile condition:

According to the U.S. Census Bureau, about 67% (pdf) of owner-occupied American homes have mortgages against them. According the the Mortgage Bankers Association, 15.02% of those mortgages are at least one payment late. That works out to be 10%, a record high.

Since 3.63% of mortgages are only one payment behind, that leaves about 11.4% of mortgage holders (7.6% of all homes) who can’t just be dismissed as having lost a payment slip.

In the third quarter of 2009, 1.2% of mortgages began foreclosure. That’s “only” .8% of all homes, and “just” in one quarter. Multiplying by four quarters puts 3.2% of all owner-occupieds in foreclosure. How many on your block?

After a decade or more of mainstream urging, I suggest that nearly everyone who wants to “go green” has done so. Or has at least started down a greener path.

Green messages may have reached a saturation point, becoming ubiquitous so we stop noticing them. There are still fortunes to be made—even outside subsidy capture—but green isn’t cutting-edge cool anymore.

So what’s next?

Going gray:

Forty years from now, one out of four Americans will be 65 or older.
Twenty million will be over 85.
One million will be over 100.

Teach a man how to beg for fish and he'll never learn to fish.

Quoted from: Cobb

The State of New York is considering relaxing requirements and increasing benefits available to welfare recipients. But maybe the poor in New York are already overpaid:

When tax credits and medical and housing benefits are included, an average single mother of two with an $8.25-an-hour job in New York City receives a $63,000 annual income. On welfare alone, that same mother would pull in $43,000 a year—a whopping amount for non-work, to be sure, but still less than work provides.

Assume a 2000-hour work year. Then, a little math reveals (43,000 ÷ 2000) that NYC welfare pays $21.50 per hour. That’s just the handout, not compensation for adding any value to anything in the form of meaningful work.

Outside the U.S. Coast Guard’s awesome rescue effort, the one organization that truly shined in the immediate aftermath of Hurricane Katrina was Walmart. It has become a stock example of the power and effectiveness of capitalist enterprise in the humanitarian sphere.

Anheuser-Busch is another example, by its reponse to the Haiti earthquake:

The day after the earthquake, the company’s AmBev business in Latin America immediately shipped nearly 350,000 cans of fresh drinking water from a brewery it operates in Santo Domingo in the Dominican Republic, about 160 miles from Port-au-Prince, to be among the first to provide relief to victims of this tragedy. In addition, the Anheuser-Busch brewery in Cartersville, Ga., is working with the American Red Cross to ship another 600,000 cans of water. In total, the company will donate nearly 1 million cans of water.

Next time you’re tippling, toast to the evil capitalists who save thousands of lives.

H/T: Make the Logo Bigger

Café Hayek has a post where commenters are asked to compose “Hayeku”:

A haiku is a three line poem. The first line has five syllables. The second line has seven. The third line has five.

A hayeku (HT: Ike Pigott for the name and the encouragement) is a haiku from an Hayekian perspective. Here’s one to get you started:

Why do we pretend

That “mandatory” spending

Is mandatory?

The idea (and the pun) tickles me. But people seem to think that any seventeen-syllable sentence qualifies as poetry if broken into three proper chunks. Nope. Like the example offered, it’s just a choppy sentence, not a haiku.

We now have a financial system that is completely based on moral hazard.

Quoted from: Simon Johnson

Via: Naked Capitalism

Bastiat’s concept of a negative railroad involved unneccessary breaks in the line that would provide employment to porters and baggage handlers. The same principle applies to duties and tariffs imposed at borders:

Just think how many jobs Congress could create by encouraging states to erect their own tariff walls? High-taxing and heavily regulating states would then be able to protect their workers from states with lower taxes and less-burdensome regulations. California wineries would never again lose market share to rivals in Oregon and Washington state. Michigan autoworkers would never again be displaced from their jobs by workers in Tennessee and South Carolina.

While pseudo-intellectual elites are wringing their hands about globalistical warmening threatening to drown worthless places like Tuvalu, the actual climate is freezing people off Peruvian mountaintops:

For alpaca farmer Ignacio Beneto Huamani and his young family, life in the Peruvian Andes, at almost 4,700m above sea level, has always been a struggle against the elements. His village of Pichccahuasi, in Peru's Huancavelica region, is little more than a collection of small thatched shelters and herds of alpaca surrounded by beautiful, yet bleakly inhospitable, mountain terrain.

The current President said:

job losses have diminished substantially since the depths of the recession when the economy was hemorrhaging jobs a rate of 700,000 a month.

"It is true that we, as a country, are in a very different place than we were when 2009 began," Obama said, saying there was evidence of a "positive trend" in the November employment report released on Friday.

Here’s what he’s accomplished in his first year:

The headlines say the worst is over. The $700B TARP program, for example, stabilized the financial industry.

How does this square with that picture?

Hunkering down by the fire, I snuggled up with H.R. 4173, the financial-reform legislation passed earlier this month by the House of Representatives.
…
It authorizes Federal Reserve banks to provide as much as $4 trillion in emergency funding the next time Wall Street crashes. So much for “no-more-bailouts” talk.
…

Good craftsmanship depends on good tools. The orthodox conception of economics holds that government can craft better outcomes than we would have if the rabble were left to their own devices.

Tools can be divided into two broad classes: working tools and measuring tools. First (and second, if you follow the maxim) the craftsman must measure. Then he cuts. Without good measurements, the quality of the working tools and the skill of the craftsman are moot.

My latest hero, Ebenezer Scrooge, is an example of a pervasive fallacy:

The widespread notion that free markets are corrupting is rooted at least in part in the innocent truism that for the market to work people must act according to self-interest. Without the motivation of self-interest, there would be no profit seeking, no price competition, no production and exchange. True enough, the market requires self-interested behavior.

But many make an illogical leap from this truism to a falsehood: that if one is self-interested, one cannot be other-interested. Many see an either/or choice. Scrooge can care about Scrooge, or he can care about others: the poor, his clerk Bob Cratchit, Cratchit’s family, including lame Tiny Tim, and so on. He cannot do both.