Friday, October 29, 2010

This one gets my blood boiling...

Disturbing news from our nation's capital...
The day after federal investigators unveiled an unsuccessful terrorist plot against the D.C. Metro system, transit police are considering implementing one of the most controversial security measures available to them.
Metro police now believe they may have to resort to random bag searches, after learning of the FBI's Wednesday arrest of Farooque Ahmed, 34, of Ashburn, Va., for helping to plan an attack on the D.C. subways.
"We will definitely look at that," Metro Transit Police Chief Michael Taborn tells WTOP.
"That is one of the initiatives that was recommended (by the Federal Transit Administration) to many transit agencies -- Boston, New York. So it is a methodology that can be used."
I don't care what the FTA recommends. I don't. Nothing in the world (or the U.S. Constitution) gives the FTA the right or the authority to overthrow due process. Random bag searches are not "a methodology that can be used", without legitimate probable cause.

Random bag searches--which are by definition of their "randomness" not based on any probable cause--are unconstitutional. I don't buy any "well I don't have anything to hide" defenses of these types of policies. Protection against unreasonable search and seizure is a fundamental right provided by the 4th Amendment, and it must not be compromised.


Citizens of this country have habitually taken their privacy rights for granted, and they have been especially quick to compromise them in the aftermath of 9/11. I'm sensitive to the threat of terrorist attacks, and I don't take the threats lightly. I rode the NYC subway to and from work every day for three years--getting off just a block away from the World Trade Center site--and I fully admit that I felt incredibly vulnerable at times.

But just as I don't take the threat of terrorism lightly, I similarly do not take my Constitutional rights lightly, or trade them on the cheap. At the risk of sounding trite, I think it's apt to cite Benjamin Franklin's oft-paraphrased line, "They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety."

I don't often go on these type of anti-Big Brother rants, but this behavior is particularly troubling to see, especially in our nation's capital. A similar approach to random bag searches was proposed by the D.C. Metro in 2008, but never enforced due in part to significant backlash. It is my sincere hope that random searches will not take place this time around, either.


[WTOP.com]

Thursday, October 28, 2010

Clip of the Week

With elections coming up on Tuesday, if you're anything like me, you're brutally tired of campaign ads by now. So this should make you smile.



"Most well-adjusted sane men would be hesitant to take a job where their decisions would so drastically affect the lives of so many. Not me. I possess a sort of sociopathic narcissism that makes me think that I should be in charge of everyone."

Outstanding.

The polarization of Congress

There was an interesting article in the Wall Street Journal earlier this week discussing one likely outcome of the upcoming elections. The great irony of the backlash against the Democratic majority in the House is that the most liberal Democrats are mostly safe--it is the more conservative ones, those elected from traditionally Republican districts, who are most at risk.
More than half the members of the Blue Dog Coalition—the organization of moderate to conservative Democrats in the House—are in peril in next week's election, a stark indicator of how the balloting could produce a Congress even more polarized than the current one.
The Blue Dogs are often seen as a kind of human bridge, connecting left and right in the House. But that bridge is imperiled by the coming Republican wave in midterm elections, the most stark example of how the midterms are likely to weaken Capitol Hill's political center.
So the backlash against Democrats seems most likely to harm not the extreme liberals in party leadership, but rather ironically the centrist ones who are more willing to buck party lines.

To be fair, the strength of the Blue Dogs' "human bridge" is fairly questionable--they reportedly voted with Nancy Pelosi and the Democratic party line 80% of the time on economic issues, a stark change from the early days of the Coalition during the Clinton years. Perhaps the Coalition's human bridge, like so many other bridges in our country, is in need of a little maintenance.


Nevertheless, the implications for Congress are clear. Instead of moving toward a less partisan, more cooperative environment that the Obama campaign promised it would bring to Washington two years ago, the House is shaping up to be incredibly polarized in the coming years--the most liberal of liberals on the left, with Tea Party extremists on the right, with little room for compromise between them.

While some would argue that this stalemate is exactly what we need right now, it's definitely a sad state of affairs if that's the case. Personally, I tend to agree more with the Zero Hedge blog, which argues that what we need right now is actual leadership out of a very difficult fiscal spot; stalemate or gridlock could in fact be highly dangerous. But this real leadership seems incredibly unlikely with our current configuration, and even more unlikely in the uncooperative Congress that we are likely to face beginning next year. So if we're looking for solutions to our continuing economic malaise, we're probably going to have to look somewhere other than Washington.


[Wall Street Journal]

Wednesday, October 27, 2010

There's a World Series going on?

The World Series starts tonight. No, really, it does. Two great pitchers, too--a two-time defending Cy Young Award winner against a man who's quickly making a case for himself as one of the greatest postseason pitchers of all time.

But I don't blame you if you didn't notice. After all, it's been a while since anybody played any baseball. A quick glance at the front page of ESPN.com indicates that the sports world has largely yawned and moved on since the World Series participants were decided on Saturday. The top headlines are all about the Celtics and the Heat (take that, LeBron), Tony Romo's clavicle, and even Brett Favre's ankle. The only vaguely World Series-related story on that front page is about the shabby treatment that Cliff Lee's wife got during the ALCS last week (see below).


This is a big problem for Major League Baseball, and it's all their own doing. Two weeks ago, I lamented the impact that TV has had on the MLB playoffs, affecting not only our interest level as fans but the competitive dynamic as well. Again, this is what's to blame.

What keeps baseball relevant is the emotional connection that it has with the fans. Baseball doesn't have the marketable culture of mercurial superstars like the NFL or NBA, nor does it present the same jaw-dropping athleticism of those two sports. We watch baseball because it's always there. All summer long, there's a game every day, from April through to October. It keeps us engaged because it's an ongoing soap opera, and there's a new installment every day. Our mood rises and falls daily along with our team's fortunes, but no matter what, there's always another game coming. That's what keeps us interested and emotionally invested. The NFL, with its one game a week, couldn't possibly hope to match that level of continued engagement.

But then October comes along, and at the point where we most want to pay attention, MLB steps in and violates that connection. Suddenly there are long periods of inactivity, and we are left cold, without baseball to fall back on. We naturally lose interest, especially as the other sports' seasons begin. Most of our teams' seasons have ended, and even the biggest baseball fans among us just stop caring. Baseball didn't used to compete with the NBA. But now, thanks to its ever-expanding postseason schedule, it does. And that's just not a battle that it's going to win.


MLB and its union will be in talks this offseason to reassess the postseason structure. On the table are proposals to expand the number of teams in the playoffs (a bad idea) and also to condense the amount of time between games (a fantastic idea). It's idiotic for baseball to break our connection with it when the games are at their most important, and they must reverse this trend. (And it's a very recent trend...consider that the 2004 World Series between the Cardinals and Red Sox ENDED on October 27, the same date that this year's Series begins).

So, tune in to this very strange World Series tonight if you want. Or don't. Apparently MLB doesn't really care either way.

Wall Street and Main Street, at odds again...

Courtesy of Michael Panzner over at Financial Armageddon comes this provocative graphic, which displays a growing disconnect between stock prices and the public perception of our economic health. The "Present Situations Index" that the graphic cites is a monthly release compiled by The Conference Board since 1967. One of three major "Consumer Confidence" statistics, it is typically closely watched by market professionals, as it is a fairly reliable indicator of consumer attitudes.


It's tempting to attribute this growing gap to behavioral or psychological factors--"consumers don't trust Wall Street any more", "persistent unemployment is a drag on the consumer's psyche", "the fat cats are getting rich off the little guy", etc.--but I don't think this is all that's going on here.

Since the onset of the financial crisis, the Fed and our government have engaged in a significant and consistent dollar debasement policy. I've written about this here before, and it's again relevant here. Essentially, while nominal stock prices have risen back to pre-crisis levels (creating the widening gap), this is not indicative of more valuable companies or a more robust economy. It is simply a measurement anomaly--we continue to measure the S&P 500 Index in dollars, the dollar is worth less now, so the S&P 500 Index is worth more of those dollars. In real terms, it has barely budged from its lows--just like our confidence.

Rising asset prices do not, by themselves, indicate a healthy economy--it's a game that our Fed is playing that simply isn't working in the consumer's mind. In other words, "Main Street" gets the game this time, and won't play along. While I'd love to say that this is a gap that is bound to close--and no, I don't mean via a market crash, I mean via an increase in consumer confidence-- I don't think it's the case. Unless we reverse the debasement of the dollar, the gap in this chart is almost guaranteed to continue growing.


[Financial Armageddon]

Tuesday, October 26, 2010

Quote of the Week

This piece yesterday on NPR (worth a listen if you can--reading the text doesn't really do justice to the people who are profiled) was a real gem. Essentially, it talks about the sometimes ironic supporters and detractors of California's Proposition 19, which could make California the first state to legalize and tax marijuana for recreational use (medicinal use is already legal in California).

Focusing on a self-described "marijuana connoisseur" named Dragonfly de la Luz, who gets high every day with a Hello Kitty pipe (seriously, I'm not making this stuff up, these people are like cartoon characters), the NPR story provides an absolutely amazing overview of the very strange world of pot smoking in California. So without further ado...

This week's QUOTE OF THE WEEK

Proposition 19 allows local governments to license commercial marijuana companies, which worries self-professed stoners like de la Luz. "We're kind of like anti-Wal-Mart and anti-McDonald's," she says. "So for them to try to sneak in and turn cannabis into a corporation, that's disgusting."
                                                                 -"Dragonfly" de la Luz, marijuana connoisseur

This is one of those truth-is-stranger-than-fiction moments. With Proposition 19, California stoners are facing an existential crisis. If their favorite hobby is legalized, then suddenly they will lose the anti-establishment edge that has been at the core of pot-smoking culture for generations. These people have built an identity--and a shady, gray-market economy--based entirely upon the government's strange stance on marijuana. In a sense, they operate in much the same world as Prohibition-era alcohol bootleggers, albeit with much less violence. They've begged the government to "legalize it" for generations, and now that it's become a real possibility, they don't know what to do.

So, Dragonfly, what's more important? Is it the high, or is it the weed-addled rambling anti-establishment nonsense that pervades the NPR piece? Either way, this is shaping up to be pretty amazing to watch. I can't wait to see how it all shakes out.


[NPR]

Senator Webb responds

In the name of journalistic fairness, I am posting Jim Webb's response (via e-mail) to my letter from two weeks ago regarding China and currency policy. While I don't agree with everything he says (I actually do agree with several of his big-picture views, but there are VERY important departures which lead us to dramatically different conclusions), I appreciate that he (or someone in his office) took the time to respond. No word yet from Mark Warner, but I'll similarly post his response if and when I receive one.
Dear Mr. Powers: 
Thank you for contacting my office regarding international trade. I appreciate your taking the time to share your specific views and concerns with me. 
Since entering the Senate, I have worked to ensure U.S. trade policy prioritizes workers' rights at home and abroad, and advances the geopolitical and economic interests of the United States.  I believe that properly constructed trade agreements benefit our country and our workers.  Trade agreements that truly focus on fair trade-as well as free trade-provide consumers with goods and services at more affordable prices, make our exports easier to sell abroad, and promote important foreign policy objectives. 
For example, I have called for a prompt resolution of outstanding issues related to the U.S.-Korea Free Trade Agreement. Passing this agreement will help industries in Virginia and will be a strong affirmation to our ally, the Republic of Korea, and the world of the U.S. commitment to security and prosperity in the Asia Pacific region, open markets, and the rules-based trading system. 
I also strongly support the enforcement of trade laws to combat unfair practices by our nation's trading partners. I have encouraged the U.S. Department of Commerce and the U.S. International Trade Commission to maintain tariffs on imports that are sold at prices that violate trade rules or are unfairly subsidized, damaging industries in Virginia and across the country. I have urged the Office of the U.S. Trade Representative to aggressively defend U.S. economic interests before the World Trade Organization. 
In addition, I am an original cosponsor of the Currency Exchange Rate Oversight Reform Act of 2010 (S. 3134), which provides for meaningful sanctions to be applied to countries, such as China, that manipulate their currency. China's currency is significantly undervalued, severely limiting U.S. exports to China and, most importantly, causing job losses here at home. Experts estimate that an increase in China's currency of 20 percent would decrease the U.S. trade deficit by $50 billion to $120 billion. 
To help workers in Virginia who have lost their jobs due to trade, I have supported petitions for assistance through the Trade Adjustment Assistance program, which provides worker training and other valuable assistance. 
As the U.S. Senate continues to address trade issues, please be assured that your views will be helpful to me and my staff.  I hope that you will continue to share your views with us in the years ahead. 
I would also invite you to visit my website at www.webb.senate.gov for regular updates about my activities and positions on matters that are important to Virginia and our nation. 
Thank you once again for contacting my office. 
Sincerely, 

Jim Webb
United States Senator
The more I read it, the more it comes across as a bit of a form letter, regurgitating his talking points on the catch-all issue of "international trade" without specifically addressing any of my concerns. But so be it. A response is a response, and I'm more than willing to post it here without directly arguing with his points. I'll save that for a different post.

Behind the scenes of the auto industry bailout

In a fascinating piece for The New Yorker, Malcolm Gladwell takes a look back at the ins and outs of the auto industry bailout, nearly two years after the fact. While the Wall Street bailouts have garnered many more of the headlines and a disproportionate amount of public scorn (largely because banks and bankers are easy targets), the auto bailouts were also extraordinarily large, and arguably more complex.

Gladwell's piece is interesting on a few fronts, but his insight into the nuts and bolts of how these bailouts got done is simultaneously intriguing and unsettling. No one man should hold as much power as these men wielded, at any point in time--a sentiment that our Constitution would echo. Gladwell writes,
“Team Auto,” as [Steven] Rattner refers to the group that he assembled to help supervise the bailout, consisted of about a dozen people, some in their twenties and early thirties. They started work in March of 2009. One of the first major issues was whether to save Chrysler. To settle the question, Rattner tells us, Team Auto gathered in the office of Larry Summers, the President’s chief economic adviser. 
The case against Chrysler was that most of the jobs lost by letting the company fail would eventually be offset by gains made by Ford and General Motors, as those companies picked up Chrysler’s old customers. Letting Chrysler fail would make Ford and G.M. stronger. But did the team really want several hundred thousand jobs to disappear—even if the losses were short-term—in the middle of a severe recession? 
Chrysler’s failure would also mean that Michigan’s unemployment-insurance fund, for starters, would need to be bailed out. One of Rattner’s team members made a counter-argument: “Given the uncertainty in our economy, it was better to invest $6 billion for a meaningful chance that Chrysler would survive than to invest several billion dollars in its funeral.” Summers put the matter to a vote. The tally was 4-3 in favor of letting Chrysler die. When the vote came to Rattner, he said that it should live. Summers agreed. Chrysler lived.
It's downright scary to appreciate how close a company was to dying, and how fickle the reasoning was behind its rescue. This is far too much power for a small panel of people to have, especially this type of panel. Keep in mind, the people on "Team Auto" were not elected, nor were they subject to any sort of Congressional approval process. And yet they were charged with the task of making massive decisions on how to deploy taxpayer resources, with the implicit understanding that any recommendation they made would be rubber-stamped by the Obama Administration. That's troubling. It amounts to a Constitutional end-around, and regardless of your feelings about the bailout, the underlying decision-making process was flawed.
To be fair, I've largely been an opponent of bailouts of all types, and that of the auto industry in particular. While I appreciate that the frictional costs of a large company going through bankruptcy can be extremely painful, and that the costs can be highly localized (as in Detroit), I think that the precedent that a bailout sets is extremely dangerous and leads to moral hazard, which can breed even more painful (if somewhat more spread and less obvious) consequences in the long run.

Gladwell's piece is both fascinating and frightening, as we realize just how much power we have entrusted to people we know nothing about (including, in many cases, their names). For an administration that preaches transparency and accountability, this seems not to jive. To have laymen making major decisions regarding the deployment of tax dollars is at best perverse, at worst non-Constitutional and illegal. Kudos to Gladwell for passing along this story.


[The New Yorker]

Monday, October 25, 2010

R.I.P. Walkman

It's been a tough year for my childhood nostalgia. First Sony announced that it would stop producing floppy disks, then Blockbuster filed for bankruptcy, and now Sony is twisting the knife.
The Walkman can officially take a hike.
Sony has announced it will officially stop making the cassette-playing Walkman in Japan, a staple of the 1980s that was first launched in 1979.
The company stopped Japanese production of the portable music player in April, and sales will end once the last batch disappears from stores, company spokeswoman Hiroko Nakamura said Monday.
This is just devastating news. I'm really getting old in a hurry here, and by the time my kids are in high school... wait a second, what the hell? Sony was still making (and selling) the cassette Walkman? You mean this thing...


...that I used to carry around in 1993, listening to Cypress Hill tapes and pretending that I wasn't the whitest kid in the world?

Why would Sony still make that thing? And who was buying it? And how much could they possibly have been paying for these technological dinosaurs? These are important questions here, and I demand answers. Seriously, can you even buy a cassette tape any more?

Since my last Walkman, I've owned a Discman, a newer Discman, a Nomad Jukebox (which still might be the best mp3 player I've ever owned), an iPod, another iPod, another iPod (with video!), an iPod shuffle, an iPhone, a Sansa Clip, and even a Samsung U5 that I bought specifically for the Boston Marathon and threw away immediately after, because it sucked.

That self-indulgent walk down memory lane reminds me not only how far technology has come since the Walkman's heyday, but also how much money I've blown on Apple products over the years. It's a little ugly. (Rest assured, I'm done now... I had my "screw Apple" epiphany a few months ago, and I'm now actively rooting against Apple as a company. As soon as my AT&T/iPhone contract--oh, and screw those things--is up, I'll be done with Apple products forever. Thus ends this unprovoked rant.)

But still... there's a small part of me that will always miss the simplicity of the Walkman. Not to mention the Maxell UR 90 cassette tape:

How will our middle school students show affection for each other without the harmless non-threatening gesture of a mixtape? 13-year old me would have been lost without them--not that he was exactly on top of the world with them. But I digress. 
 
So R.I.P., Walkman. Your death was only about 15 years overdue.


[New York Daily News]

Draw your own conclusions

Following up on this item from earlier this month, I came across another BBC article detailing some interesting behavior by dolphins.
Wild dolphins in Australia are naturally learning to "walk" on water.
Six dolphins have now been seen mastering the technique - furiously paddling their tail fluke, forcing their body out and across the water.
The dolphins seem to walk on water for fun, as it has no other obvious benefit, say scientists working for the Whale and Dolphin Conservation Society.
That makes the behaviour a rare example of animals "culturally transmitting" a playful rather than foraging behaviour.
Look, I'm not saying that dolphins and penguins are trying to take over the world, and I'm not saying they're not. I'm just saying to keep an eye out. Especially for the penguins. "Flightless" birds are not to be trusted. 

[BBC]

Friday, October 22, 2010

Celebrating 100 posts in style...

This is my 100th post on this blog, since I started it two months ago. The previous 99 posts total over 42,000 words. That's a lot. I have too much time on my hands.

At any rate, just for kicks, I went to Wordle and ran through the text of all my previous posts to create a word cloud. Apparently I like to talk about the market, the government, and China. And debt. Good talk, thanks for reading.

Merkel 1, Bernanke 0

With the G20 Summit taking place this week outside Seoul, global trade imbalances and differing responses to the global recession have again taken center stage. In this piece over at The Daily Capitalist, Jeff Harding revisits the March 2009 G20 Summit, and the rift between Germany (led by German Chancellor Angela Merkel) and the United States (led by Tim Geithner and Ben Bernanke) that developed.

Harding finds that Merkel (and Germany) is the clear winner so far. Citing his own post from August 2009 (and quoting Merkel), he writes:
“The crisis did not take place because we were spending too little but because we were spending too much to create growth that was not sustainable. It isn’t just that the banks took over too many risks. Governments allowed them to do so by neglecting to set the necessary [financial market] rules and, for instance in the US, by increasing the money supply too much.”
[Mrs. Merkel] is robustly unapologetic when discussing the origin of the global financial meltdown. The fault, she says, ultimately lies with misguided efforts in the US, both by the government and the Federal Reserve, to re-start artificially the economy after September 11 by pumping ever-cheaper money into the financial system. “We must look at the causes of this crisis. It happened because we were living beyond our means. After the Asian crisis [of 1997] and after 9/11, governments encouraged risk-taking in order to boost growth. We cannot repeat this mistake. We must anchor growth on firmer ground.”
Essentially, Bernanke and the Fed elected to repeat the financial mistakes of 9/11, and to do the same thing all over again. Merkel and Germany did not, choosing instead to lower taxes and cut government spending, essentially rolling back government stimulus and encouraging private investment instead. They took their medicine and pressed the "reset" button. Now, while the U.S. struggles with anemic growth, Germany is set to grow at a robust 3.4% rate this year. Their recovery seems to be well under way, even while we continue to flounder.

Propping up demand with stimulus, perverting the market, playing "extend and pretend", hiding bad debts in various vehicles, and shifting around assets on the merry-go-round is silly. It delays the inevitable, and confuses market participants. The Fed and the Obama administration have elected to inflate asset prices, rather than letting them find their proper level. This approach encourages speculation and risk-taking, NOT capital investment and sustainable economic growth. We've got it wrong, and Germany has it right.


True, Germany's robust growth comes at least partially on the back of other governments' pedal-to-the-metal stimulus, but that's even more of an indictment of U.S. policies. Our government ramps up spending, engages in massive stimulus, inflates the debt, and our economy continues to flounder while Germany enjoys the spoils. That's a problem. We need a better and more comprehensive tax policy (to avoid more Googles), and we must also (carefully) remove the stool of government spending-based stimulus. As long as the government insists on creating artificial demand, there will be little incentive for American businesses to invest in sustainable growth, and Germany's economy will continue to lap ours.

[The Daily Capitalist]

Reading this blog post will cure cancer...

...no, it won't. But it got your attention. I can write whatever spurious nonsense I want from here on out, throw in a late caveat, and claim journalistic integrity by the end. It's one of the oldest tricks in the online journalism book, and it's the subject of this piece over at The Guardian today.
You will be familiar with the Daily Mail's ongoing project to divide all the inanimate objects in the world into ones that either cause or prevent cancer. Individual entries are now barely worth documenting, and the phenomenon is best appreciated in bulk through websites such as the Daily Mail Oncological Ontology Project and Kill Or Cure, with its alphabetised list...
Occasionally one story pops up to illustrate a wider issue, and "Strict diet two days a week 'cuts risk of breast cancer by 40%' " is a good example... Now, if you have the time to track down the academic paper this news article is describing, from the October edition of the International Journal of Obesity, you will immediately discover that it is not a study of breast cancer, and it does not find that the risk of cancer is reduced by 40% (although it does measure a couple of hormones)...
But if I were to leave it there, then the journalist would correctly complain: because after all the grand and misleading claims, firstly, in the body of the piece, they do mention that the outcome is not cancer, but some hormones related to cancer (with no explanation of how tenuous that relationship is). Then, finally, at the very bottom of the piece, they have the reality. Although it's not spoken in the authoritative third person of the paper itself, it's there, in a quote, at paragraph 19...
The late caveat, torpedoing the central premise of a news piece, is a common strategy in many newspapers. But what use is this information, at the end of a long article, in paragraph 19?
The piece goes on to describe patterns of reading, and the extensive studies that have scientifically proven the worthlessness of the late caveat. Basically, people only read (at best) the first half of most online articles, and they selectively focus on the most outlandish claim that is made, trying to cull the conclusion. Late caveats, however important they may be, rarely get read. It's therefore left to the reader to read the small print, because the media outlet has little interest in making it any larger.


This kind of weak and irresponsible journalism only fuels confusion among the general public, especially when they are faced with multiple studies with conflicting results. Everything causes cancer, but everything prevents cancer, so you should do everything. And nothing. In moderation. And then stop doing it.


[The Guardian]

Did you know?

This graphic sort of speaks for itself. I definitely didn't appreciate just how huge Africa was. With all the talk of emerging markets and emerging economies, it's easy to overlook how massive Africa is, and how big its influence could be if it ever got its act together. Also, left unmentioned here is Russia, which has a land mass of about 17 million square kilometers (yeah, I know, we use miles over here in Amurica, but get over it), which is just huge. It's not the USSR any more, but it's still a massive country. Interesting food for thought.


[The Mess That Greenspan Made]

Thursday, October 21, 2010

Clip of the Week

This week's Clip of the Week isn't a new clip. Not by a long shot. It's from 1906, and it was the focus of a very interesting 60 Minutes piece this weekend. Taken by a cable car operator just days before the infamous San Francisco earthquake, the clip is simultaneously a rare time capsule and an eerie view of a city unwittingly enjoying the calm before an unimaginable storm.



You can also see the 60 Minutes report on the clip (including some cool commentary) here. I would've embedded the 60 Minutes report itself, but CBS News' embed function is notoriously screwy, and YouTube's worked better. Watch them both if you want the full effect.

I think it's both poignant and unsettling to watch these people going about their business without a hint of an idea of what's coming. Many (or most) of the buildings pictured were completely destroyed days later, and undoubtedly many of the people filmed were killed.

But besides all that, it's also just pretty cool to watch. The way they dress, the way there's basically no traffic laws whatsoever (and a bunch of close calls of people and cars cutting in front of the cable cars), the fact that most of the license plates on the cars are simple 4-digit numbers, indicating just how few cars were on the roads back then... It's fun to watch, and the history of the matter just makes it that much more impactful. Cool clip.


[60 Minutes]

How taxpayers are subsidizing Google--and its stock price

I've written multiple times (most recently here) about my view that government policy--both leading up to and in response to the global recession--has disproportionately benefited the rich over the poor, and more importantly the large business over the small business. As I wrote previously, "Sometimes, as in the case of TARP, this favoritism is clear and intentional. Other times, in the case of Fed-induced dollar debasement, it is more insidious via increasing consumer price inflation."

I also mentioned in this piece that our current tax policy is horribly misguided, and that it is largely to blame for our burgeoning deficit and debt (spending is obviously another huge issue that I've discussed, but there are two sides to any budget deficit). I wrote then that "it is completely ludicrous to spend time chasing after small businesses in search of $17 billion [in tax revenues] that might not exist, when the majority of U.S. companies--many of them large--currently pay no income tax." In that case, I was referring to the so-called 1099 provision in our health care bill, and the disproportionately onerous impact that it would have on small businesses.

Now, Bloomberg has brought to light just how significant the impacts of our bizarre tax policy can be. Jesse Drucker writes,
Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda.
Google’s income shifting -- involving strategies known to lawyers as the “Double Irish” and the “Dutch Sandwich” -- helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization, according to regulatory filings in six countries.
“It’s remarkable that Google’s effective rate is that low,” said Martin A. Sullivan, a tax economist who formerly worked for the U.S. Treasury Department. “We know this company operates throughout the world mostly in high-tax countries where the average corporate rate is well over 20 percent.”
The U.S. corporate income-tax rate is 35 percent. In the U.K., Google’s second-biggest market by revenue, it’s 28 percent.

Let's forget for a moment that the techniques Google is using (the "Double Irish"? The "Dutch Sandwich"? Really??) sound a bit like euphemisms for obscure sexual perversions. It is beyond ridiculous that a company like Google should be able to legally avoid taxes for so many years, while individual taxpayers pick up the slack. I mostly like Google as a company, and I don't think they're violating their corporate credo and being evil here--they're just being rational.

But when Google generates massive piles of cash--all of it essentially untaxed--we all pay the difference between their nominal tax rate and their effective tax rate. Furthermore, Google cannot repatriate that cash (and reinvest in our economy) without enduring a significant tax hit. So their only choice is to keep that cash abroad, and use it there instead of here--that means continued foreign hiring, and no uptick in domestic employment. No amount of currency market posturing against China will change that structural flaw.

[Click here for interactive graphic]

If we want to close our budget gap and stimulate our economy, finding a creative and rational way to fix this problem is an absolutely essential first step. But our politicians would rather waste their time arguing about Bush tax cuts and individual tax rates, continuing to distract from the main point. The impact of allowing the Bush tax cuts to expire is estimated at $700 billion over 10 years; Google alone avoided $1 billion in tax just last year.

Extrapolate Google's $1 billion to include all of the multinational corporations in the S&P 500 who similarly avoid taxes, and you've got a number that clearly dwarfs the impact of any individual tax policy changes. We may worry that increasing the effective tax on these corporations will change their incentives to hire and invest, but where's the evidence that our current tax policy is actually incentivizing them to invest and to hire? Certainly not in our 17.1% effective unemployment rate.

Bloomberg estimates that the total impact of Google's unpaid taxes has boosted its stock price by nearly $100 per share--about a 20% increase over what it would be absent preferential tax treatment. That increase is subsidized by U.S. taxpayers, and also disproportionately benefits the rich who own GOOG stock over the poor who don't. We need to crack down on this, and we need to do it now.

[Bloomberg]

Wednesday, October 20, 2010

Too good not to share

This is really apropos of nothing, but this speech by British author Ken Robinson is one of the more interesting videos I've come across in a while. In it, Robinson challenges our notion of education and its purposes, and wonders aloud if we've got things backwards.

The video doesn't really translate well to the blog--it's not easy to summarize, it's not a 30-second clip, it's in a sense everything the internet doesn't do well. But it's a fantastically funny and insightful piece, and if you've got 20 minutes to spare, give it a watch. It's better than watching Glee, I promise.



Robinson's basic premise is that children are inherently incredibly creative, in large part because they are unafraid to make mistakes. But schools, corporations, and just about everything that they encounter in life punishes mistakes heavily. They thus learn to play it safe, make the smart call, and never risk making mistakes. This inherently stifles creativity. In a way, Robinson argues, that's the point--schools (and especially public schools) are specifically designed to provide what industry needs. Only select industries and corporations actually value innovation and creative thinking, so cultivating it is not a priority at the schools.

It's an interesting take, and one that speaks to me. I've spent much of my life being Exhibit A of a guy who plays it safe and doesn't risk big screw-ups--I definitely admit that. For the most part it's served me well, but I also haven't exactly changed the world (and I'm far from creative or innovative). So it's interesting for me to watch this speech and think introspectively about the choices I've made, the risks I've taken (and haven't taken), and why. Hopefully you watch it and find it interesting as well.

Gather up your clovers and rabbits' feet

As a lifelong baseball player and fan, I've become very familiar with superstitions and the ritualistic routines that come along with them. Ballplayers are a notoriously superstitious bunch, and I readily admit that a lot of it's rubbed off on me.

I don't talk about no-hitters while they're going on, I adjust my helmet after every pitch when I'm at bat, and I never (EVER) step on the baselines when I'm running out to my position or back to the dugout. That last one's a big one--I cringe whenever I see anyone step on the line, even if it's a coach running out for a mound visit. It's pathological. I don't quite jump like Turk Wendell used to, but I'm pretty close.


If you know me well, you know that my belief in superstitions is a huge departure from my usually hyper-rational approach to life. I'm not a religious guy at all, and I fully realize the irrationality of believing in jinxes and curses and magic. But maybe it's not irrational after all--thank you, Scientific American.
[Superstitious behavior] can veer from the eccentric to the pathological, and though many coaches, teammates and fans snicker and shake their heads, a new study headed by Lysann Damisch at the University of Cologne and recently published in the journal Psychological Science suggests that we should all stop smirking and start rubbing our rabbit’s foot...
[Experimenters] brought participants into the lab and told them that they would be doing a little golfing. They were to see how many of 10 putts they could make from the same location. The manipulation was simply this: when experimenters handed the golf ball to the participant they either mentioned that the ball “has turned out to be a lucky ball” in previous trials, or that the ball was simply the one “everyone had used so far”.
Remarkably, the mere suggestion that the ball was lucky significantly influenced performance, causing participants to make almost two more putts on average.Why? Surely it couldn’t be that the same golf ball becomes lucky at the experimenter’s suggestion – there must be an explanation grounded in the psychological influence that belief in lucky charms has on the superstitious...
A final study sought to determine exactly how the increased confidence that comes along with a lucky charm influences performance. Specifically, was it making participants set loftier goals for themselves? Was it increasing their persistence on the task? Turns out, it’s both. Participants in the charm-present conditions reported setting higher goals on an anagram task and demonstrated increased perseverance on the task (as measured by the amount of time they spent trying to solve it before asking for help).
The article is one of those difficult-to-excerpt pieces (it rambles and rambles without ever making a pithy conclusion, sort of like me), so it's sort of helpful to read the whole thing. But to paraphrase their basic point, if you believe in a lucky charm, it will alter your psychology so that you set higher goals and persevere more, increasing your likelihood of success. You don't want to believe that your lucky charm is useless, so you go out of your way to make sure that it's lucky. Essentially. Okay, fine, it's not so easy to turn this one into a pithy conclusion, but you get the point.

But before you start hoarding rabbits' feet and four-leaf clovers, consider the author's final point.
The influence of the charm depends crucially on your belief in its inherent powers. Once you acknowledge that performance is a function of what goes on in your brain rather than a product of any mystical properties of the object itself, it becomes useless... Like the science of astronomy strips the starry night of its magic, the science of the mind strips your superstitions of their power. You’d be better off following the model of Walt Whitman: throw on your lucky fedora and forget you ever read this article.
That last point might also help explain this phenomenon, which I had meant to post about but never got around to. If you believe in something, you need to keep believing in it no matter what, or else you could end up in big trouble. Which is why I never jump on baselines.


[Scientific American]

Tuesday, October 19, 2010

Quote of the Week

Okay, in retrospect, I should've just held back my man Jimmy McMillan (a.k.a Prince Jimmy McMillan a.k.a. Papa Smurf) and given him the Quote of the Week, for basically everything he said in last night's New York gubernatorial debate. But how can you choose just one quote from Jimmy's stream-of-consciousness brilliance? It's like trying to choose a favorite son, and I just won't do it, dammit.

So instead, I'm giving the honor to an article in Newark's Star-Ledger, for its amusement value alone. It's not short or pithy like most Quote of the Week honorees, but it's a winner anyway.

This week's QUOTE OF THE WEEK

"[Lady Gaga] fans are scouring Halloween stores for bloody red dresses but the carnivorous look debuted too late for manufacturers to create a costume. Some diehards are planning to wear real meat but New Jersey butchers caution against it."
                                -Lisa Rose; Star-Ledger

Man, do you really need a New Jersey butcher to tell you that wearing a suit of meat for Halloween is a bad idea? Is this how far we've fallen? Celebrity worship never ceases to amaze me, but this is getting ridiculous...


[Star-Ledger]

My political views, finally summed up perfectly

I try to avoid partisan political discussions here...I don't really trust either established party, frankly. But I need to break my silence today. I can't hide my true colors any longer. Today is the day that I admit I am a member of the Rent Is Too Damn High Party.

I miss New York sometimes. It's a stressful and tiring place to live, but it's just non-stop amusement. Last night's gubernatorial debate is exactly the kind of stuff I miss. This just doesn't happen anywhere else.

Click to Watch

[Gawker]

Monday, October 18, 2010

The uneven costs of recession

Populist rants have increased in frequency during the global recession, as public opinion indicates a growing belief that the costs of the economic slowdown disproportionately have been borne by the lower and middle class, while the upper class skates by unscathed. I've previously argued that the response to the downturn--whether fiscal or monetary--has indeed largely benefited the rich and the large (or "Too Big To Fail"). Sometimes, as in the case of TARP, this favoritism is clear and intentional. Other times, in the case of Fed-induced dollar debasement, it is more insidious via increasing consumer price inflation (as I discussed in my recent "Letter to the Senators").

Either way, the true effects of governmental response are beginning to become more clear, as displayed in an Associated Press item published yesterday.
The luxury sector is rebounding better-than-expected this year thanks in large part to wealthy Americans replenishing their wardrobes after a year of self-denial and nouveau riche Chinese indulging in a worldwide spending spree, according to a new study released Monday.
Sales of designer clothes, fine leather goods, jewelry, watches and other indulgences around the globe is forecast to surge 10 percent to euro168 billion ($236.7 billion) in 2010, recovering from a disastrous 2009 when sales declined 8 percent to euro153 billion, Bain & Co. said in its annual review of the sector commissioned by Italy's Fondazione Altagamma association of high-end producers.
"It is really impressive how customers have rebounded in their approach to these purchases, in particular in the United States and in Europe," said Bain partner and luxury goods expert Claudia D'Arpizio.
This return to opulence comes even as the national unemployment rate hovers stubbornly around 10%, with some estimates pegging the real rate above 17%. It's hard to feel bad for the wealthy Americans' so-called "self-denial" when much of their recent spending has come on the backs of unemployed workers. While they fruitlessly search for jobs, the unemployed have also seen the value of any savings decline as the dollar continues its Fed-forced freefall.

Of course, it's not all good news in the land of luxury--the market for private islands continues to suffer terribly. What a shame.

[Yahoo!]

What can we learn from studies with "conflicting results"?

After training for and running my first marathon this spring, I've naturally taken an interest in distance running and a lot of the literature surrounding it. I wrote about it once before, after I read Christopher McDougall's fantastic book, Born to Run.

So I was naturally drawn to this item in the New York Times last week. Entitled "Do Marathons Hurt Your Knees?", Gretchen Reynolds' column attempted to make sense of the sea of studies surrounding marathon running and its effects on the body.
The idea that distance running inexorably leads to arthritis is deeply entrenched, despite the publication of a number of recent studies that have found otherwise. In one representative experiment, the knees of experienced marathoners, with multiple races behind them, were scanned with magnetic resonance imaging technology, and then scanned again 10 years later. The runners’ knees were and remained robust throughout that time, with few significant cartilage abnormalities. The only truly unhealthy knee in the study belonged to a former marathoner, who had quit the sport. In the years since he stopped running, his joint had deteriorated badly...
But then came the latest study on the issue, this one from researchers at the University of California at San Francisco, using a more sensitive type of M.R.I. technology than had been available in the past... The results, published earlier this year in The American Journal of Sports Medicine, are eye-opening. On these more-sensitive M.R.I. scans, the researchers found evidence of significant biochemical changes in the runners’ knee cartilage, particularly in the days immediately after the race. According to their postrace scans, the racers had elevated values for two technical measures of the health of their cartilage matrix...
In other words, the issue of whether distance running does or does not harm your knees would appear still to be open (to the considerable satisfaction of some of my nonrunning friends).
The column, unfortunately, didn't do much to try to reconcile these two studies with each other. This has become typical of much research (and especially media reporting on such research). When faced with studies with conflicting results, a staid "more research is needed" is uttered as a conclusion, and we all move on knowing little more than we did before, inevitably confused.

In my opinion, when we see conflicting results like these, it's usually an indication that we may be studying the wrong thing. It's not a matter of whether running itself is inherently good or bad, but the way we choose to run--how we train for marathons, what type of shoes we wear, the surfaces we run on, what type of shape we are in to begin with, et cetera, ad nauseum.

It's difficult bordering on impossible to execute a study on "running a marathon" while holding all other variables constant. There are nearly infinite factors that could separate one marathoner from the next--not to mention marathoners from non-marathoners. So we need to be very careful not to assume that any study has properly isolated the variable that it is attempting to examine. That is, after all, the essence of scientific research.


[New York Times]

Friday, October 15, 2010

Hooray sanity!

As I keep on pounding the drum for us to ease up on the political rhetoric surrounding China, today it seems that someone agrees with me that this is a sensitive issue. Per Reuters,
The Obama administration plans to delay a decision on whether to label China a currency manipulator, a move long demanded by many U.S. lawmakers but also a potentially big wrench in an important relationship. 
A Senate aide told Reuters the Treasury Department would hold off releasing its semi-annual report on the currency practices of U.S. trading partners. 
It was not immediately clear how long the delay would be. Industry sources had said they expected the report to be unveiled at 1 p.m. EDT Friday.
Thank God. That's a good first step. The next step is killing this bill. This is an incredibly delicate situation with serious implications across a variety of economic issues. Right now we need very careful diplomacy, not reckless political grandstanding. Hopefully today's decision hints at a recognition of that need for diplomacy.




[Reuters]

An interesting take on the Chilean miners

Outside of the U.S., one of the biggest news stories this week surrounded the rescue of the Chilean miners, who had been trapped underground for more than two months. It was a welcome bit of good news for everyone, and it seems destined to be the subject of feel-good books and made-for-TV movies a la Captain Sully.

But of course, I'm the guy who insists on playing the schoolteacher role, and dragging every great story back to a life lesson. Or, in this case, a business lesson. In a Wall Street Journal editorial, Daniel Henninger writes,
It needs to be said. The rescue of the Chilean miners is a smashing victory for free-market capitalism.
Amid the boundless human joy of the miners' liberation, it may seem churlish to make such a claim. It is churlish. These are churlish times, and the stakes are high.
In the United States, with 9.6% unemployment, a notably angry electorate will go to the polls shortly and dump one political party in favor of the other, on which no love is lost. The president of the U.S. is campaigning across the country making this statement at nearly every stop:
"The basic idea is that if we put our blind faith in the market and we let corporations do whatever they want and we leave everybody else to fend for themselves, then America somehow automatically is going to grow and prosper."
Uh, yeah. That's a caricature of the basic idea, but basically that's right. Ask the miners.
If those miners had been trapped a half-mile down like this 25 years ago anywhere on earth, they would be dead. What happened over the past 25 years that meant the difference between life and death for those men?
Short answer: the Center Rock drill bit.
Henninger also refers to this previous Journal piece, which raises similar points. His argument is a little overwrought, and it is also clearly heavily partisan toward the right. I don't agree with a lot of his assertions, but it's an interesting take nonetheless. Innovation=profit=societal progress, and therefore any economic policy must, at its core, continue to encourage innovation in the business world.

I, unlike many, don't think that the Obama administration is somehow inherently "anti-business". In fact, I've argued here before that the Democratic party ironically may be turning into the party of big business. I do, however, think that many recent policies--from health care to financial regulation--threaten to disproportionately do harm to small to mid-sized businesses rather than large corporations. This perverts the traditional competitive dynamic that enables small businesses to grow--and provides them with incentives to innovate.

Indeed, most large corporations become conservative once they reach their mature state, and most transformational innovations thus come from the realm of smaller business. If you harm these businesses (even on a relative basis), and give them less incentive to innovate, we all suffer. I see this as the power of Henninger's argument. If you can get past his overt partisan views, there is some opportunity to learn from his insights.


[Wall Street Journal]

Thursday, October 14, 2010

Clip of the Week

Alright, time to end this Thursday on the proper note...with a cartoon. Yup, it's Clip of the Week time, and this time around it's not Jon Stewart or Stephen Colbert. I know you're shocked.

I gave some serious thought to posting the entire "It's a Jersey Thing" episode of South Park from last night (an instant classic), but I'm going to stick to my guns and post my original choice. Given my obsession with China lately, I think it's particularly apt.

The Simpsons enlisted the help of underground street artist Banksy to draw up this week's couch gag. It was dark, incisive, and basically amazing. I give credit to Fox and the producers of The Simpsons for airing it (it's not exactly friendly to them), and credit to Banksy for awesomeness. Bravo.

A response to Prof. Krugman's response

In this week's Quote of the Week, I took aim at Professor Paul Krugman's read of our nation's fiscal condition. Apparently, I wasn't alone. In his somewhat snarky response (titled "Special Bulletin: Fractions Have Denominators") to apparently widespread criticism of his previous op-ed, he writes:
I’ve been getting some mail over yesterday’s column, with angry correspondents posting charts like this, showing government spending as a percentage of GDP, to claim that government spending has too surged:
But if you look at the raw numbers on government spending, here’s what you see:
Feel the surge!
What’s going on? Yes, that’s right: it’s what happens when you divide by GDP in a time of terrible economic performance. Spending hasn’t surged; in fact, it grew more slowly in the two years after Lehman collapsed than in the two previous years, despite a sharp rise in spending on safety-net programs. Instead, GDP growth has plunged.
I posted a comment on Prof. Krugman's new article, and I'll repeat it here.
Yes, Prof. Krugman, fractions do have denominators. The problem, though, is that the fraction does not become meaningless simply because it is the denominator changing rather than the numerator--it merely changes the fraction's meaning. 
Spending IS still increasing, by the looks of your graph about 30% over 5 years. That's significant. If a household increased spending while its income decreased, it could only do so by incurring debt. Clearly this is what we are doing with spending vs. tax revenues. 
The gap between the numerator and the denominator is DEBT, and our growing DEBT is the problem. That is the true meaning of the first graph you posted. This is the dangerous behavior that those "on the right" are decrying, and explaining the behavior of the denominator does not erase their fears. 
We are spending ever more money on interest servicing the debt, and an increase in interest rates will make the debt absolutely untenable. Think about it as a homeowner with an ARM ready to kick in. They can afford it now, but not when the higher back end rate kicks in. That's the danger, and it doesn't have anything to do with numerators or denominators. It's the gap that matters.
The Wall Street Journal also ran an opinion column (worth a read) essentially responding to Prof. Krugman. In it, they wrote:

The costs of TARP declined by $262 billion from 2009 as banks repaid their bailout cash, payments to Fannie Mae and Freddie Mac were $51 billion lower (though still a $40 billion net loser for the taxpayer), and deposit insurance payments fell by $55 billion year over year.
"Excluding those three programs, spending rose by about 9 percent in 2010, somewhat faster than in recent years," CBO says.
Somewhat faster. You've got to laugh, or cry, when a 9% annual increase qualifies as only "somewhat faster" than normal.
Stripping out the effects of TARP and deposit insurance, the Journal ran the following graphic to show actual spending trends since 2008. They are indeed alarming, and to read Prof. Krugman's op-ed without also consulting this chart is certainly irresponsible.


Note that I am certainly not one of those "on the right" that I mentioned in my response to Prof. Krugman. I am, however, a fiscal conservative, and I am deeply concerned about our ballooning debt. We as a government (and a nation) are essentially repeating the sins of now-underwater homebuyers of the last decade. Prof. Krugman is only confusing the issue by obscuring the facts. Thank you to the Journal for clearing things up.


[New York Times]
[Wall Street Journal]

The letter I wrote to my senators

It's been years since I wrote a letter (or even an e-mail) to one of my elected representatives. In fact, the last time I did so had very little to do with government or politics--it was a letter to Sen. Ted Kennedy telling him how disappointed I was that he had caved to political pressure and severed ties with my beloved Owl Club.

So it's no small matter that I chose to break my silence this week, writing a letter to both Virginia senators urging them to vote against legislation aimed at pressuring China to revalue its currency. With the Senate apparently "poised to act" on this bill (I had previously expected them to wait until after the election), I felt that sending both a letter and an e-mail was absolutely vital and urgent.

This bill is government at its worst. It is pure political grandstanding, and it will have incredibly dangerous consequences. My letter honestly could have stretched to 4 or 5 pages with all the complexity of our current relationship with China (and the power that they hold), but I kept it short for our apparently mentally-challenged members of the Senate.

If you've been reading my posts for a while, you already know where I stand. But I think this is one of the most dangerous pieces of legislation to move through our government in many years, and that's saying a lot.
Dear Senator (Webb/Warner),
I am writing to you today to express my strong opposition to current legislation aimed at pressuring China to revalue its currency. The legislation is drawn up on false premises, caters to the whim of the xenophobic, and threatens our nation's economy at a time when it is at its most vulnerable. This bill represents government at its very worst--scapegoating foreign governments for our own problems, to the benefit of politics alone. This political grandstanding is extraordinarily dangerous, and as a result you must vote against passage of these proposed currency sanctions against China.
First, as to the issue of "false premises" mentioned above, I direct you to economist and investment advisor Mish Shedlock, who summarizes the key issues in an admirably accessible manner. He writes, 
"What would happen if China raised prices 20% across the board via an export tax or revaluation of the Yuan, starting tomorrow?
For starters, the Chinese economy would implode overnight along with collapsing exports. U.S. importers such as Wal-Mart, Target, Best Buy, and Kohl's would seek new supply chains from Vietnam, Korea, Singapore, or India, but that would take time. In the meantime, U.S. stores would run out of some goods. U.S. consumers would go on strike until the supply chains were restored. Hundreds of small businesses would go bankrupt. Finally, businesses going bankrupt would pressure the banking system."
This is what we risk so that we can supposedly "save" manufacturing jobs. But this premise is faulty. Manufacturing jobs will return to the United States ONLY IF there is no cheaper alternative. Vietnam, India, and even Germany are currently still better options for our corporations (even despite our rapidly declining dollar), and they will turn there first for their manufacturing labor.
Even if those jobs eventually do return to the United States, it will serve only to increase those corporations' input costs, forcing them to raise consumer prices and feed the inflation that our weak dollar policy has already begun to cause (see the recent rapid increase in commodity prices, from crude oil to corn to oats to gold). For various reasons, inflation always hurts the poorest Americans most, as increases in food costs directly hit their bottom line. Unlike richer Americans, they don't have the option to trade steak for hamburger or organic milk for non-organic milk---they already have done so.
In addition, these "saved" manufacturing jobs will come only at the cost of dock workers unloading ships and truckers hauling goods from the west coast throughout the nation, not to mention the harm done to employees of Wal-Mart, our nation's largest non-government employer. Any projections of a positive jobs impact from this currency revaluation are grossly overoptimistic.
Therefore, AT BEST, the inflation caused by this legislation will perversely do the most harm to the very workers whom it is purporting to help. At worst, this turn toward protectionism will spark an international trade war reminiscent of the Smoot-Hawley Act, which sent the world spiraling deeper into the Great Depression. This is a price that should be deemed far too high to pay for the political "win" that Washington politicians may be seeking during this election season. This legislation must not pass. We must learn the lessons from past generations and refuse to repeat the sins of Smoot-Hawley.
Sincerely,
Evan J. Powers
Hopefully my words will not fall on deaf ears. But either way, I urge you to do something similar. This legislation is just that dangerous. I've also posted below all of my previous rants on the topic. This is not a good situation.

[9/17/10: The Unintended Consequences of Globalization]
[9/23/10: Globalization Issues Heat Up]
[9/30/10: Begun the Trade Wars Have]
[9/30/10: Uh oh... (more from Mish on the trade wars)]
[10/8/10: A Great Summation of the Budding Currency War]

Wednesday, October 13, 2010

Agents and the NCAA

Today's turning into a sports-heavy day, but given my past posts about the NCAA, there's no way I can ignore this article from this week's Sports Illustrated. There's not much new here if you've been paying attention to the budding issues at North Carolina, Georgia, and elsewhere, but it definitely adds a new perspective to the issue and makes it that much more clear how widespread the problems are.

Written from the perspective of former sports agent Josh Luchs, the article begins:
I will never forget the first time I paid a player.
There are moments you will always remember, like your first kiss or your first home run or the day you met your wife. For me, the first time I broke an NCAA rule to try to land a client is just as indelible.
Luchs goes on to recall decades of abuses of NCAA rules, doing a good job of describing the (behind-the-scenes) landscape of collegiate athletics. It's alternately infuriating, saddening, and thought-provoking, and it gives voice to a largely silent minority (agents). What I find most striking is how Luchs draws parallels between himself and college coaches--both are "recruiters", and both can and do bend NCAA rules for personal benefit. It's worth asking whether there's really any difference between a coach and an agent at the end of the day.

Rather than rant anew about old issues, I'll just excerpt here what I wrote before. It's as apt here as it was then.
This is only the latest in a long line of recent news items focusing on "improper contact" between players and agents. Alabama coach Nick Saban famously referred to agents as "pimps" in the wake of his program's agent-related controversy this summer, saying:
"I don't think it's anything but greed that's creating it right now on behalf of the agents," Saban said in a rant at the SEC media days. "The agents that do this – and I hate to say this, but how are they any better than a pimp?
"I have no respect for people who do that to young people. None. How would you feel if they did it to your child?"
This, from a man who is scheduled to be paid $4 million per year through 2017 for coaching these same kids. Look in the mirror, Nick.
Former USC coach Pete Carroll, for his part, escaped from USC before it could be sanctioned, in order to sign a 5-year, $33 million contract with the NFL's Seattle Seahawks. He will face no punishment for what happened at USC under his watch, in the same way that Kentucky basketball coach John Calipari has twice escaped programs (UMass and Memphis) immediately before they were sanctioned. Coaches, athletic directors, and NCAA officials continue to be all too quick to blame individual agents and players for illicit behavior, without even addressing the possibility that their own policies and conduct may be to blame.
We could rush to judgment on Luchs and question his motives for publishing his story now. But Sports Illustrated went out of its way to contact the people Luchs mentioned in his article, and the majority of those who were willing to comment confirmed Luchs' version of the events. So regardless of his motivations, the man clearly speaks the truth. And that's not good for the NCAA.

[Sports Illustrated]