Akkam’s Razor

Mark Nickolas has posted that Hillary needs to run for President of Appalachia, confirmed by her strong performance last night in West Virginia. It is tempting to disregard this electoral preference on surface faultline demography like race, age, poorest, or education, but Josh Marshall at TPM hints at something more.

When you look at bank failures things don’t looks so bad, historically speaking. But when you look at non-bank money-lending (and money printing institutions, things get considerably more serious.

For additional context, see Implode-Explode Heavy Industries, Inc. sites titled FedShame and BernakePanky.

I told you so - the economists are too elite.  The only supporter for her gas tax holiday plan (also pitched by Republican John McCain) she could find - Steve Elmendorf - is an Oil Co. lobbyist.

Tanta at Calculated Risk posts the following as a response to a story in the Washington Post regarding a ‘condo flipper’ upset that his owners association’s board won’t allow them to rent their properties (with the logic that if not being allowed to rent, they will be forced into foreclosure and eventually a short-sale, dragging the value down for the other units):

I’ve been hearing a lot about hoarding, rationing, or shortages of some food products - mostly rice, but also flour and cooking oil.  Even the Wall Street Journal is talking like its Y2K!

Stocking up on food may not replace your long-term investments, but it may make a sensible home for some of your shorter-term cash. Do the math. If you keep your standby cash in a money-market fund you’ll be lucky to get a 2.5% interest rate. Even the best one-year certificate of deposit you can find is only going to pay you about 4.1%, according to Bankrate.com. And those yields are before tax.

Meanwhile the most recent government data shows food inflation for the average American household is now running at 4.5% a year.

And some prices are rising even more quickly. The latest data show cereal prices rising by more than 8% a year. Both flour and rice are up more than 13%. Milk, cheese, bananas and even peanut butter: They’re all up by more than 10%. Eggs have rocketed up 30% in a year. Ground beef prices are up 4.8% and chicken by 5.4%.

These are trends that have been in place for some time.

And if you are hoping they will pass, here’s the bad news: They may actually accelerate.

The reason? The prices of many underlying raw materials have risen much more quickly still. Wheat prices, for example, have roughly tripled in the past three years.

Sooner or later, the food companies are going to have to pass those costs on.

What if something else is afoot?  What if it’s manipulation and/or speculation? Consider the following:

• Both production and supply are constant (one could argue China, our main source of rice, might keep crop for domestic consumption or switch to a more lucrative cash crop, but there’s no evidence for that).
• There could be anxiety at the wholesale level (as there has been with flour amongst bakers and pizza shops), causing a ‘rice-run’ at retailers.
• Consumers could be tuned-in to news on the subject and stockpiling (how likely could that be?)
• Or, it could be good, old fashioned pump-and-dump manipulation.

I recall that the most common way prices can be driven up (or maintained) is through scarcity - increasing demand or cutting supply.  Since production and demand seem rather constant, what other explanations are there?  Barry Ritholtz at Big Picture casts a suspicious eye towards the Federal Reserve.  Tim F. at Ballon Juice opines as well.  Angry Bear argues too-low interest rates versus demand outstripping supply.

I was going to give a long diatribe into my endorsement for the Primaries.

Flickr photo from user damonabnormal.

I’ll keep it short. Obama.

To me, this primary (and election) is not about education, opportunity, age, gender, or race. It’s not about terrorism, the war, the economy, the environment, or health care. It’s not about blue versus red, godless versus pious, or coastal versus heartland. It’s not about bowling, or coffee, or liquor. It’s not about torture, lies, or corruption. It is not about God, gays, and guns. It’s not about Pastors, lapel pins, or affiliations.

Simply put, I believe that this country is at a crossroads. We are being tested.

All of the institutions created some 230-plus years ago are faltering, have been weakened or gamed out of existence. The civic fabric of our nation is coming apart.

The social contract of citizenship has been undermined as the middle-class has been squeezed financially, while being told that their problems are largely psychological, and that values are most important. We have been told we’re winning the war, the economy is fine, the worst of the economic downturn is behind us, there is no emergent food crisis, inflation is under control, and that unemployment is low. Our military is fine, thank you, you only need listen to the generals, and is not under threat of breaking.

I want to be inspired, not led. I want to vote for optimism and change, not pessimism, triangulation, and the maintenance of an un-viable status quo. I want a candidate not running on the fumes of the past, or who feels their Presidency is a foregone conclusion and birthright. I want a candidate that can be easily removed via primary challenge in four years if need be, not one entrenched by the party system.

I say I’m for Obama, and will also state that I don’t think he bests Hillary in Pennsylvania (I think she wins with a less than 10-point spread). I may be throwing away my vote, but it’s my vote to waste.

At the very bottom of recent stories announcing the need for expanded staffing at the FDIC by 60%, with an emphasis of recruiting S&L Crisis veterans (WSJ, subscription required), was a sentence stating the following:

There are 76 banks on the FDIC’s “problem institutions” list - which would equate to about 10 expected bank failures this year. About six banks fail per year on average, FDIC officials said.

It seems to me that before we begin talking about a homeowner bailout, we need to ascertain who exactly is losing which homes (foreclosure chart pron at the NY Times via the Big Picture) - is it homeowners losing their primary residence, a ‘flipper’ losing a speculative investment, or someone losing an second or vacation home, or a landlord losing a rental property, and targeting relief appropriately.

What goes unsaid in much of the breathless coverage of the housing implosion is that being subprime doesn’t necessarily mean poor-people or deadbeats - I can just as easily be someone who is over-extended in debt-to-income, over-obligated on payment-to-income, or having inadequate lending at closing due to insufficient equity.

Although it seems moral and ethical to keep a hard working family in their home, it seems to create a moral hazard to bail
out investors. Oh, wait. Bail-Stearns threw all that out the window, didn’t they?

photo credit: joelogon

Once again, there is a discussion spanning multiple disciplines that requires attention regarding the importance and relevance of experience.

There has been a trio of stories that have come out that point out the economic problem of rising inflation and stagnant wages and their affect on many American households.

First, we have the decline of US teen drivers from about 50% all the way down to 33%.  Then, in a local story, we have Pennsylvania State Senators worried about a dwindling lottery surplus, casting a suspicious eye at currently-being-implemented casinos.  Lastly, there is the NY Times story about the decline of Americans playing golf.

The reason I illustrate these is that there are all examples of items sensitive to Americans disposable income.

Seems like some of the econoblogs (and non-econ blogs and other sources) that I subscribe to such as Econobrowser, the NYTimes, Paul Krugman, Population Statistic, Jon Taplin, the Wall Street Journal, and the Big Picture are talking stagflation.

stagflation [wiki]: a portmanteau of the words stagnation and inflation, is a term in macroeconomics used to describe a period of high price inflation combined with slow output growth, high unemployment, or recession.

You may recall that both I and Google Trends forecast that trend some time ago. Running the same query again gives a different picture, especially across different countries and cities (for example, Europe is Googling ‘deflation‘ while the US searches for ‘stagflation‘).

Back in the car business, you were only as good as your last sales month. “I don’t care that you sold twenty cars last month, what have you done lately?”

Since automobile sales people are typically motivated by both a percentage of gross profit and unit-driven pay plans, there’s a lot of temptation to ‘rob Peter to pay Paul’.  If the sales person, finance manager, or sales manager can somehow extend a month (example, the month ends of a Friday, but you count sales on that next Saturday as being for the previous month) it could be possible to meet your bonus levels.  Harmless little bit of creative accounting, right?  Well, no.