Relevant and even prescient commentary on news, politics and the economy.

Programming Note

Ken Houghton

We’re off for two weeks in a foreign country, and internet access may be limited in the Great State of New Jersey, so—just in case in can’t find a way to pity sadly the University of Chicago’s Business School curriculum (yes, there’s an is-McMegan-is-being-obtuse-or-is-she-stupid post someone has to write; I’ll trust that someone will)—Happy Hanukkah, Xmas, Kwanzaa, New Year’s, and all that.

Back by Twelfth Night. Have fun storming the castle.

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Global Warming Research Datapoint

I’m staring at my car, which survived the past six NJ winters without looking much the worse for wear.

At least compared to today.

Data research question of the Day: Any way to get data on the number of car washes done in the winter in, say, the latitude of the lower Rustbelt over the past thirty years?

I would give odds that the milder winters have driven the number down, even adjusted for income changes, etc.

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The tragedy of the ratings.

Robert Waldmann

Waxes poetic about the lost credibility of the AAA rating. For possible comic value I share my reflections.

What went wrong with the ratings agencies ?

I think the central problem is that the ratings agencies long provided a service of immense value to society, and were paid a tiny fraction of that value to do so. The loss of credibility of the ratings is one of the causes of a terrible recession. This loss is more likely to cost the world trillions in lost output than mere hundreds of billions. Sure seems that the credibility of the ratings agencies was worth, at least, hundreds of billions to the world economy. That dwarfs the market capitalization of the ratings agencies.

We lost that because we collectively decided to take it from them rather than paying them what their credible ratings were worth. For decades they provided messages of one to three letters which were collectively worth hundreds of billions per year. They were paid their costs plus a normal profit margin, just as if it wasn’t a miracle that so much value could be created with so little effort.

Their credibility was immensely valuable but not to them.

Then they were tempted by innovative financial instruments and also got tired of getting only a tiny fraction of the social value of their services. So they sold their credibility for a few billions. The problem is credibility gets damaged in the deal. The credibility they sold was worth tens of billions to the financial innovators who bought it. They converted it into cash, but they have paid themselves much of that in bonuses and blown the rest buying into their own spin. Now it’s gone. If I knew what it came from in the the first place, I would have an idea as to how to recreate it, but I never figured that out.

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FYI – labor contracts by auto company

by reader Movie Guy

It might be helpful to read the 2007 contracts negotiated between the UAW and GM, Ford, Chrysler. Recommend reading the highlights if not the contracts. Might improve the discussions on this matter.

GM-UAW Labor Contract – 2007

UAW presentation UAW-GM 2007 Contract

GM presentation UAW-GM 2007 Contract

Ford-UAW Labor Contract – 2007

UAW presentation UAW-Ford 2007 Contract (hourly)

UAW presentation UAW-Ford 2007 Contract (salaried)

Ford presentation UAW-Ford 2007 Contract

Chrysler-UAW Labor Contract 2007

UAW presentation UAW-Chrysler 2007 Contract (hourly)

UAW presentation UAW-Chrysler 2007 Contract (salaried)

Chrysler presentation UAW-Chrysler 2007 Contract

2007 UAW Contracts – Text, Highlights and “Lowlights”

2007 UAW Contracts with GM, Ford, and Chrysler Copies provided by UAW Local 1166

Update: Links re-formatted

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Swapping currencies


RGE Monitor notes this aspect of currency trading. (May require subscription for the full article)

Dec 12: South Korea and Japan have agreed to increase an existing unconditional KRW-JPY swap arrangement to $20bn from $3b effective until April 2009. This supplements a $10b agreement that can be used in times of crisis.China and South Korea agreed to a new bilateral KRW-CNY swap agreement worth USD28b for three years. The swap agreements give South Korea access to an additional USD35bn equivalent of foreign currencies (adding to the $30bn swap agreement with the Fed earlier) a major source of strength for KRW. They reflect closer co-ordination of economic and exchange rate policies within Asia particularly as Japan and China want to increasingly anchoring other weaker Asian currencies to JPY and CNY (Danske)

Other trades occur as well.

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We have become so efficient that we now have an enormous trade deficit.


(part of e-mail communications lifted for the idea)

“Although the share of manufacturing employment has steadily fallen over time, the share of manufacturing output (to total output) has been remarkably stable over the same period. Labor productivity growth in manufacturing over this period can explain the falling employment share and the constant output share.”

This is the stock response. “Can” explain or “does” explain? No weasel words here, please.

We have become so efficient that we now have an enormous trade deficit?


Rdan here: The argument rages here and elsewhere whether our output benefits people or the economy, based on the argument itself, not the real economy or paper economy.

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Death by shoe

Shoe-Hurling Iraqi Becomes a Folk Hero –

Sweg said it sooner than me:

It is clear that this is an episode of non-violent civil disobedience even if a certain element would prefer to paint it in a more menacing light. I am unaware of any reported deaths by shoe.

But there does seem to be a certain fundamental lack of understanding of the mechanics of civil disobedience. Such acts are courageous precisely because they anticipate consequences. The person engaging in these tactics has decided that breaking a minor rule of civility and paying the price is worth the higher cause of bringing attention to a particular injustice. A key ingredient in this effort is a willingness to pay the price. This is what makes it an act of courage.

Update: “First they ignore you, then they ridicule you, then they fight you, then you win.” — Mahatma Gandhi

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