Wednesday, 18 June 2008

Miscreant Ramblings

So China was barking at Henry Paulson that we have to get our shit together and follow their model for economic management and growth. This to me is a little like a guy who beats his wife giving advice to the guy whose wife has just run away with the tennis pro - "if you'd just kept her in line, you wouldn't be where you are today now would you?" The real reasoning behind China's "advice is twofold; first, without the great American consumer, their little manufacturing engine backs up on itself, and they hold a HUGE number of dollars.

My brother said it best a few months ago - "inflation is our last great 'fuck you' to China and other net dollar holders." If inflation starts to roll, China's dollar holdings get seriously devalued and their tactic of propping up American consumers by holding dollars gets prohibitively expensive. Somewhere shortly thereafter, the wheels come off their wagon pretty badly.

This is not to say that some regulation isn't necessary. The whole off balance sheet bullshit that propped up Enron's charade and is now going on with hedge funds and myriad other stuff needs to be swept away. Executive compensation needs a swift kick in the pants, and all of the increasingly arcane financial instruments starting at credit default swaps and going from there need to be reined in. How exactly this happens and who is trustworthy enough to manage it are problems, as the saying goes, above my pay grade. But if the local S&L was still a prominent feature in the landscape and originating, owning and servicing local mortgages, do you think that we'd be talking about a sever housing meltdown right now? Probably an abundantly simplistic viewpoint, but the guys who are developing all of this financial esoterica in hopes of Solomonic rewards pretty much need to be locked up. It results in a historical concentration of wealth even beyond the robber barons (whom, it could at least be argued, MADE something - roads, railways, shipping lines, materials).

Here is a great article about housing and development. Put simply, America's existing building stock and urban networks are looking like a better and better asset. If I had the wherewithal to do it, you can bet that I would be knee deep into urban redevelopment projects. Not these overwrought pieces of crap where some developer blinded by dollar signs, with a sales agent bleating stupid advice about what the consumer demands, takes a sow's ear and tries to turn it into a silk purse, replete with stainless appliances, granite countertops and 1.5 bathrroms for every bedroom. No, you have to make sense with these things. I always laugh when I see these projects in "transitional neighborhoods" that are absolutely loaded to the gills with luxurioous amenities. How about reasonable stuff that people can afford?

Another article I read yesterday talks about how McMansions in the suburbs and exurbs are likely to serve a quite different demographic than the one for which they were intended. It appears that we're rapidly approaching the tipping point where gas prices will have a systemic effect. Several subcontractors with whom I work drive 150 miles a day in pickup trucks to get to work. That's about $200 a week in gas. Think that's going to last? $800+ a month for the priviledge of wasting half of your life in traffic?

Speaking of traffic, Mrs. Wagon and I drove to NJ for our nephew's birthday this weekend. It was my first away game since the crash. No traffic. Normally, leaving on a Friday evening in the summer (technically late spring) would be a bloodbath. We sailed up the road the whole way there.

I'm psyched for the Tour this year. ASO doesn't get the highest marks for their somewhat shady and duplicitous handling of different things, but I think the racing is going to be great. I hope there are no scandals, and I look forward to watching Valverde, the Schlecks, Cavendish, Cunego, Kirchen, Thor and team Slipstream-Garmin-Chipotle (good week to be in the sponsor market, huh?) battle it out in their various quests.

Go Celts. Jesus Shuttleworth, you certainly do got game.


Kyle Jones said...

Ah thank you for writing Dave. I need something to help get me through the day.

I am glad I live in this area that is a little recession proof. My parents and family are telling me So Cal is taking a beating, since most jobs are out in LA that people from the Inland Areas with their big trucks are hurting with the Almost 5 dollars a gallon. Plus where I am from it was construction that fed construction jobs and now that the economy has somewhat tanked it has hit that area pretty hard with the Mcmansions. At least over here you can move closer to the city and have decent transportation whereas the oil, Tire, and auto industry got rid it back in good ol' So Cal.

Jim said...

David, you must be chuckling over the plan being put forth in Congress to nationalize the energy & power industries. Along with health care, I can't think of a major economic sector that I'd less prefer to have run by the Fed Gov. "Oh, but they mean well" is no real excuse when the central planning commmittee manages to create a shortage of heating oil during the winter.

Seeing how we're in a double bind between market speculators who are getting rich screwing the market like Ned Beatty on a camping trip, and would-be regulators who misunderstand markets so badly as to think you can fix them by stealing them from the owners and giving them to elected & bureaucratic oligarchs, I'm starting to understand how blind, dumb, 'storm the castle and kill 'em all' populist revolts get going. I don't sanction that kind of thing, but I'm starting to understand it. Even the Republicans, who used to be expected to understand the market marginally better than the other guys, are only talking about more drilling. The long term economic solution is a combination of using more of the resources we're sitting on now (lowering marginal prices as quickly as possible), *strongly* encouraging the building of more processing capacity (Oil refineries, Oil shale), conservation (lookin' at you Detroit...), alternative sources (nuke including breeders, geothermal heat pump, where possible solar or wind), and an agressive and at times federally led or strongly encouraged search for transformative technologies - all this while trying to find a reasonable balance in environmental protection. Gearing everything around conservation and stopping global warming, when most of the globe doesn't give a hoot about it, isn't going to do a whole lot. Putting a full court press on in the technological development arena and giving cleanness in power/energy production reasonable (but not overweening) priority may get it done.

Oh yeah, and we could really, truly use viable bike lanes / paths, both from a commuting / conservation standpoint and community re-development standpoint, but hey, that's just my personal fetish. Most people would probably settle for cheaper gas. The size of the U.S. is such that high energy prices could be debilitating, and European notions of clustered, dense urban development probably won't work, since our country is the size of western + central Europe, rather than the size of Pennsylvania or Tennessee, like most European countries are.

Chuck Wagon said...

It's like that Chris Rock bit about O.J. - "I'm not sayin' what he did was right - but I understand."

Yeah, I'm fairly catatonic over this whole thing. The fundamental thing to me is the thinking behind the gas tax holiday (which would have a net benefit, on average, of about $68 for the average household assuming static demand and no unintended consequences). If energy prices go down, demand will go up, simple as that.

We need the balls to tell Detroit that they need to get fleet composite efficiency to 30mpg or they can't sell their cars here. What's the use of supporting an industry that has zippy chance of being a net exporter. We need to eliminate the tax breaks that we give to big oil for exploration and development that they are instead using to repurchase shares. In my world, property tax rates would be punitive to outsized homes. And Chuck Schumer would be shot.

We also need to get our shit together on trade agreements, which are unbelievably punitive to our economic interests. This situation stems largely from our foreign policy - imposing our brilliant ideas on the rest of the world ain't free! This gets into a couple of specific hot potatoes, which I refuse to touch. Someone might send me a letter bomb.

There's an argument that says that speculators increase the liquidity of markets and are a net positive. I don't subscribe to that point of view, but it's there.

Many of the problems stem from the fact that the screwers have a lot more money to pay off the refs than the screwees. See also Chuck Schumer and Private Equity v. America

Ain't life grand?

Jim said...

Ironic that one of the two names on the mortgage company bailout bill is the recipient of sub-market rate mortgages from one of the chief recipients of the taxpayer bailout, no?

Then again, maybe "ironic" isn't the right word to describe that relationship.

jim e said...

Good Read! Nice comments, 'til now? Why is James Earl considered the worst?

Carter's words...

I'm asking you for your good and for your nation's security to take no unnecessary trips, to use carpools or public transportation whenever you can, to park your car one extra day per week, to obey the speed limit, and to set your thermostats to save fuel.

The only reason I can figure is because he did not mention bicycles.