Friday, January 30, 2009

"Stimulus": economists from across the political spectrum DO NOT agree on the need for massive spending [update 5]

New President Obama says that "economists from across the political spectrum agree" on the need for massive government spending to stimulate the economy. In fact, many economists don't agree. They don't agree at all.

In fact, Mr President, hundreds of them, including Nobel laureates and other prominent scholars, have signed a statement that the Cato Institute placed in major newspapers across the United States confirming that they don't agree.

Click the pic to read a PDF of the whole document. You won't believe some the names, most of them over and above those Greg Mankiw has documented on his blog in recent weeks, such as (in alphabetical order) Alberto Alesina, Robert Barro, Gary Becker, John Cochrane, Eugene Fama, Robert Lucas, Greg Mankiw, Kevin Murphy, Thomas Sargent, Harald Uhlig, and Luigi Zingalesl, [hat tip Anti Dismal], and in addition too to the fine people at both the Mises Institute and the Ayn Rand Institute.

They don't agree at all that your "recovery" plan will "jumpstart" the economy. In fact, most of them think the "jumpstart" is the very last thing that is needed.

So to say that "economists from across the political spectrum agree" on the need for massive government spending to stimulate the economy would suggest you're either aware of the dissent but lying about the agreement, or unaware of the dissent -- which is to say, ignorant of the cogent arguments against the foolishness of you profligacy.

In fact, not even the textbooks support the antediluvian idea of such a response. As Ike Brannon and Chris Edwards point out[pdf], macroeconomics has long consigned such foolish Keynesianism to the dustbin of history:

It is difficult to find a macroeconomics textbook these days that discusses Keynesian fiscal stimulus as a policy tool without serious flaws, which is why the current $800 billion proposal has taken many macroeconomists by surprise.6 John Cochrane of the University of Chicago recently noted that the idea of fiscal stimulus is “taught only for its fallacies” in university courses these days.7 Thomas Sargent of New York University noted that “the calculations that I have seen supporting the stimulus package are back-of-the-envelope ones that ignore what we have learned in the last 60 years of macroeconomic research."
In other words, this $850 billion of spending won't work, can't work, and will do nothing except drag out the time it takes for a real recovery to happen. The one thing economists without a political axe to grind do agree on is that "We Can't Spend Our Way out of This Quagmire" - as Lawrence White and David Rose point out, that's precisely what got us in this problem in the first place.
Current attempts to solve our crisis by increasing spending is exactly the wrong thing to do. No one wants to bear the political cost for appearing to be uncaring by favoring a policy of "doing nothing." Out of political cowardice, the federal government is attempting to produce a solution that is penny-wise and pound foolish. You can't solve an excessive spending problem by spending more. We are making the crisis worse.
We have been down this road before. Most recessions start with the bursting of bubbles that grew large because of excessive money growth. But again and again, we presume a Keynesian cause and a Keynesian cure.
Our recent stock market and housing market crashes can prove to be the start of a sound and rapid recovery — if we will have the courage to let it be so.

UPDATE 1: Here's more beautifully cutting commentary from two masters at the game:

UPDATE 2: Thomas Jefferson vs. Obama:
"The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."

UPDATE 3: Link from pic is fixed.

UPDATE 4:  The entertaining Fred Thompson on the Spend-Your-Way-To-Prosperity-Plan [hat tip Foundation for Economic Growth

UPDATE 5:  "Arm yourself against the growing Keynesian counter-revolution," says the Hayek Center.  "The time is now for executives and college students and small business owners and journalists and the general public to intellectually arm up — and participate in the beating back of the Cargo Cult science of the new Keynesians."  And in this post the Center provides a mountain of intellectual ammo.  What are you waiting for?

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Quote(s) of the day, on the minimum wage

While the Key Government considers their reaction to this year’s “minimum wage review,” due Monday – and people say that the days of price-fixing are dead! -- so-called economists are all a-twitter about what they might do, Nobel Laureate James Buchanan has some thoughts about most of that advice:

“Anyone who says minimum wage laws decrease unemployment disavows the law of demand and is therefore unqualified to speak as an economist.”

True enough. Are you listening Helen Kelly?  Are you listening Matt McCarten?  Increasing the minimum wage in the teeth of a coming depression doesn’t “help boost spending” –- except, in the short run, to union reps -- it simply raises costs at a time producers can least afford them, and to the extent the “price floor” pushes wages above  the market rates for particular jobs, it ensures those  jobs will soon be gone, to the detriment of employees and employers, and what was once productive spending. 

Prices don’t need to be fixed – and at the present time they urgently need to fall.  One man’s price is another man’s costs.  As the likes of Pigou and Haberler and Patinkin argue, “falling wages and prices would increase the real value of money holdings, and the spending out of those real cash balances would restore the economy to full employment.”  But only if the politicians and the union reps get out of the way first.

I liked Roger Garrison’s answers to so-called “armchair economist” Stephen Landsburg a few years back. 

Landsburgh writes concerning an increase in the minimum wage: "Sure, you've lost your job. But don't forget, this was a minimum-wage job in the first place."
Garrison replies: “Your being retained or released may be a marginal matter to the employer, but it may be an all-or-nothing matter to you.”
Landsburgh again: "In fact, the power of the minimum wage to kill jobs has been greatly overestimated. Nowadays, most labor economists will tell you that that minimum wages have at most a tiny impact on employment."
Garrison, in response: “It may have a small impact on total employment, but only because primarily minimum wage legislation redistributes employment--from the (would-be) working poor to the entry-level worker in a middle-income household and from the unskilled to the skilled. Ditch diggers lose their jobs. Trenchers with union operators get more jobs. The "tiny" effect is the net effect. But, of course, to focus [only] on this net effect is to miss the perversity of the legislation.”

Final point again, from Garrison: “Measured unemployment captures so-called "frictional unemployment" and not much else. To be counted as unemployed, you have to be actively looking for a job. People who are excluded from the labor force by the minimum wage do not continue to look. They may be unskilled, but they're not stupid.”

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'House for an Art Lover' - Charles Rennie Mackintosh



Mackintosh's 'House for an Art Lover' was designed in 1901, but not completed until one-hundred years later. Therein, naturally, lies a story.  And now, we see the mark of his genius on work still superior to most produced today.  

Glasgow has never looked so sunlit, or so alive.



Pictures are from the Armin Grew Homepage.  Check out the house's homepage for more details.

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Thursday, January 29, 2009

Warmist-in-Chief “an embarrassment” says Boss

The man who kicked off the global warming charade was NASA’s James Hansen.*  Hansen is global warming’s prime mover, Warmist Number One –- a  chap who told the US Senate that oil company executives need to be locked up for "crimes to humanity"-- the man who  likened the construction of a new coal-based power plant as equivalent to the holocaust -- who said that trains bringing coal to a new power plants are like the "death trains" moving Jews to extermination camps.  A chap who never ever lets truth get in the way of his good story.  Without Hansen to kick things off, Al Gore would still be just another man who used to be the next President of the US.

Today James Hansen’s former boss says Hansen is a bust.  “His former supervisor at NASA, Dr. John S. Theon, now publicly disagrees with Hansen's work. In … correspondence … from earlier this month, Theon dismisses the validity of Hansen's work, charges that some scientists manipulated climate change data,” and formally joins the ranks of the skeptics.  He says Hansen "embarrassed NASA" with his alarming climate claims & "never muzzled even though he violated NASA's official agency position on climate forecasting (i.e., we did not know enough to forecast climate change or mankind's effect on it)."

Details here:  James Hansen’s Former NASA Supervisor Declares Himself a Skeptic. [Hat tip Leighton Smith]

UPDATE:  Note that Hansen’s former colleague Joanne Simpson, the author of over 190 studies and who has been called “among the most preeminent scientists of the last 100 years”, has now left NASA’s employ, and now, like Theon, she finally feels free to speak out [hat tip Climate Debate Daily].

“Since I am no longer affiliated with any organization nor receiving any funding, I can speak quite frankly….As a scientist I remain skeptical...The main basis of the claim that man’s release of greenhouse gases is the cause of the warming is based almost entirely upon climate models. We all know the frailty of models concerning the air-surface system.”

Why did she have to wait until she left to speak the truth?  One wonders how many other scientists really are being muzzled.  Says Tim Ball, who’s received more than his own share of career-threatening attacks,

“Undoubtedly, there are positions and times when people are muzzled; national security is a good example. I sympathize with young people starting out on careers. I understand the pressure of maintaining a family and paying mortgages. But none of this should apply to science. It’s a measure of the degree to which climate change has become political. It’s also a measure of the degree of bullying that has occurred. Why would a scientist in an organization directly involved in climate science not feel free to speak out?”

Good question, don’t you think?  Simpson didn’t feel free to tell the truth, but her colleague, Hansen, had no problem speaking out with sexed-up lies.
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* When Hansen first sounded the alarm in Congress 20 years ago, says Steven Milloy at Junk Science, "he predicted that rising concentrations of atmospheric carbon dioxide, or CO2, would drive global temperatures higher by 0.34 degrees Celsius during the 1990s. But surface temperatures increased during that decade by only 0.11 degrees Celsius and lower atmosphere temperatures actually decreased. "  And that was the high point of his science.

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NOT PJ: “Will you be my friend?”

BernardDarnton Bernard Darnton goes looking for friends and finds a plate of deep fried stuffed mushrooms and a spicy Szechuan fish. . .

I spent Saturday night with my face gently illuminated by the liquid crystal glow of a Facebook page, amazed at how much the website had improved my social life. “Look at how many friends I've got,” I said to myself in the semi-darkness.

Mrs Darnton claims to be baffled that I've got twice as many friends as she does, seeing as she's “way cooler” than I am. (The quote marks are because this claim is obviously bollocks.)

I've now got so many friends that the little thingy down the side of the page that suggests new friends doesn't work. It used to suggest people I know. Now it suggests friends of friends that I've never met. Would I like to be friends with Paula Bennett? I dunno. She'd be good in a scrap I guess.

I don't know Paula. I try and avoid shopping malls and scrapping teenage girls and I've only ever seen Waitakere from an aeroplane window. Facebook must have matched us up because I know a few people involved in the National Party – primarily from Electoral Finance Act days. Just a reminder to them: We were promised a repeal in February, which starts in three days, so get busy.

This somewhat tenuous link is still better than the reasons Facebook comes up with for some of its suggestions. “You both went to Otago.” Along with twenty thousand other people each year. “You both live in Wellington.” First, so do half a million other people and, second, don't keep reminding me.

Clipboard01There are still people out there without Facebook pages. I was having dinner with some old friends from the Dunedin days recently and one of them admitted to not having a Facebook page, saying that it's not something people over forty did. Even the restaurant we were in had its own Facebook page and it's been around forever.

My over-forty friend probably thinks that social networks are a complete waste of time. And he's almost certainly right. Any employer would much rather you were doing some boring crap with a spreadsheet that chattering away on the fan page of a Chinese restaurant you used to go to as a student.

If you do get fired for wasting time on the Internet you're doubly screwed because prospective employers can look you up and see the photos your alleged friends have tagged you in. All that time fiddling with the fonts in your CV is worth nothing if the person reading it has seen the pictures of you cross-dressed up in a hula skirt and coconut bra getting touched up by a pissed bloke disguised as a nun.

Career-building it may not be. Social life-enhancing it would be hard to make the case for. But as entertainment it's more compelling than anything on TV. I'm not remotely interested in watching the most cataclysmic episode ever of America's Next Biggest Pop Tart -- but once somebody promises to reveal the true identity of the implausibly translated menu item number 58 at The Asian, then I'm hooked.

* * Read Bernard Darnton’s NOT PJ column every week here at NOT PC * *

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Unsound banks, unsound money -- a very unsound idea

Banks are in the money business.  It’s not just the Reserve Bank who prints money: government banking laws allow them to “print” money electronically -– in the words of Charles Holt Carroll, “organising debt into currency,” on the back of reserves they don’t actually have.

Banks create this currency electronically, backed only by lender’s promises to pay, at a ratio of up to twenty, forty, even fifty times the actual reserves that are held by the bank.  Among bankers and professional economists, this is called “fractional reserve banking.” It is a system that allows the bankers to grow very rich very quickly, and the economists to inflate the economy beyond what is sustainable.  From boom to bust at the behest of those who’ve been allowed to pretend they can create something out of nothing.

You can see the problem with banks lending out much, much more than they actually have. In fact, you’ve seen one primary problem in the news for most of the last year. 

Which is this: What happens if every depositor wants their money out all at once.  If you want to know whether your friendly local bank is "sound," then just ask yourself what happens when queues of depositors start forming outside, for whatever reason, insisting they be given their money back. What happens isn’t difficult to predict, especially since you’ve seen it happen with increasing frequency.  Once you identify that modern banks are inherently bankrupt, and it is on the back of this inherent bankruptcy that our money supply system is based, then you realise that the whole system is as far from sound as it’s possible to be – and it’s no wonder that modern economies are racked by such violent booms and busts.

And you can see the problem too with a huge component of the money supply being backed only be debt that’s been organised into currency – and in fact, you’ve seen that in the news for most of the last year as well.

Which is this: when the value of loans drop, as they have precipitously over the last year, then so too does the amount of “currency” in the system.  So too does the amount of “credit” available in the system. So when the value of existing loans takes a big dive, so too does the money supply.

Which means this system of supplying money is as far from sound money as it’s possible to be. 

And you can assess how far from sound it is -– and how big a dive the money supply and the credit available for the loan markets has taken -– from the picture below showing the market caps of some of the world’s biggest banks, and how big a dive they’ve taken over the last year. 

It’s not just a big dive, it’s a swallow dive off a cliff. 

If you want to get a visual idea of how big the world’s economic problem is, then here it is right here, courtesy of the Financial Times (click to enlarge):

4214

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Today’s price-fixing by the central bank [update 4]

Over the last few days, every bullfrog and his legrope has been debating the interest rate that Alan Bollard should announce this morning.

At nine o'clock this morning Alan Bollard, government appointee, will stare into the cameras and tell you what he’s decided interest rates should be in this economy for the next quarter, and all everyone wants to talk about is is he going to make history?  Will he fix ‘em at their lowest rate ever?

Doesn't the whole situation strike you as odd?

Everyone's been debating what the government's flunkie is going to do.  Better they'd been debating why we stand for a government flunkie to be setting the most important price in the economy: the price of loanable funds.

Better they'd been debating whether an economy in which the most important price is fixed by a bureaucrat can truly be called a free market.

Better they begin to realise that it was price-fixing of precisely this sort by the world's central bankers that was the primary cause of the whole bloody financial crisis.

Try debating that, while you work out what you're going to with your savings now there's no longer any interest to be earned on them.

UPDATE 1: NEWSFLASH, 9am: The “saviour” of the New Zealand economy licked his finger, stuck it in the wind, and decided to slash the economy’s interest rate by 1.5 percentage points.  Which means the basic nominal interest rate a negative real interest rate. 
    Expect would-be savers, especially those who rely on interest income, to be very concerned about their future.  Expect the pool of real savings to diminish.  Expect the essential liquidation of shaky positions to be postponed, and the malinvestments they represent to continue on consuming real capital, like zombies sucking up the resources needed for recovery. 
    Understand that it is these liquidations and this pool of real savings that are both needed for recovery to happen.  And ask yourself what this latest bout of price fixing will do to assist, or postpone, that recovery. . .

ocrjan09UPDATE 2:  Did someone say “sound money”?  How about we start debating that, especially since it’s so clearly and desperately needed?

UPDATE 3:  Pictured at right is the record of the Reserve Bank’s price-fixing over the last decade, including the latest precipitous fall (pic pinched from Kiwiblog):

UPDATE 4 (11am):  Hmmm, wonder what this does to the NZ dollar?
                               nzdusd_1_hourly
Wow.  Who would have thunk it.  Real money is leaving the country, to be made up (no doubt) by the stuff that comes out of the Reserve Bank’s basement.

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Monaco in Riva al Mare - Caspar David Friedrich (1810)

Wednesday, January 28, 2009

Save the earth: Exploit a greenie

From the chaps who brought you Stuff White People Like comes Stuff Environmentalists Like, “the beginner's guide to befriending and exploiting green people,” in five parts.  See Part one, Part two, Part three, Part four, Part five.   [Hat tip Lance.]

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On Stimularithmetic, and Team Obama's 'Old Left' Stimulunacy

It's not just Robert Barro who's questioning the proposed economic effect of Team Obama's "stimulus" package, which promises to shower Americans with new doles, new bridges to nowhere, "green jobs," "renewable energy" projects, and failing car companies producing even shittier cars that even fewer people will want (and remember the working definition of "renewable energy.")

Team Obama, remember, reckons their "stimulus" package will have a "multiplier effect" on the US economy of 1.5; Barro reckons they've got their sums wrong. ("A much more plausible starting point is a multiplier of zero. In this case, the GDP is given, and a rise in government purchases requires an equal fall in the total of other parts of GDP -- consumption, investment and net exports. In other words, the social cost of one unit of additional government purchases is one.")

And, naturally, other economists are joining the fray, and Arnold Kling has summarised the differences between two proponents on either side of the debate, one who predicts that with every $100 of government spending we'll see $87 worth of benefits, and another who predicts we'll lose $80 (see Paul Walker's summary here), suggesting nothing so much, perhaps, as that there is nothing so pointless as expecting results from economists doing algrebra.

Fact is, a pump primed is a recovery delayed.

So it's more instructive not just to notice that there are Republicans who are now growing spines that were nowhere in evidence over the last eight years -- and certainly not over the last eight months while their own bosses set about nationalising the banking industry -- but to appreciate the analysis of those like Robert Tracinski who leave their algebra in their brief case, and engage instead in pure logic.

Obama, says Tracinski bluntly, has no idea what he's doing.
Obama begins his administration by declaring that he will run the government
while rejecting any overarching ideas and principles regarding the proper role
and scope of government action. He starts by telling us, in effect, that he has
no idea what he is doing.
As we've noted here before. And wasn't there another US president of similar mien? Oh yes, there was:
Decades ago, we had another president who came into power during an economic
crisis, who also had no idea what he was doing and engaged instead in "bold,
persistent experimentation"--with his only absolute being that he would not let
the free market work. That was FDR. The result? The economic crisis lasted
another decade and actually deepened under his leadership. If Obama's speech is
what a cipher sounds like, the Great Depression is the kind of result that is
produced when an ambitious cipher attempts to offer vigorous leadership.
The "stimulus" package is just further evidence that Obama really doesn't know what he's doing any more than Roosevelt ever did, and that the results of what he does try to do will be as destructive as his most natural historical predecessor. Evidence too that it's when politicians are most ignorant of what the hell they're doing that they reach most vigorously for the interventionist levers -- since to them that most represents "vigorous leadership."

As Tracinski points out in his TIA Daily newsletter, it's entirely logical then that Team Obama's first moves represents a systematic "leftist onslaught" against automobiles, power plants, banks, trade, guns, and the war on terrorism, since his reign offers nothing so much as the chance for the resurgence of the Old Left. Thus:
He is pushing for global warming regulations and for heavy new regulatory restriction on the financial industry—and he is now considering outright nationalization of the banks. He's threatening to reverse the trend toward free international trade, openly inviting Congress to impose new gun bans, and removing the US government from a war footing in its fight against terrorism.
He's also doing a few things to reverse the agenda of the religious right—but on a small scale compared to his assault on the values held dear by those of us on the secular right: free markets and vigorous national defense.
Let's take the main points of this onslaught in turn:
Let's start with environmentalism. Despite speculation that the new president would shelve global warming regulations because of the economic crisis, he has put up on his new White House website a promise to "implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80 percent by 2050."
Since "renewable energy" will not be able to replace fossil fuels [remember the definition], that means roughly an 80% reduction in our energy use over the next four decades, which in turns means roughly an 80% reduction in our standard of living. It is a plan to make economic depression a permanent fact of life.
Consistent with this is his attack on automobiles, "ordering the EPA to allow California and a cabal of other states to impose new fuel-efficiency regulations on automakers, in the name of stopping global warming. The irony, of course, is that this is another devastating blow to the very same Detroit automakers that the Obama Administration has insisted on bailing out." (Be still: This won't be the only irony of this Administration.)

It continues. As Tracinski points out, Team Obama is consistent: they're against both the internal combustion engine and coal-fired power plants -- the two power sources of America's industrial power -- firing the first shot in this battle against coal and real energy in its sponsoring of the EPA's spiking of the 580 MWe Big Stone II coal power plant in South Dakota. (See here and here and here.)

And meanwhile, in the midst of financial disaster, he's looking to throttle the banking industry, and showing signs he wants to complete the nationalisation of banks begun under his immediate predecessor, back when Republican spines had atrophied from under-use.

And he's already fired the first shots against trade -- something every New Zealander needs to be concerned about. Says Tracinski:
The resurgence of the Old Left brings the revival of bad ideas by the dozen. So not only do we get a resurrection of nationalization and central planning; we also get a resurrection of protectionism.
Thus, President Obama's incoming Treasury secretary has indicated the new administration's willingness to start a trade war with China. That's just what we need to complete the current replay of the Great Depression: a new Smoot-Hawley tariff to shut down global trade.
This is what the resurgence of the left means: an attempt to make us forget all of the lessons that we learned, at great cost, during the economic disasters and cataclysmic wars of the 20th century.
And on top of all this, he's moved against the Supreme Court's 2008 decision recognizing a constitutional right to own guns (despite his campaign statement approving of the ruling and pledging his loyalty to the Second Amendment), and with the closing down of the terrorist prisoner-of-war camp at Guantanamo Bay and the appointment of appeaser George Mitchell as Middle Eastern envoy, indicating that the US War Against Terrorists is effectively over.

So, yes, the Obamessiah is moving fast, but not quite so benevolently as some commentators might have been hoping for.

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Was Peter Schiff wrong?

Mike "Mish" Shedlock thinks all of you excited by Peter Schiff's outstanding criticisms of the Fed, his explanations of how the US Government wrecked their economy, and his predictions-in-advance of the coming crash should remember that he hasn't, and isn't, getting eveything right.
Schiff's overall thesis has four legs, reminds Mish, only the first of which has so far come to pass:
  1. US Equity Markets Will Crash.
  2. US Dollar Will Go To Zero (Hyperinflation).
  3. Decoupling (The rest of the world would be immune to a US slowdown.
  4. Buy foreign equities and commodities and hold them with no exit strategy.
It's worth reading his criticism, since it looks in some detail at the issues of decoupling, and specifically of what might be happening in China. [Read it here: Peter Schiff Was Wrong].
Robert Murphy, who amusingly calls this The Mish-Schiff Tiff, points to two dissenting opinions, from the Economic Policy Journal and Tim Swanson, who have rushed to Schiff's defence.
If these are issues that concern you, then it might be worth following the debate as it develops.

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All things dull and ugly …

In the year that marks two centuries since Darwin’s birth, well-known BBC nature presenter David Attenborough is receiving hate mail from religionists [hat tip LM]. "They tell me to burn in Hell and good riddance", he says.

Nice people these Christians. The hatred apparently comes his way for “not crediting God in his nature programmes.”

    Speaking in the Radio Times, Sir David said that he was also asked why he did not give "credit" to the Lord, Sir David continued: "They always mean beautiful things like hummingbirds.
    "I always reply by saying that I think of a little child in East Africa with a worm burrowing through his eyeball.  The worm cannot live in any other way, except by burrowing through eyeballs. I find that hard to reconcile with the notion of a divine and benevolent creator."

Rather reminds me of a point made in this Monty Python song…

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3/64 Hapua St, Remuera – Claude Megson

This small Megson townhouse is on the market - one that came on the market a year or so back, and was bought and 'renovated' unsympathetically, fortunately only on a small scale, by a graduate architect who had no idea what she was working with.

By craftily making the most of view shafts and ‘shared spaces,’ Megson made this small, contained location feel like a large estate.

Now that it’s back on the market, a sympathetic buyer would be able to easily rehabilitate it. Sale details are here. Agent's blurb reads:

Remuera - Writers, Artists, Architects.
3/64 Hapua St

Open Homes: Sat 31 Jan 12:00 pm - 12:30 pm Sun 01 Feb 12:00 pm - 12:30 pm
Auction at L4, 50 Kitchener St, City on 25/02/2009 at 11:00am Unless sold prior
Architect Claude Megson created this sublime artistic retreat in the 1960s. Fitting like a glove into the Remuera hillside just below Arney Crescent, it's within easy walking distance of Parnell & Newmarket. Despite a compact floorplan, you'll be amazed how light & airy it feels. You'll discover several private spots perfect for reading & relaxing. Although every house-hunting single or couple should see this, the next owner is more likely to be someone who appreciates the architectural significance of a Megson.
  Cross-posted at The Claude Megson Blog.

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Tuesday, January 27, 2009

Barack blogs! [update 3: The stimulus edition]

President Franklin Roosevelt used his “fireside chats” to sell his perfidy to the American public.  President Obama is using a new blog – and according to reports “the blogosphere is abuzz” about it.  Do the powers of the Obamessiah never end?  He heals the sick; he heals the planet; he stops the waters rising; he meets the media … and now in his spare time, he blogs! Phew.  Even his namesake rested on the seventh day.

But if you think that’s Barack on the blog and not just a panoply of press releases, then you probably also think he’s going to “lead” the US out of recession – in which case, I have a stimulus package right here that I see you’re already buying.

UPDATE 1:  Speaking of stimulus packages, it seems Obama's economic advisers have been reading The Onion, which has several "ideas" for stimulus packages to reignite the US's bubble economy...

"What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future," said Thomas Jenkins, CFO of the Boston-area Jenkins Financial Group, a bubble-based investment firm. "We are in a crisis, and that crisis demands an unviable short-term solution."
    ...According to investment experts, now that the option of making millions of dollars in a short time with imaginary profits from bad real-estate deals has disappeared, the need for another spontaneous make-believe source of wealth has never been more urgent.
    "Perhaps the new bubble could have something to do with watching movies on cell phones," said investment banker Greg Carlisle of the New York firm Carlisle, Shaloe & Graves. "Or, say, medicine, or shipping. Or clouds. The manner of bubble isn't important—just as long as it creates a hugely overvalued market based on nothing more than whimsical fantasy and saddled with the potential for a long-term accrual of debts that will never be paid back, thereby unleashing a ripple effect that will take nearly a decade to correct."
    ... "The U.S. economy cannot survive on sound investments alone," Carlisle added.

Have the advisers been reading The Onion, or has The Onion just been reading Keynes?

UPDATE 2: Robert Barro and Robert Lucas might come from the same school of economics, but it looks at present like they're firing at different targets, and getting shot for it -- one deservedly, one not so.

Robert Murphy gives Lucas a well-earned going over for his strange faith in Ben Bernanke -- specifically Bernanke's flawed notion that too much paper isn't enough.

Meanwhile, Tyler Cowen takes on those who are dumping on Robert Barro for pointing out that any expectation of a positive multiple from government stimulus packages is wholly mistaken, and points out in passing that uber-Keynesian Paul Krugman appears to have finally admitted that WWII is not a good example of the success of Keynesian deficit spending.

UPDATE 3: In recent weeks Greg Mankiw [hat tip Anti Dismal] has documented many  skeptics about the efficacy of a spending stimulus,
a list that includes quite a few well-known economists, such as (in alphabetical order)Alberto AlesinaRobert BarroGary BeckerJohn Cochrane,Eugene FamaRobert LucasGreg MankiwKevin MurphyThomas SargentHarald Uhlig, and Luigi Zingales--and I am sure there many others as well. [Follow the links to see Mankiw's evidence.]
    Regardless of whether one agrees with them on the merits of the case, it is hard to dispute that this list is pretty impressive, as judged by the 
standard objective criteria by which economists evaluate one another. If any university managed to hire all of them, it would immediately have a top ranked economics department.

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Essay entrant

Callum McPetrie submits his entry to this year’s Kennard Freedom Prize for young Australasians.  His subject: “What responsibility, if any, do governments have for the liberty, prosperity and security of individuals?" .

His answers to the substantive questions: everything, nothing and nothing respectively.

Reads like a winner to me.

Good to see organisations recognising the value of essay competitions in spreading ideas.

NB:  On a related note, the Ayn Rand Institute has announced its winners in the 11th annual essay competition on Atlas Shrugged (read the winning essay here), The Fountainhead (read the winning essay here) and Anthem (read the winning essay here).  521 prizes totalling US$81,000 has been awarded.

And local students might want to begin thinking about this for this year:  some colleagues will be offering prizes this year to NZ students for essays on either Atlas or The Fountainhead.  As soon as details are clarified, you’ll read them here first…

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Several inches of global warming in the deserts … none in the Antarctic [updated]

Here’s one for Al Gore:   several inches of global warming have fallen in the deserts of the United Arab Emirates, just 25 kilometers from Ras al Khaimah City, one of the emirates in the UAE.

    The extreme cold spell brought the temperature on top of the Jebel Jais mountain cluster, situated at a height of 5,700 feet, to as low as -3 degree Celsius on Friday night, as the snow blanketed an area extending over 5kms.
    Major Saeed Rashid Al Yamahi, Manager of the Air Wing of RAK Police, who flew a helicopter to the top of the Jebel Jais mountain, said that the entire area was covered with 10 cm of snow…
    Aisha al Hebsy, a woman in her 50s who has lived in the mountains near Jebel Jais all her life, said snowfall in the area was so unheard of the local dialect does not even have a word for it. Hail is known as bared, which literally translates as cold. "Twenty years ago we had lots of hail," said Ms al Hebsy. "Last night was like this. At four in the morning we came out and the ground was white."

The first snowfall in living memory in the area was on December 28, 2004…. 

Naturally, the news has travelled widely.  This is another slap in the chops for global warming doomsayers, says The Australian.

UPDATE:  Yes, global warming doomsayers will say one shouldn’t rely on single events such as this to argue against their claims – despite the fact that single events are what constitute effective falsification, and that the doomsayers themselves are more than happy to use single events (even ones they’ve made up) to bolster their doomsaying.

Doomsayers have been happy, for example, to post pictures of calving ice shelves off Antarctica to bolster their flagging mantra that we’re all about to die – using the news of the warming Antarctic peninsula to frighten people into thinking the whole continent is beginning to melt, and all that ice is going to drown us.  “A recent study” by one Eric Steig had the whole litany of doomsayers cock-a-hoop.  “Antarctica getting warmer not cooler” said the ABC. “Scientists solve enigma of Antarctic 'cooling',” said The Guardian.  “Global warming hits Antarctica, study finds,” said CNN.

Puncturing their bubble however is the methodology of the new “study.”  As Christopher Booker expains in The Daily Telegraph, the Antarctic is not warming up. Steig has not been recording existing temperature measurements – instead he’s written a computer models to give him the temperature measurements he wants, and the world’s media have been only too happy to go along with the ruse.

Yet even the IPCC is askance at the perfidy.

One of the first to express astonishment was Dr Kevin Trenberth, a senior scientist with the UN's Intergovernmental Panel on Climate Change (IPCC) and a convinced believer in global warming, who wryly observed "it is hard to make data where none exists". A disbelieving Ross Hayes, an atmospheric scientist who has often visited the Antarctic for Nasa, sent Professor Steig a caustic email ending: "with statistics you can make numbers go to any conclusion you want. It saddens me to see members of the scientific community do this for media coverage."

Yes.  Me too.

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Planners still stitching up home-owners: NZ cities world’s second-most unaffordable [updated]

Despite the recession, houses in New Zealand cities are as unaffordable as they’ve ever been – that’s the conclusion of the fifth annual survey [pdf] by international organisation Demographia, who’ve found that the average price of houses in NZ’s eight major cities are still more than 5.7 times the average household income in that city.

In the parlance of the study, this makes the New Zealand housing market seriously unaffordable – just as it has been for the last decade. The survey of English-speaking countries finds that UK, Ireland, Australia and New Zealand have no affordable major urban markets, while Canada has 10 (of 34) and the United States 77 (of 175). There are no moderately unaffordable urban markets (at and below 4 times household income) in Australia, New Zealand, Ireland and the United Kingdom.  Reports NBR:

    The 2009 Demographia study of international housing affordability found Australia has the most unaffordable housing at 6.3 times annual household earnings.
    New Zealand was second on 5.7. Ireland registered 5.4, the United Kingdom 5.3, Canada 3.5 and US 3.2.
    None of the eight urban markets in New Zealand covered by the survey are considered to be affordable. Seven were severely unaffordable and Palmerston North was considered seriously unaffordable.
    A figure above five is regarded as severely unaffordable.
    Auckland is the least affordable larger market, with a median multiple of 6.4, while Christchurch (6.1) and Wellington (5.9) are also severely unaffordable.
    Tauranga-Bay of Plenty was the least affordable market, with a median multiple of 6.6. Out of the eight New Zealand markets only Palmerston North is not severely unaffordable on 4.9.

Just to clarify what this degree of unaffordability means, this is unprecedented both historically and geographically – so simply saying that young couples need to hunker down and save like their grand-parents did is not even the beginning of the whole story.   Outside the current period, at no other time in NZ’s history has this price-income multiplier been so high.  And outside New Zealand, only Australia has a higher price-income multiplier.

The reasons for contemporary NZ cities being so seriously unaffordable compared to other cities (and to other times in NZ’s history) can be deduced, if you’re smart enough, from the policies of those cities at the upper end of the Demographia survey. 

The reason for some cities being more unafforable than others is not just the excessive demand created by loose credit in recent years, since that loose credit operated across all markets; it’s not just the increased cost of construction in recent years (although that hasn’t helped the level unaffordability), since (especially across the US) those increased costs have been imposed across all markets; it’s not just the increasing attractiveness of these unaffordable cities, since domestic migration figures for most of these cities are showing either strong outflows or decreasing inflows from (and to) these cities; and it’s not like some of the world’s most unaffordable cities are running out of land: there’s no shortage of land in the likes of British Columbia, California, Victoria, or the deserts of Western Australia (and nor is there in NZ).

No, to see why some cities are more unaffordable than others you have to look at the differences between those cities, and the biggest difference is in how the cities regulate land. 

In Tauranga, for example, 'planners' have enthusiastically embraced the anti-development 'sustainable' philosophy of so called 'Smart Growth'. At a multiplier of 6.6, Tauranga has the country's most unaffordable houses. At a multiplier of 6.4, Auckland has the second most unaffordable housing – and for years Auckland’s planners have rationed the land supply, ring-fenced the city, and restricted the range of urban housing.  No wonder.  If you ration supply while demand stays the same (or increases), then you’re going to ensure prices go through the roof.

And in the most unaffordable places land is being rationed.  Ring-fencing cities to slap down “sprawl” is squeezing the supply of land in those cities; heavily regulating land-use and subdivision in cities is squeezing the supply of land in those cities.  The fact is, as I’ve pointed out before, that the world’s most unaffordable cities are almost without exception those cities who cite themselves as being the most “sustainable” –- another example of the price of fashion.

But in this case the fashion victims are us.  And even as the followers of fashion defend their advocacy of land-rationing – an imposition that all of us get to feel --  the evidence from around the English-speaking world is clear: that "smart growth" cities are unaffordable cities.

Graph from Demographia 2009 survey, pg . 26

Frankly, both ring-fencing around cities and enforcing lower densities within them are the twin causes of the problems (and it’s the state giving planners power to do both that needs to be expunged).  

There's no problem with “sprawl” if the ring-fencing were relaxed: New Zealand's urban areas account for less than 1 percent of the total country, one quarter of that in the Auckland region. If all of NZ's 1,471,476 existing households were to be rebuilt on an acre of land -- which was the sort of thing proposed by Frank Lloyd Wright in his Broadacre project-- we'd all fit in an area less than one-quarter the size of the Waikato , and just think how easy it'd be to thumb a lift out to Raglan!. 

And there's really no problem with higher densities within cities if the planners are muzzled, if the private sector gets to offer buyers what they want, and if the state is barred from building the sort of thing the state always likes to build -- which is building the slums of tomorrow.

What it comes down to is choice.  If people were only left free to live in the way they wanted -- however apoplectic that made all the many enemies of choice -- the problems of housing unaffordability would disappear overnight.

For further information, read all PC’s posts on …

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