Archive for September, 2008

No Bailout

Wednesday, September 24th, 2008

I am not in support of a bailout of any kind. I also live in an ivory tower when it comes to economics, and a short, unexperienced or well taught one at that. I am confused somewhat by the push for a bailout. Why am I confused? Well, on the one hand, I can see where the people who are going to get free money want it, and I can even see how the republicans, who generally are against free money for people, are ready and willing to give free money to banks. I understand that Bush is once again saying, “my way or the highway.” Why wouldn’t he? it has worked every other time he’s done that. That stuff is not confusing.

What is confusing is the economic reasoning for a bailout. The entire point of capitalism is that it is the best known method for increasing the standard of living of a society. It does this by selecting ideas that are winners and ideas that are losers by rewarding people who have good ideas, and making people who try to long on bad ideas go broke. Of course, one would hope people with bad ideas get the picture before they go broke, but sometimes they don’t. This idea is called Creative Destruction. I just recently finished Alan Greenspan‘s book, The Age of Turbulence, which stated the importance of this in no uncertain terms. It also stated that as you increase socialism and other safety nets to insulate people from risk, creative destruction occurs less often and the ability of the capitalist system to increase the standard of living decreases.

All that is happening here is creative destruction. Some firms, are going to go out of business. They are going to go out of business because they had some bad ideas and they ran to far with them. There is nothing wrong with these firms going under. They actually increase the standard of living in the long run by going away. Of course, not all firms will fail completely, some will merge and what not, and be able to survive. This is because they did not run as far with or have as bad of an idea as the ones who did fail. They will, however, suffer pain, as a result of the bad risks they took. Everyone who took bad risks will suffer pain, and as a result people will not take these same bad risks again. That’s how its all supposed to work. That’s clearly an ivory tower way of thinking.

But what about the credit market? When firms go out of business it is usually because there is a glut of supply, too many firms are in the market, producing too many goods. This was in fact the problem a year or two ago (or more). There were too many people willing to lend money and not enough people to which to lend money. To solve this they expanded the pool of people they to whom they were willing to lend. Clearly that was a bad idea, and the market is telling everyone who did this that it was a really bad idea, and it is telling them this in a big way. It seems obvious now that it was a bad idea, but we only know that because of the market.

The problem now is that there isn’t enough credit. People can’t get loans. There is a lack of supply, because in effect all the firms who took bad risks can’t loan money, so they are no longer in the market. The call for a bailout is grounded in the idea that we need these firms to re-enter the market so that supply will increase, and people will be able to get loans. I agree that we need more firms in the credit market, or at least that we need to increase the supply of credit. But why do we need these firms? Firms are in the end just people. These people have proven themselves unfit to be in a credit market; that is they have bad ideas about how to make money in the credit market. We should not help them to re-enter a market that they so clearly have failed at.

But how do we increase the supply of credit without them? There is no reason why new firms won’t stream in to the credit market now that there is a shortage. These new firms will need promises to their investors that they won’t repeat the mistakes that were made. They will need to not take as many risks. Investors, who are reeling from taking too much risk will flock to these new firms. This will provide them with the capitol they need to provide the loans, for which people are apparently clamoring. These new firms will flourish with their new ideas, and the old firms will die; creative destruction. As I said before, die is a simplification, some old firms may survive by doing the same thing the new firms are doing. However, if they can’t survive that way, we should not help them, just let a new firm take their place. This whole thing will take time, I don’t know much, but I bet that we can have new firms in the credit market in 2-3 quarters.

What do we do for the next 2-3 quarters? Well, it won’t be easy. There is a shortage of credit, and so people who need credit will have to stand in long lines, and accept higher interest rates (pay more for it).

Who will they borrow money from? Anyone who will lend money of course, be it small banks who see a profitable new opportunity to expand their business, or the vestiges of the old firms still limping along. There is also the federal reserve of course, they are the lender of last resort. They always have money to lend (that’s the point). In the past, large banks have been their customers, but there is no reason why they can’t make loans, at appropriate rates, to smaller customers, or anyone really. Lastly, don’t forget overseas investors.

The only real problem is that there needs to be capitol, money to lend. There is an easy way to generate capitol; raise interest rates until people who do have money are willing to lend it. There should be no free money from the government. There is no reason to think that the only people who have money are the government. There is plenty of money in the country, and even more in the world. If we want people to loan it to us so we can buy houses, we need to provide them with an attractive interest rate. When we do that we’ll get the money, and we can loan it out, to anyone who wants the money badly enough to pay for it. As time wears on the risk premium that is currently going to be required will diminish and things will return to normal. Change leads to normalcy. We need to change the big names in banking, if we just sit tight, this will happen for us. If we meddle, we’ll loose in the long run.

What might really happen? From what I’ve read, which is only a little, they are considering a type of reverse auction where the banks will all place bids. What they are actually bidding in is too complex for me right now, but the way it works out is that the banks who are better off will be able to off the government a lower bid. The lowest bid wins, and every bidder may make trades to the government at that rate. Anyone who can afford that rate, who can avoid bankruptcy by trading some amount at that rate will survive, and those who can’t still go out of business. As you can tell, Bush did not come up with this plan, which is being called his. This plan is reasonable, in that those who took the worst risks still get creatively destroyed. It lesses the short term pain, and the cost of some, intangible amount of long term prosperity. The risk to reward trade off is probably there in this plan, especially since who knows how much prosperity, how far in the future we’re talking about.

So am I for the plan? Well, I still think we should do nothing, but what they plan to do is not brain dead. What the democrats are pushing for, more regulation would be bad. It all sounds good, but markets don’t like regulation. I don’t much care how much CEO’s get paid. As the paper pointed out to day, they are losing a lot of money right now, if you count stock. If you put a cap on how much you can pay them you could end up with a shortage of qualified CEOs. One may argue we already have that, in which case we clearly need to pay more to get the actual good ones, not less. What we really need is a populace who is educated enough to participate in the credit market on both the lender and borrower sides. Until we have that, the only sensible regulation, increased transparency, is worthless. This is roughly the same remorseless conclusion that I came to in my last econ rambling. What I want to see then, are some educational riders on this bill. Assuming the risks the taxpayers are taking on comes up good and we win big. Lets require all that money we made go to education.

Maybe someday soon I’ll have time to see what Greg Mankiew thinks of all this, but I’ve been too busy at work to keep abreast of his position.

Josh & Sarah’s Visit

Tuesday, September 23rd, 2008

A friend of mine from college, Josh, and his more interesting that I imagined sister were here last week. Unfortunetly for them we were still at about 50% unpacked during their short stay. She was here to look at a graduate school and he was here cause it was essentially a free trip. We had a lengthy debate about the definition of self evident truths, as in the deceleration of independence, and how that relates to middle eastern societies who clearly do not hold that women are created equal. Essentially the truths must either not be self evident, as it is commonly defined, or someone must be in denial. Of course, we got nowhere, but it has been quite a while, since college really, that I’ve had as much fun with pointless debate.

He also brought me 3 christmas tree shaped pina-colada air fresheners. You know, the kind traditionally used in a car and traditionally in some sort of pine fresh scent. You see, when I was moving to Boston in August of 2006, I stayed with Josh in New Jersey as a layover. Before I went we had this conversation (spelling and grammar have been improved to protect the innocent) :

Josh: oh – well I am not killing you I might as well not upset your stomach – any foods you don’t like – or inversely any food you’re particularly fond of?
Me: I’ll eat anything. I am particularly fond of rice and pasta
Josh: nice – I like easy. Lets see, not kill, not disgust … I think that covers the basics of hospitality the world over
Me: yeah, I can’t think of anything else; not kill covers a lot of ground
Josh: hell, I’ll even throw in not intentionally injure … permanently injure I mean
Me: That’s quite an offer, can I get a free car air freshener thrown in?
Josh: I don’t know about that – we are staring to cross the line of things I can give to you with no financial penalty to me whatsoever to things that actually cost money … eh what the hay sure
Me: rofl. good. I think we have a deal: non permanent injury + air freshener, for the low, low cost of an air freshener
Josh: pinefresh okay? or do you want some weird flavor – like pina-colada?
Me: oh man pina-colada sounds good now that you mention it
Josh: damn, I so only offered that with the almost complete conviction that you wouldn’t choose it. Okay since I live next to a gas station that can probably be arranged
Me: wow thats a fancy gas station.
Me: oh, did you know, that EC and Sandeep are now officially dating

Josh didn’t have them when I arrived on the trip, but let no one say that he didn’t come through in the end. I even got two air freshers worth of interest.

Full Moon Resturant

Tuesday, September 23rd, 2008

In an effort to try out all the restaurants within a 10 minute walk of my new place my room mates and I went to the Full Moon Restaurant Monday night. It was excellent, but not fancy. It was the kind of place with a kids play area, chalk on the walls (for more than just the nightly specials) and crayons to draw on the place mats with. I was told of the difficulty of drawing a lobster with chandelier earrings on Sunday, and so give the opportunity, I tried my hand at it. (This came up in some kind of social game that I missed out on, on Wednesday). Despite that my lobster looked like a catfish with pincher’s that part was readily recognized, but the silver chandeliers dangling from it, with their yellow lights on the ends were not understood — apparently it is more difficult than I imagined. Anyways, the food was great, I got the special, a pork chop with mashed potatoes and asparagus. I cleaned my plate, it was delicious. I will be going back, with Wednesday Night Dinner once, and without many times.

The Kitchen

Tuesday, September 23rd, 2008

Last week two of my three room mates returned. With their help we’ve managed to unpack more than 95% of the house. It really feels much more like a home now. As I have time to make them I’ll post views of the other rooms in the house. The kitchen was one of the first rooms to get fully unpacked, here it is.

The program I’m using to create these views is Hugin. It is a gui front end for Panorama Tools, and it makes it so much easier to stitch together photos and it would otherwise be. Although, it does still take some time to setup, and it takes hours of processing to generate the full resolution source images, which then take time even to shrink down.

The setup is really identifying points in the images that are the same spot in real space. It has an excellent tool to do this, but realistically you need 5-15 points for every combination of two images that overlap. There are 17 images in the above composite. They don’t all overlap, but its still quite a few points to do manually. For simple constructions it will do this automatically fairly well, but on complex setups I find I get much better results if I do it all manually. One wrong point can cause an unsightly distortion. For example, on the one for my room, I started from the base points and added my own to shore things up a bit. There are distortions in both, that I could remove with more time, but this one does look better. I’m somewhat disappointed that I don’t have any displays that are even remotely close to being able to show the whole image at more than a fraction of the real resolution.


Friday, September 19th, 2008

I am completely spell bound by the story that ends the fifth season of Buffy the Vampire Slayer. I still have two episodes left, yet I’ve watch the last 3 unable or unwilling to take my attention away. The plots have converged wonderfully, even the remnants of the awful fourth season have found a way to do their part. They have shown that they are willing to go beyond the killing of the Star Trek red shirt analogs; they are willing to go beyond the episodic and harm long time characters. This is normally, not something I like, but it being done so well. It is successfully adding to the suspense.

I was not disappointed. It is so surprising to see a show have its best plot after it has previously gone down hill. Television quality is rarely bimodal.
And now for some details that make things so great. First, the best thing is that the only mention of Riley is in passing when detailing the litany of bad things that have occurred. This is how it should be, his one and a half season stint should have only lasted one episode. Spike’s transformation to trusted ally is complete. Buffy has been amazing at returning old characters back to the show in new roles, and this is possibly the best one yet. Although, I do love Anya, so. This above all else is what makes the show so solid, it feels like a real, whole world. Willow’s powers have grown so much; it is exciting to see what she can do. The addition of Buffy’s sister at the start of the season, what seemed like a jump the shark (although i hear the term is Nuking the fridge now) was later explained in a less than satisfactory manner, but has become so central that it must have been done. Best of all, there was actually an episode that setup the possibility for that kind of thing to happen. And, there was a episode before that one, on which it stood. Let know one say that they didn’t build their basis up well. Best of all, Buffy and the scooby gang might just loose this time! I’m hooked, I’m off to watch the rest of the season.

Large Hadron Collider

Tuesday, September 9th, 2008

The top news story on all day today was the Large Hadron Collider, and whether or not it will destroy the earth. My friend Post sent me this link today. It is a helpful site to let you know if the LHC has destroyed the earth yet or not. It even has an RSS feed, so you can just add it to your reader, and you will be notified in the evet that the LHC destorys the Earth. All that said, here is a woot podcast on the subject with, as of this writing, one very correct comment at the top, “They haven’t tested collisions yet, so you still have a chance. Continue to slack off!,” by orthancstone.

My Room

Sunday, September 7th, 2008

Today I reached an important milestone in the unpacking process. My room is not 100% unpacked, and 98% free of junk the landlord left. For the uninitiated, my new apartment comes fully furnished to the point that it is a problem. There is junk everywhere. Every little cubby hole where you think, oh I can store some the junk there is itself filled with junk. This makes the process of unpacking take a lot longer, because I must find a box of stuff I want to unpack. Take that stuff out of the box, throw a bunch of the landlord’s stuff into the box, and stash the box in one of the lofts. Then place my stuff where it goes. As promised, pictures of my room, now that it is done.

Please ignore the distortions created by stitching together this fish eye view.

Views from up in the skylight cupola thing:

The house next door has lots of solar panels:

Palin’s Speech

Friday, September 5th, 2008

I was working on configuring my DVR to work with my current cable setup on Wednesday night and so I saw about five minutes of GOP VP nominee Sarah Palin’s speech, off and on as I labored to get things working (it is Linux after all). Based on the little that I saw, I have two things to say. First, she did not write that speech (or even have a hand in writing it), and that was obvious. Second, when she debates Joe Biden it will be over for her. It will be like if the internet is a dump truck and it runs over her. She was so incorrectly informed on so many issues; it was ridiculous. How many issues can you show you are misinformed on in five minutes? It was an impressive feat of ignorance.

On the TV front, it is working, but the cable setup is wonky. There are only 19 channels on the analog service :-( and I don’t yet have a cable box. Also, the signal strength coming off the wire is pitiful. I put it into a 4 way splitter and attenuated things to the point where I couldn’t get > 65% HD signal strength. With a two way splitter I get 75%, which works. I used to get 99% with a 4 way at my old place. Looks like I’ll be buying an amplified splitter, and getting a cable box. Hopefully it will be the same easy to control model as my last cable box, which, had a standard, open serial port on the back for that purpose.

First Dinner at My New Place

Monday, September 1st, 2008

The first dinner prepared at my new apartment is current cooking. This may not come as surprise because it will be my third night sleeping here, but I have not actually gone grocery shopping yet! I also did not move much of any food from my old place, not that there was a meals worth of food left at the old place when I moved. So where did this dinner come from? Mostly from my new, wonderful downstairs neighbor Karen. She was out on a farm somewhere (near here, western Mass. most likely, but I didn’t catch where) for the weekend. She brought back 3 ears of fresh corn, a bag full of pear shaped tomatoes, a bag of fresh garlic (still on the stem) and an small container of some sort of baby, sweet tomatoes. I’d never even seen either of these types of tomatoes before.

The baby, sweet tomatoes were a great snack during board gaming, which also had its inaugural run at the new place. The corn was an easy first step for dinner. I did move 1 serving worth of pasta, but I checked and we have no sauce for it. But there are 3 large cans of tomato paste, and a bit of olive oil to combine with some fresh garlic and other random spices we moved for my first ever attempt at from scratch (well sort of) tomato sauce. It is an experiment currently bubbling in progress on the stove. I hope it turns out well, or dinner might not be so good tonight.

I haven’t posted much since moving into the new place. I am still unpacking. It will be a long process. I have most of my stuff in my room unpacked at this point, but there is still a bunch of the land lord’s stuff (which is everywhere and a longish story for another time) to pack up into boxes and stash away. I’m about 75% done with stashing away that stuff from my room. The rest of the house is not so far along. When rooms get to a presentable state I’ll start to post pictures of them. Time for dinner.