Miscellaneous

The Wall Street Journal February 4, 2010, A19 CCLV Number 28 "A Short History of American Populism"

Andrew Jackson -- libertarianism as populism. Government programs gave money to the rich. He is of course known for killing the Central Bank. In 1835, was the last time that the United States was debt free. And he opposed road/canal projects. After the Civil war, the Republicans sponsored aid to railroads. As I wrote earlier, the 1850's to 1890's where United States government sponsored the corporate form. The 1890's populism, William Jenning Bryan gave his Cross of Gold speech, because of the rampant deflation which was giving farmers who owed money a problem. But William Jenning Bryan ran several times for president, never winning and getting smaller and smaller percentages of the vote.

Andy Kessler, "Bernanke's Exit Strategy, Tighter Reserve Requirements" same issue

I wrote a lot about the system where banks can loan more money than their deposits. Currently, banks can loan ten dollars for every dollar they have on deposit. And in some cases more Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns all loaned out twenty times their capital. No wonder they have so much money for bonuses. Should the depositors all run on the bank, the FDIC is there to back the bank.

My Intermediate macroeconomics professor explained how this works, including how having multiple banks has the same effect as having one big bank. I asked him a simple question. Do the banks make profit on the difference between the interest on the deposits and the interest they change to the lender or the interest on all their loans. He said the latter. So if a bank charges an average of ten percent and pays five per cent to its depositors (a rate structure similar to the eighty's), it is earning 75% interest on every dollar deposited. No wonder, they are so willing to give away a free toaster to those who deposit in their accounts or bear the costs of processing checks for the free checking account with $1,000 minimum balance.

Mr. Kessler said this system caused all sixteen panics since 1812. The gold standard is neither necessary nor sufficient--Elizabeth gold smiths would write more gold receipts than gold they received. And in the first half of the 1800's, American State banks would do the same thing. I recall from Galbraith's Money that the Medici's did the same thing.

Stephen Greenhouse, "More Workers Face Pay Cuts, Not Furloughs" The New York Times New York Wednesday August Fourth 2010 Page A1 and A3

L. Weitzman's share economy is based upon the idea of avoiding layoffs by having one's salary be the gross revenue divided by the number of workers. A corrolary of that is a firm cutting pay during a recession or having a policy of no lay-offs. State and local governments are cutting salaries, in some case with agreement from Union. One report says that 22 percent of municipalities cut "some pay and benefits." On the business side, we have: Westin Hotel cutting wages twenty per cent, Sub-Zero, a Refrigerator Manufacturer, is asking for the same thing, threatening to move to another state, ABF Freight Systems asking Teamsters to agree to a fifteen percent cut and St. Louis Post-dispatch, Seattle Symphony and Newsday making about five percent cuts. Reed Smith, a large law firm, lowered first-year associate salaries to $130,000 from $160,000.

From NPR, on the Mortgage Crisis

I blogged several times about using the share economy idea to make mortgages payments a share of one's income. As I assume most know Freddie and Fannie have a major role in the mortgage market. They own or guarantee half of Federal mortgages 5.5 trilliion worth of mortgages. Our Federal Government guarantees them, at first implicitly , now explicitly but does not put this on the budget. Raj Date said that Fannie and Freddie accelerated the sub-prime meltdown by guaranteeing mortgages for lower-priced houses thus causing their value to inflate to bubble-proportions. These government sponsored entities represent a subsidy to "middle and upper middle income home owners." And, perhaps, we should go away from home ownership. Individuals move around much more than in the 1950's, so one has the problem of selling the house when one has to relocate for job reasons. Or in telling words, Americans should not buy an "illiquid, very large, concentrated, leveraged asset."

One of the problems is that a renter has no guarantee of being able to stay in the property long term. Personally, I was fortunate enough to negotiate a permanent lease in 1994, until either I changed jobs, had my parents come join me and we bought a house together, or on their side they remoddelled the place into something not compatible with residential living. It ended up in court when the landlord sold at a fire-sale basis. I tried to negotiate a similar deal with businesses and landlords in the area but was unsuccessful. More on that in a different blog.

Also, of course, there is also status in owning a home.

Happiness

NPR has had two series on happiness. Jiangyin in China is actively trying to make itself conducive to happiness. Xu Dongqing, the Communist party Committee's head of propaganda, said "they are trying to further use people's wisdom and suggestions to help the government do better," not provide "Western multiparty democracy." Research in the United States found that daily mood improves as one's income goes up to $75,000 per year. It does not go up as people increase their income. The famous Marmot Whitehall study found that people at the top of a hierarchy have a better health than those at the bottom, and it is a strict does-response. And those at the top of the hierarchy generally make more.