Articles that Missed this Week's Edition of Newsweek

With all of the hub-bub about the Newsweek cover story calling Obama's critics dumb, I asked what stories didn't make the issue due to timing, missed deadlines, or lack of space.  Newsweek was kind enough to send me these articles.

Dear Leader Visits Florida, Brings Sunshine

Dear Leader Obama, is planning a short trip to Disney World.  He plans to share his wisdom on topics from immigration to his control of the weather.  Out of loving concern for all of his comrades, he shall bring the sun out that day.

This mastery of the weather is reminiscent of his pre-election speech where he spoke of healing the planet, providing jobs, and receding the ocean.

We thank the Maximum Overlord, Obama, for his weather control, gentle hand, and firm discipline, guiding us to prosperity!

Our Wise Leader Explains Why Congress is Reckless and Foolish

As our Dear Leader leads us into ever greater prosperity as individuals, and as a nation, he reminds us that the scurrilous and lazy Congress wishes only harm to our great nation.  In explaining how his March to Prosperity requires more spending, he wisely spoke of the running dog Republicans and their profligate spending:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

We at Newsweek congratulate the People's Hero Obama for using his wisdom to guide our nation to a more responsible pattern of spending and borrowing.

Finally, we have this human interest piece.


With Literacy the Goal, Our Wise Leader Corrects Long-Held Errors

A long running joke is that Great Britain and the US are separated by a common language.  Additionally, with the variety of regionalisms and dialects, it is no surprise that the language of our former Imperialist Exploiters needs to be corrected for a more harmonious sound and pleasing character.

To that end, Dear Brother Obama has made this corrections, to be implemented immediately.

The military term, corpsman, will now be pronounced "corpse man."


Additionally, this correction will be monitored in all 57 states.

Also missing from the Conventional Wisdom page is this gem:

Obama - Genius
Those who oppose his benevolence - Racist idiots.

To the last 50 subscribers of Newsweek, I hope you are getting your money's worth.

Some Fun with Milton Friedman

Many may know or heard of Milton Friedman.  He was a economist who passed away in 2006 and was often credited as the intellectual voice behind modern conservative economics.

 He was also funny.  Since we have been dealing with bad economic news since late 2008, allow me to bring a little levity, courtesy of Dr. Friedman.

 Here are a few of may favorites:

"If you put the federal government in charge of the Sahara Desert, in 5 years there'd be a shortage of sand."

“Nothing is so permanent as a temporary government program.”

“Concentrated power is not rendered harmless by the good intentions of those who create it.”

Of course, no discussion of Friedman, no matter how brief, is complete without this short video:
 

Rick Santelli is Right Again! This Time on the Debt Ceiling

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In case you needed any other reason to love Rick Santelli on CNBC, below is a video where he brings some common sense on federal spending and the debt ceiling.  He does it in his traditional, calm, restrained, and cool manner.  Ok, just kidding, he is on fire!!

What is Money Anyway?

When you think about money, the first thing that comes to mind is wanting to have more of it.  Have you ever wondered what it really is?  Sure, it pieces of pretty paper in your wallet, metal coins under the cushions of your sofa, and what the government likes to take away from you.

Did you know that money is actually a commodity?  Huh?  In case you need a refresher, here is a short post explaining what a commodity is:  http://economicefficiency.blogspot.com/2009/01/what-is-commodity.html.

Money is indeed a commodity, but first, it is a commonly agreed upon representation of a unit of work.  Chew on that one for a minute.  Because Amazon doesn't accept chickens for Kindles, and the bank doesn't accept lawn mowing for your mortgage.  People agree to accept money in the form of their local currency in place of chickens, or whatever work you perform.

Historically, money has taken the form of gold, silver, sea shells, and any other item people agree has value.  Paper money has been around much longer than people think.  Letters of Credit, which allowed a traveller access to money in another town or country have been in use since the before the Middle Ages.  The Knights Templar were known as the world's first foreign currency exchange, using Letters of Credits and other instruments to exchange money.

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Even the Bible (John 2:13) records Jesus running out the money changers in the Temple.  2000 years ago, Jews would bring local currency to the Temple to buy doves or other offerings.  However, they were only allowed to buy those things with Temple currency, and thus the exchange.  Jesus was angry that people were using a holy place, a place of worship, to make a buck off the average Joseph.

Fast forward to today with discussions of "the Fed printing money" (which is inaccurate) and rapid devaluation of the dollar as well as the Euro.  What does this all mean?  In short, governments can determine, through multiple means, the value of their national currency.  The value can be manipulated (lowered, ahem, China) to encourage cheap exports, or supported (Japan) to help stave off recession.

Ultimately, it is a matter of perspective.  A strong currency means imports are cheap, foreign travel is affordable, everybody likes to feel strong.  However, it also means that exports are more expensive (less competitive), tourism is down, and it is only a matter of time until the market swings the other way.

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Weaker currencies also spell inflation.  As the value of the US dollar has decreased, the cost of crude and other imported commodities has sky rocketed.  Why?  Many international commodities such as crude and airplanes are sold in US dollars.  When the dollar is weak compared to other currencies, it takes more dollars to buy the same things.

Money is a medium of exchange, the representation of a unit of work.  It only has value because society at large agrees to it.  For centuries, it was gold, jewels, and other finite things.  In modern times, paper money, also known as fiat money, is not backed by material things, but rather by the productive capacity of the nation that issues it.

So, the next time you put your money on the counter for what ever it is your are buying, think about how much time you had to work to purchase that item.  When you do, budgeting becomes much easier and you really start appreciating what it takes to make and spend money.

Vonage Gives Free Call to Haiti from US

In the wake of the disaster in Haiti, Vonage is doing its part. From their site:

Vonage is committed to helping during difficult times. In the wake of the recent devastating earthquake in Haiti, Vonage is currently offering free international dialing to Haiti for all U.S. callers. Dial 800-809-2503 and follow the instructions to place a free 10-min call. We encourage you to pass this Vonage toll-free number along to non-Vonage customers who want to call Haiti.

Remember, calls to Haiti are free only if you use this toll-free number to place the call. If you dial from your home phone without using the 800 number, you’ll incur standard long-distance charges. Please note that due to infrastructure limitations in Haiti, you may experience difficulty reaching your party successfully. This free calling service to Haiti may be discontinued at any time.

Please remember the people of Haiti in your prayers and consider a donation through groups such as the Red Cross and Catholic Relief Services (CRS).

Will Limited Purpose Banking Prevent the Next Crisis?

As I have written about the 2008-09 financial crisis (here and here), bailouts appeared to be the only solution at the time. Serious people opposed to bailouts in general, because of their potential to create a moral hazard where there is no dis-incentive to engaging in risky behavior.

Niall Ferguson of Harvard and Laurence Kotlikoff of Boston University write in the December 03 edition of The Financial Times that the solution is reinstating the Glass-Steagall Act and Limited Purpose Banking (LPB). LPB, as stated in the article:

It transforms all financial companies with limited liability, including insurance corporations, into pass-through mutual fund companies. Limited purpose banks would process securities and sell them to mutual funds. They would not be permitted to borrow to invest. Hence, they would never face a run and never fail. Risk-taking would be done by us, the people, via our purchase of more or less risky mutual funds.

They further state this would be done under the watchful eye of a single regulator. From the article:

Under LPB all mutual fund investments would be fully and instantly disclosed on the web by the system's single regulator - the Federal Financial Authority (FFA). The FFA would verify the credit histories, income statements and third-party custody of all fund securities. It would also hire non-conflicted companies to rate the securities and value their collateral. This does not preclude private rating, but it provides the public with independent assessment.

Although the FFA would provide for instant disclosure and reduced bureaucracy, the authors don't explain what, if anything, the FFA would replace. If it could replace and reduce existing agencies, fantastic! However, if it is another layer of bureaucracy, it should be reexamined.

While world financial markets and firms have been shaken, most economies are returning to some sense of stability. In the US, unemployment remains at 10%+, but credit is becoming easier. Is now the time to establish a new agency? Is now the time to return to previous regulation? The proposition put forth by Ferguson and Kotlikoff should be discussed. Far better to take their advice than that of the current US Congress!

A More Efficient Hybrid?

Will the flywheel overtake the battery in the hybrid of tomorrow? Quite possibly!

If you have ever ridden a bicycle or watched a potter's wheel, you have seen a flywheel in action. When you pedal a bike, the wheels continue to spin even when you are not pedaling because the pedal energy has been stored and then released through the wheel.

Although flywheels have been known since ancient time, only now has their automotive potential become apparent.

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In an article by Gizmag.com, Williams Formula 1 (F1) racing was looking for a solution to capture, store and use brake force energy (Kinetic Energy Recovery System KERS). While they had considered the typical battery solution, but found that a flywheel was lighter and more efficient. Were that the whole story, it would be great, but wait, there's more!

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Williams created a separate company, Torotrak, to apply the flywheel KERS system to automobiles and found, surprisingly, that buses behave in a manner similar to F1 race cars. The similarity is found in the stop-start nature of buses and time between energy capture and release in F1 cars.

Here is a video explaining the flywheel's use in F1 racing.



What makes this concept economically efficient, and could possibly spell the end to the battery hybrid is that it can be retrofitted to existing transmissions and is more efficient. From the article:

“Our solution offers a much shorter pay back time on investment and does not reduce the number of passengers that can be carried,” explains Chris Brockbank of Torotrak. “It is also a fundamentally more efficient approach as energy remains in the mechanical state; with electrical regeneration there is an efficiency loss at each state change from mechanical to electrical to chemical and back again.”

Consider the economic benefits of a flywheel system versus a chemical battery. The flywheel is lighter, generally made of recyclable materials, and uses less hazardous materials than batteries. Additionally, they can be easily (relatively speaking) retrofitted onto existing transmissions. Finally, there are fewer components. Although I am huge fan of the hydraulic hybrid, the need for a direct drive transmission is slowing its development. However, if the flywheel technology proves itself, the need for hydraulic hybrids may no longer exist.

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In the examination of hybrids, like any other capital investment, one has to consider if the money spent will provide larger returns. When considering a technology that can possibly deliver a 30% improvement in fuel economy and can reasonably be retrofitted to existing automobiles, it may make sense. I look forward to seeing the results of the continued studies and will report back with any updates.

Proof that Al-Qaeda is a Bunch of A-holes

In case you weren't sure, Al-Qaeda is now officially a bunch of A-holes.

CBS News reports that the recent attempt on the life of Saudi counter-terrorism chief, Prince Mohammed Bin Nayef, used a technique from drug smugglers, though novel to homicide bombers.

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"Taking a trick from the narcotics trade - which has long smuggled drugs in body cavities - Asieri had a pound of high explosives, plus a detonator inserted in his rectum. This was a meticulously planned operation with al Qaeda once again producing something new: this time, the Trojan bomber."

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Although this is a humorous take on a very serious subject, notice that the enemy is changing his tactics. While Al-Qaeda continues to be a bunch of cowards, they now reduce themselves to the level of drug smugglers to commit murder.

Should you be concerned? Damn straight! Unless and until the world community crushes this heinie-stuffing goon squad, more bloodshed will occur. Call on your political leaders to use not just force, but overwhelming force to crush this enemy now.

President Teleprompter, listen to your theater-area commanders and send the necessary troops to finish the job.

Government Knows Best You Dummies!

In case you didn't know it, "The American public…just like your teenage kids, aren’t acting in a way that they should act." Thank you for the insult and condescension Secretary Chu!

Dr. Steven Chu, Secretary of the Department of Energy, made the statement above, quoted in the Wall Street Journal, at a Smart Grid conference. His remarks mirror the Democrat party line which is that government knows best, and citizens should just sit down and shut up.

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What has this to do with economics? Simply, everything! From the moment you wake until the moment you sleep, you make economic decisions. Whether it is turning the light on in the middle of the night when going to the bathroom, or having a midnight snack, those decisions have economic consequences.

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Would you be willing to let a bureaucrat mandate no lights may be turned on between 10:00pm and 6:00am? Would you be willing to pay a tax for opening your refrigerator after 1:00am? Of course not! As an adult, you reserve the right to make your own decisions. However, the current ruling party in the US believes you lack the intellect and knowledge to make the "right" decisions.

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While I generally support energy conservation through proper insulation, caulking, and other low-dollar, high-return solutions, I don't believe anybody has the right to force me to do it. Economic common sense and simple arithmetic demonstrated I should put in higher efficiency HVAC units when I remodeled my house, as well as Energy Star doors. I didn't put up solar panels, nor did I install a windmill, because they didn't make economic sense.

When government thinks it is smarter than its citizens, it is doomed to make poor decisions with horrific consequences. Consider Sen. Max Baucus's "health care" plan. Buy insurance or we will tax you $3800. Were I a 23 year old male, with excellent health, I may not want to buy health insurance and the government has no business telling me I must. In short, all citizens must have the freedom to make their own economic decisions.

I will leave you with a quotation to help distill in your mind what the current Congress and President are thinking:

"We are going to take things away from you on behalf of the common good."

Was that: (A) Joseph Stalin, (B) Ronald Reagan, (C) V.I Lenin, or (D) Hillary Clinton?

If you want to be secure in papers, property, and person, it is incumbent upon you to speak up! Contact your representatives in Congress and remind them of your right as an adult to make up your own mind, and that includes whom you vote for in the 2010 elections. If you like bureaucrats making decisions for you, stick with President Teleprompter and his gang. If you like making up your own mind, consider an alternative.