Kimball Corson
08/05/2012, Pago Pago, American Samoa

Why Congress Is Awful

Economic problems created by Congress are heating up now. Congress has to yet figure out what to do about the expiring tax cuts and scheduled spending cuts at year end that make up the "fiscal cliff." Economists say the combination would cause a recession if nothing is done. Both are Congressional creations.

Economists including Bank of America Merrill Lynch's Ethan Harris say the prospect of the cliff is already freezing business investment and hiring, and dampening consumer spending. The impact of uncertain European and American policy is showing up in everything from consumer confidence to factory orders. These impacts are also Congressional creations.

Such Dufuses.

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Kimball Corson
08/03/2012, Pago Pago, American Samoa

On the Importance of Unpopular Choices

I have long believed that a person's effective intelligence, thinking and thought processes are significantly determined by the people around him or her. We rise or fall to the level of people we are with. We come to think in a similar fashion and at a similar level as they do. We are socialized by them.

If true, this has profound implications, if we value such intelligence. First, it means we must choose our parents carefully and well. We must also avoid those who dull our wits and take us in wrong directions. Here, the old adage applies that great minds focus on ideas, typical minds focus on events and people and baser minds revel in gossip.

Secondly, education and higher education in particular must be chosen carefully. The idea here is to surround yourself with smart, interesting and interested people - students and faculty alike. Life is short and you must go for it. Finally, in choosing the company or firm and environment where you will work, the same approach applies. Go for those of intelligence and greater or more intense interests.

Avoid others where feasible and offense is not given, for as Nietzsche teaches us they distract us, lower our sensibilities and try our patience. However, good social skills do allow us to interact to some extent with all types of people as we must and we should not be arrogant at the effort, but gracious about it. Indeed, there is merit in becoming good at it, but do not expect too much. However, the synergy of interactive helpfulness is worthy and should be cultivated, independently, but all needs to be kept in perspective.

My own views are that these perspectives make for a better and more interesting life, but they will win you no popularity contests, but that really shouldn't matter to you, should it?
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For this piece and by those who know me, I have been dubbed "a snob, but a lovable snob." That is probably true.

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Kimball Corson
08/02/2012, Pago Pago, American Samoa

Duetsche Bank in Trouble

The mainstay of Europe, Germany's once mighty Deutsche Bank not only faces huge fines in the LIBOR price fixing scandal, but worse, its profits "are collapsing" and many layoffs are planned.

The bank has a real difficult road ahead. It is thought to be too big and bloated to be competitive. Profits in the second quarter fell by 80 percent compared to those of the first quarter, which were down. The bank's balance sheet is loaded with high risk, depressed mortgage instruments. Its investment arm is doing even less well.

New officers are trying to sort out the mess. Meanwhile there is a huge capital flight from Spain. In the first five months of this years, the outflows came to $163 billion.

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Kimball Corson
08/02/2012, Pago Pago, American Samoa

Another Salad Brained GOPer Proves His Worth

Criticizing President Barack Obama's health care reform law on Wednesday, Rep. Mike Kelly (R-Pa.) likened the requirement that private insurance plans provide contraception coverage to the attack on Peal Harbor and to 9/11.

"I know in your mind, you can think of the times America was attacked," he said at a press conference on Capitol Hill. "One is Dec. 7, that's Pearl Harbor Day. The other is Sept. 11, and that's the day the terrorists attacked. I want you to remember Aug. 1, 2012, the attack on our religious freedom. That is a day that will live in infamy, along with those other dates."

What a mind!
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From a friend:: No. Rep. Mike Kelly only underlined the rule to NOT KILL. We usually call it murder. We firmly believe that the "fetus" becomes a person at the moment of conception. We talk about a woman's right to make decisions that have to do with her own body. Well, about half of all aborted babies are little women. What about their right to decide what happens to their own body?

Kimball Corson: This is all relatively "new" religious theory from the religious right whereby the conservative, religious right wants to control the behavior of others who disagree with them and that theory. Throughout history the real distinction, and one recognized earlier by the law of most nations, has been between feticide (the killing of a fetus) which has been legal and infanticide (the killing of a baby which has been born) which was not. The earlier theory in practice and under the law for millennia, was that the fetus was a part of the woman's body to do with what she wanted. That status did not change until birth, when the fetus became an infant and received legal protection as a person. Religious conservatives have tipped this age old system on its head and have imposed their new theoretical system you describe on the rest of us and not surprisingly there is debate and with Roe v Wade, also compromise.

Kimball Corson: It is interesting that about eighteen to twenty years after Roe v Wade in the US -- and legalizing abortions, for the first trimester or thereabouts or at any time, in other countries -- researchers found that the crime rate automatically and by it self dropped very substantially in such countries. Crime tends to be a youthful phenomena and those aborted, as the evidence shows, included many if not most of those who commit crimes. Some of us consider such practical consequences important for society and believe the old distinction for millennia was the better one or, better yet, a theory based on natural fetus/infant viability outside the womb so as not to pick nits on the instant of being born, but still honoring practical and sensible considerations.

Kimball Corson: You see many of us do not believe in souls, or God per se or an afterlife or Heaven or Hell at all or, in this case that the "fetus" becomes a person at the moment of conception. It simply lacks too many of the characteristics of real or significant personhood in my view. It is not meaningfully "alive" as a person per se. Just my unindoctrinated, self considered views.

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Kimball Corson
08/02/2012, Pago Pago, American Samoa

The Forbes College and University Rankings (Expanded)

The Forbes ranking of colleges and universities is different in several regards from most rankings. First, it ignores reputation, the prestige factor and selectivity. Second, it mixes both colleges and universities. Third, it focuses hard on three primary characteristics: 1) teaching quality, 2) the amount of learning effort underway and 3) the value of the education obtained, as measured by post graduate recognition and success, earnings, satisfaction with education, academic awards students received, low school debt and other factors bearing on the value or worth of the education.

Not a surprising approach for a financial magazine.

The Forbes top ten are as follows (with my parenthetical observations):

1) Princeton (pretty good in all quarters)
2) Williams (a good and personal liberal education, but preppy)
3) Stanford (?????)
4) Chicago (see below)
5) Yale (has become too smug and comfortable; it is slipping)
6) Harvard (very good if you work hard at it)
7) West Point (no option but to work hard at it; intellectually limited)
8) Columbia (a big Chicago lite)
9) Pamona College (much hard work)
10) Swarthmore (a sophisticated liberal education)

I quite agree with this ranking except Stanford at third bothers me. My impression over the years, from meeting and knowing many Stanford graduates, who are clearly smart enough, is Stanford doesn't seem to affect its graduates very much, one way or the other, unlike say Chicago which engages its students in history, the classics, economics and the points of disagreement and controversy among scholars in the various fields. It leaves a distinct footprint. Stanford doesn't.

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Kimball Corson
08/02/2012, Pago Pago, American Samoa

The US Drought Is a Mess

The news media and federal government have been down playing the seriousness of the drought in the US. In truth, half of all US counties have been declared disaster areas. Some 220 of them in a dozen drought stricken states have just been added to the list of counties that are disaster areas, bringing the total to 1,584 counties in 32 states. Counties in Arkansas, Georgia, Iowa, Illinois, Indiana, Kansas, Mississippi, Nebraska, Oklahoma, South Dakota, Tennessee and Wyoming are the among the hardest hit.

As of this week, nearly half of the nation's corn crop was rated poor to very poor, according to the USDA's National Agricultural Statistics Service, with some areas experiencing over 70 poor to very poor. About 37 percent of the U.S. soybeans were lumped into that category, while nearly three-quarters of U.S. cattle acreage is in drought-affected areas, the survey showed.

The potential financial fallout from the drought in the nation's midsection appears to be intensifying. The latest weekly Mid-America Business Conditions Index, released Wednesday, showed that the ongoing drought and global economic turmoil is seriously hurting business in nine Midwest and Plains states, boosting worries about the prospect of another recession, according to the report.

Water supplies are inadequate for crops, lawns and drinking water. Not enough to go around or to make do.

With drought drying up food crops and animal feed, the USDA also said it was allowing haying and grazing on 3.8 million protected acres. Insurance companies agreed to a 30-day grace period for farmers on insurance premiums. Low interest loans are being made available by the federal government to drought stricken farmers. All helpful efforts, but what is really needed is adequate rainfall and the prospects are not good.

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Kimball Corson
07/31/2012, Pago Pago, American Samoa

The Problems with Common Sense

Conservatives love to tout what they think is common sense, but without really understanding what it is.

Common sense applies only to the application of common knowledge. More esoteric or uncommon knowledge is often counterintuitive and at least or perhaps more typically requires conflicts to be adjudged appropriately so that common knowledge is of little help there. Implications and how they operate is often esoteric knowledge, least amenable to common sense.

The resolution of informational conflicts and the determination of solutions are the particular strengths of liberals. Brain matter configuration matters here. Those who identify themselves as conservative or very conservative have a 1 to 1 distinctive brain matter configuration that corresponds orients them toward fear and the avoidance of change in life. On the other hand, those who identify themselves as liberal or very liberal have a 1 to 1 distinctive brain matter configuration that lets them deal better with informational complexity, conflicts in such information and with resolving or finding solutions to such conflicts, precisely what is needed to deal with uncommon or more esoteric knowledge in regard to which common sense has little or no typical application. Conservatives can't understand this and, out of fear, have a desire to stay with what they think they know.

Economics is a good example. Conflicting forces have to be understood and weighed to determine which are dominate and why and which are to be prevailing. First, they have to be understood at an empirical and not an ideological level. Homely analogies like the government has to balance its budget just like a household, are simple nonsense. The government has the exclusive right to generate additional fiat currency, control interest rates and determine the term structure of those rates; a household can't do any of those things. The down home analogy of common sense collapses.

Secondly, internal economic mechanisms and the institutional framework within which they conflict and operate need to be understood and that is definitely not common knowledge to which common sense applies. Such sense affords little real help here. Logic and reason are, but not common sense.

The problem becomes one of ignorance of non-common knowledge and its implications, and the informed capacity to make judgments in the face of conflicting economic and social forces. Ideology and common sense are of little help here.

Common sense is good enough in it fields of application. Those are where much experience dictates how particular matters, which are well understood, are to be specifically handled. Otherwise, it is hugely over-rated.
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Trash can by G.

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Kimball Corson
07/31/2012, Pago Pago, American Samoa

Economic Events Leading Up to Crises Proceed Slowly.

People misunderstand the speed at which economic events leading up to a crisis unfold. I remember Paul Samuelson, a Nobel Laureate, arguing during the Vietnamese war reflected that the US could have both guns -- that war -- and butter -- the great society program -- at the same time. The huge inflation did not hit until the Carter administration when interest rates and the inflation rate were both in the double digits.

Another example is now that we have stopped talking about it, we appear to be headed for a double dip recession. Too, the mess in Europe is being too much ignored because it and its consequences are unfolding too slowly according to the perceptions of many. Finally, unemployment and the economy have not recovered as quickly as most people expected.

The point is people misjudge the timing of major economic phenomena, expecting events to unfold more quickly than they do. Only in actual crisis does that happen.

The economy turns very slowly and forcefully. Like an aircraft carrier at sea, it does not make big changes in direction quickly. Events leading up to crises unfold slowly, although the crises themselves often occur more quickly. People don't understand this. We may look back and realize the 2009 crash and the double dip recession were just front end oscillations leading us into the Second Great Depression, all a part of a single large unfolding of economic events leading to a sustained crisis. Think slow motion and observe underlying longer trend direction to get a better sense of economic phenomena. Just a thought.
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Dinghy aesthetics by Dan Wentworth.

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Kimball Corson
07/29/2012, Pago Pago, American Samoa

We (You) Are Well Observed: Many Big Brothers Are Watching You

We know that NSA, the FBI and other federal agencies coordinate to watch and keep tabs on most of us, whether they are fully candid about it or not. But private, commercial interests do much the same thing and for various reasons. Our computer use, for example, is heavily tracked by many companies.

For example, install Adblock and Ghostery on your lap or desk top computer and you will be shocked at how many companies and organizations are trying to keep track of and influence your commercial and shopping interests and your computer usage. As those programs can be set to show, the number by name is considerable. But there is more.

Spies move among us all the time. Covert shoppers spy on us in retails stores, restaurants, movie theaters, banks, hospitals, bars, supermarkets churches, doctors offices, gas stations, gyms, universities public transit -- in short, anywhere members of the the public show up as shoppers or consumers. Marketing firms hire these covert or mystery shoppers who engage in a broad range of information gathering activities.

Mystery worshipers pose as first time congregants to evaluate the cleanliness, friendliness and godliness of churches. Mentally healthy covert patients complain to psychiatrists of fake symptoms, while carefully comparing doctors' behavior against a checklist. Recently, there was Congressional huppala over a federal plan to send out elderly mystery patients to evaluate health care providers and insurance companies. Our federal government helped Pakistan dispatch mystery shoppers to combat tax evasion, a system developed for use in the US.

Mystery shoppers monitor shelf organization and space purchases, welcome greetings, repair services and, basically, you name it. Just about service and purchase patter. We are well spied upon, both vocationally and as putative buyers of whatever.

You are well watched and reported on. Have no doubt about it. This is 1984 on steroids.

(roiled water about to leave the harbor in a major tsunami coming.)

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Kimball Corson
07/28/2012, Pago Pago, American Samoa

Economic Growth in the US Is Beginning to Collapse

The United States economy grew by a miserable 1.5 percent annual rate in the second quarter, losing what little momentum it had earlier this year.

Growth fell off as consumers limited new spending and as business investment slowed in the face of a global slowdown and a stronger dollar. Several bright spots in the first quarter, including auto production, computer sales, housing and large purchases like appliances and televisions, dimmed or faded away altogether in the second quarter.

The sluggishness of the recovery makes the United States more vulnerable to the troubles in Europe. It also creates a huge problem for President Obama, who must sell his economic record to voters. He could well lose the election if economic conditions continue to worsen or drop off sharply. He and Congress have in fact mishandled the economy for some time now.

In the first quarter, the economy grew by a paltry 2 percent annual rate, according to the revised figures. So this is a slowing. The second quarter figure of 1.5 percent is also likely to be downwardly revised and any partial or complete European collapse has yet to occur and hit us yet. We are vulnerable, as our drought widens and our infrastructure is evermore damaged by the weather.

A slowdown in household spending was the primary damper on growth, as consumers increased their savings rate, a sign of increased uncertainty about the future. State and local governments also cut spending. Exports struggled to stay flat in the second quarter despite more recent signs of diminishing demand.

The pace of recovery is disastrous. "You can't blame all of it on Europe -- we have our own problems yet," said Joshua Shapiro, the chief United States economist at MFR Inc., a financial consulting firm. "When you have a credit bubble or asset bubble that's popped, the recovery process from that is just really long and really painful."

Inflation, a measure watched closely by the Federal Reserve as it determines whether to take further action, slowed as well, with consumer prices growing only 0.7 percent compared with 2.5 percent in the first quarter. We may be moving toward deflation, a real worry and concern. Some are predicting that. Average annual growth in the US has only been 0.3 percent over the three-year period of 2009, 2010 and 2011, causing real economic concern .

This number is modifying public perception of two key economic trends. Corporations have rebounded more slowly from the recession than previously believed. And local and state governments have been cutting back substantially in the last two years. These elements are leading us toward economic contraction.

The US drought and infrastructure impairments have yet to even impact these numbers, to say nothing of any catastrophic failure of the financial system in Europe. If we get a serious economic failure in Europe, it could lead to the collapse of the unregulated, mega trillion dollar international market in credit default swaps against which no formal reserves are held, making that market hyper vulnerable to any systemic economic failures or collapses. Collapse of the international market in those derivatives would largely sink the world economy.

We are poised at the edge of a economic/financial cliff, but do not well seem to realize it.

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Kimball Corson
07/28/2012, Pago Pago, American Samoa

Getting the Funny Money or Windfalls Out of Our Economic System

The idea is no one should get something for nothing. Something they didn't actually earn themselves by their own labors or proper returns on their assets.

I believe rent on raw land, unimproved by its owner, is a revenue that has no cost to its original owner who seeks to add in consumer surplus as well into his rental charges. A maximum windfall. Subsequent owners must pay but they can acquire rental gains with rising rental values. Those rising rents could be taxed as unearned, on an inflation adjusted basis, of course.

I next believe high marginal tax rates should be an effort to mop up and put to better use by government funds less needed by those who "earn" them and so I favor steeply rising marginal rates at the top income levels. Many such earnings are a return to infrastructure and the social order and not really "earnings" anyway.

Highly progressive marginal rates are analogous to a tax on rising land prices where the same argument can be made. The price gain, in a scheme of rising land prices does not all costlessly accrue to the original owner. Later owners can share in those gains, too. Those gains can be mopped up for the greater good as well with a 100 percent capital gains tax (perhaps minus the inflation rate).

Indeed, to substantially reduce the blue sky and bubbles in our financial and real estate markets and have them be much more stable and equitable, I favor a 100 percent capital gains tax which would further mop up and reduce a destructive revenue source that seeks something for doing nothing of value.

High taxes on excess rents, high marginal taxes on unduly high incomes and a 100 percent capital gains tax all assets target excesses that are often not truly "earned" in a meaningful sense, but are really just windfalls people unproductively pursue, creating inequities and instability as they go.
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Capital gains = market value - (PV of reasonable estimate of future dividends + retained earnings)

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Kimball Corson
07/28/2012, Pago Pago, American Samoa

Europe heads for another recession and that means another one is likely not to far behind for us, especially with China slowing down. Europe's recession could, as I said, tip over the US economy and make my prediction of Obama's re-election simply wrong. Otherwise, I think he will be re-elected for the reasons I explained. Too, we have the economic impact of the drought and the damaged infrastructure (by the weather) which have not been factored in yet. We can only hope we don't get another dust bowl as in the 1930s.

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Kimball Corson
07/28/2012, Pago Pago, American Samoa

A Disturbing Prospective Confluence of Events

Europe faces an economic abyss as it enters yet another recession and faces the prospect of a complete or partial financial collapse. Rating agencies are quickly down grading the principal European banks and European national finances. We edge closer toward European collapse. European leaders are unable to resolve their problems. The prospect of a depression on the Continent is being talked about less and less in the shadows these days. But if that occurs and China and Japan continue to slow economically as rapidly as they are, can the US stave off another recession or worse, another Great Depression, given our posture? The history of the 1930's seems poised to repeat itself. I explain.

Two additional factors point in that direction. First, global warming and its attending weather changes of heat and drought are beginning to impact our national food production and to threaten us with another great dust bowl on the American continent. Our unrepaired infrastructure sags from the weather changes. We are basically unprepared. Food lines and worldwide hunger could well attend an American agricultural disaster or collapse in the years immediately ahead. The impacts, as came to pass in the dust bowl of the Great Depression, are cumulative. Their effects are cumulative as well.

Secondly, too much in America is too badly out of whack for us to survive well or stand strongly against such adversity - from our troubled banking system, to our excessive debt and budget imbalances, to the daft Republican party which blocks all useful change, to our unenforced and lawless legal system, to our corrupt and ineffective national, state and local governments, to our aged infrastructure in disrepair, to our inane and foolish tax system, to our collapsing union and other pension systems, to our failing national postal service, to so much of our work force being already unemployed, to our multiple wartime misadventures, to our bubbled up stock and financial markets, to the mega trillions of dollars worth of derivatives outstanding here and in Europe which cannot survive a realized systemic risk like that which is developing, to our over extended, sagging social safety net, to the mess that is our national health care system, to our troubled system of public primary and secondary education and so on virtually ad nausium.

We are the gang that couldn't shoot straight. We are simply not up to the prospects we face. We can't cope. We are invitations to disaster in the best of times. We cannot handle what seems to be coming.

America will likely relive something like the 1930's I do believe, with a dust bowl and a Great Depression. We are headed toward a perfect storm with the confluence of events I foresee and have outlined here.
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(I worried about this economic confluence of events a year or so ago, but now, the likelihoods are greater then back then and too, global warming and its weather consequences are serving up drought and crop failure in addition.)

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Kimball Corson
07/25/2012, Pago Pago, American Samoa

Nietzsche's Eternal Recurrence

Nietzsche somewhat tentatively argued existence posits an eternal recurrence. The idea, which is important for Thus Spoke Zarathustra, is stated thusly:

"[T]ime is infinite, but the things in time, the concrete bodies, are finite. They may indeed disperse into the smallest particles; but these particles, the atoms, have their determinate numbers, and the numbers of the configurations which, all of themselves, are formed out of them is also determinate. Now, however long a time may pass, according to the eternal laws governing the combinations of this eternal play of repetition, all configurations which have previously existed on this earth must yet meet, attract, repulse, kiss, and corrupt each other again . . ."

Nietzsche finds this concept "horrifying and paralyzing", referring to it as a burden of the "heaviest weight" imaginable. He honestly professes that the wish for the eternal return of all events would have to mark the ultimate affirmation of life:

"What, if some day or night a demon were to steal after you into your loneliest loneliness and say to you: 'This life as you now live it and have lived it, you will have to live once more and innumerable times more' ... Would you not throw yourself down and gnash your teeth and curse the demon who spoke thus? Or have you once experienced a tremendous moment when you would have answered him: 'You are a god and never have I heard anything more divine.'"

Nietzsche argued that merely come to peace with the idea of eternal recurrence, but to embrace it, requires amor fati, "love of fate":

"My formula for human greatness is amor fati: that one wants to have nothing different, not forward, not backward, not in all eternity. Not merely to bear the necessary, still less to conceal it--all idealism is mendaciousness before the necessary--but to love it."

Another's take is different. Not even an infinite time span is enough to necessarily play out a sufficient large but finite complex combinations of recurrences. As George Simmel has explained a finite number of recurring states need not repeat within an infinite amount of time:

"Even if there were exceedingly few things in a finite space in an infinite time, they would not have to repeat in the same configurations. Suppose there were three wheels of equal size, rotating on the same axis, one point marked on the circumference of each wheel, and these three points lined up in one straight line. If the second wheel rotated twice as fast as the first, and if the speed of the third wheel was 1/π of the speed of the first, the initial line-up would never recur. Simple differences in the period of occurrence would block recurrence."

But does Nietzsche prevent that with the idea of recurrence precluding different periods or rates of reoccurance in order to have recurrence hold or must consideration of all possible combinations and rates of occurrence prevent that and compromise recurrence. That is the heart of the matter in my view.

I think Nietzsche is incorrect and Simmel's analogy does not apply for several reasons. The key one is all whose lives that interact with ours would have to also have their lives be in sync with ours and they in turn would have to be in sync with others in their lives in an almost infinite mosaic of coordinated and recurring interactions, but this requires everything and everybody simultaneously recur, I believe.

This is a tall and quite fantastical order. Complete recurrence is too unlikely. But O.K. then, if it is not complete, then can it be true recurrence or specifically what reoccurs and what doesn't. The idea of recurrence stands compromised.

This is not to say our own ingrained propensities and the instincts of our subconscience do not serve up to us repeated and similar experiences; only that those experiences are not always exactly the same. That is a different sort of fate, but one I can accept.

I step away from the idea of Nietzsche's recurrence for these reasons and reject Fate in his form because if recurrence fails so must this conception of fate.
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You may now roll your eyes out of your head and back to their normal positions. And don't ask about the photograph either.

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Kimball Corson
07/24/2012, Pago Pago, American Samoa

Romney's Campaign Positions

Romney spends a lot of time attacking Obama and defending himself. Less time is spent spelling out his and his party's positions. There is good reason for that. Those positions are damaging to America and not very popular.

I think too many independents and a growing number of more moderate Republicans don't particularly like Obama but they are catching on to the Bush/Romney/Norquist foolishness and agenda and won't bite on it: America does not need more tax cuts for the rich (20 percent), to have the inheritance tax eliminated, to have the deficit cut precipitously, to have the capital gains tax cut (should be 100 percent in my view), to have the ACA repealed, to have the social safety net seriously compromised or destroyed, to have Social Security, Medicare and Medicaid cut and to have other follies adopted. That is the not so hidden agenda of Romney and his party.

Are you on board with it? Do you buy into Rush Limbaugh? Are you a Republican? If so, you should rethink matters carefully. America doesn't need a rich oligarchy controlling government. It needs honest, knowledgeable politicians willing and able to fix things and be fair about it. My views in a nut shell.

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