Coyote Blog

In 8th grade, my son won his science fair with this easy and fun project to measure the urban heat island effect around our city.  I know parents and kids alike can struggle to find a good project.  This is one that not only is interesting, but helps to prove the existence of a phenomenon that many climate alarmists work hard to deny.  Imagine a temperature measurement point in downtown Phoenix, which we found to be 7-10F hotter than the outlying areas just 30 miles away.

What did that thermometer read 100 years ago?  How much of measured global warming is due to this effect, particularly since our airport, the typical place where temperature records are based for large cities, is right in the center of town?

Anyway, we had to kluge together some stuff to make this work, but the Weather Shop now offers a simple kit. The site suggests keeping track of position in a log vs. time, which is what we did the first time and works just fine.  However, the second time through, we got fancy and also had a GPS logger.

We have all heard environmentalists and other American intellectual snobs lamenting that we just are not as smart as Europeans because we have so much less passenger rail.  But because freight and high-speed passenger rail service does not coexist well on the same tracks, urging more passenger rail on the US rail net is effectively asking for more freight to be dumped onto the highways.

Megan McArdle writes:

Moving freight by rail rather than by truck is an enormous carbon saving; one locomotive can haul as much as hundreds of trucks.  It also reduces highway congestion.  Unfortunately, it's hard for passengers and freight to share tracks.  In part, it's difficult simply because it's expensive to upgrade track to handle passenger speeds, but also because freight moves much more slowly, and on an irregular schedule.
I might well argue that if we were simply trying to maximize environmental benefit, we'd ignore passenger rail, and focus on upgrading our freight systems, which sorely need it.  Moreover, these upgrades could largely be made without the massive procedural obstacles that block new high speed rail lines.

But freight rail is not sexy.  It does not excite donors, and it does not excite most of the voters who are motivated by high speed rail.  Politicians win votes by delivering (or at least promising) highly visible improvements; not by silently enhancing the movement of goods from port to Wal-Mart.

A little late Al -- some of us realized this way back when it could have done some good, like before we spent billions of tax dollars and subsidized a stupid industry into being:

ATHENS, Nov 22 (Reuters) - Former U.S. vice-president Al Gore said support for corn-based ethanol in the United States was "not a good policy", weeks before tax credits are up for renewal.
...
"It is not a good policy to have these massive subsidies for (U.S.) first generation ethanol," said Gore, speaking at a green energy business conference in Athens sponsored by Marfin Popular Bank.

"First generation ethanol I think was a mistake. The energy conversion ratios are at best very small.
"It's hard once such a programme is put in place to deal with the lobbies that keep it going."
He explained his own support for the original programme on his presidential ambitions.

"One of the reasons I made that mistake is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in the state of Iowa because I was about to run for president."
...
Gore said a range of factors had contributed to that food price crisis, including drought in Australia, but said there was no doubt biofuels have an effect.

"The size, the percentage of corn particularly, which is now being (used for) first generation ethanol definitely has an impact on food prices.

"The competition with food prices is real."

A couple of thoughts here.  First, many detractors like myself have made the link between Iowa's role in the Presidential nomination process and support for corn ethanol, but it is nice to see a supporter confirm the link.  Second, I wonder how many other scientific opinions Gore holds where political expediency blinds him to the reality of the data?  I can think of at least one big one....

As can be expected, the media really did a poor job of covering the GM IPO, consistently underestimating the total public cost of the bailout (e.g. no one is mentioning the $45 billion in tax-loss carryforwards GM was allowed to keep, against all precedent).

But the real cost of the handling of the GM bankruptcy is in 1) the terrible precedents it set in hammering secured creditors to the benefit of favored political allies of the Administration and 2) the loss of the opportunity to get billions of dollars in production assets out of the hands of the people who have be sub-optimizing them.

It was this latter issue I have focused the most on, particularly in this post where I argued for letting GM die.  I said in part:

All these management factors, from the managers themselves to process to history to culture could better be called the corporate DNA.  ...

Corporate DNA acts as a value multiplier.  The best corporate DNA has a multiplier greater than one, meaning that it increases the value of the people and physical assets in the corporation.  When I was at a company called Emerson Electric (an industrial conglomerate, not the consumer electronics guys) they were famous in the business world for having a corporate DNA that added value to certain types of industrial companies through cost reduction and intelligent investment.  Emerson's management, though, was always aware of the limits of their DNA, and paid careful attention to where their DNA would have a multiplier effect and where it would not.  Every company that has ever grown rapidly has had a DNA that provided a multiplier greater than one"¦ for a while.

But things change.  Sometimes that change is slow, like a creeping climate change, or sometimes it is rapid, like the dinosaur-killing comet.  DNA that was robust no longer matches what the market needs, or some other entity with better DNA comes along and out-competes you.  When this happens, when a corporation becomes senescent, when its DNA is out of date, then its multiplier slips below one.  The corporation is killing the value of its assets.  Smart people are made stupid by a bad organization and systems and culture.  In the case of GM, hordes of brilliant engineers teamed with highly-skilled production workers and modern robotic manufacturing plants are turning out cars no one wants, at prices no one wants to pay.

Changing your DNA is tough.  It is sometimes possible, with the right managers and a crisis mentality, to evolve DNA over a period of 20-30 years.  One could argue that GE did this, avoiding becoming an old-industry dinosaur.  GM has had a 30 year window (dating from the mid-seventies oil price rise and influx of imported cars) to make a change, and it has not been enough.  GM's DNA was programmed to make big, ugly (IMO) cars, and that is what it has continued to do.  If its leaders were not able or willing to change its DNA over the last 30 years, no one, no matter how brilliant, is going to do it in the next 2-3.

So what if GM dies?  Letting the GM's of the world die is one of the best possible things we can do for our economy and the wealth of our nation.  Assuming GM's DNA has a less than one multiplier, then releasing GM's assets from GM's control actually increases value.  Talented engineers, after some admittedly painful personal dislocation, find jobs designing things people want and value.  Their output has more value, which in the long run helps everyone, including themselves.

The alternative to not letting GM die is, well, Europe (and Japan).  A LOT of Europe's productive assets are locked up in a few very large corporations with close ties to the state which are not allowed to fail, which are subsidized, protected from competition, etc.  In conjunction with European laws that limit labor mobility, protecting corporate dinosaurs has locked all of Europe's most productive human and physical assets into organizations with DNA multipliers less than one.

I must say I am feeling pretty good about my comments from Inauguration Day two years ago.  Here is an excerpt of what I wrote:

Folks are excited about Obama because, in essence, they don't know what he stands for, and thus can read into him anything they want.  Not since the breathless coverage of Geraldo Rivera opening Al Capone's vault has there been so much attention to something where we had no idea of what was inside.  My bet is that the result with Obama will be the same as with the vault.There is some sort of weird mass self-hypnosis going on, made even odder by the fact that a lot of people seem to know they are hypnotized, at least at some level.  I keep getting shushed as I make fun of friends' cult behavior watching the proceedings today, as if by jiggling someone's elbow too hard I might break the spell.  Never have I seen, in my lifetime, so much emotion invested in a politician we know nothing about.   I guess I am just missing some gene that makes the rest of humanity receptive to this kind of stuff, but just for a minute snap your fingers in front of your face and say "do I really expect a fundamentally different approach from a politician who won his spurs in "¦. Chicago?  Do I really think the ultimate political outsider is going to be the guy who bested everyone at their own game in the Chicago political machine?"

Well, the spell will probably take a while to break in the press, if it ever does "” Time Magazine is currently considering whether it would be possible to put Obama on the cover of all 52 issues this year "” but thoughtful people already on day 1 should have evidence that things are the same as they ever were, just with better PR.   For God sakes, as his first expenditure of political capital, Obama is pushing for a trillion dollar government spending bill that is basically one big pork-fest that might make even Ted Stevens blush, a hodge-podge of every wish-list of leftish lobbyists that has been building up for eight years.  I will be suitably thrilled if the Obama administration renounces some of the creeping executive power grabs of the last 16 years, but he has been oddly silent about this.  It seems that creeping executive power is a lot more worrisome when someone else is in power.

To this last point, the recent recommendations by the Center for American Progress to Obama are pretty chilling.

[The] Center for American Progress today is releasing a report, "Power of the President," proposing 30 executive actions the president can take to advance progressive change in the areas of energy, the economy, health care, education, foreign policy, and national security. "The following authorities can be used to ensure progress on key issues facing the country today: Executive orders, Rulemaking, Agency management, Convening and creating public-private partnerships , Commanding the armed forces, Diplomacy.

The New York Times fleshes out these proposals with some suggestions about policy changes across the board. The ideology of George Soros shines through the Center's report as it justifies this forceful approach to circumvent Congress when it states that:

[The] legislative battles that Mr. Obama waged during his first two years "“ notably on health care and financial regulatory reform "“ have created a weariness among the general public with the process of making laws. And it hints it has not helped Mr. Obama politically in the process.

In other words, when Congress passed a variety of laws Americans became dismayed by the horse-trading and bribes that were resorted to by Democrats to impose these policies on us. Instead of compromise and listening to the American people, Soros counsels that more forceful measures should be used to override the will of the American people.

Coyote, November 10

But what is really happening here is that the dollar is being devalued.  This is one of the semantic quirks that make me laugh "” when Argentina or Zimbabwe do this, its called devaluation.  When a western nation does it, it is called quantitative easing.

Don Boudreaux today:

Fed Chairman Ben Bernanke, fresh from injecting hundreds of billions of new U.S. currency units into the economy "“ and from planning the injection of yet an additional 600 billion such units "“ criticizes the Chinese government for injecting hundreds of billions of new Chinese currency units into the economy ("Bernanke Takes Aim at China," Nov. 18).  Apparently, when Beijing increases the supply of Chinese currency it does so as part of what Prof. Bernanke ominously labels a "strategy of currency undervaluation," but when Uncle Sam does the same thing with U.S. currency units it's called "quantitative easing" and "a move in the right direction."

My 16-year-old son is ranked 28th in the country in the ESPN fantasy football power rankings for 10-team leagues.  Wish he spent as much time on his calculus homework.

Yeah, I can see the Administration has its finger on the pulse of what all Americans feel to be the real, burning issue confronting the TSA.  Specifically:

"It is no secret that the morale of the TSO workforce is terrible as a result of favoritism, a lack of fair and respectful treatment from many managers, poor and unhealthy conditions in some airports, poor training and testing protocols and a poor pay system," said AFGE President John Gage. "The morale problems are documented by the government's own surveys. TSOs need a recognized union voice at work, and the important decision of the FLRA finally sets the process in motion to make that right a reality."

At every airport I have been to lately, there are probably two TSA workers standing around doing nothing for every one working.  Obviously this is a brutal productivity standard, and TSA workers long for the conditions that obtain, say, among municipal road workers where five or six workers stand around doing nothing for every one working.

I tell folks all the time that  99% of the time the problem with bad governance is not bad people in the government (or at least not bad before they entered government) but bad incentives and information.

Take the recent public reaction against the new TSA search procedures.  Its not that everyone in the TSA aspired for a job where they could grope stranger's nads.  Its that the incentives in government make risk management impossible.

Let's look first at the cost side.  How much do internal TSA evaluation and incentive systems value

• protection of individual rights and privacy
• stewardship of taxpayers money

Can we safely say close to zero?  I don't think anyone at the TSA is being denied promotion because they were insufficiently concerned with the fourth amendment.

So what is it that does matter in their incentive system?  I would argue that they have one single, overriding concern -- to avoid an incident for which they can be retroactively blamed as being insufficiently diligent.   If you are confused about how this incentive might arise, Conservatives need only look at themselves.  How many of you have pounded Janey Napolitano for being insufficiently diligent, for example in her "the system worked as it was supposed to" comments.

I spent a lot of time at HBS, in consulting at McKinsey, and in corporate life worrying about incentive systems.  And the absolute first rule, in my mind, is to ignore the official incentive system and explore what really drives behavior.  For example, a company might have a finely balanced set of published performance measures, but if the last three promotions all went to the person who sucked up the most to the boss, the latter will likely influence behavior much more than the published system.

The same is true at the TSA.  I have no idea what their official performance metrics are.  But to a large extent these metrics are irrelevant anyway in an environment where it's impossible to be fired and salaries and promotions have more to do with seniority than performance.   In this environment, unofficial incentives are going to be very powerful, and I am virtually positive the overriding such incentive is avoiding blame due to lack of diligence.

So we should not be surprised if the TSA runs out of control with its diligence in a way that is unchecked by any considerations of cost, privacy, or risk management.  This incentive is so powerful that the only way to override it is either through executive leadership or legislative action.  We'll see if we get either, but trashing privacy and the fourth amendment tend to be bipartisan hobbies so I am not wildly confident much will change.

I have warned many times:

When health care is paid for by public funds, politicians only need to argue that some behavior affects health, and therefore increases the state's health care costs, to justify regulating the crap out of that behavior.

So, don't be surprised to see a lot more of this:

"Too many lives are lost in motorcycle accidents," Christopher A. Hart, NTSB vice chairman, said in announcing that helmets had been added to the board's annual "most-wanted list" of safety improvements. "It's a public health issue."

This nifty quote from Senator Jay Rockefeller got me to thinking:

"There's a little bug inside of me which wants to get the FCC to say to FOX and to MSNBC: "˜Out. Off. End. Goodbye.' It would be a big favor to political discourse; our ability to do our work here in Congress, and to the American people, to be able to talk with each other and have some faith in their government and more importantly, in their future."

This last election demonstrated exactly what politicians don't like about election law when they complain about things like Citizens United.  No, its not the influx of campaign donations-- politicians are perfectly thrilled to be on the receiving end of more money.  The failure in the eyes of politicians was the large turnover in Congress and the losses suffered by many incumbents.  For most in Congress, election law is about maintaining their incumbency.  Any law that makes it harder for them to be criticized in the press or by challengers is good.  Anything that increases public criticism of them is bad.

Apparently, the folks in France are at it again, valiantly trying to retroactively create trademark rights that don't exist.  I saw this link below:

Which leads to this site, which says in part:

When it comes to wine, there is no ingredient more important than location. The land, air, water and weather where grapes are grown are what make each wine unique. That is why we, as wine enthusiasts, demand that a wine's true origin be clearly identified on its label in order for us to make informed decisions when purchasing and consuming wine. This ensures we know where our wine comes from and protects wine growing regions worldwide.

Use the form below to sign the petition to protect wine place and origin names:

I hereby sign the Wine Place & Origin Petition. In doing so, I join the signatories of the Joint Declaration to Protect Wine Place & Origin - Champagne, Chianti Classico, Jerez, Napa Valley, Oregon, Paso Robles, Porto, Sonoma County, Tokaj, Victoria, Walla Walla, Washington State and Western Australia - and a growing list of consumers in supporting clear and accurate labeling to better ensure consumers will not be misled by wine labels.

Some countries like Germany cannot use "champagne" or "Cognac" to describe similar products.  Do you know why?  These conditions were actually thrown in to the Treaty of Versailles at the end of WWI.  Since the US never signed the treaty, it and its citizens and growers are not bound by this restriction.

In the same spirit I demand that:  1) Hamburgers only be made in Hamburg 2)  Franfurters can only be made in Frankfort 3) Wiener Snitzel can only be made in Vienna 4) Hollandaise Sauce can only be made in the Netherlands  5) Boston baked beans can only be made in Boston.  Obviously we consumers are all duped, thinking our hamburger was actually made in Germany.  Had I only known!

I have nothing to add to this takedown, but in case you have not seen it you should really this.  A printed magazine called Cooks Source took an online article written by an author (Monica Gaudio) without the author's permission or any payment.  When the author complained and asked for a small bit of compensation (in the form of a donation to the Columbia Journalism School, lol), the magazine editor fired off this amazing email to the author whose work she stole:

Yes Monica, I have been doing this for 3 decades, having been an editor at The Voice, Housitonic Home and Connecticut Woman Magazine. I do know about copyright laws. It was "my bad" indeed, and, as the magazine is put together in long sessions, tired eyes and minds somethings forget to do these things.
But honestly Monica, the web is considered "public domain" and you should be happy we just didn't "lift" your whole article and put someone else's name on it! It happens a lot, clearly more than you are aware of, especially on college campuses, and the workplace. If you took offence and are unhappy, I am sorry, but you as a professional should know that the article we used written by you was in very bad need of editing, and is much better now than was originally. Now it will work well for your portfolio. For that reason, I have a bit of a difficult time with your requests for monetary gain, albeit for such a fine (and very wealthy!) institution. We put some time into rewrites, you should compensate me! I never charge young writers for advice or rewriting poorly written pieces, and have many who write for me"¦ ALWAYS for free!"

For Monica Gaudio, this must have been a bit like the person who stole your car calling you to complain that the car needed to be washed.  Incredibly, the editor then proceeded to dig the hole even deeper.

I was in discussions with California State Parks over the last few days.  Given that their new earmarked funding source was defeated in the last election, they are facing cuts next year.  A number of parks will again face closure.  As I have many times, I said that I could easily keep many of these parks open under our operations using only the gate fees and no public subsidies.

For the first time, someone explained to me why they could not entertain my proposal.  It is illegal in California to replace any function performed by a public employee with a private contractor.   The only way they could consider private operation of a park is to allow it to close, lay everyone off, let it sit closed to the public for a while, and then possibly reopen it with private management.  And even that approach will likely be challenged in the court.  The public employees unions are committed to allowing parks to permanently close rather than establish the precedent of private management.

More on public-private partnerships in recreation and how private management of public recreation works, here.

San Francisco City Hall, after the 1906 earthquake.  From Shorpy.

Radley Balko tells his frustrating stories about dealing with the IRS.  These stories seemed totally familiar to me because in my business life, I deal with very similar problems nearly every day.  Doing business in 12 states, I don't just deal with the IRS but 12 sales tax agencies, 12 employment tax agencies, 12 unemployment insurance agencies... you get the idea.   Multiply this story times 100 and that is what I spend most of my time on running my business.

Just as one example, 8 years ago Florida switched our company from quarterly to monthly reporting  for sales taxes.  They did this in the middle of a quarter, so the reporting for that quarter was a funny mix of a partial quarter plus one monthly report.  The next year a letter was triggered automatically from their system saying I hadn't submitted two months of reports.  It took me several hours and multiple phone calls and two faxed letters to get them to understand the situation and promise to update their system.  Frustrating but case closed.  Or not.  Their system again triggered a threatening letter to me over the same issue in December 2004.  And then 2005.  And 2006.  2007.  2008.  2009.  This comes up again every dang year.  Every year after hours of work someone swears I have finally found the right person and I would never hear about it again.  But the next year it pops up yet again.  In 2009 they actually sent a sheriff to our Florida location to start attaching assets over the non-issue.

I watched 2081 on video the other day -- it claims to be based on a Kurt Vonnegut's Harrison Bergeron, which I will have to take on faith because I never read that short story.  The film is only 20 minutes or so long, but I thought it was a pretty powerful statement on egalitarianism.  Recommended.

I am thinking about renaming the Chevy Volt the Chevy Bastiat.  Because the entire vehicle concept is based on the hope that people will ignore the unseen.  Specifically, those pushing the vehicle are hoping that buyers will just assume the electricity for the vehicle is free (after all it is not separately metered) and that the CO2 footprint is zero (despite the fact that in states like Michigan, an electric car is essentially powered by coal combustion.  From autobloggreen

We often, though sometimes incorrectly, assume that it's cheaper to operate an electric vehicle than a comparable gasoline auto. Hey, who hasn't? While this assumption generally holds true, electrical rates vary widely across the nation and can throw off the numbers. In some instances, like when Inside Line's engineering editor, Jason Kavanagh, drove the Chevrolet Volt out in sunny California, one discovers that operating a vehicle powered by electricity can indeed cost more than running it with the liquid fuel that pours from a pump.

Earlier, I took down the absurd initial advertising that the Volt got 230 MPG.

Here is a simpler explanation of QE2:  The same people who always get us out of recessions, eg private business people, will eventually get us out of this one.  However, the government has an incredible stake in trying to convince everyone that they actually drive the economy.  Therefore, it is important for the feds to be able to claim credit for any recovery.  Since some sort of natural recovery from the recession is likely in 2011 (and per Mark Perry may already be in progress) the government needs some program that it can credit for the recovery.  Since Congress will not pass Obama's (or Krugman's) desired son-of-stimulus bill, then the Fed must step up to create a plausible high-profile program.

It is a really weird mental block we have against paying out of pocket for medical bills, particularly since this is probably the most, not the least, important thing we can spend our money on.  Having a high-deductible health insurance plan has been a real eye-opener for me.  As in this post from Maggie's Farm, I too have found doctors will very often give a discount for cash.  My son has a great sports medicine guy (he plays 3 varsity sports so we seem to be at the doctor a lot for one injury or another) who gives us a $40 cash rate for a visit.  Further, when he needs X-rays, the radiology place downstairs usually does 2-3 films of the injured appendage du jour for around $35.  The X-ray place has a special cash price book they pull out when I show up.  I shudder to think what rate they charge insurance companies.  And t just think of the piles of infrastructure from my doctors office to the insurance company to Washington DC that would have had to come into play had I sought 3rd party payments for these bills.

And when it comes to the expensive things, it is amazing what price cuts you can find with just a little shopping.  Previously, I had spent less time in my whole life shopping medical care prices than I had price-shopping my last hard drive.  But when my son had to get a CT scan on his head (yes, another sports injury) we saved hundreds of dollars just calling a second place for a quote.  In fact, even mentioning that we were going to price shop the first quote got a few hundred dollars knocked off.  The lack of any rigor in health care pricing is just appalling, and will only get worse as government / single payer solutions crowd out approaches like mine under Obamacare.

One of the things that Ayn Rand did particularly well in Atlas Shrugged was to set the rules of collectivism in motion and see them carried to their logical extreme.  To this end,  I have always considered the hobo's tale to Dagny on the train about 20th Century Motors to be the climax of the book.  It pulls a lot of plot threads in the book together, and the story represents the ultimate expression of how a true socialist society would evolve.  "From each according to his ability, to each according to his need" is taken to its extremes, and rather than brotherhood, everyone ends up hating and resenting their fellow workers.  In retrospect, it seems dead-on prescient of this bit about Greece:

The Greek state was not just corrupt but also corrupting. Once you saw how it worked you could understand a phenomenon which otherwise made no sense at all: the difficulty Greek people have saying a kind word about one another. Individual Greeks are delightful: funny, warm, smart, and good company. I left two dozen interviews saying to myself, "What great people!" They do not share the sentiment about one another: the hardest thing to do in Greece is to get one Greek to compliment another behind his back. No success of any kind is regarded without suspicion. Everyone is pretty sure everyone is cheating on his taxes, or bribing politicians, or taking bribes, or lying about the value of his real estate. And this total absence of faith in one another is self-reinforcing. The epidemic of lying and cheating and stealing makes any sort of civic life impossible; the collapse of civic life only encourages more lying, cheating, and stealing. Lacking faith in one another, they fall back on themselves and their families.

The structure of the Greek economy is collectivist, but the country, in spirit, is the opposite of a collective. Its real structure is every man for himself. Into this system investors had poured hundreds of billions of dollars. And the credit boom had pushed the country over the edge, into total moral collapse.

Jeff Wilser via TJIC:

Let's say a man needs to buy a new pair of shoes. Left to his own devices, he would simply buy shoes in bulk, stuffing his closet with fifty identical pairs of sneakers that will last until he dies.

Since I got plantar fasciitis a number of years ago, about the only shoes I can wear without pain are ASICs running shoes.  Since I work for myself, I can get away with wearing whatever the hell I want to work.  Anyway, every few years, I look up the model number of the shoes I like (it changes a bit each year) and order 2 of each color ASICs has, usually 6-8 pair in all.  This tends to last me about 3 years.

Similarly, when I start running low on shirts, every few years I go to a Lacoste or Polo outlet (whichever I find first) and buy about 10 shirts, one of each color I can find.  This usually keeps me out of the stores for years.  For going out, my wife buys me a new Robert Graham shirt for each birthday and Christmas (much more fun than getting a tie) and this satisfies my need for dressier stuff.  Not sure how I buy jeans -- I have a whole pile of identical pairs I bought some time in the distant past that still seem to do the job.

Most of the time when folks lament about the US's trade deficit, I just yawn.  That is because to a large extent the trade deficit is simply an artifact of an arbitrary accounting definition.  Basically, we define a certain fairly arbitrary subset of total commerce and commercial activity between two countries, and then throw tantrums when that arbitrary account is unbalanced.  At the end of the day, the payments loop has to close - the dollars come back to the US somehow.  Historically, most money from such trade deficits have come back to the US as foreign investments in US assets (think, for the example, Japanese investments in the late 80's in US real estate and high profile companies).

It is amazing that we would complain about such a situation.  First, we should be thrilled that foreigners choose to invest in our productive assets rather than just our manufactured goods.  Second, think about it this way -- if we export a product, we get the foreign money but the product goes overseas.  When foreigners invest in our fixed assets, we get the money and the assets remain here.  It is the outsized political influence of shareholders and workers in a few export-oriented industries  rather than economic rationality that keeps the US Congress so fixated on the "trade deficit."

The one issue I have with the trade deficit is it is in large part tied closely to the budget deficits run by the Feds.   Think about it this way -- let's take the definition of the balance of trade and keep it intact, adding just one single additional export product to the calculation:  US Government debt securities.   Certainly these are products we export, and there is nothing wrong with thinking about them as an alternative way for foreigners to spend dollars vs. buying US exports  (just as we all face the choice of investing for savings or buying consumer goods with our own incremental income).

Last year the US trade deficit was between $400 and $500 billion per year.  In 2009 the US government deficit was something like $1.4 trillion.  Assuming they issued debt securities to fund this deficit (ignore QE for now) and assuming foreigner bought 40-50% of these bods, then we exported as much as $700 billion in US government bonds to foreign buyers.  Now, suddenly, when we consider this one additional export product in the mix, we are running a trade surplus.  This is why currencies like the yuan are not necessarily as undervalued as people (including President Obama) may assume -- the issuance of government bonds creates a huge demand for the dollar, and keeps the value high.  If exporters are truly pissed off about the high value of the dollar vs. the yuan, they should not complain to the Chinese, they should complain to Obama and the US Congress for competing with them in foreign markets.  Though we tend to go through phases where we forget it, saving is a competitive product to consumer goods.

Update: Scott Grannis via Carpe Diem

"The Chinese sell us mountains of cheap goods, then turn around and invest most of the proceeds (equivalent to our trade deficit with China) in U.S. Treasury securities. We get the goods, and we get to keep the money. Then we devalue the dollar, and they lose on their investment. Why we would want them to stop doing this is beyond me, though if I were a Chinese citizen, I would be furious with my government for directing such massive quantities of my country's export earnings to Treasuries.

My first novel, "BMOC," is now on Kindle for $4.99, a substantial discount off the  $17.95 price Amazon has for the dead tree version.  Incredibly, my author royalty is WAY more for the Kindle version even at that price than for the paper version.

Anyway, if you like this site, you might check it out.  The novel is part murder mystery, party comedy, and part business book.   I used to have fun with my friends at business school and later in nconsulting thinking up odd new business models (e.g. coin harvesting from fountains) and this book embodies some of the odder ones we came up with.  Though as wacky as the business model of the main company in the book (called "BMOC" appropriately enough) was supposed to be, since writing it I have had a number of people send me stories of startups pursuing eerily similar approaches to marketing.  Anyway, the book is a light read though with adult language and a tiny bit of sex.

A Marginal Revolution reader asks:

How would you pick a tattoo, if you decided you were going to get one? How would you pick something that your future self is most likely to be glad to have? A favorite piece of art? Follow Leeson's lead and get an economics-related tattoo? Names of family members are off-limits, as are answers like "get a small dot in my armpit that nobody would see."

I could argue that it is impossible to make a political, religious, or personal statement one is 100% sure will still be relevant 30 years hence.  Here is the solution I teach to my kids -- never, ever make a fashion you can't remove (e.g. piercing OK, tattoos not OK).   I have lived through leisure suits and grunge, wide ties and narrow, short skirts and long, tie dye and soft pastels.  Think of tattooing as having a leisure suit permanently bonded to your body.

Some will say this is evading the question, so I will actually provide an answer.  The only thing I might have conceivably chosen to ink my body with at 20 that I could probably still live with today at 48 would be something having to do with my undergrad college (Princeton).   Call it the George Shultz rule.