Coyote Blog

I could drive a Caterpillar D6 to work and still use less fuel than most folks do in their commute.  That is because I choose to work less than 2 miles from my office, out here in the northern suburbs of Phoenix (and, when it is not 110 degrees out, there is a bike path that takes a more direct route that is even shorter).  There is no place I would choose to live anywhere near the central business district of Phoenix;  if my job was downtown, rather than in my suburban neighborhood, my commute would increase to sixty minutes per day rather than six.

So, I wonder why the movement of jobs from city centers to suburbs has the Brookings folks so upset.  If your remember, urban planning types lamented the move of homes to the suburbs, saying this increased commuting time and energy use.  Now that the jobs are moving out to the suburbs as well, close to where people actually live (rather than where the planners want them to live), this increases gas use and commute times as well?

Since 1998, almost every major American metro area has seen a drop in the share of employment located downtown as jobs have increasingly moved into farther-out suburbs, exacerbating "job sprawl" "“ a phenomenon that threatens to undermine the long-term prosperity of the nation's vital economic engines, according to a report released today by the Brookings Institution.
...
""˜People sprawl' has long been known for its effect on the environment, infrastructure, tax base, quality of life, and more. Now, we must recognize what "˜job sprawl' means for the economic health of the nation," stated Elizabeth Kneebone, author of the report and senior research analyst at the Metropolitan Policy Program.

"The location of jobs is also important to the larger discussion about growing the number of jobs," said Robert Puentes, a Brookings senior fellow. "Allowing jobs to shift away from city
centers hurts economic productivity, creates unsustainable and energy inefficient development, and limits access to underemployed workers."

The economic productivity argument has me totally flummoxed.  Are they really arguing that companies purposely reduce their own productivity and access to labor?  Why?  This makes no sense, and as the Anti-Planner points out, goes totally unproven in their study.

The only possible argument I can see is a government one, that somehow suburb infrastructure by being more spread out is more costly per person than urban infrastructure.  But this is a point that has never been well proven, and is a classic case of looking at just one variable in an multi-variate system.  Sure, I would guess the total miles of sewer pipe and roads per person is greater in the suburbs than the city.  But the cost of land acquisition, infrastructure construction, and maintenance are all lower.  It is not at all clear how these balance, and the authors do not even try to figure it out.  I would be surprised if the government infrastructure costs per person in, say, Scottsdale is really higher than in Manhattan.

In fact, if there is an issue here, it strikes me it is more a government pricing issue than a demographic issue.  If government is somehow taking a loss on suburban vs. urban infrastructure, then it needs to rethink its tax structure to appropriately set property taxes and fees to match actual costs.  But I think we all know that this is NOT the problem.  Where suburbs are separate cities from the inner cities, those cities tend to have lower taxes and healthier budgets than their inner city cousins, giving the lie to the statement that suburban infrastructure is somehow more expensive (or, as a minimum, that any increase in costs are more than offset by other cost advantages to government of the suburbs).

And all this ignores the individual rights issue of why government should be influencing the shape of people's living and commuting choices at all.  Note the very suggestive words in the Brookings press release -- "Allowing jobs to shift away from city centers hurts economic productivity," as if the location of my employees requires government approval.   It's amazing to me that the children of the sixties grew up to be such control freaks.

The following actually seems real, though I had to check the date three times to make sure it wasn't April 1.  However, it appears that having cut R&D for most new vehicles and concept cars, GM is doubling down on this vehicle for the New York auto show:

No word yet on Federal crash test results, though I guess since the Feds own the company now they can waive whatever requirements they wish.

Postscript: Its probably a pretty cool technology, and I am sure it would be fun to scoot around in.   But the company is hemorrhaging billions of dollars of cash a month and someone is still funding this?  This can't be made in any of its plants, and can't reasonably be sold in any of its dealerships.   GM would have to sell millions of these to have any kind of impact on its financials, and it is highly unlikely there is any such market.  I therefore am waiting for someone in the Obama administration to say "this is exactly the type of thing GM should be doing."

Having heard that Phoenix has been coming down hard on folks for the "crime" of photographing in public places, The Northern Muckraker went to take a look.  The Photography is Not a Crime blog has a partial transcript:

Hester: I'm free to go, correct?

Guard 1: Not yet.

Hester: Am I being detained?

Guard 1: Are you videotaping my building?

Hester: Am I free to leave?

Guard 1: You're are free to leave, go "¦  but if I catch you videotaping the building again you will be arrested by the Phoenix Police Department.

Hester: On what charge, sir?

Guard 1: On charge of "¦ we'll talk to the Phoenix Police Department about it.

Guard 2: You're not supposed to videotape any federal court building.

Hester: What law?

Guard 2: National Security Act.

Guard 1: Oklahoma City, that's why.

Guard 2: It all comes down to Homeland Security and all that.

Guard 1: If you want to talk to our Homeland Security people, we can arrange that right now and we will detain you.

He further observes that the National Security Act, passed in 1947, does not seem to have any mention of video recording.

Update:  Apparently, according to an official Houston PD statement, photographing and taping a police officer is sufficient probably cause for being charged with "assault on a police officer."

Mr. Haven admitted to verbally disagreeing with Officer Dickerson. He also admitted to photographing the police vehicle and Officer Dickerson, and taping their conversation. Under these circumstances, it is not unreasonable for Officer Dickerson to have believed that Mr. Haven's relevant actions, taken as a whole, constituted more than "speech only" [and therefore constituted sufficient probable cause for arrest]

For the first time in years, we have a winner in our bracket contest even before the Finals are played.  Publicity shy Steve Anonymous is the winner, no matter who wins tonight.  He has North Carolina to win, but no one with Michigan State is close enough to catch him.  Congratulations!  As usual, I entered the sweet-16 in the top 10, but then just got crushed on the second weekend.  After having 12 of the Sweet-16 correct, I only had 3 of the final 8 correct.

Timothy Carney has a really interesting deconstruction of the US Chamber of Commerce agenda, and it is a good reminder of the forces at work pushing this country towards a corporate state (similar to France and Germany).  When large corporations lobby via the Chamber of Commerce, it is apparently not for low taxes and free markets, but rather targeted interventions and subsidies.  The article does not have a money quote I could find, but this should give you an idea of what the author discovered in the Chamber of Commerce rankings of Congressmen:

On the House side, it's a similar picture. The Republican with the lowest Chamber score was [Ron] Paul.   Even Rep. Barney Frank, D-MA, who wants to regulate everything except Fannie Mae, scored 14 points higher than Paul on the Chamber's scorecard.

Suffice it to say a ranking system that has folks like Ron Paul last is not based on free markets and small government.  Apparently, the Chamber marks down Congressmen who did not vote for all the bailout and stimulus packages, did not vote for various alternative energy subsidies, and did not vote to expand college loan subsidies.

The victor of almost any new regulation or licensing program is typically incumbents, and particularly large incumbents.  In my own business, there have been a series of new government regulations added over the years, with the effect that an industry formerly dominated by hundreds of ma and pa operators has consolidated to barely four or five players.  No one else can afford the compliance costs.  Licensing is almost always incumbent protection, and the government even frequently turns over the approval process for new entrants to the current incumbents (e.g. medicine and law).  And subsidies are almost by definition support incumbents over potential new entrants.

Postscript: In terms of incumbent protection, keep an eye on carbon permits.  There will be a ton of pressure to give free or discounted permits to current incumbents, as was done in Europe.  This would be a huge structural barrier to competition, as incumbents can service their current market share for free but new entrants (or expansions of existing entrants) will require expensive new permits.

This story in the Nation was a pretty classic example of intended consequences at work:  (via the Anti-Planner)

Thanks to an obscure tax provision, the United States government stands to pay out as much as $8 billion this year to the ten largest paper companies. And get this: even though the money comes from a transportation bill whose manifest intent was to reduce dependence on fossil fuel, paper mills are adding diesel fuel to a process that requires none in order to qualify for the tax credit. In other words, we are paying the industry--handsomely--to use more fossil fuel. "Which is," as a Goldman Sachs report archly noted, the "opposite of what lawmakers likely had in mind when the tax credit was established."

As I understand it, the paper companies had a process that has for decades been 100% biofuel powered, but if they now mix in some diesel fuel, they can get a tax credit under a provision that gives such credits for using a 50/50 diesel/biofuel mix.   Obviously, the indended consequence were to get 100% diesel fuel users to mix in some biofuel, but the law was not written in a way to preclude the opposite.

I found nothing particularly new or unique about this example, but I did find the author's reaction depressing.  Apparently, for Christopher Hayes, this is a failure of private enterprise, not of government:

I've come to expect that even nobly conceived laws will be manipulated and distorted for private ends. But once in a while I hear a story that gives me the queasy feeling that I'm nowhere near cynical enough...

the episode is a useful reminder of the persistently ingenious ways the private sector can exploit even well-intentioned legislation

First, the notion that the whole bio-diesel law was "nobly conceived" is a total hoot.  Basically this law was originally a politically-motivated subsidy of a powerful political lobby (farmers and agribusiness) that most science has demonstrated to have zero impact on its nominal target (CO2 production).  So all that is happening here is that one narrow business interest has hijacked the subsidy intended for a different narrow business interest.   Seriously, I probably should know who this author is, but can anyone who has covered Washington for, say, a week or more really attach  "noble" and "well-intentioned" as modifiers to "legislation" with a straight face?

Second, as a back-check on all the "well-intentioned" stuff, note that there has been no movement to change the original law now that this exploit is understood.  Why?  Because, Mr. Hayes says, the paper industry has a powerful political lobby.  I am having a hard time reconciling the picture of a group of folks in Congress failing to fix an expensive exploit in a law due to political pressure from 8-10 corporations with the view that these same guys passed the original law nobly and with the best of intentions.

Finally, there seems to be a general reaction, particularly on the left, that if Congress were just smarter then this would never happen.  But it HAS to happen.  It is a mathematic certainty.  No one, no matter how smart, can make changes to a single variable in a nearly infinitely large, chaotic, and multi-variate system like the economy and understand fully what the consequences will be.  It's absurd hubris to think otherwise.

Several people have said they have had difficulties with comments.  I don't know if it is a real problem, or if it is just that I was gone on Sunday and a bunch of stuff piled up in the moderation queue  (any comment with multiple links goes to a moderation hold for me manually to check for spam).  I will look in to things.

Update: Several comments on the post about police and photography creepily were sent straight past moderation into spam.  I have recovered them.

Kevin Drum quotes the Financial Times:

US banks that have received government aid, including Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase, are considering buying toxic assets to be sold by rivals under the Treasury's $1,000bn (£680bn) plan to revive the financial system.

....Wall Street executives argue that banks' asset purchases would help achieve the second main goal of the plan: to establish prices and kick-start the market for illiquid assets.  But public opinion may not tolerate the idea of banks selling each other their bad assets. Critics say that would leave the same amount of toxic assets in the system as before, but with the government now liable for most of the losses through its provision of non-recourse loans.

Wow, no one could have predicted this.  Except for anyone who spent 5 minutes with the numbers:

There is an interesting incentive to collude [in the Geithner plan] between banks and investors.  The best outcome for both is for investors to pay a high price to banks and then have the bank kick back some portion to the investor.

I will confess that I did not take the next logical step and consider that the ultimate collusion would be for banks themselves to be the investors, but the incentives for doing so were dead clear (part 1, part 2).

I will stick by my original conclusion -- Taxpayers are hosed at any price.

By the way, can anyone tell me what the evidence has been for the contention Barack Obama is "really smart," because I sure don't see it.  Yeah, he went to an Ivy League School, but so did I and there were plenty of people there I wouldn't trust to run a lemonade stand.  Sure, he gives a nice prepared speech and seems to have invested in that vocabulary building course Rush Limbaugh used to peddle on his show, but what else?  All I see is a typical Ivy League denizen of some NGO who thinks he/she can change the world if only someone will listen to them, who just comes off as puerile if you really spend any time with them.  I will go back to what I wrote on inauguration day:

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.

On several occasions, I have (unpopularly) argued that Ward Churchill's firing from his tenured faculty position at the University of Colorado was unjustified, as the termination seemed to pretty clearly be due to his remarks about 9/11 rather than any academic mis-conduct.

While Colorado has tried to argue that they fired him because his academic work was weak, I have argued that it is no weaker than much of the work done by any number of high-profile racial and gender studies departments  (Duke University being just one recent example).  Racial and gender studies professors are generally evaluated based on their political activism, not their scholarship, so firing Churchill was both wrong on a first amendment basis and wrong because his statements on 9/11 were merely conforming to the standards of his chosen academic discipline.

A jury seems to agree:

A jury found on Thursday that the University of Colorado had wrongfully dismissed a professor who drew national attention for an essay in which he called some victims of the Sept. 11 attacks "little Eichmanns."...

The jurors found that Mr. Churchill's political views had been a "substantial or motivating" factor in his dismissal, and that the university had not shown that he would have been dismissed anyway.

If you don't believe me about activism trumping scholarship as a criteria for hiring racial and gender studies professors, just listen to Churchill's lawyer:

Mr. Lane, Mr. Churchill's lawyer, said his client had been a spokesman throughout his academic career for disempowered people and causes "” a trait, Mr. Lane said, that never made Mr. Churchill popular with people in power. "For 30 years, he's been telling the other side of the story," Mr. Lane said.

Missing are terms like study, research, investigation, etc -- this is activism, pure and simple.  And Colorado knew it and wanted it when they hired him, so it was wrong for them to fire him for it.

I had someone ask me whether the results in this post on the economics of Geithner's latest brainstorm were an artifact of the selected purchase price for the distressed asset of 150.  The answer is no.  Investors are willing to buy this asset on these terms at any price under 175, and banks are willing to sell for any price over 100.  Here is the graph of expected values as a function of the purchase price

Note the taxpayer gets hosed at any price  (kind of the Obama-Geithner update on "unsafe at any speed")  Two things I had not realized before:

• Without competition among investors to drive up the price, a very large percentage of the taxpayer subsidy goes to the investors rather than the banks.
• There is an interesting incentive to collude here between banks and investors.  The best outcome for both is for investors to pay a high price to banks and then have the bank kick back some portion to the investor.

Thanks to a reader who pointed out to me that this post on Obama's economic policy and Mussolini-style fascism went poof.  I have no idea why, but if anyone else notices similar behavior, please drop me an email.  I have never deleted an old post, even when I have been later embarrassed by what I wrote, so posts should not disappear.

The post is back up, thanks to the Google cache, but some comments may have been  lost.  Sorry.

What does the title of the post mean? Well, if you are the Phoenix police (and at least one sorry-ass local judge) it is the name of the new "crime" invented to describe blogging that is critical of public officials.

In what should send a frightening chill down the spine of every blogger, writer, journalist and First Amendment advocate in the United States, Phoenix police raided the home of a blogger who has been highly critical of the department.

Jeff Pataky, who runs Bad Phoenix Cops, said the officers confiscated three computers, routers, modems, hard drives, memory cards and everything necessary to continue blogging.

The 41-year-old software engineer said they also confiscated numerous personal files and documents relating to a pending lawsuit he has against the department alleging harassment - which he says makes it obvious the raid was an act of retaliation.

Maricopa County Judge Gary Donahoe signed the search warrant that allowed at least ten cops to raid his home in North Phoenix on March 12 while handcuffing his female roommate for three hours as they tore the place apart....

The search warrant lists "petty theft" and "computer tampering with the intent to harass" as probable causes. He has yet to see an actual affidavit that lists in detail the probable cause and is skeptical that one even exists.

Hat tip to Radley Balko.   The police are apparently considering throwing in identity theft to the charges. The Bad Phoenix Cops web site is raw and over the top traffics in salacious gossip about senior police officers, but I can't see how that is illegal.  Well, its been a good week here in the Phoenix area -- Sheriff's deputies arrest four people for applauding a speech critical of the Sheriff, and now police arrest a blogger who has been critical of them and confiscate his computer.

Postscript: The author of the blog where I excerpted the article above is a Miami photographer who has been on the front lines of one of an emerging civil liberties issue.  Police have somehow developped a theory, based on no law and in total contradiction to the first Ammendment, that it is somehow illegal to photograph or film police doing their jobs in public places.  They particularly hate such filming and photography when it shows them doing something absurd.  The photographer's ongoing fight with the legal system, all begun when he had the temerity to take pictures of police officers in a public place, is here.  The blog is very well written and thoughtful and seems to try hard to be fair -- in fact, this is one of the I have ever seen someone make of his opposition.

Nobel Laureate Joseph Stiglitz has a great deconstruction of the Geithner toxic asset plan in the NY Times.  If you want to see how the new corporate state works, where the government works with a small group of powerful insiders to the benefit of those insiders and the detriment of everyone else, this is a great example.

Stiglitz walks through how the Geithner plan will operate, and I want to do so as well.  I have added a few tables to help illustrate his example a bit better.

Let's begin with a financial asset that was originally worth $200.    To make things simpler, we'll assume that with the current economy there are now two outcomes for this asset -- a 50% chance it recovers and eventually pays off its full value of $200, and a 50% chance it becomes effectively worthless  (more realistically, there is a range of outcomes, but this does not really effect the following analysis).

The average "value" of the asset is $100. Ignoring interest, this is what the asset would sell for in a competitive market. It is what the asset is "worth."

This is a classic expected value analysis.  At business school, you spend a lot of your time doing these (trust me).  Expected value is just the percentage chance of each outcome times the value of the outcome, on in this case 50% x $0 + 50% x $200 = $100.

So Stiglitz hypothesizes a situation under the new Geithner plan where a private entity might be willing to pay $150 for this $100 asset.  That's certainly a windfall for the financial institution that owns the asset currently, since the asset is only worth $100 on the open market.  But why would someone pay $150?  Well, it starts with this:

Under the plan by Treasury Secretary Timothy Geithner, the government would provide about 92 percent of the money to buy the asset but would stand to receive only 50 percent of any gains, and would absorb almost all of the losses

The actual percentages are 8% from the private purchasers, 8% "equity" from the government, and 84% in a government-guaranteed loan  (Equity is in scare quotes because most investors learned long ago that if you provide 80%+ of the capital in a risky venture, you can call the investment "debt" all day long but what you have really done is made an equity investment).

So let's look at how the purchase cost is divvied up based based on a $150 purchase cost:

But we have already posited how this will come out:  a 50/50 chance of $0 and $200 for the final asset value.  So we can compute the outcomes.

So there is a huge built-in subsidy here.   Now, I don't personally think the government needs to be injecting equity in banks.  But  I understand there are a lot of people who support it.  So perhaps the $50 subsidy of the banks in the above example is warranted.  But why the $6.5 subsidy of Geithner's old pals in the investment world?  This is a pure windfall for them, like finding money laying on the street.   Even Vegas does not tip the odds so far in favor of the house.

I agree with Stiglitz's analysis:

What the Obama administration is doing is far worse than nationalization: it is ersatz capitalism, the privatizing of gains and the socializing of losses. It is a "partnership" in which one partner robs the other. And such partnerships "” with the private sector in control "” have perverse incentives, worse even than the ones that got us into the mess.

So what is the appeal of a proposal like this? Perhaps it's the kind of Rube Goldberg device that Wall Street loves "” clever, complex and nontransparent, allowing huge transfers of wealth to the financial markets. It has allowed the administration to avoid going back to Congress to ask for the money needed to fix our banks, and it provided a way to avoid nationalization.

Update: I posted an update on the plan and these numbers here.

If I have not been convincing enough, Q&O has more on why you really, really should be planning for inflation.

Have you been reading all the follow-up stories documenting the huge cuts in electricity use during Earth hour?  Yeah, neither have I.  That is because there weren't any, at least in the US.  Apparently our local Arizona utilities couldn't really find any statistically significant drop in usage.

But here is the embarrassing fact for the City of Phoenix, though the fact appears to be one year old:

The drop-off in participation might be tied to Phoenix not being a key participant like it was in 2008.

The city spent $3,000 in overtime for employees to run around and shut off lights last year, said the mayor's spokesman Scott Phelps.

We seriously paid for that last year?  Unbelievable.

Somehow the lack of participation was spun in the article as "It was a global vote for action on climate change."  Probably why I could never be a media flack - no way I could say that with a straight face.

By the way, the Coyote family celebrated Earth hour by consuming big slabs of methane-producing cow at Ruth's Chris.

Update: The feed header for the AZ Republic article linked above reads "Arizona shrugged off Earth Hour while much of the rest of the globe turned off lights Saturday night."  Really?  Much of the rest of the globe turned off lights?  I must have missed the evidence, or even mention of this, in the article.

Look, I would love to have a good all-electric vehicle with a 100-mile range.  I love the torque of electric motors, and have had a blast every time I have driven a Prius.  But to get over-focused on all this mess is to miss the real problem American auto manufacturers have failed to deal with (via Carpe Diem)

If went back in time and showed US auto makers this chart in 1995, they would have said "holy cr*p!  We're screwed!"  And they were.  American auto makers still made cars like they were in the 1950's auto industry.  Asian manufacturers made cars like they were in the modern PC industry.

Russel Roberts deconstructs Obama's auto speech.  Well worth the read.

I have worked with folks in the government for years.  One of the common syndromes I see in government officials of all levels is something I call "arrogant ignorance."  I see a lot of it in this administration.

You start to get a sense of why green reporters might not make it in the actual value-creation world when you read stuff like this.  Is it really possible that someone is so pareto challenged that in a bid to make the world a cleaner place, they focus on ... excercise balls?  It is utterly unsurprising after reading this that when Bjorn Lomberg approaches environmental improvement from a prioritization perspective (ie where can we get the biggest improvement bang for the least bucks), greenies look at him like he is from Mars (or worse, Hades).

Our local county Sheriff's deputies arrested four people in a County Board of Supervisor's meeting whose only "crime" was applauding for a speaker who criticized Sheriff Joe Arpaio.

Friction between Maricopa County government officials and a vocal coalition of activists who oppose Sheriff Joe Arpaio reached a new level when authorities arrested four people during a County Board of Supervisors meeting Wednesday.

Sheriff's deputies and county Protective Service officers arrested two men and two women in the middle of the meeting when they stood and applauded a speaker who criticized Arpaio.

Joel Nelson, Jason Odhner, Monica Sanschafer and Kristy Theilen all were charged with suspicion of disorderly conduct and trespassing, said sheriff's office spokesman Lt. Brian Lee....

The crackdown brought the anti-Arpaio activist arrest tally to nine in the past four months.

The article includes video, so you can judge for yourself just how disorderly these people were.  Readers of this site continue to heap on me examples of Arpaio's positive public press (via PR staff paid with my tax dollars) as evidence I am too hard on Joe.  Look, I don't care how inspired his program is for caring for lost dogs with prisoners, at his core he has no respect for basic civil rights.  He is a government thug who distracts potential critics, like a magician, with pink underwear and bologna sandwiches.

Special big props to County Supervisor Max Wilson, who effectively eschewed any civilian control of the police, confirming to Arpaio that he is a law unto himself and accountable to no one:

Supervisor Max Wilson. R-District 4, declined comment on whether he was comfortable with the arrests. "I don't tell the police how to do their job. I don't instruct them to do it or when to do it. They're professionals at it and that's the way they handle it," he said.

J Edgar Hoover would have been quite comfortable with this model.

It is becoming increasingly clear that Obama has made an enormous blunder, driven in part by his best-and-the-brightest-style hubris, in taking personal ownership of GM.  Not because it will be an enormous waste of taxpayer money, because I don't think he cares about a few tens of billions of our money.  It is a blunder because GM may not be fixable, and if it is salvageable in some smaller format, it will require painful compromises by politically powerful groups Obama really does not want to square off with.

Obama's stepping forward and claiming ownership for GM's success strikes me as roughly equivalent to someone stepping forward in March of 1945 to take ownership of the German war effort.   The decision is all the dumber because there was a perfectly good alternative -- ie the bankrupcy courts -- with far more experience (not to mention authority and legislative mandate) to handle these type of situations.

Megan McArdle has a good roundup of what challenges face GM and the Obamacrats.

Update: Obama seems to be hinting that a bankruptcy may still be in the cards.  The key challenge for him will be to deal with the obvious accusation of why he didn't allow this before spending $20 billion or so of taxpayer money.  Expect the administration to be focus-grouping and trial-ballooning various euphamisms for chapter 11 to disguise this problem.

Critics of high executive pay on the soft-core / moderate left (as opposed to the hard-core socialist left) often argue that they are not against large incomes per se.  However, they argue that high executive pay is often the result of a failure in the structure of corporate governance, where a group of cozy insiders on the board and management hand each other compensation packages to which the rank and file of shareholders would be opposed  (a subset of the agency cost problem).

I am somewhat sympathetic to this argument, as I have personally observed instances where I thought boards and management were too cozy by far.  However, no one has really succeeded at proving this hypothesis on executive pay, and in fact shareholders when they have had a chance to vote on such packages have never really made a meaningful dent in them, and one can find a number of private companies where such governance issues presumably don't exist but high executive compensation packages can exist.

Just as an aside, a classic example of this can be found in the fabulous book "Barbarians at the Gate" about the RJR Nabisco takeover fight.  The book does a great job of portraying a company with horrible corporate governance issues that seemed to be used to enrich managers with both salaries and perks, but then observed that the new private owners of the company gave their new CEO a compensation package that might have made the previous executives blush.

Anyway, I am yet again off the point.  My point was to observe that the mainstream left seems to believe that there are corporate governance issues at large corporations that disenfranchise the majority of shareholders vis a vis key decisions involving the company executives.  So I have to ask myself, if this is a real fear, then how does one justify having the President of the United States effectively fire the GM CEO, without any vote or substantial input from shareholders?

Postscript: It is all well and good to be cognizant of agency costs.  Everyone should understand when an employee (or contractor or whatever) has different incentives than they themselves possess.  For example, on my recent backyard renovation, I always kept in mind that my architect wanted to create a showplace that would advance his business and possible get into a magazine.  In general, this alligns our interests, but there were times he pressed for things I did not value and I had to be insistent we were not going to do those things.

However, many folks seem to want to run off to government to do something about agency costs whenever or wherever they are found.  This is hugely dangerous, as Congress tends to have the highest agency costs one will ever be likely to find.

The answer to all of Obama's spending in trillion dollar chunks is obvious.  All we have to do is make our currency work just like that of Zimbabwe, and we will be fine.  We could pay off a trillion dollars with 10 bank notes (I bought just one the other day on eBay for $30 or so).

The problem, of course, is that this is what the Obama administration actually appears to be doing.

I don't generally give investment advice, because I am not really qualified to do so and I make enough mistakes with my own investments that it seems silly to give other people advice.

But these are extraordinary times, and I do want to pass on one general piece of advice: Be ready for inflation.  If you are under forty, you probably don't even remember any real inflation, so you may need to seek advice as to how to handle it.

I just do not see how there is going to be any way to avoid a substantial uptick in inflation over the next couple of years. Crazy-large deficit spending, huge inflation of the money supply, absurdly low interest rates, massive government money-printing efforts, and government-mandated tilts in the balance of power between labor and management towards the unions can only add up to inflation,

Now, if we were really in the next Great Depression, as the Obama administration tried to tell us in its early weeks (mainly in order to pass pet legislation in a mood of total panic), then we might not see much immediate inflationary pressure. But I think most of us are realizing that the whole depression thing was over-sold. We are likely already on the first steps towards a recovery (if the Administration does not keep doing stupid stuff to kill it) and this recovery will become obvious by the third quarter (for their budget, the Obama administration is forecasting this now to be a milder-than-average recession). When the recovery starts, inflation is going to slam home hard and fast.

The smart money already knows this. That is why the government (as is the UK government) is having a hard time finding takers for long-term government bonds fixed at 4 or 5 percent. Such low rates could easily be under water after inflation.

So, find ways to hedge inflation.  Here are some general ideas:

• If you need to borrow money, now is a great time if you can borrow long and fixed (as with 30-year mortgages).  With high inflation, the amount you owe effectively goes down every year.  Borrowers love inflation!
• Avoid buying long-term bonds at fixed rates like the plague.  Again, you want to be issuing such bonds, not buying them.
• Consider various US government inflation-adjusted bonds, or shorter maturities on traditional bonds
• Equities tend to be a good inflation hedge.  Revenues and earnings go up with inflation, so equity prices and dividends tend to as well.  There will be, though, certain industries and companies that will not manage well in this environment.
• Gold is OK, but I have always thought of gold as dead value.  Sure, it can hedge inflation, but it gives no real return.  Commodity producer stocks (e.g. oil companies) may be a better bet.
• International stocks are really dicey in this kind of environment.  Added to the underlying risk of investing in less developed markets is the currency question, which basically boils down to -- we know the US is screwing up its currency, but will other countries screw theirs up worse?  If you think there is a country out there who is less likely to inflate their currency, by all means consider equities and bonds denominated in that currency.  You get the underlying return plus an exchange rate boost   (all things being equal, if the US has a lot of inflation and others don't, the value of the dollar will fall.  Thus investment returns in, say, Euros will return more dollars in the future.)

These are just some ideas, and I am not positive they are all good ones.  Talk to someone more knowledgeable than me, but whatever you do, I think you need to be planning for inflation.

Ward Churchill's civil suit to be reinstated to his teaching post is apparently in court.  Churchill is arguing that the nominal reasons for his termination (mostly shoddy academic work) were not alone enough to have normally justified his termination, and that he was in fact fired for his remarks about 9/11.  This is an important distinction, because tenured professors can generally not be fired for exercise of first amendment rights, no matter how wacky their statements.

In a post that spawned a number of angry emails, I actually said I thought Churchill was fired improperly.  There is plenty of evidence that the Native American studies department at Colorado, and gender/racial studies departments in general, have never enforced any sort of academic rigor, and it is hypocritical to suddenly discover such rigor for this case.  Churchill has been rewarded and promoted historically for much of the same work he is nominally getting fired for now.  Further, examples are legion of heads of various elite university racial and gender studies departments who exercise the same or less academic rigor as Churchill but whom no one is criticizing.   As I mention in my earlier post, Cal State Long Beach hired a paranoid schizophrenic who had served prison time for beating and torturing two women as the head of their Black Studies department.

Frankly, Colorado is getting exactly what they hired.  They weren't looking for a research mastermind.  They were looking for a politically correct hire to fill a void and create a department that made them look nice and progressive on paper.  And that is exactly what they got.

Update: Here is a good example of the academic standards in many racial and gender studies departments, where political activism substitutes for scholarship.  Churchill, by being slack on his research work and publishing but making high-profile and incendiary statements in public, was merely following the template of many such department heads.