Passive Houses

The New York Times last week had an article on passive houses, which require very little energy to heat.

The houses may be too radical for those who treasure an experience like drinking hot chocolate in a cold kitchen.

I personally would miss those experiences. For me, the cost of natural gas is the way to rationalize keeping the house as cool as I like it.

The main idea behind the passive house is to minimize heat escaping from the house while still maintaining a flow of fresh air from outside. This is done by sinking heat from air being blown out of the house to a air being pulled into the house.

There must be limits to the temperature of air this would work on. If you want the temperature inside to be 70˚F [21˚C] while it’s -10˚F [-23˚C] outside, unless the heatsink is ideal, the air coming in will be much cooler than the air going out. The article says the system deals with this using a heating element that uses no more power than a hairdryer. A hairdryer running 24/7 for a month, however, would use well over $100 worth of electricity. Keeping a passive heating system cost efficient depends on not using the heating element too much.

Another problem with this system would be if for some reason you opened the doors in winter and let the house get below freezing. The house is good at not losing heat, but there’s no system to add large amounts of heat if necessary. This really isn’t an objection because I’ve never heard of someone opening the doors and windows in the dead of winter till their house freezes.

At least some elements of a passive house will find their way into mainstream construction. People will learn to accept their foibles just as people accept the need for a CO detector with natural gas heating. We should incorporate passive heating principles into all building design now before oil and natural gas get very expensive.

Winter Solstice

At noon on Dec 18, 2008, I measured the length of the shadow cast by a 12.125 inch ruler. It was 28 inches.
arctan(12.125/28.0) = 23.41˚.

That means the sun is 23.41 degrees above the horizon. I live at 43˚ north. The earth is inclined 23.5˚. So if the north pole is pointed directly away from the sun, at midday I expect the sun to be 90 – (43 + 23.5) = 23.5 degrees above the horizon. Noon isn’t precisely midday, so it was a smidgen lower. If the weather is cloudy for the next few days, I might not see the sun this low in the sky till next year.

This is how the winter holidays got started, and I think it’s a good reason to eat some treats and stop to remember the big picture.

Prices Down Despite Monetary and Fiscal Stimulus

Prices are down at a time when the Fed and Treasury are doing everything they can to stimulate the economy? It’s amazing. The past January I thought they were doing too much, and would have inflation. Look how the 10-year Treasury yield is declining.

I still think they’re overdoing it, and we’re going to see inflation. But today there’s no sign of it. People are buying 10-year bonds with 2.5% yields. Obama may be right to borrow money for infrastructure projects, especially if the infrastructure projects are aimed at breaking our oil addiction and are politically easy to turn off once the economy improves.

Low Treasury Yields Don't Mean We Can Ignore Deficit

The yield on the three-month Treasury hit zero percent briefly. This indicates caution and or pessimism on the part of investors.

The NYT article Investors Buy U.S. Debt at Zero Yield has this comment:

If there is a silver lining to the Treasury market’s gyrations, it is that the United States can borrow money more cheaply from investors, whether they be the governments of China or Japan, or big fund managers. That could help Washington finance various programs intended to revive the ailing economy.

This silver lining is obvious to anyone with plans for a big stimulus package. We should be careful about anything that increases the structural budget deficit because if inflation shoots up, which I suspect it will, these Treasury yields will shoot up too. It will kill the politicians’ plans of tax cuts and new spending programs.

I would suggest the Treasury sell lots of long-term bonds to lock in on these rates, but the Fed is working on a program to drive down long-term rates. It doesn’t make much sense to have the Treasury and the Fed fighting each other.

I am loathe to support any stimulus package, but since the Fed can’t do much more in the area of monetary policy, maybe it’s right to try a fiscal policy solution (i.e. stimulus = borrowing money). We just have to remember in a few years when the economic cycle turns around to do an anti-stimulus in the form of new taxes to retire the debt we’re taking on. I don’t think that will happen, so we need to be judicious with any fiscal stimulus.

Senator Dodd Sells the Auto Bailout on Face the Nation

Senator Christopher Dodd was on Face the Nation last Sunday, arguing for a bailout for the automobile industry.

There’s a credit issue, here, that we’re not really talking about. Consumers cannot buy cars. You have to have a rating -- almost a perfect credit rating to go buy an automobile today.

--Senator Dodd, emphasis added.

Senator Dodd accidentally hit on the main problem. The unstated premise is that consumers have no money. The problem is not lack of easy credit to allow people to buy stuff even if they’re broke. In fact, easy credit is what got us into this mess. The root problem is people being broke.

It’s a moot point, but I disagree with Senator Dodd’s claim that it’s hard for people to get into debt these days. I’m pretty sure if you’re broke, have a job, and have a small down payment, a car dealer can arrange financing even without a perfect credit record. It blows my mind that the US Senate is working on helping to get people into consumer debt.

At another point arguing in favor of a bailout, Senator Dodd claimed that one in ten jobs in related to cars. That certainly sounds plausible to me. Think about what that means. One in ten of us spend a significant portion of our labor maintaining one portion of our transportation system. I would think if we put our minds to it, we could find other means to get people where they need to go without 10% of working society’s effort. If we had a more labor efficient system of transportation, some of that 10% could be making more toys and gadgets, distributing food and education to the needy, or whatever the economy demands.

I am not saying there should be some massive government takeover the of the transportation system. I’m simply saying our current system is not that efficient. Having one in ten of us working on it is not something to be proud of and is not something to use billions of dollars of government money to continue. 10% is a lot of effort to spend, not event counting a potential bailout, on something that results in tens of thousands of fatalities a year, time wasted in traffic jams, and all the indirect costs such as road rage, sedentary lifestyle, and detachment from communities. I don't want to spend any government monies propping up this system.

The Cost of Cars Is One Reason to Make Alternative Transportation Options a Priority

If we were designing our basic transportation infrastructure "from scratch" there is no way we would do it based on having everyone drive cars to do their daily business.

Read the bullet points from No Impact Man's True Cost of Our Cars.

Despite the costs, some people like door-to-door car service, and we should try to make it available to them. We should also make sure alternatives are available to people who aren't keen on spending 17% of their income owning and maintaining something they don't enjoy.

Wisconsin-based Plexus Rated Best Electronics Assembly Company

Plexus Rated Best Electronics Assembly Company by Circuits Assembly Magazine: The Plexus Rx

Quick: Name the best-performing publicly held EMS company. Jabil? Not anymore. Benchmark. Wrong again. Flextronics? Not even close.

That would be Plexus.

The 28-year-old EMS company has shown gross margins of 10.9% over the past three years and a compound annual growth rate of 14.4%. This despite having what in some circles would be considered excessive overhead: too many engineers and a footprint heavy on North American operations.

I've always heard good things about Plexus, but I haven't worked with them. I have worked with another WI-based electronics assembly company, Pensar, and they are the best company I've ever seen when it comes to being flexible on prototype builds. BTW, they're busier than ever these days, despite the economic slowdown in other industries.

Maybe the secret ingredient for these companies is lots of hard-working Wisconsin employees.

A Better Way

You can't glamorize technology development, but you can have fun with it: A Better Way. This is what goes into developing electronic products.

The point of the video is that designs with large parts with hundreds of pins whose function is completely programmable don't lend themselves to schematic diagrams. Schematics are best for parts with few pins that always do the same function.

Thank an Engineer

It seems like engineering gets less respect than other professions. Even things attempting to be positive about engineers come off stupid:

Obama is an Out-of-the-Closet Intellectual

From NYT article: Obama and the War on Brains

The second most remarkable thing about his election is that American voters have just picked a president who is an open, out-of-the-closet, practicing intellectual.

He's hardworking, progressive, and intellectual. We have elected a president who represents Madison.

NYT Comment on the Election and "Real" America

From NYT article: It Still Felt Good the Morning After

The actual real America is everywhere. It is the America that has been in shell shock since the aftermath of 9/11, when our government wielded a brutal attack by terrorists as a club to ratchet up our fears, betray our deepest constitutional values and turn Americans against one another in the name of “patriotism.”

Listen to the Engineers on Energy

From an Electrical Engineering Times article: The Energy Imperative

"Drill, baby, drill!" That's the mantra of those who would continue down the well-trodden path of oil addiction, global warming and national insecurity.

Hopefully we rejected that thinking and electected a batch of politicians who will listen to the engineers. Our economy runs on energy, and we don't have a solid plan for where we're going to get energy just a few years from now. The time to act is now.

Is Hope Moving the Market?

The stock market is up today and so is the Treasury. Usually stocks and bonds move opposite each other. The idea is that when stocks are down, investors are willing to hold Treasuries with lower yields (i.e. higher prices) b/c they don’t want to hold stocks. This inverse relationship is why some investors maintain a balanced portfolio to reduce volatility.

It’s certainly not a rule that stocks and bonds must move inverse of each other. There could be any number of reasons.

I am not knowledgeable enough to tell you what the real reasons are, so I’ll give you a blatantly political guess. Investors are considering the effects of the possibility of Obama winning the election. They think that his policies will improve the economy though domestic spending initiatives aimed at the working poor. They think he will be able to rein in federal spending and reduce the budget deficit, which would result in lower interest rates (i.e. higher bond prices). So, in this story, people foresee better times and it’s driving up stocks and bonds together.

That story is about as logical as typical Wall Street Journal Op-Ed page piece, except it’s coming from the left and I admit it’s just a guess. I really have no idea whether today’s small market fluctuations having anything to do with politics. The fact that this story is plausible to me and hopefully others shows that expectations for Obama (if elected) and the new Congress are incredibly high.

Renewable Energy from MG&E

MG&E has a program that allows you to buy all of your electricity from renewable sources for a few cents extra per kWh.

This five-minute video profiles another family that subscribes to Madison Gas & Electric renewable power and runs two businesses out of the home. I like the fact that they mention other energy saving decisions such as owning only one car. These people remind me of my family, except they don't have an infant and their house is fixed up nicer.

I hope eventually MG&E can transition everyone over to renewable energy. The difficulty will be maintaining non-renewable production capacity for when the sun isn't shining and the wind isn't blowing. As a result, the cost of having over the half the population subscribed to RE might be more than a few cents a kWh. Maybe the coming decades will see new technologies to store energy from renewable sources and thereby obviate the need for non-renewable electricity sources altogether.

Admitting the Problem Is the First Step

Contrary to what John McCain suggested at the beginning of this crisis, the fundamentals of the economy are not strong, and some of the root causes of this crisis had to do with the day-to-day struggles that ordinary people are going through with flat wages and incomes but constantly increasing costs. That puts pressure on them to take out more debt, to use home equity loans, to try to refinance. It created an environment in which this kind of crisis potentially could occur. -Obama on Face the Nation on Sept 28, 2008

This means that, according to Obama, anyone who experiences a decrease in real income is under pressure to go into debt. People living within their means just isn't an option.

The proposed solution is a debt-financed bailout of companies and people who took on too much debt. This actually makes sense if we admit that a highly leveraged economy doesn't work. We're still arguing, though, that a good banking system involves a lot of debt and any time real wages fall it's natural to borrow to maintain consumption levels constant. We're still justifying our addiction. No program to wean us off will work until we admit we have a problem.

A Few Days Considertion by Congress Seen as "Second-Guessing"

From an AP story on Sept 23, 2008:

Investors grew fearful that top economic officials updating Congress about efforts to work out a $700 billion financial rescue plan were facing a greater degree of second-guessing from lawmakers than expected.

Congress is second-guessing efforts to work out a $700 billion bailout? Isn't that like parents second-guessing their child's request for a new toy. Second-guessing is supposed to be when you criticize a decision you don't have the authority to make.

Congress does have the authority to spend money. The Treasury and Fed do not. So I would call it wise and prudent first-guessing.

The AP writer seems to think that those who would like a bailout naturally deserve to have their way. Any debate by the people with that actual authority to approve the bailout is seen as second-guessing.

Congress is right to take its time before taking such a huge decision.

Tying Health Insurance to Employment is Misguided

There has been a lot of talk about health care in connection with the upcoming presidential election. The main difference between the two candidates is Obama would strengthen the ties between employment and health insurance while McCain would weaken them.

Severing health insurance from employment is the correct policy. Linking health insurance to employment is based on good intentions, but in practice it is a burden rather than a benefit to buyers of insurance, especially those of modest means who the policy is supposed to benefit.

Reasons against employment captive insurance:

• If someone gets a long-term illness while on an employer sponsored heathplan, it may be hard to maintain coverage after a job change. The employee can continue on the plan for 18 months, but then is forced to find other insurance. Health Insurance Portability and Accountability Act (HIPAA) provides protections for someone moving to another group policy, but the protections vary from state-to-state if they are getting an individual policy. Companies understandably don’t want to “insure” against a peril that has already happened.
• Even in the absence of an illness, employer sponsored insurance complicates job changes by adding another complication. This affects the boarder economy by decreasing labor mobility.
• If employees want the benefit of employer contributions but want a different plan, they must lobby their HR department to provide another option. This could affect the group rate on the existing policy, so it’s a complicated decision that takes time away doing work.
• Since group rates are based on the health of the entire group, there is pressure for employers to takes steps to encourage employees to make healthier choices to keep everyone else’s premiums down. This is an unsettling intrusion into personal decisions.

Reasons in favor of employment captive insurance:

• A group of people may be able to negotiate a slightly better rate.
• Some people lack the discipline and wherewithal to shop for insurance and pay their premiums on time. (How do these people buy their auto and property insurance?)
• The group gets considered together so that people with lower health risks pay slightly higher premiums allowing the sick to pay slightly lower premiums than their risk profiles justify. Winners of the genetic lottery of health help pay for the losers.

How to disconnect health insurance from employment while preserving some of the benefits of the employment captive insurance:

• Provide tax credits to families and individuals who earn up to three times the federal poverty line to help pay for health insurance and/or fund their Health Savings Accounts. The credit should be phased out slowly with income to avoid penalizing people for earning more.
• End the 18-month limitation on COBRA.
• Expand HIPAA to force insurers to offer a rider that allows people to transfer to similar insurance plans without regard to preexisting conditions that developed since the original policy began.
• Change the tax laws so they don’t favor employer-based plans over individual policies.
• Research ways to transition socialize risk of genetic illness only. This is in preparation for the day when genetic testing can predict chance of illness based on testing in the first week of life.

The upshot of the policy I’m calling for is to a) help the poor pay for their health care and b) stay out of everyone else’s way so people can take charge of their health care purchases.

I'm not endorsing either presidential candidate with this post. I'm calling on McCain to address the moral obligation we all have to help the poor pay for their healthcare. I'm calling on Obama to address the moral obligation we all have to take charge of our own healthcare purchases.

Negative Tone in Obama Fundraising Letter

I wonder what the motivation is behind the repetitive negative language in this Obama fundraising letter. It has nine consecutive sentences beginning with the words “I don’t”.

I don’t want to wake up four years from now and find out that millions of Americans still lack health care because Washington wouldn’t take on the insurance industry. I don’t want to see that millions more jobs have been shipped overseas as we stood idly by and allowed our economy to remain tilted against working Americans.

I don’t want to see that the oceans have risen a few more inches and that the planet has reached a point of no return because we couldn’t find a way to stop buying oil from dictators.

I don’t want to see more American lives put at risk because no one had the judgment or the courage to bring a misguided war to a responsible end. I don’t want to see homeless veterans on the streets. I don’t want to send another generation of American children to failing schools.

I don’t want that future for my daughters. I don’t want that for America.

There probably is a good political reason to write like this, but I can’t imagine what it is.

Now Is the Time to Prepare for a Possible Oil Crisis

Although it’s a good thing for economic growth, I am somewhat disappointed to see oil prices falling. The downside to falling oil is it takes away the urgency to deal with the fact that oil is a finite resource.

People have called the recent rise in oil prices an “oil tax”. This makes some sense because oil fuels our economy. It's a misleading way, however, to model the effects of oil prices. Throughout human history, economic growth has been powered by human and animal muscle. Sun falls on the earth, provides energy for plant food, and we turn some of that energy into human and animal powered labor. We discovered that some of the energy from the sun had accumulated for billions of years and formed fossil fuels. This allowed the industrial revolution, in which production and human population peaked dramatically. A few hundred years of burning fossil fuels is the exception in human history. Calling rising energy prices a “tax” makes it seem like cheap energy is a birthright instead of a brief anomaly in the course of human history.

The issue of long-term energy supply, not the issue of short-term price fluctuations, should be our main concern. The world economy and the supply and distribution chains to provide for the needs six billion people depend on energy. We have a lot of good ideas for alternative energy, but we have no solid plan for how we will provide for everyone once fossil fuels become depleted to the point of being impractical to extract.

Hopefully, increasing fuel prices will be gradual. Those higher prices will encourage drilling for oil in more locations and will encourage finding better ways to get energy from fossil fuels other than oil, such as coal and oil shale. At the same time, these higher prices will encourage development of new energy sources. This hopeful scenario is the probable outcome, but “probable” isn’t good when the alternative outcome is the collapse of world economy. Even this hopeful/probable outcomes isn’t ideal. It has us involved in wars and trading with countries we disagree with for decades to feed the oil the addiction while alternatives are being developed.

The government should initiate taxes to make sure fuel costs stay high. This will encourage development of new energy sources on our own time table, rather than under crisis. The fact that there is no plan should scare the heck out of us. Now is the time to prepare for the unlikely possibility of seeing an energy crisis in the next few decades that is so intense it ends the world economy as we know it. Doing nothing would probably be okay, but let’s be conservative and take preventative action now.

A Very Slow Shift Away from a Culture of Risk and Debt

More articles about saving money have been appearing lately in the personal finance section of Yahoo Finance. This makes me think that the mortgage problems are making people more risk averse, which IMHO is a very good thing.

In that vein, there was an article today with the promising title Some Live Without Credit Cards -- Could You? Unfortunately, most of the article buys into the banks’ way of thinking that some consumer debt is a good thing and that having a high credit score matters. These gems are just a small sample:

• Stop to consider the long-term implications on your credit score.
• A credit card is going to demonstrate how, if you pretty much have an open-end except for a credit ceiling, you can charge varying amounts each month, thus your payment each month is going to be different, and they like to see how you handle that.

If banks like it, I need to run out and do it? Why do we care what banks like to see? I guess because we want to borrow more money. But wait, I thought this article was about living without credit cards.

A third of the article is about things you can do to make banks like you and want to lend you more money. The rest is about people who can’t get banks to lend them money and people who do very stupid things for debt. The tenor is that some use of consumer debt is a smart thing as long as you don’t go overboard. There is only one sentence about the concept of spending only what’s in the bank account. All this is unfortunate, but still, front page articles even questioning consumer debt is a step in the right direction.

Is It the Economy, Stupid?

The economy has been in the news a lot lately. GDP growth is slightly lower than average. Unemployment is slightly above normal structural unemployment. The news coverage, however, often incorrectly says the economy is in trouble.

Even worse, some coverage of this non-problem suggests it’s the main issue in the presidential election. No one can do anything to stop the economic cycle of expansion and contraction or the quarter-to-quarter ups-and-downs of markets. Nevertheless this is the stuff that politicians and media talk about.

One reason for the perception that things are worse than they are is that the problems are narrowly concentrated in areas where people turn for safety. Usually when the economy contracts or stagnates, investments in growth industries are most affected. If it’s bad enough, it can spill over into normally stable areas and depress real estate prices and cause bank failures. The present situation is reverse. The areas that people thought were safe, i.e. mortgage backed securities and real estate, have been hurt while the rest of the economy does okay. This situation is psychologically worse than in 2000-2002 when the tech bubble deflated. In that bubble, people seeking high risk/return suffered losses. In the RE bust, people seeking safety suffered losses.

Another reason is that too many people are living on the edge counting on most things to work out in their favor. When the inevitable sickness, emergency, contraction in GDP, or whatever comes, it’s a crisis that demands a government response. This way of thinking is bad on many levels.

• It takes valuable time away from issues that the government actually can do something about.
• It makes people feel dependent on the government.
• The government doesn’t do as good a job as people looking out for themselves.
• No matter how good the government is, there will always be ups-and-downs in life. Not planning ahead always results in problems.

Someone needs to tell politicians and the people who cover them that managing the normal ups-and-downs of the economy is not the president’s number one job function.

Health Effects of Wireless Technology

As part of a viral marketing campaign for their Bluetooth headsets, Cardo Systems created an illusion that several mobile phones next to one another could pop popcorn. It's interesting that they would use this illusion to promote a product that involves putting a transmitter next to your head. I guess any publicity is good publicity, as long as we get their URL right in our links.

We know the thermal effects of a 1/4 W transmitter aren't significant, but we don't know for sure about the athermal effects. I first saw a 1 GHz handheld transmitter in a magazine in the late 80s. Handheld 1 GHz was new technology then. (Modern mobile phones operate a 0.9 and 1.85 GHz. Bluetooth operates at 2.4GHz.) The magazine warned users to hold the unit far away from their heads when they pressed the transmit key. Gradually, over about 20 years, people seemed to forget about the possibility of long-term athermal effects. I am not sure whether there was some research published that said there are no significant athermal effects from 1 to 2 GHz signals, or if people just forgot about the possibility.

On one hand 1/4W isn't very much compared to 100,000W FM radio stations people have been exposed to for decades, but mobile phone frequencies are 10 times higher and people hold the phones right up to their heads. I would not be completely shocked if there turns out to be some long-term health effects.

Borrowing Binge Hangover Remedy

The National Association of Home Builders has created a website explaining the new $7,500 tax credit provision in Congress' latest RE bailout package. You have dig to into their website to see where they admit that the credit operates like a loan and those who take it will be required to pay $500 extra in Federal taxes for the next 15 years.

The Problem: In 2005, unscrupulous people encouraged people to buy more house than they could afford. The government went along with it thinking that more ownership, even highly debt-leveraged ownership, was always a good thing.

The Washington Solution: In 2008, unscrupulous people are encouraging people to buy more house than they can afford. The government is going along with it and even providing tricky tools to help them do it. The treatment for a borrowing binge hangover is a hair of the dog that bit you.

I wonder how much it costs the IRS to keep track of who got this credit up to 15 years ago. I wish the government would work out how much administration plus interest costs and just pay it directly to the special interests. Leave innocent people out of it.

The federal government is helping unscrupulous people suck money from the poor.

Tragedy at the Tennessee Valley Unitarian Universalist Church

I was shocked to hear about the senseless shooting at the Tennessee Valley UU. There are sad stories in the article. There is an account of how someone in the congregation died protecting children.

The title of the article focuses on the shooter’s political motivations for the crime. Supposedly he did it because hated “liberals”. I suspect, however, that his motivations were 99% violent insanity and only 1% political.

My congregation, FUS of Madison, is having a vigil. It awful to think that this tragedy could have happened here, or anywhere. I can’t imagine how hard it is for people who directly affected.

The Tennessee Valley UU congregation is in our thoughts.

1990s "Mindset of Global Convergence" Was Absolutely Right

I heard this quote on a Meet the Press interview with Obama from this past Sunday. It's from an article critical of Obama.

The great illusion of the 1990s was that we were entering an era of global convergence in which politics and power didn't matter. What Obama offered in Berlin flowed right out of this mind-set. This was the end of history on acid.

Since then, autocracies have arisen, the competition for resources has grown fiercer, Russia has clamped down, Iran is on the march. It will take politics and power to address these challenges, the two factors that dare not speak their name in Obama's lofty peroration. --David Brooks

I completely believed in this global convergence, and I'm sad it hasn't come true yet. Technology was going to obviate the concept of spoils of war. The nation state would decline. War would end. We engineers would all be deka-milionaires. It's not going the way I had hoped, but I don't want to go back to the bad old days. If we fight competition for resources with power politics, i.e. more fierce struggle for scarce resources, we all lose. Some people will win one more generation of an unsustainable lifestyle, but that's not worth fighting for.

In the absence of a better plan, what Brooks dismissively calls the 1990s mindset of "global convergence" is the correct mindset with which to approach foreign policy. The Bush policy has been to argue it's a completely new world now because the world has never seen a massacre of innocent civilians prior to the Sept 11 attacks.

That's the old world. The new world is still a work in progress. The 1990s mindset of global convergence is a good place to start. Obama seems to understand how human history has operated and to understand that maybe another world is possible within our lifetime.

Obama and the Economy on Meet the Press

On Meet the Press this Sunday, Obama said he is concerned about the "the failures of the economy, despite the fact that we grew for seven years, to provide rising levels of income and wages for the American people, I think, indicates the degree to which we've got to fundamentally shift how we approach economic policy."

I wish Brokaw had grilled him on specific policy shifts. Getting lower incomes to rise in parity with GDP is a great goal. How do we achieve it?

Obama:

It is true that there may be some folks who didn't make the best decision that will still benefit from the home foreclosure plans that have been put forward. But keep in mind that many of these folks were not so much speculators as they were probably in over their heads. They tried to get more house than they could afford because they were told by these mortgage brokers that they could afford it.

In other words he doesn't want to bail out investors, only the foolish. I hope the next foolish thing people do doesn't cost so much.

He goes on about doing this will help keep houses expensive, which is totally false. Prices are determined by supply and demand. Price supports would work by restricting new construction and paying people to leave their houses vacant and unrented. That would create a real shortage to justify the speculative prices we have now.

All of this is just talk, nothing real. The Fed will continue to pursue a loose monetary policy, allowing inflation to be higher than it was for the past ten years. Real estate prices will fall to historic norms, and the pain will be masked by the inflation. Let's just hope the fed doesn't stay too loose, or will end up with another speculative bubble and another bailout for the foolish in about ten years.

Existing Home Sales Blamed for Stock Market Decrease

Lower existing home sales numbers may have played a role in causing the stock market to decrease two percent yesterday. That's funny to think about. Our economy is partially dependent on people trading existing houses with one another. The houses are durable. They're going to be around for a long time, regardless of who owns them. What the economy needs, though, is for people to trade them with one another frequently. We can't have the same people just continuing to own the same house for a long period of time.

I am not knowledgeable about exactly why some observers see people trading houses as a positive thing. Maybe this is just an idea that the real estate and finance (FIRE) industries have promoted because they get a cut of most residential real estate transactions. If people are voluntarily giving Realtors and banks their money, maybe this bit of GDP is as legitimate as if people were voluntarily giving their money to buy a new toys.

It's more likely related concerns about keeping real estate liquid, which is important for people who own/owe debt collateralized by real estate.

Whatever the reasons, it would be good for our economy not to be dependent on people moving house frequently.

Obama Should Stick to the Message of Hope

You've heard of mental depression; this is a mental recession. We may have a recession; we haven't had one yet. We have sort of become a nation of whiners. You just hear this constant whining, complaining about a loss of competitiveness, America in decline.

--Phil Gramm

Phil Gramm is right. There is no recession. The economy is growing.

He didn't say this but I guess what he meant was that it's a figment of your imagination, these high gas prices. When people are out there losing their homes and property values are declining, that's not a figment of your imagination and it isn't whining to ask government to step in and give families some relief.

--Barack Obama

If you think GDP has declined over the past few quarters, it is absolutely a figment of your imagination.

What do "these high gas prices" have to do with it? I thought Democrats understood that oil is a non-renewable resource and therefore things made from it must get more expensive as time goes forward until we find alternatives.

What does more affordable property values have to do with it? Prices go up and down. Government stepping in to give relief won't change that.

A hopeful, optimistic candidate would view these developments as opportunities. The spike in gas prices is a reminder that we need to get alternatives in place soon. The lower real estate prices make homes affordable.

If he were explicitly talking about the impact of these things on the poor, I would have a different take. Everyday ups-and-downs of markets are difficult for the poor. That's part of why they call it poor: it means you don't have the money to handle everyday things that come up. I still have hope Obama will become president and institute many difficult-to-dismantle programs that drastically reduce the rate of poverty for generations. But that's not what he's talking about.

Instead his talking about short-term blips the economy: "Why do things have to change? Why can't we have cheap energy? Why can't prices of everything stay the same so we don't have to adapt?"

We are not a nation of whiners; Obama's comments are whining. I can imagine McCain countering with an optimistic response of hope and being adaptive to economic change, and thereby beating Obama at his own game.

Did Greedy Executives Cause the Mortgage Crisis?

From The New York Times article, The Fannie and Freddie Fallout

IT’S dispiriting indeed to watch the United States financial system, supposedly the envy of the world, being taken to its knees. But that’s the show we’re watching, brought to you by somnambulant regulators, greedy bank executives and incompetent corporate directors.
This wasn’t the way the “ownership society” was supposed to work.

Is this true? They're saying our system is based on having responsible bank executives and corporate directors, and their lapse in judgment led to the mortgage problems. If that’s true, we should know that sooner or later a system based on the responsibility of human beings will eventually have problems.

While a system with a small group of individuals charged with doing the right thing would be flawed, our economic system does not even have such a protection. The owners are so divorced from decision making that they end up accidentally encouraging risky and unethical behavior. (Click on the chart to enlarge it.)


It’s a circular org chart with no one in charge. We haven’t appointed one group along the chain to be the guardians of long term stability or even guardians of what’s morally right.

I am not at all against corporate ownership of the means of production. On the contrary, it provides a means for productive ideas to be funded. Although our system of ownership needs improvement, I do not have a plan to improve it. All I’m saying is throwing all the blame on “greedy executives” is empty calories.

CSAs: Sustainable Food

The New York Times ran an article about community supported agriculture (CSA). My wife and I are on our second year as members of Vermont Valley CSA. We have had a very positive experience with it.

• We get organic food for a reasonable price.
• The food is grown locally, so less fuel is needed for transportation. Fuel is cheap, even with today's higher oil prices, but the price doesn't include environmental and political costs. It's better to conserve if you can.
• It helps keep farmland from being paved over by suburban sprawl. Wisconsin has some of the best farmland in the world. Once it's paved over, it's gone forever.
  
• We get whatever they grow. This encourages us to try new foods.
• Weather events such as floods, early/late frosts, and droughts affect how much food we get and remind us how connected we are to nature.
  
• There are events for adults to pick some extra food for their own use and for kids to learn about how a farm works.
  

The freezer fills up in the fall and empties by spring. The season started late this year, but the freezer is starting to fill.

The only downside is that storing and cooking the food takes much more time compared to heating the factory-made food I ate before I got married. I am fortunate my wife enjoys cooking so much.

I just checked her blog about saving money looking for something on frugality and cooking, and I discovered she had almost exactly the same comments. I didn't even know she had seen the same NYT article as I did, but evidently she read it and beat me to it. For pracitcal ideas on saving money using a CSA, check out her article "Get Your Own Farmer".

A Lame Excuse for a Lack of an Energy Policy

“[Measures to conserve energy] will work if you coerce the entire system and if you pretend the American people are Japanese and Europeans,” Mr. Gingrich says. “Our culture favors driving long distances in powerful vehicles and the car as a social expression.”

That’s like saying I will always be 15 pounds overweight because I favor eating good portions of high-fat foods as a form of personal expression. It couldn’t be the simple explanation that I don’t want to go on a diet. It must be a form of social expression. (See the picture of me participating in the social expression going on at Madison's Bratfest this year.)

I thought Republicans were supposed to be for taking personal responsibility for your actions. The social expression excuse is pretty lame. The only way this could get any lamer is if he convinced me that driving long distances truly was his attempt at expressing himself.

Another World Exists - Summer Begins in Madison

A few months ago I noted spring was here, another world is possible, and it exists right here in Madison.

This weekend was the summer solstice, which some people consider the official beginning of summer. My wife and I went to a nice summer solstice (aka Litha) celebration yesterday in Olbrich Park.

There was a bonfire, puppets representing the seasons, organizations with information about things people can do to improve Madison's lakes and streams, and plenty of kids running around playing. Parking contained as many bikes as cars.

If you live in a sprawling community where people commute from homes in one suburb to jobs in another suburb, where people don't know one another and are driven by fear and greed, it's not because of human nature. There are choices about whom you want to live with and how people plan the logistics of their communities. Values of a community reach a critical mass point at which most people go along with them.


Another world is possible, and often you can get to it without a passport.

Debtorship Society Derailed, But Clouded Thinking Persists

The New York Times reports that the percentage of people renting is rising in the wake the of the housing bust.

The article dances around the idea that the bust is reminding people that increasing rates of home debtorship is not a solution to social problems.

Nationally, rents have increased about 11 percent since 2005, when homeownership rates started to decline, though that growth is slowing, according to the Bureau of Labor Statistics.

If these are nominal numbers, it means they've kept pace with inflation. You can go to the Bureau of Labor and Statistics CPI Inflation Calculator and verify this by asking to convert the value of $100 in 2005 into 2008 dollars. It's $111.

That means despite the recent increases in the number of people renting, real rent prices have stayed the same. If there were more people than places to live, we would expect rents to rise. Thanks to the 2000-2006 boom, though, there is a surplus of places to live. That's why the rent price "growth is slowing" while inflation is rising, i.e. real rent prices are falling.

The article mentions a 68 y/o woman with low income, weak credit, and no significant down payment who wanted to buy a house with some friends. She and the non-profit who tried to help her become a homedebtor lament that it was easier to qualify a few years ago. It mentions this after several stories of how going deeply into debt to buy a house destroyed people's lives. The article leaves it to the reader to realize this woman was lucky not be able to get herself into this same situation.

The confluence of factors has largely derailed what Mr. Bush called “the ownership society."

The so-called ownership society is a good idea. A debtorship society is a bad idea. We need to focus on things that help people increase their income and net worth. It's an easier path to get into debt than to improve net worth. The easy path leads to the horror stories in this article. We need to be on the hard path.

McCain's Support for Nuclear Power is Right and Good Politics

As President Bush injected himself into the presidential campaign by calling for increased domestic oil drilling, McCain called for developing 45 new nuclear reactors by 2030.

Drilling for more oil is just delaying the inevitable. Nuclear power, on the other hand, will probably become a key source of energy as oil becomes more difficult to extract in the quantities that the world economy requires. My wild guess is that there's less than a 50% chance alternative energies other than nuclear can provide enough energy. It is most likely that alternative energy technologies will be used to store energy produced from nuclear sources.

I wonder whether President Bush and McCain coordinated this. President Bush tried to lay the blame for higher oil prices on Democratic policies. The attacks might draw regressives, who want to pretend like we can keep consuming our present levels of oil indefinitely, toward the Republicans. McCain's comments appeal to some progressives who realize that nuclear power may be the best option. This siphons some progressives away from Obama, whose support for nuclear power is tepid compared to McCain's.

Calls to Expand Domestic Oil Drilling Are Misguided

President Bush's call to expand domestic oil drilling is misguided. Today's high oil prices are an opportunity to develop alternative energies and to improve energy efficiency.

Oil is a finite resource. Alternatives must be found eventually. We should endeavor to transition to alternative energy sources on our own terms rather than struggling to maintain high levels of consumption for as long as possible.

In a crisis, we can always turn to offshore drilling and drilling in ANWR. In the absence of a real energy crisis, our energy policy should be to allow oil prices to remain high so we can transition to alternatives in an orderly fashion of a period of decades. If we attempt to sustain our current consumption until the last bit of accessible oil is extracted, the inevitable transition to alternatives will be much more painful.

Clinton Says She's the Candidate for People Who Don't Have Their Act Together

Those are all people who have a job. Those are all people who have health care. Those are all people who can afford to send their kids to college. Those are all people who can pay whatever is charged at the gas pump.

They’re not the people I’m running to be a champion for. I’m running to be a champion for all of you and your children and your grandchildren.

--Senator Clinton

In short, people who have their act together want her to quit, but she's fighting on for those who are foundering.

I want government to helping the struggling by giving them a ladder to climb out of their struggles. Clinton's comments don't bring that out. Instead she says the people she'll be asking to help the needy don't want her to run. This seems like a negative message.

This is either bad politics or she calculates there are a good deal of people out there who feel like they can't afford their basic needs without a handout. I hope it's just bad politics.

Some people say that what the US lacks in student test scores it makes up for in ingenuity. If a people are waiting for a politician to pay for their basic needs, they certainly aren't examples of people with a lot of ingenuity. People with ingenuity think of original ideas to work through their problems. If their insurance costs go up, they shop it. For college, they scrape together a little bit of money each month for an ESA or 529 plan. If they can't afford gasoline they choose another transportation method, change jobs, move, or rework their budget so they can afford it.

I strongly support using my tax dollars to help people with these things. We could create a tax credit to help people pay for insurance and college. We can encourage walkable communities so we don’t need as much gasoline. We can fund research into increasing efficiency and developing renewable energy. These things are critical. Globalization will lead to more poverty and economic stratification unless we take steps now. Those steps are to help people help themselves. "Poor thing, you can't afford gasoline; I'll fix that for you." simply will not work.

Are Mortgages Struggles Really Something New?

There's a good post about HELOCs on CalculatedRisk about why a company involved in mortgage backed securities suddenly increased the amount of loss due to HELOCs.

CR says it's more likely that losses rose suddenly than that they rose slowly but FSA "didn't get the news" right away.

CR suggests a reason: People were living off these HELOCs. When house prices went down, they couldn't continue living off them.

I agree with all of this. I disagree with interpretations (other people's not CR's) of these facts that they are a sign of a fundamental problem with the US economy. Rather, I think there is always a segment that doesn't have its act together. These people would struggle regardless of what developments occur in the economy. There are many things in life they don't prepare for. You could similarly find a bunch of stories about people who need disability insurance but didn't buy it.

The HELOC situation gets our attention because we can see the results of failure to plan in default numbers on specific packages of loans. We see those numbers and know many people are struggling. It's similar to the moment of morbid fascination reporters on the excellent show This American Life: The Giant Pool of Money experienced when a mortgage servicer showed them the patterns of people getting barely caught up on their mortgages and then falling further behind. These are lives we're looking at, they exclaimed. When we see a group of people struggling together, we feel for them, want to help them, maybe curse them for failing to plan ahead, and worry that their troubles will become a problem for everyone.

People who argue that the problems experienced by this group will be a problem for everyone need to provide evidence that people are struggling significantly more than on average. So far I'm not believing it. These people get our attention because:

• They come in groups that provide summarized figures.
• The troubles affect major investment firms.
• If you report the facts about their cases selectively, they can appear more sympathetic than other cases of people doing irresponsible things.
• Some people's memories don't go back to the recession of '91, so they think this is totally new.

As a result consumer confidence is at a 20 year low. People think there are serious economic problems. They're willing to use their tax dollars to bail out FIRE (finance, investment, real estate) industries as well as families and individuals who made bad decisions. Before we do that, show me the evidence of serious economic problems? I am just not believing it.

Americans to Saudis: You need our weapons. We need your oil.

Here is a succinct example of why US needs to break its addiction to oil: US Senators Pressuring Saudis to Hike Oil Output.

WASHINGTON (Reuters) - Senate Democrats Tuesday introduced legislation to stop a U.S. arms sale to Saudi Arabia worth $1.4 billion in a tactic supporters said was aimed at pressuring the OPEC country to increase its oil output.

"We are saying that we need real relief and we need it quickly. You (Saudi Arabia) need our arms, but we need you to cooperate and not strangle American consumers," said Sen. Charles Schumer, a New York Democrat.

With the right mix alternative energy and a more energy efficient lifestyle, politicians twenty years from now might be saying, "You need XYZ from us, but we don't need anything from you. So we're urging you to introduce some democratic reforms and give equal rights to women."

For now, though, we'll use our influence to urge them to enable a lifestyle in our country that's unsustainable. Or maybe they'll use their influence to urge us to sell them more weapons.

Getting off this lifestyle is not that hard, but it takes time to build up the infrastructure.

• Make our cities more walkable.
• Build nuclear power plants.
• Design everything for energy efficiency.
• Invest in alternative energy.

US is Behind in Reducing Car Usage

Check out this post on Krugman's blog showing the popularity of various transportation means in various industrialized countries.



It's a shame how US is behind so many industrialized countries in reducing car usage. Part of it is urban planning, but a big part of it is habit.

I wonder how much better Madison is than the US average.

There's a 50% chance the world will have to adapt to using less energy, including fewer cars. There's a 50% chance someone will develop a way to transfer nuclear power into portable high energy density storage vehicle and capture any carbon that results when the energy is released. The latter is a hard order, but people really love the perceived freedom of single-person motorized vehicles. Habits are hard to break.

Real Estate Price "Bottom" Is Academic

You can find more eager talk about "hitting a bottom" or "what a bottom looks like" on real estate sites recently than on porno sites.

Calculated Risk analyzes the latest bottom caller in Housing: Another Day, Another WSJ Bottom Call.

The analysis is interesting, but the question is academic. Real estate prices historically track inflation. It's not like stocks. Stock prices historically grow faster than inflation. They're also more volatile and more liquid. Timing the stock market, if you could do it, could make you rich quickly. Real estate on the other hand does not give you daily price updates, is more difficult to buy and sell, and typically stays around the same inflation-adjusted price.

After the current real estate market anomaly unwinds, prices will return to historical levels, and people will think about real estate ups and downs about as much as people thought about them during the tech bubble. "Oh, real estate prices outpaced inflation by 1% this year. What do I care?"

You will know the market anomaly is over because prices will be their historical parity with rents. Real estate investors will plan to make money on their properties' cash flow rather than by speculating on price volatility.

This focus on bottoms only serves people who sell real estate or provide financing for real estate. They argue that real estate will be the engine of growth in the next economic cycle because they want to make a bailout (or series of small bailout measures) more politically palatable.

Fuel Costs: All Candidates Pander Except for Obama

Democrats Divided Over Gas Tax Break

Senator Hillary Rodham Clinton lined up with Senator John McCain, the presumptive Republican nominee for president, in endorsing a plan to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for the summer travel season. But Senator Barack Obama, Mrs. Clinton’s Democratic rival, spoke out firmly against the proposal, saying it would save consumers little and do nothing to curtail oil consumption and imports.

While Mr. Obama’s view is shared by environmentalists and many independent energy analysts, his position allowed Mrs. Clinton to draw a contrast with her opponent in appealing to the hard-hit middle-class families and older Americans who have proven to be the bedrock of her support. She has accused Mr. Obama of being out of touch with ordinary Americans who are struggling to meet their mortgages and gas up their cars and trucks.

A gas tax holiday is blatant pandering. It encourages the very activity that is the problem: consuming fuel. If we want to offset people's increased energy costs, why not give people their $30 (estimated benefit to the average motorist) regardless of whether they use fuel?

I use a bicycle for my transportation. I can only get my $30 worth of benefit from this if I decide to go on a car trip. The more fuel you burn, the more you save.

McCain and Clinton both support a gas tax holiday, but Clinton takes it even a step further. She wants to increases taxes on oil company earnings. The problem in question is we're consuming more oil than we're extracting. Clinton's proposed solutions increase consumption and discourage oil extraction. Clinton's energy policy gimmicks couldn't be any stupider if she tried. I guess she's trying to exploit people's ambivalence in which they love the product but hate the people who provide it.

The only good thing about these pandering proposals is they won't really do much. The tax holiday wouldn't cost that much. Demand for gasoline is inelastic enough that consumption won't really increase significantly. Her proposal to tax oil companies' profits more than other companies', if somehow a significant tax increase passed, would cause oil prices to rise further and hasten the transition to other energy sources. I don't think that's the intention. She's probably proposing just a token tax, not enough really to affect after tax earnings and depress the share price.

Obama correctly identifies that we need a plan to reduce our oil use. The gimmicks are all about symbolism. Clinton and McCain using symbolism to show they're willing to pander, while Obama shows a willingness to talk about the larger problem. I do not support any candidate for president, but on this one non-issue, Obama is the only one showing the leadership I would expect from a president.

Local Moms Ask for a Play Area in the Mall

My wife and I are expecting a baby. This article caught my wife's eye.

Local Mom Petitions For East Towne Mall Play Area

What are local dads doing while their wives are petitioning for a play area in the mall? No dads were interviewed for the article.

We get commentary from mothers:

Moms like me feel it's very important for our kids to have a safe place to play and relax.

Madison is known for its parks. It's not like there aren't places you can take kids to play.

One of the biggest concerns I have regarding the safety of my baby is exposure to consumerism, especially before they're old enough to have think critically. There is no way I would consider it safe to have my child hanging out in a shopping center play area. I know my child will pick up some elements of his world view from the marketing of consumer products. It's important for me to minimize this.

Another comment from the article:

It would save me gas money because I drive to West Towne for this.

It would save even more money on gas and consumer products to visit the nearest public park instead of a shopping center.

It strikes me that one reason we created the commons, things owned by all members of society, is so we don't have to hope a private land owner creates the space we want. It's unfortunate that these petitioners feel like a private shopping center is their public commons.

The article also touched a nerve because having a baby has shown me that sexism isn't something that disappeared in the 70s. I can't imagine local dads petitioning the mall for a play area. (Info on the petition is at momsinmadison.com, not dadsinmadison.com.) People ask me how my career is going, but they don't ask me if I'm enjoying shopping for baby products. And if they did, I think it would acceptable, maybe even expected, for me to say I think most of the marketing surrounding baby products is rubbish. Expectations are different for my wife.

This is a tough issue because there's nothing inherently wrong with asking a shopping center to add a play area. There's nothing wrong with the petitioners being female. Sexism is not yet history, though, so we need to be careful what we imply in articles like this.

EISA Institutes Efficiency Requirements for AC Power Adapters

I just received an e-mail from a vendor about new efficiency requirements for adapter power supplies. The new requirements are part of Energy Independence and Security Act (EISA) of 2007.

Many consumer electronics products use a wall adapter to convert the high voltage AC that comes from a power outlet into something the product can use. These are almost always optimized for low cost and not for efficiency.

I am glad to see the government has made a good decision on a somewhat esoteric issue.

It's one of many tiny steps necessary to increase efficiency so that we can meet the difficult goal of increasing GDP while decreasing carbon emissions.

The Real Estate Bust Continues

From the Wall Street Journal: Yale’s Shiller: U.S. Housing Slump May Exceed Great Depression

Yale University economist Robert Shiller, pioneer of Standard & Poor’s/Case-Shiller home-price index, said there’s a good chance housing prices will fall further than the 30% drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15% since their peak in 2006, he said.

Some people think that because real estate prices have fallen it means that the bust is over. It certainly is not. For it to be over, prices have to return to parity with rents. We are moving in that direction but are not there yet. I suspect the value/rent ratio will overshoot below historical averages just as it overshoot above averages on the way up.

In addition to the value/rent ratio decreasing, rents are depressed by the increase in housing units without a corresponding increase in people needing housing.

Two other factors complicate the real estate market

• There are ghost neighborhoods of empty housing units all in the same area. Their existence may affect the market more than the same number of empty units mixed randomly with occupied housing.
• In some states the laws prevent banks from collecting the deficit balance if a foreclosed house does not cover the loan. There has been a lot of speculation, often self-serving speculation on the part of people who made the loans, that could cause large numbers of foreclosures among people who are fully capable of paying their bills.

My prediction continues to be that the Fed will pursue a loose monetary policy leading to inflation. Real (i.e. inflation adjusted) rents will decline slightly while real property values plummet. The inflation will mask this situation and make it seem (to people not considering inflation) like rents are going up and property values are stagnant. This situation will continue for several years until rent and property prices are at their historical parity.

Inflation hurts bondholders, but it won't hurt holders of mortgage backed bonds very much, because the value of their bonds decreased along with the value of the real estate collateralizing them.

But what about the Treasury? It's yield is low thanks to a flight to quality. If my inflation prediction holds true, however, we might see the Treasury yield rise significantly.

The politicians running for president are calling for new programs and no new taxes on the middle class. If borrowing becomes more expensive, that won't be an option.

Less Driving Is the Answer to Drunk Driving

According to The Capital Times, Wisconsin has the worst rate of drunk driving in the US. That's unfortunate, but not surprising for Wisconsin.

In the long-run, the best approach to this problem is less driving. We have designed our cities around cars. Many people feel the need to operate a car every day. There is bound to be a percentage of them who are tired, sick, eating, on drugs (such as alcohol), or talking on the phone.

We can and should attempt to stop people from engaging in this distracted driving. The more aggressive we get with enforcement, though, the harder it is to respect people's freedom.

The long-term solution is to give people other transportation options so they can eat, be tired, talk on the phone, take drugs, or whatever they want without it being anybody's business but their own.

Unitarian Universalist Values Are Becoming More Common

According to a the Capital Times, a controversial religious scholar, Marcus Borg, is coming to town this weekend.

For some, he represents the worst heresies of liberal Christianity, wrapped up in the notion that he questions rather than accepts traditional understandings of God and Jesus.

The article says he believes in "intellectual quests" instead of "creeds" and draws on Christianity as a source of inspiration without taking it literally. He sounds like he could belong to a Unitarian Universalist (UU) congregation.

UU values are becoming more common all the time.

Spring Is Here, and Life Is Good

This weekend was the warmest weather we've had all year in Madison. Walking through the neighborhood, there were lots of kids playing and people grilling out. I walked pasted someone chatting with her neighbor about vegetarian recipes.

The nice weather persisted this morning. I commute by bike to work every day, and today was the first morning I've worn a short sleeve shirt. My seven-mile commute takes me by a park and golf course, through Dunn's marsh, through one of Madison's poorest neighborhoods, and through one of the most expensive neighborhoods.

I see some of the same people each day. I travel about 15 miles per hour. That's slow enough to say hi to people along the way and to see details I'd miss in a car. But it's fast enough that I pass from one neighborhood to a nature preserve with deer and foxes and into another neighborhood all in six minutes time.

I spent 22 years away from here before moving back in 2004. A lot of that time was in a sprawling subtropical costal area of the US. It's a completely different world in an area with sprawl and few people with roots in the area. People are more cynical and materialistic. Whenever someone told me an idea was to idealistic or naïve, I would offer the cliché that "another world is possible." I took that on faith. I didn't know it for a fact, but I had to accept that human culture could be better. If people could think it up for the settings of utopian science fiction, maybe one day we would build it.

Now I would change the refrain to "another world exists, and you can get here without a passport in a few hours." It's not utopia. But most people live a happy life and try to make the world a better place for the future. They have hope that an even better world is possible.

Everything has thawed, and people are out enjoying it.

There are places where people know their neighborhood,
Where people live there and they think that life is good.
--Dave Rovics

Environmentalism Is Not at Odds with Individualism

This past week at church and on Wisconsin Public Radio I have heard criticism of excessive individualism as part of the discussion of Earth Day.

I understand where this is coming from, but we should be cautious about thinking of individualism as being at odds with environmentalism. Individualism is necessary, IMHO, for a pleasant life in a densely-populated, environmentally-friendly community.

We need to be aware of how our activities affect other individuals and not expect to be able to do things that cost other people without paying damages.

In the past damage to the environment was easy to see: Emission from your activities caused direct irritation to people nearby. Global climate change is much harder to see. We're not even sure how much of it is due to human activities. (We know human activities are a significant part of it.)

Global warming will be harder to address than previous environmental issues because the very foundation of the world economy, fossil fuels, is the main cause. It's a problem whose impact could be as serious as World War II, and the solution will require completely modifying the world economy, just like WWII.

I am optimistic, though, that people are becoming aware of the problem and willing to make big changes. No one technology or behavioral change will solve the problem. Many small steps, though, will solve the problem.

A Healthcare Plan Focused on the Needy

This morning NPR's Morning Edition did a piece on McCain on Healthcare.

McCain wants to encourage people to manage their own healthcare and "to rein in" spending on Medicare and Medicaid.

It's great to encourage people to manage their own healthcare. Having healthcare linked to people's jobs benefits no one. It gives businesses an extra task unrelated to its business. It creates complications for employees when changing jobs.

The case for reducing government health care programs is less clear. Having something like Medicaid, but not necessarily in its current form, is very important. It's unacceptable to have a segment of the population that is near or below the federal poverty line (around 20%) and therefore unable to afford medical care. Not only is it a moral issue, but it creates problems for the healthcare system when people unable to afford care turn up in the emergency room once their problem has become critical.

It's unfortunate that our choices in politics are

• Republicans who rightly talk about getting government out of healthcare but don't address what will be done for the poor
  
• Democrats who rightly want to help the poor but wrongly want to do it by expanding government involvement

No matter how you slice it politically, around 20% of the population will have a hard time affording basic healthcare. Another 20% can afford it, but can't afford to help other people. The remaining 60% has the ability to help others and absolutely must do it if we want a society where access to basic healthcare is universal.

Critics will say that fewer than 60% has the ability to buy their own healthcare and to subsidize others. If that's true, we're in trouble because that's the bulk of society. There simply aren't enough rich people to pay for everyone else's services.

It's in politicians' interest to convince people that if they jigger the system just right, somehow we can provide healthcare to the poor without paying additional money. It's similar to the dieting industry trying to convince people there are ways to lose weight that don't involve exercising away more calories than they consume.

It's so important, IMHO, to reduce the government's influence in the average person's life that I might prefer McCain's despites its lack of an aggressive plan to help the poor.

Masking the Real Estate Bust Using Inflation

The American Enterprise Institute in an editorial in yesterday's Wall Street Journal calls for expanding the money supply and ignoring the resulting inflation: The Inflation Solution to the Housing Mess

The least bad option is for the Federal Reserve to print money to help stabilize housing prices and financial markets. Yes, use reflation to soften the pain for Main Street and Wall Street. If instead we let housing prices fall another 25%-30% – as predicted by the Case-Shiller Home Price Index – it's almost certain that Washington will end up nationalizing the mortgage business.

I predicted over a year ago (unfortunately before this blog's existence) that this would happen. Lowering rates without regard to inflation has already been the Fed's policy since the housing bust started in earnest.

It's surprising to hear calls for loose monetary policy from a rightwing source. The article says they would rather accept inflation now, though, than deal with excessive action from Congress, which would be harder to undo than a monetary policy decision.

The Fed will allow inflation to happen, not because of rightwing fear of regulation, but because there are quite a few highly leveraged homedebtors who stand to benefit.

The article doesn't mention two other repercussions from the higher nominal interest rates that come with inflation:

• There will be increased pressure to balance the federal budget.
• Higher mortgage rates will intensify that effect of falling inflation-adjusted real estate prices.

These things aren't horrible. They're side effects of over-medication of the economy. This over-medication is a response to living on the economic edge, i.e. excessive risk taking and insufficient savings.

The right thing is for the Fed and Congress to act moderately. The economy is a problem primarily for people who took big risks. Risk takers getting hurt once in a while is supposed to be part of an economic system.

Balance between Freedom, Government Services, and Low Taxes

Here are some comments from me that the Wisconsin State Journal printed yesterday:

In a Thursday letter to the editor, a supporter of motorcycle helmet laws argues they are justified because they save taxpayer dollars by reducing Medicaid costs.

There are three competing goals that cannot all be achieved: freedom, subsidized health care for the poor and low taxes. Most people agree that those are all worthy goals.

By arguing for helmet laws on the basis that they help control Medicaid costs, the writer is saying that Medicaid and low taxes are more important than freedom. If we accept that position, government should attempt to control people's diets and exercise patterns and any risky behavior people wish to participate in.

Although I believe in helping the poor and keeping taxes as low as possible, the goal of personal freedom has to be of paramount importance.

I started thinking about this issue when a politician at a rally told the audience, in the context of discussing a national health plan, that people needed live healthy lifestyles to keep costs down. I am skeptical of a national health plan, but I think there is some merit to the idea of increasing the size of the risk pool and asking the people on the winning side of the genetic lottery for good health to subsidize care for the sick. Hearing a national politician enjoining us to live healthful lives made me think of a side-effect of spreading the risk of illness: The costs of risky behavior are now borne by all of society. It becomes society's business how I live my life. This is precisely contrary to the spirit of the US Constitution.

Predicing the Real Estate Bust and Transferring Risk

There is a good story on Calculate Risk on predicting how long it will take the housing bubble to deflate. If it follows that path of the LA housing bust in the early 90s, it will mostly deflate by 2010 and bottom out in 2013.

This is interesting, but market risk shouldn't matter too much to families buying a residence if the property costs less than the family's net worth.

Consider a family with a net worth of $300k in a $200k house. If real estate falls 15%, their house is worth $170k. They have lost 10% of their net worth. The costs of owning a home (insurance, taxes, maintenance, interest) predominate over movement in housing costs.

By contrast, if their net worth had started out at $30k, the change in housing prices would have wiped them out.

Both the $300k and $30k families should weigh the costs of ownership vs. the cost of renting and, all things being equal, should take the lower cost choice. The difference is the $300k family can afford to accept more risk. The $30k family might forgo owning a home even if it were the less expensive choice if they feel they cannot accept the risk of market fluctuations wiping them out. If they rent, their landlord is making a profit for taking the risk off of the family.

This payment for risk transfer is similar to insurance. Poor people pay for towing insurance on their auto policy until they save up enough money that they can easily handle the costs if their car should need to be towed. Similarly, people increase the deductibles on all their insurance policies as their reserves of emergency cash increase.

Poor people end up paying the rich to carry risk for them. Is this unfair? Should the economic system be changed to reward those who do work rather than those who take financial risk? These questions are way beyond the scope of this post.

The point is people should calculate how much risk their taking versus the benefit they're getting for taking the risk.

In my area this is a moot point when it comes to housing because the costs of renting a home are less than or equal to the cost of owning one. As the bubble deflates (probably in the form of nominal rents rising faster than nominal property values) and it becomes profitable again to be a landlord, people will have to ask if lower property costs are worth the market risk.

What Makes for "Hate-Filled" Rhetoric

The past Sunday guests on the Sunday morning talk shows were still talking about the controversial excerpts from Reverend Wright's sermons that I'm told have been playing on TV a lot recently.

A Clinton supporter, Philadelphia Mayor Mike Nutter, said American's reject "that kind of hate filled rhetoric" and the he would have left the church if the pastor gave a sermon like that.

Obama wasn't even present when these sermons were given. Do we really expect him to be responsible for everything the pastor says? If I worked in politics, would I have to get a copy of the sermons from Sundays when I slept in to make sure the pastor didn't say anything offensive? Would I have to be in 100% agreement with everything the minister said. I don't know how it works at other churches, but if Unitarians were required to agree with everything the minister said, the place would be empty.

An Obama supporter said that the publicizing of these excerpts "was big", yet it didn't affect is popularity. This shows, he said, that Obama can weather a scandal.

It doesn't show that at all, IMHO. The biggest scandal Obama has faced involves comments someone else made years ago while Obama was not present. That means Obama has not faced a scandal.

The comments themselves were not even very scandalous:
1. The Sept 11 attacks were blowback from US foreign policy mistakes in the past. People hope that good foreign policy will prevent future attacks, so it seems reasonable to ask whether bad foreign policy might have had a role in the Sept 11 attacks. I'm not saying the claim of blowback was right. I'm just saying it's a valid question, not hate-filled.
2. The US government mistreated indigenous peoples and African Americans.
Is there even any debate whether this is true?
3. The "drug war" has hurt African Americans disproportionably.
There is room for debate about whether a war-based approach is the best way to deal with drugs, but either way it seems reasonable that the war-based approach that started around 1970 affected African Americans more than other races.

I suppose the hate filled part is when he says, "God damn America" for its role in these problems. It wouldn't be appropriate for someone running for president of the United States to say this, but it seems very appropriate for a religious leader to criticize the US gov't vehemently. Part of the job of the president is to listen to critics of the US government, including vehement critics, and to try to improve it.

The motivation behind this story is probably that there is no other scandalous video available that you can play on TV and have its meaning understood in seconds. That's unfortunate because there's a racial element to the appeal of the Wright videos. Wright's style is not familiar to members of churches that are not predominately African American. Maybe the comments give some people a visceral reaction of: There's someone who doesn't look like me or talk like me condemning the US government. Maybe he would condemn me? If Obama is tied to him, maybe Obama would condemn me or at least not understand my interests.

If that visceral reaction is why this is still being mentioned on the Sunday morning political shows, it's shows the vestiges of racism are still alive and well.

Does the Democratic Party Lack a Coherent Message?

Listening to the Democratic candidates in the primary season has made me question whether the Democratic party has a coherent message. It seems they focus on a laundry list of problems that the government could help people with without any coherent ideology to tie it all together.

I wondered why they can't just take something like the tenets of neo-liberalism and only talk about the anxieties of the day in the context of that ideology. Now that's a coherent ideology, I thought.

Then I realized the reason is that neo-liberals are just a subset of Democrats just as neo-cons are a subset of Republicans. Republican neo-cons believe in energy independence, while the regressive wing of the GOP wants to make life just a little harder for gay people. So you could cast Republican ideology as a laundry list too. It does seem like they have a greater divide yet do a better job avoiding the circular firing squad.

I have to remember that political parties need to be a big tent. A few months ago a retired factory worker told me that neo-liberalism destroyed the world she grew up in, and she's sort-of right. I didn't know what to say. That's why they need a big tent, which sometimes feels like a laundry list.

If broad tents stop working and the political parties collapse under their own weight, maybe that's okay. The framers of the Constitution wanted to discourage political factions. The parties, though, appear to be here to stay, so we have to work within the imperfect system we have.

Energy: One of the Great Challenges for Engineering

The National Academy of Engineering (NAE) created a list of the great engineering challenges for this century and released it in February of 2008. The first three items on their list of fourteen deal with energy production:

• Make solar energy economical
• Provide energy from fusion
• Develop carbon sequestration methods

The world's economy runs on fossil fuels. In general, you need to put in a unit of energy to get a unit of GDP. Some production is more energy efficient than others, but we will not be able to reduce fossil fuel use and CO2 emissions by conservation alone.

There are two problems with getting energy by burning fossil fuels:

1. They contribute to global warming.
2. They are non-renewable.

Since fossil fuels are non-renewable, at some point we will have to accept decreased global economic production or find something else with same energy density and a way to extract that energy easily. Although it would not be as bad as people imagine, accepting decreased production (i.e. a "lower standard of living") is antithetical to a world that feels the need to produce more-and-more each year. Therefore, some source of cheap energy must be found.

Nuclear fusion is a likely source. There must be an energy vehicle with high energy density like gasoline from unlimited nuclear energy. The challenge will be to find an energy vehicle with the energy density of gasoline but that does not emit greenhouse gases when the energy is used. This means we need to create a fuel cell technology that stores energy without burning or we need to find a way to contain the carbon produced by burning.

Solar energy is a piece of the energy puzzle over the next century. In the long-run, however, given how much energy we would like to use, it's hard to see solar being a major energy source.

This is a timely issue with oil prices at record levels. Those prices will encourage the search for more energy. We need to make sure most of that search takes the form of finding sustainable energy and not just exploring for more oil. Exploring for oil is important, but within this century what's now called alternative energy sources will just be energy.

Improving urban infrastructure, which also made the list, could turn out to be the most import energy issue. In new energy technologies don't work out, it would be to have cities designed to be energy efficient. If energy becomes a problem and affects GDP growth, it will be a pity to be using our scare resources to carry 1200kg of metal around with us wherever we go to accommodate cities design in the era of cheap energy.