01/10/2013 archive

I think Mr. Mellish is a traitor to this country because his views are different from the views of the President and others of his kind. Differences of opinion should be tolerated, but not when they’re too different. Then he becomes a subversive mother.

Why The Fight Over The $1 Trillion Coin Is The Most Important Fiscal Policy Debate You’ll Ever See In Your Life

Joe Weisenthal, Business Insider

Jan. 8, 2013, 12:33 PM

(C)ontrary to all these people who say that this is a childish, non-adult proposal put forth by impish trolls, it’s actually quite the opposite. It may be the most important fiscal policy debate you’ll ever seen in your lifetime, because it gets right to the nature of what is money.

This question is central to any discussion about a country’s monetary and fiscal policy, and yet it’s almost never discussed, and virtually nobody understands it.

Almost everyone talking about fiscal policy imagines money to be a commodity of sorts that we can “run out” of if we don’t spend it carefully. In this sense, although we’ve long gotten rid of the gold standard, we’re still shackled with a gold standard mentality, where we think of money as a scarce natural resource that we need to husband carefully, lest one day the bond vigilantes show up at our door, causing us to go broke.

Now the reason I started writing this piece by talking about bananas is that I thought they were sufficiently arbitrary and ridiculous to attract your attention but I had to abandon that since they’re actually much more useful than money- you can eat them and then you’re only dealing with surplus bananas over and above Foster so please ignore any bananas that creep in and mentally substitute Yap Stones or Higgs Bosons that have a slightly different electron voltage.

You see the thing about money is that its only value except as a decorative object is that the government accepts it as payment and (at least in the United States) private vendors are also compelled to accept it as payment for goods or services offered by contract (every transaction is a contract) if the contract is written (the good or service is offered) using money as a medium of exchange instead of directly exchanging some negotiated other good or service.  In common use we call the transaction using money a “sale” and a transaction using something else a “swap”.

Now there are many reasons to use money as a medium of exchange, chiefly transportability and convenience.  Transportability is kind of obvious, you need some serious pockets to haul around Yap Stones, but most frequently suggested substitutes like Gold or Oil (somewhat more banana-like in terms of utility) suffer serious transportability problems, especially in larger amounts.

When we are talking convenience what we are saying is that for the vendor it is much much easier to value his product and sell it if they do not have to calculate an exchange rate for every possible transaction.  How many Goats are a Cow worth anyway and how much time to you want to waste figuring that out?  What we have developed instead is a Market where tokens may be received by the vendor and used by him to purchase other items and relative values are negotiated arbitrarily and automatically by the collective group of buyers and sellers that participate in the Market.  Arbitrary- I decide my Cow is worth 3 Goats.  Automatically- my neighbor will take 2 Goats for his Cow and unless I throw in some Chickens you’ll automatically take his Cow and save yourself a Goat.

See how complicated it gets?  And I deliberately chose Cows, Goats, and Chickens because they get around just fine on their own and you don’t have to stuff them in your Yap Stone pocket.

Now some people also think of money as a store of value, but that is just not true except on a temporary basis.

Let’s say I scratch in the desert around Ur and discover a pot full of Cow tokens.  I’m rich right?  All I have to do is go down to the Market…

Oh, yeah.  Over 5,000 years you say.  Well, at least I can sell them as decorative objects.  And at that they’re probably more valuable today than they ever were as Cows who would also be dead as Keynes in the long run.  If you want to see how a Market like that runs I suggest Pawn Stars and American Pickers.

I’ll give you $500 cash money right now.  Worth far more?  Not to me.  Neither rarity or antiquity represent value.  I don’t have people wandering in the shop asking for Ur Cow tokens every day so I’ll probably have them sitting on the shelf for a while.  Pleasure doing business with you, I’ll have Chumley write you up.

But, this is a good thing.

One of the problems with today’s economy is that Banks and Businesses are sitting around on a lot of Cow tokens instead of productively investing them in, oh… Cows let’s say.  The Cows would produce milk and meat and little Cows.  They would consume Grass from the Grass vendor but maybe I could get part of that cost back by selling him fertilizer.

That is a working economy.

Instead they are just putting tokens in a pot and burying them in the desert.  They are not growing into token trees or Cows but there is this expectation that in the long run you can dig them up and turn them into future Cows which are much less smelly and inconvenient than actual ones.  And as it turns out simply giving them more tokens doesn’t produce anything except more and bigger pots.

Next- more about pots in the desert.

“Punting the Pundits” is an Open Thread. It is a selection of editorials and opinions from around the news medium and the internet blogs. The intent is to provide a forum for your reactions and opinions, not just to the opinions presented, but to what ever you find important.

Thanks to ek hornbeck, click on the link and you can access all the past “Punting the Pundits”.

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New York Times Editorial: Democracy in the House

The only reason that income taxes on 99 percent of Americans did not go up this month was that Speaker John Boehner briefly broke with an iron rule of Republican control over the House. He allowed the fiscal-cliff deal to be put to a full vote of the House even though a strong majority of Republicans opposed it.

That informal rule, which bars a vote on legislation unless it has the support of a majority of Republicans, has been one of the biggest stumbling blocks to progress and consensus in Congress, and, in its own way, is even more pernicious than the filibuster abuse that often ties up the Senate. [..]

But under the majority-of-the-majority rule in the House, Democrats are completely cut out of the governing process, not even given a chance to vote unless Republicans have decided to pass something. Since 2010, there have been enough extremist Republicans in the caucus to block consideration of most of the bills requested by the White House or sent over from the Senate. If President Obama is for something, it’s a safe bet that most House Republicans are against it, and thus won’t bring it up.

Robert Reich: TARP Is Over, But the Bailouts Will Continue Until the Big Banks Are Broken Up — and Washington Knows It

TARP — the infamous Troubled Assets Relief Program that bailed out Wall Street in 2008 — is over. The Treasury Department announced it will be completing the sale of the remaining shares it owns of the banks and of General Motors.

But in reality it’s not over. The biggest Wall Street banks are now far bigger than they were four years ago when they were considered too big to fail. The five largest have almost 44 percent of all U.S. bank deposits.

That’s up from 37 percent in 2007, just before the crash. A decade ago they had just 28 percent.

The biggest banks keep getting bigger because they can borrow more cheaply than smaller banks. That’s because investors believe the government will bail them out if they get into trouble, rather than force them into a form of bankruptcy (as the new Dodd-Frank law makes possible).

That’s why it’s necessary to limit their size and break up the biggest.

This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

January 10 is the 10th day of the year in the Gregorian calendar. There are 355 days remaining until the end of the year (356 in leap years).

On this day in 1901, a gusher signals start of U.S. oil industry

A drilling derrick at Spindletop Hill near Beaumont, Texas, produces an enormous gusher of crude oil, coating the landscape for hundreds of feet and signaling the advent of the American oil industry. The geyser was discovered at a depth of over 1,000 feet, flowed at an initial rate of approximately 100,000 barrels a day and took nine days to cap. Following the discovery, petroleum, which until that time had been used in the U.S. primarily as a lubricant and in kerosene for lamps, would become the main fuel source for new inventions such as cars and airplanes; coal-powered forms of transportation including ships and trains would also convert to the liquid fuel.

Crude oil, which became the world’s first trillion-dollar industry, is a natural mix of hundreds of different hydrocarbon compounds trapped in underground rock. The hydrocarbons were formed millions of years ago when tiny aquatic plants and animals died and settled on the bottoms of ancient waterways, creating a thick layer of organic material. Sediment later covered this material, putting heat and pressure on it and transforming it into the petroleum that comes out of the ground today.

(emphasis mine)

There had long been suspicions that oil might be under [“Spindletop Hill.” The area was known for its sulfur springs and bubbling gas seepages that would ignite if lit. In August 1892, George W. O’Brien, George W. Carroll, Pattillo Higgins and others formed the Gladys City Oil, Gas, and Manufacturing Company to do exploratory drilling on Spindletop Hill. The company drilled many dry holes and ran into trouble, as investors began to balk at pouring more money into drilling with no oil to show for it.

Pattillo Higgins left the company and teamed with Captain Anthony F. Lucas, the leading expert in the U.S. on salt dome formations. Lucas made a lease agreement in 1899 with the Gladys City Company and a later agreement with Higgins. Lucas drilled to 575 feet (180 m) before running out of money. He secured additional funding from John H. Galey and James M. Guffey of Pittsburgh, but the deal left Lucas with only a small share of the lease and Higgins with nothing.

Lucas continued drilling and on January 10, 1901, at a depth of 1,139 ft (347 m), what is known as the Lucas Gusher or the Lucas Geyser blew oil over 150 feet (50 m) in the air at a rate of 100,000 barrels per day (16,000 m3/d)(4,200,000 gallons). It took nine days before the well was brought under control. Spindletop was the largest gusher the world had seen and catapulted Beaumont into an oil-fueled boomtown. Beaumont’s population of 10,000 tripled in three months and eventually rose to 50,000. Speculation led land prices to increase rapidly. By the end of 1902, over 500 companies were formed and 285 active wells were in operation.

Production began to decline rapidly after 1902, and the wells produced only 10,000 barrels per day (1,600 m3/d) by 1904. On November 14, 1925, the Yount-Lee Oil Company brought in its McFaddin No. 2 at a depth of about 2,500 feet (800 m), sparking a second boom, which culminated in the field’s peak production year of 1927, during which 21,000,000 barrels (3.3 GL) were produced. Over the ten years following the McFaddin discovery, over 72,000,000 barrels (11.4 GL) of oil were produced, mostly from the newer areas of the field. Spindletop continued as a productive source of oil until about 1936. It was then mined for sulfur from the 1950s to about 1975.

America’s first documented oil spill

The problem with Michelle Rhee’s report card for public schools

by Traci G. Lee, Melissa Harris Perry Show

StudentsFirst, a school reform lobbying organization headed by education reformer Michelle Rhee, recently released the results of its own national study of education policies by state. According to the results, no state received an A, but plenty scored just barely average, and 11 states received an F.

Each grade is the determined based on three areas: whether a state’s policies elevate teaching, empower parents, spend wisely, and govern well. The report highlights states that provide abundant school choices for parents (i.e. charter schools) and blasts states that fail to evaluate teachers and principals in “meaningful ways.” [..]

But a key area that StudentsFirst leaves out of its grading system also happens to be one of Rhee’s most talked-about issues: student test scores. Maryland, which ranked the highest in Education Week‘s 2012 state report card in terms of achievement and standards, only received a D+ from Rhee. [..]

Rhee’s standards have tied student performance almost exclusively to teacher performance, and as a result has unfairly targeted teachers whose students could not perform well on standardized tests. Unfortunately, what Rhee has left out of her sweeping policy reforms is the fact that a child is not two-dimensional and doing well on a test has little to do with a child’s intelligence or ability to perform well later in life.

While it’s believable that states across the country are struggling to close its schools’ achievement gaps, the criteria StudentsFirst used to grade each state seems to be part of Rhee’s personal agenda to reform schools nationwide using the standards she believed had a great impact during her time as D.C.’s chancellor.

Beware: “Pro-child” groups press corporate schools agenda

by Susan Webb, People’s World

What could be wrong with these self-proclaimed pro-student, pro-child groups? Plenty.

StudentsFirst is headed by Michelle Rhee, former head of the Washington, D.C., public schools. Aro notes that “Rhee’s time as the chancellor of the District of Columbia Public Schools was rife with anti-teacher policies, including illegally firing teachers.” Rhee has also been implicated in test-score tampering at D.C. schools during her chancellorship. Read more about her here.

Amidst a fog of “pro-student” rhetoric, here is just a sampling of “meat” contained in the StudentsFirst policy list:    

• shifting control of public schools away from elected school boards to one-person “mayoral control.” Why? Because, the group says, “Public employee unions invest in friendly school board candidates and expect handsome returns.”
• support for “turnaround” models that involve mass firing of teachers and principals and turning schools over to charter operators and other private managers – the vast majority of which are non-union.
• end all job security and professional protection for teachers. Put them at the mercy of individual supervisors’ whims, prejudices or favoritism. The organization states flatly: “State law should not grant, implicitly or directly, tenure or permanent contracts for PK-12 education professionals.”
• shifting teacher “defined benefit” pensions to individual 401(k) type plans, which put all the risk on the individual. StudentsFirst claims that “today’s district pensions and other benefits are not sustainable” and criticizes them for “excessively rewarding longevity.”

Rhee has refused to discuss funding for her organization, but Reuters reports that StudentsFirst has received big donations from hedge fund managers.

StudentsFirst Spending: National Education Reform Group’s Partial Tax Records Released

June 25 (Reuters) – The national education reform group StudentsFirst, which has set out to transform U.S. schools by introducing more free-market principles to public education, raised $7.6 million in its first nine months – and spent nearly a quarter of it on advertising – according to partial tax records released on Monday. [..]

Rhee, a political lightning rod since she closed scores of schools and laid off hundreds of teachers during her tenure in Washington, has refused to discuss her funding or her donors. The IRS forms released by her organization on Monday cover only the first several months of her work, through July 31, 2011. Updated filings are not expected until the end of the year, though Reuters has confirmed that recent donors include New York Mayor Michael Bloomberg and hedge fund managers David Tepper and Alan Fournier, who have pledged substantial resources to a StudentsFirst partner organization in New Jersey.

The Laura and John Arnold Foundation, funded by hedge fund manager John Arnold, has also pledged $20 million to Rhee’s organization over five years, a donation that does not appear to be reflected in the IRS forms released on Monday.

Those of you that read this regular series know that I am from Hackett, Arkansas, just a mile or so from the Oklahoma border, and just about 10 miles south of the Arkansas River.  It was a rural sort of place that did not particularly appreciate education, and just zoom onto my previous posts to understand a bit about it.

Back not that long ago there simply were things that could not be purchased on Sunday.  In some areas this still exists, but only regarding the sale of alcohol.  For example, in some places no alcohol in any manner can be sold on a Sunday, in others restaurants can offer it but not package stores, in still others only beer can be had on a Sunday, and in many there are no restrictions on the sale of alcohol.

In Arkansas, until comparatively recently, there were LOTS of things that could not be offered for sale on Sunday under pain of prosecution.  This was not confined to Arkansas, but it seems to have lasted longer there than in many places.

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