Computer Software Replacing Scientists

From ScienceNews, "Software Scientist: With a little data, Eureqa generates fundamental laws of nature" by Rachel Ehrenberg:

A new computer program called Eureqa comes up with fundamental mathematical laws, the great equations of textbooks and history, from scratch. Feed Eureqa a mess of raw data, and it will find the underlying rules describing the observations.

Consider the laws of motion and conservation of energy. Eureqa’s creators, Cornell engineer and computer scientist Hod Lipson and then–graduate student Michael Schmidt, used a motion-tracking camera to capture the chaotic swings of two pendulums linked together. After measuring the pendulums’ angles and velocities, the researchers fed the numbers to Eureqa. Without any knowledge of geometry or physics, the program came up with Newton’s second law of motion and other equations governing the double pendulum’s behavior.

Character Building Programs Improve Student Educational Outcomes

From "KEY TO SCHOOL IMPROVEMENT: READING, WRITING, ARITHMETIC — AND CHARACTER?" on ScienceBlog:

A study of 20 elementary schools in Hawaii has found that a focused program to build social, emotional and character skills resulted in significantly improved overall quality of education, as evaluated by teachers, parents and students.

The concept includes organized activities to build character that go beyond more traditional rules or policies to control or punish problem behaviors. But it still takes only about an hour a week away from traditional education, and previous research has documented much lower numbers of suspensions, lower absenteeism, and better reading and math scores on standardized tests.

Comment To Tyson's Economix Post "Wyden-Ryan’s Unrealistic Assumptions"

A comment I posted to The New York Times, Economix blog, "Wyden-Ryan’s Unrealistic Assumptions" by Laura D'Andrea Tyson:

Governments do not lower costs. They increase costs to the user outside of government accounting, which appear to lower government costs but merely shift these costs to end users.

By paying below market rates, as Ms Tyson's chart indicates, the number and quality of medical providers decreases, waiting time increases as well as denial rates for service.

Additionally, out of pocket medical expense increases to offset government's lower payment rate, as in England where people buy secondary medical private insurance to supplement their government health insurance, or as in Canada where people travel to the US for faster and better medical care.

Furthermore, administrative costs is a red herring, since there are many other government functions that Medicare relies on that are outside of its accounting statements and measured costs, but which are included as costs for private insurers.

Labor Force Participation Is Key To Future Unemployment Rate

From The Federal Reserve Bank Of New York, "Labor Force Exits Are Complicating Unemployment Rate Forecasts" by Richard Peach, Josiah Bethards, and Joseph Song:

What will the unemployment rate be in 2013? Even if you were certain how much the U.S. economy (gross domestic product, or GDP) would grow over the next year or two, it would still be difficult to forecast the unemployment rate over that period. The link between GDP growth and unemployment is complex in part because it depends on how many people decide to work or look for work—that is, the labor force participation rate. In this post, we discuss the recent steep decline in the labor force participation rate and explain how uncertainty regarding the future path of that variable contributes to conflicting views about the future path of the unemployment rate.

Read the complete NY Fed blog post.

Intercity Bus Ridership Growing: Departure Growth Exceeds Airline And Rail

From Bloomberg, "Bus Trips Surge as Free Wi-Fi Beats Driving" by Jeff Plungis:

Higher gasoline costs make driving a car more expensive at the same time as buses offer access to free Wi-Fi and cheaper fares than on planes and trains, Schwieterman said. Once viewed as a last resort in the U.S., bus travel is now attracting more affluent riders, students and women traveling alone, he said.

“Bus travel is suddenly cool,” Schwieterman said. “There’s a fatigue over driving combined with a revitalized image of the bus.”

Exceeds Airline Gains

Daily intercity curbside bus departures increased to 778 from 589 a year ago, according to a DePaul study to be published today. Scheduled departures for the total bus industry, which includes Greyhound Lines, increased 7.1 percent to 2,693. That compares with a gain of 1.5 percent for airline seat miles and 1.2 percent for rail seat miles, according to the study.

Ineffectiveness Of TSA Airport Screening

Charles C. Mann has written an interesting article in Vanity Fair on the uselessness and waste of taxpayer dollars of TSA screening at airports.

From Vanity Fair, "Smoke Screening" by Charles C. Mann:

To a large number of security analysts, this expenditure makes no sense. The vast cost is not worth the infinitesimal benefit. Not only has the actual threat from terror been exaggerated, they say, but the great bulk of the post-9/11 measures to contain it are little more than what [ Bruce] Schneier mocks as “security theater”: actions that accomplish nothing but are designed to make the government look like it is on the job. In fact, the continuing expenditure on security may actually have made the United States less safe.***From an airplane-hijacking point of view, Schneier said, al-Qaeda had used up its luck. Passengers on the first three 9/11 flights didn’t resist their captors, because in the past the typical consequence of a plane seizure had been “a week in Havana.” When the people on the fourth hijacked plane learned by cell phone that the previous flights had been turned into airborne bombs, they attacked their attackers. The hijackers were forced to crash Flight 93 into a field. “No big plane will ever be taken that way again, because the passengers will fight back,” Schneier said. Events have borne him out. The instigators of the two most serious post-9/11 incidents involving airplanes— the “shoe bomber” in 2001 and the “underwear bomber” in 2009, both of whom managed to get onto an airplane with explosives—were subdued by angry passengers.***As I waited at security with my fake boarding pass, a T.S.A. agent had darted out and swabbed my hands with a damp, chemically impregnated cloth: a test for explosives. Schneier said, “Apparently the idea is that al-Qaeda has never heard of latex gloves and wiping down with alcohol.” The uselessness of the swab, in his view, exemplifies why Americans should dismiss the T.S.A.’s frequent claim that it relies on “multiple levels” of security. For the extra levels of protection to be useful, each would have to test some factor that is independent of the others. But anyone with the intelligence and savvy to use a laser printer to forge a boarding pass can also pick up a stash of latex gloves to wear while making a bomb. From the standpoint of security, Schneier said, examining boarding passes and swabbing hands are tantamount to performing the same test twice because the person you miss with one test is the same person you'll miss with the other.***Staffing the airport checkpoints, at least in theory, are “behavioral detection officers,” supposedly trained in reading the “facial microexpressions” that give away terrorists. It is possible that they are effective, Schneier says—nobody knows exactly what they do. But U.S. airlines carried approximately 700 million passengers in 2010. In the last 10 years, there have been 20 known full-fledged al-Qaeda operatives who flew on U.S. planes (the 9/11 hijackers and the underwear bomber, who was given explosives by a Yemeni al-Qaeda affiliate). Picking the right 20 out of 700 million is simply not possible, Schneier says.

All Time High Odds Of Independent Or Third Party Run For Palin, Trump, Bloomberg, Paul or Bachmann For Presdient

Intrade odds of Palin, Trump, Bloomberg, Paul or Bachmann running for President as Independent or 3rd party candidate are at an all time high of 44.9 percent:

Source Intrade: Palin, Trump, Bloomberg, Paul OR Bachmann to run for President as Independent or 3rd party candidate

Federal Reserve Proposal To Strengthen Regulation And Supervision Of The Banking System

The Federal Reserve Board issued a Press Release on its proposed steps to strengthen regulation and supervision of the banking system:

Press Release

Release Date: December 20, 2011

For immediate release

The Federal Reserve Board on Tuesday proposed steps to strengthen regulation and supervision of large bank holding companies and systemically important nonbank financial firms. The proposal, which includes a wide range of measures addressing issues such as capital, liquidity, credit exposure, stress testing, risk management, and early remediation requirements, is mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The proposal generally applies to all U.S. bank holding companies with consolidated assets of $50 billion or more and any nonbank financial firms that may be designated by the Financial Stability Oversight Council as systemically important companies. The Board will issue a proposal regarding foreign banking organizations shortly. In general, savings and loan holding companies (SLHCs) would not be subject to the requirements in this proposal, except certain stress test requirements. The Board plans to issue a separate proposal later to address the applicability of the enhanced standards to SLHCs.

The Board is proposing a number of measures, including:

• Risk-based capital and leverage requirements. These requirements would be implemented in two phases. In the first phase, the institutions would be subject to the Board's capital plan rule, which was issued in November 2011. That rule requires firms to develop annual capital plans, conduct stress tests, and maintain adequate capital, including a tier one common risk-based capital ratio greater than 5 percent, under both expected and stressed conditions. In the second phase, the Board would issue a proposal to implement a risk-based capital surcharge based on the framework and methodology developed by the Basel Committee on Banking Supervision.
• Liquidity requirements. These measures would also be implemented in multiple phases. First, institutions would be subject to qualitative liquidity risk-management standards generally based on the interagency liquidity risk-management guidance issued in March 2010. These standards would require companies to conduct internal liquidity stress tests and set internal quantitative limits to manage liquidity risk. In the second phase, the Board would issue one or more proposals to implement quantitative liquidity requirements based on the Basel III liquidity rules.
• Stress tests. Stress tests of the companies would be conducted annually by the Board using three economic and financial market scenarios. A summary of the results, including company-specific information, would be made public. In addition, the proposal requires companies to conduct one or more company-run stress tests each year and to make a summary of their results public.
• Single-counterparty credit limits. These requirements would limit credit exposure of a covered financial firm to a single counterparty as a percentage of the firm's regulatory capital. Credit exposure between the largest financial companies would be subject to a tighter limit.
• Early remediation requirements. These measures would be put in place for all firms subject to the proposal so that financial weaknesses are addressed at an early stage. The Board is proposing a number of triggers for remediation--such as capital levels, stress test results, and risk-management weaknesses--in some cases calibrated to be forward-looking. Required actions would vary based on the severity of the situation, but could include restrictions on growth, capital distributions, and executive compensation, as well as capital raising or asset sales.

The Board is proposing that firms would need to comply with many of the enhanced standards a year after they are finalized. The requirements related to stress testing for bank holding companies, however, would take effect shortly after the rule is finalized.

The Federal Reserve consulted with other members of the Financial Stability Oversight Council in developing the proposal. Comments on the proposal are requested by March 31, 2012.

For media inquiries, call 202-452-2955.

Household Wealth To Income Ratio Back To Long Term Trend After Pre-Recession Peak

From Federal Reserve Bank of Cleveland, Economic Trends, "Household Financial Position" by O. Emre Ergungor and Patricia Waiwood:

In the years preceding the stock market and housing bubbles, household wealth grew faster tan incomes, leading Americans to believe that they were getting richer. As the bubbles burst, the wealth-to-income ratio took a dive and returned to its long-term trend. The adjustment took place as households constrained their spending and reduced their debt. After peaking in 2008, household consumption expenditures dropped slightly (1.69 percent), hitting a trough in 2009. Yet since then, the wealth ratio has stabilized, and consumption expenditures have resumed growth, already climbing 2.2 percent beyond the pre-recession peak.

Source: Federal Reserve Bank of Cleveland

Margaret Thatcher On Income Inequality

(HT: Mark Perry)

Public Choice Theory Recognizes Many One Percenter Groups With Concentrated Political Power And Similar Interests

From Forbes, "Occupy Wall Street And The Myth Of The 99%" by Todd Henderson, professor at the University of Chicago Law School:

The ‘Occupy’ movement will never succeed against its “one percent” adversaries until it begins to understand that there is not a single one percent, but rather many.

An entire field of economics, known as “public choice,” studies how small, concentrated groups with similar interests generally prevail politically against larger groups of diffused interests. And, in our society, these concentrated interests – like unions, defense contractors, religious groups, farmers , etc. – are not necessarily part of the “one percent” Occupy talks about, and several have even joined or co-opted the Movement. But they are part of the broader one-percent problem.

High Income Volatility In The Top 1 Percent

From The Wall Street Journal, "The Truth About Wealth: Affluence Is Becoming a Temporary Phenomenon. Here's How to Dodge the 'Beta Trap' and Hold On to What You've Got" by Robert Frank:

The total income of the top 1%—or those earning more than $343,000 in 2009—fell by more than 30% from 2007, according to the most recent Internal Revenue Service data. By contrast, the average income of the bottom 90% fell less than 3% during the same period.

A November Federal Reserve study, meanwhile, found that a third of the people in the top 1% in 2007, as measured by wealth, were no longer in the top 1% in 2009.

CBO Infographic Of TARP

CBO's infographic of the Troubled Asset Relief Program (TARP).

Larger version of the TARP infographic.

SEC Sues Ex-CEOs Of Fannie Mae And Freddie Mac For Misleading Subprime Disclosures

From Bloomberg, "Ex-Freddie, Fannie CEOs Sued Over Loans" by David Glovin and Joshua Gallu:

Daniel Mudd, the former chief executive officer of Fannie Mae, and Richard Syron, ex-CEO of Freddie Mac, were sued by the U.S. Securities and Exchange Commission for understating by hundreds of billions of dollars the subprime loans held by the firms.***Also named as defendants are Patricia Cook, Freddie Mac’s former executive vice president; Donald Bisenius, ex-senior vice president at Freddie Mac; Enrico Dallavecchia, who was chief risk officer for Fannie Mae; and Thomas Lund, Fannie’s Mae’s former executive vice president.

Wyden-Ryan Medicare Proposal To Use Vickrey Reverse Auction To Control Costs

From The Wall Street Journal, "The Wyden-Ryan Breakthrough
A better, bipartisan Medicare future."

But there are several key changes. Most of the substantive argument turns on how the premium supports should grow over time. Wyden-Ryan would dispose of a predetermined rate—GDP plus 1%, medical inflation, etc.—and instead use competitive bidding. Insurers and traditional Medicare, which would remain intact, would essentially participate in a reverse auction and the second lowest bid would set the benchmark for a given region. Seniors would pay at the margin for more expensive options.

Teen Cigarette And Alcohol Use At Historic Low

From National Institute Of Health News, "Cigarette and alcohol use at historic low among teens:"

Cigarette and alcohol use by eighth, 10th and 12th-graders are at their lowest point since the Monitoring the Future (MTF) survey began polling teenagers in 1975, according to this year’s survey results.***The 2011 results showed that 18.7 percent of 12th-graders reported current (past-month) cigarette use, compared to a recent peak rate of 36.5 percent in 1997 and 21.6 percent five years ago. Only 6.1 percent of eighth-graders reported current smoking, compared to a recent peak of 21 percent in 1996 and 8.7 percent five years ago.***For alcohol, 63.5 percent of 12th-graders reported past year use, compared to a recent peak of 74.8 percent in 1997. Similarly, 26.9 percent of eighth-graders reported past year use of alcohol in 2011, compared to a recent peak rate of 46.8 percent in 1994. There also was a five-year decrease in binge drinking, measured as five or more drinks in a row in the past two weeks, across all three grades. Binge drinking was reported by 6.4 percent of eighth-graders, 14.7 percent of 10th-graders, and 21.6 percent of 12th-graders, down from the 2006 rates of 8.7 percent, 19.9 percent and 25.4 percent respectively.

Thailand Using Financial Markets To Minimize Damage Risks Where US Would Regulate Activities Instead

Thailand is suggesting it will allow flood related futures trading to hedge the risk of damage from flooding. Thailand appears to understand its economy and financial markets in a way that the US does not; markets are a risk transference mechanism -- not a risk avoidance mechanism without losses.

Futures and other derivatives are a zero sum investment. For one investor to show a gain, another investor, the counter-party, must show a loss. Hedgers in flooded areas will be compensated for their losses at the expense of counter-parties to the futures transactions.

Thailand will allow the markets to deal with the risk of damage from flooding, unlike the US approach of attempting to regulate away the risk by dictating and limiting what activites, how and where can be conducted in a flood prone area.

Also, Thailand will avoid the need to provide subsidies for flood plain insurance and catastrophes, as is done in the US through its flood plain subsidies.

From Bloomberg, "Thai Floods May Prompt Water Futures Trading" by Anuchit Nguyen:

Thailand may start trading of water derivatives, giving investors a means of hedging against disasters after the nation’s worst floods in almost 70 years, the [Thai] Securities & Exchange Commission said.

CBO Letter On Impact Of A Financial Transaction Tax

CBO letter to US Sen. Orrin Hatch, Chairman of the Finance Committee, on the effect of a proposed US tax on financial transactions.

CBO Hatch Letter on Financial Transaction Tax

CBO Infographic Of Federal Budget

CBO infographic of the US federal budget:

Larger image of infographic.

Higgs Boson Intrade Price Plummets In Advance Of Announcement

The Intrade price (odds) for discovery of the Higgs boson particle prior to December 31, 2013, plummeted from 88 to 30 prior to the CERN LHC update conference on December 13, 2011.

Source: Intrade: Before December 31, 2013 Higgs Boson Observation 

  

Voters Not Concerned About Income Inequality

From Bloomberg, "Voters Not Buying Obama’s Bogus Inequality Talk" by Ramesh Ponnuru:

When the National Opinion Research Center asked people whether they believed the government has a responsibility “to reduce the differences in income between people with high incomes and those with low incomes,” in 2008, only 37 percent agreed. Forty-three percent disagreed, and 20 percent had no opinion. When pollsters ask people to name the top issue facing the country, almost nobody volunteers inequality, notes Karlyn Bowman, an opinion-research analyst at the American Enterprise Institute. “I’ve literally never seen it cross the 1 percent threshold,” she says.

But if voters don’t especially care about how much money the rich are making, they do care about how much they themselves are making. A return to robust economic growth and rising middle-income wages doesn’t require reversing a decades-long trend toward higher inequality. It requires improvements to our monetary, tax and health-care policies.

A Mess Only Congress Can Create

From The Wall Street Journal, "The Cellulosic Ethanol Debacle: Congress mandated purchase of 250 million gallons in 2011. Actual production: 6.6 million."

To recap: Congress subsidized a product that didn't exist, mandated its purchase though it still didn't exist, is punishing oil companies for not buying the product that doesn't exist, and is now doubling down on the subsidies in the hope that someday it might exist. We'd call this the march of folly, but that's unfair to fools.

Most Americans Favor Televising US Supreme Court's Hearing Of Healthcare Law

From Gallupp, "Americans Favor Televising Supreme Court Healthcare Case: Large majorities of Republicans and Democrats favor cameras in the high court for this case" by Lydia Saad:

Nearly three-quarters of Americans, 72%, think television cameras should be allowed into the U.S. Supreme Court when it hears oral arguments in its upcoming review of President Barack Obama's healthcare law.

Time For The Fed To Raise Short-Term Interest Rates To Boost The Economy

The Fed has held short term interest rates, during and after the recession, at close to zero level in an attempt to jump start the US economy, but to little avail. GDP growth is slow. Employment growth is weak and housing has not recovered in either prices or construction activity. The other tools the Fed tried to lower the longer end of the maturity curve have also not added to the strength of the economic recovery.

As reported in Bloomberg, the US Census Bureau reported that many households experienced a loss of income from rents, dividends and interest payments.

The Fed's actions have failed to grow the housing market. It cannot control or affect corporate dividends, but the Fed can raise short term interest rates.

Higher short term rates will put more money into households' pockets. With the additional income, households will spend more and the economy will grow faster than it has. A rise in short term rates will neither affect the housing market nor corporate investment.

It is time for the Fed to shift gears and add spendable income to the economy and households by raising short term rates. The Fed's efforts at the shorter end of the yield curve have not boosted the economy to an acceptable rate of growth. Its actions have been ineffective and the loss of household income from the extended period of lower rates may have actually been harmful and delayed the economic recovery.

From Bloomberg, "Plummeting Income Shaves Household Cash" by Frank Bass and Timothy R. Homan:

The housing market collapse, historically low interest rates and corporations stingy with dividends helped cut the median household income in two of every three U.S. counties, the U.S. Census Bureau reported today.

The number of American households that made money from rent, interest or dividends fell by one-third to 24.2 percent in 2010, even in affluent counties including those that encompass New York City and San Francisco.

Financial Crises Do Not Affect Economic Recoveries After Recessions: Fed Reserve Research Study

A new research paper from the Federal Reserve finds that financial crises do not affect the strength of recoveries from recessions; housing prices decline in recessions; larger home price declines lead to slower recoveries; deviation from output trend is due to less labor input, implying that the output gap is smaller than assumed by macro models.

From The Federal Reserve Board, "Are Recoveries from Banking and Financial Crises Really So Different?" by Greg Howard, Robert Martin, and Beth Anne Wilson, November 2011:

Abstract: This paper studies the behavior of recoveries from recessions across 59 advanced and emerging market economies over the past 40 years. Focusing specifically on the performance of output after the recession trough, we find little or no difference in the pace of output growth across types of recessions. In particular, banking and financial crisis do not affect the strength of the economic rebound, although these recessions are more severe, implying a sizable output loss. However, recovery does change with some characteristics of recession. Recoveries tend to be faster following deeper recessions, especially in emerging markets, and tend to be slower following long recessions. Most recessions are associated with a slowing, if not outright decline in house prices, but recessions with large declines in house prices also tend to have slower recoveries. Long recessions and those associated with poor housing-market outcomes can lead to sustained output losses relative to pre-crisis trends. Consistent with microeconomic studies showing permanent income loss to job-losing workers during recessions, we find that the sustained deviation in output from trend is associated with a reduction in labor input, especially linked to declines in employment and labor-force participation following recessions. On net, our results imply that the output/employment gap following a severe, long recessions is considerably smaller than is typically assumed by standard macro models, which in turn may have substantial implications for macroeconomic policy during recoveries. [Emphasis added]

The Wealthiest 1% Have More Education Than The 99%

From Gallup, "U.S. '1%' Is More Republican, but Not More Conservative: Nearly half of wealthiest Americans have postgraduate education" by Lydia Saad:

Advanced Education Separates the 1% From the 99%

Apart from their bank accounts, Gallup finds education to be the greatest difference between the wealthiest 1% of Americans and everyone else. The Gallup analysis reveals that 72% of the wealthiest Americans have a college degree, compared with 31% of those in the lower 99 percentiles. Furthermore, nearly half of those in the wealthiest group have postgraduate education, versus 16% of all others.

(HT: Greg Mankiw)

Bernanke's Letter To Congress On Alleged Secretive Lending To Financial Institutions

Federal Reserve Chairman Bernanke's response, in a letter to Congress, to recent news articles about alleged secretive emergency lending to financial institutions during the financial crisis.

Bernanke Responds to Recent Articles on Emergency Lending Activities

Fed Is Camouflaging The True Cost Of Capital And Hiding The Funding Risk Of Our Tax And Spend Policies

From The Wall Street Journal, "The 'Financial Repression' Trap: In capitals world-wide, policy makers deliberately obscure market prices and prevent informed judgments." by Kevin Warsh, former Federal Reserve governor:

Markets are not always efficient, but the market-clearing prices for stocks, bonds, currencies and other assets (like housing) are critical to informing judgments, in good times and bad. Market-determined asset prices often reveal inconvenient truths. But the sooner the truth is revealed, the sooner judgments can be rendered and action taken.

By contrast, government-induced prices send false signals to users and providers of capital. This upsets economic activity and harms market functioning. Markets that rely on governmental participation will turn out to be less enduring indicators of value.***Financial repression is sometimes the effect of policy even if it is not the intent. It manifests itself, for example, when policy makers react more forcefully to declines in asset prices than to increases. Price increases tend to be treated with benign indifference. But declines often lead policy makers to respond with force, deploying fiscal stimulus and monetary accommodation. Market participants then conclude that governments have their backs.

Consider the fiscal trajectory of the United States. However well-intentioned, the Federal Reserve's continued purchase of long-term Treasury securities risks camouflaging the country's true cost of capital. Private investors are crowded out of the market when the Fed shows up as a large and powerful bidder. As a result, the administration and Congress make tax and spending decisions—with huge implications for our standard of living—with heightened risks around future funding costs.

Effective Schools Come From Teacher Feedback, Tutoring, Data Guided Instruction, More Instructional Time And High Expectations: Not Small Class Size, Not More Dollars Per Student, Not Teachers' Certifications, Not Teachers' Advance Degrees

A new research paper (abstract below), finds that neither teacher certification, teacher advance degree, class size, nor dollars spent per pupil are important for school effectiveness.

Instead, the researchers found that "five policies ... frequent teacher feedback, the use of data to guide instruction, high-dosage tutoring, increased instructional time, and high expectations" are the important criteria for school effectiveness.

From research paper abstract, "Getting Beneath the Veil of Effective Schools: Evidence from New York City" by Will Dobbie, Roland G. Fryer, Jr, NBER Working Paper No. 17632, Issued in December 2011:

We find that traditionally collected input measures -- class size, per pupil expenditure, the fraction of teachers with no certification, and the fraction of teachers with an advanced degree -- are not correlated with school effectiveness. In stark contrast, we show that an index of five policies suggested by over forty years of qualitative research -- frequent teacher feedback, the use of data to guide instruction, high-dosage tutoring, increased instructional time, and high expectations -- explains approximately 50 percent of the variation in school effectiveness.

Investor-Owners of Multiple Homes Were Large Share Of Subprime Borrowers And Mortgage Defaulters During Housing Boom And Bust

From Federal Reserve Bank Of New York, "Flip This House”: Investor Speculation and the Housing Bubble" by Andrew Haughwout, Donghoon Lee, Joseph Tracy, and Wilbert van der Klaauw:

new findings from our recent New York Fed study that uses unique data to suggest that real estate “investors”—borrowers who use financial leverage in the form of mortgage credit to purchase multiple residential properties—played a previously unrecognized, but very important, role. These investors likely helped push prices up during 2004-06; but when prices turned down in early 2006, they defaulted in large numbers and thereby contributed importantly to the intensity of the housing cycle’s downward leg.***At the peak of the boom in 2006, over a third of all U.S. home purchase lending was made to people who already owned at least one house. In the four states with the most pronounced housing cycles, the investor share was nearly half—45 percent. Investor shares roughly doubled between 2000 and 2006. While some of these loans went to borrowers with “just” two homes, the increase in percentage terms is largest among those owning three or more properties. In 2006, Arizona, California, Florida, and Nevada investors owning three or more properties were responsible for nearly 20 percent of originations, almost triple their share in 2000.***Because investors don’t plan to own properties for long, they care much more about reducing their down-payments than reducing their interest rates. The expansion of the nonprime mortgage market during the 2000s provided the perfect opportunity for optimistic investors to get low-down-payment credit, albeit at high interest rates. As shown in the charts below, investors were far more likely than owner-occupants to use nonprime credit to make their purchases, especially at the peak.***borrowers with multiple mortgages start out being better risks—their loans were less likely to become seriously delinquent before 2006—but end up accounting for a disproportionate amount of defaults thereafter. What changed in 2006? Prices started to fall. In 2007-09, investors were responsible for more than a quarter of seriously delinquent mortgage balances nationwide, and more than a third in Arizona, California, Florida, and Nevada. [Emphasis added].

Intrade Odds Of Finding A Higgs Boson In Next Two Years Jump To 88 Percent

The Intrade odds of observing a Higgs Boson particle before December 31, 2013, have jumped to 88 percent.

The prices of the other Intrade securities for finding the Higgs Boson in different years are listed here.

Political Nonsense Of Linking Specific Taxes To Specific Programs

All tax revenues and fees go into a general revenue pot to pay for all government programs and expenses. To say that a specific tax is for a specific program is just silly political theater and under Obama, divisive class warfare.

Identifying taxes for targeted programs is like putting cash into a bank account, then making a withdrawal a few weeks later and expecting the serial numbers on the currency withdrawn to be the same as on the cash previously deposited.

It is like going on a driving trip and noticing that the gas tank is half full, filling the tank up and expecting to use the new gas for the later part of the trip and the gas that was originally in the tank for the beginning part of the trip, as if the gas did not mix in the tank.

The government works the same way. No specific tax can pay for any specific program. The government takes in a total sum of money from taxes and fees and spends that money on all its programs and expenses. Any extra money left over is a surplus and any shortfall of funds is a deficit that must be borrowed.

Opportunity Cost of Taxes And Programs

Any new tax or revenue increase whether linked to a new program or not is deficit reducing. Any new program whether linked to a specific tax or not is deficit increasing. By joining taxes and programs together as a single item, politicians are hiding from the public and media that new programs are spending and deficit increases and that new taxes and ending existing programs are deficit reductions.

New taxes justified as the basis for new programs, ignores the lost opportunity of using the new taxes to reduce the deficit. Likewise, failing to end an existing program, ignores that the termination of that program would also reduce the budget deficit.

All existing programs are deficit increases because ending any program would reduce the deficit. Likewise, any new tax revenue is deficit reducing and failing to increase revenues is an increase in the deficit.

Call For A Deregulation Job Stimulus

From City Journal, "The Regulatory Thicket: It’s time to cut it back." by Iain Murray and David Schoenbrod:

How to Do It

Iain Murray

In the seemingly endless debate about how to put Americans back to work, one solution dare not speak its name: deregulation. Yet if implemented correctly, it would provide an almost cost-free stimulus of a trillion dollars or more. According to the Small Business Administration (SBA), the regulatory burden on our economy is a staggering $1.75 trillion annually.***Reining in the Rules

David Schoenbrod

The economic consequences of regulating business are huge. Regulatory costs raise prices, depress incomes, and encourage companies to locate in friendlier climes, harming our economy and hampering recovery. Unfortunately, the perennial cry to reduce “regulatory drag” has yielded few results at the federal level. Congress rarely responds to such pleas because voters usually regard regulation one-sidedly, believing that it simply reduces risks without imposing burdens.

Alcohol Driving Studies, Multicollinearity, And Missing Variables

A comment I posted on John Goodman's Health Policy Blog, "Alcohol: Is the Medium the Message?" by John Goodman:

Actually auto accidents and alcohol drinking is not as clear-cut as common wisdom believes.

Night driving, driving while tired (later at night after being out), younger, inexperienced drivers, and risk takers all have higher accident rates than the general public, even without alcohol consumption.

Studies about alcohol and accidents do not include these other accident causative factors. If they did, the increase in accident rates from effects of alcohol consumption would be greatly diminished and maybe even found to be not statistically significant.

By excluding the additional causative factors, the studies would show a continuing need to lower alcohol consumption to lower auto accident rates. The vested interest groups which fund the studies and which lobby for lower alcohol consumption do not have any interest in seeing studies showing a lower effect of alcohol consumption on driving accidents.

When variables are correlated among themselves, multicollinearity, or when variables are excluded, the strength of the effect on the outcome of any of the included variables, like alcohol consumption, cannot be determined accurately. Alcohol's correlation with the missing variables may make it appear that it is a cause of accidents when in effect it may not be.

Medical Marijuana Decreases Alcohol Use And Auto Accidents

My posted comment to Carpe Diem blog, "More Pot, Less Beer, and Fewer Traffic Fatalities" by Mark Perry:

The decrease in traffic accidents and fatalities from legalizing marijuana may be only temporary. The decrease may not be from decrease in alcohol consumption, but from the change in social setting for medical marijuana versus alcohol. There could be a decrease in total driving and nighttime driving, which will lower the accident rates.

The authors found that the main beneficial effect on traffic fatalities was at night and weekends: "Likewise, we find that the estimated effects of MMLs [medical marijuana legalization] on fatalities at night and on weekends (when alcohol consumption rises) are larger, and are more precise, than the estimated effects of MMLs on fatalities during the day and on weekdays."

There are more driving accidents at night, more accidents among younger (more likely to go out to drink and socialize), inexperienced drivers, more accidents among tired drivers, e.g. later at night after being up all day (when drinkers return home after a night out), more accidents among risk-taking drivers, like those willing to risk a DUI/DWI after having a few drinks, and more accidents the more miles driven, even without the driver drinking alcohol. These added accident causes are in addition to any physical or reaction impairment due to excessive alcohol.

The legalization of marijuana will increase the social use of the drug and make it as socially acceptable as drinking. The partial legalizing for medical use may have the unintended effect of decreasing nighttime driving, which will not occur if there is full legalization and full social acceptance.

Full legalization will increase nighttime driving, increase the number of younger people driving to use or obtain it, etc., over the amount for medical marijuana, raising the additional driving accident causative factors to the same level as with alcohol.

As far as I know neither the CDC nor alcohol groups run a multivariable analysis to see which accident causative factors predominate as the leading cause of accidents while driving after a few drinks. They just assume it is alcohol if alcohol consumption is present in either driver.

It may very well be that alcohol impaired driving during the daylight, when the driver is well rested, in older, experienced drivers, in non-risk taking drivers (safe drivers) does not cause accidents.

CDC could do, or anti-alcohol groups like MADD could fund, a study that would show the additive effects of alcohol consumption on the other known accident risk factors.

In effect, not including as variables in the statistical studies these non-alcohol accident factors will enable the studies to show a continuing need for lower levels of alcohol consumption. However, including the additional factors might upset the well-funded vested interest groups and diminish alcohol's role as a major accident causer.

With full marijuana legalization and social acceptance, the driving accident rate might not be lower as the study shows for medical marijuana legalization.

If you are not regularly reading Mark Perry's blog Carpe Diem, you should.

Maintenance Cost Savings, Not Energy Cost Savings, Pushing Commercial Switch To LEDs

From The Wall Street Journal, "The Math Changes on Bulbs: Modern LEDs, While Expensive, Save Companies on Labor" by Kate Linebaugh:

Bulbs built around light-emitting diodes—semiconductors that produce bright light when zapped with electricity—last 10 times longer than conventional bulbs, meaning fewer ladders blocking frozen-food aisles or unsightly scaffolds towering in hotel lobbies as workers change blown-out bulbs. With energy savings not yet enough in some cases to cover the higher cost of the new bulbs, it's lower maintenance costs that are getting sales across the finish line.

It also means the switch to lower energy use LEDs would most likely have happened without government involvement in mandating energy efficient light bulbs. Of course, the government will still take the credit.

Since 1995, Wal-Mart has increased the number of skylights in its stores to reduce its energy use and need for light bulbs. Wal-Mart did this without any government incentives or mandates to use more skylights.

Improvements in energy use and efficiency is a natural part of the on-going cost savings process in companies and occurs without government incentives or mandates. The profit motive is the natural process to motivate companies to lower costs, including energy use.

Two-Thirds Of Illegal Immigrants Lived In The US For Over 10 Years: Half Are Parents Of Minors

From Pew Hispanic Center, "Unauthorized Immigrants: Length of Residency, Patterns of Parenthood" by Paul Taylor, Mark Hugo Lopez, Jeffrey Passel, and Seth Motel:

Nearly two-thirds of the 10.2 million unauthorized adult immigrants in the United States have lived in this country for at least 10 years and nearly half are parents of minor children, according to new estimates by the Pew Hispanic Center.

Read the full 13-page Pew Hispanic Research report, "Unauthorized Immigrants: Length of Residency, Patterns of Parenthood" by Paul Taylor, Mark Hugo Lopez, Jeffrey Passel, and Seth Motel.

US Has Comparatively High Life Expectancy

As I have said on this blog in previous posts, e.g. here and here, and in comments to other health related blogs about US life expectancy, the US health related life expectancy is much better than OECD statistics make it appear.

From John Goodman's Health policy Blog, "Do We Really Spend More and Get Less?" by John Goodman:

What about life expectancy statistics — a favorite of the critics, since Americans don’t score very high? It turns out that when you remove outcomes doctors have almost no impact on — death from fatal injuries (car accidents, violent crime, etc.) — U.S. life expectancy jumps from 19th in the world to number one!