Mr. Crankypants Sez "I told you so."

Mostly I just wanted to cleanse the palate to move on to lighter topics, but first I needed to cough an "I told you so" hairball out of my bloggin' throat.

Ten-year T-bill returns are still well below where they were on the Aug. 5 downgrade of U.S. Credit. Despite everybody losing their mind during the second week of August, the stock market continues to limp along in stagnation. Here's a graph with the S&P 500, Dow Jones, NASDAQ, and 10-year t-bill rate all indexed to 100% at the close of business on Aug. 5:

This economy badly needs a major dose of economic stimulus and a huge jobs program. I know that idea gives people the heebie jeebies because we budgeted $800 billion in 2009 to deal with this economic disaster all we managed to do was to keep the Great Recession from turning into the second Great Depression. (Come to think of it, that's not all that bad for $800 billion.)

But we are losing trillions of dollars in potential productivity because we're stuck in neutral. And it's not just an economic disaster. It's a personal disaster for the millions of people who have lost their jobs and who now can't find good jobs.

I know the national debate has been focused obsessively on the long-term deficit -- which was created by the Bush tax cuts, by the way. But that deficit is a problem that gets much more manageable if you have a functioning economy. If you need an analogy, think of a second stimulus as electric paddles on a heart in defribulation. You wouldn't want it to be an ongoing treatment, but a good jolt is just what we need right now.

As for what shape that stimulus would take, I'd focus in two areas: infrastructure and jobs creation for the long-term unemployed. Our national infrastructure is still a mess, and continuing to fall behind our international competitors will only worsen our long-term prospects. Fortunately, although there's a lot of work that needs doing out there, there are also a lot of people who desperately need work. We can work out some pretty good ways of getting them together. (Want a starter? Municipal governments, state governments, libraries, and schools have all cut out tons of local services in the past few years to deal with their own fiscal crises. Let's get some three-year federal grants back into those areas to re-hire staff and rehire the teachers, cops, and firefighters that have been laid off over the past couple of years. That's easy AND good for our communities. It'd probably take a half-dozen Congressional staffers an afternoon to put together the whole program.)

Then let's just go ahead and build a high-speed rail system on the East Coast, the West Coast, and in the Midwest. And after that, maybe we can finally address our crumbling electric grid...

... What's that? Oh, you're still freaked out about the deficit? I have an easy solution if that's really your concern. Let's go back to the tax rates under Clinton, WHEN WE HAD OUR LONGEST, STRONGEST PERIOD OF ECONOMIC EXPANSION SINCE WORLD WAR II. Cutting taxes on the wealthy didn't lead to the giant economic boom and employment growth that it was sold with. And even that sales job relied on them "sunsetting" in ten years because even the most ridiculous projections couldn't make them work in the long run. So, here's another easy policy decision. Let's not do the thing that didn't work and led to economic disaster. Let's do the thing that worked.

What brought Mr. Crankypants back from his blogging exile, you ask? Sorry, I'm indexing part of a math book this afternoon, and preparing to index some economics charts and graphs on Monday. And I'm tired of policy debates that ignore math and economics.

Okay, Mr. Crankypants now returns you to your regularly scheduled and undoubtedly more-congenial-on-a-Friday-afternoon blog reading.

Mr. Crankypants Presents Remedial Economics 101

If you think that this morning's stock-market plunge is a validation of S&P's rating downgrade for U.S. debt, you don't understand the purpose of the ratings

Just a quick recap of the first morning of stock trading after S&P downgraded the rating of U.S. debt from AAA to AA-Plus. Here are the numbers from this morning's open to noon:

Stocks
Dow 11,120.42 -324.19 -2.83%
Nasdaq 2,438 -94.54 -3.73%
S&P 500 1,157 -42.79 -3.57%

Bonds & Currencies
10 Year Yield 2.38% -0.17

Stocks down, bond rates down, cats & dogs living together, MASS HYSTERIA! Total validation for the S&P downgrade and the national debt as our #1 problem, right?

Wrong.

The decline in the rate on 10-year treasury bonds means that money is flowing into U.S. debt, not out. When more money tries to buy something the price -- in this case the interest rate -- goes down. S&P's rating was for U.S. Treasury bonds, not for stocks. Investors are actually moving their money out of stocks and into U.S. debt.

Why? Because what the smart money fears is not a U.S. debt default. The smart money fears the absolute sluggishness of a stagnant economy. Our nation's problem is not debt at 2.38%. Our problem is high unemployment and a lack of growth.

And from what I have heard out of Washington and on the news, both today and over the past few months, there are an awful lot of politicians and commentators who either have never studied history and basic macroeconomics, or who have chosen to ignore history and basic economics in favor of shilling for their pet policies.

So here's tip #1 for you today.

If you hear a politician or commentator saying today that the stock-market plunge validates the view that our economy's problem is our national debt, that person is either ignorant or lying to you. Either way, you should ask yourself if he or she really has your best interests or the nation's best interests at heart.

The Naughtful Naughties: What Went Wrong - The Growth of Ignorance in Public Policy

No poetry today. In fact, what I have for you today is more of a rant than anything else because I'm still flabbergasted by the results of the CBS News / NY Times Poll released Feb. 11, 2010, on the Tea Party Movement.

In particular, I'm flat-out astonished by two statistics. Only 2% of self-identified "Tea Partiers" know that tax rates have gone down since Obama took office. This means that 98% of them are flat-out factually ignorant about the tax rates that are allegedly their primary point of protest.* Is it any wonder that Sarah Palin is their queen? **

Nearly as astonishing is that only 12% of all Americans know that tax rates have gone down since Obama took office, but at least they have the excuse of not being so obsessed with taxes that they are running around waving tea bags at TV cameras. I would at this point pull out some comparative poll statistics on how many people know who won the last season of American Idol or Survivor, but why make this post any more depressing than it has to be?

I probably wouldn't be so irked if I didn't believe that public ignorance of the basic facts of our governance has grown significantly over the last decade. I truly believe this is one of the most important factors that has led to the disastrous partisanship we see these days in Washington, in our state capitals, and even in county governments.

Having abandoned their responsibility to be informed citizens, it seems that far too many people have decided to choose their positions based on a concept of politics as a sporting event in which the only thing that matters is that their side wins. And in this win-at-all-costs view of politics, lying and cheating are perfectly okay if it leads to electoral victory.

I would at this point like to lay the blame at the feet of convenient whipping boys like "the media" or "pundits" or "the blogosphere" or "those lying politicians" but I that is the attitude among too many citizens that has led us down this disastrous path. Because ultimately the media, the pundits, or even the polticians are not responsible for educating us.

We are responsible for educating ourselves. This is a democracy, and too many people in the last decade have abandoned that basic responsibility of citizenship. They think that somehow relying on Glenn Beck or Keith Olberman or some other entertainer for their "news" makes them educated. Listen up folks. It doesn't make you educated. It makes you ignorant. And the saddest part is that you are so ignorant that you don't even see the bars and walls of the prison that you have chosen.

In the last decade there was a phrase that was thrown around with quite a bit of disdain among the punditry, especially by some in the Bush Administration: "Fact-based politics."

Count me as a big fan of fact-based politics. Because I'm really, really, really tired of what ignorance-based politics has done to my country, and I would very much like to see a return to fact-based politics. I think it's our best chance to get out of this hole.


*Yeah, I know. Their primary purpose seems generally to be opposition to Obama being the president under any and all circumstances, but I'm willing to cut them some slack and credit them with taxes as their rallying point.

**How's that "hopey-changey" thing working out for me, Sarah? A lot better than electing an ignorant quitter as our vice-president would've worked out.

Mr. Crankypants Looks at a February Wednesday, AND HE IS NOT PLEASED.

While Miss Crankypants uses her powers of crankiness for good in Paris (An Early Morning Visit from Miss Crankypants; More Good News from France : Fighting like Pirates; What Max Said) Mr. Crankypants is on the loose here in Detroit and he is neither good nor noble. He is cranky.

You'll be relieved to know that in his munifence today, Mr. Crankypants has deleted a long, long whiny post and will instead condense that bit of cranking to this single, extremely whiny paragraph:

My back hurts. I'm tired of winter. I miss the sun. I'm behind schedule on *everything* and starting to let some things slip that should not slip. We're not going anywhere warm this winter. Television sucks, and what passes for television journalism these days is worse. My salary is stagnant. I've made a mess out of both my cubicle and my space at home. And did I mention that I'm freaking tired of my lower back hurting and that it's making me feel worse that Monique's had to do all the shoveling for the last six weeks? All I did was ride the exercise bike for fifteen minutes at the gym on Monday and it was Back-Spasm City all over again yesterday. Bah! Humbug!!

Yeah, Mr. Crankypants is REALLY, REALLY sorry he tweaked his back last month.

I even wrote up most of a sonnet titled How Do I Crank Thee? (with apologies Elizabeth Barrett Browning) but by the tenth line or so I found that it was making me too damn cranky. Plus, I was having a hard time finding an appropriate rhyme for "tighty whities." So I scrapped the whole project, much to the relief of poetry critics around the world.

Oh, sweet crankiness, how do I crank thee? Let me count the ways.

Instead of a sonnet, I present a Top Five list:

5) I am now officially so cranky that crabbiness would be an upgrade!
4) Crankcases come to me for advice!
3) Another foot of snow might actually improve my mood!
2) The DEA is investigating me because they heard I was "the Midwest's biggest supplier of crank!"
1) Oscar the Grouch was recently heard to say of me, "Sheesh, what's that guy's problem?!"

Be warned world. You mess with me today and I will be *very* whiny about it.

Re-creating the Dubious Foundation of The House of Cards

I will try not to let this become an arcane post on arcane points of financial regulation. But among an assortment of news items this morning that made me believe the Democratic Congress is well on its way to botching financial reform every bit as badly as it has so far botched health care reform, was a story on securitization in this morning's New York Times: Seeking a Safer Way To Securitization.

I suppose before I dip in to the article, I should explain a few basic items about securitization of loans. Securitization is the process through which a lender takes a bundle of loans, packages them together, and then sells that package to investors in the form of market securities, similar to bonds. The investors recoup their money as the loans are paid back. You may also occasionally hear about "tranches." Those are different parts of a securitized bundle of loans. The safest loans within the bundle can be sub-bundled and sold as one sort of security with one rate of return and guarantees, while the riskier loans can be sold as a different tranche with a different rate of return.

The process of securitization is not necessarily an inherently bad thing. It lets a lender spread a bit of the risk of its loan portfolio, and in return investors get something to invest in -- presumably with a rate of return that corresponds with the riskiness of the loans.

However, the way that securitization of loans worked in our economy for at least the last decade is that lenders would generate large batches of loans, securitize them, provide their own estimate of risk for the various tranches, and either sell the entire loan on the market or sell all but a tranche whose repayment was guaranteed at the expense of the higher-risk tranches. The rates of risk for the various tranches presented to investors were often grossly misrepresented. The lender's profit no longer came from the repayment of loans with interest; the lender's profit came from selling off bundles of securitized loans.

This means that a lender could generate loans with the profit guaranteed, regardless of how ill-conceived the loans themselves were or whether they were ever paid back. Loan risk was divorced from lending profit, and available credit mushroomed as lenders generated loans with nary a thought as to whether they could or would ever be repaid. Borrowers took this cheap credit and invested in homes, often basing their lending decisions on the assumption that housing prices would always rise at a rate that outpaced their interest rate. Many of them didn't just invest in a home for themselves to live in. They leveraged the easy credit into a series of home purchases well beyond their means as they tried to "flip" their way to wealth.

Even ordinary mortgage borrowers, who just wanted a place to live, found themselves forced to take on far more debt than they might have wanted to incur because housing prices had risen so high, so quickly. They could at least reassure themselves with the rationalization that the bank wouldn't loan them the money if the bank didn't think they could repay the loan, little knowing that the bank no longer cared whether or not they could repay the loan.

Thus a bubble in housing prices was created.

But remember this. The problem was not that home prices eventually fell. The problem is that borrowers were given loans that they could not repay. And the heart of the problem is that those borrowers were able to borrow money that they could not repay because securitization now fully insulated lenders from any risk that the loan would not be repaid. Those bad loans could have inflated a bubble in anything: airline stocks in the 1920s, dot-coms in the 1990s, or tulip bulbs in Holland in the 1630s. In the Naughts, it was housing.

These dubious securitized loans formed the foundation of the house of cards that was our financial system in the Naughts: easy credit for bad loans. Several more layers of unregulated risk in the form of assorted derivatives and credit default swaps were built atop this shaky foundation. I won't get into them today. Suffice it to say that the home loans defaults couldn't have wrecked our financial system without help from those other things.

Okay, so I may have tip-toed towards financial system arcana there, but hopefully you found it useful. Back to this morning's New York Times article: Seeking a Safer Way To Securitization. The article features remarks to a meeting of the American Securitization Forum by John C. Dugan, the U.S. Comptroller of the Currency, the official whose department is charged with maintaining the safety and security of our banking system.

Here's what he said that has me bothered today:

“A requirement intended to improve the securitization market by improving the quality and trustworthiness of underwriting could significantly curtail the number of securitizations that are actually done,” he said. “And that, of course, could materially reduce the amount of credit available for housing or any of the other sectors that have traditionally benefited from securitizations.”

In other words, he's worried that regulating the securitization process in a way that discourages lenders from dumping bad loans onto investors would keep lenders from generating the sorts of bad loans that created the housing bubble in the first place.

And this is what worries me today. I don't see any willingness in Washington to fix the basic regulatory failures that brought our nation to the brink of utter ruin in 2008 and that caused The Great Recession. Instead, I see Democrats who are unwilling to engage in serious reform, and Republicans who are so unable to take accountability for any of their actions when they ran the country for eight years that it's impossible to take anything they say seriously.

Oh, and let me add to that a Comptroller of the Currency who apparently seems to think that we shouldn't create regulations for securitization if the regulations discourage banks from lending money to people who can't repay it.

Yeah, I got a feeling the upcoming bout of "financial reform" is going to make the health-care debacle look like a shining city on the hill before Congress is done with it.

The Facebook version of my continued rant about the Menifee USD pulling dictionaries out of classrooms

As Arsen put it in one Facebook comment about my ranting, "Hell hath no fury like a reference publisher scorned!"

I'm pretty sure the several posts I put up on this in Facebook generated more comments than anything else I've posted in ages. I'll leave the others' comments there, but here, gentle reader, is the fruit of my scorned fury:

5:35 pm Tuesday -- I've seen "Idiocracy", but I thought it was a documentary. I'd look it up in the dictionary, but somebody might be offended.

6:29 pm Tuesday -- This is why I don't write much satire any more. It used to be that when I made up stuff this dumb, it wasn't true!

8:00 pm Tuesday -- I'm reminded of "A Christmas Story" when Ralphie blames his knowledge of all the bad words he heard from his father on his friend "Schwartz". In the modern version, I suppose he'd say he came across them while perusing the dictionary.

8:06 pm Tuesday -- I have no idea why I just put quotemarks around Schwartz's name. I would look up the usage rules in my copy of Strunk & White, but I just threw that out because it contained the word "gratuitous," which sounded like it might be kinda dirty.

7:58 pm Tuesday (re: my misspelling of Menifee as Menifree) -- Yeah, "Menifee". I would haved checked the spelling ... if I'd had a freaking dictionary.

8:08 pm Tuesday -- You're wondering what happened to the big Merriam-Webster's Geographical Dictionary I keep at my desk? I chucked it because it contained the place name "Sodom."

Better safe than sorry. I can now go about my business, pure and ignorant.

10:50 am today -- You can have my dictionary when you can pry it out of my cold, dead hands.

10:55 am today -- I'm mostly done ranting about the Menifee school district. However, I did want to note that Monique pointed out that the "offensive" dictionaries they pulled were the edition published in 1994, which means that they've been corrupting little children in that community for more than a decade.

Forrest Gump was right: "Stupid is as stupid does."

The Dumbing of America continues apace

I Twittered about it, I linked to it on Facebook, and now I think I shall inflict this upon you in a Mr. Crankypants blog post, gentle reader. Here's the headline and a couple of paragraphs from the Southwest Riverside News Network:


Menifee USD pulls dictionaries due to explicit word.

School officials in the Menifee Union School District pulled all copies of the book from its fourth and fifth grade classrooms last week.

A parent complaint that a dictionary in her son’s classroom at Oak Meadows Elementary contained the term and definition for “oral sex” prompted school officials in the Menifee Union School District to pull all copies of the book from its fourth and fifth grade classrooms last week.

Copies of Merriam Webster’s Collegiate Dictionary, Tenth Edition (published in 1994), were taken from a recommended reading list and put into use in district classrooms a few years ago to accommodate higher level readers, said Betti Cadmus, spokeswoman for the district.


Oh, sure, I could spend the rest of this post ranting about ridiculous levels of prurience. Or I could rant about the bizarre insistence that our society seems to have in exposing children to vast oceans of violence while insisting that the slightest hint of sexuality will corrupt them forever. I could discuss the salacious seas of sexuality that flood our media, even our purported children's programming, and examine whether therein lies a much greater threat to our nation's collective innocence.

Perhaps I could segue into a diatribe about the utter failure of abstinence-only sex education programs -- I use the phrase "sex education" loosely here, since as near as I can tell those programs are designed to inculcate"sex ignorance" -- in preventing pregnancy, preventing the transmission of STDs, or in encouraging any actual abstinence. That might perhaps indicate the effect, or lack thereof, that removing dictionaries with the objectionable phrase may have on the behavior of these children in the future.

Heck, I could just rant about the fact that shortly before these current fourth- and fifth-graders were born every newspaper in America seemed to carry the phrase "oral sex" on its front page. But I like to think we shan't go through that sort of thing again.

However, I won't rant about any of those things, gentle reader. Instead, I shall simply point out that the editor who wrote the headline for that story in the Southwest Riverside News Network used the word "word" to describe a two-word phrase.

Alas, that there are no longer any dictionaries in Menifee, so that we could see whether his usage of the word "word" was correct.

I fear for the future of General Motors

I was innocently reading the sports section of the ol' New York Times this morning when I came across this review of the new Cadillac station wagon:

Behind the Wheel 2010 Cadillac CTS Sport Wagon: The Wagon of Cadillacs

There's a lot of interesting stuff in there about the reasons for the decline and fall of station wagons in North America, the continued popularity of station wagons in Europe, and the decision of Cadillac to start making a station wagon this year, the only American-brand station wagon.

But here's the part that caught my eye:

Particularly unusual for a wagon are the ultraslim rear-quarter windows and extra-wide rear pillars. They make it look as if Cadillac’s designers were afraid to let their wagon look like a wagon — and they were.

“There’s a stigma of what a wagon is and I think what we were trying to do is something that was not a traditionally defined wagon,” said Clay Dean, Cadillac’s chief designer, who is also executive director for G.M. global advanced design. “The D-pillar is thicker than you would normally do; normally you’d thin that thing up as much as you can for visibility, but it was a conscious choice.”

From the driver’s seat, the low priority given to visibility is painfully evident, as the chunky pillars have a tendency to make cars in the adjacent lane disappear. Before changing lanes, precise adjustments of the side mirrors are advised, along with over-the-shoulder glances. ...

The firm front seats, however, earned low marks for comfort. In the rear, space is adequate — a 6-foot passenger can sit behind a 6-foot driver—but the seat cushion is short and low, and the rather small door openings impede access.

In another compromise to style, the rakishly sloping roofline and forward-canted rear window shrink the luggage space. The cargo hold is well-finished — there are movable tie-down loops set in tracks on the carpeted floor, shallow bins underneath and a cover that can be propped up to help keep items from tipping over — but it is small.

In other words, according to their own chief of design, Cadillac deliberately chose to sacrifice visibility, safety, and space to style for their station wagon.

There are a lot of cars in which style can and should drive the design. But a station wagon? A station wagon?! The point of moving from the sedan version of a car to the station-wagon version is that you pick up a lot of additional functionality.

To be honest, General Motors cars haven't been very high on my "to-buy" list for quite a while, but it has nothing to do with oft-cited GM problems with reliability, durability, mileage, or performance. It's because what they like to call their "aggressively sloped" rooflines don't leave me enough room to sit upright in the damn cars. I'm a pretty tall guy (6'3", for anybody reading this who doesn't know me) but I'm not Shaquille O'Neal. And, honestly, all of the other stuff doesn't matter if I can't sit upright in the car without turning my head on its side.

And I've sat in a lot of GM cars over the past ten years. In fact, it's become an annual highlight of my tour of the Detroit Auto Show, the portion we like to call, "John sits in a couple dozen different Chevrolets, Buicks, and Cadillacs, bumps his head into the roof, and gives up the thought of ever buying a GM car."

By choosing your low rooflines, GM, not only are you making it physically impossible for me to justify shelling out for one of your cars, you're also telling me that you don't care about me, that you think style is more important than me, the driver and purchaser. You are doing the same by choosing style over visibility and cargo space in a station wagon. This is not a customer-centric vision of the future.

The only possible silver lining in all this is that I'm sure that this car was designed before GM went bankrupt. So I can only hope that this proud "conscious choice" is a leftover of now-discredited policies. I don't see any reason to believe that to be true. I just like to vaguely hope that somebody GM will have learned from utter failure. I'm an optimist.

Finally, since I am now a majority owner of your company (as are all of my fellow taxpayers) and you're pissing off your boss, a note directly to GM's board of directors, CEO, and executive director for G.M. global advanced design Clay Dean:

Please stop making crap and trying to sell it to us all on the basis of style. That strategy already wrecked your company once. Just make good cars, and sell us good cars. C'mon, you used to be able to do that. Really, I'm rooting for you. But sometimes you make it very, very difficult for me to keep doing that.