Dee Feat is in Dee Flation - Part the Thirty Second

It's been many months since the last entry in this subject. My bad. The fact remains: all that TARP and QE money still hasn't generated inflation. You can only get wage push or demand pull inflation if the newly printed moolah ends up in the hands of the underclasses. Period. That is also, as it happens, how you get growth. Growth is caused by increasing demand, and that only happens when new moolah gets to the hands of those who buy stuff with that new money. The 1%-ers who got the QE moolah weren't and didn't. The "supply side" notion has been disproven every time it's been tried. It was never anything more than an excuse to send moolah to the 1%. As you will see below, producers do all they can to constrain output. Cartels are one fairly well known mechanism. Deflation is still the big bad bear; it stifles both production and demand. And, once again, Neil Irwin reads my mind.

There is a worldwide glut that includes oil wells, steel plants and eager would-be workers, and it will take more than a United States presidential election and a few months of solid global growth to fix it.

So, why don't they just stop producing? That nasty capital albatross: they gots to pay the Piper no matter how much they produce, so they're boxed into generating any cashflow they can. And who's the Piper? All those 1%-ers with idle cash they want return on. Get a job, for crying out loud.

As has been mentioned by a few of the saner mainstream pundits: since the 1980s, manufacturing output has about doubled with about a third less labor. It wasn't China or Mexico, but automation that took the jobs. Everywhere.

All the trickle down folks, including by default Obambi/Bernanke, simply ignore that handing out Bongo Bucks to the .1% who already have more than they can spend doesn't do anything for GDP growth. On a zero-sum basis, well, some win and others lose. But nothing good happens overall. The Revenge of Laffer is in the Mnuchin propaganda.

The Republican tax-cut plan is designed to reduce the tax burden for the very rich, and, since this is a highly unpopular thing to do, Republicans are going to spend a lot of time lying about it. Treasury Secretary Steve Mnuchin was dispatched to do the round of morning shows, and his first attempt at lying did not go especially well.

Back to I Still Hate Neil:

... many of the biggest forces in the economy don't announce themselves with an election or a central banker's announcement, but through shifts in the underlying forces that make the global economy tick. And those don't change overnight.

Here, Neil is a bit too naive`: the Great Recession did announce itself pretty much to those paying attention. And the Trump tax cut, if it happens as now stated, will generate the Permanent Depression. Of course, Orange Julius Caesar is certainly on the way to starting a War, if only to install himself as dictator. It's happened before, you might know.

We'll really know the Right Wingnuts are worried when they demand the Damn Gummint pay them more interest on bonds than they can get from private investment.

That Capital-Labor Ratio

A long standing meme in these endeavors, both quant and macro, is that capital is constraining vis-a-vis labor. You can't lay off your capital; you have to pay for it, no matter what. So long as output remains steady, or better increases, going all in on capital makes sense. But it doesn't always work. This is especially true if you overpay for that capital:

Last year, the network's new nine-year agreement with the NBA to televise pro basketball games took effect. The reported cost to ESPN: somewhere around $1.5 billion per year, a massive increase over the previous deal. That's on top of deals the network already had with the NFL ($1.9 billion annually), various NCAA conferences and the College Football Playoff (well over $1 billion), and Major League Baseball ($700 million).

All of those contracts aren't the usual kind of capital, but they really are. So, having lost tons of subscribers (and the ESPN set have the advantage of being in the default delivery for most services).

[C]able and satellite companies including Comcast and Time Warner Cable say they have to do something to keep cash-strapped customers from cutting the cord.
...
In order to keep costs down, it won't have ... ESPN, ESPN2...

What kind of economy do we have if the default cable bill is too much for so many folks? The canary just died.

So, in order to pay for all that capital, ESPN is chopping up to 100 heads. Is that anywhere near enough to finance all those $$$ billion contracts? Not even close. Most, from what's been published so far, are regional/specific sports reporters. The only two general faces so far are Ed Werder and Jay Crawford. The latter has always been the most intelligent presence on the network. Figures.

Thought For The Day - 21 April 2017

The Right Wingnuts are forever pointing at Unicorns to justify all manner of divide-and-conquer manuevers. Chief among such is that "college doesn't matter, just look at Bill Gates!" The Unicorn Theory of Success. Is and always was nonsense, but even most of the Unicorns find it useful to justify both their paths and also the constriction of access to various paths for the less fortunate. Gates was born with millions in trust funds. Not exactly a bootstrap tale.

Well, another research study puts the lie to the Unicorn Theory:

We found about 94 percent of these U.S. leaders attended college, and about 50 percent attended an elite school. Though almost everyone went to college, elite school attendance varied widely. For instance, only 20.6 percent of House members and 33.8 percent of 30-millionaires attended an elite school, but over 80 percent of Forbes' most powerful people did. For whatever reason, about twice as many senators - 41 percent - as House members went to elite schools.

Where did Devin Nunes go?

After receiving his associate of arts degree from the College of the Sequoias, Nunes graduated from Cal Poly San Luis Obispo with a bachelor's degree in agricultural business and a master's degree in agriculture.

And what about that associate's degree? oops!

WASC placed the college on "show cause" status in early 2013 and required to demonstrate to WASC that it should remain accredited. In early 2014, the accreditation status of COS was changed to "warning" as many of the original deficiencies were corrected but others remained; a follow-up report is due in October.

A shit kicker in Congress.

Thought For The Day - 18 April 2017

Does anyone else find the new Old El Paso "taco party" commercials just this side of porn? I mean, in the usual context, I prefer tacos over hotdogs. But not as food.

See The Dots, Connect The Dots

Work with me on this one.

We know that Empty Counties are Red just because they're white, uneducated, unskilled, and unemployed. Incestuous hollers. Enough Empty Counties in a state, and it runs Red.

We know that cities are Blue just because they're polyglot, educated, skilled, and employed. Enough cities in a state, it's true Blue. Have you noticed that mongrel mutts are almost always tractable and smart? Same with people. Thoroughbred horses are a nightmare. Same with people.

We know that Red states aren't pure Red, but dotted (or swamped, in some cases) with Blue cities. All that matters is who breeds faster (I'll leave that as an exercise for the reader) and who is dumb enough to believe lots of things that aren't true. And who actually votes.

So, today we find that real estate experts (or some, anyway) expect city rents to decline due to overbuilding. But that this will last only a year or two, since liberals and progressives and the smart and employed continue to flock to cities.

In a few years, not even the Red-est of states will be able to find enough votes in their Empty Counties to overwhelm their Blue cities. Oh the irony of it!! The real Tea Party happened in that most socialist city of all, Boston.

The KKK's worst nightmare.

Eventual Data

Another in the grab bag of tricks with these endeavors: events drive data, and not the other way round. Of course, one can find hundreds of books on Amazon with the search 'financial engineering'. 6,296 as I type this. That's a bunch. Beginning, in earnest, with Samuelson, my initial profession of economics slid down the rabbit hole of quant. Political economics has always been about policy, which is just a polite way of saying, "how do I kill my opponents and reward my allies?" Orange Julius Caesar as President should dispel any notion of a higher purpose.

Well, surprise. The announcement of the second tier international economics award comes as a big surprise. Or, perhaps not. These missives have oft mentioned Gordon's book the last few months. His approach is very much the wordy approach to analysis that Samuelson and Solow attempted, successfully, to kill off.

The economics association highlighted Mr. Donaldson's interest in historical research, an unusual focus for a leading economist. In one paper, Mr. Donaldson found that the spread of railroads in 19th-century India increased prosperity by increasing trade. A subsequent paper reached a similar conclusion about the United States.

Study the events, and you'll see why the data turned out as it did.

The economics association also highlighted Mr. Donaldson's research techniques. It said he had "formed and become the principal practitioner of a distinctive style of research, based on important conceptual questions, careful data work and credible identification combined with state-of-the-art structural methods."

One might dismiss such as reactionary, but given Trumpism and Creationism and Isolationism and Populism and the like, why not?

Finally, the real surprise to anyone who's kept track of econ research and punditry over the last decade,

Mr. Donaldson, 38, was born in Canada. He graduated from Oxford University with a degree in physics and then earned a doctorate in economics at the London School of Economics. He joined the faculty at Stanford in 2014.

When I was at UMass, I opted into then out of, the Ph.D. program and took the participation trophy MA rather than put up with just such graduate program professors. They could spit derivatives off the end of the chalk (yes, it was that long ago) with supreme confidence, but hadn't much of a clue about economics. Not a one of them would have written what Donaldson has. Not even as punishment for high crimes.

Small Victories

One of the quant-ish memes in these endeavors is its use in the field of pharma. Should NHST be used? Should Bayes be used? Should single arm trials be allowed? And so on. But one of them has to do with the gaming of the system. There are as many ways to attempt that as there are the stars in the sky. Over the last decade or so, one of the most popular has been Orphan Drug designation.

You can read up the wiki article for all the gory details, but the summary is that Orphan Drug designation blesses the sponsor with lots of additional profit making opportunities. One of the more subtle, and not necessarily obvious, during the application process: can/will the drug, if approved, be easily moved into a wider population than the orphan indication? The orphan benefits, by current law, follow the drug into such indications. Some mainstream pundits have kvetched about that and about the number of potential patients which define orphan, currently 200,000. That's a lot.

Well, today's briefing.com brings some good news. If you think spiking the cheating is good news:

6:01 am CytoDyn announces that its application for Orphan Drug Designation was not granted by the Office of Orphan Products Development of the FDA 'because PRO 140 appears to have the potential to treat more than just the subset of multi-drug resistant HIV patients for which the designation was requested'

I wonder how much they'll send along to Jared or one of the Wonder Kinder to have FDA change its mind?

Thought for the (Good Fri)day - 14 April 2017

Just when you thought Orange Julius Caesar was going to Make America Great Again (whenever, and for whomever, that might be), we get the CPI summary that can, reasonably, be his alone.

The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.3 percent in March on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today.

Some of that was gas went down (it's been rising since that data was collected), but

The index for all items less food and energy fell 0.1 percent in March, its first decline since January 2010.

Of course, that month was still a Great Recession month, despite what some BLS wonks have said. Falling prices, aka Defeat is in Dee Flation, are the canary in the coal mine keeling over just before it blows up. Welcome to Trump Crater, where the Billionaire Boys get richer and the poor die sooner. The imploding Middle Class (what's left of it) doesn't have lots o moolah to push up prices. If that all sounds like you've read that here before. Well, you have.

Times A Wastin'

Have many stopped to consider why Orange Julius Caesar is so hot to trot with his "disruptive initiatives"? You might notice that most of the damage is coming from his anti-American agency heads. Pruitt (yeah, it's a tort law firm link, but it was the first one that came up with a money quote, which is what matters) declaring asbestos benign.

Hon. Mr. Pruitt: Asbestos has been identified by the EPA as a high-priority chemical that requires a risk evaluation following the process established by the Lautenberg Act to determine whether conditions of use of the chemical substance pose an unreasonable risk. Prejudging the outcome of that risk evaluation process would not be appropriate.

As if the effects of asbestos were unknown? DeVos expressly denied holding all schools to equal performance metrics

Betsy DeVos admits to Sen. Tim Kaine that she does not support holding charter schools "equally accountable" as public schools.

Of course, Orange Julius Caesar and DeVos made millions fleecing vulnerable folks and the Federal government. I spent about a year "teaching" for one of those for-profit schools (not, so far as I know, owned by either). No diploma? No GED? No problem. We'll turn you into a MultiMate expert in a few months. [If you've ever heard of MultiMate...] Just sign here.

One could go on for hours listing the cynical anti-American exploitation of this crew over the course of just three months. But the underlying question is why the need? Orange Julius Caesar knows, for sure, how much collusion there was between himself, his helpmates, and the Russians. He likely knows how far along the FBI (with help from NSA and CIA) investigation is. He's counting the days until his perp walk. Time's a wastin'.

What he's too dumb to figure out: the sooner he craters the country, the longer the electorate lies prostrate into the 2018 election. And, thus, the greater the threat to the Right Wingnut control of Congress. Even shit kickers in Empty States know when they're being kicked in the face while they grovel in the mud. The Obambi employment surge has past, so good luck.

Who Was That Masked Man?

In a NYT interview published yesterday, Kim Jong-Don had this to say about Susan Rice:

I think the Susan Rice thing is a massive story. I think it's a massive, massive story. All over the world. It's a bigger story than you know in terms of what other people have done also. The Russia story is a total hoax. There has been absolutely nothing coming out of that.

She's been on various "news" chat shows, and didn't say what needed to be said. I offer up this example of how to do it.

Trump is either an idiot or a pathological liar; likely both. His assertion amounts to saying that the National Security Advisor receives these reports with names of US citizens covered by a piece of tape with "US Person" printed on it, and then the Advisor peels off some of those tapes to see who is named. The further assertion that the Advisor was using these reports to "spy" on Trump and associates requires that the Advisor know, beforehand, that a Trump or associate name is under the piece of tape. That's nonsense, of course. If a report, during the campaign, mentioned Russians and election fiddling, then it would be my job to determine which US citizens were colluding with Russians. That these US citizens just happened to be Trump and his associates is just tough luck for them. Caught red handed. Boo hoo.

In order "unmask" a US citizen name (which is the text "US person number X" and such), the Advisor can only request the name of the US citizen from the originating agency, which may or may not oblige. The Advisor cannot "unmask" unilaterally.

That's what she should have said.

Thought For The Day - 5 April 2017

Been in another peeing contest with a Bayesian. They're as bad as the tea baggers in believing so many things that just ain't so.

The fundamental flaw in Bayes is the assumption that investigators are both objective and honest. Humans always have an agenda. In the pharma world, sponsors will do most anything to get a drug approved, even glossing deaths. FDA, on the other hand, will renege on agreements (SPA, generally) if they see new data that is worrisome.

Since there are an infinite number of priors available to any study, there's every reason to believe a sponsor will choose the one which best fits the agenda. Good luck with that.

Orwell Got It Wrong

Two ways of using quant have been, to my mind, wrong: financial engineering because it's been the source of collapse since the beginning of the Nation, and psychoquant which uses data to manipulate the rest of us to the advantage of the few. Well, Noam Scheiber goes long in today's NYT with a detailed expose` of how Uber does it. It should give you the willies. May be not. What the story doesn't tell you: Uber, despite these very expensive efforts to manipulate its "contractors", is massively underwater.

Uber exists in a kind of legal and ethical purgatory, however. Because its drivers are independent contractors, they lack most of the protections associated with employment. By mastering their workers' mental circuitry, Uber and the like may be taking the economy back toward a pre-New Deal era when businesses had enormous power over workers and few checks on their ability to exploit it.
[my emphasis]

The point, of course, is to re-institute the indentured servitude (or, in the extreme, slave) model of the 19th century. For those who think that immigration in the century was the result of National magnanimity, well no. Various folks, generally on a racial basis, were imported to deal with specific projects. Asians building railroads likely the best known. As explained many times previously, as capital substitutes for labor, the less there is for the capitalist to gain from squeezing the workforce. And it matters not whether they're "employees" or "sub-contractors".

The destruction of employment will, in all likelihood, have some predictable effects. Healthcare will devolve to the pre-New Deal model where it's just another consumer spend, and quality will devolve to that level. The reason healthcare evolved so rapidly in the post WWII period was just because of all that moolah injected into the system. Most of the basic tech that was implemented was known before the War. There just wasn't much money coming from the 1% to finance progress. In other words, money can't buy you love or better health. It takes a bit more than a few village people to fund R&D in healthcare.

Retirement funding, similarly. And, by the same mechanism: divide and conquer. The Right prefers the verbiage of "freedom to choose", but, of course, the only way to fend off the powerful few is if the many merge together.

The Editors, most likely, buried the lede to the last graph:

"You have all these players entering into this space, and the assumption is they'll do it through vast armies of underemployed people looking for extra hours, and we can control every nuance about what they do but not have to pay them," said David Weil, the top wage-and-hour official under President Barack Obama.

When you stop to consider the enormous cost advantages, Mr. Weil said, "it says to me this is an area that will grow fast."

Take the time to read the whole piece. It will curl your hair, if you're among those who've not been paying attention to this quant space.