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Yesterday I asked for links to any articles explaining how bad things could get if the $700 billion bailout doesn't happen. The best one I saw was this:

http://www.nytimes.com/2008/10/01/business/economy/01leonhardt.html?_r=1&oref=slogin


I like the clarity of that explanation, but it seems incomplete. For one thing, there is no discussion of the positive aspects of a financial calamity, for example:

- Rent gets cheaper when housing prices fall. That's a redistribution of wealth from the rich to the poor.

- While it will be harder to get a mortgage for an $800K house, that house is only worth $500K now. That should make it a lot easier to qualify.

- Gas at $4 per gallon is a necessary condition for creating the next economic boom: renewable energy and green technology.

- A good recession now and then is necessary to purge the economy of things that need purging.

- College students are starting to choose technology majors over finance majors, probably because of the financial headlines, and this bodes well for the future.

I also wonder if the Internet will take some of the steam out of a credit problem. The problem is a lack of credit, not a lack of people who want to borrow, or a lack of money to lend. When lending is constrained by geography, you might find that your local bank is unwilling to help you. But with the Internet, it seems we could always find a match between a lender and a borrower, at some interest rate. The people who have money to lend aren't going to be keen on the stock market or real estate for awhile, so there should be plenty of capital for private lending at attractive rates. Arguably, banks are an anachronism anyway. This might speed up the inevitable.

I own some real estate (an empty lot) I have been trying to sell. Every recent offer on the property has included a component of seller financing. I expect to see a lot more of that if bank lending dries up.

And allow me to leave you with a pinch of optimism, just because I can. I call it Adams' Rule of Obvious Calamities. It states that any calamity that is foreseeable by the public at large won't turn out so bad after all. The best recent example was the Y2K problem, where computers worldwide were expected to fail. It seemed impossible that those issues could be resolved in time, but they were.

The problems that hit hardest are the ones that sneak up on you. Our current financial problem is big, but I expect a recession to be mild and even useful, precisely because so much human energy and attention is being focused on the fix.

 
Now that the government has proposed bold solutions to the financial meltdown, and also rejected them, I am digging my underground bunker and hoarding canned goods. I call that "doing my part."

I wasn't truly scared until I saw on the Internet that Michael Moore has waded into the economic discussion. When citizens start getting their economic guidance from Michael Moore, well, that is a harbinger of doom. But the worst part is that I'm not entirely sure he's wrong. Stay with me on this.

There is a growing school of thought - let's call it the Michael Moore school - that the $700 billion dollar so-called bailout is intended primarily to enrich the already rich. To me, that sounds like a cartoon characterization of a complex situation that couldn't possibly be accurate. On the other hand, a year ago if you told me the entire economy depended on making loans to people who couldn't repay them, I would have dismissed that too. So I am reluctant to dismiss ideas just because they sound crazy.

Let's pause here to acknowledge that any governmental action to maintain the health of big banks, and the economy in general, will benefit rich people the most, simply because they have more money on the line. That's how capitalism is constructed. The relevant question is whether lower income people also gain by the $700 billion bailout.

Viewed in terms of suffering, it seems obvious that rescuing the economy helps low income people the most. A billionaire who becomes only a half-billionaire doesn't suffer as much as a factory worker who loses his job, or has to pay more taxes, or gets devoured by inflation. So if the price of helping the factory worker is that some rich people get richer, that's unavoidable under capitalism.

Lately I have been hearing that the $700 billion should go directly to help the people who need it, not to help the greedy corporations. In other words, the government should borrow $700 billion from the taxpayers and then give it back to them. I think that is the kind of thinking that caused the problem in the first place. Unless this is just another way of saying the government should transfer a huge amount of money from the rich to the poor in one fell swoop. If that's the plan, let's call it what it is, and debate it clearly.

What seems missing in all the discussions of the bailout is some sort of description of what is likely to happen if we do nothing. Personally, I am not persuaded by hand waving and vague pronouncements of doom. I'd like to see the risk illuminated a bit.

For example, is the risk primarily to a number of big financial institutions that wouldn't be missed by anyone but the stockholders and employees who signed on for the risk? Or is the failure of those companies just the start of a process that would inevitably cause a great depression? I have no idea.

Does anyone have a link that describes what probably happens if the free market sorts out things on its own?
 
Today I discovered I am on a list of famous people who have dyslexia. This made me happy, not only because I am in good company, but because the lits si alphabetical os I ma no otp.

http://hometownhollywood.com/2008/09/70-famous-dyslexics/#comment-87


I don't understand why having something in common with famous folks is supposed to make people feel good, but it does. Heck, it worked for me, and I'm on the list. So I tried to reproduce the feeling by seeing what other lists I am on. I found a few surprises. I listed them at the bottom.

This made me think that a good web site would be "famous people who are like you." It could start with famous people who have the same birthday, graduated from your school, once lived in your town, have the same sort of dog, watch the same TV shows, had your same profession at one time, committed the same crimes, are the same height, played the same instruments or sports, and so on. If you are like me, you will feel comforted knowing there are lots of famous people who have things in common with you. It's a shallow feeling, but a good feeling nonetheless.

The website would be extra cool if you could paste your own photo into the list of famous people, and create a web page, or print it out. Someone please go build that website.

Here are some more of the lists I discovered that include me.


Famous Mac Users (I switched to Windows years ago.)


http://www3.bc.sympatico.ca/greenacres/macusers.htm



Famous Unitarians (even though I have never been one)


http://www.unitarian.co.za/famous_unitarian_universalists.html



Famous Mensans (I stopped paying dues in the eighties)


http://en.wikipedia.org/wiki/List_of_Mensans



Famous Vegetarians


http://www.happycow.net/famous_vegetarians.html



Famous Economics Majors


http://www.marietta.edu/~ema/econ/famous.html



There is not yet a list of famous people who are CostCo members, but I could be on that list too:


http://www.costco.com/Service/FeaturePage.aspx?ProductNo=11023465

 
Doomed
Sep 26, 2008 | General Nonsense | Permalink
One of my favorite words is "doomed." It always makes me laugh. I like the way it sounds. And I reflexively find humor in situations that are so bad there is no hope. I'm not proud of this quality. I'm just saying that if scientists discover a giant asteroid heading toward Earth, I would probably laugh myself to death before the impact.


With that in mind, today I saw two articles about human intelligence, as it relates to voting. I suggest you read both, and pause after each paragraph to contemplate the word "doomed." It might make the experience funnier.

Here's the first. This one made me laugh my "ars" off.


http://arstechnica.com/news.ars/post/20080924-does-ideology-trump-facts-studies-say-it-often-does.html


This one is almost as funny.


http://www.salon.com/env/mind_reader/2008/09/22/voter_choice/index.html?site_design=grapenuts


Now go out there and vote. Especially if you are sure you are right!


(Doomed)

 

Yesterday I found myself in a political discussion that included my very lonely Republican friend. Eyes rolled when he claimed the Clinton administration was to blame for the mortgage fiasco. His argument is that during the Clinton era, lenders were pressured by the government, and by interest groups, to loosen loan standards in order to increase minority home ownership. This strategy reportedly worked splendidly while home prices were increasing. You know the rest of the story.

My Republican friend followed up with a link to an article that I have seen twice in the comments to this blog, so I hereby promote that link to my post:

http://www.nypost.com/seven/09242008/postopinion/opedcolumnists/house_of_cards_130479.htm?page=0


I'm not persuaded by the article, but neither do I discount it entirely. My problem, as always, is that I don't have enough knowledge to make a judgment about it. It sounds credible, but that doesn't mean much.

At best, the pressure to increase minority home ownership was only part of the problem. The executives in the mortgage industry must have known that the increased lending activity would make them even more stinkin' rich than usual, at least short term. In the long term, they would be living on their yachts. Without the greed angle, the executives might have better resisted what they knew was a risky path.

Second, as Warren Buffett said when he saw all the complicated financial derivatives based on mortgage activity, "My eyebrows are huge!" He didn't actually say that, but he did warn that trouble was brewing in the derivatives game long before it was obvious to people with normal sized eyebrows. So the exotic and complicated financial derivatives market made a bad situation worse, and that had nothing to do with the liberal agenda.

If there is any truth to the idea that the Clinton administration was a major cause of the mortgage crisis, you have to ask yourself why the media is mostly ignoring that angle. If it isn't true, does anyone have a link to a rebuttal?

 
I was surprised at how little attention my Dilbert Survey of Economists got from the media. It did well on the Internet, finding a prominent place on CNN.com, then getting picked up by Reuters, BusinessWire, MarketWatch.com, Yahoo, Dilbert.com obviously, and tons of blogs. But it didn't get any play with television, radio, or newspapers. Why not?

Several people with knowledge of the media told me the survey "wasn't biased enough." Democrats and Republicans in the survey mostly stuck to the party line. Obama had the most support from economists, by far, but there are more Democratic economists in the country, and in the survey, also by far. To my knowledge, no one has ever studied why that is.

Today the headlines tell us that Obama is pulling ahead in the polls because likely voters have more confidence that he can handle the economic crisis compared to McCain.

http://www.msnbc.msn.com/id/26862018


In other words, public opinion is starting to line up with the opinion of economists. Did the Dilbert Survey of Economists have any impact on that move?

The biggest reason for the move in the polls probably has to do with McCain's support of Republican policies that are widely seen as the source of the problem.

Second, the financial problem is complicated. The only thing we ignorant voters know for sure is that we want someone with a high IQ to sort out this mess on our behalf. No matter how much you love McCain's philosophy, track record, moral compass, common sense, or anything else about him, he doesn't come close to Obama in pure brain power. For most issues, that probably doesn't make much difference. For an issue of this complexity, it might.

Third, I think the Dilbert Survey of Economists probably had some impact, at least with the free thinkers of the Internet. A lot of people, including me, assumed before the survey that most professional economists would lean Republican. The fact that so many economists are Democrats, and support Obama, is both a surprise and hard to ignore.

I wouldn't have funded the survey if I didn't have this blog. And I wouldn't have this blog if people didn't leave comments. So if the Dilbert Survey of Economists ends up changing the world, and you have ever left a comment here, you were part of something important.

 


User Shaqbark had a great comment about the notion that the rich don't have enough money to put a dent in the financial problems:

Fire@will writes:

[The "rich" don't have enough money to make everyone else rish. Confiscate all the wealth of the wealthiest ten percent and I'll bet it would not pay our debts for a month. Then what?]

From http://en.wikipedia.org/wiki/Distribution_of_wealth:
The United States is one of the richest countries in the world, and in 2000, the mean wealth was $143,727 per person.[10] In the United States at the end of 2001, 10% of the population owned 71% of the wealth, and the top 1% controlled 38%. On the other hand, the bottom 40% owned less than 1% of the nation's wealth.

Hence, the rich actually DO have enough wealth to make EVERYONE in the US rich - if it were possible to redistribute this wealth without causing massive inflation, which it would not be.

One of the best-kept secrets of the rich is that being wealthy (not just having lots of zeros in your bank balance, but being able to have a life of leisure, space, and privacy) requires other people to be poor.

 

When famous bank robber Willy Sutton was asked why he robbed banks, he reportedly replied "Because that's where the money is." And when our next President, no matter who it is, and Congress try to unscrew this financial mess, they will quickly realize two things:

- It will require a crapload of money.

- Poor people don't have money

Like a group of Willy Suttons, they will come after the rich because no one else will have any money. The fairness part of the debate will become moot.

The problem is that the rich are the only group powerful enough to stop the government from raising their taxes. So my question to you today is this: What is the best way to confiscate money from the rich?

There must be some way to give the rich a spoonful of sugar to make the medicine go down. Somehow the impression of unfairness has to be mitigated so they comply willingly. Allow me to jump to some bad examples to make the point.

Suppose the next President made the following pitch. "This is a once-in-a-century cash crisis. To get us through, we are going to tax the rich heavily for the next ten years. In return, the rich will each get two votes in every election."

Now remember that the spoonful of sugar can be more psychological than economical. A double vote is the one sort of thing a rich person can't already buy. And it wouldn't have much impact on democracy because there aren't that many rich people. Everyone gets something. The poor get money, the rich get slightly more influence.

Or suppose the rich were required to fund alternative energy projects directly, and in return get some equity, like a mandatory venture capital model. I would much rather give my money to a specific venture with a tiny chance of payback, as opposed to the general tax fund.

I would also feel okay about a tax increase if 100% of the extra money went to buy healthcare for those who couldn't afford it, and I knew how many people that was. For example, if I got a tax bill from the government with a specific dollar amount, and next to it an estimate of the number of people it will give healthcare to, I couldn't feel so bad about it. I'll only get pissed if my money goes into some general fund to buy bridges to nowhere.

Or suppose Congress makes a deal with the rich, something along the lines of raising their taxes only if the government reforms something in particular that is widely agreed to need reform. I wouldn't mind paying extra taxes if it inspired the government to be more effective or efficient going forward.

Or how about requiring the rich to buy foreclosed houses, with a requirement that they rent them to others for the next 15 years? The rich can qualify for the lowest loan rates (or pay cash), so the credit problem would be solved. While the rental income wouldn't cover the loan and other costs, there is some potential that the investment could turn at least neutral when home prices rise in the future. Low income people would get extra places to rent, and rich people wouldn't feel so screwed if they owned property that had some chance of breaking even. And banks would be solvent.

And suppose you require the rich to install solar panels and other energy solutions to each foreclosed home they purchase, and optionally roll that expense into the mortgage. That would create lots of jobs and reduce national energy consumption at the same time.

In business school we learned that you can usually reach a deal whenever two parties put different values on things. Do you have any better ideas for how the government can confiscate money from the rich and make everyone happy about it?

 
With all the news of disasters, I thought it was time for another round of unwarranted optimism to cheer you up.

As I have previously noted in this blog, every week the media reports breakthroughs in curing deadly diseases, and inventions that turn just about anything into cheap energy. The one thing all of these reports have in common is that you never hear much about them again. The stories are generally completely fraudulent, overhyped, or prematurely optimistic. But that doesn't stop me from hoping the next one is real. That hope makes me feel good. To spread the joy, I give you the three stories of amazing breakthroughs that will change the world. Or not.

We start with the 12-year old genius who recently invented a type of solar panel that is 500 times more efficient than what is on the market now. I questioned whether a 12-year old could really do this sort of thing until I looked at his biography. If that doesn't convince you, just look at his picture then look at yourself in the mirror. Who looks smarter?

http://www.katu.com/news/28432984.html

You still need a cheap way to store the solar energy. Otherwise you need other sources of energy at night, or for cars. Some smart guy at MIT (Dilbert's alma mater) has you covered. I've shown this link before, but it makes me happy every time I think about it:

http://newsoffice.techtv.mit.edu/file/1243/

It does you no good to have electricity if you have no clean water to drink. That's a huge problem in a lot of places, and getting worse. Luckily, inventor Dean Kamen has you covered with his water purifier that requires no filters.

http://www.newsweek.com/id/130735


Kamen also invented a device that will inexpensively create energy from manure. It works best if you have livestock, but there's no rule that says you can't crap in it yourself. This will lead to new sayings replacing the venerable "I have to go drop a penny," and "I have to see a man about a horse." In the future you will be able to say, "I have to go pinch a watt," or "power the Kamen."

Do you feel hopeful yet?

 
Once again I have inadvertently created the same comic twice. Call it self-plagiarism if you must. The first one ran 5/25/07:


Then on 9/18/08 its fraternal twin appeared. Readers were quick to let me know.



In my defense, it isn't a case of laziness. Drawing is the hard part for me, not the writing, and both comics were drawn from scratch. It isn't a case of running out of ideas; I always have plenty of those, thanks to readers submitting material. So what the hell is wrong with me? I'll use this excuse to give you a tour of my creative process.

Every comic starts with a basic premise, either from my own experience, reader suggestions, or the business headlines. I typically start drawing the first panel of the comic before I know where it is heading. The premise tells me which characters will be involved and where they will be. It helps to start drawing right away because I feel as if I am making progress. No writer wants to look at a blank screen.

When the characters appear, it's almost as if they suggest dialog. I think a similar thing happens for movie writers who find it helpful to imagine a specific actor in a role when creating dialog. Seeing a character helps you find the right voice.

Once the first panel is drawn as a rough draft, I tinker with the words. I might do a first draft of the writing all the way to the end just to make sure the characters appear in the order they will be speaking. I'll go back and fiddle with the wording between spurts of drawing. As I get deeper into the process I inevitably have the following thought: Did I already do this exact comic, or does it just seem that way because I have been thinking about it for the past hour?

I've created 365 Dilbert comics a year for 19 years. I remembered all of them for about the first four years. Now it is impossible. So I sit there for a few minutes rummaging through my memories and finding nothing but spider webs. At this point I will digress and give you my untested theory about creativity:

Creativity is highly correlated to poor memory.

For me, ideas stream through my head at a frantic pace. I feel like a bear trying to grab a salmon. If my paw misses its target, that salmon is gone for good. I don't dwell on it. I just lunge for the next salmon. I think people who have fewer thoughts per hour have time to let them settle in and form memories. It's just a theory.

To make matters worse, every few months I like to draw a generic character that has something horrible happen to his head. I just like how it looks. Sometimes the head explodes. Sometimes it turns into a skull, or shrinks, or enlarges, whatever. These are especially hard to remember because they get lumped in my memory and congeal over time into "things that happened to heads."

The punch line for my recent repeated joke, "Clean up on aisle three," wasn't original the first time I wrote it. It's funny in part because the phrase is so common, even in the context of humor. When you pair a common phrase with an uncommon situation, such as an exploding head, the reader's brain has a little hiccup over the juxtaposition, and that triggers the laugh reflex. Gary Larson was the master of that method. His Far Side comics often featured unusual characters in bizarre situations saying things you hear all the time.

You can go the other way too. I often mix unusual wording with mundane office situations to produce the same mental hiccup. Why say you attended a long meeting when you can say you watched your irrational optimism circle the drain, starving and screaming at the same time?

And always end with a clean finish. Like this.

 
 
 
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