Category Archives: Uncategorized
What can you get for 6.8%? That would be the rate for a student loan as of July 1, 2013.
As of July 7, 2013 rates for other kinds of loans are:
30 year fixed rate mortgage 4.40%
15 year fixed rate mortgage 3.45%
5/1 ARM 3.55%
30K FICO based home equity loan 5.19%
48 month new car loan 2.57%
In fact the only thing worse than the student loan rate is the average rate for credit cards, at 15.27%.
Now, here’s some information from the Federal Reserve about what it costs for banks to use the “discount window:”
“Federal Reserve Banks have three main lending programs for depository institutions — primary credit, secondary credit and seasonal credit. Under the program enacted in 2003, Reserve Banks establish the primary credit rate at least every 14 days, subject to review and determination of the Board of Governors.
Primary Credit Rate: 0.75%Primary credit is available to generally sound depository institutions on a very short-term basis as a backup rather than a regular source of funding. Depository institutions are not required to seek alternative sources of funds before requesting advances of primary credit.
Secondary Credit Rate: 1.25%Secondary credit is extended on a very short-term basis to depository institutions not eligible for primary credit. It is available to meet backup liquidity needs when its use is consistent with a timely return to market sources of funding or the orderly resolution of a troubled institution.”
Now, what bank wouldn’t want to borrow at 0.75% to make student loans available at 6.8%?
Is that even a word? However, the schedule around here is getting a bit hectic, and therefore posting will be sporadic, episodic, or only when the Spirit is Really Moved! For the rest of the time, please enjoy some of the excellent blogs listed in the sidebar!
** Good news and Bad news: Nevada’s Governor is good at finding money for state programs — on the other hand the money is flowing in because our economy is lagging. [LVSun] Unfortunately, this comes with an ideological framework, which a person could suppose is meant to sound moderate: “We cannot cut our way out, we cannot tax our way out, we can only grow our way out.” The phrasing sets up a false choice in which “C” is the sole useful option. It’s commendable that the Governor acknowledges growth based solutions as the proper course for economic development; it’s not so commendable to see that increasing taxation on economic elements in Nevada who have not been paying their way isn’t part of the total package.
** The Nevada Legislature is looking at the issues related to severe mental illness and gun possession in two bills. SB 221, which cleared the Senate Health and Human Services Committee with a Do Pass as Amended recommendation, upgrades the background checks required by Nevada law to include private sales, and specifically prohibits a person who, in the estimation of a psychiatrist or a licensed psychologist is likely to be a danger to self or others from “possession, custody, or control” of a firearm. Once more with urgency: The only people who would be “inconvenienced” by background checks under Nevada law are (1) felons (2) fugitives (3) minor children (4) domestic abusers, and (5) undocumented aliens. Surely, it’s not too much to ask that those seeking to transfer “possession, custody, or control” of a firearm would want the recipient to pass a quick background check before selling a weapon to anyone in those categories?
** Those who managed to find a bit of time to keep up with economic news during the Week from Hell, have benefited from “Pete Peterson’s Fingerprints…” at Crooks and Liars. The Austerians are, indeed, losing the narrative in the national economic debate, and this short article explains who is still promoting illogical austerity pontification which passes for economic theorizing in Dante’s Fourth Circle of Hell. For those inclined to get into the mathematical weeds of the R&R mess, Angry Bear has a handy post. A more general critique is available from the EPI. As for the prospective denizens of the Fourth Circle, see Naked Capitalism’s post in which Robert Johnson opines of the oligarchs, “they are all standing on the deck of the Titanic looking in each other’s eyes.”
** Republicans behaving badly: Second Amendment Solutions? One GOP lawmaker in Arkansas would like to activate them in terms of the expansion of Medicaid under the terms of the Affordable Care Act. [Think Progress] Ohio legislators would like to prohibit instruction in health education classes about “gateway sexual activity.” [TP] As if the kids haven’t just about figured out the “gateways” already? Texas state legislators dislike the meddling old EPA — and they have a blasted out neighborhood in West, Texas to prove it. [Politicususa] In the mean time, would someone explain to me how any Planning and Zoning Commission could possibly approve plans to build residential developments next to a fertilizer plant — or a fertilizer plant near a residential neighborhood? Much less in proximity to a junior high, a high school, and a nursing home?!
T’is the season for DB’s annual break from blogging action. The blog will be back in action on April 11th. In the mean time, please check out some of the fine Nevada and national blogs on the sidebar for excellent news, views, and analysis! Thanks!
One of the most basic lessons in economic education is the differentiation between Wants and Needs. It usually shows up somewhere in the K-3 part of the curriculum. The most basic expression comes as: “Needs are something you must have for survival. For example, food and water. Without food, you would not be able to live. Wants are something that you would like to have, but it is not necessary, and you could do without it. ” We have to be careful with this one in a consumer based economy because honestly there are lots of things we don’t need…as in most of the stuff being marketed to us.
However, for all the palaver expended on marketing, the fundamental concepts are simple: (1) Target the “right” market, identifying potential customers; (2) Provide “bait,” which can range from something like offering a Two For One sale or as complex as the psychologically based, focus group tested, campaign to sell luxury cars; (3) Utilizing appropriate media to get the message out. For all the variations, the message is always the same — I’m selling something and I want you to buy it.
So, what can we learn about gun owners — or potential customers for more guns — from the statistics at hand?
If I were selling guns, I’d notice that 42% of Americans own at least one firearm, and of that 42% about 48% are male, and 57% of those males are Republicans. Were I looking to expand my sales, I’d pay attention to the fact that only approximately 37% of women are firearm owners.
I’d notice that 55% of white Republicans are gun owners, and in the midwest and south Republicans comprise 62% and 56% respectively of firearm owners. In terms of population density, it’s relevant to observe that 60% of rural Americans own guns, 42% of suburbanites are owners, and urban gun owners make up 30% of the total. Age is often a marketing guide, so we’d want to note that individuals aged 18-29 have a 34% gun ownership rate, those aged 30-44 have a 42% rate, those people aged 45-65 have a 45% rate, and those over 65 have a 44% rate of gun ownership. If we’re looking at trends by political affiliation the chart would look like the following:
From a marketing perspective, there is more of a potential market among women, independents, and Democrats — but there are also those declivitous slopes in their purchasing patterns. This lends credence to the conclusion that “The household gun ownership rate has fallen from an average of 50 percent in the 1970s to 49 percent in the 1980s, 43 percent in the 1990s and 35 percent in the 2000s, according to the survey data, analyzed by The New York Times.” [NYT] In turn, we come to another conclusion — there are more guns in fewer households.
Repeating an oft cited economic rule of life — If your business has an increasing share in a declining market You Are In Trouble.
One factor in the declining overall market is urbanization — those who might have owned firearms for hunting, predatory problems, and personal safety in rural areas find less compelling reasons for gun ownership in urban areas. Hunting sports are trending downward as well, “only a quarter of men in 2012 said they hunted, compared with about 40 percent when the question was asked in 1977.” [NYT] The aging of America may have some relationship to this as well; hunting is hard physical labor, and those over 70 may not find the activity as enjoyable as it was on 35 year old legs.
Thus, gun manufacturers are faced with some serious marketing issues. Ownership trends in statistical terms, (not in anecdotal references to people who sign up for safety classes, or who make purchases of new models), are down. Urbanization is increasing. Women, less likely to buy a weapon, are 50.8% of the population. Hispanic Americans, also less likely gun owners, are 16.7% of the population and increasing. [Census] How can gun manufacturers profit, if they can’t buck the trends in which (1) a gun is less likely to be considered a “need” and more likely in expanding urban/suburban settings as a “want?” Or, if the population trends are such that those elements (women, Hispanic Americans) who are less likely to own guns are increasing in the overall count? In marketing, not shooting sport terms, — where are the targets?
Here’s one marketing ploy:
“A pink AR-15 will rock their world. I don’t care if they are welcomed on unwelcome visitor, everyone will respect your choice in weaponry. House guests love the look of your pink pink AR-15, and the bad guys will either bleed or run like hell. Wolverine Tactical Firearms utilize a Duracoat finish for their pink AR-15, and the ceramic coating is both durable and attractive. Yes we do purple as well.” [BTD.com]
The seller goes on to assure the potential buyer than a rifleman doesn’t have to explain why he or she would own a pink or purple AR-15 — the 2nd Amendment covers all that…. This assumes that one’s house guests are also shooting enthusiasts who won’t ask WHY you have a pink assault rifle. So, how many middle-western or southern white males aged 34-65 are going to drive to the gun shop for a pink AR-15? Or how many of their wives are likely to think this would be the sweetest Valentine’s Day present ever? The marketing answer to these questions may very well be Not Enough to make these products (1) answer a felt “want” in an expanding market, (2) create enough demand to justify the expenditure of complex marketing research and subsequent campaigns, and (3) get a return on advertising investments anywhere near the tipping point.
If we’re looking for a reason why the National Rifle (Manufacturers) Association is putting up a frontal assault of its own against any and all gun safety and violence abatement legislation — we might well consider the marketing problems they are facing in this country. Certainly, in light of the pink AR-15, they are.
The House Republicans continue to manufacture mountains of problems out of mole-hills of economic issues, and they can’t be completely oblivious to the ramifications of their ideologically driven proposals for Nevada. Here’s a hint:
“In fact, Nellis Air Force base has no new information about how the sequester changes might affect their operations, and is making no different plans to react to sequestration than they were a month ago, according to spokeswoman Jessica Turner. Civilian furloughs begin at the end of April, and from there on, will be equivalent to about a 20 percent pay cut through September.” [LVSun]
That’s five months with 20% pay cuts for civilian workers at Nellis AFB. Although the article doesn’t give the average pay for a civilian worker at Nellis, we might reasonably assume that it’s comparable to other AFBs around the nation, in which case the average annual pay is about $50,000. [Portales] It’s also public knowledge since November 2011 that there have already been cuts to civilian employment at Nellis and other installations in Nevada:
“Combined, the Southern Nevada bases and range installations account for 10,393 military and 4,366 civilian employees with a payroll of nearly $1.2 billion. In 2010, there were about 6,416 indirect jobs created with an annual dollar value of $257 million. “We’ve had a civilian hiring freeze for some time. Of those 155 being considered, some or all might be cut,” Lustig said Thursday.” [LVRJ]
If all the positions were cut back in 2011-2012, then we could estimate there are about 4,211 civilian jobs associated with military installations in southern Nevada. 4,211 employees multiplied by the average salary or wages of $50,000 comes out to $210,550,000 annually. If we shave 20% of the total then we’d calculate a loss of $42,110,000 to the regional economy of southern Nevada. It’s at this point where the square peg of ideological purity meets the round hole of economic reality.
The White Queen’s Economics
“Alice laughed: “There’s no use trying,” she said; “one can’t believe impossible things.”
“I daresay you haven’t had much practice,” said the Queen. “When I was younger, I always did it for half an hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.”
Alice in Wonderland.
Impossible Thing One: “Spending is the Problem.” We have the Sequester because it is taken as an article of faith in Republican quarters that federal government spending is “out of control.” Much was made of the fact that the U.S. was borrowing 36¢ on the dollar back in late 2011 , but there wasn’t much said about the fact that this rate had been DECREASING. For fiscal 2009 the rate had been 40¢ and 37¢ in FY2010. [FactCheck] This brings us to the report from the BEA in February 2013:
“The increase in real GDP in the fourth quarter primarily reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, and residential fixed investment that were partly offset by negative contributions from private inventory investment, federal government spending, exports, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased.” (emphasis added)
If the amount borrowed per dollar of revenue is declining, and if the sluggish rate of growth indicated by the 4Q GDP report is partially explained by a reduction in federal spending — then how on earth can a sentient person maintain the fantasy that “spending is out of control?”
Impossible Thing Two: “Every dollar borrowed by government is a dollar that is not being invested in our private sector economy.” This is an articulation of the Crowd Out Theory — this makes some sense IF and ONLY IF interest rates are HIGH. Even then it’s a bit sketchy because some government revenues are invested in research, development, business subsidies, commercial ventures, and the like. Dare we venture into the real world and look at corporate borrowing costs? If the Crowd Out Theory is correct, and government borrowing is making corporate borrowing more expensive, then what do we make of the following chart?
Moody’s forecast shows top quality corporate bonds paying about 4.01% interest through August 2013. As of July, 2000 corporations were paying 7.67% interest. [FRB H15] Thus much for government borrowing crowding out corporate borrowing.
Impossible Thing Three: “Government can’t create jobs.” When pressed about the relationship between teachers, firefighters, police officers, social workers, and “government” the answer from right wing ideologues is often punctuated by stammers — or pontifications about how public employees are Piggies At the Public Trough. A decision must be made at this juncture: Does government not create jobs, or is it that government creates too many “good” jobs?
Caution must be taken with charts purporting to “prove” government employees are making “too much money” in comparison to the private sector, especially when educational and expertise requirements are taken into consideration. Additionally, even the AEI is moved to report that workers moving from public to private sector employment are more likely to take a cut in pay. However, this isn’t the core of the issue.
Government does create jobs, and in the private sector. “But, but, but,” stammers our hypothetical ideologue, “Those aren’t REAL jobs. Permanent Jobs.” Ask any construction contractor and the individual will tell you the obvious: No construction job is permanent. When the highway is finished the job runs out and it’s time to bid for another contract. Since we have a lovely backlog of clean water, sewage treatment, bridge building, and transportation related projects we’re fobbing off on our descendants, wouldn’t it be a nice “job creating” thing if we paid some of this bill ourselves and at least made a head start on the payments?
Impossible Thing Four: “The national debt will turn us into an unstable place like Greece.” (Or Spain, or Italy, or Ireland, or Cyprus). Nonsense. For one thing we have our own national currency, [Creamer] and secondly, the economic policy process in the Eurozone should remind us all that the authors of the Federalist Papers were absolutely right in arguing we needed a unified national structure (our Constitution) in order to put ourselves on a sound fiscal basis. If a person might wonder about what happens when a loose confederation attempts to behave like a sovereign nation, it’s advisable to look at Hamilton’s response in Federalist 15. He was even more blunt in Number 17, “Commerce, finance, negotiation, and war seem to comprehend all the objects which have charms for minds governed by that passion; and all the powers necessary to those objects ought, in the first instance, to be lodged in the national depository.”
Another factor too often overlooked during periods of hyperbolic hysteria is that the U.S. has something else the Eurozone does not — a federal monetary policy compliments of the Federal Reserve System which can monetize the federal debt, and a process by which we prevent “runs.”
Impossible Thing Five: “Our national debt is a serious and immediate problem! Just look at all those digits on the debt clock.” Calm. Down. The debt isn’t an immediate problem (even some members of the House GOP are beginning to back off this canard) what we need to be doing — in a rational universe — is to stabilize the national debt. Here’s what our debt looks like compared to our Gross National Product:
In the wake of the Great Recession and wars in Iraq and Afghanistan, we’re now looking at a 67.7 ratio; [Atlantic] but then Germany’s public debt is at 80.6, Canada’s is at 87.4, Italy’s is 120.1. [Atlantic] The average in the Eurozone is about 82.5. The trick isn’t to “pay off the national debt” because who would want their long term Treasury notes paid off before collecting all the interest? The U.S., as noted previously, doesn’t have creditors — it has Investors, and as of right now the 30 year U.S. note is paying a rather measly 3.15% interest rate. The ten year notes are only paying 1.95%, and the 20 year notes will earn an investor 2.77%. [TreasuryYieldCurve] If we aren’t obliged to pay higher interest rates to people who are investing in our national notes, then why should anyone believe that The Debt is a terrifying thing?
Impossible Thing Six: “Federal Spending hurts our economy.” Now, we’re back to Nellis AFB in southern Nevada, or to northern Virginia — home to thousands of federal employees, or to Youngstown, Ohio with its TechBelt Initiative. What happens in places like Las Vegas and surrounds when $42 million is removed from the local economy in a year? As repeated ad nauseam herein, “government spending” doesn’t fall into a black hole. Salaries and wages are spent in the local economy, for everything from apples to zoology textbooks. Those unsure of the importance of federal spending in local economies have only to look at the various renditions of grief on display when the Department of Defense seeks to close a base. Once more, with great feeling — the formula for both aggregate demand and for the calculation of the GDP assumes government spending at national, state, and local levels. GDP= C+I+G (for government) + (X-M).
What is truly alarming is the capacity of members of Congress to believe all six of these impossible things before breakfast.
“One judge down. Just 69 more vacancies — including three in Nevada — to go For the past few years, political and procedural standoffs have stymied President Barack Obama’s attempts to get dozens of his nominees’ bids approved in the Senate, leaving dozens of gaping holes on benches across the country. But in few states has the situation reached such a fever pitch as it has in Nevada, where three of the state’s seven seats on the federal bench have become vacant in the past year. Seasoned lawyers say it’s the most troubling federal court crisis they’ve seen in Nevada in decades. And, they warn, it’s a crisis with real consequences.” [full story Las Vegas Sun]
As the article makes clear, criminal cases take precedence in scheduling because of the “speedy and public trial” provisions of the 6th Amendment. The implications are obvious. Civil cases will pile up in the backlog as three judges take on a workload intended for seven. Have an issue involving water rights in a federal court? — wait your turn. Have an issue with contract enforcement or terms in a federal court? — wait your turn. Have an issue with the application or interpretation of federal guidelines in almost any subject? — wait your turn. And, wait and wait and wait. “On Sept. 30, 2007, there were 3,685 cases pending before U.S. District Court in Nevada. On Sept. 30, 2012, there were 4,364.” This in a state which has grown by nearly 50% since the 2000 Census.
Worse still, we aren’t alone. Here’s the compilation of vacancies as posted by the U.S. court system:
There are 18 vacancies at the Appellate Court level, and half remain “pending.” Of the 69 vacancies at the District Court level 24 are pending. The two vacancies in the U.S. Court of International Trade are both “pending.” So, what constitutes an “emergency situation?” The definition is as follows:
“Any vacancy where weighted filings are in excess of 600 per judgeship; or
Any vacancy in existence for more than 18 months where weighted filings are between 430 and 600 per judgeship; or
Any court with more than one authorized judgeship and only one active judge.” [Judicial Nominations]
Nevada hits two out of the three elements, and at the rate we’re going item 3 isn’t out of the realm of possibility.
It’s time to remember that Justice Delayed is Justice Denied.
A bit of blatant blog flogging: The Fix is seeking nominations for state based political blogs to add to its annual list. Your nomination for Desert Beacon would definitely be appreciated. Link Here.