“Reportedly”, i.e. “Not” – Part 2

Seven days ago, the taxpayer-funded global news-gathering resources of TVNZ brought us this important news –

Hayden Panettiere is reportedly dating Mark Sanchez.

She was spotted with the 24-year-old New York Jets quarterback in Laguna Hills, Caliornia yesterday where they visited In-N-Out Burger with another couple.

(causing me to post this tweet).

Today Fairfax’s stuff.co.nz brought us an update on this critical issue (emphasis added) –

Hayden Panettiere is reportedly dating American Football player Scotty McKnight.

Earlier this month, Panettiere was mistakenly linked to Mark Sanchez, who is a friend of McKnight.

Which kind of reinforces the view expressed in my tweet: #DefundTVNZNow

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NZ Greens Scapegoat Australian Banks

The NZ Herald reports that the Green Party is criticizing Prime Minister John Key for lacking “the courage to tackle the big Australian banks which have saddled New Zealanders with billions of dollars of debt in pursuit of profits.” They call for “state-owned Kiwibank to be bulked up to take them on.”

This really looks like a argument driven more by ideological predisposition than by any logical analysis, i.e. “private profits bad, state ownership good.” First, they completely ignore the fact that New Zealanders’ debt is a consequence of New Zealanders’ own choices. No one has a gun to the heads of borrowers. If New Zealanders are taking on too much debt (and I’m inclined to think they are), it’s because of their own stupidity.

To the extent that this may involve poor lending standards for residential mortgages, the banks do bear some responsibility – but it is primarily responsibility to their own shareholders for the additional risks this entails (though arguably the Government also has a stake, given the retail deposit guarantee scheme). However as Gareth Morgan pointed out back in September, part of this responsibility actually belongs to the Government – not for failing to restrain the banks but rather for actively encouraging them through Reserve Bank prudential policy favoring lending for property over other investments.

Further illustrating the silliness of the Greens’ attempt to shift blame for bad borrowing decisions away from New Zealanders themselves, Bernard Hickey had a good article in the Herald a few days ago pointing out that Kiwibank actually relies on risky short term overseas funding to a greater degree than the Australian banks, and has “decided not to compete as hard with the Aussie banks for term deposit funding”. They were also New Zealand’s second biggest mortgage lender in the March quarter, making it pretty hard to paint the Australian banks as the villains of the New Zealand banking industry.

Brian Gaynor also has an article in the Herald today pointing out the huge difference in attitudes towards saving in New Zealand compared with Australia. The same banks (more or less) operate in both countries. But the data Gaynor presents shows clearly that New Zealanders are much less inclined to save and invest locally than Australians, further illustrating the fact that New Zealanders’ financial situation is a result of their own choices. For the Greens to paint the Australian banks as some malevolent force that must be stopped is just absurd.

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“Reportedly”, i.e. “Not”

Couldn’t quite find a way to fit this into Twitter…

From NewstalkZB and dutifully copied verbatim by the NZ Herald:

Australian tennis great Ken Rosewall is reportedly in a fight for his life after being admitted to the stroke unit of a Rome hospital.

Apparently they didn’t check with the Sydney Morning Herald:

Australian tennis great Ken Rosewall is in a good condition in a Rome hospital after suffering a suspected disturbance of the brain, according to reports.

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Making Up The News

Few things annoy me as much as when the news media engage in speculation about the motives behind things people do and say with minimal substantive basis on which to do so. Two examples have emerged in the last few hours in the wake of Mike Huckabee’s announcement last night that he won’t be running for the GOP Presidential nomination.

First, in thehill.com, Jamie Klatell tells us this (emphasis added) –

Huckabee did not mention any other candidates by name in his announcement, but he did make comments that could be a jab aimed at Indiana Gov. Mitch Daniels, whom many conservatives believe to be among the strongest potential Republican candidate.

“I don’t have an issue with my family being supportive — my wife actually has encouraged me to do it, despite knowing full-well that it will subject her and the rest of the family to some brutal and savage personal attacks,” Huckabee said.

Daniels has not made a decision on running, and his hesitation has been attributed to his wife’s concerns about the scrutiny of the campaign trail.

This is ridiculous. Does it not occur to Klatell that it is perfectly reasonable for Huckabee to make clear to the public the factors that did not lead to his decision in order to emphasize the significance of those that did? Is there any reason to think that Huckabee would want to go after Daniels in the way Klatell insinuates, especially when Daniels has not even entered the race? So what makes Klatell want to paint the picture this way?

Then National Journal’s Beth Reinhard searches the tea leaves and comes up with this (again, emphasis added) –

“[quoting Huckabee] For me, the decision is ultimately not a political one, a financial one, or even a practical one—it’s a spiritual one,’’ he said.

Perhaps, but it must also have been a financial one. While many politicians use money and celebrity to gain power, Huckabee appears to be reversing the equation, using his political clout as a means to fame, riches, and the bestseller list. Running for president would have meant giving up lucrative speaking gigs and a Fox News gig worth $500,000 a year through 2012. Last year, he broke ground on a beachfront home in Florida estimated to cost $3 million.

Really? It must have been? Even though he just told you it wasn’t? Even though he said on Fox News Sunday today (quoted by Politico) that “Up until just a few days ago… I honestly thought I would be in it”?

Claiming that you know what is in someone’s heart when you really have no way to know isn’t journalism. It’s arrogance.

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More on Krugman and Bonds

I commented a few days ago on Paul Krugman’s views about the current state of the bond market and mentioned the fact that Pimco has sold all of it’s US government debt, while the Federal Reserve is the largest buyer of US debt. Today Megan McArdle has a good piece in The Atlantic on the same subject. She interviews Bill Gross, the head of Pimco, as well as economist Carmen Reinhart. I thought the following was pretty interesting –

Some observers point to our current low interest rates and ask, “Why worry about deficits right now?” Paul Krugman, for example, regularly derides the people who are worried about the “invisible bond vigilantes.” But of course, as Gross says, what’s keeping Treasury-note prices low is not so much the free market as the behavior of central banks, which are buying for reasons that have nothing to do with their assessment of our fiscal rectitude.

Reinhart, who has done extensive research on the topic, was even more dismissive of Krugman’s analysis. “Are interest rates a good indicator of impending crises? The resounding answer is no.” Deficit doves seem to assume that bond interest rates will act as a sort of early warning system: when they start to creep up, then we should start cutting our deficits. But Reinhart argues, “Before the crisis, Ireland’s rates were imperceptibly higher than Germany’s.” By November 2010, the Irish were paying an extra 6 percent annual interest to borrow money. “I certainly wouldn’t call this my baseline scenario for the U.S.—but the message is: think the unthinkable.”

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Cognitive Dissonance

Today in thehill.com

The couple issued a joint statement Monday saying they are already living apart…

In their statement, the couple said they plan to raise their four children together.

From Wikipedia:

Cognitive dissonance is an uncomfortable feeling caused by holding conflicting ideas simultaneously.

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Paul Krugman on the Bond Market

In his latest op-ed in the NY Times, Paul Krugman makes some worthwhile comments about the seriousness of persistent unemployment. However I was struck by this claim –

And, for what it’s worth, actual investors — people putting real money on the line — are notably unworried about any near-term fiscal crisis: the Treasury Department continues to have no trouble selling debt and remains able to borrow very cheaply, indicating high confidence on the part of investors that debts will be repaid in full.

This is interesting in light of a couple of facts that Professor Krugman did not mention –

  1. In late February, Pimco, the world’s largest bond investor, dumped all of it’s US Government debt holdings (Reuters). In March they went further and actually bet against government debt by shorting US$7Billion worth, i.e. by selling $7Billion of US Treasuries that they had borrowed – approximately 3% of their total bond fund (The Guardian).
  2. 70% of all new US Government debt is bought by… the US Federal Reserve (Seeking Alpha). Are these the “people putting real money on the line” Professor Krugman was referring to?
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We Don’t Decide How the Laws Operate. Except When We Do.

I couldn’t help noticing the following quote from President Obama in politico.com this morning –

We’re a nation of laws. We don’t individually make our own decisions about how the laws operate.

The context is an article about the case of Bradley Manning, the US soldier accused of providing classified material to the Wikileaks website. The point of the article was to report criticism of the President for stating that Manning “broke the law”, when in fact he has yet to be convicted.

However to me the quote is interesting for a different reason – the fact that it stands in remarkable contrast to a couple of other recent reports about the administration’s views on the rule of law –

  1. CNBC asserted recently that Obama’s Treasury Secretary Tim Geithner “ignored the law that explicitly forbid the government from putting conditions on banks that wanted to repay TARP. … This was completely illegal—but he got away with it.”
  2. MSNBC reported in March that the President himself has decided that he “will no longer defend the federal law that says marriage can exist only between a man and a woman”

So apparently the administration thinks there are circumstances in which it’s perfectly fine for people to make their own decisions about how the laws operate. As long as they are those people.

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45% of American’s Pay No Income Tax in 2010

The Miami Herald reported yesterday the results of a nationwide McClatchy-Marist poll showing that American’s are 2-1 in favor of raising taxes on the wealthy.

Coincidentally, a number of other news outlets reported yesterday a study by the Tax Policy Center showing that 45% of Americans pay no income tax at all. Since McClatchy-Marist’s poll used a random sample, those 45% are presumably represented appropriately amongst those who want the wealthy to pay more tax. It’s interesting that so many who pay so little want others to pay more. And it’s also interesting that calls for the wealthy to pay more tax are so often framed as “shared sacrifice“.

I went looking for the details of the Tax Policy Center’s analysis and the most specific information I could find was actually for 2009, contained in a report published in July of that year. In that case the proportion of people paying no tax was 47%. The table below taken from that report shows a detailed breakdown by income level.

The updated figure of 45% for 2010 appears to come from a short article from March last year (incidentally it also notes that the report containing the 2009 data is the most requested publication from their website). Another Tax Policy Center article, from June 2010, makes the further point that the largest factor behind so many people paying no income tax is the fact that “Congress has chosen to deliver large portions of social policy through the tax code.”

I have no problem with the notion that those in genuine hardship should not be expected to pay income tax. But 45% of the American population do not live in hardship by any sensible global or historical standard. Unlike most conservatives, I’m not fundamentally opposed to tax increases (though I have questions about the need for them and their effectiveness). Nor am I fundamentally opposed to tax increases on the wealthy. I just think that expecting the entire middle class to pay their ‘fair share’ should be a higher priority than going back to those who already bear the greatest share of the country’s tax burden. And yes, that means that I think I should pay more tax before someone earning more than I does. I suspect I may be in the minority on that.

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Mark Thoma on Government Debt

I was mildly surprised to read the following reaction today from the University of Oregon’s Mark Thoma (no relation :)) to S&P’s negative outlook for US debt (via Brad DeLong):

… it’s important to remember that the US debt is a promise to pay dollars, and we can print as many dollars as we want. That could be inflationary, and the inflation can undermine the real value of those bond payments and cause other problems, but that is not technically a default.

I find the sentiment disturbing. “Not technically a default”? Correct, but an abrogation of moral responsibility nonetheless. Debasing your currency simply to avoid paying less in real terms than your debtors can reasonably expect is a cynical breach of good faith. And of course it’s more than that – it represents a systematic confiscation of wealth from people who hold cash and bonds and a redistribution of that wealth to those who hold debt.

I note that Brad DeLong raises no objection. And Paul Krugman‘s views are well known –

… in 1946, the United States, having just emerged from World War II, had federal debt equal to 122 percent of G.D.P. Yet investors were relaxed, and rightly so: Over the next decade the ratio of U.S. debt to G.D.P. was cut nearly in half, easing any concerns people might have had about our ability to pay what we owed. And debt as a percentage of G.D.P. continued to fall in the decades that followed, hitting a low of 33 percent in 1981.

So how did the U.S. government manage to pay off its wartime debt? Actually, it didn’t. At the end of 1946, the federal government owed $271 billion; by the end of 1956 that figure had risen slightly, to $274 billion. The ratio of debt to G.D.P. fell not because debt went down, but because G.D.P. went up, roughly doubling in dollar terms over the course of a decade. The rise in G.D.P. in dollar terms was almost equally the result of economic growth and inflation, with both real G.D.P. and the overall level of prices rising about 40 percent from 1946 to 1956.

I am by no means an ideologue (yet) on the general question of economic stabilization, but perhaps Irwin Schiff had a point when he claimed that the only arrow in the quiver of Keynianism is inflation.

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