Inflation | Periscope Depth

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Sep

we’re just a million little gods causing rainstorms turning every good thing to rust

Posted by Perich at 7:00 am

I had an exchange with Tom yesterday that reminded me how close I came to flunking macroeconomics.

You might not believe it, given my understated brilliance, but I really struggled with advanced macro. I was never great at studying: I lacked the diligence it required and attending college at the dawn of the era of streaming digital video didn’t help. But I had no problem with microeconomics because it made sense. Marginal utility, demand elasticity, interest rates: once the right people explained it to me, I understood it. I reasoned my way through problem sets, rather than spitting out stock answers, and did fine. (I still would have done better if I studied)

But macroeconomics resists that kind of intuition. Take the following quiz question, for instance:

All other things being equal, raising interest leads to _____ in aggregate demand.

(A) A rise
(B) A fall
(C) No change

So I think:

Well, raising interest rates encourages more people to save, which increases the funds available for borrowing, which means banks have more money to lend out. It would also draw more banks into the credit card market, since payoff terms become more favorable for the lender, thus increasing the sources of available credit. Of course, there would also be a decrease in borrowing, as fewer people would want to take out loans. It’s tough to tell which effect would outweigh the other, so I’ll presume they cancel.

At which time I put (C) and am told I’m incorrect. The correct answer is (B).

As it turns out, my answer is also correct depending on when you stop counting. Raising interest rates does (or should) encourage people to save and invest. Raising interest rates also does (or should) increase the profits of credit card companies, and the more profitable a field the more competitors enter it. But all of these effects manifest in the long run. In the short run, an increase in interest rates lowers aggregate demand.

The problem is that it’s always the long run. Today’s “long run” is next year’s “short run.” And today is the “long run” of four years ago. “The market will correct the price of these subprime mortgages eventually.” “We need companies to start spending now; we can deal with the consequences of bailing them out later.” Now is later! Today is the future of the past! We’re on all corners of the four-dimensional timecube simultaneously!¹

Not to bury the lede, but this return to my prodigal youth came up after I linked to this lovely chart on income stagnation² from The Economist. In 2010 dollars, income for the bottom 10% of America has been largely steady since 1967 and hasn’t improved much for the median 50% either.

I made the observation that average prices have gone up about 6X in that time (which is true; check for yourself). Tom asked me if this observation still mattered, given that inflation was already baked in to the rise in median income. I had to plot the reasoning out in my head several times to answer him because, again, macroeconomics does not come naturally to me. Ultimately, Tom was right to correct me, since people aren’t 6X worse off today than they were forty-five years ago. But I was still on to something.

If you’re in the 50th percentile of American households today, your income is about $50,000 in 2010 dollars. A household in similar straits in 1967 would have an income of about $40,000 in 2010 dollars. However, a new car in 1967 would cost about $17,755 in 2010 dollars (source); a new car today costs $29,217 in 2010 dollars (source). So the price of a new car has gone from about 44% of a middle class family’s income to … about 58% of a middle class family’s income.

This isn’t as damning a statistic as it sounds. “Middle class” is not an absolute term; it only means something in relation to the folks above and below it. If things besides income are getting better for everyone (like the quality of goods, hypothetically), then the relative allocation of prices doesn’t matter as much. And the people who were middle class in 1967 most likely weren’t middle class in 2010, if they’ve survived. But what’s noteworthy is that households in the top 10% haven’t suffered the same fate. While their membership isn’t absolute either, it tends to be stickier.³

We think of inflation as a force that weakens the purchasing power of a dollar. This is true. But inflation can also lift the wages we receive, since employers pay more for labor while we pay more for groceries. So you’d think it all evens out – until you see a chart like this. Then we recall that inflation enters the economy through an increase in the money supply. And even though an increase in the money supply trickles down to everybody, it hits those with easy access to credit first. The defense contractors, the institutional investors, and the ones with an inside scoop on appropriations. They get the “first batch” of new money – still warm to the touch, juggling steaming Andrew Jacksons from hand to hand – before people start raising their prices.

Don’t take it from me, though. I nearly flunked macroeconomics.

_________________
1. Do I even need to link to Timecube anymore? They still hand that to you on your first day of Internet, don’t they?

2. Apologies for that “opinion cloud” sidebar, which is completely fucking up my browser.

3. “Families are always rising or falling in America, am I right?”
“Who said that?”
“Hawthorne.”
“What’s the matter, smartass, you don’t know any fuckin’ Shakespeare?”

Jul

now here’s a mickle truth

Posted by Perich at 7:00 am

Again, that’s adjusted for inflation. A private college education’s share of your household income has more than doubled in the last three decades. It’s gone from about a fifth to nearly half. You can always go to a state school for cheap, but then the quality of your education hinges more on accidents of geography – what state you happen to live in – than your merits as a student. Virginia: congratulations! Missouri: I’m so sorry.

(I’m surprised more parents don’t take advantage of this. “Well, honey, we can’t afford to send you to Cornell. So why don’t you go live in Virginia for twelve months to establish residency? You can wait tables or work at Old Navy; we’ll send you a little something to help pay the rent. Then, after a year, you apply to UVA and we pay the very agreeable Virginian-resident tuition. Sound good?”)

Those are the facts. Here are the surmises: the quality of college education has not more than doubled in the last three decades. Sure, kids who went to university in 1979 didn’t have the benefit of White Noise or classes on the philosophy of the Matrix. But they still managed to do all right. I’m sure the burden of keeping a campus network running 24/7, streaming porn, Twitter and Facebook at torrential volumes, raises costs. But the savings on interoffice memoranda alone should more than make up for it.

And as my esteemed colleague Joel Grus has pointed out, college has not become twice as good at preparing young adults for modern industrial society. Paying work has not risen in complexity on par with the rising price of a humanities degree. Getting a degree not only fails to prepare you for a real job; in many cases it can hurt. My dad recently observed that getting an MBA can make people less employable, as it bumps them into a higher salary bracket. My first (real) job out of college was doing temp data entry for a medical supply firm. The last question I got asked in the interview was, “Aren’t you really overqualified for this job?”^*

College is (and I’m not the first person to assert this) an expensive form of signalling. It tells future employers that you had the money to spend on four years of being lectured, the discipline to attend 8 AM classes and write papers on authors you hated, and the ability to work in a lab or study group without driving your peers to murder you. Those are valuable skills in the office economy. The problem with college – as with all forms of signalling – is that it soon becomes cheaper to buy the signal than to manifest the effort the signal represents. Just as RayBan knock-offs allow everyone to look like a movie star, so do increasing student rolls allow everyone to look like a college grad.

No discussion about the importance of education can be taken seriously unless it addresses this issue first: that college gets more necessary (for any but the hottest and noisiest jobs, to quote The Simpsons) and more expensive every year. Your future earnings become substantially higher if you’ve been to school, and the cost of school becomes substantially higher as well. And what do those future earnings translate into? Household income – the first column in the chart above. ~~The “bonus wage” that you get from your fancy college education is being eaten up, in increasing bites, by the “entry fee” of a college diploma~~. We can’t go on; we go on.

Update: commenting on my mirrored Livejournal post, Alexandra pointed out that the figures for “household income” include both people with college degrees and people without. But people with college degrees have substantially higher incomes than people without, per the National Center for Education Statistics. So a college degree’s still worth it, if you can service your debt and aren’t holding out for your dream job and go to a decent school.

________
* I was, and said as much, but you should have seen the job market for English/Econ majors back then.

Sep

when the law break in, how're you gonna go?

Posted by Professor Coldheart at 7:00 am

September 25, 2008: Lawmakers ~~reach~~ nearly reach deal on $700,000,000,000 bailout^*

Sadly, we lost Mr. Tambor in the L.A. Water Riots of 2012.

By the time that bright, cold day in April rolled around, I’d been dealing for the monthly Mount Weather Blackjack Game for half a year. I’d been introduced to Mount Weather – the secret FEMA facility in which most of the Bush administration had been hiding – in September ’13. I saved Henry Paulson from a roving mob of battery scavengers while vagabonding through Cincinnati. This was unintentional; in the dark, I mistook him for Arrested Development‘s Jeffrey Tambor.

The guards waved me through the access gate – wearing remaindered TSA uniforms from the summer of ’11 with the silver skulls on the epaulets – and I swiped my access card outside the express elevator. A ninety second ride conveyed me to the sub-basement, and from there a quick walk to the Rumpus Room.

The gang was there already.

“Hey, gang,” I said. “Let’s get started.”

Two hours later, I was sorting my massive stack of chips while Bush tried to talk Bernanke out of buying in for the fifth time. I didn’t know why these guys insisted on playing blackjack, rather than stud poker or hold’em or any game that they had a chance of winning. Maybe the Clinton years had given them an inferiority complex – always on the outside, looking in – and they felt a constant need to stake their luck against The House. I always returned all their money at the night’s end, anyway. They were still using ’09 greenbacks, which wouldn’t buy me a stick of gum on the outside.

“Why do you guys always play blackjack?” I finally asked.

“Bobby gave us the idea,” Bush said, indicating former AIG chief executive Robert Willumstad with a jerk of his head. “We had that Kevin Spacey movie 21 on the DVD and we thought we’d try our luck at counting cards.”

“Really? You’ve been counting cards this whole time?”

Bernanke nodded. “It’s a four-deck shoe, so we worked it out that …”

I shook my head to cut him off. “I always deal out of a seven-deck shoe.”

The room fell silent.

Definitely counting cards

“So you thought I had more high cards left in the deck,” I explained, pouring myself a drink, “than I actually did. So you started bidding more aggressively, because high cards are good for the player. But then you started losing hands – because you were wrong about the future composition of the deck. And then you did that stupid Martingale thing where you double your bet after each loss, which only got you farther into hock.

“And besides,” I continued, “successful card counting is usually done in teams. It doesn’t work if you’re all counting cards against each other. Because then one player’s success is another player’s failure.”

Henry Paulson scratched his head.

“This is the same way you got in trouble with mortgage securities,” I told Herb Allison, former CEO of Fannie Mae. “You thought that there were more high housing prices in the future. You were wrong about the future composition of the deck. And because you were already investing in mortgage securities on credit, you had to keep raising your bets in order to make up your losses.

“And the rest of you …” – here I turned to the former CEOs of Merrill, Goldman, Lehman, Bear Stearns and Washington Mutual – “… all had to keep him in the game. Because if he folded, then all of those bad cards – meaning, all of those toxic mortgage debts – would start coming to your hands. And the process would repeat.”

“Not for me,” Willumstad of AIG said.

“No,” I agreed. “But you wrote credit default swaps – insurance contracts on those bad bonds. These contracts only paid off in the event that the holder went bankrupt. And when lenders started going bankrupt left and right, you owed more money than you could pay.”

“It could have been a catastrophe!”, Paulson exclaimed. “Think about it – trillions of dollars of wealth, vanishing overnight. All because of some greedy bankers …”

“Don’t go blaming us for this!” said Richard Fuld, former CEO and chairman of Lehman. “We wouldn’t have bought so heavily into these mortgage securities if Moody’s hadn’t rated them AAA – as safe as government bonds!”

“Like this is our fault!” shrieked Ray McDaniel, former CEO of Moody’s. “Those brokers bundled junk mortgages together into a single package that looked like a safe investment. If they hadn’t been after those thousand-dollar commissions …”

Angelo Mozilo, former CEO of Countrywide Financial, made a jerk-off motion with his leathery hands. “Puh-lease. What, am I gonna be the guy who turns down some poor schmoe from getting a home? When he can just go to a competitor down the street and get the same no-income, no-assets, adjustable-rate loan? Let the FHA investigate me for discriminatin’ against blacks and Hispanics and what-not …”

The shouting rose to a general din.

“Guys, guys,” I yelled, “no single one of you takes the blame.”

“Exactly!” Paulson squealed. “Because I solved it.”

“None of you take the blame,” I continued, ignoring him, “because the problem isn’t personal. It’s institutional. Suffering never comes from a few people conspiring to do evil; it comes from a million people with no incentive to do good.

Everyone's entitled to their piece

“Consumers had no incentive to be honest about their loan applications – not with loans available that didn’t even require you to state income. Lenders had no incentive to be honest with the consumers – not with the new lowered standards for credit. Brokers had no incentive to investigate the loans that they bought from lenders and bundled into tradable securities – not with the heavy demand from investors. And investors had no incentive to question the riskiness of the securities they bought – not with the generous rate of return they were seeing.”

As I spoke, I dealt cards from the deck to everyone still sitting at the table, punctuating each sentence with a face-up card.

“No one had an incentive to look,” I concluded, still dealing. “Everyone was looking the other way. And that’s when the train hit.”

I dealt a final card to James Cayne, ex-CEO of Bear Stearns: the grinning Joker.

“Did I leave that in the deck again?” Bush asked, peering over Cayne’s shoulder. “Shoot. Always forget that one.”

“The Professor’s right,” Paulson said, sidling up behind me and clapping me on the shoulder. “It’s silly to talk about who’s to blame. That’s all in the past. Especially since I solved the credit crisis with that massive bailout.”

“We solved it,” Bernanke insisted. “And a fat lot of thanks we got for it, too.”

“Have you seen what it’s like upstairs?” I asked. “People are burning dollar bills to heat their homes. Typhoid’s sweeping through the Midwest. I have yet to meet someone who’s traveled more than ten miles from their home in the last year. You didn’t solve shit.”

“Obviously, it’s a time of hardship for the nation,” Bush admitted. “After the 2008 election …”

“Don’t blame this on him,” I interrupted, referring to Bush’s successor. “This is only partly his fault. You’re the ones who gave the Secretary of the Treasury absolute power – power that couldn’t be questioned in court – to control the economy. Given the idiot he appointed, this is only common sense.

“You started this when you spent seven hundred billion dollars – more than the budgets of the Departments of Defense, Education and Health & Human Services combined – to buy up bad mortgages. You sank seven hundred billion dollars into investments that would never pay off. Where would you get that $700,000,000,000 from?”

“New Treasury bonds,” Bernanke offered.

“But who would buy them? Treasury bonds are supposed to be a riskless return, but you just sank seven hundred billion in the same shit that crippled Stearns, Lehman, Merrill, Goldman and Fannie Mae. So since those debts are never going to pay off, the only way to honor those bonds is by printing worthless paper.

2008 Greenbacks - Collect Them All!

“Why do you think mothers stuff their children’s jackets with dollar bills? Why do you think customers at bars buy their drinks six at a time, before the price goes up at the end of the evening? How is it I can make a living gathering five dollar bills off the street, stitching them into a wallet, and selling the wallet for more than the currency it’s made of?”

They didn’t get it, of course. They never got it.

“Inflation,” I said, trying not to scream. “Inflation on a level that’s making Mugabe laugh at us all the way from the Hague. Inflation that bankrupted everyone on a fixed income – including the huge generation of Baby Boomers. Inflation that penalized savers and rewarded borrowers, turning America into a nation where everyone was in debt to everyone else. Consumers borrowed from corporations, corporations borrowed from banks, banks borrowed from the Treasury, and the Treasury just kept printing money to oblige.

“You returned America to serfdom. Nice work, guys.”

My voice had grown hoarse from lecturing, so I took a sip of my drink. A muffled pounding slowly filtered into the room from seven stories above.

“What’s that?” Paulson asked.

“Oh,” I said. “I might have forgot to lock the door behind me. Sorry.”

“It’s all right,” Bernanke said. “The guards will protect us.”

“I don’t think so. I paid them off on the way down here. As stocked as you’ve kept your bunker, there’s one thing you can’t provide them.”

“Porn!” Bush said, striking his palm with his open fist. “Curse our fundamentalism!”

“But who is it?” Paulson asked. “Who could want to hurt us?”

“Well, that’s the thing of it,” I said, palming the smoke bomb I’d hidden behind my belt buckle. “Remember how I said Treasury bonds used to be a riskless investment? The kind of investment that was typically only bought by large institutions looking for absolutely safe places to store money? Like pension funds? Like the New Jersey local of the Brotherhood of Maintenance of Way Employees’ pension fund?”

“Oh, hell,” Bush swore, fumbling for his cyanide capsule. “It’s the Teamsters!”

“Wait!” Paulson yelled, sweating and grabbing at the deck of cards scattered across the table. “What do the rest of us do?”

“I don’t know,” I said, dropping the smoke bomb. “Bail out?”

______________
^* I’ve had this post on the spike since Tuesday; I’ll miss the news cycle if I wait any longer. We all know the bill’s going to pass.

May

professor? what's another word for pirate treasure?

Posted by Professor Coldheart at 8:30 am

Before taking the current job, I had one interview and a follow-up with Extensive Enterprises (they took over the old Bear Stearns offices downtown). I had almost reached the elevator after the second interview when the COO caught up with me in a hurry.

“I actually wanted to talk with you a bit more before you left,” he said.

“Sure thing, Mr … Xamot?”

“No, I’m Tomax, actually. Xamot heads up Marketing and Relations.”

“Right, Tomax. Is that Greek?”

“Corsican.” He steered me toward a private elevator off a back hallway – a glass-walled cage that looked out over the entire city. We began our slow descent.

“So, what are you spending your stimulus check on?” he asked with a conversational chuckle.

“Hadn’t planned that far ahead yet, actually. I figured I might just invest it.”

“You don’t want to do your part to help stimulate the economy?” He put the weirdest emphases on certain words.

“I’d rather preserve the check’s value against inflation.”

“Inflation!” He hissed like he’d suffered a paper cut. “Why is inflation such a big deal?”

“Okay,” I began, “a lot of times, when people want to see how wealthy a country is, they look to see how many dollars it has. This can be dollars of goods produced per citizen, also known as GDP per capita, or the average value of the companies based in that country which sell public stock, also known as a stock index. Or any method of your choice.”

“I like exports over imports myself.”

“Yeah, you and Lou Dobbs. But dollars aren’t just a method of measuring wealth, like the pressure gauge on a barometer. Dollars are also an actual trade good. People exchange dollars for other goods all the time.

“You look at a supply and demand graph in any Intro. Econ textbook and you see price, in dollars, on one axis and quantity, in units, on another. But nobody ever thinks about the supply and demand for dollars.”

“Hmm,” Tomax said. “Could you elaborate?”

“You have a given amount of liquid money on hand,” I explained. “Cash in your wallet, plus whatever you can draw from an ATM or write a check against. Let’s say $100,000. You also have a house full of stuff: a flat screen TV, an Italian leather couch, some imported rugs, a boxster in the garage, etc. At any point, you can trade that stuff for dollars, or those dollars for stuff. The fact that you have $100,000 and a set amount of stuff currently – as opposed to, say, $80,000 and …”

“And a hovercraft with a giant snake’s head on it,” he suggested.

“… is a function of your current desires,” I concluded. “Think of it as the intersection of Money and Stuff on the supply and demand graph in your head.”

“I see. So how does this tie in to inflation?”

“It works the same way on a national level. The total amount of dollars available as liquid cash – hard currency, checking accounts, savings accounts, traveler’s checks – is about seven trillion, seven hundred billion dollars – what the Federal Reserve calls M2. The total amount of stuff available is … well, everything on the planet, really. At every second of the day, people exchange dollars for stuff or stuff for dollars.

“Dollars,” I continued, pulling one out of my wallet to illustrate, “are banknotes issued by the central bank of the United States: the Federal Reserve. The Fed has at its disposal a variety of tools to put more dollars into the market:

They can buy or sell Treasury bonds – which would put dollars into or take dollars out of circulation, respectively.
They can raise or lower the discount rate – the interest rate that U.S. banks can charge each other for interbank loans. Raising it tightens the dollar supply; lowering it expands the dollar supply.
Or, they can change the reserve requirement – the percentage of dollars that a bank has to keep on hand to honor outstanding accounts.

The Fed typically only uses the first of these three.

“The problem: the Federal Reserve can, and does, increase the supply of dollars without actually creating any more stuff. So now you have more dollars chasing fewer real world goods. The purchasing power of the dollar declines overall.”

The elevator dinged as it hit the 30th floor. A man dressed identically to Tomax stepped on board. “Ah, Professor,” said Tomax, “you’ve met my brother Xamot, haven’t you?”

“Last time I was here,” I said, shaking his hand. “I was just telling Tomax about how inflation reduces the purchasing power of the dollar.”

“I’d heard that,” Xamot said. “But doesn’t it level out over time? The economy adjusts to the new equilibrium between dollars and goods, and we all trundle on.”

“It levels out,” I replied, “but not all at once.

“Let’s say the U.S. orders up one hundred billion dollars worth of bomber jets. The DoD cuts Boeing a check for $100,000,000,000.00, which Boeing can cash out and use to pay its employees, suppliers, distributors and the like. But the DoD doesn’t have one hundred billion dollars – they spent what they got in taxes long ago. The DoD has now added to the U.S. national debt by one hundred billion dollars. Fortunately, every bank in the world cashes their checks, so no one starves this month.

“Now, the supply of dollars has increased by one hundred billion dollars. But this rising tide doesn’t lift every boat. Even though the dollar has just lost a bit of purchasing power, not everyone knows it yet. The employees and customers of Boeing got their hands on that hundred billion first. They get to spend it on food, gas, clothes, cars, industrial materials, investments, whatever. The people they buy from then get to spend it on food, gas, clothes, etc. So that hundred billion trickles out to the economy slowly. Some people profit from it; some people get screwed by it.”

“What does the Federal Reserve …” Tomax began.

“… have to do with all this?” Xamot concluded.

“The U.S. government finances its debt through Treasury securities – which, as I said before, the Fed sells. You exchange cash for the T-bill, which is a promise to pay back that cash plus interest on a future date.”

“I’m still not sure what the big problem with inflation is,” Tomax said. “Sure, direct beneficiaries of government spending get the new cash before anyone else does. But so many people benefit from government spending that the effect has to be pretty broad.”

“It’s like a perpetual motion machine,” Xamot said. “So long as people keep exchanging cash for T-bills, the U.S. debt remains guaranteed, and money keeps pumping along.”

“You’re forgetting one thing,” I corrected. “Overseas investors.”

“Oh,” Tomax and Xamot groaned.

“Overseas investors buy a lot of Treasury securities. They also buy a lot of dollars. Sometimes they pay for these dollars with goods produced in their countries, like clothes from Singapore or cars from Japan. But people in other countries have a demand for dollars and a supply of stuff, same as Americans do. If foreign investors simply refuse to buy Treasury securities, this means they no longer have as high a demand for dollars. When the demand for dollars drops, compared to the demand for euros or yen or rupees, economists call this a weakening dollar.”

The elevator let us off on the ground floor. Tomax and Xamot exchanged a meaningful look. Then Xamot drew a gun, backed up ten feet and pointed it at me.

“Is that a laser pistol?” I asked.

“You’ve found out our plan,” Xamot snarled. “Our master plan to bankrupt the U.S. and destroy the world economy! Whether you’re a spy sent by G.I. Joe or you just figured it out on your own, we can’t let you spoil our scheme. Terribly sorry, Professor.”

Xamot had me dead in his sights. At ten feet away, I couldn’t hope to close the distance and knock the gun out of his hand in time.

So I kicked Tomax in the crotch.

“Guh!” Xamot and Tomax moaned simultaneously, doubling over in pain. I picked the laser pistol out of Xamot’s limp fingers.

“Seriously, guys,” I said, exiting the lobby. “You really ought to do something about that.”

# # #

The Federal Reserve creates easy credit, by targeting a lower Fed funds rate and expanding the money supply. A certain industry – whether it’s housing or domestic manufacturing or savings and loan houses or Internet companies or housing – borrows this easy credit and expands quickly. Once investors start losing confidence, though, this industry stops expanding. Then it contracts, and drags down every company tied into it.

How the Fed gets championed as the solution to this problem, instead of part of the problem, I’ll never understand.

The moral of this story: you can’t create wealth out of thin air. An expansion of credit is not the same thing as a growing industry. Government spending is not the same thing as investing. Money on paper is not the same thing as food in the fridge. At the closing bell, if it doesn’t point to liquid cash or something you can touch, think twice about it.

I’m not suggesting a return to a barter economy or a withdrawal from the modern economy. But remember the rosy figures Enron posted simply by switching some numbers around in their accounting. Or just consider how many years it would take to pay down the U.S. national debt if the federal government did nothing else. If it’s not real wealth – the clothes on your back, the house you sleep in, free time with the ones you love – it’s bookkeeping. And the world’s short on honest bookkeepers.

Apr

so much to say, so much to say, so much to say, so much to say

Posted by Professor Coldheart at 9:48 am

Link dumps in lieu of content:

#: Actual inflation up at least 6.9 percent in the past year. Most inflation statistics that you read in the news report core inflation – inflation that excludes changes in the price of oil or food. But if inflation comes from an increase in the money supply relative to the demand for dollars, then we’d want to look extra closely at any industry the U.S. subsidizes – any stops along the trough where the feds pour more money in. And the U.S. subsidizes domestic food production, to the point that American corn sells on the international markets below cost, and wheat sells at nearly half cost. And the price of oil today certainly reflects decisions that the Commander-in-Chief makes in regards to certain Middle Eastern provinces. So if you have an argument for why I should pay more attention to core inflation than bottom-line inflation, I’d love to hear it.

(This article explains inflation in better detail than I can)

#: On the subject of economics: a New York Times article on Jan Chipcase, a “human behavior researcher” for Nokia. He travels all across the planet – to Vietnam, to Sri Lanka, to Bangladesh or to Mississippi – to simply document how people live. Nokia’s not trying to sell these people cell phones – at least not through Chipcase, anyway – but rather, trying to understand what their needs are and if Nokia can make a product that fulfills them.

The article also explores one of my favorite themes: markets evolving out of nowhere, unbidden and unpredicted. How does a Ugandan day laborer send money to his mother in a rural village where only one person (a “phone lady”) owns a cell phone?

Someone working in Kampala, for instance, who wishes to send the equivalent of $5 back to his mother in a village will buy a $5 prepaid airtime card, but rather than entering the code into his own phone, he will call the village phone operator (“phone ladies” often run their businesses from small kiosks) and read the code to her. She then uses the airtime for her phone and completes the transaction by giving the man’s mother the money, minus a small commission. “It’s a rather ingenious practice,” Chipchase says, “an example of grass-roots innovation, in which people create new uses for technology based on need.”

Order arising from chaos turned me onto economics in the first place. I eat nuggets like this for dessert.

#: “”Expelled, Ben Stein’s new jeremiad against Charles Darwin, purports that Darwinism caused the Holocaust. Not true! In fact, the Holocaust is almost solely the work of Scandinavian astronomer Tycho Brahe!”

#: More coverage of John McCain on the campaign trail:

McCain has a whole slew of superstitions and rituals, many stemming from his days as a Navy fighter pilot, a notoriously superstitious bunch. He won’t throw a hat on a bed (bad luck), and he carries a lucky feather, a lucky compass, and a lucky penny — and nickel, and quarter.

[...]

He’s got more stuff on him, too. On St. Patrick’s Day in Chicago, “this guy had a lucky four-leaf clover that was laminated,” Buchanan said. “He pulled it out of his pocket and told the senator it had brought him good luck and now the senator carries it around in his wallet.”

I don’t know what bothers me more: the notion that President Dog might decide to bomb Iran based on a horoscope, or that he’ll carry any random piece of shit that a stranger hands him. Here, Senator – my grandfather had this rusty sewing needle with him when he landed at Omaha Beach. My mom buried it with him five years ago but I want you to have it.

#: Finally, Delta and Northwest announced plans yesterday to combine and form the world’s worst airline. Finishing the work that the TSA started on September 12th, 2001 would daunt most challengers, but I think Northwelta can handle the task. Combining their unions’ contracts, their legacy software and the various deals they have with our nation’s airport hubs, they can make transcontinental travel just as quick, safe and cheap as it was in 1908. If you need me, you can find me in the club car, stretching my legs.