The graph on the right is care of The Economist. Not being an American taxpayer myself, I blame my ignorance of the staggering implications of the Bush-era tax cuts on the “need to know” rule.
This is something Barack Obama has been at pains to point out, as Republicans have attacked him as a profligate spender and runner of deficits. Most of today’s borrowing, he has said, is attributable to factors beyond his control. He is essentially pointing people to charts like the one at right.
That’s a damning chart. It implicates a lot of people, including some of the same Congressional Democrats who are now joining Republicans in assailing the president for budgeted deficits, but who voted for the Bush tax cuts and the wars in Iraq and Afghanistan. Politically, this is a pretty important chart.
That said, these most recent contributions to the federal debt appear to be irrelevant when looking at the long term:
That massive increase there at the end is due to two things: growth in spending on Medicare and Medicaid, and growth in interest payments on the debt. But the real problem is Medicare and Medicaid. By about 2070, spending on Social Security, Medicare, and Medicaid alone will outstrip revenues.
In the end, who caused what deficits when isn’t important. What is important is finding some way to avoid that spike. And both parties seem to be a long way away from having anything like a serious discussion about that challenge.
From the Canada West Foundation’s discussion paper Look Before You Leap comes a rather compelling reason why Canadians should consider “the importance of the oil and gas industry to the Canadian economy [and to take] into account when debating how to address greenhouse emissions in Canada.”
In short: A panel of experts brought in by Google to advise their employees pre-IPO recommended buying index funds, not actively managed mutual funds. Their reasoning? The statistical improbability of outperforming the market is less than 100:1, and the amount you beat the market by gets eroded anyways by the higher fees you’ll be paying for the service of having a human fund manager.
An added gum: There’s a great link in the article to a Mutual Fund/ETF Expense Analyzer, which lets you compare up to 3 funds for their performance upon an amount and term length you enter.
As Google’s historic August 2004 IPO approached, the company’s senior vice president, Jonathan Rosenberg, realized he was about to spawn hundreds of impetuous young multimillionaires. They would, he feared, become the prey of Wall Street brokers, financial advisers, and wealth managers, all offering their own get-even-richer investment schemes. Scores of them from firms like J.P. Morgan Chase, UBS, Morgan Stanley, and Presidio Financial Partners were already circling company headquarters in Mountain View with hopes of presenting their wares to some soon-to-be-very-wealthy new clients.
One by one, some of the most revered names in investment theory were brought in to school a class of brilliant engineers, programmers, and cybergeeks on the fine art of personal investing, something few of them had thought much about. First to arrive was Stanford University’s William (Bill) Sharpe, 1990 Nobel Laureate economist and professor emeritus of finance at the Graduate School of Business. Sharpe drew a large and enthusiastic audience, which he could have wowed with a PowerPoint presentation on his “gradient method for asset allocation optimization” or his “returns-based style analysis for evaluating the performance of investment funds.”
But he spared the young geniuses all that complexity and offered a simple formula instead. “Don’t try to beat the market,” he said. Put your savings into some indexed mutual funds, which will make you just as much money (if not more) at much less cost by following the market’s natural ebb and flow, and get on with building Google.
I spent my Christmas holidays in New Zealand with my girlfriend and her family. We flew Air New Zealand from Toronto -> Vancouver -> Auckland, and Auckland -> Los Angeles -> Toronto on the return trip. It’s an breaktakingly beautiful country in the middle of its summer season – coming back to -25C weather was rough.
I’ve still got a few photos left to post from my last couple of days there, but here’s 9/10ths of what we snapped. Enjoy!
Unlike most of the world, it appears that Iceland’s failed banks won’t be bailed out using public funds. The situation is unique and unprecedented – but while the Icelandic taxpayer may have made the right moral choice, they’re probably doing the wrong thing in realistic terms: As badly as their bankers may have behaved, this is not the right time to display to the world the fact that your money is not safe and secure in your country’s banks.
Another good point made in the article (one I haven’t quoted below): These failures occurred at “the hands of inept politicians, bumbling regulators, a farcical central bank, abuse of deposit insurance and the adventurous world of currency traders,” not at the behest of a free market/laissez-faire system. Like all scams, the Icelandic one was a timebomb, a plot derived from greed and ignorance.
In many countries, taxpayers are rightly cranky over the idea that their governments are bailing out banks and others — including their own regulators and central bankers — who helped create the 2008 global financial meltdown. Iceland appears to be setting a new standard of taxpayer response that politicians everywhere might want to note.
Under pressure from voters and taxpayers, Iceland’s President, Olafur Ragnar Grimsson, this week refused to sign a bill to reimburse almost $6-billion to Britain and Holland for money paid to depositors who put money into two high-flying Icelandic banks that failed in 2008. The president was responding to taxpayers who are essentially rebelling against being forced to pick up the tab for a financial bailout of depositors, regulators, foreign governments and even their own government and politicians.
It is only a bit of an exaggeration to say that the people of Iceland are refusing to pay for all the schemes of private bankers and public officials who, over the course of the last decade, drove the whole of Iceland into bankruptcy.
So as I posted earlier, I’ve read one of the pre-convention drafts of the treaty and was amazed at how obvious the language was about having very little to do with the environment – it seemed to be all about wealth transfer from “developed” to “developing” nations, with nothing in the treaty requiring the “developing” to use these funds to cut emissions.
I’m not exactly sure why these drafts have to be leaked instead of posted publicly for our perusal, but whatever. The UK’s Guardian newspaper has a draft from last week up on their website and I’ve taken another quick scan through it to see what the fuss is about, and if anything has changed.
It still doesn’t appear to have much to do with cutting carbon emissions. There’s language in there about the environment, but only as a justification for a mandated $X billion dollar support fund for “developing” nations.
I’ll touch on a few parts of the draft to explain why I’m thinking this way. There are 32 “points” to this proposed agreement, each numbered.
2. In this regard, the Parties:
- Commit to take action to mitigate climate change based on their common but differentiated responsibilities and respective capabilities,
- Commit to take action on adaptation including international support assisting the poorest and most vulnerable countries,
- Commit to strengthen the international architecture for the provision of substantially increased finance for climate efforts in developing countries,
- Commit to establish a technology mechanism to promote the development, transfer and deployment of environmentally sustainable technologies in support of mitigation and adaptation efforts.
Almost straightaway in the draft we have mention of financial support for developing nations. read more »
What is the agent’s incentive when selling her own home? Simple: to make the best deal possible. Presumably, this is also her incentive when selling your home; after all, her commission is based on the sale price. And so your incentive and the agent’s incentive would seem to be nicely aligned.
But commissions aren’t as simple as they seem. First of all, a 6 percent commission is typically split between the seller’s agent and the buyer’s. Each agent then kicks back half of her take to her agency. Which means that only 1.5 percent of the purchase price goes directly into your agent’s pocket.
So on the sale of your $300,000 house, her personal take of the $18,000 commission is $4,500. Still not bad, you say. But what if the house was worth more than $300,000? What if, with a little more effort and patience, she could have sold it for $310,000?
After the commission, that puts an additional $9,400 in your pocket. Yet the agent’s additional share – her personal 1.5 percent – is a mere $150. So maybe your incentives aren’t aligned after all. Is the agent willing to put out all that extra time and energy for just $150?
See the issue? Now let’s talk incentives. Michael James has an interesting idea on how everybody can win:
Suppose that Rick [the real estate agent] were to get 10% of the portion of the sale price above $300,000 instead of 2% of the whole price. Now a $25,000 difference in the sale price makes a $2500 difference in Rick’s commission. This more closely aligns Rick’s interests with Hanna’s [the homeowner] interests.
The big problem with this idea is that it supposes that all parties have a good idea of a fair sale price. With this type of commission structure, Rick is strongly incented to convince Hanna that her house is worth less, say $350,000, and that way the deal will give him 10% of the sale price above $280,000. If Rick then sells the house for $375,000, he gets a $9500 commission instead of $7500.
As Mr. James alludes to, the main issue with this approach is at what price point to use before the 10% bonus system kicks in: Too low and you make even less money than you would have normally. Too high and not only do you run the risk of not selling your home at all, you may run off your agent. (Thankfully, real estate agents appear to be a dime a dozen.) Comprehensive research is recommended before employing this approach.
Can this bonus structure be used with a headhunter as well? Depends on the company you’re dealing with, but I imagine it would be worth a discussion about.
Veronica Foster, an employee of the John Inglis Co. Ltd. Bren gun plant, known as “The Bren Gun Girl” poses with a finished Bren gun at the John Inglis Co. plant.
If I was the type of guy who framed and hung vintage photographs in his home, I’d put this one up. How ridiculously cool is this lady?
Criminal acts like those by Major Nidal Hassan at Fort Hood raise the question of how a native-born son of an inclusive, democratic nation like the United States or Britain could turn against it and hold in their heads ideas that mere common sense would dispel.
The commentary is comprised of four parts, and is seemingly out of order: The discussion of why Britain gives birth to extremists is the third act. This is the part I’ll post below.
As children and teenagers, the ex-jihadis felt Britain was a valueless vacuum, where they were floating free of any identity.
Ed Husain, a former leader of HT, says: “On a basic level, we didn’t know who we were. People need a sense of feeling part of a group – but who was our group?” They were lost in liberalism, beached between two unreachable identities – their parents’, and their country’s. They knew nothing of Pakistan or Saudi Arabia or the other places they were constantly told to “go home” to by racists.
Yet they felt equally shut out of British or democratic identity. From the right, there was the brutal nativist cry of “Go back where you came from!” But from the left, there was its mirror-image: a gooey multicultural sense that immigrants didn’t want liberal democratic values and should be exempted from them. Again and again, they described how at school they were treated as “the funny foreign child”, and told to “explain their customs” to the class. It patronised them into alienation.
“Nobody ever said – you’re equal to us, you’re one of us, and we’ll hold you to the same standards,” says Husain. “Nobody had the courage to stand up for liberal democracy without qualms. When people like us at [Newham] College were holding events against women and against gay people, where were our college principals and teachers, challenging us?”
Watch out, doctors, lawyers and policemen – scientists encroach on you and become sexier with every passing day. Let’s just hope that the limit of sexy for scientists isn’t at infinity.
The graph on the right is care of The Economist. Not being an American taxpayer myself, I blame my ignorance of the staggering implications of the Bush-era tax cuts on the “need to know” rule. 
