From an article by Porter Stansberry:

Only 20 years ago, the U.S.'s total outstanding mortgage debt made up roughly 30% of our GDP. Homeowners held large stakes in their houses – close to 70% of the equity on average. Today, mortgage debt equals nearly 80% of GDP. The average homeowner owns less than half the equity in his home. This seismic change in the nature of home ownership and debt financing occurred nearly overnight – in less than one generation.

Fannie Mae and Freddie Mac made it all possible. Released from capital-ratio requirements and backed with a line of credit at the Treasury, they were able to buy a nearly unlimited amount of mortgages. Today, Freddie or Fannie finance more than 80% of all new mortgages in the United States. Over the last several decades, their presence in the market greatly lowered interest rates, created an endless supply of credit, and pushed housing prices higher. Meanwhile, the cost of the government guarantee, which lay behind Fannie and Freddie's power, was invisible.

Another aspect of this bubble is the huge increase in the size of typical houses. In many parts of the country houses have been torn down to be replaced by something much larger rather than to be renovated and added to, as in the past. Two offshoots of this binge is the large, and unnecessary, increase in material resources used to house the same-sized family and the long-term drag of energy and maintenance costs on the family budget.

Pleased to announce that Patricia has relaunched her website featuring her paintings.

www.satterlee.com

Enjoy!

from NYT

The Roaring Nineties
Joseph E. Stiglitz, 2003

On a number of occasions, Stiglitz points out that supply-side economics is a win-win for conservatives. If the theory that tax cuts stimulate earnings and lead to greater tax revenues is correct, then there are more tax revenues. If the theory is incorrect, then government must be defunded and made smaller.

In discussing the energy crisis in California that came from deregulation, he writes:

(P. 251) If this entailed bankrupting firms that seemed to have been efficient under the old regime, so be it; if it meant hardship on low-income individuals who could no longer afford skyrocketing utility bills, so be it. It was a new form of social Darwinism -- let the fittest survive. The greatest sin was interfering with market processes.

The wag in me points out the curiosity that the administration that courted the anti-evolution fundamentalists justifies its actions based on Darwin.

The cynic translates this into "let them eat cake".

The reasonable voice just shakes its head. If the rising tide is supposed to float all boats, then everyone needs a boat. Otherwise, those without will drown. If market processes are the enactment of social Darwinism, then they are guided by an oligarchy, not a democracy. Something is not right with this picture.

Treasury Plans Social Security Debit Card
ELEANOR LAISE, January 4, 2008

The Treasury Department plans to introduce a prepaid debit card for Social Security recipients in an effort to provide safer and cheaper benefits payments.
...
The card could mean significant cost savings for benefits recipients as well as the federal government, Treasury officials and banking experts say.
...
But there are some cardholder fees associated with Direct Express, and a significant education effort may be required to get users to accept and understand the card.
...
Comerica will earn money on cardholder fees, interchange fees when cardholders use the card at the point of sale, and the float on funds sitting in cardholders' accounts.
...
Cardholders will get one free ATM cash withdrawal per deposit per month, but Comerica will charge 90 cents for each additional withdrawal. Like other debit-card holders, users may also face surcharges at many ATMs. Other fees include for international ATM withdrawals, 3% on international currency exchanges, 50 cents for each online bill payment and 75 cents per month for paper statements.

Cardholders can avoid surcharges at more than 56,000 designated ATMs, including those run by 7-Eleven and PNC Bank. ATM balance inquiries and cash withdrawals at a teller window will be free, and there will be no fees for overdrafts, declined transactions, or inactivity. Cardholders can opt to receive free deposit notifications or low-balance alerts via text message, email or automated phone call.The card should bring substantial savings for the federal government. The government's cost to issue a paper check was 89 cents in fiscal year 2006, versus nine cents for an electronic payment. Four million recipients of Social Security and SSI don't have a bank account. If each of them signed up for the debit card, the government would save million a year, Ms. Tillman says.

Cost shifting from the government to the citizen to the benefit of the bank.

• With a debit card, the chances are that most recipients will use a lot more than the one time per month free transaction.
• Based on 4 million recipients, it takes only per year in transaction charges for the cost in fees to outweigh the cost in savings.
• Link to listing of check cashing charges (PDF)

With this administration, it is very difficult to not be cynical about such cost shifting, especially when the shifting could lead to much higher consumer transaction costs and a windfall of transaction fees to financial industry. The cynicism also leads to questions about this policy being a trojan horse for Social Security privitization.

Rise of the Vulcans
James Mann, Penguin Books, 2004

I've been reading Rise of the Vulcans finally. I found this quote on p. 279:

But if a relatively weaker America had decided against any accommodation with the Soviet Union in the 1970's, then why should the United States at the peak of its power in 2001 need to compromise with North Korea, a regime vastly smaller, more impoverished and more repressive than the one in Moscow?

A touch of magnanimity and letting the weaker regime save some face is not compromising. Cutting North Korea off cold ended up making the US look weak and petulant, unsure of how to wield its new power. Later, the insistence on no direct negotiations led to China climbing on to the world diplomatic stage as an equal partner to America.

The irony is that the this diplomacy resulted in the breaking of two of the Vulcans' goals:

1. stopping proliferation of nuclear weapon technology; and
2. keeping America as the only pre-eminent nation with no equal.

How to Organize the Web
Erica Naone, November 2, 2007

"Lists are a fundamental data type across the Web," says Live Labs product manager Alex Daley. "Whether you look at task managers, blogs, RSS, shopping lists, or wish lists, they share a simple, linear list structure. A great deal of the information we produce and consume across the Web is in this structure." Similarly, says Daley, the virtue of Listas is its generality: it allows users to organize data in whatever way they want and begin to tease out trends.

Robot Boats Hunt High-Tech Pirates on the High-Speed Seas
Erik Sofge, October 31, 2007

The 21-ft.-long Interceptor can travel at up to 55 mph, and is designed to be piloted both remotely and autonomously.

For a patrol boat, autonomous control would be a huge advantage, allowing it to traverse huge stretches of open sea, instead of having to remain within radio range of a given vessel.

I bet the next frontier will be the hacking battle to gain control over the growing armada of remote-controlled devices.