Wednesday, September 30, 2009

Automating Manhattan

Manhattan wants congestion pricing, bringing digital communications to Manhattan vehicles. That results in system wide knowledge of current traffic, measured to vehicle location and direction. Coupled with traffic light synchronization, and driver dashboard hints, we have an order of magnitude greater match with freight volatility to road price. Then, the insurance and automobile companies add lane alignment, collision detect and warn, with early payback from insurance rates.

Total additional technology added to the car comes in at less than $1500, payback within the year. Congestion communication should be less than $100, GPS optional, and driver assist optional.

The system is self policing, so traffic priority rules easily enforced. Manhattan autos can be warned to the right allowing the passing of a bus, for example. So the cooperating vehicles might clear virtual BRT lanes on system command. This is one project the DOT might push on harder.

Monday, September 28, 2009

The utility of money

Rowe, Beckworth, and Kling are in a blogosphere discussion about money, and its role. Is there a money illusion? Somewhere Jim Hamilton posted a study that determined about 20% of our inflation is monetary, the rest is due to the relative volatility of separate goods. I interpret that to mean that 20% of the efficiency of our economy is due to the efficiency of money.

What makes money useful are the financial analysts, bankers, and investors, real people; just like any other business. These people work along the bankers yield curve, assigned to estimate inventory levels at particular terms. The central bank can deflate of inflate this group of people; making the supply chain for money shorter or larger. When the central banker makes a large enough change in short term rates, the banker people in total will shrink or expand the term points along which they operate, like any other good with its inventory managers. Bankers and investor employment will have sudden changes to such a regime change. I call it a regime change if the number term points on the yield curve change.

When I look at Beckworth's VAR charts, what interests me is the short term effects, how long does the economy take to adapt to a central bank policy change. What I find is that the two sigma boundaries diverge after about six to ten months, which I take as the time required for investors and bankers to adapt to the new inflation/deflation scheme.

In QM Theory, deflation or inflation of any supply chain will of necessity overshoot, because supply chain changes occur in integer jumps. Also, the banker's yield curve, though the fastest adapter, cannot do its job well if it adapts too soon, it is a follower. The VAR system is not quite enough to tell us if the central banker has moved us closer to an equilibrium or away, because of the follower problem. The deflation/inflation scenario has already occurred by the time the central banker reacts. The central banker rarely errors, except in the timing, he is always late.

The research needs to decompose the economy into five or so major sectors, and run what really is a Kalman filter, a simultaneous VAR on the major components of GDP, including the financial system. A more difficult task, but the paper referenced by Hamilton (which I am not searching for) did exactly this. The paper first decomposed GDP into sectors, then ran the VAR separately for each component.

Saturday, September 26, 2009

Automate the BackHoe!

Let's automate this. Make it remote control for the skilled worker walking nearby. Remove the cabin and associated weight. Give it laser guidance, vision and it will dig perfect trenches forever.

The skilled operator brings it to the site on his trailer, the rest is remote control and automation. The gains in trench-meter/gal of gas will rise immediately by triple. Secondary effects give it another 2-3 fold efficiency gain.

These kinds of solutions are where the investment money should be, companies that do this.

Friday, September 25, 2009

Mackerels and Money

Kling started it, Rowe doesn't yet finish it, so I jump in. Money and mackerels are pretty close.

The Mackerel industry does have a production system, hence it has velocity just like money. How many times do you spend your paycheck? Once, how many times can you eat a Mackerel?Mackerels go from wholesale, processing, shipping, and retail, just like money.

In fact I dare say there is likely a mackerel banking cult that follows the mackerel industry quite closely and lends to mackerel fishermen. This banking industry would like money to flow and grow with each stage of the mackerel industry.

We can even price goods in units of Mackerel is we like, the accuracy depends upon most people eating Mackerel now and then. We can even predict interest rates to a extent by measuring the mackerel population in the ocean, subtracting demand, adding natural growth, and estimating the elasticity of mackerel to other goods. The math gets a banker's yield curve based on the mackerel. Within a known accuracy bound, we can build the inventory yield curve of any good in terms of any other good.

Even when the mackerel is not used for money, there are time when money is not used for exchange. Trades often take place by barter still.

Nick Rowe makes to much of the lightweight nature of money and its ease of use because of literacy. That makes money more accurate, not different.

Thursday, September 24, 2009

Which Moral Hazard?

Damian Paletta reports:

"Treasury Deputy Secretary Neal S. Wolin on Thursday said that if policy makers don’t make changes to financial market rules, the extreme government intervention in the economy might end up making things worse.

“There is no question that, unless we enact meaningful reforms, the fact that the federal government intervened this past year will have made the problem worse,” he told a group of bankers in a speech. “We take this moral hazard challenge very seriously.”


Which moral hazard would that be? Dick Cheney promising our oil creditors that government will always make them whole? Congress Persons going behind the Fed's back and getting commitments from banks to move lots of Congressional debt paper? The Fed laundering money for foreign banks? Obama wanting another large taxpayer loan to complete a campaign promise? Economists faking Keynes to predict more future than there is on the horizon? Too many financial cooks and not enough broth? Or just wishful thinking?

This is bizzare!

HT Carpe Diem, reported by MacEachem.

"The [Tuscon Unified School Baord] is calling for a two-tiered form of student discipline. One for Black and Hispanic students; one for everyone else.

With the goal of creating a "restorative school culture and climate" that conveys a "sense of belonging to all students," the board is insisting that its schools reduce its suspensions and/or expulsions of minority students to the point that the data reflect "no ethnic/racial disparities."

From the section of the 52-page plan titled "Restorative School Culture and Climate," subhead, "Discipline":

"School data that show disparities in suspension/expulsion rates will be examined in detail for root causes. Special attention will be dedicated to data regarding African-American and Hispanic students."


I cannot begin to explain this.

Wednesday, September 23, 2009

The Courts delemma

In the case about corporate book banning during election season.

There is no evidence of missing Due Process. Every person involved in the case, judge, lawyer, corporate officers, had exactly the same right to publish at all times. No one lost their rights, none, zip, nada. No loss of Due Process.

This is a contract law dispute between the creator and destroyer of the corporation (Congress), and the corporation. The dispute states that if a corporation engages in the business of electioneering, their corporate license is removed, with some right of appeal. Contract law.

Ray LaHood, political czar?

In this news story, Secretary of Transportation, Ray LaHood seems more interested in politics than transportation issues. A DOT Secretary voting impeachment for someone who disguises their sexual habits rather than a DOT making transportation more efficient scares me. As the nation's technical auditor for transportation projects, it is incumbent upon me to straighten the man out. I suggest the following:

1. Control spiraling inflation in the nation's transit projects, especially boondogles like the Oakland-Airport connector in California.
2. Spend more time with local traffic planners and advocates in metropolitan districts and less time with state politicians
3. Find solutions in which low cost technology can improve traffic. Electronic devices on cars that allow insurance by the mile, congestion and toll pricing.
4. Standardize the emplacement if intelligent traffic signal technology.
5. Push technology solutions to distracted driving, insurance companies have already measured rapid payback.
6. Get more functionality out of existing infrastructure and spend less on building new.
7. And do not forget to look for, find, and report the rampant corruption in public transit spending.

It is only a small list of seven items.

Dean Baker makes an error?

In this post he criticizes the NYT for getting wrong the trade rebalance problem. He says:

"Actually, the most important change for the United States would be a reduction in the value of the dollar, which would allow the country to reduce its trade deficit."

Actually, trying to debase the currency absent economic changes will have a worse effect. The United States needs to use oil more efficiently, and build and ship products which China needs. The result is that Chines dollar holding will become more valuable to them and less valuable to Congress.

Tuesday, September 22, 2009

In my prosperous dream

I watch a young baker on the screen, chatting with me. Baker lives a mile away and has lots of baking fans. He bakes a batch of our favorites, bags them up for use and the robot puts my carton of goods in my mail box within the hour, for a buck.
Are you going to make me say it? OK, Silicon, rubber and asphalt!

Say hello to Ray LaHood.

Another bite of the health care battle

Out problem. An excess of people who want to manage medical professionals and a shortage of people who are medical professional. Convert the one to the other.

My health care stimulus plan:

Fund medical education.
Break up the AMA monopoly.
Federalize hospital emergency rooms throughout America.

It should gain immediate and renewed economies of scale. It standardizes a fixed universal service which is socialized anyway, hence over all government should be share neutral. It takes a huge burden from states, in quite linear proportion to population density. Yields stable purchase rate in supplies, transportation and capital equipment.

We would be able to enhance the statistics of danger. The Federal Hospital Agency would know right away when excess drug use appears and where. They would be the first to detect an upsurge in gang violence. An adverse health upsurge allows federal emergency workers to alert local authorities, hold public meetings and offer outreach programs.

Do that then trade some more later on. Obama gets a great victory.My point here is, fine, take a quantum leap, we are humans. Just include the unwinding plan which economists will be eager to impose.

Is there a resemblance?

Resemblance? Wrong, neither is Alfred E. Newman.

Robert Hirsch on peak oil

"This problem is truly frightening. This problem is like nothing that I have ever seen in my lifetime, and the more you think about it and the more you look at the numbers, the more uneasy any observer gets. It's so easy to sound alarmist, and I fear that part of what I'm saying may sound alarmist, but there simply is no question that the risks here are beyond anything that any of us have ever dealt with. And the risks to our economies and our civilization are enormous.

Robert was a government analyst on energy issues. EV World has an interesting story about how the government, under both lil Bush and Clinton buried his Peak Oil report.

My take:

Robert is an energy supply analysts, one of the best. But is is not a Silicon Valley investor, and he would not know what, if anything, digital technology could do to solve the energy problem.

Fresno County, CA , pension shortfalls...again

The Fresno Bee reports. Some key highlights from the retirement board meeting of Sep 2,2009:

"The board has a number of complicated options to consider, but generally the question is how soon the county will make up for last year's market losses.

Some retirement board members say it is financially irresponsible to delay the costs. But county supervisors say they can't afford higher pension payments.

"The county is in a very tenuous situation," said Supervisor Phil Larson, also a retirement board member.

Under the existing method for calculating contributions, the county can expect to pay $158 million, about 25% more than this year's $127 million contribution, Retirement Administrator Roberto Peña said. The estimated contribution equates to roughly half the county's discretionary spending this year.

Retirement board member Vicki Crow said she has proposed a method to spread the additional retirement costs over three years.

The board rejected that proposal last month.

Crow, the county's auditor-treasurer/tax collector, says the county is already suffering enough financial turmoil."

Cash for Clunkers revisited

I had convinced myself to overcome some doubts and suggest that Cash for Clunkers may have been a modestly successful stimulus. Then comes this post. The Everyday Economist reports that costs exceed benefits by $2000. Evidently the role government played did not push transportation to a more efficienct relationship with the other parts of the economy.

What would I want from Cash for Clunkers? Imagine that new cars had the electronic device that could report mile usage to our insurance agents by simply driving by his office. Each month, or more often, I drive buy his office, and he records my mileage. In that case, the new technology would allow my insurance agent to simply charge me insurance by the mile. I suspect the average gains in car insurance for new car buyers could easily exceed the $3000 in three years.

My new car could easily be used for congestion pricing, reducing my congestion time on important trips by an hour or so, resulting in nearly $40 in savings on important trips into town. Probably another savings.

So, in the ideal world, government, playing an expected role in traffic management, could have produced a "loss leader" that would have moved the motorist to a more efficient technology faster. This would be standard stimulus theory, using monopoly power to move the market to a more efficient system of production.

Zero Hedge reports on railroad shipping declines

Zero Hedge always looks into the structure of commerce, deeper than the financial sector where so many economists stop. It is the flow of goods and the production structures that cause it that matter. Zero Hedge looks at the latest decline in rail road shipments, from an annual decline of 17.1% to 19.8%, computed monthly.

This can be explained with our deflation inflation cycle. At the crash, store closings went faster than goods flow, so we had an excess of inventory in the remaining stores. Now goods flow is adjusting, catching up, to the crash. Basically the dominate factor is the declining dallar and reduction in foreign trade. This catching up helps explains the recent change in price changes from -2.1% to -1.7%. Inventory reductions are occurring in the now shortened consumer supply lines.

The job of the consumer sector is to defeat the energy constraint in the last mile of delivery so that it can again expand.


I have to work the issue.

My stating point is that the economy cannot get economies of scale by shorting its distribution network due to some restriction, generally political. The long supply chains produce volatility in inventory hence shortages and price rises.

The Weimar Republic is an example where the police action of the WW1 victors demanded Germany become an exporting nation while Germany still had to work the retail sector to feed, clothe and house its people. So the financial system is trying to mediate two incompatible productions systems. The retail sector wants longer supply chains, the export system wants shorter. In order to decorrelate the flow of funds between the two requires a greatly expanded financial system, so the transaction costs of money go way up.

Hyperinflation often results in the aftermath of war when a nation must restructure the foreign terms of trade but has aneglected the domestic terms of trade during the war. So foreign trade splits up the yield curve differently than the domestic terms of trade. Foreign exports may require a rank three production system, such as delivering machine tools to the victor of war, but the domestic economy wants a rank four production system. Finance, in an attempt to decorrelate its measures of inventory growth ends up with a 12 level distribution rank, clearly impossible. So, either collapse of one or the other occurs and hyplerinflation never last longer than a year or two.

Monday, September 21, 2009

$15 billion expected income for sex bot!

HT Instapundit (Glenn is at least entertaining)

Read about this company from Germany. 4 Million orders at $3800 each. Are they listed?

What economic school can explain asymmetry?

US Unemployment

The chart above is the unemployment over two recent recessions. Why does the chart show asymmetry? Krugman has a hard time explaining it, except by panic. DeLong cannot solve it. It does not appear in the efficient market hypothesis.

The Austrian school can explain it, partially. Thoma has no clue. Kling gets it with recalculation, but he is an expanded Austrian. The Austrians were close, but it is more than the finance industry that is asymmetric, is is all industries.

If an economist can't solve the asymmetry problem then they have no business recommending cures.


Always read the LGL blog for sensible interpretation.

Also read Mankiw's review of the Keynes bio from Mr. Skidelsky, in which Mankiw hits the asymmetry nail on the head:

"But if recessions and depressions are as costly as they seem to be, why don't firms have sufficient incentive to adjust wages and prices quickly, to restore equilibrium? This is a classic question of macroeconomics that, despite much hard work, is yet to be fully resolved."

Sunday, September 20, 2009

Tim Duy reports, I analyze

Tim reports periodically on likely policy changes expected from the Fed. Let's look through his current posting.

Starting with his inventory to sales chart. It simply shows that the excess inventory resulting from store closings has started to work itself off over time. I mentioned this effect in an earlier post. This working off of excess inventory did not produce more goods flow. Looking at his chart on industrial production, most of that production was due to increased military expenses, total base spending up by 5.7% in 2009.

As noted by Zero Hedge, auto sales will likely be at their lowest level in 218 years for September. Cash for Clunkers simply sold off excess inventory resulting with the closings of thousands of auto dealerships. Tom quotes the WSJ to confirm:

The July/August average for “core” retail sales is still not much stronger than the [second-quarter] average, but after a string of contractions, these data suggest that consumer demand is, at a minimum, stabilizing. Core retail sales may even be starting to firm slightly (up in 2 of the past 3 months), but we will need to see another month or two of positive data to have confidence in that view. –Stephen Stanley, RBS

Trade with China, still way down, so China is not restocking our store shelves.

Then Tim goes back to the Great Depression and makes this common mistake:

"And - critically for divining the path of policy - the growth in the 1933-1937 period was not sufficient to allow for policy tightening, as evidenced from the 1937 recession."

Which I covered in a previous post. The 1937 recession was caused by the fascist uprising and FDR switched from domestic production to war materials. That switch, a zero crossing, required a tightening by the Fed in 1937.

The real bottom line, we are still working off excess inventories. We are still trying to find solutions to the oil efficiency problem. We will continue to deflate until we solve the oil problem, cut the defense budget, raise taxes, and shrink both state and federal government. Or some combination of these.

Lawrence Mishel please figure out something, then speak

From the Economic Policy Institute, Mr. Mishel explains the cure to our malaise but never mentions what actually caused the crash. Listen to the video, and tell me when this guy actually states the sickness, yet he is full of cures.

Also, point out to me where he mentioned public sector unemployment, still the lowest, still the group with a 30% consistent wage gain over the private sector. Yet he wants to fix private sector employment by hiring more government workers!

See if he explains why government productivity statistics were discontinued in the early 90s, and never measured since. Hint.

We crashed with oil at 65$/barrel. Oil is now $70, so does he explain how more government work is going to reduce that price?

I am looking for economists who 1) do not treat government as some exogenous source, and 2) actually state the cause of the Great Recession before talking about cures.

Also, Mark Thoma is tiring the way he protects half-wit economists going about curing everything without the slightest notion of what they are curing.

Zero Hedge reporting the Cash for Clunkers hangover

Quoting from a gated copy of the site, the monthly sales of autos will be 8.8 million, the lowest in 28 years. Auto buyers have ten days to put the industry back into ominal territory!

Did Republicans screw up, yet again!

A report on distracted driving suppressed by Republicans, now comes to light under Obama?

NEW YORK (AP) - The National Highway Traffic Safety Administration gathered hundreds of pages of research and warnings about the hazards of drivers using cell phones, but withheld the information from the public in part out of fear of angering Congress, a newspaper reported Monday.

The former head of the traffic safety agency, Dr. Jeffrey Runge, told The New York Times that he was urged to withhold the findings to avoid antagonizing members of Congress who warned the agency against lobbying states. Runge said transit officials told him he could jeopardize billions of dollars of its financing if Congress thought the agency had crossed the line into lobbying, the Times said.


Is this another case of the Republican Communist Party using government to destroy the economy?


We find that Barbara Boxer is adding funds to provide positive collision avoidance in Metro trains due to drivers who masturbate while driving Metro. This is called automation of our tracks, the idea is that digital systems are safer. Slowly, like a worm inching across the street, this concept might just enter the brains of our traffic planners in the next few months.

Lawrance G. Lux nails it again.

In this post, the part where he discusses taxes. He us right. Most of our problems occur because of improper action by government, and the solution is to make us pay exactly for the messes we create via our votes.

Saturday, September 19, 2009

Inflation, unemployment and zero crossings

Unemployment and Inflation

Economic Reasearch and Data discusses the relationship between unemployment and inflation.

They point out that unemployment jumps during the recession and sends inventory into a deflationary spiral for a time. This chart would indicate a long period of deflation ahead. My question to myself is why did the deflation rate slow in the August CPI release.

First, notice that after the 1991 recession, both employment and deflation increased. More people working and more inventory growth. After the 2001, employment and deflation inverted. The reaso is simply that the Clinton era was built on smaller, more efficient government and greater use of techology. The Bush administration basically built on Communist big government fraud.

The turning points are called zero crossings because any restructuring requires some inventories to go to zero permanently, which temporarily inverts the demand curve. The lower the price, the less is sold.

After the restructuring, my naive prediction would say inflation rises with growth, but as we can see, productivity driven growth results in deflation, as per George Selgin.

Don Boadeaux wants an answer

"But if so, how would he [Mo Lotman] distinguish this hypothetical legislation from the restrictions [on corporate political activities] that he defends?"

The answer is quite simple. Any group affiliated with Congress is restricted from activities that Congress restricts. Corporations are partnered with Congress by virtue of the Corporate charter. Congress can restrict its partner, even dissolve the corporation. Corporations choose to form a contract with Congress, for which they gain some Due Process not available to others. If they want to lose that Due Process, then corporations need form private partnerships.

It is a contract law provision, not a free speech provision.

Expectations and economic constraints

An essential good that is constrained wants to simplify its supply chain and gain efficiencies of scale. The result is deflation pull on the rest of the economy. The constrained good organizes its simplified supply chain on the yield curve to minimize uncertainty in inventory levels. Part of the economy, over-constrained by the essential good, will follow suit, other parts will not. So, we have rank interference.

The economy acts like a calculator that cannot make up its mind between 2.000 and 1.999, and the residual error is forcing constant recalculation. The resultant volatility in inventory becomes dominated by the high cost of restructuring across the economy, prices rise with the square root of volatility.

I think this is called stagflation. Ultimately technology is applied across sectors such that they all can deflate. After total deflation, the number of transactions, over all are reduced, but transaction sizes increase. The banker's yield curve is more simply defined, the economy is lower dimensionality

This simple queuing model defines "unexpected" to mean a large jump, the most significant bits in the economic calculator are alternating rank size by one. Each change in the constrained supply chain, the remaining correlated supply chains will de-correlate by recalculation, you get that Ramsey recursion over the graph of factual and counter factual paths.

In the equilibriated economy, the bands across the bankers yield curve will be finite and evenly split the amount of bandwidth, adjusting transaction rates and lot sizes. Hence signal to noise at each inventory level is constant.

We have the opposite with unconstrained goods, the sudden discovery of minerals, a break through in technology, or some brilliant reorganization of culture. The unconstrained good induces other parts of the economy to expand it supply chain ad provide greater diversity.

Simpler supply chains expose less information.

Distacted Driver, Technology, Insurance Rates

Just to help out the DOT.

The solutions to the distracted driver have been lane alignment warning and forward looking obstacle detect and warning.
Then comes automatic braking.
Then comes automated lane guidance.
Then comes congestion pricing and the digital thingy on the car.
Then comes light synchronization of traffic flow.
Then each car has wireless communication.
Each car has total knowledge of all vehicle locations.
Add pedestrian detect and we are automated.

The result is very low insurance costs. Our list contains an order of competance for licensing bots.

Friday, September 18, 2009

VW Building a 170 MPG car?

HT to Instapundit.

Small, two seat diesel/electric with aerodynamic features and light weight body.

Say's Law under discussion

The claim of those who dispute Say's law is that the money system does not have the range and precision to measure all inventory. Hence, some inventory gets over valued or under valued. That is true, but the inventory still exists and is still measured. Even if the measurement volatility is too high, the goods can still exist and have value on some other regressed monetary system.

Inventory has to rot away, be destroyed by police action, or become permanently obsolete to violate Say's law. A good that becomes permanently obsolete will never be measured for value even when money becomes equilibriated again.

It is also true that money technology can become obsolete relative to other technology.

Thursday, September 17, 2009

Ray LaHood is getting closer

Like a horse and water, eventually we will get him there. He is at least discussing distracted driving. This gets him a step closer to licensing the StreetBots, because most of the solution will be automation technology assisting the driver.

Two Bubbles

Two Bubbles Courtesy of Calculated Risk

Why did we have these bubbles? A very large technology change requires a major restructuring, and it takes us two or three tries to get it right. During the adaption we try a complete restructuring, discover the technology needs to progress further, we regress, develop and try again. HT Delong

Money, prices, correlation and constrained goods

The money industry in our simple mutli-stage queue model operates like a distribution queue for paper contracts, debt. In equilibrium, money meets that same sampling constraints and form the banker's yield curve. Because of the drive toward constant inventory measurement uncertainty, the bankers yield curve is finite dimensi0oned with a specific rank. All goods, including money, try to achieve the same rank, or length, in the supply chain.

Money will adjust the lot size and trading frequency to meet the rank of all other goods. The five year goods inventory trades five year bonds, etc. The farther back in the queue of money, the large the unit of debt and the less often it is traded. We get the standard bankers queue.

Money debt wants to match the variance of queue size to the average of all other goods at the specific term. A good price is proportional the square root of variance/(mean squared) at each term. When the price is rising, interest rates rise.

A highly constrained good will try and deflate the distribution queue, shorten the supply chain. If other goods queues do not follow suit, then there is term overlap Deflated term points will overlap term points of other goods and money balances across queue boundaries become correlated.

Money, which is really paper contracts estimating future deliveries, became efficient with the literary revolution of 1750, and since then money has been the fastest adapter and least constrained good. Most inflation results from sudden, relative constraints in some essential goods. Little of it, in modern times, comes from monetary constraints.

So, in this formulation, Say's law is correct in equilibrium, and equilibrium adjustments are aburpt because of the low dimensionality of the economy.

Tuesday, September 15, 2009

Ray LaHood has some new rules

With Lisa Jackson of EPA, the Secretary of Transportation says:

"Our proposal builds upon core principles President Obama announced with automakers, the United Auto Workers, leaders in the environmental community, governors and state officials in May. It would sensibly coordinate national vehicle fuel efficiency and emissions standards."


"Look, America simply cannot continue down this path of dependence on oil. It's not who we are."

Not quite Mr. Secretary. Did you happen to mention the involvement of metropolitan transportation planners?

What Americans do is invent game changers, new ways to synchronize transportation such that we get 30% to 50% more energy efficiency when moving freight and people. We need automation on our streets, we need you to define rules for licensing robots on our public roads.

Monday, September 14, 2009

What to make of this deflation

From the Inflation Data link we have the following CPI numbers for the last few months:

0.03% 0.24% -0.38% -0.74% -1.28% -1.43% -2.10%

We are still seeing price reductions. In our simple queuing model, this price reduction represents increasing inventory build up in the retail sector. Store closings outrun goods production for a time.

We have gone through store closings 1100 for GM alone, as well as smaller outlets as luggage Maker, Samsonite, Closing About Half U.S. Retail Stores, Circuit City and Sears closed 28 underperforming stores and strip mall showing higher vacancies, such as NYC where some malls have 25 to 40% vacancies. The affect is excess inventory build up in remaining outlets.

Here are the CPI number for the first half of 2008:

4.28% 4.03% 3.98% 3.94% 4.18% 5.02% 5.60% 5.37%

The rising CPI prices represent scarcity of inventory. Too many stores for the amount of goods flow.

So, using this simple queuing model we do not need supply/demand and price equations and can simply go straight to goods flow. The retail supply chain has reduced the stages of production, going from an inflated state to a deflated state; from a longer to a shorter supply chain.

The retail sector has a yield curve that is a multi-stage flow of goods. It, like the monetary yield curve, has gone from flat to steeped. However, because of quantum choices, it always over corrects. Both the monetary yield curve and the goods flow yield curve are adjusting. The monetary yield curve is generally six months behind, but both should soon attempt to flatten.

Here is how the adjustment process occurs. Consumers hoard of money as continued price reductions incentivize consumers to wait on purchases ( the Keynesian speculative holding of money). Though nominal short term interest rates at low, the price reductions yield a real 2% gain from holding money.

The retail banks will also shorten their supply chain to match the shortened retail supply chain. The result is larger lot sizes, larger purchases by consumers with fewer transactions, and larger but fewer loans by banks. This is the economies of scale effect, larger lot sizes and fewer transactions. It means that the short end of the yield curve disappears. The short end sample rate is lower, the finance industry no longer measures shorter term activity.

So consumers really aren't hoarding money, they are simply buying less often but buying more quantity. The entire system is equilibriating by applying economies of scale. The resulting economy has settled on longer intervals between transactions. Everything seems to slow down. The interest rate yield curve still measures the growth of inventories but with fewer measuring points. It is a simpler supply chain and a simpler monetary yield curve with fewer term points.

What are the fiscal and monetary policy implications? Nothing is implied by this analysis except that government and the Fed have to deflate. Any policy recommendations would be concerned with what caused the original inflation and subsequent deflation. It is the constraint that is causing us to seek economies of scale, find that constraint and solve it.

Sunday, September 13, 2009

Minsky back in the news

Minsky and the instability of capitalism is back, HT Calculated Risk. When we strip away the value terms, Minsky's thesis is another form of the Malthusian growth and decay process. Yes, we are unstable and can never really attain equilibrium. Referring to our simple multi-stage queuing model, we say the economy starts with N-1 stages of production; and inflates to N stages of production. We are euphoric on inflation, and a bit panicked on deflation.

Again the issue is obtaining the same measurement uncertainty for all agents. Whether poor or rich, we seek the same, constant uncertainty in life. And that leads to quantum states we can call the rank of the economy. I can go through the postulates: constant uncertainty built in, minimize transactions, keep the variance/mean (signal to noise ratio) of the queue sizes equal.

We never quite get there, build up surpluses in one instance which causes an inflation. In the inflated state volatility builds and we return to the deflated state.

Stiglitz wonders who will fund government?

In this Bloomberg article. He says:

"The Federal Reserve faces a “quandary” in ending its monetary stimulus programs because doing so may drive up the cost of borrowing for the U.S. government", he said.

The question then is who is going to finance the U.S. government,” Stiglitz said.

We know who is going to fund the US government, US taxpayers. The real question is when. China is about fed up with US deficits. Congress cannot continue borrowing without the support of big banks to sell the paper. Obama won't raise taxes until he gets his programs. Foreign lenders are increasingly loaning on the short end of the curve to keep liquid.

But Treasury notes are valuable only because of CPI deflation, now running at 2% . With deflation of 2%, the real short term interest rates are 2% for short term notes. Inflation expectations for the five year TIPS seem to be about .6%. (From Baseline Scenario). The yield curve is not as steep as nominal rates would indicate.

Banks get printed money, then let it sit in reserve account while deflation is lowering the cost of retail goods. If banks find anything to spend the money on, they would be advised to wait until deflation goes away and they get everything cheaper, currently cheaper by 2% annually.

Why is this happening? Because Obama and the Keyensians have crowded the private sector out of the constrained good, oil. So the private sector deflates at the short end while the long end, which is mainly the government sector, is inflating. John Taylor is right, Keneysian multipliers are going to be less than one.

Friday, September 11, 2009

Oil is Money

Courtesy of Forbes we have a run time chart that tracks nominal and real prices for oil.

I posted it on my frequent links, Tracking Oil. Notice that real and nominal oil prices have been in lock step since 2001. Notice also the Oil imports by volume chart. Oil imports continue to track down, have been doing so ever since the crash. Oil is still the constraining input, it is correlated with everything the economy does.

Look at the inflation data, it is still tracking downward. Then look at the Zero Hedge post showing that the S&P index simply reflects printed money floating around New York and Washington.

As long as oil remains the constraint on the economy, monetary policy will simply cause more bits to flow around the computer networks. None of the companies on the stock exchange can do any real investing, every profit calculation they make has oil on the input and oil on the output, canceling their business plans.

As far as fiscal policy, there is no unused resources, all resources are used to the limit of oil surpluses, which is none. Under these conditions, the fiscal multipliers will be less than one unless government actions move to relieve the oil constraint. The private sector will shrink by more than one barrel of oil each time the government sector uses one barrel of oil.

The economy is operating as if oil is real money, and I do not believe there is some oil illusion that can fool us. Economists who think that government expansion is using excess resources are engaging in fraud.

Christopher Steiner lays out the problem in his book: "$20/gallon"

Why did macroeconomists get it wrong?

The shortest answer is that macroeconomists use 32 bit precision on their computers, the aggregate economy, however, is stuck with five bits of precision in good times, about four in bad. Traders know this, that is why they look at trading bands and get excited when trading band reach a resistance level. They know that the aggregate economy is calculating a new solution with limited precision, this is Kling's recalculation.

Nuttiness among the Supremes

ScotusBlog is reporting on the case regarding rights of free speech for corporations. The court is hampered by some case far back in history in which Corporations were granted the rights of people.

Corporations are entirely the creation of Congress. Nothing Congress has done has hampered the rights of shareholders to organize for free speech, Congress simply re-defined their regulatory creation by limiting the use of that creation for political purposes.

The simple question the idiot Supremes should ask themselves is the following: If Congress created a completely new structure, call it a Giggle, and allowed people to form Giggles, would Congress be prohibited from regulating the behavior of Giggles? Absolutely not, Congress made the Giggle contract without restricting anybody's rights, Congress can limit Giggle behavior however it wishes.

Whatever Congress demands of a Giggle has no impact on my rights, except where I, as a voter, voluntary, let Congress grant a Giggle some of my rights. And if voters do allow Congress to grant some of their Due Processes to a Giggle, then voters do so only for that particular two years session of Congress. As soon as the voter re-elects a new Congress, the issue must be revisited.

Thursday, September 10, 2009

Car insurance and digitally assisted driving

ABC is reporting that the Auto Insurance Institute predicts a 32% reduction in costs of accidents with collision warning and lane drift digital technology. ABC got an early look at the study and it is not online.

The results, economically, are simple. If we estimate savings of 30% in crash costs, then we should expect a 30% reduction in insurance costs. If comprehensive insurance for the car is $3,000/year; then we can justify driver assist technology costs of about $1,000. This number is within the range of systems recently deployed.

The point being that increasingly automating our vehicles increasingly pays back to us in lower overall costs. Not just in the expected 40% reduction in total energy saving, but an additional 30% reduction in accident costs. When applied to freight trucks and public transit then the total costs compound.

We are indeed in the era of automated vehicle control on our public roads.

Stiglitz on using the GDP measure.

Joe Stiglitz questions the use of GDP as a measurement tool:

"For example, while GDP is supposed to measure the value of output of goods and services, in one key sector - government - we typically have no way of doing it, so we often measure the output simply by the inputs. If government spends more - even if inefficiently - output goes up. In the last 60 years, the share of government output in GDP has increased from 21.4 percent to 38.6 percent in the U.S., from 27.6 percent to 52.7 percent in France, from 34.2 percent to 47.6 percent in the United Kingdom, and from 30.4 percent to 44 percent in Germany. So what was a relatively minor problem has now become a major one."

Why can't we measure the value of government goods and services?

From the BLS archive:

"The Federal Productivity Measurement Program produced labor productivity indexes and related statistics covering about two-thirds of the entire Federal Government. Indexes of output per employee year, output, employee years, compensation per employee year, and unit labor cost are available for fiscal years 1967 to 1994 for selected functional areas of Government. The program, which was part of the Division of Industry Productivity Studies, was terminated in 1996."


"The program to measure State and local government productivity, which was part of the Division of Industry Productivity Studies, conducted research on and developed labor productivity measures for State and local government services. Indexes of output per employee year, output, and employee years are available for selected periods between 1967 and 1992 for various State and local government services. This program was terminated in 1994. "

What happened to measures of government productivity?

Roals Wirtz of the fedgazette picks up the story:

"BLS found that annual productivity in the federal government grew by 1.1 percent from 1967 to 1994—not too far from the 1.4 percent annual growth of the nonfarm business sector during the same period. In fact, the two rates were identical from 1967 to 1982. But the rates diverged at this point, and from 1982 to 1994, the federal government's annual rate of productivity growth was less than half that of nonfarm businesses (0.6 percent to 1.3 percent, respectively)."

My interpretation:

Basically, the BLS quit measuring government productivity because Ronald Reagan, darling of the Conservatives was a damned communist who wasted trillions of taxpayers dollars in government expansion. As Communists always do, Reagan engaged in accounting fraud.

My bold, my quote, so sue me. It is time we purge the Republican Communist Party.

IBM and the Commuter Pain Index

IBM's Second Annual Pain Index for Commuters

IBM is getting serious about transportation technology. This is their second survey of commuters. (HT Elana Schor at StreetsBlog.) Key results:

"The index is comprised of 10 issues: 1) commuting time, 2) time stuck in traffic, 3) value of time; agreement that: 4) traffic has gotten worse, 5) start-stop traffic is a problem, 6) driving causes stress, 7) driving causes anger, 8) traffic affects work, 9) traffic so bad driving stopped, and 10) decided not to make trip due to traffic. "

An important measure is sensitivity to gas prices, sensitivity is up:

"And drivers are more sensitive to the price of gas. This year, 20% said that $3.50/gallon gas would lead them to seriously consider alternatives to driving alone, in 2008, it was 9% at that price level."

The lesson of the 2008 crash on commuters is do not get dependent on energy inefficient transportation.

The study also references the 2009 Urban Mobility report which puts the congestion cost of traffic at $87 billion in 2007 vs $63 billion in 2000. Consumers surveyed put the cost of an hour stuck in traffic at $40.

The point I take away is that IBM is getting serioud about applying technology to transportation. They have the market exposure and technology experience, so likely to make an impact.

Wednesday, September 9, 2009

FED Chicago Pres, Evans speaks on inflation

Inflation in what part of the yield curve?

Mostly he is speaking about the consumer end, the short end. Mr. Evans will need to look at the long end, which is inflated relative to the short end, which we can see directly by the steepness.

The costs for stimulus projects are already being over run, up about 10% at least. As time passes, many of these projects are being canceled, exceeding any reasonable cost to completion. So the yield curve tries to get a realistic estimate of the real inventory of goods coming from the stimulus. Most of us already expect there will be no bullet train down California. Most of us know the war costs are woefully underestimated, and must stop soon.

The Treasury yield curve is steep, the steepness is a measure of expected inventory build up at the producer end of government relative to inventory at the retail end of government. We get measurement uncertainty as government does more than the whole economy can support.

When the Fed uses its independence to keep the yield curve moderately sloped, then neither Congress nor the President has room to deceive the public about the true costs of government production. Greenspan enabled accounting fraud under Bush, and Ben is on verge of enabling accounting fraud under Obama. Lil Bush, by far, is the worst in terms of accounting fraud.

Tuesday, September 8, 2009

Martin Feldstein worrys about deficits

National debt to GDP

In this WSJ opinion article. He complains about Obamacare. I certainly hope Martin never worked for any of the three presidents who put the red lines on that chart above.

Good Riddance to the Moon Trip

The Bush idea was nothing but a vu graf* generator in the first place. but now, even the CEO of Lockheed-Martin can figure out that a space ship to the moon makes no sense.

I would look at keeping the shuttle form factor, but lower the cargo demand and add fuel for the retro home. The next and easiest thing we need to do is build large aperture mirrors, 30 meters in diameter, in near earth orbit. We can push these things around, they are lightweight. Then lets take a deep and close look everywhere.

* A vu graf generator is a government program that everyone knows will not come to fruition, but it pays to pretend.

Computer vision pushing into the auto market.

Ford and Mobileye are aggressively pushing driver safety, with Ford delivering crash-warning safety features into its midpriced car class for the first time, and Mobileye offering more features at the $900 price point for aftermarket retailers.

Aftermarket suppliers and car companies alike are investing in advanced safety electronics, a category that is expected to grow by 27 percent on a compound annual basis through 2013 in the OEM market, according to iSuppli.

This same package also gives you a “collision warning” if a driver is closing in on the car in front of him too quickly.

As for Mobileye, its new C2-170 offers several functions. It issues a warning if the driver is drifting outside his lane unintentionally (if he don't have his signal light).

It also reads out the distance between the driver's car and the car in front and warns if the driver is following too closely.

A third function is forward-collision warning. “The processing power of our chip calculates the closing rate of your vehicle and the vehicle in front of you. If it determines there's going to be an imminent contact, it gives you a loud beeping” and shows an icon on the display, said Kinford.


How big is that market in total? With a 20 million annual global cars sales, each outfitted with semi-automated vision assist comes to $10 billion in annual sales for automotive vision with economies of scale dropping the unit price to $500.

Monday, September 7, 2009

The price of Buses

The New Hybrid Flyer

Standard New Flyer heavy transit buses cost $250,000 (30-50 people). Articulated buses about double, but can carry 150. LRT cars are 8 times the bus price and carry 250. LRT cars last twice as long. (This estimate of relative costs is very approximate)

Some published snippets about bus prices.

PHILADELPHIA – September 27, 2007 – At its regular monthly meeting the SEPTA Board today approved the purchase of 400 new diesel-electric hybrid 40-foot low floor buses from New Flyer of America, Inc. for a contract price of $212,387,236.00.

General Manager Fernandez said Wednesday before the board vote that the $547,739 per [60-foot buses] bus proposed purchase price for the 19 Van Hools is “fair and reasonable,” and rejected assertions that comparable buses by other manufacturers could be purchased for a cheaper price. In addition, Fernandez said that if Van Hool eventually won the contract after competitive bidding, it is likely that inflation over the time of the extended bidding and contract award process would drive up Van Hool’s price.

The hybrids (non-articulated?) cost $645,000 each – approximately $200,000 more than a new diesel bus.

More later on this.

Saturday, September 5, 2009

Traffic and transit protocols

In world of transit automation, knowledge of all objects along the transit corridor are broadcast and known by digital wireless devices, including the general public. In software we talk about protocols, what do the words of software mean that pass over the corridor wireless net?

I claim here that knowledge of objects is fundamental to participants in the digitally controlled region. Reported object locations should be sit directly upon the transport layer. In Internet world, the TCP and UDP layer holds object location messages. This sort of precludes the idea of XML or other web protocols carrying the vital information.

This idea also requires local object processing of local images. The camera, processor, and wireless link are embedded into a single unit. Its output are object descriptors and locations every where it looks.

Wireless security and authorization are important, and should be buried in the link layer.

With a low level, simple, location code, the cost of applying one to an existing car, like a radio beeper, offers great simplification at low cost. Humans driving through the robotic zone will beep the what they are, and hopefully where. This helps the automated traffic to stay on equilibrium.

The idea here is (KISS) Keep It Simple Stupid. We need to simplify the setting up of camera units and wireless beepers.

I am currently looking at DSRC, from the Intelligent Transportation Society. Reading the research reports and looking at the organizations, DSRC is certainly the main standard. It is in "beta" test at the Michigan Speedway, supported by DOT, etc. But if it not yet available, go ahead and use commercial wireless ethernet. They come from the same technology base and both will likely be in play. One wireless communications unit will be in the $100 range in quantity.

It is still embedded visible object identification which is the constraining technology.

Obama wants citizens to save more

According to this CNN story. (HT to Steve Horwitz).

If Obama wants us to save then Obama should talk to Ben about raising the short term rates, otherwise Obama is ripping off workers with this pitch. But then, as Steve points, raising short term rates puts the whole Paradox of Thrift argument down the drain.

Is this a case of Larry Summers or Chris Romer being unable to reach Obama about the contradiction he implies, or is this a case of the economic team finally capitulating and preparing for a Fed rate hike? Has Ben forewarned these folks about a impending rate hike before we know about it?

ISM Index

From Scott Grannis:

"The Institute for Supply Management's service-sector releases for June showed substantial improvement, as seen in these charts. Both the general indicator as well as the prices paid index have risen to levels that are consistent with the end of a recession."

So far so good. The ISM Index is still tracking oil prices, but somewhat less so. The key to ending the recession is to remove the inelasticity of oil. I also noted the sudden jump in yield across the curve in one day, yesterday. We are seeing nominal growth in GDP, but dominated by inflation.

The thing to watch is oil inventories, so let's check the DOE report:
"U.S. commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) decreased by 0.4 million barrels from the previous week. At
343.4 million barrels, U.S. crude oil inventories are above the upper boundary
of the average range for this time of year. "
We want oil inventories to be decorrelated from the ten year yield. More precisely, we want it decorrelated by design, not by default.

Friday, September 4, 2009

Computer Vision is coming

Computer vidio is still lagging for semi-automated traffic control. The technology is there, the traffic systems market focus is not. I think I can solve that problem with some well timed phone calls.

Check the investment list, the newest entries will mostly be concerned with vendors who solve the vision problem.

The Oakland Airport Connector, and RapidBART

I concern myself with the better BRT based proposal to connect Oakland Ca airport with the Bay Area Rapid Transit, BART.

First, I think there is every reason that the currently proposed elevated guideway for a people mover will crash and die. The main reason being that the technology community in Silicon Valley will unite in opposition to the proposal, and in favor of a proposal like RapidBART from Transform. Transform is a local transit monitoring NGO in the Oakland area and they have watched the Oakland Airport Connector (OAC) for years. There website here.

This post will be updated as I evaluate the RapidBART, but for now, I am going to propose that RapidBART take the meridian strip of Hegenberger Road, and possibly one additional lane for dedicated BRT. I would include the best of breed technology such as computer vision based detection of buses and traffic, automatic lane guidance, and central traffic management along the dedicated route.

Automatic lane guidance should get a BRT system an additional lane by narrowing the corridor. Central traffic control allows bi-directional travel by all BRT on all dedicated lanes, with turnouts for passing. Consider this research from the Mineta Research Institute. Here the authors discuss a single dedicated lane BRT system in which left turn lanes are taken from traffic temporarily so that one BRT may idle and allow an opposing BRT to pass. This scheme allows two way BRT traffic on a single lane taken from the street meridian. The concept requires more sophisticated traffic software than a simple Bus Priority Signaling system. However, the more sophisticated traffic control allows BRT to effectively use two lanes, one lane or even three in various configurations with directional flow being altered by control.

Central traffic control in turn requires distributed collection of traffic conditions, including location of automobiles as well as buses. Hence the need for computer vision based traffic detection, as I always talk about. Computer analysis of the traffic scene will be the norm starting in the next year or so, and computer detection of obstructing vehicles and pedestrians will be the norm for all semi-automated BRT. All semi-automated BRT will have pedestrian detect and avoidance. Computer vision requires aggregation of both stationary and mobile cameras. Each camera scene analyzed to detect traffic units and create a uniform model of current vehicles, buses and pedestrians, available to all BRT systems.

And a note on BRT configurations. BRT with lane assist will generally be two, three and even high multi-car configurations. They will use electric control and be managed from either end, so they are bidirectional. Being bidirectional greatly simplifies the construction of ed terminals, and with no additional cost allow shorten local routes within the automated traffic corridor. I believe bidirectional BRT configurations will be the norm within a year or two.

The system I describe requires a bus manager, not a driver. The driver is not nearly able to take digital commands and execute them, and certainly the automatic lane guidance is far more accurate than the human driver can handle. But BRT speeds of up to 70 MPH and higher are indeed possible on a semi-automated BRT.

Bus Priority Signalling

Much of the gains in traffic relief we will see in the coming years comes from signal assist, automatic lane guidance. This post is bout signal assist for buses and BRT. It will take a few updates to fill in the references, but the basic price point for adding signal control is about $20,000 at the low end. Thee has been a lot of studies, and I have read the most important ones. Over the ext day or so, I will fill in the key quotes and hopefully reference the important research on the topic.

The following abstract from Chattanooga, TE is typical:

"The Chattanooga Area Regional Transportation Authority (CARTA) installed a new transit signal priority system to improve on-time performance for buses operating in a heavy retail area of Hamilton Place. Instead of increasing their fleet size and adding more buses to compensate for increased traffic delay, the city installed a traffic signal priority system for $250,000. Twenty-seven agency buses were equipped with transit signal priority transmitters, and 10 intersections on Gunbarrel and Shallowford roads and near the mall were equipped with receivers. The transmitter aboard the bus automatically transmits a signal to the receiver. If the traffic control light is about to change to red, the green time is extended 10 to 15 seconds to allow the bus to pass. Overall, the system was expected to improve operational efficiency and have minimal impacts on other traffic."

The parameter to watch is cost per intersection, at $25,000 this implementation is still on the low side.

NYC had a trial on Staten Island to cut transit time. They call it Transist Signal Priority:

"TSP technology was installed aboard 300 New York City Transit buses on Staten Island and at 14 intersections along the critical 2.3-mile Victory Boulevard/Bay Street corridor to and from the ferry terminal in St. George. The system operates in the ferry-terminal bound direction during the morning rush-hour period and outbound during the evening rush period, and is used by 19 bus lines and 49,000 daily passengers."

Their cost per intersection was a little high, but they installed more technology on the 300 buses used in the trial. In a moment I can get into the various choices transit authorities make regarding bus installed technology.

The best overall review of Transit Signal Priority comes from England in this online report. This report discusses the technologies of TSP, as well as other aspects. My position, right now, is that vision based traffic and bus detections will become the norm. I like this technology because vehicle detection by computer visions makes the entire traffic corridor available to all vehicles and to control, uniformly.

Stay tuned.

Thursday, September 3, 2009

This robot on U Tube, just too weird

See it here.

tutor2U must include negative multipliers

In this post they talk about multipliers from government spending.

"If the $10bn increase [in government spending] caused total United States economic output to rise by $5bn, the multiplier would be 0.5; if it rose by $15bn, the multiplier would be 1.5."

It can also drop by $5 billion, making the multiplier -.5. There are many, many, many multipliers that have negative value. Norm Mineta's San Jose Light Rail fiasco, for example. Many economists consider this depression to be the result of a negative multipliers, from lil Bush.

Krugman resurrects the dead Economist, again

Let us review Quantum Mechanical economic theory and deflation/inflation.

In QM Theory we deal with the finite length of the productions chain. The finite dimensionality of production is reflected in the monetary yield curve as defined with a finite set of term, estimation periods, on the yield curve. We can only support a small number of term points of the curve.

Deflation is what happens when the economy reduces the length the distribution chains, and the yield curve reduces the number of investment terms. The reduction in rank is greater than required for the underlying technology because our choices are quantized between N and N-1.

Inflation is when the finite terms of investment is greater than can be supported by the underlying technology. We have a greater length of the production chains than is needed, because we are quantized to choose between N and N+1 for queue length.

We use the mathematical concept of a multi-stage queue to model the phenomena. Inversion in the yield curve occur because some inventories have to go to zero if we restructure the inventory queue. The zero bound in inventories causes the yield curve to have a momentary zero in its spectrum, which we see as an inverted yield curve.

The inventory queue is distorted when fat tail effects happen, like right now. The upper part of the yield is inflated the lower part deflated. What happened to demand? We will see new demand rise when the yield curve goes through a complete inversion, the upper part of the curve has to deflate.

All of this theory comes about because humans are at least endowed with a constant desired level of certainty, neither more or less. This endowment results in minimizing the interference of the terms across the yield curve. Investment terms have to be separated and numerated to minimize the interference between certainty bands across the yield.

Demand is there, but we cannot see the new demand because of measurement interference in the inflated part of the yield curve. From a path point of view, the problem is backing down one path so we may take the better path. Deflate to maximize observation, then re-inflate with better observation.

The technology in question is transportation during the larger deflations, transportation is undergoing restructuring and inevitably local and state governments are reluctant and try to continue to inflate. So we have contradictions, like Norma Mineta, the worst traffic planner in history, having a wonderful transportation research group named after him. Like Obama hailing from Chicago with the worst rail freight congestion in the nation, now pushing High Speed Passenger Rail. Finance, Fed and Treasury all trying to restore Humpty Dumpty. These large institutions occupy the fat part of the tail, and their monopoly power is draining as they are the last to capitulate.

What cures the recession is enough deflation such that economic agents can see what is happening, then the agents can choose a better path. Remember, for each "rank" change in the queue, all term points have to readjust, we get economic wide adjustment.

Take Keynes scalar view. Make it a vector. Add minimum variance estimation techniques. Accept a finite dimensionality and constant uncertainty. Add a biological bias toward collective action. Then you have the chain of economic thought from 1920 to 2010. An asymmetric, finite dimensioned, quantum mechanical system.

Railroad Freight is critically congested

Obama may be bushy tailed and eager, but the frail freight system is not elastic enough to meet our needs. High Speed Passenger Rail does nothing but make the problem worse, and the US economy will be choked right back into recession. That is my interpretation of this report.

Amtrak, barely used in percentage terms, occupies 30% of the rail space in many US regions. Obama has let the HSR lobby rise at the expense of this critical rail freight problem, and Obama should know better he has been dealing with the wost of the freight congestion problems for years, Chicago.

Somebody in the Department of Transportation has not been thinking this through.

Wednesday, September 2, 2009

CALPers pension losses hit cities big time

California cities will pay for a long time for CALPers pension losses.

HT to Pension Watch, this story from Bakersfield will be typical.

"Bakersfield will pay about $7.5 million annually for 30 years to cover a single year's heavy losses at the giant state pension fund it contracts with, city officials estimate.

The staggering bill will be in addition to ongoing pension payments. The city will pay about $19 million to the retirement fund this fiscal year, which started July 1."

California cities have two choices, seek bankruptcy so as to void obligations, or cut back on services to pay retired city workers.

Corruption and Poor Performance for Light Rail

As told by Randal O'Toole.

Same author on Denver:

'Denver voters approved a 119-mile rail system in 2004 on the promise that it would cost $4.7 billion to build it by 2017. The current estimate is up to $7.9 billion, and the regional transit agency says the system might not be complete until 2034'

Ottawa killed a Light Rail fiasco.

Hay Group, auditor of national transit, thinks San Jose Light Rail basically sucks.

All over the West, Light Rail performs poorly and does not attract new development, does not increase ridership, and is only useful in conjunction with the car and parking.

I give Randy O'oole the floor:

"New Secretary of Transportation Norman Mineta may be one of the costliest appointments to George Bush's cabinet. A strong enthusiast of light-rail transit, as congressman from San Jose Mineta funneled hundreds of millions of dollars into that region's light-rail system.

San Jose's light rail has turned out to be an even more spectacular failure than the ones in Sacramento, Portland, and Los Angeles. Yet regions all over the country, including Houston, Seattle, and Orange County, suffer from light-rail envy and are eagerly planning new rail systems.

That Mineta remains a proponent of light rail shows that he hasn't learned the most important lesson from those cities that have already built light rail. That lesson is that this nineteenth-century technology completely fails to meet the transportation needs of twenty-first-century cities.

Does light rail improve transit? No, most cities that built light rail experienced a decline in transit's share of travel. This is partly because the expense of light rail forced transit agencies to increase fares, as Minneapolis is about to do.

Is light rail faster and more attractive to transit riders than buses? No, transit riders are sensitive to frequencies and speed, and buses can easily run on schedules more frequent and faster than light rail. Where most light rail lines average just 20 miles per hour, many express bus routes average better than 30 miles per hour.

Does light rail reduce congestion? No, it increases congestion whenever the rail lines occupy former street space and also because it is such an ineffective form of transit. Traffic growth on the freeways paralleling Portland's light-rail lines accelerated after the light rail replaced faster express bus routes.

Is light rail cost effective? No. The average light-rail line planned or under construction will cost more per mile than a four-lane freeway. Yet no light-rail system in the nation carries as many people (in passenger miles per route mile) as a single lane mile of typical urban freeway.

Nor is light rail cost-effective when compared with bus transit. One dollar spent on bus transit can provide the same benefits as $10 to $100 spent on light rail. Light rail is so expensive that most cities that have built it lacked the funds to make needed bus improvements."

Norman Mineta is a disaster.

Why are transit planners caught up in the old technology of 1920, like they want to replay the Great Depression?

The Left attacks the Oakland Connector Fiasco

The Oakland, CA airport connector program is still under continuing attack for foolishness. It is the nonsense of building guideways for a people mover, above one of the main commercial area of the city.

Urban Habitat summarizes the basic complaint. It is a bad deal for Bay Area Rapid Transit (BART), likely resulting in major cost over-runs. It is a bad deal for the Hegenberger corridor, which does not need some monster guideway running through.

Bart has an 1880 mindset trying to upgrade to a 1950 infrastructure. My suggestion to the Oakland City council is to come out in a full assault on this nonsense.

The correct answer, of course, is to automate lanes along Hegenberger road, inside the airport, and on to Bart. Work with PATH, in Berkely, or the Mineta center in San Jose. These two technical groups, with proper public auditing, can move traffic, cargo and people all around the airport/Bart corridor. Using technology, we can lower the total transportation costs by at least a third for all businesses along Hegenberger. Some jobs lost, but thousands gained.

If you are from the Bay Area, California I suggest you follow the link above, and support a reconsideration of the proposal.

Bombardier guided trams suck

According to this critical review of their use in Nancy Fr.

I agree, they use a mechanical guide, how dumb is that? They designed the thing in 2001, they could have called any of a half dozen technology vendors to get optical guidance from the lane markings.

Anyway, that is my job, locate dense transit planners before they get all "animal spirited" about some proprietary, half designed transit gimmicks.

Do not invest in Bombardier, they are off my investment list until I see evidence that they use digital technology.

Yet in 2004 we have this:

"Irisbus has supplied ten Civis guided vehicles to operate in Las Vegas, the gambling capital of the world. The fleet entered operation for the first time on the famous 'Strip' under the eyes of the city authorities and representatives of the State of Nevada.
Fitted with Siemens Transportation Systems' state-of-the-art optical guidance equipment the Civis has become an integral feature of the Las Vegas landscape and is running on the first exclusive Bus Rapid Transit right-of-way, set up by the local organizing authority Regional Transportation Commission."

So I have IrisBus in my investment list, Bombadier out.

Here, you can read about UC Berkely and their expanded trials with magnetic guidance systems for BRT. Magnetic guidance has the advantage of working in snow or rain, unlike optical.

The New Auto Trams

The New AutoTrams

From this science article. These multi-carriage configuration contain visual guidance for lane following.

"The advantages of a train and a bus are united in the AutoTram: It has the transportation capacity of a streetcar and the versatility of a bus. Fraunhofer researchers (Germany) have cooperated with Hübner GmbH to devise a new concept for a modular vehicle that, depending on the volume of passengers, can either be operated as a single bus or assembled to form a uni-directional or bi-directional high-capacity vehicle."

This is what we want for BRT.

Tuesday, September 1, 2009

Measuring the global yield curve

This post by David Weil talks about real world measurement of GDP from outer space. If it works then we have the global monetary standard.

Technology and the HOV lanes.

The problem is how to merge existing auto technology with digitally assisted lanes? The demand for command control means a forward technology conversion for autos. Obstacle detection, lane following, and communications.

Conversion kits come with a price tag up to $2,000; and will be available for newer cars only. Since the new technology lanes have more traffic variety, total congestion goes down, more traffic is managed for efficiency.

So, this add-on industry will thrive for ten years, longer, as the cost of conversion drops. Freight will be a large buyer, allowing freight companies to lower their initial costs of digital assist.

The HOV lanes know have complete knowledge, the system is closed to non-certified traffic.

I add this company and this market to the pile of investments in the industry. I am also looking at automatic loading and unloading vendors, robot arms, efficient pick up.

Checking historical data

Shiller's Historical inflation

How does one come up with very old data? Use historical newspapers and other reported indexes at the time. Data collected in 1890 had greater error than data collected in 1925, because of increased technology. Or, more plainly, how did Shiller filter for local (temporarl) volatility? We must to deduce anything in the variance change.

Political calculates that the change in volatility from 1890 to 1925 as follows:

"We find, through simple visual inspection, that the Federal Reserve has indeed had a powerful effect upon the volatility we observe in the rate of inflation in the United States."

The problem is that a lot of industries had lower inventory volatility by using newer technology.

Tube Freight

A fun idea.

We have tubes, or we can simulate them with existing tracks. What we need is light weight, local, automated freight on the rails, to interface with semi-automated street operations. Ultra simple cargo exchange between steel and rubber wheeled makes for great utility of interleaving light weight freight during underutilized rail periods.