So who stole all that wealth

Assessing the Costs and Consequences of the 2007–09 Financial Crisis and Its Aftermath

Explaining the Output Loss The $6 trillion to $14 trillion base estimate of lost output following the crisis depends on assumptions about the economy’s trend rate of growth and whether an oil-price shock in 2008 might have caused a mild recession anyway.[3] This estimate of the aggregate cost of the crisis covers 2008 to 2023, when output is assumed to fully return to trend. Ultimately, there is no way to know for sure what path output would have followed or even if the financial crisis caused the output drop. The standard assumption is that trend growth would have continued at a pace similar to that in the preceding period. From 1984 to 2007—a period often referred to as the Great Moderation due to its relative economic and price stability—the average annual growth rate of gross domestic product (GDP) per capita was 2.1 percent. Conceivably, historically high crude oil prices were partly responsible for the contraction that followed, and trend growth overstates what output would have been. The cause of the oil shock, however, may be inseparable from the roots of the financial crisis. A global-imbalances narrative posits that an influx of overseas demand for U.S. financial assets fueled an unsustainable creation of structured credit products (financial instruments such as mortgage-backed securities) that pushed real (inflation adjusted) interest rates lower. This connection between financial flows and various hard-asset commodity prices—including the crude oil price spike—sowed seeds of instability in 2007–08.

So hold on there a moment. The author reviews two possible crash causes, financial misregulation and a sudden oil shortage.

I happen to believe in the oil shortage, but lets work with the assumption that financial mismanagement caused the great recession. First, the mechanism, I assume, is the loss of housing wealth by the middle class due to the housing bubble and crash. Now, hold on, lets first look at the actual losses in the housing industry, total. Currently there is a shortage of housing lots, and no land was destroyed in the housing crash. Second, there were only a few instances of actual destruction partial or unsold housing. Where exactly were the physical losses, the rotted fruit, in the housing industry? None, zero, nowhere. So how did all those middle class folks lose wealth? Answer that, under the assumption this author makes, and you have a causis beli, a valid reason to dismember the union.

Is JP Morgan delevering?

Two stories, one they are dropping the student loan portfolio and two, allowing a bank run go forward on their gold storage. Is JP getting squeezed or is JP doing the squeeze? My search reports JP had been increasingly holding more cash, they are preparing to be the first to jump ship. I see a contraction when large brokerage firms reduce the number of asset classes.

When I see the unusual, I check my favorite indicators, the CPI and the PPI:

This chart is revealing

Normally I look at the ratio, CPI/PPI; and call that the gains from scale.  We can see that producer prices hit a wall, they cannot go higher. If we bounce down from that wall, it is recession time. If it is recession time then we will see large investment brokers lead the delevering.

The other news was that PIMCO took a hit from the emerging market mess up. They lost 14% of their customer. There customers going to JP Morgan?

Let us Taper, expand the experiment.

The real deal on California

If it were the independent nation the Sacramento budget would be about $300 billion, depending upon your persuasion. We aren't.  If we were one of seven large states, in a 14 member Senate, our budget would be $250 Billion, more or less.  The difference is gains from agglomeration. If we could live within the current system, we are optimum with a budget of about $200 billion. But the total tax base is limited folks, and it is strained. To get California with the optimum budget, we need a cut of about $1 trillion in DC, because of proportionality. The little prairie states won't go for that.

Are we getting the problem?  What is the way out? California should just elect eight at large Senators, and send them to our own private legislative chambers, in that huge California lobby we own in DC.  Elect them in six year rotations, we all get two votes every six years. Californians need to start a referendum to create these newly elected, statewide officers.

The point is, these fake Senators would have enormous political power in DC, they would have the projects and programs adjusted for maximum efficiency back home.

Foreign policy

The story is Obama and Putin agreed on removal of the gas used by the Syrians. No cruise missiles needed. Putin then had sex with a bear.

And we hear the Dennis Rodman, on his visit to Nuklurea accidentally stepped on the tiny little dictator and knocked him out.

Who cares that the Fed buys 30% of Treasury Bonds

Brad in his monetarism wants to know what the problem is.  Answer?  Because after foreign investors, only 30% of those bonds are bets made by the domestic economy.  When the domestic economy does not believe in the longevity DC, then we have a problem.

Here in central valley, even the uneducated are wondering why we should bet on DC when we lose 25% of that money; even while we are one of the poorest states in the union. Which bodes ill for Obamacare.  We are asking the young and invincible to bet that DC can manage the medical industry for 30 years, until they need medical help.  Not likely in central valley, we are not even betting that our Choo Choo money will arrive from DC.

Japan data confusion mastered

Confusing me, the analysts went to percent change in growth rate, over the period. Normally I am used to growth rate as a percentage from a year ago, or even compound growth rate over long periods. But with a regime change in Japan the percent change from a year ago does not show the effects of short term changes. Hence the switch in units of measure made everything appear out of whack. Units! Always changing and often the GDP report does not specify exactly what units.

Boneheadism at the Fresno Bee

My local paper has been advocating for High Speed Rail, under the assumption that money is available from DC. Now they discover the money is not all there for transit, and it comes with expensive strings, and it was our taxes to begin with.

It's a crying shame, but Gov. Jerry Brown had no choice but to exempt transit workers from the state's pension reform law, at least temporarily. The U.S. Department of Labor was poised to cut off billions in federal grants to local transit districts if California did not back off. So the governor has made a strategic retreat. Fresno Bee Editorial

Read more here: http://www.fresnobee.com/2013/09/08/3482762/editorial-brown-must-press-fight.html#storylink=cpy

All the rags in central valley making a discovering that all the rags in central valley are stupid. Let me repeat, working with DC is a loser when you have only one fifth of a Senator on your side. Try a little long division. Divide up the number of Senators by the number of Congressional districts. Do that for a few states. Do that and we will learn why California is both a poor state, a highly taxed state, loses 25 cents on the dollar to DC, and spends near the bottom on education. Add to that the inherent corruption of Nancy Pelosi, Darrel Steinberg and the unions. Pretty friggen obvious why California is a laggard and in constant budget trouble.

Watsons all over, the singularity is here

Seattle police turn to computer software to predict, fight crime

Seattle Mayor Mike McGinn and Chief John Diaz announced today that police have begun using new “predictive policing” software in the city’s East and Southwest precincts in an effort to reduce crime through analysis of data on crime and location. “This technology will allow us to be proactive rather than reactive in responding to crime,” said McGinn during a news conference. “This investment, along with our existing hot spot policing work, will help us to fulfill the commitments we made in the ’20/20′ plan to use data in deploying our officers to make our streets safer.” According to a Los Angeles Times article on predictive policing employed by the LAPD, predictive policing is rooted in the notion that it is possible, through sophisticated computer analysis of information about previous crimes, to predict where and when crimes will occur. Based on models for predicting aftershocks from earthquakes, predictive policing forecasts the locations where crime is likely to occur.

What is really going on? These are varieties of the machines pioneered by IBM. The machine that won the jeopardy game. Tuned to analyze crime reports. Where do the crime reports come from? Cops, the machine teaches the cops about computer entry. Cops even use blogs, these machines can read. Where do the cops go? Where the machine tells them to.

Are you getting the picture?

The singularity has arrived when humans work, literally, for the machine.  This thing will print pay checks, evaluate and recommend bonuses, order supplies, and with human help, manage inventory. This thing will be in the courts, the mayors office, pension fund managers have them.

In about one year, these things will be virtual web bots, anybody can have as many as they want, all of them fairly brighter than their human partners.

How did all this happen?
Here is my partial list, names are missing, but I have:
1) Ben Franklin, the electron
2) Morse, Baudot, Nyquist  DC signaling over wire, fax
3) Maxwell, Hertz, and DeForest These get you high frequency, electron charge tools.
4) Hartley, Shannon;  standard radio, spectral analysis, computer architecture
5) Schrodinger, Schockley,Noyce The microprocessor

And 30 years later, the machines are taking over.

Texas beats California in education

Says John Taylor. Well, those superior California liberal intellectuals have been exposed as frauds once again. The answer, once again, is simply that California has become too big to fit into the system. Our relationship with DC is breaking and multipliers dropping.

Japan's growth rate recently

I have no clue at the moment, numbers appear all over the map. Trading economics has real growth around. 8% for most of 2013, but I hear reports that this will be revised upward, and current growth is around 3%, expected to go up to 4.5%. None of the numbers seem consistent to me! I still look for some sanity in it.

I myself figured a 3% productivity growth was doable considering Japan's expertise in energy efficiency. Maybe this all comes together soon.

The risk? The Japanese have been through this many times and they know a wage cut has arrived so consumer purchases will decline. The key to success is that gains from lower cost wages are greater than losses from more costly inputs. The part I don't get  is the fiscal expansion part.  Why does government compete for inputs with the export sector? This is all about export margins, and I suspect exporters will force government to curtail its expansion plans.