Monday, March 2, 2015

Jobless Recovery

I walk along the city streets
You used to walk along with me
And every step I take reminds me 
Of just how we used to be
--Naked Eyes

Prof John Taylor updates his economic recovery metrics that we first reviewed nearly a year and a half ago. His data suggest little real improvement since then.

Perhaps the most striking stat is the trend in the percentage of the US population currently working. Here we more than six years since the official end of the recession and we have about the same fraction of US citizens working now as were working at the end of the Great Recession.

As a frame of reference, Taylor provides fraction working following the '82 recession. As I happened to enter the full time work force in June, 1983, I was part of that particular uptrend.

Factors different this time around include less savings available to apply toward capital investment, previous malinvestment resulting in useless capacity, and, of course, the transfer payment bonanza which keeps many people on the dole.

Sunday, March 1, 2015

Socialism, Slavery, and Sin

"There will be a day when you will wish that you had done a little evil to do a greater good."
--Sybilla (Kingdom of Heaven)

Socialism is an economic system that prohibits private ownership of property. Property is said to be 'socialized,' meaning that whatever is produced is expropriated from the producers and pooled together in the public domain and then redistributed by a group of central planners.

The economic problems posed by socialism are well known with Mises (1951) delivering perhaps the most decisive critique.

Here, Prof Williams considers the moral argument against socialism. On the most basic of levels, socialism is theft. Property of one person is confiscated for the benefit of another.

Because property is confiscated on an ongoing basis, then socialism can be seen as a form of slavery. Slavery is "the forceful use of one person to serve the purposes of another."

As Prof Williams observes, various euphemisms are employed to cloak the evil. Social Security, Medicare, transfer payments, contributing, fairness, social contract, common good, democracy, et al.

Many people see socialism as a good thing because it can have good ends (helping people). Of course, good ends do not justify evil means. As WEW observes: "Reaching into one's own pocket to assist his fellow man is noble and worthy of praise. Reaching into another's pocket to assist one's fellow man is despicable and worthy of condemnation."

With the commandment "Thou shalt not steal" as a backdrop, Christians on the road to truth must conclude that socialism is sinful.

Saturday, February 28, 2015

Barber Half Dollar, 1892-1915

Slow change may pull us apart
When the light gets into your heart
--Simple Minds

In 1869 Charles E. Barber became chief engraver of the US Mint. At this time, Seated Liberty Half coinage was going strong. Like all engravers, however, Barber yearned to put his mark on US coinage.

His opportunity came in 1890. The Mint Act of 1890 act required that designs of US coins to change every 25 years. Because Seated coinage had already well exceeded its tenure, Barber got busy. The first step was to solicit designs--which resulted in about 300 proposals from sculptors and other artistic types. Barber rejected them all in favor of his own.

1910 Barber Half Dollar PCGS PR64 CAC ex Larry Shapiro

The obverse design returned to the Ms Liberty headshot tradition of the Flowing Hair, Draped Bust, and Capped Bust vintages. The right looking Liberty portrait drew heavily from the design of Liberty head coinage from the Second French Republic from 1848-1852. Thirteen stars (for the first time, six pointed stars) surround the obverse rim with IN GOD WE TRUST at the top, LIBERTY labeling the headband, and the date at the bottom.

The reverse featured a new rendition of the heraldic eagle that contained design elements from previous series. The spread winged eagle faces left, with talons clenching an olive branch and arrows. The eagle holds the E PLURIBUS UNUM banner with 13 five pointed stars above its head. UNITED STATES OF AMERICA circles the top while HALF DOLLAR circles the bottom.

Diameter: 30.6 mm
Weight: 12.5 g
Composition: silver .90; copper .10
Edge: Reeded

Mintages regularly exceeded one million per year with most going into circulation. The design, which left many of the device high points exposed to friction, made circulated Barber halves subject to considerable wear. Many survivors today are 'slick' Barbers, meaning that much of the relief has been worn away with few design details remaining.

To me, the most interesting numismatic coins among Barber series are the proofs. Proofs were struck each year by the Philadelphia mint. Mintages are tiny in all years. For example, for the 1910 date shown above, a total of 551 proof pieces were struck--not graded, struck. Yet, for most years, prices of proofs rarely exceed prices for business strike examples of the same grade.

Because most surviving proof examples were carefully cared for by collectors, they are well preserved with many possessing very interesting colors from years spent in paper albums and envelopes. Proof Barber halves can be very pretty, and given the small mintages, pops, and prices, they seem to offer interesting value.

Friday, February 27, 2015

Principals of Violence

Drinks flow
People forget
That big wheel spins
The hair thins
People forget
Forget they're hiding
--The Who

Most people do not view themselves as violent or aggressive. Instead, they view themselves as peaceful.

However, government is force, and those who condone the activities of the modern state are proponents of the use of offensive force.

The 'government' label, then, can be seen as serving a euphemistic purpose. By excluding the concept of force from the word, statists rationalize that they are not acting aggressively on others when they condone government programs.

But they surely are. They may not be pointing the guns, but their hired agents are.

Statists are principals of violence who exert force on others via agents of aggression.

Thursday, February 26, 2015

Sameness is Maladaptive

Look in the mirror
And see how you've been taken
You won't surrender
But now your heart is breakin'
--John Waite

Sameness, uniformity, standardization. Many associate these with order, control, stability. In the near term, that illusion is seductive.

But the nature of the university is not grounded in similarity. It is grounded in differences, diversity, change. Darwin observed the importance of variation in adaptation.

Natural order is spontaneous and dynamic.

Sameness is maladaptive. Stabilization is chaos.

Wednesday, February 25, 2015

Needling the Rich

Walking side by side with death
The devil mocks their every step
The snow drives back the foot that's slow
The dogs of doom are howling more
--Led Zeppelin

In Matthew 19:24, Christ states that it is easier for a camel to pass through the eye of a needle than for a rich person to enter the kingdom of God.

Many view this passage as justification for taking wealth from rich people by force. Rather than constituting theft, forcibly alleviating wealth from people provides a two pronged benefit. It helps those who get the resources, and it helps save the souls of those who are now less rich.

While such twisted logic may be embraced on earth, it seems likely to find no quarter on Judgment Day.

Tuesday, February 24, 2015


"A king may move a man. A father may claim a son. But even if the men who move you be kings or men of great power, your soul is in your keeping alone. When you stand before God you cannot say, 'But I was told to do thus,' or that 'Virtue was not convenient at the time.' That will not suffice. Remember that."
--King Baldwin IV (Kingdom of Heaven)

Expedience involves doing something convenient to advance one's interests even if it violates natural law. Expedience often appears in the political sphere, where people seek to marshal the strong arm of government to get what they want.

Expedience is action of opportunism, of getting more benefit for less effort.

Although we rationalize expedience in our earthly actions ("It was practical," "Compromise was necessary"), it seems likely that when we stand before the Creator to account for our actions, arguments of expedience will garner no sympathy.

Monday, February 23, 2015

Debt Iceberg

"Do you have the slightest comprehension of what you're getting into?"
--Molly Brown (Titanic)

The Constitution of the United States was the first complete framework for government that grounded in natural law. But it was not perfect, has these pages have discussed on several occasions (e.g., here).

Nice piece here discussing problems with the enumerated power in Article 1, Section 8 that permitted Congress "To borrow Money on the credit of the United States." The author notes that anti-federalists such as Brutus foresaw problems with this clause with prescient accuracy.

The author suggests that borrowing is politically attractive because it bypasses the unpopular need to tax citizens to pay for government programs--whether they be for warfare or welfare. But borrowing merely pushes taxation further out into the future. Indeed, people looking for evidence of short time horizons of politicians need look no further than political propensity to borrow--near term gratification that creates long term problems.

The political borrowing habit is so great that young and future generations have been sentenced to toil as debt slaves.

The author doubts that even amending the Constitution to eliminate congressional borrowing power would eliminate our debt addiction. Instead, he suspects that the good ship U.S.S. United States has a date with a looming debt iceberg.

Sunday, February 22, 2015

My Science

Jake Lo: What judge is going to believe that?
Agent Wesley: My judge.
--Rapid Fire

Modern 'science' is the classic example of confirmation bias in motion. People have a belief. They seek credible evidence that confirms their belief. What better source of evidence could be more credible than a 'scientific study' that backs one's belief?

Markets for bias inevitably form. 'Scientists' perform studies for biased consumers--often through grants of resources provided by those same consumers. If that market grows large enough, it becomes scientific orthodoxy. Buyers collect those slanted studies and call them fact.

They file them away in a mental folder called My Science.

Saturday, February 21, 2015

Buyback Bubble

"And with the surplus cash, we'd implement a major stock repurchase. So Trask is protected and their stock goes up, and everybody's happy. Or not."
--Tess McGill (Working Girl)

Not sure there is a more perverse incentive program than incentive stock options (ISOs). The thinking behind ISOs is that they help solve the agency problem. Managers are hired agents who may have different objectives from the owning principals. Because owners would like to see their share prices increase over time, then why not get the hired agents on the same page by offering them stock options, and rewarding them when they act in manners that get share prices higher?

The problem is that there are prudent and imprudent ways to boost share prices. Prudent approaches increase the intrinsic value of the firm over time. Smart investment in productivity-improving projects. Careful financial management. Product and process innovation. New market development.

But these things take time and capital--something that most agents (and many principals for that matter) don't have.

It can be a lot faster to boost share prices by imprudent means. A favorite approach currently is to borrow money on the cheap and use the proceeds to buy back shares. As shares are retired, there is less supply. With less supply, the price per remaining share should go higher. Both principals and agents are happy.

The problem, of course, is that stock prices become disconnected from the intrinsic, cash generating potential of companies and their shares. As long as credit is cheap and managers are rewarded via ISOs for boosting share price, there is no such thing as share prices that are too high to buy in.

Meanwhile, balance sheets get ever more levered...

Currently managers are borrowing money and buying in shares at all time stock market highs. Principals look at their monthly statements with glee. These ISOs really work, they conclude.

In reality, ISOs create a situation of mismanagement based on measurement. ISOs drive share prices higher for non-fundamental reasons. All are mesmerized by the rocket ride of price. What they can't see is overvalued shares and weakened balance sheets.

Welcome to the buyback bubble.