Category: mafia

Excess returns to Congress

Some may say excess never left Congress, but I am referring to something a bit different.  “Excess returns” is the phrase used to describe an investment result which is above average for the kind of investment made.  And according to a report from Barron’s Randall W. Forsyth, a new study shows that U. S. Senators achieve an excess return of 10.7% per year in their personal investments.  For members of the House of Representatives, the excess is 6.8%.  Forsyth points out that any professional investment manager who achived this result on a consistent basis would be quite phenomenal.  He concludes that

Members of Congress used inside information gleaned from their positions of power to enrich themselves in the stock market.

He is probably right, and I would be the last to accuse Congress of honesty, but there is another possible explanation.  Maybe Congressmen are just cleverer than the rest of us, and in particular are more difficult to deceive.  Congress itself is evidence that the broad public is easily fooled.

In this regard, I recall stumbling a few months ago on a link to the personal investment statements that Congressmen and some other federal officials file. (Curious that I did not bookmark it and can’t seem to locate it right now.) I picked a Congressman who I thought might be honest, Ron Paul, and looked up his statement.  Dr. Paul seemed to have most of his money in precious metals, I don’t recall the extent to which it might have  been bullion, mining stocks, or related investments.  Of course this strategy would have done very well over the past couple of years. Paul is associated with the idea that U. S. dollars should be backed with gold.  I don’t think he considers this realistic in the near term, but of course if it ever happened the effect would be to push the price of gold higher as bullion would be accumulated to “back” the money.  But does Paul endorse gold-backed money in order to increase the value of his investments?  Or does he invest in gold  because he expects its value to increase?  I’m pretty sure it is the latter.  Of course this kind of logic would apply only to honest Congressmen, so I suppose we could consider Ron Paul to be an outlier.

According to Forsyth, the source study, by Alan J. Ziobrowski of Georgia State University, James W. Boyd of Lindenwood University, Ping Cheng of Florida Atlantic University and Brigitte J. Ziobrowski of August[a] State University appeared May 25 in the Journal “Business and Politics” and covers the years 1985-2001.

New horizons in corporate subsidies

I thought it was a scandal when, years ago,  businesses were given subsidies– free money– in exchange for doing the community the favor of employing people.  I thought it was a bigger scandal when retailers were allowed to retain sales taxes, paid by their customers, to pay for capital equipment used in their business. I thought it was about the biggest possible scandal when Continue reading New horizons in corporate subsidies

Another way the poor and their land are separated

Andrew Kahrl‘s talk this afternoon at APA was “The Plight of Black Coastal Landowners in the Sunbelt South and Its Lessons for Post–Housing Bubble America.”

He used examples from New Hanover County (NC) and Virginia Beach (VA).  A hundred years ago, coastal land wasn’t really good for farming, and folks were aware of the danger of storms, so it tended to be cheap. Poor black farmers wanted to own their own land, and this was what they could get.  Continue reading Another way the poor and their land are separated

Saudi housing bubbling

Suppose you are a king. And suppose you have a restless, mostly young population, high unemployment, with most people having to rent because housing and land are too expensive. Few people can get mortgages, because they involve large down payments and high interest rates. Also suppose that you have a big country, lots of land relative to population, and a huge government surplus. What to do?

You could examine why housing is so expensive, and whether there’s a way to make more land available. Maybe that’s happened in Saudi Arabia, but recent news reports give no indication.  Instead, the Saudi solution is to encourage the mortgage industry and expand credit.  Will that make housing cheaper?  Will that make it easier for an underemployed population to get decent housing? Or will it drive up the price of land and feed what seems to be an already-building bubble?  It may be that the Saudi objective is to get more of their people into debt-slavery so they’ll faithfully serve the state.  I don’t know.

What really puzzles me is how mortgage interest fits into an Islamic-dominated state.  Possibly this is like the “Islamic Finance” offered by some U S banks, where no interest as such is charged, but either the price is inflated to compensate for the fact that it will be paid gradually, or the “homeowner” is technically a renter until enough rent has been paid to cover the cost plus what, to others, would be interest.

Bloomberg says the King pledged more than $82 billion for housing, but does not say whether this comprises direct government grants, or is simply some amount of debt which homebuyers will contract.  It also says that

Saudi Arabia’s mortgage law will change the way home finance is regulated, from registering mortgages to prosecuting police officers who refuse to carry out eviction orders.

This will be interesting to watch, preferably from a distance.

More about Saudi housing and morgages:

 

How to prevent economic Ebola?

Economic Ebola is “the virus that infects scientists and engineers and causes them to go to Wall Street rather than create something of societal value,” says Paul Kedrosky.  Graduates with quantitative skills are offered salaries up to five times what they could make in productive work, so of course many of them spend their time finding ways to scrape a few million from high-velocity financial markets, rather than designing products or processes that would actually increase society’s satisfaction.

“Let’s save the world by keeping our engineers out of finance,” says Vivek Wadhwa. [Well, they’re not really our engineers, they belong to themselves, but we’ll skip that for now.]  A fine idea, but how to do it?  One answer might be a financial transaction tax, a tiny levy on each financial trade which could remove the profit from “financial engineering.” It would have no real effect on “long-term” investors who hold a position for more than a day. Seems like a good idea, but of course there will need to be a definition of what is a “financial transaction” for tax purposes, and clever people will find a way to design a transaction which doesn’t meet the criteria.

Maybe a better approach is to eliminate or scale back some of the things that make financial engineering lucrative.  For instance, if a land value tax prevented private collection of land rent, the mortage/financial crisis we’re still in would have been much smaller, or perhaps not possible at all.  We might want to go back to the classical concept of usury, forbidding all transactions where interest is charged for the use of money.  (People can still get compensation for lending money, but it would be as some agreed share of the profits which the investment generates, keeping the lender conceptually closer to the borrower.)

Of course we could start with something simple, like having the government take over insolvent banks, prosecuting and imprisoning criminal executives, letting stockholders, bondholders, and others who have unwisely trusted the bank to absorb the financial loss.  That alone would make financial engineering a lot less appealing.

Vivek Wadhwa

How to cut your medical costs 75%

Last month a couple of my dependents went to the local hospital for routine blood tests.  The hospital sent me a routine bill for an outrageous amount, saying “don’t worry about this, we have asked your insurance company to pay, and you are responsible only for the portion they don’t pay.”

A few weeks later, the “insurance” company, popularly known as “Blue Thieves,” sent me a statement, and the hospital sent a revised bill.  These show that the insurance company paid exactly zero, but muscled the hospital’s fee down by 75%.  Both parties expect me to pay the difference.  In other words, if you are a normal retail customer, the hospital marks up your bill 300%. In my previous experience, lab costs are typically marked up this much or more; for other services the markup is often less.

To reduce your medical costs, then, just tell the hospital that you’ll pay what Blue Thieves pay, 25% of retail.

I put “insurance” in quotes because what they sell is mainly not insurance, in the sense of taking on some of your risk, but protection, in the sense of “we will impose extra difficulties on you if you do not pay us.”

National Police Misconduct Statistics and Reporting Project

[November 2012 update: Earlier this year, the project got something like the resources it deserves, having been adopted by the Cato Institute.  The new link is http://www.policemisconduct.net/, with browsers apparently being forwarded from the old link. The text below is unedited since it was originally posted.]

A very impressive volunteer statistical effort, injustice everywhere simply summarizes and tallies reports of one kind of injustice in one country, specifically police misconduct in the United States.  Certainly a big enough category, it turns out.  For the first three quarters of 2010, a total of 3814 reports, involving 4966 police officers and sheriff’s deputies.   Sounds like a lot of misconduct, tho actually less than 1% of the country’s government-employed law enforcement people.

All information is from published reports, and a link to each (a dozen or more most days) is provided.  “National Police Misconduct Statistics and Reporting Project” seems to be the overall project name, but a bit ponderous for a URL.

This is one of those things that somebody ought to do, and fortunately somebody does.   It’s really something the government should be doing, or, if you don’t trust the government, perhaps a university.  Or, if you don’t trust entrenched university staff, it falls to independent scholars, and that’s what we’ve got.

It really deserves more resources, so that systematic data-gathering, analysis and followup could be done.  Those of us with a few extra dollars can help, especially if we do not itemize our tax deductions. Injustice Everywhere hasn’t yet managed to jump thru the hoops to charitable status certification. There’s a donation link near the top of their web site.