Regional currencies– displacing dollar?

Learned a few interesting things at the Monetary Reform Conference where I spent Friday and Saturday.  One speaker made a sort of offhand remark about the Sucre, new Latin American regional currency, which was not familiar to me.  Turns out this is a real and significant thing, whereby a currency is created for use in international trade, where the dollar would heretofore have been used. Cuba, Bolivia, Venezuela, and Ecuador are currently involved; the best description seems to be here. Claimed advantages include cheaper transaction costs and reduced exchange rate risks.

I recall that the Sucre used to be the name of Ecuador’s currency, but apparently that was replaced by U S dollars in 2000.  Why Ecuador would find it advantageous to use the new Sucre for international exchanges isn’t clear, but perhaps they are looking to get away from dollars.

More on the Monetary Conference later.

Medallion prices now posted by Chicago Dispatcher

Now that Chicago Dispatcher is posting Chicago taxi medallion sales prices in a defined area of their web site, it may no longer be useful to post any of them here. (Chicago Dispatcher’s print edition was the source for all recent reports I posted, but posting of the information on the web wasn’t consistent.) They continue to calculate an “average” monthly price; unfortunately it seems to be a mean or mode, not a median. At last report (pdf), this figure was $183,000, indicating little change in recent months.

Ideas come from the community

In his 2003 book Copyrights and Copywrongs: The Rise of Intellectual Property and How it Threatens Creativity, Siva Vaidhyanathan notes that creative works always build on previous (often traditional and/or public domain) creative works, and that creativity will become nearly impossible if writers (or those who “own” their output) are permitted to exercise absolute monopolies over use of their products.  Potential remedies include shorter and looser copyright terms, placing works into the public domain, licensing them as open source, or using another of the Creative Commons licenses.

Michele Baldrin and David K. Levine, in Against Intellectual Monopoly, provide numerous historical examples of patents retarding, rather than promoting innovation, and note the finding (p. 92, regarding the software industry) that patents were not an encouragement to research and development, but rather a substitute for them.

Now, in  Where Ideas Come From (in Wired Oct ’10) Kevin Kelly and Steven Johnson sort of combine these two ideas by asserting that innovations are not the products of individuals, but of communities.

It’s amazing that the myth of the lone genius has persisted for so long, since simultaneous invention has always been the norm, not the exception … [T]here’s a related myth, that innovation comes primarily from the profit motive… If you look at history, it comes from creating environments where [people’s] ideas can connect.”

And they tie this into another kind of property rights:

One reason we have this great explosion of innovation in wireless right now is that the U S deregulated [allowed unlicensed use of parts of the] spectrum.  Before that, spectrum was something too precious to be wasted…But when you deregulate– and say, OK, now waste it– you get Wi-Fi.

All in all, a very Georgist article, the authors of which have also written what I hope are very Georgist books (both coming out next month):

Steven Johnson, Where Good Ideas Come From

Kevin Kelly What Technology Wants

Theories are easy; facts are hard

Georgists say that we understand the cause of the global financial crisis, and we saw it coming.  So if we’re so smart, why ain’t we rich? Well, some of us are, but for most of us it’s a matter of data and calibration. If we had detailed data on land prices and land rents, and a few other robust variables, properly and consistently defined, for a couple hundred years, we might make some real and pretty quick money from the theory that we do understand quite well.Or maybe not.

The above is suggested by a somewhat related post at Falkenblog.

Most people think facts are easy, and theory is hard, but actually I think it is the reverse. Theory, once you understand it, is trivial, yet important facts are very elusive, often at the bottom of most major disagreements.

And, from one of the comments:

Economics is not Physics. Economists do not collect data then develop theories like physicists. Economics is closer to Ethics in form and methodology…

Let’s you and him pay to maintain my land value

Chicago Metropolis 2020 has issued a new report about Illinois transportation. (Right now, the report is on their front page; I don’t see a permanent link.)  Their stated objectives are things I support, including better and more attractive public transportation as well as a more efficient freight system.  They acknowledge that coordination and planning need to be improved, and that good transportation is an important component of a strong economy.

They also point out that much of the current system is in bad shape, and that billions of dollars would be required to bring it up to a reasonable standard.  They quote estimates of $45 billion over ten years to refurbish and expand Chicagoland public transportation, and $171 billion over 30 years for transit and highways statewide. They propose to pay for this using an increased motor fuel tax, increased and more market-sensitive tolling, and innovative financing techniques (about which more is below).  They do not claim that these sources would be fully adequate to the “need.” (My own opinion of fuel taxes is that, yes, they ought to be increased, but whatever amount is raised should be devoted to the budget of the military, who spend a lot of money attempting to maintain petroleum supplies. ) Continue reading Let’s you and him pay to maintain my land value

If pain and suffering don’t matter…

…we could reduce medical costs by 2.4%. That’s the finding of a new Harvard study as reported in today’s Tribune.

The analysis included payments made to plaintiffs, administrative costs such as attorney fees and the costs of doctors’ lost work time. It also included the costs of “defensive medicine,” in which doctors perform or order extra tests and procedures to protect themselves legally.

I don’t know about you, but my medical insurance costs go up by more than 2.4% every year.  I am happy to pay an extra 2.4% to give medical staff some incentive not to screw up, and so that if they do screw up I have some possibility of receiving compensation.

Those who really want to cut the cost of medical care will look at monopoly interests such as licensing and patents, and the way that government subsidies increase costs.  They’ll find many multiples of a 2.4% savings.

Taking risk for modest returns

As interest rates on “safe” bonds and CD’s decline, those with cash to invest may look to riskier options in order to generate significant return. M P McQueen in the WSJ identifies possibilities including cellphone towers, self-storage facilities, parking lots, and offcampus student housing.

The article notes some cases of > 100% returns, but what’s scary is the indication that an ordinary investor with reasonable luck is told to expect returns more in the range of 7% – 10%.  Does that compensate for the risk involved?  Or is everyone still counting on selling out at a profit several years down the road?

Of course another option is peer-to-peer lending, such as Lending Club or Prosper, who claim returns in the same range. There’s still plenty of risk, but a modest investor can diversify by participating in a hundred or more loans.  Liquidity is limited, but at least in the case of Lending Club loans can be bought and sold (no guarantees about the price, however).

Avoiding foreclosure vs. getting ripped off

A significant post at Naked Capitalism asks “Why Are NACA’s Innovative Mortgage Modification Marathons Below the Radar?”    Suppose a property bought for $300,000, with a $290,000 mortgage, has declined in value to only $200,000.   If the borrower can’t keep up the payments, the lender could foreclose, but would net less than $200,000 after expenses, while the borrower would lose the property.

The rational solution is for the parties to agree to a reduction in principal, write the mortgage down to, say $200,000, with payments reduced commensurately.  The lender is better off, the borrower is better off, and there’s no vacant foreclosed home for the neighbors to worry about.

But homeowners under financial stress tend to have a lot of difficulty dealing with their lenders.  Lenders want to pretend that the mortgage is still worth $290,000 (otherwise they might have to liquidate or raise more capital), and/or hope to be bailed out by yet another federal program, and/or lack competent staff.

The NC post implies that NACA can be helpful in this situation.  But, as one of the commenters there notes, thousands of other enterprises make similar promises, and many of these are predatory.  How is the stressed homeowner to find someone who will help, rather than rip her off?

NACA provides some reason to be suspicious:

NACA – America’s Best Mortgage Program
The incredible NACA mortgage allows NACA Members to purchase or refinance homes with:

  • no down payment,
  • no closing costs,
  • no fees,
  • no requirement for perfect credit,
  • and at a below-market interest rate.

Everyone gets the same incredible terms, including the below-market interest rate, regardless of their credit score or other factors.

I can only answer by treating it like any other purchase of consumer services. You ask your friends, google around to see what other folks say about it, evaluate the explicit promises made on the provider’s web site…. and maybe you guess correctly, getting real help. [Hopefully you are not working three jobs trying to make ends meet, lacking time to do any real investigation.] There is no sure solution, only ways to improve the odds.

A better remedy, of course, would be a system that allows people to obtain decent housing in a decent neighborhood, without having to mortgage their futures for an “investment.” That would be one benefit of a land value tax.  No, we wouldn’t expect our homes to appreciate in value, at least not beyond the general rate of inflation.  But we would need much less debt to purchase them, and more easily build a reserve of real savings.

A warning about the NACA web site, btw: They seem beholden to Microsoft and will display an error message on many pages if you are not using genuine Internet Explorer.  I think some other browsers allow you to pretend to be using IE, and possibly this will solve the problem.

Time to buy land?

Bloomberg reports that upscale homebuilder Toll Brothers is starting to buy land even tho it already has enough for 15 years of development at current rates. This is a change from the prior several quarters, when they disposed of most of the lots they had held.  And Toll isn’t alone. “The 12 largest homebuilders by market value added 14,214 lots to their control over their two most recent quarters.”

It appears Toll spent $27 million in recent weeks to purchase land interests from a failed bank at “40 cents on the dollar,” presumably 40% of what somebody claimed the land was worth at one time.  This is just part of a reported $250 million that Toll has spent to acquire land so far in 2010. Still, they seem to have over $1 billion in cash available for further purchases.

Securities analysts quoted by Bloomberg don’t appear impressed by this strategy, suggesting that the cash would be better used to buy back shares, or acquire one of their more down-market competitors.  I dunno, somebody is gonna buy land at the bottom, maybe it’s Toll?

Who are putting their lives on the line for us?

A new report(pdf) from the U S Bureau of Labor Statistics provides 2009 data, pretty much consistent with earlier years, about fatality rates (per 100,000 equivalent full-time workers) in various occupations:

  • Fishers and related fishing workers 200.0
  • Aircraft pilots and flight engineers  57.1
  • Farmers and ranchers 38.5
  • Roofers 34.7
  • Refuse and recyclable material collectors  25.2
  • Driver/sales workers and truck drivers  18.3
  • Miscellaneous agricultural workers 16.7
  • First-line supervisors/managers of landscaping, lawn service, and groundskeeping workers 16.2
  • First-line supervisors/managers of construction trades and extraction workers 15.2
  • Grounds maintenance workers 15.0
  • Taxi drivers and chauffeurs  14.9
  • Police & sheriff’s patrol officers 13.1
  • All self-employed workers (included in the various occupational categories) 12.0
  • Firefighters 4.4

When I think about what occupations are really important to the maintenance of civilized life in my community, I definitely think of the farmers and the refuse collectors. And in an emergency, sometimes I have had to call on a taxi driver.  Some of the other categories maybe are less essential. I like fish, but not enough to risk death.

Of course police and firefighters face dangerous situations, but they are trained, equipped, and staffed to deal with them.  Maybe we need to give equal attention to some other essential occupations.