Evaluated

I saw a social media post today claiming that Alphabet was now "worth $4.8 trillion." Considering that I didn't see any reporting on that anywhere, I'm dubious about that number, but it started me thinking. Just how does one determine how much a company is "worth."

After all, it wouldn't be possible to simply hand over $4.8 trillion and just own Alphabet... if a significant number of shareholders were all looking to proactively sell, the price would immediately drop. Likewise, if someone (or an organization) with a remarkable amount of liquidity decided to buy up a significant portion of the shares, the price would rise. Stock prices are generally set between buyers and sellers, and valuations are generally determined on the basis of some average of the transactions that take place over a given timeframe. So, at least as far as I'm concerned, the statement that "a given company is worth some number of dollars," doesn't really tell us anything.

Except, maybe, about investors. It occurs to me that to value a company is to presume that it's possible (at least in theory) for all of the shares to change hands over a reasonable span of time. Leaving aside for a moment the changes in share price that such a shift would bring about, any valuation implies that some amount of money is currently tied up in the company's stock. Some of it can be thought of as not being "real," since it doesn't matter how long the stock has been held by it current owner; if it hasn't been sold recently, and isn't currently for sale, no-one has to actually produce the money to buy it... but the owner is credited as having grown wealthier all the same.

And that wealth is counted just like money in the bank would be. A lot is made of wealth inequality, but it's rare to hear about how much of that wealth is represented simply in terms of an expectation that, if someone were to sell something, they would be able to receive a certain amount of money for it. But if all of these expectations were added together, how would that compare to the amounts of hard currency there is? Could people actually buy all of these companies at their stated valuations? Or do expectations represent the bulk of modern money supplies? 

Billion-Dollar Baby

So, I've been hearing people talk about the idea of autonomous automation allowing for one-person, billion-dollar valuation companies. It's a topic that comes up on financial and technology podcasts from time to time.

And it's raised a question for me... What would these companies sell? Now, I get that it could be something new and wonderful that no-one has thought of yet, so I'm really asking what characteristics the goods and services they would offer would have.

Because if we're talking about a company that's 1 human being, and X number of automated agents, then anyone who has access to X number of automated agents could make the same thing. There could be other capital needs, but perhaps not, depending on what exactly it is that's being produced. So how does our one-person company protect its market(s) well enough to get to a billion-dollar valuation, rather than simply becoming a proof-of-concept for a number of other market actors? Would it need to be something where the primary market is people who don't have access to the same level of automation?

And, speaking of proof-of-concept, if our one-person company demonstrates that a whole class of goods/services could be produced entirely with automated agents, that could really do a number on the employment market. So does their product or service also need to be more-or-less downturn-proof? And how would that work in practice? Would it create demand for physical human labor in another area? Or would it be something that isn't aimed at the public at large? (Which goes back to the first question... because if other people could make their own version, anyone with the means to copy the product or service might not be a good long-term customer.)

In the end, I understand that talk of one-person, billion-dollar valuation companies is really about a level of techno-"optimism;" the idea that capital could create its own labor, and thus result in fairly big gains for the investor class... But I think that a lot of the speculation makes the implicit assumption that nothing else changes in the overall environment, and I suspect that wouldn't be the case. We'll see, I suppose, sooner or later.

Unreturned

I was listening to the Altruism After USAID episode of Slate Magazine's Money Talks podcast a few days ago, and the guest, NPR's Mary Childs made the point that in the wake of USAID halting disbursements to non-governmental organizations and the like, that the money being withheld couldn't be replaced by philanthropic organizations.

My first thought that this was a matter of will. After all, if the United States government was no longer paying to fight malaria, and instead giving the public tax cuts, nothing stops that selfsame public from deciding to donate the savings to charities and keep the programs funded. The Trump Administration and Elon Musk's DOGE operation targeted USAID because they understood that many Americans feel poor enough that they resent the government giving money to ameliorate the problems of people far away.

But a moment's further thought put that idea to bed. After all, the federal budget isn't balanced; it's propped up by some pretty serious borrowing from global capital markets. Of course, people expect that the United States is good for it, which is why the government can borrow at favorable rates, but it's debt all the same.

And that's really the part that private philanthropy cannot replace. No rational lender is going to loan a charity several millions (or perhaps even tens of thousands) of dollars to save lives in third-world countries. Because there's no profit in it. Not even China, which makes a big deal out of its investments in poor nations, is doing so out of generosity; they expect a positive return, and when nations start defaulting on payments, China is going to start claiming assets as collateral. Charities, more or less by definition, don't impose repayment terms that entail seizing what few assets poor nations still have.

Given the fact that the United States borrows simply to keep the lights on and doors open towards the end of the fiscal year, some amount of the funding that USAID was providing was in the form of money borrowed from elsewhere. Specifically because poor countries tend to be bad investments, for any number of reasons.

Perhaps it's time that this was more openly acknowledged. There's nothing wrong with the understanding that, as a wealthy nation, the United States has an obligation to alleviate poverty in other parts of the world. And it's true that many Americans overestimate (sometimes wildly) the amount of money that goes into such philanthropy, as a proportion of their annual taxes. Still, this is part of what representative government is all about; having to make the case to the people who will be, ultimately, footing the bill.

And Then, There Was One

So this was an interesting LinkedIn post:

My AI vendor upgraded the terms of service.

For 12% more cost per month, I will get only 60% of the monthly credits for my use. Less for more. Sounds like a great upgrade... for them.

Time to drop my provider, I guess.

Are the costs finally reaching the consumers now? Have the AI vendors run out of free money they can use to keep costs artificially low?

The last sentence stood out for me in in the context of the third line; this person believes the time has come to drop their generative automation provider, because that provider can, apparently, no longer afford to keep compute prices artificially low. This is the genesis of the the process that Cory Doctorow terms "enshittification." As companies find themselves in the position of needing to show a profit, they are forced to raise their prices. The resulting flight of their customer base hobbles them, they enter a death spiral, and are either forced to exit the market or are acquired by another player. The number of providers shrinks until the overall market is highly consolidated, and then prices start rising to repay investors for the subsidized costs that have lured in customers all this time. And because all of the remaining players are raising their prices (or there are no other remaining players), customers have nowhere else to go, even if lock-in effects aren't present.

And since all of the market players are now very large, new entrants to the market are at a sizable disadvantage... in order to compete, they'd need to have unbeatably low prices, which would require a large amount of up-front investment... which would need to come from people and organizations that aren't bought in to the current market principals. So there's nowhere to keep moving to for investor-subsidized services forever. And. of course, investors realize this; the whole reason they're subsidizing costs for customers at this point is the expectation that once the market consolidates, they'll make all of it back, and more.

One commenter noted that State of the Art (SOTA) models based in China have very low costs, but without insight into their economics, there's no way of knowing whether those prices are artificially low, themselves. Nothing prevents the government of China from attempting to ensure the Last Provider Standing, and thus the one that benefits from being able to squeeze customers, is a Chinese company. But even if they aren't, if they can force other nations to take over the role of subsidy provider, that's still a benefit to them.

Either way, this mindset of "not artificially low is too high" is being penny-wise but pound-foolish. The unwillingness to pay what one believes that things actually cost out of a pervasive sense of one's own poverty has never ended well. And while this time might be the first, I don't see much investor money backing that position.

Penniless

One of the strange things about the Trump Administration is its uncanny ability to enact a policy that people want, but to do so in a way that make people wish they hadn't. Case in point, the end of the penny.

“We have been advocating abolition of the penny for 30 years. But this is not the way we wanted it to go,” said Jeff Lenard with the National Association of Convenience Stores.

[...]

“We don’t want the penny back. We just want some sort of clarity from the federal government on what to do, as this issue is only going to get worse,” the NACS’ Lenard said.

Most, although not all, Congressional Republicans seem to be of the opinion that, in the eyes of their voters, President Trump can do no wrong. This has eliminated any incentive they may have had to push back against the Administration when it's going to implement policy chaotically and haphazardly, because they believe that voters are going to hold them accountable for holding the Administration accountable. (I also suspect that they believe that once the President is out of office, they'll be able to wash their hands of Trump Administration policies that turn out to be highly unpopular.)

I am reminded of a saying that I heard once: There's no such thing as managing expectations; you either meet them, or you don't. Big picture, I think that the federal government has been failing to meet people's expectations of it for some time now. And given an explanation for that failure which claims the root cause are federal workers and elected officeholders who are actively hostile to the well-being of the public, and the Trump Administration has a convenient scapegoat for breaking things: that the process was sabotaged by Democrats and/or "the Deep State."

President Trump is often derided as a buffoon, and I can understand why... he certainly doesn't have a problem with playing one on television. But he isn't stupid; he really does understand, and channel, the anger, bitterness and frustration of any number of Americans for whom things have simply Stopped Working. And he understands what feels like creating solutions to them. There have been some missteps (there's a reason why immigration enforcement is focused almost exclusively on Blue states now), but the Trump Administration understands how their voters want to feel, and have pushed policy in that direction.

Hence the chaos and confusion around the sunsetting of the penny. The goal wasn't to solve a business problem, such as the National Association of Convenience Stores might outline. It was to be able to hold up the $56 million that the Treasury is no longer spending to mint the coins, and imply that that money is part of a bigger package of lower expenditures which would justify tax cuts. And that job has been done. But the Administration's exclusive focus on those people it perceives as loyal voters has, time and again, cost them the ability to make inroads with the rest of the public. As Mr. Lenard points out, there has been a constituency for doing away with the penny for decades. A gracefully-managed wind-down of the coin would certainly have earned points with people. But that isn't a draw for an Administration that's bent on demonstrating that the minority of the public that actively supports it is all that they need.

If You Can Keep It

My father was of the opinion that redistributing wealth wouldn't, for the most part, work. The problem, as he saw it, wasn't that most people didn't have money, it's they didn't know how to keep it. And I think that I agree with him on that. Not in the sense that Americans spend too much on random crap, or that they're too easily manipulated into poor financial decisions, but in the sense that many people fail to understand how the broader economy works, and the (admittedly minor) impacts of their choices on it.

A lot has been made of the Trump Administration cutting federal programs that places rely on, but that's also starting to lay bare just how often states and localities have shifted their costs to the federal government, in order to keep their own taxes low. Promising people high-quality services and low tax rates only works for a time, and if the Trump Administration manages to make all of the cuts in funding to things that it wants to, that time is likely up.

At some point, one has to bite the bullet and align what one wants with what one is willing to pay for; and really understand how much things cost. The Trump Administration has been taking heat from commentators who cannot believe that the Administration honestly thinks that a) large-scale manufacturing can be re-shored in anything under a decade or two and b) Americans would be willing to pay what domestic citizen labor would cost, but the Trump Administration doesn't have to believe any of it. The Republican voter base appears to think that it's true, and that is what drives statements from the political class. As long as there are young men out there with high-school diplomas who think that if Apple would only give them a job assembling iPhones that they'd be set for life, Commerce Secretary Lutnick can proclaim that, "Our high school educated Americans- the core to our workforce, is going to have the greatest resurgence of jobs in the history of America to work on these high-tech factories, which are all coming to America," without actually needing to believe a word of it.

If people really wanted to pay more for things, simply because they were made in the United States, they would. But they don't. Because in the end, it's inefficient. To be sure, sometimes, efficiency isn't the best thing, but it can be hard to get people to see the value of resiliency, when it can be a waste until something bad actually happens. And now, one can make the case that something bad is happening.

The Pursuit of Cash

In the recent "The Chase Glitch Proves Checks Are Stupid" episode of the Slate Money podcast, Felix Salmon, with some backup from co-host Elizabeth Spiers, argues that the young people who wrote massive checks to themselves thinking that they could obtain free money this way should be forgiven, because "Gen Z" simply doesn't understand how checks work.

Personally, I think the problem is that a lot of people, and not just "Gen Z" don't understand how money, let alone banking, works, or even what money really is. So it makes sense that it's unrealistic to expect young people to understand how checks actually work. But I don't think that forgiveness should be on the table so easily, because even of young people didn't understand check fraud, I suspect that a lot of them do understand taking something from someone else, and thinking that they would never be caught.

If you haven't heard about this, the basic gist of it is simple: A person writes themselves a check for some (usually fairly large) amount of money, deposits that check into a Chase automatic teller machine, and when the ATM shows the new account balance, withdraws some amount of money from the machine... generally much more than their original balance had been. The check bounces, because there wasn't enough money in the account to cover it, and the would-be clever person now finds themselves deep in the red. This had been touted on TikTok (because of course it was) as an "infinite money" "glitch" over the holiday weekend and while the number of people who rushed to take advantage of it has been wildly overstated, there have been several examples of people online showing their bank balances going negative once things started shaking out.

While I understand the idea that many of the people who showed off the money they believed they'd been able to get on social media didn't have the mens rea for check fraud, attempting to take advantage of a perceived flaw in a system to benefit oneself at the expense of the people who run the system isn't exactly above board behavior. If a person can reasonably be expected to understand that ATMs don't print the bills they dispense to people, then it's reasonable to presume that people understand the money comes from somewhere, and likely belongs there. After all, this is not a situation in which the understanding was that Chase was holding some sort of promotion or giveaway, and people thought that the bank was intending to give them money with no strings attached.

Rewarding ignorance, or even making it less painful in circumstances where it otherwise carries consequences, creates something of an incentive to ignorance. High profile prosecutions of people for attempted check fraud, even if they didn't understand that's what they were doing will push people towards realizing that understanding how their bank accounts actually work is better than not understanding that. Harsh lessons are still lessons, even when it seems distasteful to teach them.

Bad Finance

Not how this would work.

The difficulty with being suspicious of systems that one doesn't understand is that it's easy to imagine all sorts of malfeasance that can't actually take place. Anyone who has a general understanding of how finance works would realize that the scheme laid out in the meme above simply wouldn't work. But if all one knows about the topic is what one has been told about the workings of private equity companies, and how some of them have looted businesses they've purchased, it might seem that this is how it works.

It's the downside of the general pattern of disengagement that one sees in the United States, and it's one of the things that leads to such low social trust; the idea that people one doesn't like have found ways of enriching themselves that are barred to everyday people, and /or are simply shady/illegal.

But avoiding the trap means taking the time to understand any number of subjects that don't otherwise have any bearing on a person's day-to-day life. Which goes a long way towards explaining why comparatively few people make the effort.
 

And Effect

While there is a lot of chatter about how wrong economists (as if economists were some sort of collective intelligence) were about recession predictions, there are a fair number of people who believe that the United States is, in fact, in a recession. And they could be right; after all, the beginning of a recession is always declared after the fact.

And one could be forgiven for thinking that a recession is still in the cards for the near future, given the steady trickle of news about layoffs in company after company. I've spent a decent amount of time on LinkedIn recently, and my feed has been something of a downer recently. There have been a number of notifications of layoffs (and even company closings) recently. To be sure, there have also been people celebrating their new roles, but those are individual events, and they don't manage to balance the news of groups of people losing their jobs. I wondered what this would mean for confidence numbers, so I hopped over to The Conference Board's website, and, sure enough, Consumer Confidence in the United States is down by 1.7 points.

I'm curious as to the degree that this is a self-fulfilling prophecy. Because sometimes, there's no better way to be ahead of an event than to be part of its cause. One company's employees are another company's customers, and each round of layoffs makes other companies that rely on the public's discretionary income think that maybe they should start cutting production, costs or both, in order to not be caught flat-footed when demand takes a dive. And the snowball simply grows from there.

To be fair to businesses, they're simply following their incentives. After all, they have a responsibility to look after their stockholders' investments, and no real responsibility to the public at large, or their employees; at least not in the same way. And positioning themselves for a recession that doesn't come is considered more responsible than not being prepared for one that does. And labor costs are seen as something to be done away with, rather than a necessity for the economy at large to function.

It's also worth pointing out that government has it's own part to play in all of this. The United States government, being unwilling to tailor either spending or taxation to prevailing economic conditions, is unable to respond to those conditions without creating more problems down the road. Although, given that the United States does have a representative government, most of the blame for this can be laid at the feet of various constituencies, especially those that have the wherewithal to fund campaigns, and those that prefer to be the passive audiences of those campaigns, rather than seeking out information themselves. (Representative governments punish the non-participatory, regardless of the reasons for non-participation.)

In any event, there seem to be a lot of forces conspiring to ensure that a recession occurs late, rather than never. The business community is simply more open about its plans.

Flat File

I was listening to some or another talking head go on about income inequality in the United States when a question came to me: How much would a day-care worker have to make in order to be able to afford day care for their own child?

I understand that it's something of a silly question, so bear with me. Most jobs that pay well in the United States have large customer bases, such that each beneficiary of a good and/or service need only put in a fairly small amount towards the worker's wages. Think about someone who makes automobiles. They put in a little work on a large number of vehicles in a year. If all of those vehicles are sold over the course of the year, they can get by on a relatively small amount from each sale. Of course, in reality the economics are more complicated, and there isn't a direct connection between how much automotive manufacturing workers' salaries and the number of vehicles sold. But consider a day-care worker. They interact with only a relatively small number of children over the course of a year. And so each family represents a bigger slice of their final wage. And so for them to make a relatively high salary, each of those families would have to pay a fairly large amount.

Of course, there are some exceptions to this, as there always are. Individual craftsmen who produce goods and services primarily or exclusively for the very wealthy can live well from the patronage of a small handful, or even one, customer, and certain low-wage jobs pull in so little from each individual customer that there simply isn't time to provide services to enough people to make a good living. In the end, however, if a business can create an economy of scale, it needn't charge customers as much money as a business that's unable to reach very far.

And this creates the catch-22 that many people who have low-wage, labor-intensive service jobs find themselves in. Unless the people they're working for are wealthy themselves, those employers aren't going to feel that they have money to be insensitive to prices. And as long as they're employed by people who are watching their budgets, they're unlikely to be able to make enough money to take advantage of services similar to the ones they offer.

The only real way out of this would be for a third party to subsidize the whole affair. Which, in effect, broadens the pool of paying clients without adding as much to the workload. Otherwise, the inequality between the parties is baked into the system.

I Know This One

It's a simple enough headline, "It was a wild week for stocks. Should you worry? Here are 4 things to keep in mind."

It contains a simple enough question: "Should you worry?"

And it has a simple enough answer: "No."

Because I keep coming back to things that irritate me on Nobody In Particular, I'm going to make a point that I've made before: "Does it spark anxiety?" is not a good judge of a headline. "Is there anything you need to do?" is a much more useful question, because the answer is, more or less by definition, able to be acted upon. Sitting and fretting is always less useful than identifying what needs to be done, and doing it to the best extent possible.

What I think that headlines like NPR's tend to tap into is the sense that there is nothing to be done, because the forces at work are simply too large, and too impersonal, to be impacted by individual action. But if it would be helpful to reduce one's exposure to stocks, or to put more money into savings, those are actions that can have measurable effects; and they don't require anxiety to implement.

Worry headlines are, I think, a slice of the phenomenon of news consumption as a hobby. Something that people do as a diversion, or to understand themselves as more informed about the world, but that doesn't require any other time or effort. And I understand why, in matters of finance, NPR avoids giving definitive advice. And I doubt that the headline writers at NPR actually see themselves as contributing to their audience's sense of anxiety. (In fact, they'd likely tell me that their audience doesn't need them in order to feel anxious.) But there's wisdom in the saying that no single raindrop feels responsible for the flood. Still, if enough of them held off, there might not be a flood to feel responsible for.

Predictable

I am not an entrepreneur. There are two main reasons for this. The first is that I have a generally low tolerance for acknowledged risks. The second is that I have a poor track record for being able to predict what the future might hold. And, given that these are the two traits that appear to best predict success as an entrepreneur, I've concluded that it is a path that I should stay away from.

But like any blind squirrel, I do, on occasion, find a nut. Last May, I was opining about the restrictions put in place to combat the growing SARS-CoV-2 pandemic. And I noted that there was a high inflation risk associated with adding money to the economy when the overall basket of goods and services wasn't able to grow at a rate to match it. Now, a year and a half later, there's a certain amount of public heartburn over higher than normal rates of inflation. Now, I'm not going to take credit for being a seer or anything. Predicting that jacking up the money supply when output of goods and services is depressed may lead to inflation isn't exactly a difficult call to make. And I wasn't betting on the ongoing supply-chain problems that contribute to the current situation.

So instead, where I'm going with this is that I suspect that for many people, their conceptualization of money is what stands in the way of their understanding of how economics actually works. If I may be allowed to repeat myself, I'm unsure of the degree to which people understand that while modern economies work on the exchange of money for goods and services, money is not itself a viable substitute for those goods and services. And I think that the inflation worries that are driving economic unease (and perhaps worsening approval numbers for the Biden Administration) are an outgrowth of this lack of understanding.

Part of this may be the simplistic way in which people talk about inflation. National Public Radio's Greg Rosalsky, for instance, puts it this way: "We all know what inflation is. It's when prices go up. You know, companies charge you more for stuff." And while that's an easy explanation, I don't think that it really gets at the underlying mechanics of how inflation actually works, and it leads people to think that the choices that drive it are in the hands of a different group of people than they may actually be.

Given that the Trump Administration was still in office back in May of 2020, I don't know that a better understanding of what the government was seeking to do, and the potential aftereffects of those choices, would have been a reasonable expectation. Governments in general tend to be leery of openly noting the trade-offs that they make when setting policy, and the Trump Administration seemed to be downright allergic to it. And I suppose that they may have been right to have been. The general consensus is that the Biden Administration is taking the brunt of the blame for the current levels of inflation, despite the fact that very little of the causes are the Administration's doing.

I don't know that a better understanding of the causes of and contributors to inflation would have made the public more prepared for this. That seems to run counter to human nature. But even with my very shallow understanding of the economics of inflation, this wasn't a surprise to me. Perhaps people being better educated on what money is and how it functions in an economy could have made things better. But, more likely, it's just another item on the list of things that people are often too busy to think about.

Cashing Out

I found an article this morning titled: "Cash will soon be obsolete. Will America be ready?" It started out as fairly bog-standard cheerleading for the Federal Reserve establishing a Central Bank Digital Currency; basically, a version of Bitcoin (or any other cryptocurrency, really), just this time, it's backed by the United States government, and so people could use it to pay their taxes. It's not a new idea... I want to say that I first encountered it a year or two ago. And a Federal Reserve version of Bitcoin is not a bad idea on its face. It would come with a decent set of benefits, which, one suspects, is why the concept was floated in the first place. But this particular benefit articulated by the article's author, Eswar Prasad, struck me as perhaps ill-advised.

A central-bank digital currency can also be a useful policy tool. Typically, if the Federal Reserve wants to stimulate consumption and investment, it can cut interest rates and make cheap credit available. But if the economy is cratering and the Fed has already cut the short-term interest rate it controls to near zero, its options are limited. If cash were replaced with a digital dollar, however, the Fed could impose a negative interest rate by gradually shrinking the electronic balances in everyone’s digital currency accounts, creating an incentive for consumers to spend and for companies to invest.

Begging the expert's pardon, but if one of the expected benefits of a Central Bank Digital Currency is that said Central Banks can combat the Paradox of Thrift by adding a "use it or lose it" clause to people's money in order to force, either though spending or taking, a lowering of the aggregate Savings Rate, cash will most certainly not become obsolete, let alone "soon."

There is already a certain segment of the public that understands inflation targets as an unwarranted tax on the value of their cash savings. The steady march of inflation forces people to take risks with their money simply to have it retain its purchasing power, given that standard bank accounts pay less than the rate of inflation in interest. And the idea that the Federal Reserve could simply remove money from one's digital currency account is likely to spark also sorts of conspiratorial thinking. I can almost hear people railing against "the mark of the Beast" already. Of course, that it will set of religious zealots is not a reason to avoid doing something, but how the public will see something might be. And a public that understands that their bank balances can be directly manipulated by the Federal Reserve is likely to trigger a flight to commodities, or some other assets that can't have their value eroded whenever the Federal Reserve concludes that people need to be levered into buying things that they'd rather not. And that doesn't even touch on financially straited people; imagine someone having to go to a landlord or a utility and plead for forbearance because the Federal Reserve has gradually shrunk their electronic balance below what they need to pay their rent, mortgage or electricity bill. In short, the idea that the Central Bank could literally erase people's savings for policy reasons isn't going to be seen as a plus to many people.

But even without that, I suspect that it's too soon to predict the end of cash. Mr. Prasad rightly notes that the ability to trace and audit transactions, removing both anonymity and privacy from transfers of wealth is both a blessing and a curse. On the one hand, underground economies go away. On the other, the government can now see everyone that everyone does business with. One doesn't need to have a conspiratorial mindset to understand how the ability of government to see each and every transaction one makes could result in anxiety. Governments already have a high degree of confidence that no matter what may have been done in the past, the honest have nothing to hide from them. The honest, however, often feel differently. The perception that Big Brother is watching every penny they spend will certainly drive a fairly substantial constituency to maintain some form of anonymous means of purchasing goods and services. And the first leak of information that results in a someone being embarrassed, injured or killed will only accelerate that.

Whether Central Bank Digital Currencies are the wave of the future or not (and I suspect they are), physical currencies will never really go away. They're too useful and governments are not trustworthy enough.

Dragging

Systemic racism doesn't just hurt individuals and limit their opportunities — it also creates a lasting drag on the economy, writes Atlanta Fed chief Raphael Bostic, the first Black president to lead a regional Fed bank.
Fed examines racism's economic toll

Unfortunately, it's not much of an examination. While A Moral and Economic Imperative to End Racism does note that racism means that people impacted by it contribute less to the economy than they could have otherwise, that simple observation seems fairly straightforward. It's fairly easy for anyone to claim that someone languishing in long-term unemployment would be contributing more in a well-paying job.

But it seems unlikely that if the United States actually needed greater economic contributions "in the form of work product and innovation" from it's citizenry, that it wouldn't have found a way to put its currently excess labor force to work and realize those contributions. The problem that racism causes for a national economy isn't that it lowers GDP. If anything, it's that the discontent that a skewed distribution of poverty creates siphons resources away from more productive uses. Between police overtime and insurance claims for burned-out vehicles and buildings, there are clear expenditures that would have been better spent on more productive activities. But while the Glazier's Fallacy might state that the money spent replacing cars is poorly spent overall, the simplest answer to that is that if the protestors would simply accept their lot, there would be no need for added expense. And even so, it's a shift of economic activity, rather than a straightforward drain. And so the idea that systemic racism is a drag on the economy is not as clear-cut an idea as it might seem.

Because the demand for labor, goods and services is not infinite, racism doesn't have to mean that a society is willfully leaving money on the table, simply to spite some or another sector of the populace. If there is a presumption of rationality, then growing the demand for people to contribute work product and innovation is how one defeats racism. And if there isn't a presumption of rationality, then pointing out a hit to GDP is unlikely to work in the first place.

Mythologizing

I'd been under the impression that the now-legendary "419" scam had always been something of a small-time operation. Sure, a particular scammer might have a dozen or so people that they were stringing along, but that was the extent of it. So color me surprised to learn that a lawyer in the Dominican Republic has managed to rack up nearly 30,000 "clients" in a scheme to lay hands on what is supposedly billions of dollars that is sitting in banks after an ancestor deposited gold some 150-plus years ago. The story, by Joe Nocera, is a fascinating read.

What I found to be most interesting about the whole thing is the power of the myth that lay at the bottom of it. And I don't mean "myth" in the often pejorative usage of a false narrative, but rather as a traditional story which embodies a belief regarding some fact or phenomenon of experience. The belief that members of the Rosario family are heirs to an impressive fortune can be said the be the driving force in all of this; the current lawyer is not the only person to have formally looked into this, simply the only one to have told the family that they're correct, and that the money is waiting for them. They just have to pay some up-front expenses first...

Regarding the various Rosarios that have bought into this as stupid, greedy or naïve is easy. Perhaps too easy, since it does provide a convenient narrative for why they were taken in when so many other people have managed to see through this and similar ruses. Rather, I wonder what this says about the power of disappointment and disillusionment that people would go to what strikes me as such great lengths to avoid them. Maybe it's because I'm not desperately impoverished and wasn't raised with a narrative that says, in effect, "our current lot is not our genuine fate" but I find the tenacity with which the story of the gold, and the wealth that has since become, maintains its hold to be remarkable. I would have expected that everyone would have given up by now.

But I suppose that this is the reason why there is a reading of the Pandora myth that claims that Hope was just as much an evil as the other maladies that were in the wedding gift jar. I have a difficult time seeing how Hope isn't a curse for everyone except the lawyer.

On the Hook

Mike Pesca has an interesting article in Slate about the outrage-baiting that was prompted by a MarketWatch article that portrayed a hypothetical family of four as struggling on a pre-tax income of $350,000.

Personally, to describe the situation as outrage-baiting seems too tame. "Hate-baiting" would perhaps be a more apt description.

At the conclusion of the piece, Mr. Pesca notes: "Our (manipulated) outrage is unempathetic, adding to the anger in the world while doing nothing to achieve a solution."

Adding to the anger in the world, though, is what generates click-through rates. Empathy doesn't raise advertising revenue.

But perhaps where things go wrong is when giving people the opportunity to add to the anger in the world not only allows themselves to express themselves (and virtue signal), but also to feel as if they're doing something constructive. I know a number of people who feel that the first step in solving a problem is to become emotional about it, and if the emotion needed is a burning class resentment, then so be it.

In my experience, though, our resentments are less effective at inspiring people to solve problems than they are at stoking further resentments. People come to resent what they perceive to be unfair resentment, and it starts to become a vicious cycle.

But the most interesting thing about this is that it isn't new. Sam Dogen, who put together the budget that had people so up in arms, had done the same thing back in 2015 or thereabouts (judging from dates on the comments). At that time, the income being looked at was $200,000 dollars and a lot of the same outrage was generated (it popped up on Google+, which was still active at the time). I recall being a but dubious about the idea that the family in question was "just getting by." After all, from where I sat, they seemed to be doing pretty well for themselves, considering. But I could understand how they felt that they were more precarious than it may have first appeared; a stance that cut no ice with a number of people.

Of course, it's unlikely that it's all the same people commenting now who were commenting then. After all, the initial piece didn't seem to have that broad a reach.

In the end, it doesn't make sense to expect societies to learn from past experiences. That simply isn't way the world works. But I'm curious to see, if Mr. Dogen repeats this exercise again in 2023, if a new, fresh round of outrage is triggered. Or, rather, what that round of resentment will look like.

The Renters are Coming

Suspecting what I would find there, I checked out the website, and sure enough, I found this:

This new building will encompass 134 new apartments approximately plus some retail stores. This is a big development (4 stories building) which will have a severe impact in our community as traffic will increase significantly and home value could be negatively impacted.

While it's become popular to blame Amazon and Microsoft for the run-up in housing values, factors like Washington State's Growth Management Act, which restricted the available land for housing, are largely overlook. Also overlooked is the resistance of incumbent homeowners to the large blocks of new housing that are required to keep the supply on par with demand. While this website seems to indicate that it's the size and traffic impacts of the new complex that are the culprits (in language that reads oddly like a non-native speaker of English...) the fact of the matter is that if a shortage of housing is driving prices up, alleviating that shortage is bad for you, if you're a homeowner; especially one who purchased recently.

And this, to me, is the biggest overlooked factor. The hundreds of thousands of households for whom the fact that housing stock is limited becomes a direct infusion of home equity. And not that I necessarily blame them. I know a single mother whose children's college funds are essentially the fact that she can borrow against the high value of her home. If housing prices collapse, one wonders how they'll go to school.

But it is worth keeping in mind that opportunities come at a cost to someone. And sometimes, zero-sum games develop.

Imagine Luxury

You’re providing a luxury service at a bottom-wage price. This is the most galling element: Having hot food delivered on a whim is ostensibly one of the most upper-class things imaginable. It’s entirely a luxury service, but people treat it like it should be a “deal,” or at a rock-bottom price with absolutely perfect service each and every time.
Luke Gardner "I Delivered Packages for Amazon and It Was a Nightmare" The Atlantic

With all due respect, Mr. Gardner lacks imagination. When I was younger, and living, I might add, in greater Chicagoland, having hot food delivered on a whim was quite common, so long as one had a taste for pizza or Chinese. These were the foods that could charge enough to make delivery worthwhile, yet didn't charge so much that people expected a better experience than eating at home could provide.

It was most certainly a discretionary service, in that you didn't need to have the food delivered. Going to a place that didn't deliver (or one that charged extra for the service) and either eating there or taking it home yourself was an option for the slightly more frugal. But it wasn't a luxury. It wasn't something that demonstrated a certain level of wealth, sophistication and/or status for people who engaged in it, unless their peer group was quite impoverished or visiting from a third-world nation.

The fact of the matter is that people who are willing to drive food from a restaurant to a home in return for a bottom-wage are thick on the ground, for any number of reasons. And that is why the wages are so low. That, and most, if not all, of the people who use GrubHub, or have their packages delivered by Amazon are not themselves "upper-class." The upper class have better ways of obtaining hot food on a whim and more secure ways of having things delivered to them. The people whom Amazon Flex and Grub Hub are serving are looking for absolutely perfect services at rock-bottom prices because absolutely perfect service helps them to feel better about themselves and rock-bottom prices are all they can afford without worrying about their finances.

One a recent trip to New York State, a heat wave was settling in just before we were preparing to leave. The nearest retail outlet to our hotel was a Walmart, so I hopped over there to buy a handkerchief to stuff in a pocket and mop the sweat from my face when the Sun came for me. I found a packet six thin squares of cloth for the "rock-bottom" price of three dollars. As I pulled one out of the package and looked at it, I realized how desperately cheap it was. The napkins that the airline handed out to be used with dinner were miles better than this. I would gladly have taken one halfway-decent handkerchief for that same three dollars. But six, I recalled, is more than one. And so I had six nearly-worthless handkerchiefs, rather than one useful one. Because the ability to buy six handkerchiefs (certainly more than anyone needs at one time) helped Walmart customers to feel better about themselves and fifty cents apiece spared them from worrying about their finances. And thin cotton, assembled by people for whom American poverty would be considered a luxury, is inexpensive. Enough so that there's a margin to be had at six for three dollars. Because there is always more where that came from.

And that's the thing about Amazon Flex or Grub Hub drivers. There are always more where they came from. If The Atlantic's Alana Semuels never gets behind the wheel of a car again in the service of delivering packages for Amazon, Amazon will never miss her. There are thousand other people waiting for the work. And because it doesn't take any particular preexisting skill or acumen, most of them are likely competent enough that it doesn't matter to Amazon which ones they pick. My father told me that the only way one makes good money working for someone else is to do something that other people can't do, or something that other people won't do. Gig-economy courier satisfies neither of those.

And that's why the pay is so low, and the expectations are so high. Someone else is willing to claim that they can do that work both better and cheaper, and they're willing to take the risk that they can somehow make that work, because they don't have any better options. And while the services of the desperately poor may be a luxury good in that they're a discretionary purchase, they haven't been the mark of true luxury for some time.

Idjits

Okay, let me get this out of the way right now, so people won't think that I'm being remiss. Speaker of the House of Representatives Paul Ryan (R-Wisconsin) is an idjit.

Right. Now, on with the show.

Speaker Ryan ignited a coffee-cup conflagration when he Tweeted the following: "A secretary at a public high school in Lancaster, PA, said she was pleasantly surprised her pay went up $1.50 a week... she said [that] will more than cover her Costco membership for the year."

Cue Democrats, advocates for low-income earners and other varieties of left-learning Americans jumping on the speaker.

But, okay, as I stipulated at the top of this post, let's say that Speaker Ryan (or someone on his staff) made a colossal public relations blunder (hence, idjit) in celebrating Julia Ketchum's modest change in circumstances. While it allows the opposition to enthusiastic virtue-signal to the choir, it basically misses the entire point.

As I understand it, Speaker Ryan's Tweet was inspired by this article by the Associated Press: "Tax bill beginning to deliver bigger paychecks to workers," which quotes Ms. Ketchum, and a couple of other people, making positive comments about the greater take-home pay they are seeing as a result of their employers implementing new guidelines on tax withholding put out by the Internal Revenue Service.

Note that is about tax withholding, not tax rates. That's an enormous difference, one that Speaker Ryan doesn't seem to appreciate. And neither did the handful of people quoted in the Associated Press article, all of whom seemed to see the money as available to spend in it entirely. But that presumes that their tax liability decreases by the same amount or more. So while Ms. Ketchum might be seeing $78 a year in lower withholding, unless her tax bill declines just as much, she's going to wind up giving some of that money back - either as a lower refund or writing the IRS a bigger check. And if that happens, and she's not prepared for it, it could be a problem.

Many American's really don't understand how the tax system works. This may be why 44% of respondents told Pew that the complexity of the tax system bothers them a lot. And not understanding the difference between paycheck changes due to withholding and changes due to actual changes in their tax liability is pretty clear indication that people don't understand their taxes.

You could, if you choose to, lay some of this at the feet of the press. The headline of the AP article is designed to grab attention, and discussion of the possible downsides of lower withholding (which, after all, is a "pay me now, or pay me later" sort of deal comes after the positive quotes. And you could blame politicians if you choose. One would think that Speaker Ryan's office would know the difference well enough to understand that lower withholding is not the same as lower tax bill.

But the fact of the matter is that very few people care about such things. I've seen a lot of people giving the Speaker grief about his holding up such a paltry sum as if it were life-changing, but pretty much nothing about the difference between a withholding change and a liability change. It's just not "sexy" enough. Maybe Speaker Ryan isn't the only idjit.

Untaxing

Today's "Daily Dispatch" from The Economist makes the following point about Congressional Republicans' efforts at tax reform: "The tax bill passed by the Senate on Saturday morning makes a mockery of Republican claims to want to balance budgets. The only objective seems to have been to cut taxes."

With all due respect to The Economist: Well, duh.

No form of government is perfect, and one of the imperfections of a representative government is that there is always the temptation for voters to elect people who will promise benefits at the expense of people who cannot (or do not) vote. Back in the day, the enfranchised class could vote for representatives who would deliver benefits that women, or the Black population of the country would have to pay for. But near-universal enfranchisement has changed that. And so the the current group that's been elected to shoulder the burden of today's benefits are tomorrow's adults, who are now either too young to vote or politically disengaged.

Part of what drives this is that despite the fact that Republicans are primarily focused on lowering taxes, public peity demands that they make some sort of noises about "fiscal responsibility." It's another case of the public effectively asking elected officials to lie to them, because partisan support for spending through the tax code rarely erodes simply because it will increase the size of public debt.

It's a popular trope on "the Right" (to the degree that such a large group of people are unified in any one specific issue) that Democrats often "buy" votes by promising the (undeserving, by many Conservative standards) urban and suburban poor "free stuff," and in doing so, freeing them from having to work for a living. It's a popular trope, in large part because it grows neatly out of a particular conservative worldview that tends to break the world down into Makers and Takers (which are more moralistic than economic distinctions, the way they are typically deployed).

Cutting tax rates, and "letting people keep more of their hard-earned money," is often floated as a way of restoring a measure of fairness to the world, depriving the lazy and unindustrious Takers of the fruits of the hardworking Makers' incomes. But all in all, direct cash welfare via transfer payments is a fairly small amount of the overall federal budget. Social Security, Medicare and Medicaid, are, by themselves, about half of all government spending at this point, even when the net interest on the current debt is included. And these are programs that are popular all across the political spectrum. Reducing government revenues is not going to make these programs go away or immediately reduce their benefits. And in this, the Republican drive to reduce taxes, given the dubious chances that they will spark enough growth to fully offset their costs, is effectively, well, buying votes by giving their constituents "free stuff." It's just that the "stuff" comes in the form of retirement income and medical care.

While Senator Mitch McConnel can say that for the Republican tax plan to pay for itself only requires a boost of 0.4% to current growth rates, that's not as simple an issue as he makes it sound. While 0.4% is a very small amount, what that means in practice is boosting the current growth rate from around 3.17% to 3.47%. That's a jump of a little over 12.5%; or adding an extra dollar of economic growth for every 8 dollars of current growth. Not impossible, but a non-trivial feat.

I find it interesting that there doesn't seem to be a push to recreate the conditions that lead to the technology and internet boom of the late 1990s and early 2000s. Were it up to me, I'd be diligently attempting to understand how to create a sustainable version of that. And one doesn't have to sustain it forever. Just doing so long enough to allow for a substantial dent in public debt would be more than worthwhile. Had that rapid economic expansion been the direct result of lowering taxes, one would think that the Republicans would be shouting it from the rooftops, so that doesn't seem to be the Republican intent. The cynic in me has a suspicion as to why there isn't a move to spark another technological revolution, but since my cynical impulses are also uncharitable, I'll keep them to myself.

In the end, I hope that the Republican tax plans do drive enough economic growth to be revenue-neutral in the end. I doubt it will happen, if for no other reason than there will be heavy political pressure to not allow the individual tax rate reductions to sunset, but I have no desire to cheer the downfall of my own interests, regardless of whether I believe that they're honestly being looked after. But I do suspect that economic growth wasn't really the intent. It's well and good for the Republicans to cast doubt on each and every analysis that says that the growth won't make up for the shortfalls, but part of me thinks that it's simply to avoid admitting that they're buying votes, and since they won't be paying the price, the unit cost doesn't matter.