Link of the Day

Mario Rizzo's post at ThinkMarkets is stellar. Be sure to read some of the comments.

HT: Don Boudreaux

Explicit Negative Rates from the Fed?

When I first started getting into Econ sometime last year, I thought those calling for the abolishment of the Fed where a little bit loony. As with any notion that is originally found extreme I thought it implausible and dangerous. I've come around. Having a central bank that is able to manipulate the interest rates of a whole economy is in fact the implausible and dangerous action. That being said, I don't foresee the termination of the Fed as anything that will happen in the near future. Now that you know where I stand on the issue, let's look at Greg Mankiw's upcoming letter in the New York Times:

Suppose that, looking ahead, the Fed commits itself to producing significant inflation. In this case, while nominal interest rates could remain at zero, real interest rates — interest rates measured in purchasing power — could become negative. If people were confident that they could repay their zero-interest loans in devalued dollars, they would have significant incentive to borrow and spend.

Normally I would talk about the lunacy of this proposal as if fits in my ideal society, but we don't live in my ideal society. My society wouldn't have a central bank. Given the fact that we do have a central bank, and looking at the proposed policies, arguing for an explicit negative rate from the Fed almost seems like the least of all evils. (I'd still argue that the best action would be to give the people a set of guidelines that won't be changed and tell people to deal with it, instead of changing policies willy-nilly and promoting confusion). I have seen and read commentary arguing that the Fed funds rate is effectually already negative, but for the Fed to be explicit in their pursuit of rampant inflation (by acting with the Treasury) as a means to produce negative interest rates would be troubling. The power to even theoretically pursue such a policy is troubling. Imagine being a responsible long-term lender and you have entered into contracts over the last few years with a nominal interest rate of 5%. Each lender has a responsibility then to also adjust that nominal rate so that it reflects the effects of inflation. Without a central bank, lenders are directly responsible for their own analysis of the perceived underlying inflation or deflation in the economy. But with the Fed present, lenders need to somehow factor in the potential manipulation of a currency by central bankers that are nominated by the Administration. While many efforts have been made to minimize conflicts of interest between Fed members and the Administrations nominating them, and while I'll assume that Fed members act in the best interests of society, there is bound to be some influence put upon a Fed so focused in DC. To ask lenders to take losses on responsible loans is another bailout for those who overextended themselves during the last decade.

Now, it could be argued that a bailout to the borrowers will at least allow them to pay back some of their debt instead of simply defaulting on it and going into bankruptcy. But for Mankiw to still be talking about 'aggregates' as if that all-encompassing-word could ever possibly hope to reflect the underlying complexities of society, is in my opinion misguided. He may think that this proposal is the best one on the table, or he may be proposing what he thinks has the best chance of actually passing through Congress/the Obamadministration. Nonetheless, the more the government stays out of the way and the sooner it let's entrepreneurs step in and assess the situation the better off we will all be. Instead, the government seems set on trumpeting its own importance and trying to clean up the mess that its myriad of follies helped create. I'm by no means trying to oversimplify the situation and simply blame everything on the big, bad government. Private actors were an integral part of this collapse, but the government has done its best to make sure these private actors don't pay the price for their mistakes.

I've gotten a little off topic, but the points remains the same. Promoting more government intervention may be the proposal to actually get serious consideration, but it promotes using the very institutions that manipulate reality in hope of keeping the curtain pulled over the imbecile wizard.

If the NBA playoffs aren't your cup of tea....

....maybe DonkeyBall is.

If the game is simple, playing is not. The sport turns on the donkeys’ stubborn nature, a quality that is encouraged by the referees. Some are trained to buck or to duck their necks — sending the players sliding to the floor — and referees reward the mischief with carrots. Other donkeys plant themselves under the hoop, providing players with a reliable scoring opportunity.

A Soothing Voice

There is a certain level of calmness to the way in which Tyler Cowen speaks. The combination of his intonation and pacing, supported by a sound level of self-doubt and logic, makes for a really enjoyable listening session. Over the course of the last week I've listened to his bloggingheads session with Will Wilkinson, and two of his podcasts a Econtalk (Monetary Policy and his Econ book). Here's a sample of Tyler talking about blogging and entrepreneurship. The sound of his voice is strangely calming to me.

Breaking down the NBA Playoffs

I love the NBA playoffs. 40 games in 40 nights on TNT is awesome. Every year there is some series that surprises everyone (think Hawks/Celtics last year). Some team inevitably gets hot and seemingly can't lose (Lakers rolling through the epic WC of last year). Every round has a matchup that is so even they could play best of 77 and it would be won 39-38 (Houston/Utah last year). There's the older team knowing that this year is likely their last with the current nucleus (Detroit last year). It's great and this year will surely feature the same awesomeness. I'm giddy (even though KG going down has momentarily faded that giddiness). Let's break each matchup and then I'll throw out some preposterous predictions:

EASTERN CONFERENCE:

(1) Cavs vs (8) Pistons

What was one of the marquee matchups the last few years in the Eastern Conference has been demoted to what should be a first round laugher. The Pistons were going to struggle some this year and it would've been a surprise for them to challenge for the EC, but I didn't expect them to be 8 seed material. Who knew that Chauncey was that valuable to the team, and who knew Iverson was going to struggle THIS much with the Pistons. Lebron gives everyone trouble, but he has been the bane of the Pistons' playoff existence the last few years.

Lebron is on a mission, this team has playoff experience. Cavs in 4.

(2) Boston vs (7) Chicago

I'm not even going to mention KG during this breakdown. KG was really overrated for this team and they won't miss KG at all. KG didn't bring anything to the table for the Celts and they won't miss KG at all. Ok, I failed. But Chicago is young; they were a promising team a few years ago, the up-and-coming team of the EC, but that went down in epic flames. Seriously, Deng, Wallace, Williams, Heinrich, Gordon. They were supposed to be good. That was a few years ago, and while D. Rose has been great this year, I think people have written the Celts off, but they won't let that happen. I actually see the Celts having an easy time with the Bulls.

KG's injury sucks, but I think the Celts have a surprise in them. Celts in 6.

(3) Orlando vs (6) Philly

Orlando is going to struggle. They've been playing terribly of late and I think they are assumed to be the only challengers left to the Cavs, and I don't like that combination. I can see them subconciously getting ahead of themselves and worrying too much about how they are going to handle the Cavs while overlooking their first two rounds. Well, after they lose Game 1, they'll be in for a struggle. That's right, I'm calling this series as the surprise battle that nobody saw coming. The point of this playoffs breakdown is not to be accurate but to make outlandish predictions. Responsible journalism gets thrown out the door when talking about sports (unlike my completely professional job while covering all other subjects). Philly is not a good team, but I want them to be good for a few games. Orlando seriously outmatches the 6'ers and I can barely even remember the name of the 6'ers coach, but I gots a feeling about this one.

Orlando in a 7 game battle.

(4) Atlanta vs (5) Dwyane Wade

Atlanta shot outta the gates this season, settled into the 4 slot and just kind consistently rode that wave to the seasons end. Miami's 2-12 players are nothing amazing (yet) but I like Spoelstra walking the sidelines and Wade doing insane '06 theatrics. I have a feeling this will be a popular upset pick (which bothers me), b/c I think the Hawks are really good. If I was being responsible, I'd pick them to win this series and then give the Cavs one hell of a battle. But I'm an idiot and I want to see Wade and Lebron battle in round 2. So, selfishly, I'm picking the Heat. I just want you to be warned, I'm probably wrong. The Hawks are a fun team to like when they are the 7 or 8 seed. There is something unlikable about them in Round 1 as the 4 seed. They become likable again if they play the Cavs in Round 2. Write that down.

Wade in 6

More worthless predictions: Cavs and Celts advancing to ECF. Shockingly, I have the Cavs going to the finals.

WESTERN CONFERENCE

(1) Lakers vs (8) Utah

I think Carlos Boozer hates his life. As a Duke fan, I really liked him in college. As a person, I really found him despicable for screwing the Cavs like he did 3/4 years back. I can never really be a fan of his after that sleaze move he pulled. He had a verbal agreement with the Cavs, they left him not under contract for like an hour, and he jumped ship. Yeah, it's tough to pass up a few million and the opportunity to be the Alpha-Dog; and the Cavs GM was an idiot for even letting that situation be possible, but still, it left a bad taste in my mouth. I'm going to hold that against him until he saves the life of some kid or something. Also, as much as Chris Paul is admired and as awesome as his game is, I can't let go of the fact that he punched Julius Hodges in the balls during the ACC tournament a few years ago. That's just low; that's something a soccer player would do. You play the game, and you get every legal advantage you can get. You do not punch a guy in the balls. Let me repeat that: YOU DO NOT PUNCH A GUY IN THE BALLS. I hold those two events against those two players.

I digress. The Lakers are good. And if they can find a way to work around Bynum; they will be great. They can go big; they can go small; they can go deep; they can go Kobe. The have Phil doing crazy Asian stuff on the bench. They've got Mental Jack courtside hollering at officials. They can't be beat. This whole Kobe/Lebron factor reminds me of Obi-Won Kenobi and Darth Vader in Star Wars IV: A New Hope when Obi-Won and Darth are about to do battle:

Darth Vader: He is here.
Governor Tarkin: Obi-Wan Kenobi? What makes you think so?
Darth Vader: A tremor in the Force. The last time I felt it was in the presence of my old master.
Governor Tarkin: Surely he must be dead by now.
Darth Vader: Don't underestimate the Force.
Governor Tarkin: The Jedi are extinct, their fire has gone out of the universe. You, my friend, are all that's left of their religion.
[answering a comm signal]
Governor Tarkin: Yes?
Voice over comm: We have an emergency alert in detention block AA-23.
Governor Tarkin: The Princess? Put all sections on alert.
Darth Vader: Obi-wan *is* here. The Force is with him.
Governor Tarkin: If you're right, he must not be allowed to escape.
Darth Vader: Escape is not his plan. I must face him, alone.

The 'I must face him alone' part is exactly what is going on between Kobe and Lebron right now; I'm just not sure who is Darth Vader and who is Obi-Won (ignore the fact that Kobe raped a girl. Ok cheap joke, Kobe if you're reading this blog, I was joking). I see them both just blitzing through their conferences. More on Obi-Won/Vader later...

Lakers in 4

(2) Denver vs (7) New Orleans

I was talking to my amigo yesterday and asked him the question, "Is Denver secretly good? Is there something I'm missing here?" The WC has been awesome the last few years. They've come back to earth a little this year, but I am flabbergasted at the fact that Denver is the number 2 seed. Chauncey obviously has done a lot for them as far as leadership goes, so I struggle to write them off, b/c he's got huge playoff testicles (not nearly as big as Sam Cassell's though). But I could swear that NO is way better than Denver. NO was great last year. They were the number 2 seed and took the Spurs to 7 games and looked like they were going to be a dominant force this year. 5 games separated the two teams this year; which is negligible. The teams split the season series. I think the 2 seed through 7 seeds are pretty much equal and any three teams could advance to round two.

I don't think Denver can get out of Round 1. I'd like to see them never get out of the first round for some reason. Hornets in 7 winning a road game for the series.

(4) Portland vs. (5) Houston

Another great matchup. Of course the 4/5's usually are, but Portland has been the semi-surprise/non-suprise of the year. It was surprising to see them in the top 9 of the WC for the first 1/3 of the season, but when you thought about it and accepted the fact that they have a great nucleus, it ceased to be a surprise and now they seem like a mainstay. Houston had the T-Mac debacle turn out to be a blessing in disguise. They've been better without him. I also think we forget how good Ron Artest really is. He's a GREAT on the ball defender, gets it done offensively and is a totally repressed nutjob. This works in his favor. Have you seen "I Love you Man"? Ron Artest reminds me of Jason Segel's character when a stranger confronts him about not picking up after his dogshit. Jason Segel responds by just walking up to the stranger in a confrontational manner and making really loud/crazy noices in the strangers face. I feel like RonRon could do that at any minute and that scares his opponents; except he's not going to do that because he's found his 'Happy Place' (sorry, two movies references in one sentence). I also like the prospect of Houston never making it out of the first round with this team, but now that T-Mac is on the sidelines, I think it would be great for them to make a playoff run with him being a non-factor. It would belittle T-Mac for handling his injury this year like a D-Bag.

Houston in an exciting 6.

Ok, finally:

(3) The Spurs vs. (6) The Mavs

This battle usually takes place later in the playoffs, but with the Mavs struggling to find their groove until the last two weeks of the season, it's a first round Texas Two Step instead of a WCF Two-step. No big deal. Going to college in San Antonio, I know first hand how much these two teams hate each other (or at least the fan bases). The Mavs are the hottest team in the league right now, and the Spurs are coming off news of Ginobli being done for the year and Timmy D's health less than stellar. Tony Parker has shown me that there are admirable Frenchy's out there and Greg Pop will come up with a great gameplan. Throw in Mason and Finley hitting shots and they will be a tough game for anybody. The Mavs though are playing great basketball. As soon as they realized they would be the 8 seed at least, it loosened up their playing style and they've been able to beat some really good teams down the stretch. The teams split the season series and this is that one series where the teams could play a billion times and it would split 50/50 (ingoring the fact that the Spurs would fade because of a lack of depth/age). My favorite part about the Mavs this year is that it will convince Mark Cuban that maybe this nucleus could actually still win a championship, so instead of blowing the team up (like he should have done after '06's fail) he might try and add pieces again and watch them putter to 6/7/8 seeds for another two years. Then Dirk will be done and the Mavs will have to retool from scratch. I think the Spurs will win because I have little faith in Rick Carlisle. It's gonna be great though.

Spurs in 7

Ludicrous predictions: Lakers and SPURS going to WCF. Spurs will be the surprise team going that far. I think the Lakers will lose 1 game in the WC. It's going to be memorable.

I hate picking the Cavs and Lakers to go to the finals, b/c that's what everybody is picking. But I'm not going to pick against the grain just to do it. That's stupid. The Lakers and Cavs are simply the cream of the crop in their respective conferences. Obi-Won and Vader. I think Lebron is going to do ridiculous things throughout the playoffs and leave his stamp on the game. In fact, he's been doing that all season. His team is quite mediocre relative to their record and 9ppg advantage over opponents (100ppg scored vs. 91ppg against). The Cavs are unstopable. So I'm picking the Lakers. I love Kobe, but he is the perfect Vader. And that's the thing, Vader beats Obi-Won in their Death Star battle. But Lebron is going to leave his stamp on the game, just like Old Ben Kenobi. Lebron is going to influence this story for years to come and go down in history as a better player than Kobe. But Kobe gets this one to cement his status.

Lakers win the championship in 7 as the Cavs can't protect the home-court they famously defended all year. Remember, it was the Lakers that were the only team to beat the Cavs on their home court this year (excluding the meaningless last game of the year vs. the 76ers). Watch this championship go down as one of the top-5 finishes to an NBA season.

The Model Essay

I don't agree with this article, but I think it perfectly captures one major side of the debate. I'll be sure to comment about it and reference it in blog posts to come. A sample: 

Three broad steps must be taken to remake this failed, unstable model: one, regulating global finance; two, correcting global economic, social and environmental imbalances; and three, devising ways to make sure economic progress is aligned with social needs.

Maybe the Bulls knew something we didn't

The Chicago Bulls laid an egg last night against the Toronto Raptors....or so I thought. With a win, the Bulls would have secured the 6th playoff spot in the East and would face the battle-UNtested Orlando Magic. Instead, the Bulls played terribly and ended up in the 7th spot, set to face the defending champ Boston Celtics.

I thought the Bulls really screwed the pooch last night, but it turns out, maybe they knew something we didn't:

Kevin Garnett isn't ready to start the playoffs, and Boston Celtics coach Doc Rivers said Thursday that there's a strong possibility that he will miss the entire postseason.

 Hmmmm, that changes things.