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Comment: Re:Can we stop trying to come up with a reason? (Score 1) 751

by alexander_686 (#48205135) Attached to: NPR: '80s Ads Are Responsible For the Lack of Women Coders

It's like King Cnut commanding the seas – maybe not the best idea.

Should the government discourage training the youth because they threaten the grey breads? How can the US government prevent the rise of coders (and other STEM jobs) in the rest of the world?

Unions are good (or at least, should be good) at redressing the balance of power between a strong centralized management and diffuse workers. They do little good and much harm against fundamental changes in labor or market structure. Trying to hold back these changes is like trying to hold back the sea. Compare and contrast the fate of Germany autoworkers against French or US autoworkers over the past 30 years as a reference point. German unions adapted to the times and are vibrant. US and French unions – less so.

I am not saying there is not a place for government policy. I am saying that fighting against the future is a losing battle. Look forwards, not backwards. If you can't embrace the risk that an uncertain future brings you will fail.

Comment: Re:Can we stop trying to come up with a reason? (Score 5, Insightful) 751

by alexander_686 (#48199039) Attached to: NPR: '80s Ads Are Responsible For the Lack of Women Coders

Let's extend your argument and look at doctors. What if we cut the number of admissions to medical colleges by 1/2? By reducing the number of doctors we could boost the wages of all doctors! Wouldn’t' that be great? Would that not make our future brighter?

Probably not.

You are talking the same position as the old guild members, fighting to keep their privileged position as more productive factories raise productivity and living standards for everybody. I mean it is great that you beat everybody else in the great land rush, but I don't think you should close the gate behind you. I am not even sure you can as I look at India, China, etc. Give them 25 years. Don't focus on short term gain but on long term greed. You will benefit more from vibrant economy than a stagnant one.

Comment: Re:Can we stop trying to come up with a reason? (Score 4, Insightful) 751

by alexander_686 (#48198059) Attached to: NPR: '80s Ads Are Responsible For the Lack of Women Coders

Coders (well, STEM jobs in general) will build the future. The more coders that we have the faster we will reach a bright future.

We are discouraging large chunks of people who have the intelligence to train as coders, thus our future is dimmer.

While I have not read the article, I suspect the article is being too simplistic. Culture is pushing away girls (As Barbie says, "Math is hard!") to woman. Most women pick careers that are "family friendly" or offers a good life / work balance.

Comment: Re:The Middle Class is the Bedrock of Society (Score 1) 836

by alexander_686 (#48181765) Attached to: Bill Gates: Piketty's Attack on Income Inequality Is Right

Your comments would have been spot on 20 years ago. Things have changed. Read up on Basel II.

Let us start with reserve requirments. The banks need to keep this reserve at the Fed (where there is a required minium) or in other safe assets like US Treasury Bills. T-Bills always offer a higher rate – unless intrest rates are zero. Then you use the Fed becasue it is more convient. What you are showing is the banks preference in where to park their reserves, not overall excess reserves.

Second, high poewr money is no longer high power.

Which results in this:

(M1 is the bit that the Fed has indirect control over. The rest less so.)

Why is this? The Fed issues currency – a.k.a. high power money. But anybody with high quality liquid assets can create money. 20 years ago that was primarily banks and the Fed had a 1 size fits all when it came to reserve ratios. To maximize profits, banks need to be as highly geared as they could be. Any new cash from the Fed would be turned into loans fast.

Then Basel II came along and said that reserve ratios had to be risk adjusted. Was your lending safe, then you have have a high ratio and a low reserve. High risk loans meant a low ratio and a high reserve. Banks would create a computer model.

Or you could lend off books. Issuing loans via MBSs dod not require any reserves. The shadow banking system does not require any reserves. Both of these methods could indirectly create money. The Feds have very little control over these markets.

Then the banking crisis hit. The computer models toe calculate the reserve ratio blew up and the shadow banking system shut down.

Which takes us to your point on the reserves – exchanging productive assets for Fed reserves. To be a little glib, managing reserves is one of the primary functions of the banks – a necessary part in converting 30 year home loans into 0 years savings products. Banks want to gear as high as possible to maximize profits while central banks want to keep the gearing low to reduce risk. The current environment is not that bad. In the past 100 years I can point to 20 to 30 years where it was worse.

And I am not sure what you mean by the comment that MBS and Treasuries will soon be worth far less. I can't think of any way the one could make Treasuries worth less without making the Fed's reserve dollars taking a even bigger hit. Nor do I know what you mean by big fish. Banks and the wealthy hold much of the government debt and MBS so they would suffer the most. My personal vote is for financial repression, but for that to happen we would need to have some inflation over the next 10 years, and the market does not think that will be happening – we know that because the price of TIPS.

Comment: Re:The Middle Class is the Bedrock of Society (Score 1) 836

by alexander_686 (#48172379) Attached to: Bill Gates: Piketty's Attack on Income Inequality Is Right

Right now, banks are sitting on unprecedented levels of excess reserves

I would severely contest that statement. If you are quoting negative basis points implies you are from the EU where banks still routinely fail stress tests because they have too little capital. Back during the financial crisis banks where operating on very thin reserves (a.k.a. risk capital) / highly leveraged / high geared ratio / whatever term you want to call it. This is one of the reasons why the crisis was so bad. On a relative measure (reserves / assets), they are recovering but are still historically below average.

Which takes me to 2 points.

First, what you are seeing is a fight between the politicians (and by extension, the central bankers) and the stock holders. The banks need to recapitalize and deleverage – everybody agrees on that. The central banks want this done fast and remain the same size by issuing new stock to raise fresh capital. The central banks argue that would take the risk out of the banking sector as well as stimulate the economy. The stockholders are resisting this idea. This would water down their stock. They prefer a slower, more organic approach. As loans come due, bring in the profit into the reserves instead of lending it out, shrinking the overall balance sheet. This means reducing the rate of lending.

Secondly, let us consider secular stagnation

Demand isn't really in the equation right now. People and firms aren't looking to borrow because they're concerned about risk.

This is what I hear: People are not looking to borrow because there are few projects with an adequate risk / return profile, ergo demand is low. What is difference in what we are saying?

Interest rates are set by the supply of credit (savings), demand for investments.

I would argue that supply is high. See central banks pushing the money supply.

To extend on the theme that demand is low. Always use a risk / return framework. If not you can get skunked.
There are a variety of measures of risk aversion (VIXX, credit spreads) and these have been falling.
Return is tied to overall growth. If growth sucks, than return sucks. Look beyond the banks to almost every out asset class out there – stocks, real-estate, bonds (government, corporate, high yield, short term, long term) – expected returns are at very low levels.

Here is a link to a excellent source – with arguments for both sides.

Comment: Re:Let me get this right (Score 1) 836

by alexander_686 (#48168199) Attached to: Bill Gates: Piketty's Attack on Income Inequality Is Right

“The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing” – Jean Bapiste

What does "fund the government" mean? And how does a high income tax promote wealth equality? Is this some vindictive punishment against the wealth, who be definition are evil? By destroying innovation and driving away high performers away? France's 75% income tax rate plus its wealth tax is doing that quite well. But I suspect that you don't.

I suspect that you are confusing taxes (inputs) with government policy (outputs), and you fear that a consumption tax by itself won't raise enough money to fund the government policies that you want.

I will point out that the current US tax system is kind of flat. High earners are in a higher tax bracket but have more opportunities for tax breaks. The overall effect is that everybody has about the same marginal tax rate after $50,000. And what does this added complexity buy us?

If you further up the thread you can see that I support a consumption tax, a flat income tax with a negative income component.

Comment: Re:Let me get this right (Score 1) 836

by alexander_686 (#48165897) Attached to: Bill Gates: Piketty's Attack on Income Inequality Is Right

Let me pick a few things apart. I think you have good intentions, but....

What are you trying to say that the self employed should be limited to 2k in itemized deductions? Are you referring to the consumption tax, income tax, or something else? Because I am thinking about my brother in law who has 250k in itemized deductions to run his farm to generate 50k in income. Farming takes a heck of a lot of capital.

Food is tax free, so no taxes on lobster, caviar, or hot slices of pizza from your bakery. But delivered pizza is taxed. Why? If you are concerned about it not being progressive enough, why not increase the negative income tax or sales tax rebate? I am not a huge fan of the Fair Tax but its main virtue is that it is simple and hard to game. What is the value to the added complexity?

Medical is tax free, so we are giving tax breaks for boob jobs, messages, and Christensen Science healing, but not for yoga, gym memberships, or bikes. Why is this better than just giving a direct subsidy to buy medical insurance?

Increasing student loan subsides is not a good idea. Whenever you subsidize goods both the consumer and producer benefits but not always at the same rate. Universities, in particular elite private universities, have been able to grab most of the benefit of the subsides. With subsidize loans on the table they have been able to raise tuition. The universities get piles of cash and the students graduate with piles of loans. Cheap loans, but still a pile. Of course, the more loans you take out the larger the subsidy you get. So graduates from elite institutions, who should be making big dollars, are getting the most free money. I am not saying that we should scraps loans. Rather they scope should be reduced and the savings transferred to grant programs.

Comment: Re:Let me FTFY (Score 4, Informative) 294

by alexander_686 (#48163569) Attached to: Michigan About To Ban Tesla Sales

Partly it is the American ethos, however romanticized, about the individual over society. A bigger factor, in my opinion, is that America's unions are pretty bad.

But here is the main reason. In business, contributions are split pretty evenly between Democrats and Republicans. It drifts from year to year, from industry to industry, but rarely do you find more than 70% coming from a single industry to a single party. I am not saying that Americans like corporate lobbing, but corporate lobbing does not discriminate.

Unions, on the other hand, give over 95% of their donations to Democrats. Than factor in that the majority of union members work for government. In effect, union members are hiring the managers who will be negotiating their salary. School board elections are notorious for this.

Comment: Re:The Middle Class is the Bedrock of Society (Score 3, Informative) 836

by alexander_686 (#48163361) Attached to: Bill Gates: Piketty's Attack on Income Inequality Is Right

I would not say unsubstantiated. Like climate change, economic historians have to deal with second rate data sets. People in different times and places survey and assemble the data differently. Wars, tax changes, and technology changes the relationship of the underlying variables. etc. It is why I give some of his arguments a lighter weight. However, as I have said before, he has posted his data.

As for lower growth equaling higher inequity, his arguments and data are stronger. In an enterprise, profits are split between capital and labor. If growth is low then demand for new capital is low. A low demand for new capital by definition means low interest rates. With 7% interest and 20 years compound interest is your friend. A modest income can build wealth. If interest rates are at 2%, compound interest is a miserly friend. Better hope you inherit or marry well.

Comment: Re:Let me get this right (Score 1) 836

by alexander_686 (#48163007) Attached to: Bill Gates: Piketty's Attack on Income Inequality Is Right

Demand vs Investment. Chicken vs. Egg. It is a old argument about which comes first. You need both. If there is an increased in demand but no new resources, consumption won't increase. Of course, if there is no demand than nobody will invest. I favor investment however. New investment can drive demand. (and by investments, I am including infrastructure, R&D, education, etc.) Consumption is fleeting but investments last. If you want to increase income you need to increase productivity, and that implies new investments.

Let us say assume (which I will grant is a huge assumption) that everybody will pay about the same in taxes – what is the advantage of a sales tax over a income tax? Well, what makes a good tax?

Tax should be simple and easy to understand: The average American spends 10s of hours and need outside help to prepare their taxes. I volunteer at a tax clinic helping people file their taxes. We are talking about simple straightforward taxes and people still need help. What does this extra complexity buy us? Not much. The fair tax is simpler.

Taxes should be hard to avoid. Divorce income from cash and things get murky. Many accountants are employed to turn high earner's ordinary income into capital income, which is taxed at a lower rate, and then delay or mitigate that tax. Assets slipped into trusts to even further delay that tax. Evading consumption tax is harder to do. It is harder and less beneficial to delay consumption.

Tax should have consistent revenue and be broad: In a recession, consumption drops modestly but income drops radically. IIRC, during the last dip, California's income tax from the top 1% drop by 50%. This can be traced back to the fact that most income from the top 1% come from capital gains, not employment income. This has caused California some real problems. Another argument why taxes should be broad.

Taxes should not distort the economy. All taxes distort the economy. Fair taxes decrease demand but increase investment – back to the chicken and the egg. However, how we invest and work should be based on economy factors, not the tax code. Does the mortgage interest deduction help first time home buyers? Proponents say yes. I say no. It increases the cost of starter homes and encourages the wealth to invest in McMasions instead of productive assets. Real Estate Investment Trusts (REITs) get special treatment for their corporate taxes. I have seen these companies do stupid thing in an economic sense because their tax status as a REIT was more valuable.

Of course, most of the above arguments also work in favor of a flat tax. Which makes this more of a indictment on our current system than an argument for the fair tax.

Comment: Re:Let me get this right (Score 1) 836

by alexander_686 (#48161905) Attached to: Bill Gates: Piketty's Attack on Income Inequality Is Right

It is not as bad as you think, but it gives me pause as well. You can set the sales tax percent / refund check so that the tax burden on 99% will remain basically the same – less than a 5% swing.

It is the top 1% where things get tricky – or to be honest – the top 0.1%. Here are some points.
          IIRC they currently provided about 40% of the tax revenue in the US.
          They spend a smaller percentage of their income on consumption, which implies lower taxes under the fair tax.
          They spend a higher portion of their income on investments which creates the middle class jobs of tomorrow. A fair tax would increase that basis.
          The current income tax is riddle with loopholes that the rich can exploit. The fair tax has fewer loopholes.

Overall it would be hard to tell what the ultimate result would be. So, for myself, it is the unknowns that deter me from a fair tax. I personally would have a low flat tax coupled with some type of negative income tax (EIC, prefund check, etc), a VAT tax, and an increased inherence tax on large estates. So I would adopt some aspects of the fair tax.

Comment: Re:The Middle Class is the Bedrock of Society (Score 5, Interesting) 836

by alexander_686 (#48161523) Attached to: Bill Gates: Piketty's Attack on Income Inequality Is Right

The summary has it wrong. Piketty argument is not against "unchecked capitalism." His argument is that lower growth leads to wealth inequity, which implies a host of social ills such as increased income inequity, class stratification, etc. He goes on to argue that the current golden period of income equity and class mobility – 1950s to the 1980s was due to a golden period of growth. He believes that we are returning to a more normal growth rate of 2% - which was the norm for the past 300 years. If we can't increase the growth rate – which he thinks we can't – the only way to avoid the social ills is wealth redistribution via taxation.

I think his arguments that lower growth leads to greater wealth inequity are very persuasive. He has posted his very extensive research on his website. I think his other points are valid and interesting but I give them less weight.

Comment: Re:Let me get this right (Score 1) 836

by alexander_686 (#48161135) Attached to: Bill Gates: Piketty's Attack on Income Inequality Is Right

What KingOfBLASH is not a "progressive tax on consumption" but a luxury tax. Your comments are spot on.

For a progressive tax on consumption, the government would not need to track all purchases – or any purchases. The government sends out a "pre-rebate" check to everybody to cover their sales taxes – say $2,500 a year. If the sales tax was 20% and you spent $12,500 a year you would pay – net – no sales tax. If you spend less it is probably because you are poor and we can treat it as a form of welfare.

Take a look at I am not a fan of the organization because I think they are too dogmatic but they do put forward a well thought out argument and plan.

"Irrationality is the square root of all evil" -- Douglas Hofstadter