Someone sent me this last week. I skipped linking it, because I thought it was sort of simplistic. And wrong.

The wrong part of it is the suggestion that it's somehow a good thing if the dollar's buying power increases -- that is, if we have deflation.

If I'm wrong about this, let me know, but I thought that economists agree (including conservative ones) that the following list of inflation states, from most preferable to least preferable, is correct:

1. Very low inflation, around 1-2% per year

2. Low inflation, like 2-4% a year

3. High inflation, like 4-8% a year

4. Very high inflation, like 8-12% a year

5. Deflation

6. Hyperinflation, 12+% per year and likely higher than that

Am I right or wrong about that? I think I'm right that that's the general consensus. Deflation is among the worst situations to be in, because if it becomes a positive investment strategy to just bury your money in the backyard, many will do that, and that means billions will not be used to provide loans to new (and existing) businesses, which means that those billions will not be used to produce further billions, etc.

Deflation is essentially a hurdle to investment, to putting money to work. If deflation means that money increases its value by 1% per year with no risk at all (and you can insure it, I guess, against the risk of theft or destruction), that means that any investment will have to pretty much guarantee a 2.5% return at minimum before being worth any investing at all. (Like, subtract the 1% from that you'd make by not investing, include another cut for taxes, include another cut for no guarantees, etc.)

This video is kinda dumb in that it suggests deflation is something we should all be happy about. Increased buying power, yay! Yeah, at the expense of dramatically decreased investment and business start-ups and etc.

Maybe they don't mean that... but they seem to.

One part of it is more accurate -- the part about there being almost no signs of this supposed coming deflation at all.

Policymakers would like to inflate the dollar. Doing so seems to them like the path of least resistance. (Certainly it's seemed that way in the past for governments in budget trouble.)

We have to always bear in mind the third-most powerful psychological drive there is: Rationalization. (According to Jeff Goldblum in the Big Chill, it's actually the most powerful one; as he says, you've gone plenty of days without sex, but how many days have you gone without one juicy rationalization?)

Rationalization is the process by which we convince ourselves that the easy thing to do, the thing we want to do, is actually the right thing to do. And humans are damnably good at it. Find a cheating husband, put him on the lie detector, and you'll probably find that he believes his rationalization, Well my wife didn't want to have sex anyway; this is really sort of for her benefit, my relieving her of the pressure to have sex by seeking it from my mistress... I mean, in a way, I'm practically a hero, aren't I? Well maybe not a hero, but a good samaritan, certainly.

The video is right in that regard-- a lot of people have decided that the budget is in such bad shape our only hope is to inflate the hell out of the dollar (oh, right, all the times that's worked, eh?) and so are convincing themselves that a dramatic burst of deflation is right on the horizon that we must protect ourselves against.

But is it? Prices seem to be rising at rather normal-ish sort of levels, don't they? Where exactly are these pre-earthquake tremors of coming deflation?

The idea, I guess, is to discourage hoarding-- many companies and banks, they say, are sitting on money now, because they're worried about instability and would rather just not risk their money in such adverse conditions. So I guess the idea is Punish them for hoarding by making it a bad deal to just sit on money (as inflation impounds value from it).

But I don't know at all about that. Seems to me that if people are worried about instability and uncertainty, the correct thing to do is cure those worries by action that actually addresses them, not punish them by making their best available strategy also a bad strategy. I see doing the latter as increasing uncertainty -- who knows what the hell is going to happen?

And if that's what people think, they won't invest their cash. They'll buy gold.

List of Inflation States Changed: A.G. says that 1% is "ideal" inflation so I changed it to reflect his input.

Comment: Tantor writes:

Deflation is bad because the whole business world runs on borrowed money. It's great to borrow money in inflationary times because you're borrowing a buck now and paying it back in a devalued buck that may be worth only 95 cents or even way less. However, if money is deflating, that means you're paying back that buck with deflated money that may be worth $1.05 or more, plus interest.

That's how a lot of farmers lost their farms back in the 1930s, when money was based on gold. Farmers took out loans to buy their seed corn and paid it off when the harvest came in. However, if gold spiked up, that meant they'd have to pay their seed loans off in dollars which were worth a lot more than the ones they borrowed. Such loans ruined them. That's why the gold standard was bad.

Every business borrows money to buy its inventory. When deflation screws up those loans and makes it impossible to make a profit on borrowed money to do business, the economy tanks.

Which isn't to say that deflation is happening now. But this Ron Paul-ish idea that deflation is a good thing is kinda crank.

Disagreement: Vic says that deflation had nothing to do with the wipeout of farmers in the 30s. That the bottom fell out of the market and they couldn't sell their crops for as much as it cost to grow them... but... that sort of sounds like a deflationary effect to me.

Another Take: Contemplationist:

Its more accurate to say that there are two kinds of deflations - a secular deflationary trend produced by better technology and innovation in service and product delivery etc, and a rapid deflation produced by increased demand by the public to hold cash.

Economists would agree that the first kind of deflation is not bad though they might not prefer to accommodate it as public policy due to some other extant circumstance (political reasons). But all except Austrian economists would say that the second type is a bad type of deflation, and can be fought by accommodating the public's increased demand to hold cash - by producing more cash.

Thats standard monetary macro 101.

I can't link them all but a lot of commenters are offering the Von Mises/Ron Paul view, which I don't buy.

Posted by: Ace at 11:53 AM | Comments (234)
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Using the NYT budget simulator, James Pethouikis gets a trivial deficit by 2015 and a surplus by 2030 with an hour's worth of work.

It took Instapundit 2 hours.

I've been playing with this for a while, and I found it pretty easy to check the boxes. Whether or not there's the will to do this stuff is highly doubtful.

In fact, exercises like this might delay necessary reforms by suggesting it's so easy to accomplish the goal of balancing the budget -- if it's so easy, hey, can't we wait another 15 years for all this stuff?

The stuff that would be considered contentious among conservatives, which I chose to do anyway, included the following:

* Reduce the Number of Navy Fleets and Air Force Wings. This is one of the ones I have the most problem with, because power projection is so important, and sheer numbers do count. But the suggested cuts seemed not all that deep; 286 ships reduced to 230, and two tactical air wings elminated. Actually my preference would be to fudge on this one and do half that.

* Reduce Space Spending and the Nuclear Arsenal. Going from almost 2000 nukes to just over 1000 seems like a fairly painless cut. The surplus nukes seem to only have value as bargaining chips to trade away in exchange for Russia cutting its own stock; the odds of so many of our nukes being taken out in a first strike as to leave us without an apocalyptic retaliatory strike -- with all those nuclear subs at sea -- seems remote.

* Gradually Escalate the Age of Medicare and Social Security Eligibility to 70. Seems like a no-brainer.

* The Lincoln-Kyl Plan for Estate Taxes. To be honest, I've never been on the bandwagon about reducing estate taxes to zero. The only clear advantage to this I can see is that I have heard estimates that mere enforcement of this tax -- with all the lawyering and expert appraisals and so on and so forth -- actually consumes nearly as much as the tax itself collects. I don't know if that's true. If it is true, then this is a bad tax. But I sort of doubt it.

I guess my problem with reducing it to zero is that almost everyone has to pay tax on every dollar received -- and I have trouble excluding this one tax from that general understanding. (Yes, people will say they're double-taxed, once in life and once in death, but that's not true, in the sense that it understates the situation; in fact every dollar received is taxed dozens of times as it's converted from one use or one person to another.)

To me it's a question of which sort of income do I want to tax more, and which do I want to tax less: Do I want to have to tax regular income more to avoid taxing estates? I can't think of an equitable reason or moral reason to justify that; it seems to me, all else being equal, regular wage-type income should be more privileged than inherited wealth, not less.

Ending the tax for all estates smaller than $5 million sounds reasonable. If not, hey, $8 million. But that's just me.

A friend of mine says he likes this particular tax because it's some sort of impediment to a permanent aristocracy. I don't know if I buy that but I can't dismiss it out of hand.

* Eliminate Loopholes But Reduce Rates Slightly. This actually would be a net tax increase because the value of the loopholes closed would be a bit higher than the value of the reduced general rates. But as a general proposition, I'm in favor of lower rates and reduced loopholes and shelters, which tend to distort economic behavior and furthermore tends to divert a lot of wealth into the tax-avoidance industry, which doesn't actually produce anything.

* Reduce Mortgage Interest Deduction By Converting to Credit. The mortgage interest deduction is supposed to be an encouragement to home ownership. This change would apparently keep the deduction, but make it less valuable for the very wealthy. Which is fine, by me, because the wealthy are going to buy homes anyway, so why subsidize an activity that is already 99% guaranteed?

At any rate, my final numbers put me in the "RINO" category of 86% reduction through spending cuts and 14% through increased taxes; on the plus side, I'm so over the mark for closing the budget gap I can play around with changes (like restoring weapons programs delays, un-cutting the size of the Navy and Airforce, only escalating Medicaid and SS eligibility to 68 instead of 70) and still remain balanced.

Posted by: Ace at 10:46 AM | Comments (296)
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The guy's got more shady money than Nucky Johnson but he can't spring for his own mouthpiece.

Rangel was not in the room when the case began. Before the case was presented, Rangel argued he's in a "Catch-22" of sorts in attempting to defend himself and asked for a delay in his trial so that he can get a lawyer that he can afford without violating House ethics rules.

Infusing normally dry proceedings with high drama, the 20-term lawmaker said his "50 years of public service is on the line" because he can't afford to get a lawyer and offers for a pro bono defense would violate House ethics rules.

See the link if you want to read about the case presented against him, which seems open and shut.

Monty wonders what purpose could be served by a delay, and suggests that he wants to be tried by a Republican controlled House, presumably so he can 1) claim this is all a partisan witch-hunt and 2) play the race-card like there's no tomorrow.

Video: Via Captain Ed, calling Charlie Rangel's stirring oration "The Otter Defense."

Posted by: Ace at 08:56 AM | Comments (151)
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Via Hot Air's Headlines, Geraldo, some kind of engineer now, has "questions."

"Building seven came down, went into a sudden collapse across the full width and length of the building, for 2.25 seconds, which amounted to 105 feet or eight stories, eight 13-foot-tall stories -- it was in full free-fall acceleration, " explained Tony Szamboti, a mechanical engineer who appeared on Fox News with McIlvaine.

"That is impossible because, in a natural collapse, columns would have to buckle," he said. "When columns buckle, there is a minimum resistance. ... It would slow down."

First of all, this is stupid. The proof they offer is that the building couldn't have fallen at "freefall acceleration;" it's impossible.

The next proof is that the building did fall at freefall acceleration. Ergo something odd must have happened.

Do they not notice the problem here? Their big proof is that it's impossible for a building to fall at freefall acceleration. But it did. How about modifying your original claim that it's impossible?

In other words: Whatever happened, the building did fall at freefall acceleration. Whether it's a plane doing it, or their stupid theory about a controlled demolition -- either way, the fact is that the building fell at that speed. So what proof is this? Either way, the claim they're making is that what happened is simply impossible under any circumstances.

But that is what happened.

Second of all, that's not what happened. The modified version of this claim is that the building fell almost at freefall acceleration (because apparently it did collapse down more slowly than at a full 1 g.)

So... um. The claim is that any building that was collapsing in on itself must fall at some trivial discount to 1 g, which is... what happened.

And from this stew of angry crazy -- controlled demolition.

"What are you suggesting brought it down?" Geraldo asked.

"I'm suggesting there was some form of demolition devices in that building," he replied. "... I'm not saying I know what it is. I'm saying that it was at freefall acceleration and the NIST admitted to that."

Geraldo agreed that it looked like a structure "being demolished by the professionals who can actually collapse a building right into its own footprint".

Let me get to the central stupidity of this proof, which is repeated over and over and over again -- that the building looked like a building brought down by a controlled explosion.

There is a reason people say that. A simple reason, actually. I'm surprised these geniuses have never considered it.

The reason they liken it to a building brought down by controlled demolition is because they have never seen a building brought down in any other fashion. That is, their visual memory of buildings coming down is always a memory of big casino-hotels in Vegas being brought down that way. That's what they all look like.

But have they ever seen a skyscraper that didn't collapse due to a controlled explosion?

That is, is there a single filmed record of any building falling due to some other cause?

I can't remember any. If anyone knows, let me know.

Here's a possibility for the Truthers -- 95% of all buildings which collapse will pancake down, one floor collapsing on to the next, just like the 9/11 buildings, whether brought down by controlled demolition or non-controlled unexpected demolition, because that is how these things tend to collapse.

They lack a contrary case -- that is, in their stupid little minds they are thinking that most buildings brought down by uncontrolled explosions topple over like Lego towers, falling over to their sides (and knocking over the dinosaur toys right next to them). Thus, any building that pancakes must be brought down by controlled demolition.

That is what they are thinking. Their stupid little memories of knocking over Lego towers. It does not occur to them that they cannot simply "upscale" from that example -- that perhaps the forces of friction holding Lego bricks together, and the structural strength of plastic, are both quite a bit stronger than the absolutely trivial forces pulling down a two foot tall, zero point one kilogram of mass Lego tower. It doesn't seem to occur to them that in a real110-story building, the force of gravity dramatically outpace the structural integrity of Lego bricks.

Do they have a single recorded case of this happening in the real world? That is, not involving a Lego tower, but a real tower in the real world toppling over to its side like a giant domino?

If 95% of all buildings will pancake down, no matter what brings them down, with just one in twenty falling to the side, then what kind of proof is it that the 9/11 buildings pancaked down? They would pancake down 95% of the time no matter what the cause of the demolition was.

The Truthers cannot point to a single building falling down in any other way -- and yet they assert (through an unstated but quite visible assumption) that the "normal" way buildings fall down is toppling over to one side, and it's only the controlled sort of demolition that causes pancaking.

Where is their evidence for this? Apart from disaster movies, I mean, which, um, don't count. Where is their film showing a building falling over to the side?

Guys -- gravity pulls down. Directly down. Unless there is a very serious force being applied to the side of a very heavy structure, 99-100% of its movement during a collapse will be directly down, not off to the side (gravity doesn't pull to the side).

Insanity.

Did I Make My Point Clear? I don't think I did -- that's why I kept writing and writing. Because I suspected I wasn't making my point clear.

I'm talking about a control. Like in a drug test-- a placebo control group alongside the actual group the drug is being tested on, to make sure that any effects are coming from the drug itself and not generally-existing factors.

Where is their "control study" of a building falling by some cause other than a controlled demolition? How can they say with certainty that buildings don't naturally fall in a pancake collapse without a single control case of a building falling in any other manner?

Update: Here's One Building That Toppled Over. I said 95% because I was pretty confident this sort of fall-over was possible -- but unlikely.

Note it's only a 13 story building.

Thanks Hoss Fuentes.

Posted by: Ace at 08:20 AM | Comments (265)
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Here We Go!

I'm hearing some scuttlebutt about the laughably named Public Safety Employer-Employee Cooperation Act possibly being revived for a vote. It is a Reid-sponsored bill.

S.3194 would force ALL police and firefighters nationwide to unionize regardless of the wishes of the local community, overriding existing contracts and any state bans in effect.

H.R.413 and its nearly identical Senate counterpart, S.3194, would federally impose union monopoly bargaining by denying localities the option to refuse to grant a single public-safety union the power to speak for all front-line employees, including those who donÂ’t want to join.

Monopoly bargaining, euphemistically labeled as “exclusive representation,” would be foisted on state and local police, firefighters, and other public-safety employees nationwide.

And in most states that already authorize public-safety union monopoly bargaining, H.R.413/S.3194 would widen its scope.

Because in difficult economic times, what we really need is MORE public employees enrolled in an organization that is thuggishly political and overtly hostile to the taxpayer. Minitrue calls this 'Employer-Employee Cooperation.'

And cooperate you will!

More chewy outrage below the fold. more...

Posted by: LauraW at 07:27 AM | Comments (108)
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I will be on the Pat Campbell Radio Show this morning talking about the Oklahoma Anti-Sharia Amendment aka the "Save Our State Amendment" and the federal court case CAIR filed against it. My previous post on this is here, for background.

Pat Campbell Radio Show
1170 KFAQ - Tulsa, Oklahoma
Streaming on the Web
6AM-9AM Central Time

I should be on in the 6:30AM CST block.

Posted by: Gabriel Malor at 03:04 AM | Comments (133)
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Damn, is it really mid-November already?

Posted by: Gabriel Malor at 02:45 AM | Comments (148)
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Three episodes into the First Zombie Miniseries in history, and we know a few more interesting facts this week. (as usual, vague hints at spoilers are in the extended entry) more...

Posted by: Russ from Winterset at 07:44 PM | Comments (207)
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Beef: ItÂ’s whatÂ’s for ONT

(What! Monty has a Sunday book thread. We can't class up the ONT joint a little?)

What a foolish question. Which brings us to...

Honorary Moron Does Good:

By winning a $129 million lottery ticket bought at a Detroit-area porn shop.

” (CNN) -- A group of friends got lucky when they bought a winning Powerball ticket at a Detroit-area porn shop. Mike Greer claimed the $128.6 million prize on Friday, on behalf of a group of southeastern Michigan residents that he dubbed "Team Victory Club." At a press conference in Lansing, Michigan, Greer wouldn't answer questions as to who purchased the ticket at Uptown Book Store in Highland Park, or why they were at the store in the first place. "Nobody cares," said Greer”

No kiddingÂ…there needs to be a reason? If only you people would apply yourselves more, as Mr. Greer has done, you just might make something of your useless, non-lottery-winning, porn-starved lives.

But enough tough-love and mockery...additional depravity as usual below the fold...

more...

Posted by: Genghis at 05:00 PM | Comments (667)
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Really bummed I'm gonna be on a plane this afternoon, and I won't get to see Dallas get their asses kicked by the Giants today.

Darn.

Hope you all are having a great weekend. Mine's not too bad at all.

Posted by: Dave in Texas at 08:15 AM | Comments (531)
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