A Riddle for My Readers

Question: A bat and a ball, together, cost a total of $1.10. The bat costs $1 more than the ball. How much is the ball?

The answer is not 10 cents.

Niall Ferguson on George W. Bush

From Niall Ferguson's The Ascent of Money, paperback, Penguin Books, 2008-09, page 119:

During [George W.] Bush's time in the White House, his administration ran a budget deficit in seven out of eight years. The federal debt increased from $5 trillion to more than $9 trillion. In 2008 the Congressional Budget Office forecast a continued rise [in the federal debt] to more than $12 trillion in 2017.

Where was the anti-spending Tea Party then?

Bonus: It is no coincidence that in English the root of "credit" is credo, the Latin for "I believe." (page 31).

Page 36: "For Christians, lending money at interest was a sin. Usurers, people who lent money at interest, had been excommunicated by the Third Lateran Council in 1179. Even arguing that usury was not a sin had been condemned as heresy by the Council of Vienna in 1311-12...

See Deuteronomy: 'Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury.' In other words, a Jew might legitimately lend to a Christian, though not to another Jew. The price of doing so was social exclusion." (pages 36-37)

Money is worth only what someone else is willing to give you for it. An increase in its supply will not make a society richer, though it may enrich the government that monopolizes the production of money. Other things being equal, monetary expansion will merely make prices higher. (page 27, on inflation)

"The Weimar tax system [which led to massive inflation, making the German mark basically worthless] was feeble, not least because the new regime lacked legitimacy among higher income groups who declined to pay the taxes imposed on them. At the same time, public money was spent recklessly, particularly on generous wage settlements for public sector unions." (See page 104. My reaction? The more things change, the more they stay the same.)

Once there had been meaningful social ties between mortgage lenders and borrowers. Jimmy Stewart [in It's a Wonderful Life] knew both the depositors and the debtors. By contrast, in a securitized market (just like in space) no one can hear you scream--because the interest you pay on your mortgage is ultimately going to someone who has no idea you exist. (page 262)

"Roughly two fifths [40%] of the world's population is effectively outside the financial system, without access to bank accounts, much less credit." (page 282)

On LTCM: At the end of August 1997 [prior to the its collapse in August 1998] the fund's capital was $6.7 billion, but the debt-financed assets on its balance sheet amounted to $126.4 billion, a ratio of assets to capital of 19 to 1...On Friday 21 August 1998, it lost 550 million--15 per cent of its entire capital, driving its leverage up to 42:1. (pages 324, 327)

"In 2007, the United States needed to borrow around $800 billion from the rest of the world; more than $4 billion every working day. China, by contrast, ran a current account surplus of $262 billion, equivalent to more than a quarter of the U.S. deficit." (page 355)

Note: Italy invented banking; the Dutch founded the first joint-stock company (i.e., stocks); France founded the first central bank; and the Scots founded the first insurance company.

HAL and Wall Street

From Timothy Lavin (The Atlantic, August 2010):

By some estimates, algorithms now trigger 70 percent of all trades in U.S. equities. The speed and volume of everyday trading have propelled the market into a new and esoteric dimension, and rendered traders in the pits largely obsolete. Average daily share volume on the New York Stock Exchange increased by 181 percent between 2005 and 2009, while the time required to execute a trade on its electronic systems dropped to 650 microseconds.

Over 2/3 of all trades are made by computers? Who is looking out for the buy-and-hold investor? Seems like all the benefits go to the speculators these days. More here.

To the Anonymous Commenter

To the anonymous person who left a detailed comment regarding a Bay Area judge:

Thank you for reading my blog and taking the time to post your comment. Unfortunately, I cannot publish your comment. I am an attorney, and my license to practice law is a privilege given to me by the state bar. Being a member of the bar requires me to adhere to certain rules, including ethics rules. Some of these rules prevent attorneys from publicly criticizing judges.

You may wonder how someone like me--who favors free speech and disfavors content-based speech restrictions--can reconcile his personal beliefs with his refusal to publish your comment.

First, I am a pragmatic man. As long as I am a lawyer, I exist to serve my clients. If local judges think I will publish negative commentary about them, some of them may do whatever they can to harm my cases. The law gives judges much discretion, so it is unwise to give a judge any incentive to go against you.

Second, in theory, the judicial branch exists as a check on the passions of the people. This special role requires judges to be independent. Judicial independence is difficult to achieve if lawyers are openly criticizing judges to a public that lacks the training to understand difficult legal concepts. As it stands, American judges have, for the most part, remained above the political fray and are viewed as neutral by most Americans. This favorable perception is due in part to maintaining a closed system of criticism, which gives the public fewer opportunities to sensationalize court hearings and rulings. In short, cases are unique, rights are precious, and unsubstantiated public criticism about specific judges makes it more difficult to execute judgments and have faith in the legal process.

I hope you understand my position, and I hope you will continue to read my blog.

Update on March 2017: I've become extremely critical of lawyers as well as judges; however, I no longer have an active caseload, so my primary duties are to the public and to the truth, not to my clients.  

Linkfest: Articles

I've included a link to some wonderful articles HERE. I really enjoyed the one about the classical musician playing in a New York metro station.

Rant: We Live in Amazing Times

I hate the way some people chide developments in technology, as if progress were something to be feared. Multi-player video games? “What about exercise?,” they scold. Email? “Makes things too impersonal,” they say. Facebook? “What about the quality of the relationships?” they shrill. iPhone? “But we’ll be glued to our phones at the expense of real life,” they argue. Each and every one of the naysayers reminds me of Victorian England–a place where people yearned for fixed rules and regulations designed to ostracize newcomers and entrepreneurs.

Every time a new communications invention occurs, we should be ecstatic. Google is apparently working on a phone that will automatically translate languages. Do you realize that within five to ten years, we might be able to call anyone on the planet and have a conversation?

Also, the internet is a godsend for people who are better at writing and reading than speaking and small talk. What’s wrong with a medium that gives an advantage to people who excel at spelling, writing, and grammar? What's wrong with being able to instantly broadcast your ideas to the world for free? Yes, there are some downsides to giving everyone a microphone, but why not focus on the gems we wouldn't have discovered if Big Media (GE, Disney, News Corp, Viacom, CBS) were still in total control of mainstream media?

Overall, the pace of innovation over the last fifteen years has been amazing. We can watch movies and television shows online (Hulu); sell anything directly to millions of people (eBay); talk to people worldwide for free (thank you, Skype); text message anyone (VZ, T); and keep in touch with friends and acquaintances with minimal effort. I realize we're in a recession, and the unemployment picture isn't pretty. But if you ask me, what we've accomplished over the last fifteen years is much more useful to the average person than going to the moon. Yet, almost all Americans loved the idea of space travel and were rightly proud of the Apollo missions. It is sad today to see most Americans not as openly appreciative of our more recent inventions. As far as I'm concerned, what we've done over the last fifteen years is just as good, if not better, than going to the moon. I'm just sayin'.

Sample Letter to Congressperson re: Hearing Aid Tax Credit

If you saw my review of Plantronics recent shareholder meeting, you noticed that Congress is considering a hearing aid tax credit. Unfortunately, the House bill doesn't cover most hearing-impaired working adults. In contrast, Senator Harkin's version of the bill--S. 1019--covers all hearing-impaired persons. If you would like to write your Congressperson and support Senator Harkin's bill, I have included a sample letter below. Just fill in the name of your House Representative, your own name at the bottom, and paste it in an email to your Rep. Your House Representative can be located here.

Dear Honorable NAME OF REPRESENTATIVE:

I am a long-time resident of your congressional district. I am writing you regarding HR 1646 (The Hearing Aid Tax Credit bill.)

I understand you are a co-sponsor of this bill. Unfortunately, this bill limits the tax credit to hearing impaired people who are 55 and older and dependents. The bill completely ignores working people who are under the age of 55.

Without well-functioning hearing aids, hearing-impaired workers will not have full access to the workplace. Thus, they will be unable to compete with other workers.

Expanding the tax credit to all ages will ensure that hearing-impaired workers will be able to compete in the workplace. Accordingly, I ask you to support an amendment to this bill which was ensure that credit would be extended to all regarding of age.

This amendment would be similar to the S. 1019, which covers all ages.

In closing, thank you for your time and consideration.

Sincerely,

YOUR NAME