This report has an interesting detail.  It mentions in passing that men between 55-65 continue to participate in the labor force at roughly pre-recession levels.  All other groups have sharply reduced levels participation rates.   Increased economic uncertainty has scared them into holding onto their jobs.  They did not to retire.

This emerging story of how the major banks have been misreported the interest rate they were paying to borrow/lend money to each other is beyond outrageous.  The LIBOR (London InterBank Offer Rate) is has many uses and this fraud corrupted all those uses.

For example it signals what the market thinks about the stability of the banks, so by reporting the wrong values the banks were hiding their instability.  There is no doubt that if they had reported it accurately then at least some people would have reacted.  For individual investors those reactions could have saved them from huge loses.  For regulators it might have reduced the magnitude of what happen in the world economy.

But that is not why the banks were engaged in this fraud.

It’s not often you get to talk about quadrillions of dollars; but this is a good time.  The US economy in total produces around 15 trillion dollars a year.  But there are financial instruments around which 500+ trillion dollars worth of trades happen a year.  The LIBOR forms the foundation for  some of these instruments.  The banks undermined these markets by manipulating the LIBOR.  It looks to me like quadrillions of dollars of transactions are now in doubt.

…

I’m reading “Red Plenty”.  It is, sort of, a series of short stories about the Soviet Union’s experiment with central planning.  Each story is a beautifully written; with sympathetic and complex characters.  I was delighted to encounter in the midst of it a story about  a middleman.  Literature where the middleman is the hero are exceptionally rare, but apparently not entirely so.

One of many threads that runs thru the book is how the central planners are caught between a rock and hard place.  For example at one point the eggheads point out that nobody can create a supply meat at the regulated price and convince the planners that if only they would raise the price of meat sufficiently then there would be meat.    So, they raise the price, the workers complain, some of them step into the streets, some of them gather in the town squares.  Some local officials say unfortunate things.  Soon men appear on roof tops and bullets tear into the crowd.

A problem of central planning is that you lose the plausible deniability that markets provide.  When the market raises the price of meat the public doesn’t march out of the office building and into the town square; and even if does the elite merely shrugs and mutters:  “Tell it to the invisible hand.”

But in sense that’s not true.  Political scientists assure me that the single most potent predictor in electoral upsets is the public’s sense of how much better or worse off they are v.s. 12-18 months ago.  So the embrace of a market economy v.s. a centrally planned one doesn’t entirely shield the political elite from the being asked to take responsibility for hard choices.  One group of the elite capture the benefits for disruption while others are take the blame for the resulting displacement.

…

This chart from Mike Konczal  illustrates a fascinating statistic that I didn’t realize the government collects – how many people quit their job.  Mike posts this statistic because of a conversation that’s broken out in one corner of the blog-o-sphere about – a worth conversation about how if we are to go all gushy about “freedom” we really ought to spend some calories discussing “freedom” inside of commercial contexts.  In particular how much or little freedom most employee’s have.  Unsurprisingly there are people on the Internet who whole some pretty outrageous opinions.  For example that there’s not problem with the boss insisting that you sleep with him, or wear diapers rather than use the bathroom; since your always free to quit.

Quiting is, is of course, one of the ways firms get clear feed back about their employment regime.  If lots of your workers quite, presumably you might adjust your terms of employment.  Hershman wrote a nice book about this “Exit, Voice, and Loyality;” where in he makes short work of the fanciful presumption that exit – the best loved feedback signal of simple economic models.  Early in the book he allows as the claim that exit works as a feedback signal has no experimental data to back it up.

What this chart shows is that when the economy tanked people stopped quitting in droves.  Apparently 38 Million corrective signals have gone missing.  What can this mean?  Three thoughts come to mind.  Employees have become significantly more loyal or vocal.  Employers have become much nicer.

Where are the statistics on the volume of employee voice?

This is a fascinating interview with David Graeber, an anthropologist, about the origins of money.

For years now I’ve been convinced that where is something curiously wrong with the presumption that “the books balance.”  One way I talk about that is to ask: “Wouldyou rather die with people owing you, or with you owing them?”  Graeber gets into this in the interview; arguing that exchange exists against a deep background of existing relationships; that the entire myth about the market arises from a simplifying assumption of early economists where they start from a surely impossible initial state where the participants have no existing relationships; i.e. the books begin balanced and we continuously strive to get back into that lonely atomized state.

Graeber outlines a sharply different story about money from the usual just-so-storywe have all been told.  The fairy tale he is dismisses goes like so: barter comes first with individuals exchanging A for B.Over time traders recognize that some commodities are money like – their value is durable, they store easily, their value is easy to decern – and these commoditiesthen become units of exchange.  Later tokens appear that represent these commodities,and at that point it’s off to the races.  Graeber highlights a problem with this story, e.g. that anthropologists haven’t found any examples of this in practice.  I am surely exaggerating, but I come away wondering if barter actually exists.  He says the only place it appears to happen is when an existing currency regime collapses.

Graeber says nope.  He argues, and I think this is exactly right, that what happensfirst is that exchange takes place in the form of “I’ll give you A, and you’ll owe me.”  The “owe me” clause is part of the social sphere.  It’s in the set of books that balance only very roughly.  I’d argue the entire idea of such books coming into balance is fairly toxic to the social sphere.

In this telling the emergence of money is largely as a means to keep a measure of the extent of outstanding debt.  And curiously one place that debt appears is betweeninstitutions (clubs) and thier members – in that context the club members draw uponthe benefits of the club and in turn they accumulate a debt to that club.  In time,as the institution becomes more formal and it’s members more alienated from it themanagement of this debt becomes more formalized.  The club then introduces membershipfees, or taxes.  Money becomes that which the King will accept to pay your taxes.

It’s worth reading the entire interview, because money (reified obligation) has a design flaw; the debt trap.  And there are complex currents about it’s interplay with a societies presumptions about what is moral; and thus a societies morality.  He has fascinating things to say about slavery; debt forgiven, cycles between money as commodity (for example gold) and money as virtual, and on and on.  And possibly most importantly the balance a society based on virtual money most find between protections for debtors v.s. creditors.

Theorizing about money is fun, but try not to forget; studies have shown that 97.3% of those who do it are nuts.

Speaking of clubs … I’m now 18th in line at the public library to borrow their single copy of Graeber’s book: Debt: The First 5,000 Years.

Damian Dovarganes of the AP wrote this peice about the effect of gas prices on household budgets; it’s interesting how an piece like that spreads.  Google shows it in over 400 news outlets from Fox to NPR.

I am not interested in the article, but this factoid: it says that American households spend on average $369 a month on gas.  If we presume that gas cost 4$ a gallon then we are buying 92.25 gallons of gas a month.  If we assume 20 miles to the gallon we are driving 1,845 miles a month.  That’s around 61.5 miles a day.  About an hour a day in the household’s cars.  By the way, that hour is  commuting to work.

I did a posting a few years ago about car costs.  At the time time gas was 27% of the over all expense, and for example, depreciation was 25%.  At that time gas was $2.90 a gallon.

The article quotes an expert saying that there isn’t much you can do to improve your milage.  Gosh, I suspect that quote pissed off the expert; since he surely knows there is plenty you can do: air in the tires, combine trips, drive slowly and smoothly.

(fyi – the AP pretty far to the right)

If it wasn’t so bleak I’d find this chart amusing.  I love the idea that we can reduce the worries of business owners to just four things; for sake it doesn’t even call out the five things that your freshman business major is is taught to worry about.  It is obvious this data series was intended to server a anti-government anti-tax PR agenda.

The second thing I notice is that two of the curves (taxes and finance) are sufficiently constant as to be uninteresting.  The only signal in this data series is just  the business cycle – when things are hot the problem is finding good people; when they are lousy the problem is sales.

Sadly this is a horribly bleak chart.  It shows that the recession is just awful.  It’s the worse in 25 years, at least.  It also shows who tightly coupled demand for goods is to demand for labor.  Of course it’s not surprising that if you can’t sell your don’t worry much about finding good labor.  One way to look at that red line is that it hints at what percentage of firms are hiring.

If we don’t find a way to crank up demand, e.g. sales, we are in for a long a miserable decade.