Sunday, December 29, 2013

Three Rules for New Year’s Resolution Success

It is that time of year when people are picking new year’s resolutions, so I want to take this moment to repeat my advice on the subject. A new year’s resolution is a powerful way to focus your intent for an extended period of time, but you must avoid getting muddled along the way. Staying clear and focused is the biggest challenge, when you remember how long it takes for a year to go by. For best results:

  • Pick just one resolution. Think in terms of a change you want to make in your personal life — but a large change, something that may take a good part of a year, not something you could imagine completing in a couple of days. Pick something with a sense of importance about it. On the other hand, don’t pick a change that is so large that you can’t easily imagine completing it before the year is over. Maybe you have a whole list of changes that you are committed to. Great! Pick just one of them as your new year’s resolution. The one you choose doesn’t have to be the most important change you are working on. It is more important that it fits the format of a new year’s resolution, having to do with your own decisions and actions over the course of a calendar year.
  • Pick a new resolution. You don’t get the same sense of newness if you try to repeat a resolution you have ever used before. You can approach the same problem as before if you wish, but change the resolution and your plan of action just enough that it feels new.
  • State the resolution very clearly in terms of your own action and results. Memorize it. Be prepared to explain it to close friends in ten seconds or less.

If you look at resolutions that fail, most of them don’t follow this approach. Last year’s resolution to lose weight went nowhere, so people try it again, and they get the same results again. Some people accumulate resolutions as the years go by, things that they try and fail at year after year. You often see people writing a list of ten resolutions, then forgetting all of them. It is hard enough to remember just one! This is also why you need to tell people your resolution. There is a certain power in secret plans, but new year’s resolutions that you keep to yourself are more likely to be forgotten.

New year’s resolutions rely on a gimmick. It is a gimmick you can use every year, but only at the new year. The change of calendar on New Year’s Day is as emphatic and irreversible as any change you might want to make. Pick one area of your life that calls for a similar change, and make that change!

Saturday, December 28, 2013

CD Wallet vs. USB Flash Drive

Here is an interesting price comparison (from Micro Center):

Toshiba TransMemory 8GB USB 2.0 Flash Drive
Inland 32 Disc CD/DVD Wallet

The flash drive costs more than the CD wallet, but it is no longer such a big difference in price. Why do I make this comparison? Within a certain narrow niche, these are competing products. Either will hold about 400 songs, on music CDs or copied from CDs. Either will play the songs back on a middling car stereo of 2005–2010. The amount of music is, I would think, enough for a two-month vacation. If you are preparing for a road trip and have music on CDs that you want to listen to on the trip, you could choose either the CD wallet or the USB flash drive to contain your songs for the trip.

Most people would do well enough with either choice. I would recommend the USB flash drive just because it is easier to handle and takes up less space. Of course, if you already own a USB flash drive, this makes the choice easier. To the extent that people agree with this assessment, it argues for the functional obsolescence of the car CD player. If you don’t need the car CD player for a 2-month trip, then when do you need it? When you look at the added cost of including a CD player in a car stereo, it arguably makes better sense to leave it out and rely on USB flash memory for music playback.

Obviously, this is not a new idea; people have been buying and using car stereos with no CD player for a few years now. It’s the way to go if you don’t buy your music on CDs, as most people don’t these days. But what this comparison shows is that you now may prefer a car stereo without a CD player even if your entire music collection is on CDs. Even if you have the CDs, it is expensive and not particularly convenient to play them in the car. This, to my mind, is a sign that the music CD is well along the path from being a mainstream media format to being a specialty format, one that you wouldn’t expect everyone to be able to use.

Friday, December 27, 2013

This Week in Bank Failures

There were 24 failures of FDIC-insured banks in 2013, a much slower pace than we had seen in the previous five years. Bank profitability also improved this year, and real estate values increased. These effects are related. Speculators poured billions of dollars into U.S. real estate, and that speculative support took some of the financial pressure off of lenders and borrowers. A general improvement in the U.S. economy encouraged all of these trends. Credit union failures have not slowed down as much, but there were only 13 NCUA credit union liquidations in 2013.

U.S. bank regulators are considering adding another loophole in the Volcker rule, this one for collateralized debt obligations backed by trust preferred securities, which banks have routinely used to finance consumer loans along with other activities. Two bank holding companies claim they would have to write down these assets, even though the Volcker rule does not require them to sell the assets at this point. The banks could suddenly appear illiquid, even though no actual financial change took place, as a result of the accounting change that requires them to recognize the risks inherent in these securities.

A payment card data breach at Target is more serious than previously thought. Intruders intercepted PINs for the debit cards among 40 million payment cards that consumers used for purchases at Target between late November and the middle of December. Personal data was also intercepted. The affected debit cards and PINs should be replaced. The data breach occurred as criminals planted malware on many or most of the retailer’s point-of-sale terminals, though it is not clear how that took place. Some banks effectively froze affected debit cards last weekend, apologizing as the move prevented hundreds of account holders from traveling home for Christmas.

In Japan, the chairman of Mizuho will resign in March as part of a plan for change in corporate governance. The bank made hundreds of car loans to criminal enterprises and failed to respond for two years after learning of the problem, leading to a series of regulatory orders late this year.

Thursday, December 26, 2013

A Late White Christmas

Christmas arrived late. Fluffy snow arrived and coated the ground and the picture here was taken only after people had returned to work today. Meanwhile, packages projected to arrive before Christmas were shipped in such huge numbers on Sunday and Monday that not all will be delivered even today.

I know something about the latter. A package that an online store thought would arrive here between December 20 and December 24 did not roll into town until 9:04 a.m. on December 24, three hours too late to be sorted and put on a Christmas Eve delivery truck. Even if it had arrived at 6 a.m., the trucks were already filled with the flurry of two-day shipments. Now the unexpected snow can only slow down the remaining deliveries. Of course, delays are worse to the north where the ground has been ice-covered since the weekend.

We have more than enough excuses for the delays. Package volume, like light snow, is hard to forecast accurately even hours in advance. Bad weather in the first half of December pushed more shoppers than ever online late at night on December 22, after they realized that the last weekend was over and the shopping hadn’t been done. UPS did the right thing in sending most of its workers home before Santa arrived.

You can’t properly blame the retailer or delivery company when you ask them to send you a package with no time to spare, knowing that not all packages arrive on time. Fundamentally, this pattern of rushing, cutting things close, and arriving late is a sign of being overcommitted, or attempting more than time will allow. People were being unrealistic and unreasonable in their planning. We can decry the wishful thinking or celebrate the ambition that it represents, but the key to making it work is flexibility, to receive the things that seem to arrive out of sync. It is an enjoyable snowy scene this morning even if it seems to have arrived on the wrong day.

Tuesday, December 24, 2013

Every Kind of People

You can run across every kind of people on the day before Christmas. There are, of course, people rushing around with too much to do, but a few steps away you might find someone with all their preparations complete or with nothing to prepare. It is one of the busier travel days of the year, with millions of people traveling long distances, but there are also people who won’t set foot outside. More so than most days, it is a good time to be alert to the varying moods and circumstances of the people around you.

Monday, December 23, 2013

BLS Views Incremental Jobs Growth

Wow. The Bureau of Labor Statistics has come around to my view of the economic recovery, in substance if not in rhetoric. The precis from “The U.S. economy to 2022: settling into a new normal”:

No one could have predicted the length of time that the economy has required to recover. A variety of economic headwinds have battered the recovery, causing output growth to be somewhat slower than was expected in prior projections. Over the coming decade, growth is expected to be gradual but persistent, bringing the unemployment rate down and returning the macroeconomy to a more stable position.

“New normal” is wrong, of course, since incremental growth in the labor market is also the historical norm for the U.S. economy. There isn’t any historical precedent to support the abrupt jobs growth that the BLS and others were expecting five years ago. “No one could have predicted” is correct only if you discount the chorus of economists who were pointing at the historical record. But there is no need to quibble. The aggregate models at the BLS now agree with the historical view that it will take years for the U.S. labor market to return to something approximating a nice balance. It may happen around 2022, absent any intervening calamity, the new BLS forecast suggests.

Sunday, December 22, 2013

Ice and Water in Greenland

The Greenland ice sheet is not as frozen as it appears. There is liquid water within and beneath the ice. Scientists are still a long way from knowing how much liquid water there is among the ice, but a big step forward is published today and described at BBC News:

The significance of the aquifer described in the article depends on how effectively it drains into the ocean — if it does so at all. Perhaps the water drains out slowly somehow, through channels that haven’t been mapped, but another possibility is that it is not currently draining at all and may lead to an “abrupt” sea level rise of some millimeters upon some future melt event. Regardless of questions of flow, the presence of any liquid water in the Greenland ice sheet reduces the mass of ice that remains to melt.

Saturday, December 21, 2013

Christmas Shopping After the Rush

I went out shopping several times this week. By all appearances, the Christmas rush was long past. That observation clashes with U.S. retail statistics that show that today, the last Saturday before Christmas, is the biggest day of the year. If you are out shopping today, though, you might not see it. Today is probably the big day if the metric you look at is spending by shoppers in stores (this includes the big Christmas food purchases in supermarkets). It is not nearly so big if you are measuring retail traffic. There are lots of shoppers, but the mall parking lots will not fill up because people cannot afford to spend much time shopping. The car will be parked at the mall for an hour or less. There is no time left for indecision — it’s the day to grab whatever you need, pay whatever you have to pay, and get home in time to go out again to the Christmas parties. Today is the biggest day for Christmas parties, so most people who are shopping this morning have social obligations later. Did I mention that today is also Humbug Day? That’s a coincidence of the calendar this year, but all this rushing around, which for many of us reaches its peak today, is what leads people to say, “Bah! Humbug!” about the whole Christmas season.

Returning to the subject of retail, today is a “make-or-break” day for many retailers after dangerous or unpleasant weather conditions across half of the United States marred the previous two weekends. I think people will go out to buy what they need today, but when shoppers have to be quick about their errands, it minimizes the potential for the impulse purchases that ultimately make stores profitable. I can relate an example of this from a visit I made with another shopper to Bath & Body Works two days ago. We were looking for a hand lotion that would work as a gift but settled, in about two minutes, on a body lotion from a display at the front of the store, marked down by 67 percent. In my spare seconds I scanned the store for anything I might want for myself, but you can’t really pick out a personal care product from five meters away.

Along the way we took a few minutes to walk through the revamped JCPenney. The store space was transformed with very nice neutral white lighting, along with a brighter, cleaner floor and brighter walls that also reflected high-quality ambient light onto the merchandise. Unfortunately, the merchandise so accurately illuminated by all this nice white light was not obviously different from what you might have seen half a century ago. I looked at shirts, proudly featured on modern mannequins, that might as well have been left behind from the 1980s or 1960s. The same could be said for the other clothing and many of the housewares I happened to walk past. JCPenney’s great challenge these days is to get the shoppers who abandoned the department store five or ten years ago to return — but to what end, if we walk around for a few minutes and leave saying “They mopped the floor, but nothing’s really changed”? It almost doesn’t seem fair to be evaluating JCPenney right after shopping in more up-to-date stores like Victoria’s Secret, American Eagle Outfitters, and Macy’s, but then, this is the actual mall JCPenney chose to make its case to shoppers.

Speaking of the mall, remodeling has made the place look more lively. This particular mall recently demolished one anchor store to make room for surface parking, then eliminated a dozen stores adjacent to the abandoned anchor, apparently converting that space for use as storage. It also expanded many stores, most notably H&M, which grew to department-store size on two levels, occupying a space that was drawn up for 12 stores. The happy result is a mall more than 90 percent occupied. But fewer stores also means fewer shoppers, and the overflow parking, once required for the entire Christmas shopping season, was never pressed into service this season.

The tame shopping scenes this week and weekend tell us of a Christmas shopping season that peaked some time ago, and there are other indications. The jobs report for the week ending December 8 had almost the highest seasonally adjusted new jobless tally all year, suggesting that seasonal retail employees may have been pink-slipped right on Black Friday, or (I hope) over the three days that followed. When I asked around this week, I heard of stores where workers had used their extensive free time last week to take down the store’s Christmas decorations. Retail has to be forward-looking, and with the Christmas season behind them, it was time to start getting ready for spring. A generation ago, the Christmas shopping season ran from Black Friday to Christmas Eve, and most news reports still describe it that way, but this year, most of the actual shopping happened between the Saturday after Halloween and the Monday after Thanksgiving, fully three weeks earlier than the traditional schedule.

Friday, December 20, 2013

This Week in Bank Failures

A Senate bill would prohibit employers from checking credit reports when making hiring decisions. This would be good news for banks. Loan losses often occur after a consumer cannot work their way out of a financial squeeze because employment discrimination prevents them from getting a new job.

Janet Yellen was unofficially confirmed to be the new Fed chair. For procedural reasons, the U.S. Senate must repeat the vote on January 6.

The euro zone seems to be close to an agreement in principle on a banking union, though the all-important details of bank resolution remain elusive. Bank resolution has to be part of the plan because the European Union is not large enough to backstop all of the banks currently known to be in difficulty, should those banks continue to decline.

The Fed is carrying on with its “quantitative easing” asset-buying program, but is slowing its pace of purchases with an eye toward stopping them entirely a few years from now, around 2017 I guess. The Fed is not interested in pushing interest rates upward at this point, so it seems likely that rates will remain below 1 percent at least through 2016.

A court in Israel has sentenced a business tycoon to 1 year in jail for crimes committed as the head of a bank. Danny Dankner’s brief stint as chairman of Bank Hapoalim from 2007 to 2009 reads like a non-stop parade of shady dealings in which he used the bank as a vehicle for personal profit. One wonders whether he was briefed on the concept of fiduciary duty when he became a bank officer. Regulators persuaded him to step down in 2009, after which he was arrested and charged. There are anecdotes elsewhere that suggest that when tycoons bring their deal-making tendencies to banks it leads to turmoil. During his time in jail, Dankner will stand trial in an unrelated bribery case.

Thursday, December 19, 2013

Chilling Effects: Don’t Make the Robots Mad

Dave Eggers writing in The Guardian indirectly asks U.S. writers to say more about how we are being affected by NSA surveillance:

First, I must state what should be obvious. I limit what I write on the Internet and what I say on the phone, and you should too. We live in an era in which we must simply assume that every phone call is being transcribed by machine and the resulting garbled transcript analyzed for word frequencies to discern subject and mood, and electronic documents are analyzed in the same way. I may be specifically targeted because I am a writer, but as a reader, you are not much safer. The words you read are analyzed just as assuredly as the words I write are. You must arrange to live part of your life offline if only to create a smidgen of separation from the world of digital surveillance. A judge recently described the NSA’s surveillance net as unreasonable and indiscriminate, and that was based just on what was in the court record. Imagine what the judge might have said if the full scope of NSA surveillance had been disclosed. Then bear in mind that the NSA is just the most prominent in a mass surveillance game that has hundreds of players, many effectively unknown to us.

I see no reason to take at face value the assertion that the NSA’s digital obsession is the violence of terrorism. With the technology it has at its disposal, the temptation to commercial espionage is far too great to resist. My assumption is that at least 95 percent of the NSA’s work is of a commercial nature. If you want to know what the NSA is working on, then you probably just need to look at what people are spending their money on. In my view, the significance of the NSA is fundamentally no different from that of the spammers who study all of us for the same purposes. Indeed, some of the spam email you receive must surely originate in the NSA, as they use junk messages to feel out the weaknesses in your email service in preparation for breaking in. Part of the reason we can never win the war against spam email is that organizations like the NSA depend on it as a cover for their own activities. If the NSA is not actively trying to profit from the spam messages it sends, the Chinese military almost certainly is.

Eggers links to a report on self-censorship. Most U.S. writers, a survey found, limit their work because they assume they are being watched. The word “self-censorship” could be misleading. It implies that a writer like me must black out some of the words he has written because they are not safe to release to the public. That happens far less than you might imagine. I must assume that my unpublished drafts are being scrutinized just as indiscriminately as my posts. Any words I might have to black out, topics that get writers in trouble, I never write at all. But it goes beyond this. It is better if I do not even think deeply about these subjects. These are problems for other thinkers, problems that probably must be left for other decades when people gain more freedom of action to address them. But this scarcely matters now. The current decade gives us more than our share of problems to look into, and it will be enough if we address the ones that we can.

Prior to 2003, espionage was conducted by people looking for patterns, and so people mistakenly assume that the NSA must follow that pattern from the past. But the scale of the NSA’s activities is too great for them to possibly be done that way. When White House officials say that no one is listening to your phone calls or reading your email, the statement is as literally true as it is misleading. If there is a machine that knows what you are talking and writing about, and to whom, that is every bit as damaging as if people were collecting the same information in the traditional way. In a very real sense, it is more damaging, for two reasons: the NSA machine has this information on all of us, and it is a machine that is out of control. People work for the NSA, but the NSA no longer works for the benefit of people.

In the late 1980s I participated in a small way in a draft of a musical called Robots. In the story, the robots, often disguised as humans, do not reveal their plan to take over the world until the end, after it has already happened. Even then, most people pay no attention. This is the real threat from the kind of technological surveillance we now face. It is not the humans at the NSA that we fear. As writers, when we self-censor, it is because we don’t want to make the robots mad. A writer like me cannot stand up to the machine. But this means it is a war that the robots are already winning.

Tuesday, December 17, 2013

GSK Halts Some Incentive Payments to Doctors

Pharmaceutical companies routinely pay doctors to prescribe drugs to patients. To pharmaceutical companies, it is a way to promote a new product, but the obvious conflicts of interest, when drugs may be prescribed for the financial health of a doctor and drug maker rather than the health of the patient, have drawn criticism. Now one of the largest pharmaceutical companies, GSK, says it is stopping some programs by which it makes payments to doctors. The story at ThinkProgress:

Consumers’ view of popular prescription drugs will surely change next year when we get a glimpse of the money flows. A U.S. government database will let you look up your own doctor’s incentive payments from drug makers. Uncounted thousands of doctors make more money this way than the average worker makes in total, and when people see this, I believe it will help them to understand that commercial medicine is not nearly so scientific as it sometimes claims. GSK has apparently decided it does not want to be at the top of the money list when it comes out.

Saturday, December 14, 2013

A Snow Day at Retail

For the second Saturday in a row, a winter storm warning covers much of the Northeast. This will surely put a dent in Christmas shopping. “Another storm may have you shopping in your PJs,” CNBC says, its headline plugging both online shopping and pajamas, a traditional Christmas gift item. Deeper into the story, “Traffic the first week in December—generally a slower week—was down over 21 percent year over year [nationally].” And that was last week. Today’s storm affects a smaller area but with more severe driving conditions, compared to last Saturday. Based on the calendar, today would figure to be one of the year’s busiest shopping days, short of only Black Friday, Christmas Eve, and the Saturday before Christmas. The weather will wipe out much of the day’s shopping, though, with a snowstorm from Maine to Missouri and precipitation almost everywhere east of the Mississippi. Retailers can hope that the weather improves and people feel like shopping tomorrow.

Friday, December 13, 2013

This Week in Bank Failures

Wall Street thought it would never happen, but the Volcker Rule is now officially approved. The Volcker Rule largely prohibits banks from engaging in speculative securities trading. There are quite a few exceptions, but they are outlined narrowly enough that a bank cannot just trade first and look for an excuse later. Even this goes beyond what was expected on Wall Street, but it is the other provisions of the final rule that come as the biggest shock. Banks are prohibited from bonus arrangements that would give traders an incentive to give away the store. Trading is limited to 3 percent of a bank’s total value or its core capital — that provision alone will decimate Wall Street banks’ trading, which can no longer be large enough to make up for a bank’s losses in lending, branch operations, or real estate speculation, as it did for so many banks going back to 2005. This limit and others provision were tightened after the London Whale scandal, when it emerged that a bank had put more than its entire value at risk in a single speculative trade. And there is more. High-velocity trading appears to be banned completely for banks. Portfolio hedging is effectively prohibited, though it appears banks are still permitted limited short-term hedging related to the activities of a specific client.

There will surely be legal challenges to the Volcker Rule, but Wall Street banks aren’t betting on a sympathetic ear in the courts. Bank of America, for example, has already shut down its trading desks and says it substantially conforms already, though the new rule doesn’t fully take effect until 2015. The bank admits it is giving up $2 billion in annual revenue that it previously made from speculative trading. Goldman Sachs is the one Wall Street company that is seen as unprepared for the new rules, but its stock was down just 2 percent after the rules passed.

Ireland has climbed out from under its European bailout with a final payment made today. The country still faced excessive debt, but this will be financed on the private markets over the next three years while the country pays it down to manageable levels. Ireland’s government finances and economy are much stronger than they were on the crisis weekend when Ireland’s initial bailout was arranged. To this point, Ireland is the only country ever to exit a European bailout.

The central bank of Russia canceled the licenses of three banks, including the country’s 79th largest and two others of similar size. The moves are described as part of a crackdown on money laundering, but the three banks also had urgent problems with capital, liquidity, management, and operations that would be reason enough to shut them down. The banks had combined assets of just over $2 billion. Russia has shut down 3 percent of the country’s banks this year, but this has done little to stem the country’s capital outflow. This illegal money movement is driven by criminal enterprises seeking to place their illegal profits beyond the reach of law enforcement. It is a pattern that will continue as long the central government tolerates an economy largely run by criminal gangs, but many of them are the government’s political supporters.

The U.S. Treasury has sold off its General Motors portfolio, recording a $10 billion loss on the bailout. As often happens, the accounting measures underestimate the costs of action, but also neglect the comparative costs of inaction, which also would have been higher than $10 billion.

A federal court has allowed a Wells Fargo executive to be added to a mortgage fraud case against the bank. The bank certified thousands of defective loans, and the government claims the bank and its executive were both actively involved in covering up deficiencies in order to siphon off money from government programs.

A federal court approved a settlement between merchants and credit card processors intended to give merchants more control over transaction costs. The court approved the settlement even though thousands of merchants opted out.

The O.C.C. closed Texas Community Bank, N.A., with two branches in The Woodlands, Texas. It had $143 million in assets. Spirit of Texas Bank is taking over the deposits and purchasing most of the assets.

The NCUA placed one tiny credit union into conservatorship. Bagumbayan Credit Union has 44 members in Illinois and less than $1 million in assets. It has been operating since 1964. For now, the credit union will be operated by Great Lakes Credit Union.

Low-Efficiency Light Bulb Ban

The ban on low-efficiency light bulbs goes into effect on January 1. Here is the story at CNN Money:

Consumers mostly won’t notice the change, as most stores stopped stocking the low-efficiency bulbs last year. Consumers can still purchase traditional incandescent bulbs, with designs improved to meet the new efficiency standards, for less than $2 each. Or, shoppers may, perhaps without realizing it, buy LED light bulbs, which save about $5 a year in electricity and may last 50 years.

LED light bulbs will never dominate in retail unit sales. Lasting at least 20 times as long, they can become the majority of light bulbs installed with retail sales near current levels, around 4 percent of the total for light bulbs.

Wednesday, December 11, 2013

The Illusion of Diet Soda Fades

As soon as you see through the illusion, diet soda can seem terribly expensive. A dollar a liter for water with chemicals added? Perhaps people are no longer fooled, based on the latest reports of soda sales. From the CNN story “Soda sales are losing their fizz”:

Americans are on pace to drink 38.6 gallons of soda per person this year, but that's down 3.5 gallons from five years ago.
Year-over-year, consumers spent 7.2% less on diet cola and 7.8% less on diet lemon-lime drinks.

The decline extends a long-term trend that hit beer around 1997 and soda around 2002. In either case, it reflects consumers’ desire to simplify things, to save time and money, improve health, and lose body fat. The sudden drop in diet soda is something new, though, and it comes in spite of corrupt government initiatives, such as last year’s New York City aspartame law, intended to force people to drink diet soda in place of sugared soda and fruit juice. Word of the tendency of diet soda to make people fat and its apparent effects on brain function may be finally getting around. Yet even if diet soda were not harmful to health, how can you justify the price for a product that, in food quality terms, is inferior to tap water?

As a trained economist, of course I would like to give consumers credit for making a more rational decision, but television may be part of the change too. It is television advertising that created the illusion that diet soda is a real product, and the declining hold of diet soda may be related to the declining reach of television advertising, following on people’s switch from CRT to the less hypnotic flat-screen technology for TV viewing.

Tuesday, December 10, 2013

NSA’s Three Degrees of Phone Separation

I’ve been thinking about the NSA’s Three-Hop Rule. This is the law that allows it to monitor your phone calls without judicial review. It is not that it is so hard for the NSA to get a court’s approval to monitor someone’s phone calls. I have to assume, as a blogger who writes regularly about sensitive topics ranging from the health dangers of nuclear waste to the radio boycott of the Dixie Chicks, that the NSA has court approval to monitor my phone calls specifically. Of course, I don’t know that, and if I did know, it would be a felony for me to say it, but it seems a safe assumption. It is certainly not much of a stretch to imagine given the estimates that the NSA has obtained approval to monitor a few million specific individuals. Once it has court approval to monitor a person, the Three-Hop Rule allows the NSA to monitor all phone lines within three degrees of separation of that person’s phone lines, looking back apparently over a five-year period of phone records. This gives each court order — and remember, there are millions of such orders — a broad reach that includes almost everyone who talks on the phone.

Let’s start with me as a hypothetical case. There are several patterns in my phone calling that probably put you within two hops of me.

  • I have used several phones in recent years: cell phone, desk phone, etc.
  • I place calls to banks, insurance companies, and retail stores. If you have ever called the same banks, insurance companies, and retail stores, you are two hops away from me.
  • Occasionally other people use my phones, calling many more numbers that I would never call myself.
  • I place calls over the Skype network. Skype calls go out over a limited set of phone numbers, so if you have ever received a Skype phone call — and there would be no way for you to tell, since they are just ordinary phone calls — there is a strong chance that you are just one hop away from me, according to the NSA rules.
  • I receive calls from political pollsters and robo-calls from Republican political candidates. These calls originate from a mere handful of phone numbers, so if you are a registered U.S. voter, it is all but certain that you are two phone network degrees of separation from me.
  • Spam fax services place calls to my cell phone. If you have ever picked up the phone to hear fax tones, then you are two hops away from me.

Here we already have at least 300 million U.S. phone numbers, and remember, I am only talking about a single court order, and there are millions of secret court orders, and only two hops, when the rule allows three hops. When you go to three hops, to add in everyone who knows anyone in the two-hop group, it is hard to imagine how a phone number could be off limits to the NSA.

I used myself as a starting point for this analysis, but that is just a gimmick. The spam fax services are key to this analysis because they call, along with many other phone numbers, every business in the country. This means if you have ever called a business, or if a business has ever called you, you are two hops away from most of the country.

The Three-Hop Rule, then, means that the NSA has the legal authorization to monitor probably every phone in the United States and the vast majority of phones in the world. It is no wonder that some observers have suggested that the law that allows this broad collection of data is reaching too far.

Monday, December 9, 2013

Energy Savings and Security in Gmail’s Image Caching

With its latest change in Gmail, Google is caching most of the images contained in email messages sent to Gmail users. It is a technical change that makes email operations more energy-efficient, as the email servers do not have to retrieve an image every time a message is read. The energy savings may add up to a few cents if the same message with the same images is sent to thousands of Gmail users, and these savings are shared by the sending email servers too.

The real reason for the change, though, may be security. Bulk emailers use dedicated web servers to collect data on the way people interact with email messages by tracking the images embedded in the messages. Spammers routinely use this information to determine which of the email addresses they send to are still active. With image caching, such information is much harder to collect and analyze. This makes it harder for spammers to target you. But more importantly, it makes it harder for anonymous email senders to collect data on the way the Gmail system works. Such data has been used in the past not just by spammers, but by the Chinese military, the NSA, and other political and industrial espionage organizations in their efforts to break into people’s Gmail accounts. Images in email still represent something of a security hole, but Google is making that opening smaller.

Friday, December 6, 2013

This Week in Bank Failures

How is it that base interest rates such as Libor are legal in the first place? Interest rates are prices, after all, and whenever an entire industry works together to set prices that they use in common, it is never far removed from price-fixing.

The reason a base rate may be considered legitimate is that base rates are intended as a neutral, transparent economic measure that doesn’t reflect the business plans or management decisions of any one business organization. Of course, this is possible only if the banks that have input into the base rate aren’t getting together to negotiate ways to manipulate the process based on their business objectives. That would be considered collusion, and the resulting base rate would be illegal to use.

As we now know, there was a lot of that going on between 2005 and 2012. Essentially every day, bankers exchanged messages with colleagues at other banks to decide on trading strategies and agree on false data to feed into base rates. Many of these messages were recovered from the banks’ email systems and reviewed by investigators. There is little room left to imagine that industry base rates were being created in a way that lived up to the spirit of the antitrust laws, which prohibit collusion in setting prices.

The result, this week, is one of the largest antitrust assessments in EU history, €1.7 billion against Deutsche Bank and four other banks. The banks were cited mainly for operating a Euribor cartel between 2005 and 2007. UBS and Barclays also participated in the cartel and might have been fined €3.2 billion but for their early cooperation in the investigation. The fines cover other offenses that continued almost up to the present.

A bankruptcy court approved the bankruptcy of Detroit, dismissing various challenges to the filing. The court ruled that protections for creditors didn’t create an ability to pay on the part of the city.

Winning Over the Skeptics

As I look back over Mandela’s life, one of his qualities that I especially want to remember is his compassion for those who are skeptical of change. That is, after all, all of us at times, depending on the circumstances and what we have heard before. As Mandela reminded us, the sweeping changes that seem simple and obvious in retrospect may appear impossible beforehand. It is our task, if we are to lead a change, to win over the skeptics as well as we can.

When I remember how South Africa fared, I must remember that there was a time when I was one of the skeptics. I remember hearing the musical line “I (I) — I (I) — I ain’t gonna play Sun City,” referring to one of the segregated institutions that might be particularly visible to a musician visiting South Africa, and agreeing with its sentiment of togetherness but not with its sense of hope. It was only when de Klerk ordered the beaches opened that I realized that there was no turning back — and though on that day I might have recognized what was taking place, there were still people around me who remained convinced that nothing was changing in South Africa.

There are those who are equally skeptical of the changes taking place today. It can be tempting to rail against the skeptics, but the better course of action, when we can manage it, is to find a way to win them over.

Thursday, December 5, 2013

Justice for All — Landowners, That Is

People wonder why the courts work as slowly as they do, and such comments are often phrased in terms of “what’s wrong” with the justice system that it takes so long to decide some of the simplest things. The slow pace is designed into the system, though. In most of the world — essentially wherever the Roman and Cyrillic alphabets are used — we use versions of the post-Roman justice system. This is based on Roman law but adapted to the needs of Medieval Europe, when landowners were at the heart of society. The system was based on the assumption that the people involved in the disputes it settled would be landowners. It wasn’t a problem to take a long time deciding the disputes because a landowner wouldn’t be going anywhere.  But this system is adapted only with difficulty to a world run by workers, and this is especially evident when you look at corporations. When giant corporations are taken to task, the workers (mostly executives and officers) who got the company in trouble are likely to be long gone before the case comes to trial, never mind the five years of appeals that may follow. As for intentional criminal enterprises organized as corporations, they have rapid money movement written into their business plans, so they can arrange to be broke long before the prosecutors come around.

Wednesday, December 4, 2013

Heavier Shopping in First Two Weekends of November

With more retailers releasing data for November, it’s more clear that Christmas shopping is moving earlier in the month. The pre-Thanksgiving sales, mainly on the Tuesday and Wednesday of Thanksgiving week, had some impact. Store openings on Black Friday Eve, also known as Thanksgiving, might have been important to some shoppers, but remained tiny compared any other shopping day. 

It is the first two weekends of November that are getting the most buzz. Sales those weekends drew shoppers away from the Saturday and Sunday of Black Friday weekend, and that seems to be the big new trend this year. This is also something I observed in traffic patterns locally. The holiday shopping season is not over yet, and retail analysts are hoping for a strong December to make up for the shortfall in November.

Monday, December 2, 2013

Black Friday Weekend Pattern and the Declining Consumer Class

From my vantage point it looked like a robust Black Friday at retail, but Saturday and Sunday were a dud, with only a few places where retail traffic was stronger than a regular weekend. This also fits the early reports from the retail sector, which put Thanksgiving and Black Friday slightly above last year, but the next two days well below, looking at both sales volume and number of shoppers.

Another way of saying this is that by the time Black Friday was over, people had spent most of the money they had available to spend — and perhaps it goes without saying, shoppers are still not reaching for the credit card to finance their Black Friday deficits. This accounts for the largest drop ever between Black Friday and the day after. Part of the explanation for the revenue decline too is steeper discounting than last year. That especially hits after Black Friday. If someone is still shopping after Black Friday is over, it is to fill a specific gap in the Christmas list, not to spend a particular shopping budget. If they can get the same item for less money, that just means more money for next year.

You might ask, what’s the point of Black Friday, if the net effect is to get people to shop on Friday instead of Saturday and Sunday? But this makes perfect sense if you see the Christmas shopping season as a kind of auction, with many competing retailers and a limited number of shoppers. From the retailers’ point of view, they have to get shoppers’ money early in the season or risk not getting it at all. In a way, then, the early Christmas shopping season, which seems to get earlier every year, is a sign of the economic decline of the middle class, which no longer has the capacity to support its traditional place in the U.S. economy. The middle class has been in decline since the 1970s, the victim of tax policies that increasingly favor the billionaire-investor class. It is the latter who are financing so many retail stores, more stores than the middle-class shopper can possibly support.

Friday, November 29, 2013

This Week in Bank Failures

A few quick notes from Europe: Berlusconi was expelled from parliament in Italy for his role in a tax-fraud scheme. Stripped of parliamentary immunity, he almost immediately faced new criminal charges, this time involving bribery. . . . Also in Italy, troubled bank Monte dei Paschi is shutting down its back-office operations at the end of the year and laying off more than a thousand workers. This step is presented as a cost-cutting move but may also be seen as a preliminary step toward shutting down the bank while selling off some branches. . . . The European economy in general is seen as doing better, but while Spain saw its debt upgraded, the Netherlands and France have seen downgrades this month.

In the United States, today is Black Friday, the busiest day of the year at retail. Early indications are generally favorable for the state of the U.S. economy and consumer confidence in particular, which were shaken by a near-default experience barely a month ago.

Wednesday, November 27, 2013

Pre-Thanksgiving Sales

Today in my area it is flooded intersections and ramps from a major winter storm causing traffic trouble in my area. Yesterday, though, it was the pre-Thanksgiving sales, putting shoppers on the same roads as commuters and holiday travelers. The resulting traffic jams were ferocious. But it shows that the retail promotions targeting the two data before Thanksgiving, the biggest innovation in this shopping season, are having an impact. Retailers may like the extra store traffic, but there is a cost: with so many scheduled sale days, few shoppers will be looking to pay full price for anything.

Monday, November 25, 2013

Earthquake Near Fukushima

Part of the idea with the spent fuel removal at Fukushima is the way that further damage may be avoided if the fuel is removed before the next big earthquake. The fuel removal has barely begun, and an earthquake in the area today served as a reminder of how chancy that plan is. The 5.0 earthquake was not strong enough to damage a sound building, but could have shaken something loose in the already damaged buildings at the Fukushima nuclear power station. Fortunately, there are no reports of damage, and we can hope that similar luck holds long enough for all the hazardous materials to be removed, remembering that the spent fuel is just a preliminary step.

£1 Billion in Student Loans

The British government has sold off a portfolio of almost £1 billion in loans.

The loans, which originated in 1990–1998, have a face value of £890 million, but were sold at auction for £160 million. The sale raises cash that will make the government’s books look better this year, but it also raises all the usual concerns about the takeover of higher education by big business and what may happen to society when students are treated as a cash cow.

Friday, November 22, 2013

This Week in Bank Failures

JPMorgan Chase’s $13 billion settlement with the U.S. Department of Justice, federal regulators, and four states became official. The settlement covers specific mortgage-backed securities issued by the bank and its predecessors.

A federal court ordered MF Global to repay $1 billion in lost customer funds. The order has little immediate consequence, but ultimately may ensure that the money is not spent on the bankrupt broker’s other debts.

The former chair of the collapsed Co-Op Bank in the United Kingdom was using hard drugs during his time at the bank, he admitted this week. Separately, an inquest found that the death of a Bank of America intern in London earlier this year, who worked 72 hours straight, then went home and died near the end of a 7-week internship, was due to natural causes, with no indication of the drugs that some had speculated about. In the middle of all this talk about drugs in banks, some have come to the defense of London bankers’ drug habits, arguing that the stimulants and narcotics are not such a problem because bankers use them only while on the job.

The U.S. Senate changed its filibuster rules this week after some Republicans threatened to block any vote on any judicial nominee. The changed rules make it unlikely that Janet Yellen’s nomination to head the Fed will face a procedural delay of a few months, something at least two senators who have proposed to abolish the Fed had threatened.

The NCUA liquidated one very small credit union tonight. Polish Combatants Credit Union of Bedford, Ohio had 52 members.

Wednesday, November 20, 2013

Americans Stay Put

Americans are not moving from one residence to another nearly as often as you would expect from historical patterns, according to the latest census report, “Geographical Mobility: 2012 to 2013.” The 2013 mover rate of 11.7 percent is not significantly above the record low of 11.6 percent set in 2011. It is not just that people are financially stuck in their current houses — among those who moved, most stayed within the same county. Only 4 million moved at least 200 miles and into a different state. For those moving from one state to another, the biggest group are moving from California to Texas — hardly a surprise given the size of the two states, but a large enough trend that it will surely soften Texas’ sometimes confrontational culture over time. The report notes that people living in poverty are more likely to move than others, but those numbers are skewed by the inclusion of a disproportionate number of college students in that category.

The pattern of moves is interesting, but the bigger story is found in the 88.3 percent of Americans who stayed in the same residence as last year. Part of this is financial pressure, to be sure, but part of it may also be the growing inertia that comes with owning more and more material possessions, making it more work to move. I think also people are not putting quite so much emphasis on living in an impressive home — perhaps because people simply aren’t as impressed with homes as they were a few years ago.

Tuesday, November 19, 2013

Belated Cleanup Begins at Fukushima

Those who misread the news might imagine that the process of dismantling the damaged nuclear reactors at the site of the Fukushima disaster has now begun. No doubt the power company involved would like you to see the story that way, but the actual reactor disassembly is still many years away. The new work this week concerns the fuel rods, essentially nuclear waste, which must be removed from onsite storage before they do any further harm. The fuel rods are stored upstairs from the reactors in structures resembling swimming pools, an arrangement that presents a wide range of possible problems. The earthquake itself may have disarranged some of the metal rods. Others may have softened and bent as the water supply in the pools became unreliable in the following three or four days. Subsequent explosions in the outer shells of most of the reactor buildings sprayed debris into the pools, debris that cannot be removed until after the fuel rods are taken away. Yet some rods may be stuck in the debris.

In an undamaged reactor, moving fuel rods is a delicate operation, but all in a day’s work. With all the damage at Fukushima, removing the nuclear waste may take years. The hope is that it can be completed before the next major earthquake. The more difficult cleanup below can’t really get started until the nuclear waste is moved out of harm’s way.

Sunday, November 17, 2013

Buying Off-Peak Electricity

Pennsylvania is one of the states that encourages consumers to choose their electric suppliers, and today, I signed up for an off-peak electric plan. Compared to plans that charge the same price all the time, this plan charges a price 80 percent higher during peak hours on weekday afternoons. The idea is to encourage you to shift electric use to off-peak hours, during mornings, midday, evenings, nights, weekends, and major holidays when there is excess electric supply capacity. During off-peak hours, the off-peak plan’s price is 20 percent lower than comparable plans. This pricing is possible only if your electric use is measured with a digital meter that keeps track of the time of day. The meters on my house were replaced with the new digital ones just a month ago.

An off-peak plan is not meant for anyone who runs air conditioning all summer. If you insist on keeping cool, air conditioning can be half of your total electric consumption over the course of the year, and almost half of this will fall during the peak hours. But if you do not use air conditioning at all, or if you are out of the house on weekdays and the air conditioner is off while you are out, it seems to me you would have to save money with the off-peak discount.

There isn’t the same issue with heating. If you use electric heating, you can heat up the house in the morning, then turn the heat off for the afternoon. Afternoon is the time of day when a house gets the maximum solar heating effect, so even without adjusting the thermostat, you use less heat in the afternoon.

In my case, I can save more money if I can put off cooking and using hot water until off-peak hours. I know there are days in the summer when there is nothing on in my house but the computer, stereo, and refrigerator during the peak afternoon hours. Perhaps the off-peak electric plan will encourage me to follow that pattern more often.

Friday, November 15, 2013

This Week in Bank Failures

Three European banks in terrible financial condition this fall, Monte dei Paschi and Carige in Italy and Britain’s Co-Op Bank have something in common: a history of being controlled by charitable trusts. Monte dei Paschi is government-controlled now after a series of bailouts, while Co-Op gave over control to Wall Street hedge funds as part of a rescue plan this fall. Carige looked to be in better shape until its latest financial report, when the erasure of €2 billion in phantom assets left it holding an embarrassingly weak balance sheet. In truth, Carige has broken even this year aside from its accounting corrections, so it has a fair chance of raising capital in the securities markets. With Co-Op Bank, by contrast, no one can say whether it will be viable next year its new form. It seems just as easy to imagine its customers abandoning it. As for Monte dei Paschi, it doesn’t have a way forward and faces liquidation in about a year if nothing is done.

Is there a governance problem with banks organized as charitable trusts? Trusts can stagnate, but that is a risk shared with every form of business. Looking more closely, there is no question that Monte dei Paschi and Co-Op were ruined by recession acquisitions. These were huge and arguably worthless asset purchases that the respective banks paid handsomely for, almost as if the recession did not exist. Carige is a different story, but its problem loan portfolio also may reflect a history of being oblivious to economic risks. It doesn’t quite add up to a pattern that explains anything, but I will keep looking for any neglected principle that this set of troubled banks might point to.

Thursday, November 14, 2013

Cell Phones as Document Scanners

This a technology transition that sneaked past me and had already taken place before I noticed. In the late 1990s there wasn’t any hand-held camera that could take the place of a flat-bed scanner. I know this because I tried it. The camera image was not sharp enough, and the shutter not fast enough, to produce a readable image of a business document. That changed sometime in the last few years. The best evidence of this is found in the millions of checks that are deposited from mobile apps every day. If a cell phone camera is sharp enough to create a check image, then it is also sharp enough to create a worthy image of a business letter or a retail receipt.

Obviously, there are compromises involved. Compared to what you get from a flatbed scanner, the image from a hand-held phone camera is blurry. The colors are grayish, the shapes skewed. But the advantage is that you don’t have to carry the document to the scanner. Often, that is a compelling advantage, and it is reason enough to predict, we will be seeing more and more cell phone camera images of documents in the years ahead.

Tuesday, November 12, 2013

A Catastrophic Hurricane Season

Some in America are saying it has been an exceptionally light hurricane season. Presumably they are looking at the North Atlantic Ocean. The number of North Atlantic tropical systems this year has been about what you would expect, but their wind speed and combined energy has been low, the lowest in three decades by one measure. Globally, it has been a different story, and that was true even before the typhoon that leveled whole towns over the weekend. The intensity was expected to match that of the most intense tropical cyclone ever to strike land, and early damage reports are generally consistent with that prediction. But with landfall occurring on a minor holiday weekend in the United States, I fear that many American TV news viewers may never learn of it, and may carry on imagining that the world got off easy this hurricane season. The vagaries of the U.S. news cycle often result in major stories getting lost in this manner, and policy decisions are distorted as a result. Of course, announcements of bad news are routinely scheduled for Friday afternoon so that the country will not notice. You could make the case that this is the United States’ Achilles heel, yet it is hard to say how the news of the weekend could be brought into balance with the news of the week.

Sunday, November 10, 2013

Christmas Shopping Off to a Quick Start

Last month’s government shutdown hasn’t dented this month’s Christmas shopping. Shoppers locally have been out in force in the last two weekends, during daylight hours anyway. There are not so many shoppers out after dark, but I think people are just trying to be practical, and that is what makes people undertake Christmas shopping in October and November in the first place. Retailers’ promotional discounts may be low-key at this point, but they are big enough to tell shoppers who know they will be busier in December that there is no need to wait.

Locally the weekend shopping has been lifted by favorable weather. That looks likely to continue today and tomorrow, not just here, but across most of the country.

Saturday, November 9, 2013

LED Prices Declining Again

Prices for LED light bulbs held nearly steady for a year as manufacturers focused on boosting volume, but now prices are moving down again. Locally I am seeing clearance prices as low as $8 (update: as low as $5 for 40-watt equivalent bulbs) and regular prices mostly between $11 and $19.

The $10 price point is significant because it represents the crossover point, from a consumer point of view, between incandescent and LED. At that price, an LED light bulb costs about the same as an incandescent bulb over the first year of operation. After the year is over, the LED costs are much lower, as the incandescent bulb burns out and has to be replaced, but the LED carries on. An LED bulb may last for 50 years — they haven’t existed for that long, so we don’t really know. Fluorescent bulb prices have also fallen, so that they have a slightly lower one-year cost, but they too are more expensive than LED over the life of the light bulb, and they have the disadvantages that go with a more fragile device and a lower quality of light.

It isn’t the season, in the north, to make the switch to LED — the waste heat of incandescent bulbs isn’t wasted during the heating season. If LED light bulb prices fall below $10 by spring, though, that may be the moment when the market shifts and LED becomes the dominant technology for room lighting.

Friday, November 8, 2013

This Week in Bank Failures

SAC Capital pleaded guilty today to insider trading. Under an agreement with prosecutors, the fund manager will close its hedge funds and pay a $1.2 billion fine. A related civil settlement, which included an additional penalty, was approved this week. The criminal penalties the company has agreed to must now be reviewed and possibly adjusted by a judge. Six SAC employees have pleaded guilty and two others are awaiting trial. Regulators have been criticized for going easy on SAC because of its size, but in my opinion it was probably prudent to allow a $15 billion fund to wind down over a period of a few months. Just shutting it down one day with no advance warning could have caused a cash crisis among banks and other third parties.

This week’s better news comes from Ireland, which is ready to exit its European bailout arrangement. The international lines of credit are set to be paid back next month, though there is a possibility of a delay or a transitional line of credit through about February. Ireland became insolvent from a series of ill-advised bailouts for banks that failed in the end anyway. However, it has climbed back much quicker than most observers had predicted.

In other developments, France was downgraded, Barclays and Deutsche Bank failed to get Libor claims dismissed, and the U.S. Department of Justice in a mortgage fraud case is seeking damages from a Wells Fargo executive in addition to the bank itself. New York Fed President William C. Dudley in a speech talked about a cultural problem in banking and criticized “the apparent lack of respect for law, regulation and the public trust” on Wall Street. It was startlingly direct language that may be a sign of the frustration regulators feel at the lengths the giant banks have gone to to circumvent laws and regulations.

Thursday, November 7, 2013

FDA to Delist Trans Fat

The Food and Drug Administration today proposed removing artificial trans fat from its Generally Regarded as Safe (GRAS) list of food ingredients that can be used with few or no restrictions. That might sound like a technical change, and the FDA presents it in those terms, but it is a revolution in food safety.

The FDA cites the estimated 5,000 heart attack deaths caused annually by trans fat. Some experts suggest a much higher number. Yet, strange at it may sound, heart attack death is actually one of the smaller effects of trans fat. Trans fat is a badly shaped fat molecule. Fat molecules form cell walls, so when trans fat is part of that mix, the result is a badly formed cell wall that tends to leak under stress. And guess what is made of cells: your entire body. So when we say trans fat causes leaky cell walls, what that really means is that it causes your whole body to start to break down. This creates openings for fungi such as yeast to attack your body. It is a lot like having the decay associated with death going on while you are still alive.

There is a great deal of irony in this effect. The reason food manufacturers make trans fat is that it resists decay better than natural fat. But the same qualities that make trans fat last a long time at room temperature also make it difficult to metabolize. The trans fat in your body is harder to burn off than natural fat — not good news if you want to lose weight. The best answer for trans fat is to not eat it if you can help it, but the FDA hasn’t been helping in that regard. It not only encourages trans fat in food, but allows moderate amounts of it, up to 0.5 gram per serving, before food manufacturers are supposed to tell you it’s there. Food manufacturers routinely go right up to that 0.5 gram limit. At that rate, you could be eating 2 kilograms a year of trans fat even if you stick to foods that are labeled as trans fat free.

Some of the dangers of trans fat have been well known to science since about 1994. Yet it is still on the “safe” list — a governmental lie that has been allowed for the past generation. As the FDA begins the slow process of changing its policies, it is understandable that it will be downplaying the change. The government is not about to say, “We’ve been encouraging food manufacturers to put potentially deadly poison in your food, but that is going to change in a few years.” Yet that is essentially the situation.

The proposed FDA rule does not affect “natural” trans fat, but I don’t think that matters. In reality trans fat occurs only in trace amounts in nature. The “natural” trans fat that the FDA is referring to is found in meat and milk, primarily from cows that are fed candy (along with bread and other surplus food) that contains artificial trans fat. If you think it’s natural to feed cows candy that contains dangerous chemicals, maybe you could work for the FDA too. “Natural” trans fat is really just another form of artificial trans fat. But this also means that as food manufacturers change their recipes, the “natural” trans fat will gradually go away too. Eventually, the surplus candy fed to cows won’t be so loaded with trans fat.

Changes won’t occur right away, so read food labels and avoid food that lists trans fat or that comes from a manufacturer that uses trans fat in any of its other products.

The partial ban on trans fat in New York City restaurants helped pave the way for today’s FDA action. When that ban went into effect, restaurant owners complained that the flavor of food would suffer. Yet restaurant patrons barely noticed the change. This makes sense when you consider that trans fat is an artificial chemical that essentially has no flavor of its own, the result of the same chemical properties I have already mentioned. As we find our way out from the effects of a century of eating trans fat, some thanks has to go to New York for paving the way.

Wednesday, November 6, 2013

Unmarried Voters Carry Virginia

In yesterday’s gubernatorial election in Virginia, Terry McAuliffe defeated Ken Cuccinelli by about a 2.4-point margin. The results were hardly the “squeaker” that so many people were saying last night when an eighth of the votes had not yet been counted. It was a race that was being watched nationally to see how a culture-war conservative might do in a “swing state.” The results can hardly be encouraging for social conservatives who think they shouldn’t have to pull any punches when they criticize students, singles, union members, and other groups who they see as responsible for social decline. One of the most surprising results seen in exit polls was the margin of victory for the Democrat McAuliffe among unmarried voters. From Ariel Edwards-Levy’s story in Huffington Post:

. . . unmarried voters, especially women, preferred McAuliffe by wide margins. He beat Cuccinelli by 25 points among unmarried men and 42 points among unmarried women.

This is a notable trend not just because there are so many unmarried voters. Unmarried voters also are more likely to be paying attention when they vote. Married voters have a greater tendency to choose their vote based on things they heard 10 or 20 years ago. Unmarried voters, by contrast, are more likely to vote based on current information. Unmarried voters, then, give a better indication of where the electorate is going over the next 10 or 20 years.

And what that indicates is a 2-to-1 margin of victory of a Democratic candidate over a Republican candidate in a swing state like Virginia. That will certainly be a problem for culture-war Republicans — and given the election result, it is a problem already.

Tuesday, November 5, 2013

Confidence and Credence

The bankruptcy in Brazil of oil giant OGX and the plea agreement in New York for hedge fund manager SAC show how quickly multi-billion-dollar enterprises running on bravado can unravel. It is a lesson we should have learned in 2008 when the Wall Street companies that boasted the loudest turned out to be the ones that were closest to the edge of disaster. That perhaps is still true, but most analysts and journalists still tend to automatically ascribe credence to CEOs who are artists when it comes to expressing confidence in the prospects of their respective organizations. Reports based on that error are in every day’s news, and when you read them, remember that confidence is just an expression. It won’t determine the actual outcome of a struggling business.

Monday, November 4, 2013

Shelling Cashews and Fair Trade Questions

The Guardian has a story about the cashew trade:

The story focuses mainly on cashews produced in southern India and sold in western Europe, though cashews are also produced in many other countries. People might be surprised at how labor-intensive a product like cashews is, and how little is paid for that labor. The biggest concern is the lack of hand protection for many workers who shell cashews. Raw cashews are naturally coated with a caustic oil similar to that found in poison ivy, and the need for skin protection is obvious. For it to be absent is a sign of cost-cutting gone too far.

Friday, November 1, 2013

This Week in Bank Failures

Royal Bank of Scotland went through the whole exercise of designating a portfolio of its “bad” assets, those with a projected value near zero, only to learn that it must continue to hold its bad portfolio on its own books. At least it will be able to report separately how its “bad” assets are doing. That may reassure investors, but with no restructuring, there has to be some doubt about whether RBS will be able to become privately owned again anytime soon.

At least Citizens Bank will eventually break free of state control. The RBS U.S. subsidiary, purchased in 1988 and based in Rhode Island, will see an IPO about one year from now, with plans to sell a 25 percent stake at that time. RBS says it will complete its spinoff of Citizens Bank by 2016, probably with additional stock offerings. As recently as last week there were reports of TD Bank buying Citizens Bank, but that apparently will not happen. The spinoff of Citizens Bank is seen as an important step toward recapitalizing RBS.

A probe of currency trading by banks is now targeting at least nine giant global banks. As a sign of how seriously the banks take the investigation, many suspended traders and executives this week, particularly in London. The suspicion of investigators and banks alike is that traders at several banks may have been working together to manipulate foreign exchange markets, similar to the way that other traders colluded to manipulate Libor base rates. One consequence of suspending traders is that it may prevent them from making new trades to cover their tracks.

There was a rare Wednesday evening bank failure this week. State banking regulators closed Bank of Jackson County, which had branches in Graceville and Marianna, Florida, near the Alabama border. It had $25 million in deposits and a similar amount in assets. First Federal Bank of Florida took over the deposits and purchased the assets.

The NCUA took charge of a credit union in Philadelphia tonight, placing Mayfair Federal Credit Union into conservatorship. Only the main office will stay open. The credit union has 1,500 members.

Wednesday, October 30, 2013

“Haunted House” at New Yorker

The New Yorker picked up on the haunted House theme for their October 21, 2013 cover painting. Sadly, the image still holds true two weeks later now that Halloween is actually here — the government may have reopened, but nothing has intervened to show any life returning to the House Republican caucus. Happy Halloween!

Tuesday, October 29, 2013

Bosphorus Tunnel

A rail tunnel connecting the European and Asian parts of Istanbul is set to open in a few hours. The Bosphorus is not so wide, only about three kilometers or similar to many rivers that flow through cities, so in a way, it is odd that it took so long to build the rail connection. Initially the tunnel will only connect the two sides of the strait and relieve traffic on the two congested bridges of Istanbul, but the Turkish government imagines it eventually becoming a key link in a rail system extending from Europe to China and Japan. There is, everyone will agree, more work to be done.

Update: A short BBC News video showing the tunnel in operation: BBC inside new tunnel to link Europe and Asia shores

Monday, October 28, 2013

The Real Estate Lending Rush in Australia

The largest investment bank in Australia is rapidly expanding its presence in the mortgage market, a market in recent years dominated by the giant national banks. The banks are reporting record profits as real estate values increase year after year. Meanwhile, the central bank and other authorities are dismissing worries about a bubble in the real estate market. Smaller banks too are trying to get in on the action. The Reuters story:

Aside from the location, it all sounds terribly familiar, doesn’t it?

Sunday, October 27, 2013

Magic Over the Isolation of Work

One of the challenges of work is that so much of it must be done in relative isolation. Workers must make decisions that will determine the way people receive their work. Given the nature of most work, the customers who are affected can’t be present to guide those decisions. It is a spiritual problem that has, for those who dare to attempt it, a shamanic solution. That magical answer is what is depicted in this new Paul McCartney music video. (Video with Vevo commercial)

Saturday, October 26, 2013

China’s Confessions and Torture Deaths as a Measure of Corruption

In this morning’s news there is another story about a high-profile public confession. State-run media has been trotting these out every few days lately. At the same time, though, there are as many stories of prisoners tortured to death or dying by suicide or under mysterious circumstances, casting doubt on the authenticity of the confessions we hear. Taken as a whole, I come away with a picture of an empire that, in spite of some recent house cleaning and lofty rhetoric, is more corrupt and repressive than ever. Economically, such a system won’t stand indefinitely. Corruption means that people who are trying to get work done are being impeded, particularly whenever there is something new involved. It is like working with one hand tied behind your back — you fall behind the pace of the world around you. That is where I see China going in the next decade, until something eventually breaks.

Friday, October 25, 2013

This Week in Bank Failures

Two mortgage securities cases this week: The JPMorgan settlement with FHFA is the largest securities settlement yet. The bank will pay Fannie Mae and Freddie Mac $4 billion, and an additional $1 billion as a penalty. At issue were $34 billion in securities sold by the bank and two predecessors to Fannie Mae and Freddie Mac, which the government has said did not accurately describe the mortgages involved. In an unrelated case, a court found Bank of America liable for one specific Countrywide mortgage lending program designed to speed paperwork and lower underwriting standards below even the low standards of that era. Significantly, the court also found the executive in charge of the lax lending personally liable. The bank had described the prosecutors’ case as whistling in the dark just days before, and expressed astonishment at being found liable. That outcome, though, may make bank lawyers and executives more eager to settle cases involving sloppy and incomplete mortgage paperwork. There is certainly a lot of that around, with U.S. authorities now investigating nine banks over mortgage-backed securities, according to a list compiled by the Financial Times.

The mortgage business isn’t what it used to be, with the pace of new applications falling by about half since the start of the year. Adjusting to the slowdown, banks will have cut between 30,000 and 40,000 mortgage workers by the end of the year. Relatively few new branch closings have been announced, but that is a trend that will resume if the mortgage business does not recover next year.

U.S. consumer confidence has fallen sharply since August and is now at levels that smell like a recession, though still above the lows of 2011. Consumers responded to the possibility and then the actuality of a government shutdown, and more generally to the economic risks represented in the Republican strategy of legislative nullification. There is anecdotal evidence that consumer confidence increased when the government re-opened, but the survey data so far doesn’t show any such recovery.

That Republican strategy of legislative nullification continues with procedural maneuvers in the Senate to try to delay the confirmation of Janet Yellen as the new Fed chair. Republican senators may not be able to do away with the Fed, but they will see if they can render it leaderless for a time.

U.S. credit unions will not be exempt from stress tests, with the NCUA board this week proposing to stress-test about four very large credit unions, coordinating with the Fed’s stress test schedule.

Thursday, October 24, 2013

Mobile Video Games

What happened to video games? The genre seems to be in decline, but look more closely, and you realize that people are still playing video games, just not in the same way. About 1/5 of the video game market is on mobile devices, mainly phones, but that is if you measure according to revenue. If you look at the time people spend playing, probably more than half of that time is on phones. The phone games are different — smaller, simpler, shorter, and often free. Game designers are having some success in selling expensive console versions of the games they give away or sell at low prices on phones. This marketing approach probably cannot last very long, though. With graphics improving on phones and most players saying they don’t really have time for the large-format console games that predominated five years ago, the console games are fighting an uphill battle. Of course, “uphill battle” sounds just like a scenario for a video game, and my feeling is that the games will keep coming even though the number of buyers declines.

Wednesday, October 23, 2013

OS X Release Slows Internet

My Internet connection has been draggy today, running about a tenth of its nominal speed. This is surely the result of network users in my neighborhood downloading OS X 10.9 Mavericks. The Mavericks release affects fewer users than the iOS release last month, but it is a larger download, so the total network traffic is probably higher. On the other hand, it takes a more concentrated effort to upgrade a desktop computer, so the downloads may be spread out over a couple of weeks. There aren’t many reports of choke points on the Internet since yesterday’s Mavericks release, so perhaps that shows that the pace of downloads is slower, but it is still large enough to test the Internet’s capacity at specific times and places.

Tuesday, October 22, 2013

Working Within the System

Does wealth result from work, or from occupying positions of privilege?

In the United States, it is more the latter, and government policymakers are more likely to see their role as protecting privilege than protecting work.

A particularly egregious example of this was the Louisiana law that prevented a monastery from selling caskets. Under Louisiana law, only embalmers could legally sell caskets. That law supposedly protected the public, but its real purpose was to protect those in positions of privilege and to prevent others from working, a federal appeals court decided in striking down the law. Last week, the U.S. Supreme Court decided not to consider the case.

The story at the Los Angeles Times:

Of course, a host of problems result when institutional power is used to prohibit work while rewarding privilege. Most fundamentally, from an economic point of view, when useful work is discouraged, less gets done and aggregate wealth declines. Beyond that, it is important for people not to feel that they have been shut out, or that “the system,” the combined effect of institutional power, is working against them. To simplify somewhat, people who are prevented from working within the system will work around it or against it. When monks are getting involved in “black market” funerals because it is the only practical opportunity open to them, it is abundantly clear that restrictions on work have gone too far.

Monday, October 21, 2013

Flight to Quality Hits American Fast Food in China

This month, McDonald’s and KFC reported declining same-store sales in China, in both cases surprising Wall Street analysts. Both restaurant chains are being affected by a flight to quality. No one is surprised anymore by flat same-store sales in U.S. fast food, but it’s a trend that wasn’t expected to reach China, at least not this year.

KFC parent company Yum had pinned its hopes on rapid growth in China, so the report of a sharp decline there put its business plan in doubt. McDonald’s report, though, may be more gloomy. It doesn’t have a bright spot anywhere in the world to point to, and a barrage of promotions in the United States failed to lift sales about last year’s levels. McDonald’s blames the state of the global economy for its poor results, but it may just be that it doesn’t have much to offer to people who are trying to do better for themselves.

Sunday, October 20, 2013

Post-Shutdown Shopping

Perhaps I was not the only one who went on a spending freeze during the federal government shutdown. I saw plenty of cars and people as I went shopping yesterday. Retail workers said the stores had been especially busy not just on Saturday, but also the day before. It is perhaps an indication that people were holding back on spending to a slight extent for the last few weeks as a precaution, as they were faced with the prospect of a shutdown-fueled recession. Some of that delayed spending is happening this weekend.

I don’t think this means people will be spending freely again at retail for the rest of the year, though. It often happens after a major interruption that people think they are going back to what they were doing before, when in fact they may be doing ten percent less.

Saturday, October 19, 2013

House Cleaning Can Make You Fat

Here is a science story from The Guardian:

The University of Ulster study of 4,563 adults found a strong positive correlation between housekeeping and body fat levels. People who spent the most time cleaning house also weighed the most. The researchers and reporter speculated that house cleaning is not the useful exercise that it appears to be.

But there are more direct ways to measure the effects of exercise. When you measure a person’s oxygen consumption, you have almost a direct read on how much fat burning is going on. Exercise physiologists can estimate within a factor of 2 just by watching video that shows the muscle movements of an activity. Such direct evidence of the exercise value of house cleaning can’t be abandoned for this kind of indirect evidence. And there is no need to. There is a simpler explanation.

We know that there is a toxic effect from breathing air that contains cleaning chemicals and dust. This effect is compelling enough that there are workplace safety regulations on the subject. There are no such rules when you clean your own home, yet chemicals and dust are found there too. Toxic effects lead to body fat buildup. Body fat is used to store some chemicals and minerals temporarily, for weeks or years, until the liver can decompose and encapsulate them. With more chemical stress, more body fat is needed. If housework is leading to body fat buildup, this suggests that the cumulative toxic effects of house cleaning are greater than previously thought.

I am not about to stop cleaning my house, but I will see what I can do to limit my exposure. People who do commercial cleaning all day long don’t seem to have the same risk, even though commercial cleaning chemicals are in some cases more toxic than the household versions of the same thing. The main difference, I think, is that professional cleaners don’t stay in a room they have just cleaned. They always have somewhere else to go. I know people who have the same habit at home: clean, then get out of the house for an hour. There must be something to that.

Friday, October 18, 2013

This Week in Bank Failures

The federal government shutdown started with great fanfare on October 1 with huge promises, house parties, and so many lights you could have thought it was Christmas time. It ended much more quietly, the lights long gone, the promises vague and muted, the final hour of debate in the House shortened by almost half because no one really wanted to be in the limelight taking credit for a political stunt turned disaster. There were no celebrations that I know of because the people most affected had to get up and go to work in the morning. (I am sure some people who got their jobs back are out celebrating tonight.) The economic damage had been done, and political damage too. Unlikely players, from Starbucks to the U.S. Chamber of Commerce, drew lines and made new enemies along the way. One lasting consequence, though, is that many people came to realize how much they liked the federal government in some way, whether it was the panda cam or the economic statistics.

The Fed and federal banking regulators operated normally during the shutdown, and though seemingly not much happened, the Fed’s balance sheet continued to grow with new asset purchases. The Fed now owns about $2 trillion in federal government debt and nearly as much in mortgage-backed securities, an astonishing amount in total. There was some hand-wringing this week about what happens when the Fed starts selling off its assets, as if it might just dump $4 trillion in securities on the market some day. Realistically, though, the Fed will never sell most of those assets — nor does it need to. Most of the worry seems to originate on Wall Street, where if they had a $4 trillion portfolio, they would immediately start day trading. Wall Street traders and analysts probably have some difficulty believing that the Fed is not planning on any London Whale-style financial maneuvers. But the Fed is a different kind of bank, and it can easily just keep bonds until they mature. That is what I imagine will happen with most of the assets the Fed is currently holding. In theory, the Fed could sell a block of assets to reduce the money supply, slow growth, and fight inflation, but I am not sure that opportunity will come up between now and 2025.

I saw the suggestion that the Fed could forgive the $2 trillion in U.S. government debt it holds. In theory, that would be a transaction with no financial impact, but there are legal and policy complications, so it won’t happen — at least, I hope the suggestion was merely rhetorical.

Bank failures are likely to resume in the coming weeks as banks post quarterly results. There are always a few unhappy surprises among banks’ income statements, and when those happen to a bank that is already on the edge, regulators can decide it is time to take action.

Thursday, October 17, 2013

The Cost of the Government Shutdown

What did the government shutdown cost? It was a costly distraction. Roughly speaking, the United States lost close to one day of GDP during the actual time of the shutdown, but other costs are spread out over a longer period. Some employers, for example, will freeze staffing levels at current levels until the government budget problems are definitively resolved — that is, for at least one more quarter. And so, the lingering economic damage over the coming months will be roughly another day of GDP. In total, the loss was less than one percent of annual GDP, and that might not sound like much when you look at it that way, but if you describe it as two to three months of normal economic growth — so that a political stunt set the whole country back by two to three months — then you start to realize how big it is.

Wednesday, October 16, 2013

Turning Away

Now that the Senate has passed a debt ceiling measure that will also reopen the government till at least January, and the House has agreed to take a vote tonight for the first time this month, I can say it: the people who looked at the government shutdown controversy for maybe five minutes and then went off to practice piano, go running, or wash the dishes were right. Washington did not earn our attention this past month. Those who were paying attention learned that the House collectively has all the energy of a dying music box, perhaps an important thing to know, but of course, that quality does not make them a useful example to study and emulate. It is better if we spend our time doing the things we know we have to do.

After all that, and with the government already two steps over the edge, one sixth of the Senate still voted to continue the government shutdown and to repudiate the government’s debts. I am told we can expect a much larger number of votes in that direction from the House. It is a reminder that there are still plenty of politicians who don’t want us to be feeling good about where we are, or who don’t want us to be in a place we can feel good about. It is the kind of thing that can be infuriating to watch, but only, of course, if we stop to watch. All the more reason not to watch for very long.

Sunday Night Crash

There were two reports yesterday of an imminent deal on the debt ceiling, but both plans fell apart within hours. A complication is that House Republicans must seek a solution that doesn’t involve breaking up the dysfunctional alliance between the Republican Party and the Tea Party. It is no victory for Republicans if they save their country but lose their party, yet the Tea Party has made it clear they won’t mind destroying both if that’s what it takes. Another complicating factor is that while the Treasury will run out of money and start delaying payments on Thursday or Friday, Congress seems to see Sunday night as their deadline. It is a setup for a Sunday night crash in the House, followed by stock market crash the next morning — because after Sunday, every day is a step backward to the tune of a few billion dollars, making it very hard to form an agreement in principle that means anything while working at the speed of Congress.

House leaders want to go right up to the edge because they think it gives them more leverage, but then when the time comes they don’t have the basic vitality it takes to get their work done. If recent history is a guide, the House will meet Sunday, but end up not taking a vote. Of course, it is foolish to suggest a prediction, but even more foolish to just assume that when push comes to shove, the House Republican caucus will be able to agree among themselves.

Tuesday, October 15, 2013

Credibility and Proportion

Yesterday I was asking about credibility. The common advice on credibility is that consistency and attention to detail are a big part of establishing credibility. It has been observed that associating with credible people helps and that making distinctions is important. It has also been suggested that smoothness and personal beauty are more important than people would like to admit.

In addition, though, I would like to suggest that proportion is an underrated component of credibility. If you can consistently separate the big stuff from the small stuff, that is more credible than if you get the big stuff and the small stuff confused, or if you mix them together in an attempt to confuse others. At the other extreme, people who react to every event as if they are all equally big or little give the impression that they are not paying attention — and attention, it seems to me, is where credibility starts.

Monday, October 14, 2013


Where does credibility come from? It is a big question that seems to turn up often these days. I don’t have the answer, but I can see in this weekend’s news stories some approaches that don’t work. Changing your public positions and opinions to ones that you think should sound more credible won’t make you more credible. Complaining about lost credibility won’t bring it back. After looking at these and other examples, it seems to me credibility starts with paying attention. Paying attention by itself is certainly not much, but if everyone can see that you have stopped paying attention, then there is nothing you say that can make you credible again.

Sunday, October 13, 2013

Arctic Freight Picks Up in Spite of Ice

Freight companies are discovering that Arctic sea ice in September and October is not quite the barrier it appears on the satellite pictures and maps. Perhaps that is especially true this year, with Arctic ice more dispersed than at any time in recent memory. The satellite maps show the Northwest Passage closed, but there are reports of ships passing through, none to my knowledge accompanied by icebreakers. Officially all freight traffic in the Northern Sea Route is guided by Russian icebreakers, but other freight vessels travel farther north to avoid the paperwork, and those get through too.

There are a few explanations for ships passing through areas that seem to be covered in ice. One is that for a ship to get through, it needs a gap in the ice only the size of a ship. You can’t see the ship on the satellite map, so you can’t see the ice at the level of detail that matters to a ship. Another point to consider is that ice comes in a wide range of sizes and forms, some of which are perfectly innocuous. In October, large areas of ocean are covered by what is sometimes called grease ice, and this is no more of a barrier than it sounds. In late summer when weather is calm, a sheet of ice may shrink to a thickness of a tenth of a meter before it shatters. This thin ice may still look just as formidable as a meter-thick sheet of ice, but it is not an obstacle to a ship any more than it is safe for a person to walk on.

I imagine that freight navigators, many on their third or fourth year of Arctic crossing, are gaining experience with the ice and gaining confidence in crossing it. That confidence is not necessarily a good thing, but it does help to explain a continuing increase in Arctic freight traffic, even this year when weather is less favorable.

Saturday, October 12, 2013

Now Open, ObamaCare Popularity Surges

The polls are surprising: the popularity of “ObamaCare” is surging after a week in operation. People were tired of all the negative talk and perhaps expected to see something as monstrous as what they had heard, but the reality turned out to be much smaller, simpler, and easy to describe (try “a web site where freelancers can buy group health coverage”). When something actually exists, it is easier to see how it might be useful.

There may be other reasons for the abrupt shift in the polls. The House Republicans’ government shutdown, purportedly to protest ObamaCare, is so unpopular that people find themselves liking ObamaCare, or at least the general idea of access to health care, out of spite. It is hard to find anyone who agrees with the idea of just canceling everyone’s coverage and shutting the system down — yet that is the exact idea that House leaders had staked their reputation on.

Given that contrast, it makes sense that Republicans have taken a hit from their high-profile attempts to gut health care. All polls this month place the Republicans, the Tea Party, Republican leaders, and key Republican ideals well below major-party levels. Compare the Republicans’ latest 24 percent favorable rating to Ross Perot’s 46 percent going into the 1992 election, or Ralph Nader’s 34 percent in 2000, and you get an idea of how far the Republicans would have to climb to be competitive again. More worrisome still are the nearly identical poll numbers for the Republican Party and the Tea Party. As far as most of the public is concerned, the smash-and-grab politics of the Tea Party have already come to define the identity of the Republican Party.

Friday, October 11, 2013

This Week in Bank Failures

On the political calendar in Washington, we are more than halfway from government shutdown to sovereign default. It is worth remembering that two weeks ago, a majority of pundits, voters, and politicians did not believe the government shutdown would happen. The House inaction, we imagined, would give way to action when there were three or four hours to go, as we had seen in the past. But that transition did not come about. Flash forward to yesterday. Some in the House Republican caucus thought they needed a six week extension on the debt ceiling to give them more time to dither — while the government remained closed, of course. But in the end they could not agree on that either. Instead, today’s plan to get the House of its rut of inaction is . . . more talks. It is not Halloween yet, but can we all practice a ghostly wail for a minute?

I say all this just to put the risk of default in context. Most of the people who say a default can be easily avoided are not paying any attention to what is actually going on in Washington, and in the House Republican caucus specifically. It is a narrative worthy of the fall of Rome, so who is to say that now is not the time for the fall of Washington?

The reliability of United States government debt instruments is an unstated assumption in finance worldwide even today. Precisely because it is accepted as fact and not seriously examined, we cannot predict what parts of the global financial system will break when that assumption is broken. I will cite just two of many possible breaking points.

  1. Money market funds famously keep much of their liquid assets in government bonds, especially ones issued by the U.S. Treasury. If the Treasury is seen as no longer liquid, that could provoke a run on money market funds. And that, of course, is on top of the withdrawals already taking place now that furloughed employees of government contractors are living off their savings. Sponsors of funds that made mistakes while trying to keep their funds liquid could end up illiquid themselves.
  2. A huge sum, I am guessing about $3 trillion, in deposits are kept in banks in the United States at considerable inconvenience, just because of the perception of the United States as a safe haven for deposits. If that perception is shaken only slightly, so that a small fraction of deposits are moved to other countries, the giant banks in the United States could be looking at deposit flight on the order of $250 billion in a matter of a few weeks. That could easily be enough to change the color of a bank’s balance sheet. Half a dozen boutique banks that rely disproportionately on the deposits of foreign billionaires could be seeking emergency capital.