Two Trends

In the news, there is corroboration for two trends we’ve been observing.

• In a survey a consensus of economists now believe the winter slowdown in the United States was weather-related and expect improvement as we get farther into spring. Previously, you could find conservative-leaning economists and ones based in California who were skeptical of the weather effects, but several early indicators from unemployment reports to health care sign-ups seem consistent with a pronounced weather effect in half of the country.
• The Bureau of Labor Statistics found near record high levels of temporary and contract workers in March, which seems to be part of the broad shift toward a more loosely structured workforce that observers have been tracking for some time.

Change All Your Internet Passwords

The taxes are in and Friday is here, but it is not time to drink a toast to getting back to normal. That’s because if you drink, you are likely to have extra trouble remembering all your new Internet passwords.

Well, you are changing your passwords, aren’t you? The headlines on Heartbleed may have died down, but the need to change your Internet passwords — all of them — is no laughing matter. The flaw in OpenSSL software put the communication between you and most secure web servers at risk for a period of time. Unlike other Internet security flaws, this one was not focused at a particular place, so exploits, when criminals use the flaw to gain access to data, are not necessarily possible to detect. Along with other data, your passwords could have been accessed. This means you don’t know who has your passwords, but you can fix that by choosing new passwords.

I know I said you should change all your passwords, but that is a slight exaggeration. There is an exception, but if you want to be cautious, the exception is not much. If you are sure you did not log into a site between 2012 and now, or the site tells you it was not affected by the Heartbleed flaw, you may not need to change your password there. However, this exception applies only if you did not use the same password, or a password that is partly the same, at any other site. And, this exception does not apply if the password was ever emailed to you in an email account that was affected by the flaw. As I said, it’s not a very big exception. If there are accounts that you have effectively abandoned, you might choose to delete them at this point (or delete your more sensitive information from the account). That doesn’t save you any work, but it is something to consider along the way.

I know, changing all your passwords is a lot to ask. I personally have 200 accounts with passwords to change. I memorized almost half of them, and now I will be changing them all in a matter of days. My chance of memorizing dozens of new passwords quickly is in the don’t even try category. I will have to write them down. And, I will have to be systematic about changing them.

Being systematic starts with choosing good passwords. Even on sites that don’t enforce rules for password quality, a password should not be a single word that could be found in a dictionary. Most of all, don’t use any word that can be found on your Internet profile as a password. Of course, don’t reuse any of your old passwords — you know, the ones that might be posted on a message board somewhere by now?

Changing passwords might be the most tedious task you can think of, but it still has to be done well, so don’t rush through it. Making mistakes when setting passwords is a security flaw of its own. Realistically, you probably won’t change all your passwords in two or three days, so start with affected email accounts and banks. Go on from there to retail sites that have your banking account numbers. Keep track of which passwords you still need to change. And for your own safety, don’t drink and password, even if it is Friday.

The Energy Wars

As Russia angles for a way to annex the first hundred kilometers of the Ukraine natural gas pipeline, I can’t help thinking of the energy wars that were a recurring theme in 1970s American science fiction. That fictional theme was obvious enough if you think of the historical context. The fictional scenario was that energy producers — the massive corporations that run energy installations such as oil refineries and nuclear power stations — would amass so much influence that they would secretly be running the world. Then they would begin to fight proxy wars with each other for world dominance, but the energy giants’ involvement would be mostly a secret, hidden from the public.

Energy wars have been an unacknowledged part of U.S. policy for a generation, with the war in Iraq being conducted as much by an oil services company as by the U.S. military, even if you would not see the oil tycoon on television giving the press briefings. Russia currently is even more under the thumb of its energy sector than the United States is. It is not really the civil government in Russia that wants to control Ukraine, nor the military, but the natural gas producers, who lose enormous sums in revenue whenever the pipeline that crosses Ukraine is not operating.

So is the world heading for generations of energy wars, as the science fiction stories predicted? I don’t believe so. In the science fiction stories, the heart of the energy giants’ strategy was the suppression of information on all decentralized forms of energy. Corporations can dominate energy only when energy installations are engineered on a massive scale, beyond the financial reach of a homeowner or a small town. As long as ordinary workers can purchase rooftop solar installations and similar small-scale energy sources, centralized control of energy faces limits. In the novels, energy companies recognized this and used their political might to eliminate solar power. They made sure that information on a whole range of energy technology, from small-scale nuclear reactors to batteries, was a state secret. If the breadth of energy technology were to become known to the public, the continuing energy wars would lose their popular support.

In real life, no one industry has cornered the market on energy. We have certainly seen well-funded efforts in recent years to discredit energy technology, but I don’t think that campaign is having much effect. When people see solar-powered airplanes fly, hear music festivals powered by bicycles, or warm up by wood-burning stoves, it anchors the idea that there are choices. I don’t know if Europe is ready to say, “Maybe we can do without natural gas,” but there are legislators pushing that point of view. It is too late for the past two decades of innovation in energy technology to be turned into a secret. The more risky natural gas or any other centralized energy source becomes, the more speaking time those who want to build alternatives will be afforded.

Tax Weekend and Feeling Old

More than a few people are feeling older this weekend. I say this because the U.S. income tax deadline is the middle of April, and this weekend is the last chance most taxpayers have to get their tax forms together before the deadline. The simple accounting that goes into a tax form is the kind of thing that makes most people feel old — putting transactions in categories and adding them up, with hundreds of details and tens of thousands of rules to observe, and real money at stake if you make a single error at any point along the way. And the time pressure is real: if you look at the tax law, in general you are better off with a complete and filed form with errors that you hope are not too serious than you are if you miss the deadline. If your form has errors, you may, in the worst case, have to persuade a judge that these were honest last-minute mistakes from a taxpayer who is not so skilled with taxes. But if you do not file on time, even a judge cannot save you.

Of course, it is more than just the difficulty of the forms themselves. There are all the things you miss out on while you are hunched over a table covered with letter-sized papers. Just one example from Twitter three evenings ago, during the Rock ’n’ Roll Hall of Fame induction ceremony:

#rockhall2014 is going on and I'm sitting at home doing taxes, does anyone else see the problem here

— Ben Dover (@jessaykoch) April 11, 2014

Things are not necessarily better for the people to whom tax forms are simple and obvious, the natural accountants among us. A tax professional might prepare a hundred people’s taxes this weekend, a mind-bending task that researchers say results in almost the same error rate that you see when people do their own tax forms. The advantage of hiring a professional is not getting everything right, but getting it done faster and with less fuss.

Some people, of course, have much simpler taxes, but that is not necessarily a good thing. For the college graduate who managed to string together three temporary jobs over the course of the year, the tax form that combines this income is not too much to ask, but adding the numbers together and double-checking and finding that one is officially living below the poverty line can be a sinking feeling. Tax forms are nothing if not nosy. It is on line 1 that Form 1040 asks how your family is doing. If you were eager to tell the government that your only child died or that your marriage is over, this is where you do it. And the form doesn’t get much better as you go along.

I fell into tax weekend myself in spite of filing my forms two months ago. A letter arrived yesterday from the IRS asking me to fill in one key line I mistakenly left blank on schedule A. The computer-generated letter is careful to explain that they don’t want an explanation, just the corrected schedule. And so, I have an envelope going out to the IRS tomorrow morning too, along with 100 million other people. It looks bad that my mistake is on Schedule “A” — I didn’t get very far with my attempt at an error-free tax filing, did I? But I know I will make these mistakes sometimes and I am glad there is a system to sort it all out.

In the end, it is probably a good thing that tax filings go out with a relatively unforgiving deadline. It is bad enough that so many people postpone tax work until April when it can more easily be done in February and March. With a softer deadline the procrastinators among us might still be worrying about their tax forms when summer comes. The United States might lack the political will to address the emotional mess that the tax system entails, but at least we can put tax season behind us every year.

This Week in Bank Failures

It has become a little harder for the largest banks to make a profit — at least in the securities markets. Trading desks turned an impressive profit as long as the stock market was going up, but the strategy began to show strain last year and fell apart, based on the early reports, in the first quarter of this year. We knew all along that giant banks could not continue to make their money in the markets indefinitely. The interest rates banks pay to borrow money for trading will not stay low forever, the stock market cannot go up forever, and every gambler eventually places a bad bet. But also, some of the shadow-banking investors that have funded banks’ trading desks have come under scrutiny; banks have been paying too big a share of gains out as bonuses, while absorbing the losses; new regulations narrow the range of trading that banks can do on their own accounts. The era of securities trading at banks is certainly not over, but the big profits may be harder to find now.

A federal court in New York has approved SAC Capital’s insider trading settlement. The fund manager will pay $1.8 billion in fines and penalties and will scale down its operations, no longer managing investments for the public. Eight employees have been convicted for their involvement.

Vatican Bank will remain open for now, as Pope Francis has decided to pursue reform instead of closing the bank.

The Commodity Futures Trading Commission may draft clearer guidance on swaps and related derivatives, it is hoped, after a Senate committee approved Timothy Massad to head the agency. Massad has worked in the international swaps trade in recent years and may be more able to spot potential loopholes in the rules.