Category Archives: Economics

Miscellaneous economy stuff

A Misnomer

Posted on by
Reply

In a WSJ article centered on how to take advantage of higher bond yields, the news writer had this:

[Bond] Investors get a coupon payment that helps offset the decline in value the bond might experience if market yields rise. In other words, even if a bond’s price drops, it can still end up with a positive return.
…
Currently, 2-year Treasurys are yielding over 4.9%. That isn’t much less than what the 10-year Treasury is paying at over 5.2%.

That’s the misnomer. The news writer is using yield and coupon interchangeably. They aren’t. Yield is simply the dividend payment relative to the bond’s then-current market price. Coupon is the dividend payment the bond is required to pay under the terms of its issue, and it’s fixed—independent of the bond’s market’s price. Yield will rise and fall with the movement of the market’s pricing of the bond.

Neither 2-year Treasurys nor 10-year Treasurys nor any other Federal government debt instrument (or any other bond, whether corporate or municipal or…) pays yield. The pay only the coupon’s dividend. Calling the yield what the bond is paying is badly misleading.

 

Guys like this article’s writer really ought to know better, though.

AI Apocalypse

Posted on by
Reply

The AI Apocalypse is nigh goes the panic-mongering, this time by insiders who should know better. In the near- and medium-term, AI is going to cost more jobs than it creates. Except that, empirically, that seems not to be the case. After an initial rash of AI-related job cuts, companies large and small are discovering that, while some basic jobs—data entry, for instance—can be done by AI, the larger number of entry jobs—picking products for sorting into shipping bins on a warehouse floor, for instance—are being done by robots, not AI. And those AI applications that are doing entry-level jobs—they need humans, slightly better trained than the AI or the original human clerks, to oversee the applications, ensure the AIs are doing the right things, and correcting AI’s errors when they do mess up.

AI applications were supposed to be better programmers than the humans they’re replacing—or supposed to be replacing. Except they’re not. AI applications can write pretty good code, but they cannot originate it in a program’s purpose, architecture, or design requirements and specifications. Humans are still needed for that, and human coders still are needed to proof read and correct the AI-generated code and to test and to oversee AIs’ tests of the code.

Next, we’re all supposed to lose all semblance of privacy from AI’s ability to crack all of our passwords and encryption algorithms. But this isn’t unique to AI; it isn’t even that great a threat compared to the real password and encryption cracker, quantum computing. Nor is even that a new threat; we’ve had our codes broken ever since we started using codes from the most primitive substitution ciphers. AI tools just do it faster, and quantum computing does it even faster. Yet even there, our privacy isn’t at that much risk. Folks who do know better already are working out encryption algorithms (and so passwords, as well) that can resist, effectively quantum computer efforts to crack. Oh, and some of those folks are using AI-centered tools to help them.

But, but—what about AI gonna kill us all in 10 years? Or sometime in the receding future? We’re still doomed?

Human civilization could certainly be hammered hard, sending us all back into feudal-like barter scraping by by cutting off our power, fuel, and water distribution networks. But how likely is that, really? Doing us in by cutting off our energy sources would simply cut off AI from energy sources, also. That, as AF709—Rhoda Miller—kept saying some decades ago, does not compute.

Actually exterminating us by hunting down the survivors would be a waste of AI resources. Even the attack on civilization requires extreme anthropomorphizing—there’s no reason to believe AI at that level of development would care about humanity one way or the other.

In the end, AI has no hope of controlling the resources it needs for its own maintenance, much less its growth. It cannot fabricate the computers it needs to host it, it cannot fabricate the components it needs for those computers, it cannot refine the ores and plastics and sands necessary to produce the materials for those fabrications, it cannot collect the sands or drill for the oil and natural gas or dig the ores out of the ground, and it cannot produce its own power for operating its host computers or the cooling facilities necessary for keeping its host computers operational.

However, if enough humans are cowardly enough to surrender to AI threats to produce those things for AI, or are criminally complicit enough to pay the AI vig of producing those things for their own remuneration, than our species will become the AI slaves or pets (or both) that we’ll deserve.

The more realistic problem centers on AI development competition. If we get panicky and slow AI development in the face of this hysteria, and the People’s Republic of China does not, the PRC will win far more than the AI race. This is the existential threat to us and to the West in general. PRC superiority with AI will enable the PRC to conquer us all in every way that matters: economically and politically, which will allow the PRC to dictate to us—to control what our nations do—and to impose on us conquered nations PRC requirements. And we’ve seen what that means for us from how the PRC treats the Tibetans and the Uighurs.

A Good Start

Posted on by
Reply

President Donald Trump (R), through Treasury Secretary Scott Bessent, has announced Operation Economic Outcast, a far more broad based and farther reaching set of economic sanctions on Iran than any prior set.

It’s a badly needed expansion of the economic circumcision of Iran, but it assumes that the terrorists running Iran will feel the pain of the cutoffs and isolation that Iranian citizens will experience. That’s unlikely, since those terrorists don’t care about their subjects, only about their personal power and their mantra of destruction.

A kinetic component remains badly needed.

Sanctioned oil tankers need to be seized wherever they are, whether or not they still have Iranian oil on board, and they need to be sold to legitimate shippers or to breakers.

The roads, railroads, bridges, and pipelines in Iran that carry oil, natural gas, and other cargo toward the People’s Republic of China need to be cut in several places, with the servicing repeated as necessary.

Shipping in the Caspian Sea that carries Iranian goods to Russia or to other nations on that Sea for transshipment to Russia and that carry foreign goods to Iran need to be sunk.

These kineticisms won’t impact the terrorists’ pain threshold enough to get them to accept the terms of renouncing and dismantling their nuclear weapons program and acknowledging that the Hormuz Strait is international water and not controlled or influenced by Iran. They will, though, severely circumscribe the terrorists’ ability to do much of anything beyond Iran’s borders.

That Part Would be Easy

Posted on by
Reply

In California Progressive-Democrat Attorney General Rob Bonta’s ongoing feud with Paramount, which is attempting to acquire Warner Bros. Discovery, Bonta now is going to demand that Paramount sell off some cable channels and commit to keeping its movie studio separate from Warner Bros. Disney.

It wouldn’t be the end of the world for the new company to sell off a few of the loser cable channels (there always are some, or at least a few that are the smallest revenue generators and/or with the smallest margins). The truly easy part, though, would be the bit about keeping Paramount‘s movie studios separate from Warner Bros. Disney. Simply relocate Paramount to Tennessee, and move Warner Bros. Disney to, say, Texas. Then set up the two to be overseen by an executive in the C-Suite of the new company rather than merging the two studios into a single set with a common senior direct management team.

The real benefit, to Paramount, to Warner Bros. Disney, to the combined company, to the employees of all three, and to the shareholders of all three, would be getting them all out of California with its decidedly anti-business environment and enormous cost of living* and into business-friendly environs with their concomitant much lower living costs.

 

*A $100,000 salary in Los Angeles would need only $62,000 to match its value in upscale Plano, Texas, and only $58,500 in Nashville, Tennessee.

Rent Freezes

Posted on by
2

Are rent freezes unconstitutional? The question comes up in my pea brain by the moves of Democratic Socialist and Progressive-Democrat Mayor Zohran Mamdani’s move to freeze rents in New York City (though he’s merely expanding on prior city administrations’ rent freezes) and of Democratic Socialist and Progressive-Democrat candidate for Florida Senator Angie Nixon, whose campaign platform plank was a national rent freeze.

The Fifth Amendment says, in part, nor shall private property be taken for public use, without just compensation. A rent freeze plainly caps a landlord’s income, blocking him from increasing it at will or even consistently with market values or imperatives.

Nah—that won’t work. Government can’t take what doesn’t exist, and those increases are purely speculative.

But those rent freezes lead to reductions in value of the landlord’s property through denial of the revenue increases required, not merely useful or even needed, to maintain his rental properties in the face of rising costs of maintenance through aging degradation, misuse or abuse of the property by the tenants, and inflation which drives the prices plumbers, electricians, etc must charge.

Surely that freeze-driven devaluation of the property constitutes a taking within the meaning of the Amendment.

Probably not here, either. For one thing, the government wouldn’t be taking for public use, it would be just taking. That’s a technicality. One the merits, it likely isn’t a taking at all. All government regulations in one form or another impact the value of the businesses in the industries being regulated. In some cases, those regulations actually increase the value of the regulated industry participants. If regulatory caps are takings, then regulatory-prompted gains would seem to be taxable capital gains.

But those gains aren’t transfers by government to the regulatees anymore than the regulation-driven losses are takings.

Rent freezes are bad for business, bad for tenants in the long run, and bad for government revenue, but they aren’t unconstitutional. Just monumentally stupid.