The Fed

Ben Bernanke is a smart guy and a student of the Great Depression, too bad it appears that he's focused on the wrong decade. Allan Meltzer has a terrific editorial in today's Wall Street Journal wondering if the Fed is making the same mistakes from the 70s, which lead to stagflation, that is, focusing on unemployment and recession at the risk of increased inflation and depressed economic growth.

According to Meltzer the Fed is under a lot of outside pressure:

For Wall Street, the pressure for lower interest rates is based on a hope that bond and mortgage yields will decline and their losses will be limited. Often long-term rates fall when the Fed lowers short-term rates -- and since bond and mortgage prices rise when their rates fall, the losses of investors in these instruments will be reduced. For Congress and the administration, there is a need to show "concern" by doing something in an election year. These are not the concerns that should influence an independent central bank.

....

After 1985, Fed policy kept inflation and unemployment low. The result was 20 years of growth, and three of the longest peacetime expansions punctuated by short recessions.

We should not throw this policy away. Federal Reserve independence is a valuable right which should not be discarded. The Fed should insist on its obligation to prevent inflation and sustain growth, not sacrificing inflation to lower unemployment before the election.

At the heart of this is a desire to avoid a "recession" and can be seen in the Fed's rate cutting actions and Congress' move to protect those who suffered from home loan defaults. The article wonders if the political desire to do something about those issues (cutting rates, stimulus packages and bailouts) is worth the longer term effects on the economy (higher inflation, higher unemployment, low economic growth). Or, as Robert Samuelson put it in a recent Washington Post editorial:

Naturally, no politician acknowledges the self-evident implication: that recessions, though unwanted and hurtful to many, are not just inevitable; sometimes they're also necessary to prevent the larger and longer-lasting harm that would result from resurgent inflation. Interestingly, many academic and business economists who have more freedom to speak their minds suffer the same deficiency. They treat every potential recession as a policy failure when it is often simply part of the business cycle. They thus contribute to a political climate that, focused on avoiding or minimizing any recession, may perversely aggravate inflation and lead to much harsher recessions later.

....

But persistent inflation -- the general rise of most prices -- has only one cause: too much money chasing too few goods. It's not a random accident. The Federal Reserve regulates the nation's supply of money and credit. The Fed creates inflation and can control it.

Since August, the Fed has been under great pressure to ease money and credit. It has. The overnight Fed funds rate has fallen from 5.25 percent in early September to 3 percent now. Politicians are clamoring for the Fed to prevent a recession. Banks and other financial institutions want cheaper credit to enable them to offset losses on subprime mortgages. There is fear of a wider economic crisis if large losses erode confidence and, by depleting the capital of banks and other financial institutions, undermine their ability and willingness to lend and invest.

Unfortunately, the Fed shows signs of overreacting to these pressures and repeating the great blunder of the 1970s. Underestimating inflation then, the Fed repeatedly shoved out too much money and credit in a vain effort to keep the economy near "full employment." Now, the Fed has again underestimated inflation. It expected the economic slowdown to suppress inflation spontaneously. But so far, the lower inflation hasn't materialized, in part because, outside of housing, there hasn't been much of an economic slowdown.

It's true that the Fed is treading the proverbial tightrope. No one wants a financial crisis, but no one should want the return of stagflation, either. The American economy -- a marvelous but flawed engine of wealth -- periodically goes to speculative or inflationary excesses. If most of those excesses aren't given the time to self-correct, we may be trading modest pain today for much greater pain tomorrow. Trying to prevent a recession at all costs is a fool's errand that could ultimately backfire on us all.

The Fed is in a no-win situation at this point: the political environment is not favorable to "letting markets work," instead, "something must be done" since people are losing their house (nevermind that those same people knowingly put themselves into that situation with their home loans), or "we are in a recession, Fed do something about it." Bernanke risks losing all control of the situation as he tries to mollify the competing interests of the political environment and the desire of Wall Street. As the saying goes, when you try to please everyone, you end up pleasing no one.

Just what I needed

You know, I don't even like writing about this stuff anymore, but for some reason, I can't help myself.

Today, the Ess Eff City Council decided that chains (defined as having 14 or more locations in California) need to post their nutritional information for all the world to see. Well, what's wrong with that, you might say. For one thing, they already do it- go to McDonalds, look around, I bet you'll find a large piece of paper with a crappy plastic frame that outlines the nutritional information of that greasy double cheeseburger. If not, guess what, simply go up to one of their helpful counter-people and ask for the nutritional information booklet, and, voila, there you go. Not only that, it's readily available on their web page. And all this information is available because customers have asked for it, not because government demanded it.

But, since people are still eating at fast food restaurants and since fast food restaurants are owned by large (read: evil) corporations, that's simply not good enough. Instead, the City Council wants the nutritional information right up there next to the item- as if me knowing that the double cheeseburger I so dearly love has 440 calories is going to keep me from eating it (rather, having the fries now cooked in a "healthy" soy-based oil instead of the old "unhealthy" oil is what's keeping me from eating there).

Next you might say, but doesn't the customer deserve to have this information available in order to make their own choices? Yes, and the information is already available. And people are still eating there.

If the city wanted to really help people eat better, they'd loosen building and chain restrictions to allow for grocery stores to open in neighborhoods that are under-served, they would work with private corporations to make school lunches more healthy (and appetizing for that matter), and do more to educate the public, especially in lower income areas (since, really, that's who this law is aimed at and to shame those people for eating at chains), at eating better.

I don't really know how making this information even more available is going to solve whatever problem the city sees is the problem- as I noted above, it could be that simply eating at fast food restaurants (or chains) is the problem, or they are trying to shame people into not eating that cheeseburger or slice of cheesecake, or whether they are trying to dissuade minority and lower income residents from eating there (hint: they eat there because they can afford it).

The City Council seems to think that the residents of this city are stupid and incapable of making their own choices, in that, the City Council has their own opinion on what the right choice is and, despite their best efforts on zoning, building restrictions, and other anti-chain legislation, people are still going to chains. Yet at the same time, they pursue other anti-business legislation, such as universal health care and paid sick time, when the only companies that are able to afford those policies are chains.

What is it worth to you?

From today's San Jose Mercury News on a pilot project to get hydrogen cell buses up and running throughout Santa Clara County:

But a new report from the VTA says the $18 million state-mandated pilot project costs too much green - and raises troubling questions about whether the program should continue.

The most glaring figure: Zero-emission buses - or ZEBs - cost $51.66 to fuel, maintain and operate per mile compared with just $1.61 for a 40-foot conventional diesel coach. They break down much more frequently, and replacement parts are next to impossible to order, according to the report.

Further, the article also notes:

Although the cost of a new hydrogen-fuel-cell bus has fallen from about $3.5 million to $2.5 million, a diesel coach costs about $400,000. And ZEBs have on average traveled 1,100 miles before needing repairs in the VTA trial, while a typical diesel bus covers about 6,000 miles.

So, the VTA spent $6 million to buy 3 buses that are not cost-efficient, are expensive to maintain, and yet the state has mandated that transit agencies with 200 or more diesel buses must have 15% of those be zero emission by 2012. And the state is looking to expand these pilot programs. AC Transit uses hydrogen/diesel hybrids, an option that was not given to Santa Clara County. I can only imagine the eventual total cost to these transit agencies (and the residents of these counties) to meet these arbitrary goals and standards, what with transit agencies already overwhelmed and running over budget.

According to S.F. Muni, they use electric/diesel hybrids, with the hope to use biofuel-based diesel at some point in the future (oh great); these buses cost $500,000, and, apparently, have lower maintenance rates as well than the fuel cell buses.

What does this all mean? It means that Santa Clara County is spending well beyond its means to meet an ambitious goal, was not allowed by the State to figure out how to meet that goal cost-effectively, which resulted in them buying an expensive technology that does not appear to be commercially ready, and still has a due date in the future to purchase more of these money-losers. San Francisco, on the other hand, appears to have successfully navigated their way around this and come out. . .looking good? Am I even allowed to say that? I'm guessing SF Muni said, "hey, we have these hills to climb and this technology can't provide the power needed to get up and down these hills, so. . .can we figure out how to do it on our own?"

Two final things- 1) I like fuel cell technology, it's not like powering something with hydrogen is dangerous or anything; 2) I hate the S.F. Muni hybrid buses. Unless you are over 6 feet tall, you can't open the windows, if you're sitting down, you can barely look out the windows and there are 2 steps towards the back which wastes alot of space, in my opinion. Also, there is a short-bus version that has less seats, but the same 2 steps in the back. The short-bus version is quite prevalent on my bus route since it's an express route. I'm sure that will come as no surprise to some people that I sometimes ride the short bus.

Garbage police

This is a news report from KPIX here in Ess Eff on the garbage police. Apparently, the garbage company here in Ess Eff has the authority to go through your trash to make sure you're recycling. Once again, the powers that be in this City will stop at nothing to enforce their way of life on the residents of Ess Eff. Eventually, City mucky-mucks would like to see fines for people who veer off the chosen path.

Having garbage workers go through people's garbage presents several concerns- 1) don't they have better things to do than go through people's trash to make sure recycling is going on, 2) if they are going through people's trash, what's to stop them from stealing stuff from the trash, say, credit card bills, or other sources of information that could lead to stolen identities, and 3) seems to be an otherwise unwarranted government intrusion on one's privacy, to the extent one believes in a "right to privacy" (which I do believe is a requirement to be a liberal, errr, progressive).

The City is increasingly using the guise of environmentalism to enforce a rigid set of lifestyle rules for the residents of Ess Eff, right down to monitoring your trash, regardless of cost. This is no more apparent than in an article from today's Chronicle on the hiring of a "Director of Climate Protection Initiatives" with a salary of $160,000 a year- now one of 25 people employed by the City to work on climate change. Wouldn't that money be better spent actually doing something instead of talking and meeting? Nevermind the bond measures that have passed and will be presented to voters in the coming elections on various spending priorities- how can the residents sit here and allow their tax money be spent on frivolous city government jobs and at the same time agree to huge bond measures that will burden current and future city government budgets and residents.

Sorry, I'm just a bit cranky these past few days and am not looking forward to a group exercise tomorrow on Value Statements and Group Objectives that is required by work.

Awakening

The Awakening. That probably doesn't mean much to most people, but just those two words immediately transports me back to D.C. So, it was with a bit of sadness that I found this article- Moving Day for The Awakening. The Awakening has been a fixture at the tip of Hains Point in D.C. for nearly 30 years, and a source of endless amusement whenever I would take family visiting on my tour of D.C.; the kids always loved climbing on the old man and it provided a great view of Reagan National Airport. A friend even came to town only wanting to see The Awakening- turned out the only day available turned out to be the same day as a very miserable downpour that ended up closing that end of Hains Point due to flooding concerns (long-time residents of D.C. will also remember that day as the Bull Run Radiohead fiasco, which I and a group of friends in town all had tickets to and were on the road to the park when we got word it was cancelled). Now it is moving. . .to Maryland.

According to the article, the sculpture was purchased by the person bankrolling the National Harbor, which will be located in Prince George's County, just to the show of the Woodrow Wilson bridge, which is also where it will be re-installed in a bed of white sand. On the web page, there is even a graphical representation of where The Awakening will be located.

I am sorry to see The Awakening go, even if it is only a few miles downriver, nevermind that I can count on one hand the number of times I ventured anywhere near the Woodrow Wilson Bridge in my 8 1/2 years of living in D.C. I can only hope that this National Harbor does not sully the wonderful view of the Potomac one has whilst driving down the George Washington Parkway to Mt. Vernon, and provides a suitable venue for The Awakening.

Wine clubs

So, last Saturday went up to Sonoma for another round of wine tasting- since having moved to the Bay Area trips to Napa and Sonoma have been quite numerous. This trip was done on the occasion of a birthday for one of my wife's friends and because we had a few wine club pick-ups to make.

Wine club- a marketing program whereby a winery entices customers with discounted prices but loads them up on wine; some also provide perks, such as free tastings for you and friends or the ability to have dinner with the winemakers.

We hit the road, and our first stop is Iron Horse. It's a bit tricky getting to the tasting room since you hit the end of the paved road and drive onto what looks like a private road, but the road leads you right to their tasting room. Better known for their sparkling wine, they also put out some whites (chardonnay and viognier) and reds (cabernet and bordeaux blends). You get 3 options, 2 of which cost $10 (1 sparkling and 1 red/white) and the 3rd costs $15 (this is for their vintage stuff). With there being 5 of us, we had 2 sparkling tastings and 3 red/white tastings. After we finished with the listed tastings, the pourer went ahead and poured us some extra's like their vintage sparkling and some cabernet in a magnum. We walked out of there with a bottle of their bordeaux blend that was very enjoyable- others left with a magnum of a vintage sparkling and another left with several bottles and joined the wine club.

Since we didn't leave the Sunset until 10:45 AM, and we finally got to Iron Horse around noon, after the Iron Horse tasting it was time for lunch. So, we stopped at the Ace Cider Pub. Ace makes several varieties of cider, including apple, pear (my favorite), berry, honey and a number of other styles. It doesn't look like much, but it's a place to get some cider and food, especially considering that there aren't too many places along the wine tasting roads to get food. Of course, if you aren't a cider fan, you can get a bottle of Abbot Ale.

After lunch, we had to make a quick stop at DeLoach to pick up the February wine club shipment, before moving on to J.

J was a winery that my wife and I had always wanted to join because they had good wine and with a wine club discount, it would allow us to try other wines that they offered. Additionally, the tasting would come with a food pairing, and that resulted in a fairly high tasting price of $20 per person. So, we joined the wine club and we initially got 4 free tastings. About 6 months later, we go there with 3 people and we're told that it had been changed to 2 people, but they let us in anyway. At the beginning on January, we got a letter from J letting us know about changes they were making to the wine club- basically, they instituted 4 levels of membership, increased the number of bottles per shipment, but took away the food pairing tasting, and most other tasting room-related perks (but kept the free 2 person tasting). The food pairing can now only be done 4 days a week, must be arranged in advance, and wine club members only get a small discount on the fees. From conversations overhead and with our pourer, it's apparent that wine club members are unhappy with the changes. One of our friends that was with us expects to quit in a month or so after using a free tasting in a month or so. Even though the draw of a magnum of bubbly at the end of the year is strong (it was fun to carry a magnum around with me at the end of new years eve and taking swigs from it between songs on Rock Band), I'm not really seeing the benefits that used to be there.

Nevertheless, the wine club pick up room did have food, and fairly tasty food at that, including braised short ribs on mushroom caps, which went well with their Thomas Vineyard Pinot Noir. Yum!

Finished J at around 4 and thought, hey, we can still hit at least 1 more, and decided on trying somewhere new- the tasting rooms around Healdsburg Square.

Had never ventured into the square before, but had seen it as an opportunity to hit one day, and even did a bit of research. First stop, Chateau Felice, just off the square. Being a Chalk Hill appelation winery, I knew at least one person in the group would like it right from the start, and we were not disappointed. We were offered two tasting options, 1 for $10 and the other for $15, we all stuck with the $10 one. The wines were all very approachable and enjoyable. The chardonnay (un-oaked) was very crisp, the reds were equally good, and we took home a bottle of their chardonnay and their Cabernet, which is priced $19 a bottle- a steal! Having enjoyed their tasting so much, we joined their wine club- and bought everyone else's purchases since we got the discount.

We stumbled out of the Chateau Felice tasting room and looked around and say right next door, another tasting room!! This one was for Selby Winery. Walked in, got a few glasses, talked with the pourer and got a taste of their white; the tasting was supposed to consist of like 8 tastings, but we only made it through 3 before we walked out having been ignored for far too long. That's right, left the glasses on the bar and walked out. I can only think of one other time where I've walked out of a winery, and that was because the wine was nearly undrinkable, but never due to poor service. We may stop in at this winery again at some time in the future, because a) i'm a sucker for what appeared to be a free tasting and b) it's right next door to Chateau Felice.

With that bad feeling, we walked back towards the car, but I wanted to check out one more tasting room, unfortunately, what was billed as the Mayo Family tasting room was in fact a wine bar and store. So, we all walked around the store, and found a bottle of Ridge that I had never seen before: Independence School. If there is a wine that I'll buy without tasting, it will be a Ridge wine.

All in all, an enjoyable trip up to the Russian River Valley, as most trips are. I've already begun looking at more wineries and tasting rooms to hit for next visit.

Yes, I realize that the criticism of the J wine club was probably far more whining than I meant it to be, but really, people join a wine club to feel like a part of the winery, and when that winery starts treating its members like crap, it's hard not to speak out. And it certainly won't stop us for contemplating joining new clubs, as evidenced above.

Bits and pieces

On the bus ride home the other day, I saw something startling. First, background: there are two gas station on Divisidero and Fell, one is an ARCO that is always cheaper than most other Ess Eff gas stations because the use cash prices and charge a fee for using a credit or debit card, and across the street from the ARCO is a 76 station that is at least 40 cents more. So, on my bus ride down Fell, I noticed that the gas station across the street from the ARCO is no longer a 76, but is now an independent gas station called Spirit, based on the new logo that is now in front of the old gas station logo. With the change comes a change in price- it's now 2 cents more than the ARCO, making it extremely competitive, if not cheaper (unless you pay cash at the ARCO). This is quite a welcome change in gas price for that neighborhood, not to mention traffic- there were often lines of cars up Fell waiting to get to the cheaper gas. Not to mention that the gas station owner was probably tired of paying 76 high amounts of money for licensing and figured he could make more money without the name branding and buying his own gas- good for him.

Just one or two things on the election: not too bad with the election picks, only missed on Ess Eff Prop A, but I fully expected that to happen (and don't expect me to start supporting bonds, Ess Eff is planning a lot of them in the years ahead, and I plan to be very suspicious of them).

What I find amusing about the discussion about states from last Tuesday is that on the Republican side John McCain wins in traditional Democratic states and it's a sign of weakness (the base doesn't like him and won't vote for him), but Barack Obama wins in traditional Republican states and it's a sign of strength (look at his ability to cross party lines). Maybe it's a sign of each party, and goes along with my view that maybe it's time for the grand alliance to re-think itself. The Republican "base" doesn't like John McCain for a number of reason, including ability to work with Democrats. The Democratic base appears more aligned with Hillary Clinton, but new Democrat voters are coming out to support Obama. So, in states that are traditionally held by the other party, means that there is more ground for new voters to have an impact- which results in base candidates winning base states and non-base candidates winning non-base states.

Finally, with Mitt Romney dropping out of the Republican race to be the nominee for President, basically means that John McCain will be the Republican nominee, which automatically leads to discussions on Vice President nominees. First, we're dealing with the opposite of 2000: George W. Bush being relatively young, chose someone with no desire to run for President on his own, Dick Cheney. This time, we have a relatively old person running for President, so his pick for VP will be under much more scrutiny since they would be put in place to run for President in 2012 (presuming McCain wins, or even loses), or earlier. Which means. . .I hope it's not Mike Huckabee. I really won't get into prospective VP nominees, I have people I'd like to see, and people I'd rather not see. But I don't really want to get into it right now.

In preparation for February 5

In case any of y'all missed it, here are my reviews and recommendations for tomorrow's California primary:

Prop. 91- No
Prop. 92- No
Prop. 93- No
Prop. 94 through 97- Yes

Republican- John McCain

San Francisco ballot propositions

Prop. A- No
Prop. B- Yes
Prop. C- No

If you want another opinion, you can see my friend Vansmack's reviews here.