All posts by James O'Keefe

Stupid idea to revive the economy #1

NPR reports that the Republicans are pushing a proposal to have the federal government make home loans at a reduced rate (say 4%) for all non-jumbo loans.  Since the mortgage rates are about 5.38% at this time, Senate Republican leader Mitch McConnell purports that:

"the average family would see its monthly mortgage payment drop by over $400 a month, which comes out to over $5,000 a year"

If the Republicans are pushing a program to keep mortgage rates low (ala 1890's Populism), then they are pretty desperate to avoid increasing government spending to build needed infrastructure like roads and help states and municipalities cover their increasing budget short falls.

However, this proposal has several obvious problems:

  1. We don't need to prop up the housing bubble artificially, since it will merely sustain already high home prices that are out of whack with economic fundamentals;
  2. Such a plan is a net transfer to the middle class who are able to keep their jobs and will not directly help those who are poor and/or lose their job and so cannot pay their mortgage payments;
  3. With the economy in free fall, many middle class folks are unlikely to spend much of any savings they realize from these loans.  That will reduce any economic stimulus that might result from this proposal;
  4. Anyone refinancing will be paying out thousands of dollars of fees for the privilege, which I suppose will stimulate the economy by paying lawyers, insurers and financiers, but I doubt many would see that as a net benefit, especially if it ends up increasing their loan amount, or reducing their savings;
  5. All that said, with the economy tanking and this proposal unlikely to do much to stop that,  housing prices will continue to decline, leaving the federal government on the hook for more foreclosures.

Here are the not-so-obvious (and long-term) problems.

Firstly, the proposers suggest that the federal government will make money through this plan because the federal government is currently able to borrow at a lower rate than the rate at which the money would be lent out to home buyers (i.e. 4%).  That is a fine assumption for now since the economy is tanking, interest rates are extremely low and we are facing deflation.  What happens when the economy starts to grow again?

Since 1962, nominal 10-year Treasury Bonds rates have seldom been below 4%.  Once those 10-year TBond rates go back over 4%, this proposal starts costing the federal government money and lots of it.  I will point out that some financial institutions (say those in Iceland among other places) went bankrupt taking these "borrow at low short-term rates and lend at moderate long-term rates" bets.

Secondly, it is likely that such a program will not continue indefinitely, especially as Treasury Bond rates go up.  By keeping 30 year mortgage rates artificially low for some portion of the home-owning population, we create an incentive for people with these loans to not sell their house to move up to a larger house or to move to out of regions where jobs are scarce to where they are plentiful (though there aren't many of those now).  It they do buy a new house, they will need to get a new mortgage and if they do that, their rates will go up.  Perhaps the Republicans will also propose that we make mortgages transferable.

I am really surprised by this proposal.  I thought these Republicans believed in small government and dealing with the problems at the margin (like say for people who are being foreclosed on) rather than having expensive all encompassing solutions.  I think the Republican leaders are just desperate enough to suggest it, and hope no one looks at the details.  But that has been their playbook for a long time.

ADDENDUM: Anyone want to bet that if this proposal gets signed into law, the Republicans are going to clamor for a similar program for commercial real estate?  Anyone?

Telephone Serendipity

When I was in high school I hung out at MIT a great deal.  It started at the MIT Educational Studies Program, and continued on until I went off to UMass Amherst for college.  It was there that I met some good friends, some of whom I worked with at FTP Software among other places.

It was there that I met Phil Servita, Larissa King, Mark Mason and others and embarked on what is the strangest telephone experience I have ever experienced until today.  For you see on that day over 20 years ago, we decided to pull a prank on Adam Mackler, IIRC.

We (by which I mean me, Phil and I think Larissa, Mark, and maybe one or two others) knew that Adam would be home alone that moment with his family away.  He would be asleep comfortably in his bed in the morning and we knew how to get into his house.  We stole into his house and cooked him green eggs and ham.  Then we tip toed up to his room, announced our presence, gave him the green eggs and ham and proceeded to go all Thing One and Thing Two on him and his house (though we didn't actually break anything.)

He chased us and finally got tired of it and went to his room and started to eat the green eggs and ham.  In his room we started to yell: phone, phone, phone, …  We had arranged with another friend for him to call Adam's house at just that time and ask something like "Is Joe there?" and hang up.  As we yelled phone, …, Adam picked up the phone before it rang, but just after it established the connection between the two phones and was greeted by "Is Joe there?" to which he screamed in surprise and threw the phone away.  And so I encountered my first case of telephone serendipity.

Thankfully, I am lucky enough to actually have two such experiences for today, as I sat in my car with my three year-old asleep in her car seat, and having just finished listening to NPR talk about John Maynard Keynes, I called Melanie.  I was greeted by the sound of someone dialing into the phone.  For at the exact moment that I called, she had pressed the Talk button on her phone and started dialing. 

Telephone serendipity can strike twice.

For a little color

Been a bit tied up with work and family.  Managed to get all of the Shadow Cruisers built.  Planning to base the White Stars this weekend.

Next up I thought I would try my hand at painting some of the triremes.  My research turned up that the hulls of the Athenian triremes and the quinqueremes were probably made with fir.  The Phoenician triremes and the heptares likely with cedar.

I visited my local woodworking store to get samples of each type of wood.  They didn't have any fir, but being the knowledgeable folks they are, they did have a book with pictures of different types of wood.  The cedar looked like pine, only darker and more red.  The fir looked lighter and less red than the cedar, but still darker than a pine.  I figure I can make a wash using a light brown and a bit of red for the cedar and water it down further to make the fir color.  This is of course on top of the tan I sprayed on the primed ships.

Ok, maybe I could use a life stream

Arstechnica had an interesting review of a new life streaming service called Storytlr.  I liked their idea of allowing users to take items from their life stream and put them together to tell a story.  That and the ability to integrate your life streaming page with your domain peaked my interest.  I tried it out and found the setup easy.  I need to add a picture and update my bio, but stream.jamesokeefe.org exists if you want to get a summary of what I am doing/posting on the web.

However, the one thing you won't find there are my Facebook notices.  Everything I have now often feeds into Facebook as is and I am just not willing to give my Facebook login over to any site.  Storytlr should add Facebook Connect and OpenId/OAuth/OpenSocial/etc support.

AI on my mind

The second half of the fourth and last season of the new Battlestar Galactica (BSG) starts on Friday the 16th.  As someone who got into the show at the start of season three (watching seasons one and two on dvd was a pleasure), I am quite sad to see that it will be over in about three months or so.  It is pretty much the only show I go out of my way to watch with regularity.

There have been a spate of movies and novels on the effects of Artificial Intelligence (AI) on our society.  Some with AI's working with people and others with them working against humanity.  I have been meaning to start a list of such works of fiction and now seems a fitting time.  However, wikipedia, of course, beat me too it.  However, they don't list the following works of fiction:

Though the last two may have non-sentient AI.

Thoughts of the week

Perhaps life is like a balloon. The more you squeeze on one end, the
more another end will pop out in an unexpected way. So, marshal your
energies, stay in balance, don't overextend. Love those who love you,
because to the universe we are no more significant than an individual
star or a particular ant.

Explosion or implosion … maybe both

The geek in me finds the explosion of effort to build an open social web really exciting and believes that we are on the verge of increasing connections among peoples.

The green in me looks at what we are doing to kill our planet and our fellow human beings, and believes that we are the verge of a catastrophe that will decimate life on this little ball in space.

All of the cyberpunk novels I read in college are looking way more likely.  argh…  back to the struggle.

Project Sweet Tooth

I have kept my new year resolutions to a minimum this year.  I figure that less is more in this case. 

I have a sweet tooth and I am overweight.  So my primary resolution is to cut back on eating sweets.  This includes soft drinks.  Lemonade is allowed, but has to be watered down by half.  To spur my efforts, I decided to provide an incentive to myself.  For each day that I do not eat sweets, I bank an hour for "me time".  That includes my hobbies, side projects, Green-Rainbow Party activities and surfing the web. This way, I have two limits.

So far I have gone seven days without eating sweets or drinking soft drinks.  I find that I am hungrier, so I am trying to eat more fruit and vegetables.  I even resisted the donuts during a work meeting, which is quite the achievement since I tend to have little will power with them.

Wish me luck.