The physics of banking - for every action an equal and opposite reaction

Hoarding liquidity

Q&A on Health Care and Electricity

Q. How have we managed to live with highly-regulated “socialized” electric power since the 1930s?
A. Very comfortably

Q. How many U.S. households did not have electric service in 1930?
A. One-third.

Q. How many rural households in the U.S. did not have electric service in 1930?
A. 90%.

Q. How many U.S. households do not have electric service today?
A. A statistically insignificant number; in other words, zero.

Q. Why do we all have reasonably affordable electric service today?
A.Some obvious reasons, including the following:

a. Urbanization: in 1930, fewer than 60% of Americans lived in cities; in 1990, more than 75% of Americans lived in cities, in some measure because rural electrification contributed to major increases in agricultural productivity and allowed millions of Americans to move to higher value-added employment;

b. Technological improvements, from generators and transformers to appliances and electronics;

c. Federal government initiatives through agencies such as the Rural Electrification Administration (“REA”) and its myriad progeny of rural co-ops; the Tennessee Valley (“TVA”) and Bonneville Power (“BPA”) Authorities; the Federal Power Commission (“FPC”) and its successor, the Federal Energy Regulatory Commission (“FERC”).

Several generations ago, we Americans somehow collectively decided that access to electric power was a necessity not a privilege; and that the private sector could not complete the country’s electrification on its own. Perhaps many of the good consequences of this “socialist” plot were unintended but it would be hard to not acknowledge that the policy has made huge contributions to our national security, our standard of living, our quality of life and to the growth of our capitalist economy.

Substitute "health care" for "electricity". It’s déjà vous all over again.

Under the Influence

I just started taking Zyrtec-D (cetirizine and pseudoephedrine) to deal with an allergy-induced sinus infection. At about four this morning, I started thinking about how best to relate human behavior to that of the financial markets. Here's the product:

Do We Really Want Mob Rule?

Steven Pearlstein's take on the AIG bonus riot.

The next shoe...

...but are we dealing with a centipede?

Oil v. Gold

Oil v. Gold - a good arbitrage?

How About This, Rush?

"I should like to see the Republican Party reorganized. ... I don't think there is any room in this country for an old conservative party. . . . Abraham Lincoln and Theodore Roosevelt were liberal leaders. It doesn't take long to shake off what you call conservatism. . . . There was a vast amount of reaction against the New Deal, but what were the people offered? . . . People can't eat the Constitution." ...Thus Senator Borah [Republican, Idaho], speeding to Washington, summarized his feelings about the election.

-Time, Monday, Nov. 19, 1934