It's officially out...  

The PSA test for prostate cancer, which IMHO, has been a Full Employment Act for Urologists, as well as a sales brochure for daVinci robotic surgery machines, is no longer recommended for any man.

The task force said it conducted a review of clinical studies of PSA testing, including a large U.S. study and a European one. The U.S. study didn't find a mortality benefit. The task force said the European study suggested a small benefit of no more than 1 in 1,000 men screened.
"Many men are harmed by prostate-cancer screening" with a PSA test, said Michael LeFevre, the task force's co-chairman and a professor at the University of Missouri School of Medicine. "Very few will benefit." The task force is made up of 16 nonfederal, primary-care providers who review preventative health services and make recommendations, primarily for primary-care doctors.
Dr. LeFevre said the task force recommended doctors could still offer the PSA test if men are informed about the risks and benefits of the test. The blood test is meant to detect a substance found normally in the prostate that is also made by cancer cells. Men with higher PSA scores typically have a higher risk of developing prostate cancer. But the test isn't perfect, and in some cases follow-up biopsies find no cancer. [More]

Arguing against this test is like arguing against breast cancer screening. That too, has failed to show any true benefit. What we cannot handle intuitively is the false positive problem. Our "better safe than sorry" mentality should be replaced with "worse likely harmed than rarely sorry". Neither popular screening generates any good for the vast majority as well as much harm for way too many.

Just say no, amigos.

Before the Segway...  

The best we could do was this for personal transportation.

 

Looks like something for scouting cornfields to me.

Yet another reason...  

Why I drive a Chevrolet Equinox.



Jeez - it's funny when pretentious jerks fail.

I did not know that...  

In honor of a Johnny Carson special I watched in part this week, a factoid that would provide him a chance for the above well-worn line.

What are the word's busiest airline routes?

No matter what you guessed - you're wrong.

As you head out...  

To a graduation ceremony, try not to think about these troubling trends.

First, the sad job situation.

The research, done at Rutgers University, found that of the kids who've graduated from college since 2006, only 51 percent of them have full-time employment, and eleven percent of them are not working at all. That's bad enough, but when you look at just those people who have graduated since 2009, it gets even worse. Fewer than half of them found a job within a year of graduating; whereas 73 percent of those who graduated between 2006 and 2008 found jobs in the first year. Kids who graduated after 2009 are three times more likely to not have a fulltime job than the kids who finished between 2006 and 2008. Carl Van Horn, one of the study's co-authors, says,

The resilience of this year's and recent college graduates are being tested. Students who graduated during the past several years are facing historic obstacles in achieving the foundations of the American dream.

Well, the idea that they've got to go out there and dream the impossible dream really ought to motivate everyone currently busting ass to finish up school and get out into the "real world." [More][Source study]

But wait - there's more!

The study also determined that of those post-2009 grads who did end up finding full-time employment, 43% have jobs that do not require a college degree, prompting many to agree with their mothers' advice four years ago that you probably shouldn't have wasted four credits on that "Hegelian Dialectics in Buffy the Vampire Slayer" course you took sophomore year. Employed, post-2009 graduates also have an average starting salary of $27,000, $3,000 less than the average starting salary for the classes of 2006 and 2007; experts estimate that given the fragile state of the post-2009 economy, these wages are likely to stay depressed for the next ten or fifteen years. [More]

At the same time, student debt could be the next financial debacle we have to manage.

Over the weekend, the NYT had a great, in-depth look at soaring student debt figures, and the picture is not pretty: over the last decade, tuition and fees at state schools have increased 72%, and public funding per pupil has dropped 24%.
Student loans are now a generational rite of passage – 94% of students borrow to earn a bachelor’s degree, up from 43% in 1993. The total value of student loan debt has passed $1 trillion, up from $852 billion halfway through 2011. As the Federal Reserve shows, it’s not just the young who bear the burden: a third of the value of outstanding student loans is owed by those older than 40.
Congress, for its part, is currently wrangling over a bill that would prevent federally subsidized student loan rates from doubling to 6.8% beginning July 1. Looking at that debate, Will Wilkinson makes the point that interest rate subsidies are just another form of spending that could be better directed at scholarships for students of modest means. And Conor Friedersdorf takes that argument one step further, calling indebted college graduates a “privileged class” on whom spending money “in a country with impoverished immigrants and struggling high school dropouts and hard-pressed single mothers” is pandering at its worst.
While lower interest rates would help, Mark Kantrowitz and Mark Schneider point to students’ bleak income prospects: “Debt is a problem only if students don’t graduate or if graduates can’t get jobs that pay enough to allow them to repay their loans. Taking on $25,000 in student loans to earn an additional $25,000 per year is a good investment; borrowing $100,000 to earn an additional $5,000 per year is not.” Josh Barro also notes that loans are just one way to fund higher education – direct state funding of public universities is the most obvious alternative. [More]

As hard as it is to imagine, perhaps the basic impossibility of these two trends co-existing means college costs may soon have to become subject to ordinary supply-demand economics. One possible outcome would be new rankings from US News and World Report, et al, based on placement - Is our children working? - so to speak.

It is no small coincidence that young people are lined up ten deep waiting to get into farming. Notice how there are precious few articles in the ag media about getting kids back to the farm, just laments about how hard it is to get them started.

It also increases my skepticism that not allowing them to do dangerous work as an employee for another farmer is necessary to lure them back. I can't believe we sold ourselves that whopper to justify our wretched child safety record.

Since discovering there are...  

More Muslims than Methodists in IL, I guess I have been sensitized to mentions of what's happening in the Islamic world. Frankly, it's not a whole lot clearer than the confusing internecine Christian squabbles.

IT SEEMED historic. Muslim scholars, 170 in number and representing nine schools of legal thought (including four main Sunni ones and two Shia), gathered in Amman and declared that, whatever their differences, they accepted the others’ authority over their respective flocks. Implicitly, at least, they were renouncing the idea that their counterparts were heretics. Some called that meeting in Jordan in 2005 the biggest convergence since 969, when a Shia dynasty took over Egypt.
Many of the globe-trotting greybeards who met there, and at a similar gathering in Qatar in 2007, remain actively and optimistically engaged. But seen from the outside, feuds between Sunnis, who make up roughly 80% of the world’s Muslims, and the Shia minority (most of the rest), remain savage and are, in some ways, worsening. [More, along with the helpful chart below]

For most of us, the Islamic culture is just too much work to understand and too alien to be attractive, so we marshal our ignorance when the issues arise between cultures. I know I find little attractive about the theology and practices, but at the same time my lack of person-to-person contact with Muslims makes me uneasily aware of my ignorance, and hence, poor judgements.

Partly it's because of the factionalism and clear terrorist ties to some of the sects. But then you look at the largest Muslim country (any guesses?*) and think "they're not so weird".

[Click to enlarge]

Well, we may be getting some help bridging this gap. One of the biggest cultural differences with the West has been Islamic problems with capitalism. Due to Sharia usury laws, Islamic entrepreneurs have had to devise some, umm, innovative workarounds to help capital flow.

The chief loophole was murabaha. Let’s say that you, a small businessman, wish to go into business selling cars. A conventional bank would examine your credit history and, if all was acceptable, grant you a cash loan. You would incur an obligation to return the funds on a specific maturity date, paying interest each month along the way. When you signed the note and made the promise, you would use the proceeds to buy the cars—and meet your other expenses—yourself. But in a murabaha transaction, instead of just cutting you the check, the bank itself would buy the cars. You promise to buy them from the bank at a higher price on a future date—like a futures contract in the commodities market. The markup is justified by the fact that, for a period, the bank owns the property, thus assuming liability. At no point in the transaction is money treated as a commodity, as it is in a normal loan.
But here’s the catch: most Muslim scholars agree that there is no minimum time interval for the bank to own the property before selling it to you at the markup. According to Timur Kuran, the typical interval is “under a millisecond.” The bank transfers ownership of the asset to its client right away. The client still pays a fixed markup at a later date, a payment that is usually secured by some sort of collateral or by other forms of contractual coercion. Thus, in practice, murabaha is a normal loan.
Since murabaha must be asset-based, however, it can’t help a small businessman who needs a working-capital loan, for example, to provide cash on hand to meet payroll or other expenses. To get such capital from an Islamic financial institution, an entrepreneur would have to sell the bank an equity interest in his business. This is far riskier for the bank and thus much harder to obtain. [More interesting background]

Let's face it, it's no worse than say grain loans/PIK/LDP contortions at the FDA, IMHO. Anyhoo, these types of financial sidesteps are gaining ground, especially in countries just beginning to taste some economic wiggle room. After all, it doesn't take long to adopt a "It's about the economy, stupid" mentality when you are suddenly having to actually pander for votes, instead of arranging the elections.

Islamist parties are increasingly becoming "service" parties: an acknowledgment that political legitimacy and the likelihood of re-election rests on the ability to deliver jobs, economic growth, and to demonstrate transparency. This factor introduces a huge degree of pragmatism in their policies. The example of Turkey, especially its economic success, has had a major impact on Arab Islamists, many of whom would like to emulate the Turkish model. The Arab Islamists have, in other words, understood the truth of the slogan, "It is the economy, stupid!" The Turkish model, with the religiously observant provincial bourgeoisie as its kingpin, also acts as a reminder that Islam and capitalism are mutually reinforcing and compatible.
It is notable that the Islamists' economic agenda does not espouse a distinctive "Islamic" economic model. This is unsurprising, however, as an Islamic economic model does not exist. Islamists suffer from a paucity of original ideas on the economy and have not even developed a blueprint to tackle the structural socioeconomic crisis in Arab societies.
Nevertheless, what distinguishes centrist religious-based groups from their leftist and nationalist counterparts is a friendly sensibility toward business activities including wealth accumulation and free-market economics. Islamism is a bourgeois movement consisting mostly of middle-class professionals, businessmen, shopkeepers, petty merchants and traders.
If there is a slogan that best describes Islamists’ economic attitude, it would be: "Islam-is-good-for-business". Many Arab Islamists admire and wish to imitate the example of Turkey, even though they know little about the complexity of the country’s economy and lack Turkey’s strategic economic model. What impresses them is Turkey’s economic dynamism, especially the dynamism of the religiously observant provincial bourgeoisie who have turned Anatolian towns such as Kayseri, Konya and Gaziantep into industrial powerhouses driving the growth of the Turkish economy. [More]

In fact, keeping our eye on Turkey (which is becoming a more reliable US partner, as those things go) or Indonesia instead of Saudi Arabia and Iran might help us coexist a little more anxiously with the enormous Muslim world.

Nothing fosters bonding like griping about government economic policies together.


* Indonesia

The collateral losses...  

It's likely most of us just snickered when the now-infamous trading blunder by JP Morgan was revealed. But since then, a little more thought and information adds to the curious nature of what is now our financial system.

To begin with there is question of scale.  While farmers are arguing about a new farm bill that will cost (ostensibly) about $18B per year for farmers, it should be measured by this supposedly huge mistake.

The number that you have not heard is the cost of the legislation, which is $995 billion over the course of the next 10 years, for the mandatory elements of the Farm Bill. 
1.    $772 billion or 78% is for domestic nutrition assistance programs, primarily the Supplemental Nutrition Assistance Program (SNAP).
2.    $223 billion, is divided among various agriculture-related programs,
    a.    Crop insurance ($90 billion, or 9%),
    b.    Farm commodity price and income supports ($63 billion or 6%),
    c.    Conservation ($65 billion, or 7%).
    d.    1% of the baseline is for international trade ($3 billion)
    e.    Horticulture programs ($1 billion).
[More]

Of course, the shallow-loss provision is an unexploded budget bomb that could balloon those numbers should prices drop drastically. 

But note that we are fighting over a few billion per year and JPM just bungled away $2b is a matter of hours.


But the big jolt is, it's peanuts for JPM.

Over at Seeking Alpha, Gene Kirsch tried to put Hedgegate into a broader context. "JPMorgan losses are reported to be actually $800 million in Q2 with the potential for legal and other losses up to $4.2 billion over a longer period of time, possibly exceeding one year," he wrote. "The banking unit of JPMorgan Chase alone made $12.4 billion last year. The holding company has over $2.26 trillion in assets and is the largest U.S. bank and 8th largest in the world. The holding company made $29.9 billion in operating income and just over $20 billion in net income for 2011. So, this initial loss of $800M represents approximately 4% of its total net profit for all of 2011, less than 2.7% of its operating income."
The firm, in other words, can manage it. Though as Brad DeLong was quick to point out, tallying the direct losses misses the episode's larger impact on the firm's value. "The revelation that JPMC did not have control over its derivatives book--even though accompanied by promises of multiple firings and deep reforms--destroyed 1/7 of JPMCs franchise value." Turns out the market doesn't much like it when what's reputed to be the safest bank on Wall Street turns out to be incompetent.
Jared Bernstein draws out the larger lesson nicely, and so I'll quote him at some length. "The fundamental truth here is the one known since Adam (Smith, that is) and amplified by the great financial economist Hy Minsky: humans underprice risk. Their proclivity to do so increases as the business cycle progresses and confidence takes over (remember, JP’s bet was unwound by the fact that the economy wasn’t as strong as they thought). The advent of a global derivatives market with notional trades in the trillions greatly amplifies the risks."
"The fact that humans like Jamie Dimon—he who presided over JP’s self-proclaimed 'fortress balance sheet'—he who inveighed against financial reform as imposing unnecessary oversight on such skilled risk managers as he and his staff—fall prey to this fundamental truth only underscores the lesson of this episode in financial hubris."
"And that is this: financial markets are inherently unstable. They will neither self-correct nor self-regulate. Their instability poses a threat to markets and economies and people across the globe. Therefore, they need to be regulated. That’s not to say that anyone knows the best way to do this yet in order to balance the necessity of oversight with the dynamics of the markets. We don’t know where to set the speed limits. It must be an iterative process. But we do know they need to be set, and JP’s loss should be taken as a warning that our tendency is to set them too low." [More]

Our world is now one where all the behemoths are not governments when it comes to economic clout.
It also indicates to me that this sector is not so much about "allocating capital efficiently"anymore. It's about finding things to bet on. Or deriving them from thin air.

The bottom line for me: the more distance I can put between me and Wall Street the stronger my future finances. Participating directly in derivative markets (options) is a sucker's game, and will be subject to lightning raids when JPM-like entities decide to swoop in for whatever reason using the latest quantitative strategy.

Marketing partnerships (contracts) with our grain merchandising industry (coops, ADM, etc.) at the least throws them under the finance bus before my farm is hit. Thinking I can play with these guys, regardless of my preparation, smarts or adviser is a bad idea. They operate on another level where I am defenseless.






 

Guess who...  

Didn't make it to church today?  So instead let me share a couple of nuggets that struck me about what it means to be a Christian these days.

First, it means finding The Flock is infested with parasites.

For 39 years, the Trinity Broadcasting Network has urged viewers to give generously and reap the Lord’s bounty in return.

The prosperity gospel preached by Paul and Janice Crouch, who built a single station into the world’s largest Christian television network, has worked out well for them.

Mr. and Mrs. Crouch have his-and-her mansions one street apart in a gated community here, provided by the network using viewer donations and tax-free earnings. But Mrs. Crouch, 74, rarely sleeps in the $5.6 million house with tennis court and pool. She mostly lives in a large company house near Orlando, Fla., where she runs a side business, the Holy Land Experience theme park. Mr. Crouch, 78, has an adjacent home there too, but rarely visits. Its occupant is often a security guard who doubles as Mrs. Crouch’s chauffeur.

The twin sets of luxury homes only hint at the high living enjoyed by the Crouches, inspirational television personalities whose multitudes of stations and satellite signals reach millions of worshipers across the globe. Almost since they started in the 1970s, the couple have been criticized for secrecy about their use of donations, which totaled $93 million in 2010.

Now, after an upheaval with Shakespearean echoes, one son in this first family of televangelism has ousted the other to become the heir apparent. A granddaughter, who was in charge of TBN’s finances, has gone public with the most detailed allegations of financial improprieties yet, which TBN has denied, saying its practices were audited and legal.  [More details]

Yeah - I know, it's the "librul media", AKA the New York Times, but the stuff they mention is public record and pretty fairly presented, IMHO. I have surfed over this channel from time to time and never watched for long, but obviously the Crouches have found a rich vein in pseudo-spirituality that can keep them in considerable comfort.

Meanwhile, back at the Prairie Bankruptcy that is my home state, consider this new finding:

Muslims have become the third-largest religious group in the state after Roman Catholics and independent evangelicals. Not to mention, the fastest-growing one.
That's according to a census of American religious congregations unveiled Tuesday in Chicago.
This year, for the first time, the nationwide aggregation of religious traditions, dubbed the "Religion Census," counted nondenominational evangelical congregations, ranging from storefront sanctuaries to megachurches with multiple sites such as Willow Creek Community Church.

...

That calculation revealed that evangelicals affiliated with independent churches make up the second-largest religious group in Illinois. In fact, in 48 of the 50 states, independent evangelicals occupy a top-five spot. In the Chicago area, Illinois and nationwide, Roman Catholics rank as the largest religious group.
With 176 religious traditions, Illinois slipped from its top spot as the most religiously diverse state in 2000, falling to Pennsylvania with 184.
Religious leaders and sociologists welcomed the bird's-eye view of America's religious landscape as a helpful tool for determining where to evangelize and understanding where certain religious traditions thrive. But some caution that the numbers and rankings shouldn't be taken as gospel because religious groups apply different standards for counting adherents.
"We're always saying how much we contribute to the state of Illinois, but it's more anecdotal," said Ahlam Jbara, interim executive director of the Council of Islamic Organizations of Greater Chicago. "As somebody dealing with government officials, it's about numbers as well. Here's information, here's real data in our community which we really haven't been able to show."
The religion census is the latest in a series of reports released each decade to coincide with figures from the U.S. census. It is compiled by the Association of Statisticians of American Religious Bodies. The 2010 edition is the sixth since the U.S. Census Bureaufirst excluded religious affiliation after World War II.
Overall, the study shows a profoundly Christian nation with a lot of variety beneath the surface, including about 150 million Americans — half the population — who aren't engaged with a religious community.
...

Stephen Warner, a sociologist of religion at the University of Illinois at Chicago, said the decennial study is the best attempt at mapping religion in America.
"What we get is a geographic distribution about where the heartlands and hinterlands of the religious bodies are. They're not evenly distributed," he said. Warner added, however, that Methodists seem to be the exception. "My God, they're everywhere." [More]

I know looking at the scoreboard during the game is a bad idea, especially in a bipolar state like Illinois. Still, more Muslims than Methodists???

Finally, I cannot recommend highly enough Jonathon Haidt's new book. I'm only partway through and already rethinking how I arrive at my own moral judgments.

A slow post...  

Somehow, around two weeks ago, I strained? pulled? twisted? some thew or something in my left shoulder. Driving a tractor with all the controls on the right became a real hassle, and putting on my pants a challenge. Needless to say, posting one-handed wasn't fun either.

So I didn't.

But it's getting better in that casually glacial pace I now realize is how geezers heal.

So let's talk irrationality. It seems fitting just now when a new farm program is taking shape.

As many of you know I have been fascinated with efforts by cognitive psychologists to understand why we make irrational choices, indeed how we choose in the first place. A considerable body of research has piled up on the odd ways our mind works.

All of it is pretty damning when it comes to imagining our species as having anything at all in common with say, Vulcans. We are persuaded by the trivial, attention-grabbing, or emotional in the face of hard facts to the contrary.

In fact, it all seems pretty futile.

The last several years have seen many popular psychology books that touch on this line of research. There’s Ori and Rom Brafman’s Sway, Dan Ariely’s Predictably Irrational and, naturally, Daniel Kahneman’s Thinking, Fast and Slow. If you could sum up the popular literature on cognitive biases and our so-called irrationalities it would go something like this: we only require a small amount of information, often times a single factoid, to confidently form conclusions and generate new narratives to take on new, seemingly objective, but almost entirely subjective and inaccurate, worldviews.
The shortcomings of our rationality have been thoroughly exposed to the lay audience. But there’s a peculiar inconsistency about this trend. People seem to absorb these books uncritically, ironically falling prey to some of the very biases they should be on the lookout for: incomplete information and seductive stories. That is, when people learn about how we irrationally jump to conclusions they form new opinions about how the brain works from the little information they recently acquired. They jump to conclusions about how the brain jumps to conclusions and fit their newfound knowledge into a larger story that romantically and naively describes personal enlightenment.
Tyler Cowen made a similar point in a TED lecture a few months ago. He explained it this way:

There’s the Nudge book, the Sway book, the Blink book… [they are] all about the ways in which we screw up. And there are so many ways, but what I find interesting is that none of these books identify what, to me, is the single, central, most important way we screw up, and that is, we tell ourselves too many stories, or we are too easily seduced by stories. And why don’t these books tell us that? It’s because the books themselves are all about stories. The more of these books you read, you’re learning about some of your biases, but you’re making some of your other biases essentially worse. So the books themselves are part of your cognitive bias.

The crux of the problem, as Cowen points out, is that it’s nearly impossible to understand irrationalities without taking advantage of them. And, paradoxically, we rely on stories to understand why they can be harmful. [More]

Currently, I'm reading Jonathon Haidt's The Righteous Mind, which could be the best of the bunch. And despite the warnings voiced above, I think it has been remarkably helpful, especially in this election season.

But I agree about the "narrative bias". The reason farmers watch USFR is hear a story about the commodity markets that has all the elements of any good yarn. Good guys and bad guys, a range of motives, and nearly miraculous abilities to shape events.

Most of all it transforms a raft of transaction details (sales) into an living entity - The Market. This entity goes shopping for acres, gets confused, and tries to persuade farmers to do various things like hold crops or shift acres. It is this enduring fairy tale that takes a mess of dry data and turns it into something we think we understand. In reality it is little different from seeing a pony in the sky when looking at water vapor accumulations.

The bigger question is if we can or even should override this predilection to choose a narrative over say, a statistical summary. Currently, I still hold out hope we can, but it's so much hard work with often little reward, we don't.

Regardless, just knowing our thoughts are riddled with inconsistencies should enable us to proceed with more caution, especially when demanding we know The Truth.

Much like my tax return...  

 The math for budget-cutting is tricky.  I have been studying the Romney/Ryan hybrid proposal and agree with most econobloggers who are not sure where he can find the loopholes/deductions to pay for his tax breaks.

The first thing to note is that there are clearly enough tax expenditures to finance the $900 billion cost that the Tax Policy Center reckons Mr Romney’s plan will cost (relative to current law). But as you dig into the list, problems arise. First, these expenditures would be worth a lot loss once Mr Romney has cut income tax rates (see my caveat below). Second, Mr Romney has put several off limits, most notably the preferential rate on dividends and capital gains (worth $91.3 billion) and the ability of corporations to defer tax on foreign income ($19.6 billion), since under his plan corporations would not owe taxes on such income. Third, several will presumably be off limits: is he really going to tax Medicare benefits ($79.3 billion) or eliminate the earned income credit ($58.5 billion)?

But the biggest problem is one not obvious from the table: the distribution of these breaks. Yes, they disproportionately benefit the upper 20% of households because their tax rates are higher. Nonetheless, as this Tax Policy Center paper notes, roughly a third went to the bottom 80% of households (especially tax credits and above-the-line deductions). Since Mr Romney has said he would spare the middle class, most of this money would be off the table. Where it gets really interesting is inside the top 20%. Many deductions are in effect capped. As a result, their biggest beneficiaries are not the top 1% but the next 19%, with one exception: the preferential rate on capital gains and dividends, more than half of whose benefits go to the 1%. By eliminating tax expenditures for upper income families except the preferential rate on capital gains and dividends, Mr Romney’s plan would be a gigantic transfer from the upper middle class to the rich. And keep in mind that the upper middle class is also the group likely to pay most under any reform to Social Security and Medicare. 

Mr Romney’s team defends the feasibility of his plan by noting its similarity to the Bowles-Simpson commission proposal, which like Mr Romney lowers the top rate to 28% and pays for it by closing loopholes. But the comparison does not actually help Mr Romney’s case. First, unlike Mr Romney, Bowles-Simpson eliminates the preferential rate for capital gains and dividends. That is both a significant revenue-raiser and the principal reason the truly wealthy suffer most under their plan: the top 1% sees its after-tax income fall 7.8% and shoulder half the net increase in taxes. Under any plausible version of Mr Romney’s, the after-tax income of this group would rise. Second, it only lowers the corporate rate to 28% instead of Mr Romney’s 25% (from 35%). Third, Bowles-Simpson clearly hurts the middle class; the middle 60% of households see their after-tax income drop about 1.5% each. The reason is that the plan nukes almost all deductions, and replaces only a few with miserly tax credits that are worth less than the current deduction to most taxpayers. If Mr Romney wants to spare the middle class he will have to be much more generous than Bowles-Simpson when it comes to protecting their tax breaks. And there’s the rub: Mr Romney can be revenue neutral or he can spare the middle class but I don't see how he can do both. [More]

From the table above - which has been widely accepted as an accurate account of what tax expenditures cost, farmers should note certain items.

1. Exclusion of capital gains at death: This "step-up in basis" is a BIG deal - perhaps more important than the actual rate itself. It also looks to be one with a smaller consituency to fight for it. I think it is greatly at risk.
2. Capital gains: As discussed in the above article, the fact this is largely helpful to the 1% and few others makes it a tempting target. Again it's a big deal for farmers selling land after the recent runup.
3. Elimination of deduction for health insurance: Depending on the outcome for Obamacare, this could tempt many employers to drop group insurance for simple compensation. At the very least, it will undoubtedly push more of the cost to employees, although that is happening already.
4. Mortgage interest: I think this applies to homes (reported on Schedule A) - not interest reported on Schedule F, but it's the same 1099, so I could be wrong. [Update: probably not at risk unless a desire to include real estate investors in the revenue makes it a target]
5. 401K benefits: Not sure how many farmers do this when buying land has trounced these as retirement piggy-banks, but some did.

While it's hard to imagine enough Congresshumans anxious to attack these popular "loopholes", you can't get done what Romney has proposed without hitting many of them. So the bottom line is worrying about the Farm Bill is peanuts compared to the budget debate for my farm.

Prediction: tax cuts might happen, but eliminating enough tax breaks won't. 

Just stumbled across this...  

I'm not a fan of soppy stories, but I admired Caine's ingenuity.

Let's form a club...  

I have somehow neglected to get a tattoo. I'm not alone.

But the new extreme inking is by no means confined to the sporting set. Everywhere I look in Florida, I clock old geezers with hammocks and the word “Margaritaville” emblazoned across their burly sun-blasted torsos. Chicks, too: Today I saw a superannuated South Beach swinger boasting a tarantula on her right shoulder. Every time she hoisted her sippy cup to her lips the spider jiggled. And it’s no longer just a class thingy: I even saw tats at the legendarily WASP-y Bath and Tennis Club in Palm Beach. OK, so they were on the leg of the car-park valet, but just you wait. Next year, the old broads in the canasta salon will be sporting radical ink. Mark my words.

In the past there was one reason, and one reason only, to ink up: A tattoo confirmed your status as a scary outsider rebel carny outlaw sociopath. “Don’t mess with me because I am insane,” was the intended message. And it worked. Remember Robert Mitchum in Night of The Hunter? When he cuts Shelley Winters’ throat we are hardly surprised: We knew trouble was on the horizon as soon as we saw the words LOVE and HATE inked across his knuckles. Tattoos meant mayhem.

Cut to today: Having a tattoo has lost its original meaning. Having a tattoo now has no meaning. Having a tattoo means that you have a tattoo. [More]

I prefer to think of it as "like-new" condition.

****

On a totally unrelated note: Anybody need a automatic talc dispenser? It is similarly new-in-box, and too big for our embarrassingly small model of seed tender. Will autograph. Make an offer.

Still sunk after all these years...  

What is it about the Titanic?  I mean, it's not like Spock died.

I wasn’t the only one who was obsessed—or writing. It may not be true that “the three most written-about subjects of all time are Jesus, the Civil War, and the Titanic,” as one historian has put it, but it’s not much of an exaggeration. Since the early morning of April 15, 1912, when the great liner went to the bottom of the Atlantic Ocean, taking with it five grand pianos, eight thousand dinner forks, an automobile, a fifty-line telephone switchboard, twenty-nine boilers, a jewelled copy of “The Rubáiyát of Omar Khayyam,” and more than fifteen hundred lives, the writing hasn’t stopped. First, there were the headlines, which even today can produce an awful thrill. “ALL SAVED FROM TITANIC AFTER COLLISION,” the New York Evening Sun crowed less than twenty-four hours after the sinking. A day later, brute fact had replaced wishful conjecture: “TITANIC SINKS, 1500 DIE.” Then there were the early survivor narratives—a genre that has by now grown to include a book by the descendants of a Lebanese passenger whose trek to America had begun on a camel caravan. There were the poems. For a while, there was such a glut that the Times was moved to print a warning: “To write about the Titanic a poem worth printing requires that the author should have something more than paper, pencil, and a strong feeling that the disaster was a terrible one.” Since then, there have been histories, academic studies, polemics by enthusiasts, and novels, numbering in the hundreds. There’s even a “Titanic for Dummies.” This centennial month alone will see the publication of nearly three dozen titles. [More]

Junkbox, Episode VRIDRI...  

Stuff I saw this week that made me say "huh":

• Russian agriculture update 
• The roads may not be getting better soon
• The wind bloweth where it listeth... (Thanks, Tom)
• Why I'm not going public
• Bailouts? They were investments that are paying off.
• The last word on French women

I think our corn will survive the 25℉ nights last week.

An economy of debt...  

I have been struggling to get my mind around the working of the shadow banking system. 

It's not easy for me.

The shadow banking system is the collection of financial entities, infrastructure and practices which support financial transactions that occur beyond the reach of existing state sanctioned monitoring and regulation. It includes entities such as hedge funds, money market funds and structured investment vehicles. Investment banks may conduct much of their business in the shadow banking system (SBS), but they are not SBS institutions themselves.
The core activities of investment banks are subject to regulation and monitoring by central banks and other government institutions - but it has been common practice for investment banks to conduct many of their transactions in ways that don't show up on their conventional balance sheet accounting and so are not visible to regulators or unsophisticated investors.^[1] For example, prior to the financial crisis, investment banks financed mortgages through off-balance sheet securitizations and hedged risk through off-balance sheet credit default swaps.^[1]
The volume of transactions in the shadow banking system grew dramatically after the year 2000. By late 2007 the size of the SBS in the U.S. exceeded $10 trillion. By late 2009 the United States SBS had shrunk to under $6 trillion due to increased regulation, changes in business practice, and pressure from investors who in some cases no longer wanted their funds to be used in the shadow banking system. Globally, a study of the 11 largest national shadow banking systems found that they totalled to $50,000bn in 2007, fell to $47,000bn in 2008 but by late 2011 had climbed to $51,000bn, just over its estimated size before the crisis. Overall, the world wide SBS totalled to about $60 trillion as of late 2011.  [More] 

These complex, interwoven financial contracts are essentially a function of debt of various kinds - mortgages, bonds, commercial paper, and other assorted and newly arrived instruments. As the shadow banking system grows relative the the regular banking system, (avoiding regulation and offering bigger profits) demand for debt grows.



The idea of demand for debt is exactly the opposite of what most of us are conditioned to expect. Our moralistic teachings from the Depression Generation has left us confused about how debt could have any redeeming aspects whatsoever.


But the effect of what happens in the SBS immediately is felt in the money supply which in turn impacts economic growth in a big way.

The blurring, or even absence, of the line between fiscal policy and monetary policy in the shadow banking system is often ignored.
It’s no longer enough to understand traditional monetary policy transmission mechanisms (money multipliers, federal funds rates, reserves); it is also necessary to understand how the shadow banking system (collateral supply, rehypothecation) affects monetary policy, and vice versa.
And this also seems like the source of the many challenges in working out how to regulate the sector.
Because one thing that’s clear from the note is that the shadow banking system represents a lot of money, and more specifically a lot of credit flowing through the economy. Regulating it won’t be as easy as saying bring it all on balance sheet or higher capital standards (though the latter is probably still a good thing).
How to define, for instance, the appropriate coordination between the central bank and fiscal policymakers when the outstanding Treasury stock affects monetary policy in this way? Or how to go about discovering the right balance between government readiness to respond (as it did in this case) vs the moral hazard it would bring?

… and summary from Credit Suisse:

Crucially, this chart and the shadow money perspective allows one to see that there has been
(1) a huge and necessary change in the composition of the effective money stock,
(2) a big reduction in the velocity of circulation of liquid collateral,
(3) a sharp reduction in the value of illiquid collateral (houses),
(4) an increase in the “haircuts” on illiquid collateral (higher LTV ratios), and
(5) a big increase in the precautionary demand for money by both firms and households.
The net result cannot be reasonably characterized as posing a major inflationary threat – at least until such time as financial system deleveraging is more complete, collateral values, especially house prices have recovered substantially, and overall private sector credit demand is growing strongly…
The public sector is still doing King Collateral’s work. How long it acts as Regent may be the central question for financial markets in the next decade.

[More]

This is pretty obscure I know. But when we argue about the size of our federal debt, it is a powerful complicating factor.  The SBS needs an immense supply of US Treasury securities, regardless of whether we think it is a good idea or not to run deficits. This is one reason why despite now-decade long predictions of interest rate increases, it hasn't happened, and doesn't appear likely in the near future.


In order for the massive financial sector which has grown to about 1/3 of our economy - and its outsized rewards to those employed there - to continue, a steady supply of debt/currency is needed to substantiate deals as acceptable collateral. 


Our financial system has evolved from supplying limited capital to enormous demand for investment loans, to chasing limited investment opportunities with wads of cleverly contrived debt-based capital.


I don't see - nor do any economists I read - any way to reverse this trend. The investments the world needs are to a significant degree public investments - infrastructure is a great example - and the political winds are blowing us away from those ideas. Absent massive government spending on roads, schools, locks and dams, etc. we only have industrial production to fund. That's not enough to absorb both public (like China) and private pools of capital.


As a result the financial sector makes money by betting on itself. This produces little other than big winners and losers, and frantic action, to my eye. To make it more complex, it will take us a long time, I think to grasp the idea of a world where free capital is plentiful and places to put it or not.


Strangely enough, we have been in a similar position before: the Middle Ages, after the Great Plague.
Demand had collapsed and the tiny number of nobles with money had nearly zero investment choices. This is one of the reasons they chose to plow money into their afterlife by building cathedrals - it was simply one thing to do with their accumulating wealth.


It is almost impossible for many of us to comprehend debt as an asset, but it has to be for the counterparty, by any accounting system. The stronger we make our guarantees for both public and private debt the more we enable the SBS to spin off derivatives of them to trade in various manners. Aided by new technologies that slice time into tiny segments to extract value, the possibilities seem nearly endless, but I can envision an upper bound to this profit source, as it simply becomes more common.


The demand for high-quality debt, however, may never abate. In other words, it may be a long time before interest rates reach anything like what many of us consider normal.  Bad news for savers and investors, good news for those who can deploy capital profitably.