The Electrical Brain

Power failed again in our neighborhood, evidently due to some defective transformers. This had happened before, and over an extended period, the week of August 8-14, 2010, thus less than two years ago. Oddly enough, power to half of our circuits remained on. It was denied to about a third of the house, from basement to the second storey. Whole banks of plugs were also gone, and these affected parts of the still “lit” portions of the house. The failure lasted from 8:43 pm to 1:10 am (this morning)—but we were gone and discovered the situation at 11:30, about midway into it.

Such events rudely remind us. We never think about electric power—until it fails. And when it does, it is truly difficult to think about anything else. It is a trauma—although in rank secondary to failures of the body itself, which are even more powerful reminders of our contingent state in this dimension.

This morning—the coincidence seems meaningful—comes an op-ed piece in the Wall Street Journal informing us that data centers now consume 1.3 percent of all electricity generated across the globe. Data centers are used by the likes of Google, Facebook, Bing, Yahoo, and many others—not least any organization or individual engaged in “cloud” computing, thus storing files miles away from the screen-keyboard-and-box. The author of the piece, Robert Bryce (“Renewable Energy Can’t Run the Cloud”) says that “The power needed by data centers has been a hot topic for more than a decade as local electricity grids have been forced to adapt to huge new loads.”

When you think about it, that 1.3, while a small percent, is high when we think of all the lights that burn—so much so that you can see the outlines of America from a satellite by night if it is cloudless across our sub-continent.

Got us thinking. How much of our food-intake is used by our brains? The answer is 20 percent (link). This answer is based on the brain’s average consumption of our oxygen intake, used for burning, in part to the brain’s glucose consumption; that varies from 11 percent in the morning to nearly 20 percent in the evening (link). A fifth is pretty high considering the size of the head in comparison to all the rest. Here is a highly privileged consumer of our daily bread.

Now we known what the global cybernetic brain’s memory storage consumes. It would be nice to known how much electrical energy we use in our communications—including the devices that are hot-and-ready to serve me here, in this basement work space. The printer’s on, the computer hums, and light reaches me from my efficient flat-screen display. Are we, in the broader category, already at 20 percent? I think not—but have no data. But the time will come. As will the arrival of the end of fossil fuels. What are we going to do then? And what will we call that approaching time? The Dark Ages?

Short Selling in China

Coverage about “the whale,” read the JP Morgan Chase trader named Bruno Iksil, got me thinking about fundamental reforms that would once more turn financial trading into genuine investment and do away with Casino Wall Street. One such idea is to prohibit short sales of anything. If you sell something, you ought already to own it, and be ready to prove that you do. Then the thought occurred. I wonder if short selling is permissible in China.

The short answer is Yes, but the fuller answer is more interesting. It is legal there but only since 2009. And such activity is only permitted to be carried out by 11 brokerage firms. Such trading is now going on under a trial, under the auspices of the China Securities Regulatory Commission, and it may be stopped in the future. Same holds for trading on the margin.

Interesting. Before the capitalist monster eats a culture, it first sells it short. I am hoping for the nixing of this “trial” in China. If not, I confidently predict another Great Proletarian Cultural Revolution in the future. “Strike the enemy down on the floor and step on him with a foot!” Ah, the memories…

Colonialism Lite

The sometimes odd behavior of foreign governments vis-à-vis the United States, occasionally describable by that memorable phrase “at your feet or at your throat,” may be due to colonialism lite: indirect influence purchased by massive doses of foreign and military aid. Of late this has been most clearly visible in Afghanistan and in Pakistan. That behavior is a little more one-sided in the case of Israel. It is mostly at our throat—because it has its own constituency within our political structure. Herewith some data for 2009 on military aid. It totaled $11 billion that year, 24.5 percent of total foreign assistance, that year, worth $45 billion.

Fifty-one countries received military aid, and the top ten show that we cover the globe. Conspicuous by absence in the longer list is China, surprising that Russia is present. India, based on population the second largest collective in the world, barely makes the list, but does so, receiving $1 million in 2009. The data come from the 2012 (and last) Statistical Abstract of the United States, Table 1299.

The logic of colonialism lite is that military funding is virtually irresistible for collectives—even when they don’t resonate at all with the American Way (or what it has come to mean). This produces in their societies contradictory impulses that lack coherence—and our attempts at buying power create the same problems at home.

Slingshots—But Not Yet Computerized

When I was a boy in the 1940s, slingshots played a major role in my life—always hand-made, of course, what else? The process required find a suitable young Y-shaped branch, acquiring part of an old inner-tube, still used in autos back then, and ideally a good piece of soft leather to hold the stone. One also needed some decent string to affix rubber to wood, leather to rubber. And then off to hunt. The other day, to my innocent amazement, I discovered slingshots for sale, plastic wrapped, of course, at Ace Hardware. (I was looking for a small U.S. flag on a stick for our backyard, and there it was, at the end of that same aisle). I am showing a picture, unwrapped, made by Marksman. Wonders shall never cease. To be sure, making our own bows and arrows was another way to be truly armed at 10 or thereabouts, but I had discovered ages ago that the art of making one of humanity’s oldest sophisticated projectile weapon (the spear having precedence but not sophistication) had been improved by modern industry a long, long time ago. In the future? Well, rubber will disappear before string does. And wood will still bend in the post-Fossil age. As for slingshots, we made our own once and never had any dealings with adults. For all I know, now that you can buy the slingshot for $8.99 ($7.19 at sale price), there will soon be Little Leagues where boys too small to use them, in appropriate Robin Hood uniforms, will be guided in the art of sling-shooting by hovering daddies wishing to live their lives through yours.

Growing Pains

Here is a quote which illustrates the capitalist mentality. It is, to be sure, by a journalist for CNet, Roger Cheng, who is presumably not a capitalist himself (else he would be wheelin-n-dealin rather than surfin-n-writin). But Mr. Cheng probably has his fingers on the pulse. The quote comes from an article reviewing Facebook’s lackluster performance yesterday (link) and ends by saying:

But with its business model still in flux and CEO Mark Zuckerberg's promise that the user will come first, perhaps it's a better bet to stay on the sidelines for now.

Zuckerberg’s grave sin, putting the users first, comes from his remark the morning FB went public when he said: “Our mission isn’t to be a public company. Our mission is to make the world more open and connected.” Zuckerberg is still young, isn’t he. He hasn’t drunk deep enough at the fountain of real wealth. The mission, Mark, is to make the stockholders happy. The public is just a means to that end. Write that down with a good ballpoint pen—right on your palm. 

“Valuation”

With Facebook going public today—and leading up to it, presumably in the wake of it too—the business pages are littered by the word “valuation.” Thus Facebook’s valuation today, still about an hour to go before the heavens open, is $104 billion. So what is valuation, exactly?

The full and correct use of that word, or so the Investopedia tells me, is “pre-money valuation.” I am told that real insiders use the first and newspapers the second part of that phrase. Pre-money here actually means the worth of a company before any real money has been forked over for its stock. The stock value of a company, then, is presumably called “post-money valuation”—but that’s just the ordinary stock price.

“Valuation,” therefore, means nothing more than “expectation.” It is a guess by some mysterious and presumably continuously changing band of investors—a guess they more or less all agree upon—of what the stock will, shall, in the future, actually fetch when that Initial Public Offering, the IPO, the capitalist version of the Holy Ghost’s descent, actually takes place.

The Wall Street Journal helpfully informs me that there are, right now, Facebook not counted, its glory is just, ah, 40 minutes away as I type this, twenty some-odd Internet enterprises, most without any revenue, never mind profit, that are “valued” at $1 billion or more. They offer such irresistible new services as keeping your scrapbook, making notes, sharing files, and renting rooms—services we desperately need to see online. The difficult we do today, the impossible, e.g. online toe-nail clipping, will take a little longer.

When in Doubt, Cash Out

The Wall Street Journal reports this morning that 57 percent of stock Facebook will sell in its initial public offering will come from investors, 43 percent from the company’s own printing presses, as it were. When Google went public, 28 percent came from investors. I found this interesting. Right now the stock’s value is riding on the magic carpet of expectations. Once the company is public, the price will be determined by Facebook’s ability to draw in advertising revenues. A story in the New York Times this morning suggests that beyond GM’s withdrawal of its ad spending from Facebook, others are contemplating doing the same—and that the banks backing Facebook have similar concerns. Somebody is certainly cashing out—six of ten of the owners…

GM Face-Off

Genuinely interesting business stories are so rare. The Dow is off because the Greeks don’t want to play? Again? How many more times? An investment bank is rocked by losses? Again? The stock of a company leaps on news that it will have massive layoffs? Yawn.

The news today that GM will no longer advertise on Facebook, having, as it were, tested the waters by spending $10 million—why that is something worth contemplation. Have I said it before? Probably. Certainly on the old LaMarotte. I’ve felt, ever since my own days in advertising, which now seems pre-historic, that justifying ad expenditures by results may not be possible, with any precision, unless you’re advertising in the Wanted sections of papers. Well, GM has found the way to do so, and evidently FB does not deliver.

Our latest “industries” consist largely of banks of computers and software connected to the Internet: Facebook, Twitter, LinkedIn, and their imitators. They depend on building up massive bases of names and e-mail addresses—“monetizing” which to channel advertising messages is where the “industry” actually is.

Assemble a huge crowd in an abandoned drive-in movie theater and then show them masses of ads on a huge screen. Is that the model? No. Not really. Assemble a huge crowd in an abandoned drive-in movie theater and then show them a tense thriller on the huge screen. But scatter postage-stamp-sized little ads on the grounds so that the few who have to go to the toilet in the dark might see them, bend down, and pick them up. That’s the model at work on the social media.

A question today sent me to FB; I am one of the millions Facebook counts as its monetizable base, but I visit the site only rarely. Okay, I am a minority perhaps. Still, I did my business there. It’s content is immensely rich, complex, all those people who are my friends, all the stuff they say, the links they provide, the pictures. Did I even notice the ads on the right? No. Did I look there? No. I’ve learned to ignore the right column precisely because I know that it holds ads. Can’t do that when watching TV. That’s where the mute button comes into play.

Topsy-Turvy

The etymological rootings of that phrase rest on what has become an obsolete verb, to terve, meaning to turn something upside down. When things are properly arranged, turning them upside down produces chaos. We live in topsy-turvy times.

About a year ago now I had some entries on the old LaMarotte comparing social security and health programs in this country and in Europe. One post (link) featured the Germans’ principles underlying their social insurance policies. One of those is the principle of self-government, derived from the “subsidiarity principle.” It states that common goals must be achieved at the lowest appropriate level of society. That principle is old but articulated for modern times in the papal encyclical, Quadragesimo Anno, §79, issued in 1931 by Pope Pius XI. Here is the relevant quote again:

Just as it is gravely wrong to take from individuals what they can accomplish by their own initiative and industry and give it to the community, so also it is an injustice and at the same time a grave evil and disturbance of right order to assign to a greater and higher association what lesser and subordinate organizations can do. For every social activity ought of its very nature to furnish help to the members of the body social, and never destroy and absorb them.

In §80 the same document refers to the “principle of ‘subsidiary function’” from which, first in German, then translated into English, we get the subsidiarity principle.

Now this principle suggests that government should not reach down and micromanage what various subsidiary levels (as seen from above) must do on their own; but its natural corollary is that the lower levels should not reach up and try to dictate policy one, two, or several levels above the place where they have their natural sphere of action. The ideal implementation of this idea is representative government—in which the lowest levels elect representatives, those elected then select, by vote, the next level up, and so on. In that system the president would be elected by Congress, not by the public. Indeed the Constitution still, if in practice only technically, describes one such method—the election of electors—whose names we never see on ballots.

Ideas like this are utterly weird in the modern context—and precisely because they are, while the reason alive within us finds them logical and right, is why we live now in topsy-turvy times. Just think. Once upon a time the Federal government was funded by a levy on the states—not by the income tax. A curious by-product of violating the subsidiarity principle in governance is rise of politics to the first rank among public preoccupations and the universal flowering of a vast and bewildering ecology of activism—the leaders and members of which, quite a random, as it were, thus as in Nature, attempt to gather masses and, by agitating publicly and in the media, to shape decisions in narrow and in wide regions of policy.

When power has been concentrated very high up, as it has these days, the natural and logical distribution of powers and of responsibilities has been so deformed that chaos reigns—and reigns so totally now that one cannot imagine its reform unless we start all over again. No wonder I have delighted nightmares about Emperor Napoleon.

Congress Tries to Blind the Public

In a nutshell, the Congressional Appropriations bill would henceforth eliminate the Economic Census (EC), axe the American Community Survey (ACS), and reduce funding for the decennial population census. The first of these is the very basis for understanding the economy at the industrial level; the EC is also a major contributor to our Gross Domestic Product estimates. Economic censuses take place every five years, in years ending in 2 and 7. Between those years the U.S. Bureau of the Census conducts less comprehensive annual surveys, thus giving business, economists, and analysts the “eyes” by which to track economic activity at a meaningful level of resolution. Eliminating the EC blinds us. The annual surveys crucially depend on the five-year full surveys.

The ACS is the statistical lens focused on economic behavior at the local level. It measures demographics, income, insurance coverage, educational level, veterans status, disabilities, employment, place of work, getting to work, where people live, and what essential services cost. The ACS has a 1-year, 3-year, and a 5-year cycle, with the 5 year surveys having the most comprehensive coverage down to the Census Tract level. ACS data are extensively used by business and by the educational sector (which uses data published every year for school districts). It is, of course, of vital importance for counties, cities, incorporated place, and towns in administering themselves. Without the ACS, a richly detailed map of the United States goes grey.

I provide next a brief YouTube presentation by Dr. Robert Graves, head of the Bureau of the Census:

Congress has already succeeded in killing the Statistical Abstract. As reported here (link), it went west last October 1. With the additional execution of the EC and the ACS, Congress is also, de facto, killing off the entire profession of micro-economics. And weakening the population census—and thus of the annual estimates and projections of population that take place in the years between those ending in 0, we shall jump, in a single leap, from being the world’s leading provider of statistical information to the status of some third world country where most of the labor is absorbed by herding or farming.

It isn’t done yet, of course. The beady-eyes in Congress, drunk on tea, may not succeed in this attempt to blind us. In fact I hope the public will wrestle the ice-pick out of the maddened hands of Congress pronto.

I would add here this link to a post on the old LaMarotte titled “Telescope of the Economy” which shows why we really need good statistics broadly available to the public.

Hat tip to Joyce P. Simkin who un-made my Sunday.

If It Isn’t Right, Do Nothing

Short Social Security income by cutting the payroll tax. Give small business incentives to hire more people. The logic in both cases is outrageously thin. Forty bucks a household a week will produce an avalanche of consumption producing vast job creation? Small gains, small purchases, and if we scan the stores, we see that such small commodities are mostly made overseas. Small businesses create most of the new jobs? True. They also lose the most of them when things turn down. Businesses hire when they need help—not because they get some tiny tax reward. The economy is not a precise instrument where pushing this lever will automatically get that result. Predictably. Do the right things—or do nothing. Stupid gestures just confuse.

Bonny-Part, We Need You Now

When rabbits are set to guard the carrots and dogs the freshly sliced steak, be sure that something is badly out of joint. There is the Volker Rule: banks must not engage in trading with the deposits in their banks. It was proposed in 2010 but is still not law. It’s passage is projected to September, but I wouldn’t hold my breath. Furthermore, its sway only touches federally-insured deposits. It does not prohibit trading in derivatives, does not outlaw hedge funds, and do other sensible things that would restore sanity to the finance sector. The time approaches when we need a Napoleon again—meaning that these things are resolved by someone who commands real force. Meanwhile we’re entertained by continuing news of chaos form that sector—today a kind of meltdown at JP Morgan Chase, traceable to those old toxic assets, once again, and to the insane gambling fever that goes by such hallowed named as investment and liquidity, and such. Liquidity? The Fed is supposed to provide that. We don’t need the help of gamblers. Investment? The stock markets are bad enough. I don’t like men on horseback, even little men with tri-cornered hats. But my wishes are horses, and Napoleon is riding one of them.

Greek Corrective

To read the papers, it would appear that just about everybody in Greece is working for the public sector. I found some numbers for Greek public sector employment on the Philip Atticus’ blog (here) for 2011, citing ELSTAT, the country’s National Statistics Organisation. According to these numbers, public sector employment in Greece was 18 percent of the total workforce—which compares to 16.6 percent for the United States in 2011, taking December 2011 as the benchmark. Not all that different.

I made efforts to look at other sources of data as well. One is the Organization for Economic Cooperation and Development. OECD presents data for the period 1993 through 2009, identifying one category as “Public Administration and Defense”; that category, much like the equivalent U.S. data from the Bureau of Labor Statistics, excludes the armed forces. The numbers I found (link, p. 158) are significantly lower than those cited by Atticus: In 1993 public sector employment was 7.2 percent of the total labor force, in 2009 8.6 percent.

In any case, the Greek economy looks quite similar to others in the developed sector. Agriculture represents 12 percent of total employment, which is fairly high (and compares to our own at 1.6%), industry at 20 percent (30.1% in our case), and services at 68 percent (68.3% in the United States).

I tried to find confirming data on ELSTAT myself, but the site is all in Greek—and Google’s translation service failed me when I had penetrated down to the really substantive statistical presentations.  

Labor Force Participation

Today’s Wall Street Journal brought Bureau of Labor Statistics data on labor force participation, showing it dropping (BLS press release link). The labor force is defined as those aged 16 and older; the participation rate is the percent who are actually working or seeking work. The Journal shows data from 1980 to 2012, which forms rather a bulge, with participating rates dropping below 1980 levels. I got curious and obtained a longer series from the BLS, thus going back to 1948:

The lowest numbers on this chart came in December of 1954, 58.1 percent, undoubtedly a consequence of the July 1953-May 1954 recession. The peak came in 2000 when labor force participation reached its maximum, 67.3 percent, January through April. Thus less than 10 percentage points mark the bottom and the top.

The bulge in the curve is in large part the consequence of women’s entry into the labor force. In 1948, female participation was 32.3 percent. By 2000 it had reached 59.9 and by 2010 it had declined to 58.6 percent. The pattern for men has been a gradual decline, from a rate of 85.1 percent in 1948 to 74.8 in 2000 and 71.8 percent in 2010.

The BLS’ own projections indicate an ultimate stabilization of this pattern around 60 percent in the out years, meaning by 2050 or thereabouts. Or maybe it will be a lot higher than that as the oil runs out…

Employment Update: April 2012

The Bureau of Labor Statistics revised last month’s employment numbers upward (link), from the reported 120,000 to 154,000, for a gain of 54,000. April numbers show a modest gain of 115,000 jobs. We are rocking along. What more can be said? Well, the Construction sector turned in losses (2,000 jobs); the worst negative performer was Transportation and Warehousing (16,600 jobs lost), signaling that trade isn’t doing well. And Government clocked losses again (15,000 jobs were shed). So there is no sign of Spring growth around here. The updated chart follows: