Saturday, February 28, 2009

Twirling the flag

In the mid-70s, I went to a high school game between the school where I was teaching and a very rural high school in a very poor and rural county.

We were playing on their field. Many of our players were the sons or grandsons of Marines, who had come out to see their boys play.

At the beginning of the game, the home team's band came out on the field to play the National Anthem. They had a flag team, with 2 girls carrying the national and state flag, and two others with wooden rifles as an honor guard. We all stood up and removed our hats, the band played, and the flag and honor guard marched off.

At halftime, the band came back on the field to perform its program, and the flag team came out with it. Most of the girls had banners with the school colors, but two of them still carried the US and NC flags. The music started, the girls on the flag team began their routine, waving and twirling with the flags--including the national and state flag.

I thought the Marines in our stands were going to have collective heart failure!

When the young lady threw up and caught the US flag along with the others, you could hear a collective gasp.

Several of them wanted to go in a body to the band leader and tell him off Marine style. But a retired colonel and the civilians among us (including their wives) finally convinced everyone that a confrontation there, on their field, at their school, and in their county, might not be a strategically good idea.

What they finally decided to do was to get a copy of the USMC flag manual and send it to the school with a letter advising them that they needed to handle the flag more respectfully.

This was done. The next time I happened to see that school's band perform, the flag was not twirled.

Thursday, February 26, 2009

The poverty effect

During the housing boom (or, as we now know, the housing bubble), many people felt richer than their incomes might have indicated because their house had increased so much in estimated value. They took out home equity loans and other loans to buy things they would not otherwise have considered buying. They felt that, if necessary, they could sell their house at such a profit as to be able to clear their debts and still leave enough to buy another house. Some people even made this a practice, buying a run-down house and refurbishing it and "flipping" it with a profitable resale.

Economic reporters called this feeling that a house was a storehouse of value that you could tap to improve your lifestyle, the wealth effect. It led people to buy more, spend more, and rack up more debts.

Now that we are in a recession, many of those people who enjoyed the wealth effect are suffering from the poverty effect. Some of them are really much poorer than they were, having lost their jobs, their health insurance, and their house to foreclosure.

The poverty effect, however, is spreading beyond this group. Many young people with good and stable jobs have looked at the falling values of their 401k's and gone into panic mode. The fear of losing your job is real; it is wise and reasonable to take precautions. It is wise to revisit your 401k and put whatever is left into more conservative investments for the time being. It is wise to increase savings and decrease waste in your daily expenses. It may be wise to postpone getting that new car or replacing your living room furniture until you are sure of your job situation.

But the poverty effect can lead to irrational behavior as much as the wealth effect. If you are in your 50's and your 401k had sunk like a rock, you are facing serious problems. But if you are in your 30's, you still have thirty more years of work and investment to repair that damage. You may never get back to where you appeared to be at the top of the boom, but you can reach a level of safety. And, in fact, you never really were as well off as you thought at the top of the boom: like the invisible assets of so many toxic bonds, you had imaginary wealth, like the imaginary food in old tales that seemed real, but evaporated when you swallowed it.

It is wise to postpone replacement of a good, reliable car. It is unwise to skimp on its maintenance to save money, or to hold on to it when it has become unsafe.

It is wise to try to take care of minor problems yourself. It is unwise to try to take care of things that are beyond your skill because plumbers or electricians are expensive. The fifty or one hundred dollars you might have saved is nothing to the result of a flooded house or one burned down by an electrical fire.

It is wise to cut back on luxuries, but homeowners and liability insurance is not a luxury. Yes, you've had your house for ten years and never needed it. But that is no guarantee; during Hurricane Floyd, part of North Carolina flooded that had not flooded since before the Civil War. You may be able to save on premiums by raising your deductible, but if you raise it to a point where you don't have the cash to cover it readily available, you are actually worse off than before.

Above all, we all need to remember that this is not going to last forever. We have gone through these situations before. The Great Depression was long and difficult, but it ended. The panics before it ended. The recessions since the Depression ended. And this will end.

I am not being Pollyanna. I know we are in trouble, and that closing our eyes and whistling "Happy Days Are Here Again" is not going to solve the problems we face.

But neither is panic and irrationalism.

Wednesday, February 25, 2009

Unemployment for part-time workers

As I understand it, several governors are asking their legislatures to refuse that part of the stimulus money that extends benefits for part-time workers who lose their jobs. The governors of South Carolina, Louisiana, and Mississippi are among them.

These governors feel that such an addition to the unemployment insurance program, if begun, would be politically difficult to end. Once the stimulus money is gone, the state would then have to increase unemployment insurance premiums on businesses in the state, adding to their expenses.

All of that is true.

What they are not saying is that it has become a common practice for many businesses to hire many part-time workers instead of a smaller number of full-time workers deliberately, just so they will not have to pay benefits to those workers. Wal-Mart is not the only major chain that practices this.

One result of this practice has been to exacerbate the health care crisis by adding to the number of workers without health care.

Another has been to increase the number of working poor: people who have a job, but don't earn enough to sustain an adequate standard of living. These people further strain social service benefits, such as food stamps, housing assistance, etc.

In other words, to keep the cost of their business down, some businesses are deliberately acting to force the local and state governments to accept greater expenses. The taxpayer is being forced to assume the costs these businesses are refusing to pay. They are doing this very rationally; a good businessman acts to increase profits and/or decrease expenses. They do it because it is legal. It is an unintended consequence of the original decision to exclude part-time workers from unemployment insurance when that program was set up.

We need to decide if we are going to become a full-time or part-time labor economy. If we are going to make it economically advantageous for businesses to hire part-time workers instead of full-time ones, we need to structure our system so that the national, state, and local governments are prepared to take on the social costs of that decision.

In the long run, I think such a decision would be wrong economically, socially, and ethically. I believe it would increase the percentage of working poor at the expense of the middle class. I think it would greatly increase the tax burden on every level of government.

Friday, February 20, 2009

Recession and the motorcycle industry

I wonder how this recession will affect the motorcycle manufacturing industry? I think we may end up very glad that MG is affiliated with Piaggio, which seems to be one of the manufacturers that is set to weather the storm. Piaggio's strong presence in the scooter market gives it an income stream that is likely to resist the downturn. In fact, as people look for cheaper vehicles, they may prosper. And while they do, our marque will last, if only because the Italian government insists that it last.

Honda and the other Japanese manufacturers are part of very large industrial concerns that are likely to weather the storm.

Royal Enfield is part of a large Indian transportation group, Eicher Group.

BMW is also part of a larger manufacturing concern.

Harley has enormous reserves. If the recession lasts too long, however, they may also find it hard to adjust their product mix. Piaggio sells Guzzis as well as scooters. Harley sells Harleys, and their past offerings of cheaper bikes have not gone over well. For one thing, can they retool to produce much smaller motors?

Victory, which is part of Polaris, may have a good chance.

It is the smaller marques that may suffer the most. Ducati and Triumph may have a harder time. Mergers with stronger firms may hold the best outlook for them.

I think that in 5 years we may have a much smaller range of marques.

What I would do about the current economic crisis

I would do what Henry Paulson said he was going to do and did not do, and what still has not been done.

I would create a program to buy the unsalable toxic assets of the banks--mostly collateralized mortgage packages that contain an unknown amount of sub-prime mortgages that cannot be valued. I would buy them at an amount greater midway between their salvage value (8-10 cents on the dollar) and their face value--around 60 cents on the dollar.

I would place them in a fund where, as those mortgages that were sound were paid off, the money could accumulate to repay the government for their initial investment. In the long run (10-15 yrs.), I think the entire cost could be amortized, so that the program would cost the government nothing.

Many banks are resisting the sale of these assets. Some still hope this crisis will be short (4-5 yrs) and they can recoup their investment. More are unwilling, by revealing how much of these assets they have, to reveal how stupidly they behaved during the real estate bubble. I would use the regulatory authority of the government to compel a sale.

From the beginning, the current problems have been caused by the toxic assets that are weighing down the banks and destroying their ability or willingness to lend. Everyone has said this, yet no one seems willing to do anything about it. They remain there, month after month, the recession drags on month after month. We create programs to deal with the consequences of their effects, but we do nothing to deal with the cause.

Wednesday, February 18, 2009

GM kills Saturn, Hummer, and Pontiac

As part of their reorganization plan being presented to Congress, GM will shut down or spin off Saturn, Hummer, and Saab. GM will also end Pontiac as a separate division, retaining a few models that will be sold at GMC dealers. It's about time.

In the Roger Smith era, GM reduced the individuality of its brands. In essence, when you saw a car coming down the road, you knew it was a GM product, but until it got close enough to see the badge, you often didn't know which GM marque it was. This was a disaster. The distinctions and marketing differentials the various divisions worked for years to build up were wiped away. Every attempt to re-establish those differences has failed except for Cadillac, which has managed to regain its reputation in the luxury car market, just as Lincoln has been losing theirs.

GM needs two divisions with separate dealer networks: Chevrolet and Cadillac. The Chevy division should have Corvette as a draw, and the Caddy division should sell the Crossfire as its rival. Chevy could sell Chevy trucks, and Cadillac could sell GMAC trucks.

Very few people will miss Buick. Saturn will be a lost opportunity. I hope someone will buy Saab, preferably to return it to Sweden, where it got its original reputation as a superb but quirky car.

Ford has already gone this way: There are Ford dealers and Lincoln-Mercury dealers, with Mercury being only a few models to attract younger buyers. But unless Ford begins to pay real attention to Lincoln, it will lose this brand as well. While Cadillac has finally managed to build some fast, sporty upscale models, Lincolns continue to be huge, clumsy Interstate cruisers. Sorry, but if I had the money for a Lincoln, I would not get one. And I am at the age where comfortable cars are a real draw, belonging to the War Baby generation, before the Baby Boom. If I had the money, I would buy a Jaguar. Why can't Ford build cars that handle like Jags in its Lincoln plants? They once owned Jaguar, so they should know the technology.

Chrysler tried to merge with Mercedes, and is now trying an "alliance" with Fiat. It isn't going to work unless Fiat is able to cut off the entire top leadership of Chrysler and start over. The current Chrysler management still has a "Big 3" mentality, thinking of Chrysler as an equal or superior partner in any merger. They aren't. But that arrogant attitude will ruin the culture in any merged company, as it ruined the merger with Mercedes.

Finally, Americans need to learn how to build luxury cars. I'm sorry, but no matter how realistic the interior plastic looks when it's new, it's still plastic, not wood, and you can tell. And vinyl is not and never will be leather.

Saturday, February 14, 2009

The stimulus package and its opponents

This is why bipartisanship did not work on the stimulus package, in my opinion.

The Democrats and the Republicans have two entirely different theories about how the economy works. These theories, strongly held on both sides, determine what each party believes is the best way to deal with the current economic downturn.

The Republicans believe that market conditions are self-correcting--this theory is sometimes known as the "invisible hand of the market." If the market goes down, demand will shrink until prices begin to fall. When prices fall sufficiently, demand will rise again, and the downturn will become an upturn. In their opinion, the best thing the government can do in a downturn is to get out of the way and let the market work smoothly, doing only whatever is necessary to prevent absolute want. Part of that getting out of the way is reducing taxes, to put more money in the hands of businesses and individuals. The great economic theorists that support these beliefs are Adam Smith and Joseph Schumpeter.

Most Democrats believe that all of the above is true
most of the time. But, in exceptional circumstances, they believe that the market may lose the power to self-correct. In other words, the normal cycles of ups and downs predicted by Smith and Schumpeter may, under certain circumstances, run out of control. One of the things that might cause this is a structural flaw in the market system. In such a case, the government can't just get out of the way of the market, because the market will spiral down to catastrophe, as it did in Germany prior to the rise of the Nazis. When such a "death spiral" begins, they think the only force that can prevent it is for the government to create and pump stimulus in the form of deficit spending (to be repaid when the crisis is over). The gurus of this view are John Maynard Keynes, Paul Krugman, and Joseph Stiglitz.

The Republicans believe that most of the predictions that we are entering a "death spiral" at the present time are overblown and alarmist. Yes, things are bad, but in their view, not so bad as to require huge deficit spending. Indeed they fear such spending will create huge inflationary pressure once this downturn comes to its natural end, as they think it will. They believe that the markets will indeed self-correct.

The Democrats believe the subprime mortgage crisis and the resulting blow to bank liquidity have created the kind of structural flaw that will prevent the markets from self-correcting. They point flaws in the banking system in 1929 caused by a lack of a system for guaranteeing bank deposits. These flaws meant that when the banks wished to inject capital in the markets, they could not, and that the same conditions exist today. Therefore, they believe that only quick, massive, and decisive action by the government can prevent the "death spiral" which they fear we have begun to enter.

Notice that these viewpoints make it very hard to compromise. If you believe we are not yet in an out-of-control situation, as most Republicans believe, then you think all this huge stimulus will do is create a huge wave of inflation in a few years. High inflation is a very cruel thing, especially for the poor.

On the other hand, if you believe we are in a systemic crisis, as most of the Democrats believe, you think that if we fail to act strongly now, we will create a situation that may be uncorrectable for many years--years of joblessness and misery.

Please note that there are degrees of agreement with both theories in the academic community and in the political community as well. Some Democrats (who voted against the stimulus in the House) are not convinced the situation is out of control. Some Republicans (the 3 who voted for the stimulus bill in the Senate) believe we may indeed be getting to a crisis point.

Both sides are sincere, I think. They sincerely hold views that lead them to opposite conclusions as to the best way to act. They are not traitors or buffoons, but principled people who disagree.

For the record: I have attempted to put the views of both sides as neutrally as I could. I personally think the banking crisis points to a serious structural flaw in the market system and that the danger of an out-of-control economic fall is real; in other words, I agree with the Democrats. Indeed, I believe that the current stimulus bill is, if anything, much too small. Nevertheless, I respect the positions of those who agree with the Republicans, and deplore the nasty tone and vicious attacks that BOTH sides have engaged in.

Friday, February 13, 2009

The blame game and the economic mess

Letting the chips fall where they may is all very well as long as the ones that fall on you are few and small.

But when the chips falling where they may, means that you lose your income, your health insurance, or your house, then what others call a chip may look a lot like an avalanche to you.

Part of our defense against fear is generalizing that the others who are harmed "earned" it. I saw this a lot in Vietnam. He got wounded because he didn't wear his flak vest. I always wear my flak vest, so it can't happen to me. This defensive blame game is very easy to play.

The same rationale appears today, They are losing their home because the took out too big a mortgage. I was careful not to overextend myself on my mortgage, so it will not happen to me.

But I learned in Vietnam that being careful and thoughtful and doing the wisest and best thing doesn't always save you. Buddies of mine who were more careful, more skilled, and more experienced than me died, and careless, foolish guys lived. When you are in a bad place, bad things happen--and they can happen to you just as easily as they can happen to others. Until we realize this, we cannot really do the things we need to do that might actually help save us.

Right now, we are all in a bad place, and the defensive blame game is in full cry. You read and hear it all the time. The people losing their homes got mortgages that were too big. The people losing their jobs didn't keep up with their skills so as to remain competitive. All of the businesses that failed were run by greedy, incompetent people and deserve to fail.

All of that is untrue: many people who bought houses that by traditional standards were completely affordable are losing their houses, many well-trained people who kept up with their skills so as to remain competitive are losing their jobs, and many perfectly good businesses that were run by prudent, careful operators are being forced to close.

We need to get out of this blame game, however comforting it may be. Unless you are in the Bill Gates class, this downturn will affect you, even if so far you have been lucky.

Schadenfreude, pleasure at the misfortunes of others, is an ugly emotion. More important, it is a counterproductive one. As long as we blame greedy bankers, foolish mortgagees, and stupid business managers, we are like children who laugh when the sand castles of others are washed away by the tide. We keep forgetting that the tide will wash ours away too.

Thursday, February 12, 2009

Buying a used car

Anyone buying a used car should get a car history from CarFax. Quazen has a checklist that you can use. Here is a list from Consumer Reports about best and worst models of used cars.

One thing that has changed over the last few decades is the expected life of a car. Back in the 70's, most people felt they were lucky to get 100,000 miles out of a car before it was so worn out in all its major components that it was essentially worthless.

Since then, the Japanese (primarily) and the Ko reans have raised the stakes, and many makers have responded. American and European have also improved in quality--with the possible exception of Mercedes and Volkswagen. Today it is very common for a car to last 150,000 miles, and many of them last 200,000 miles. This means they last that long without a major failure of a main component. Mercedes and VW have not so much gotten worse as simply stood still, so that now what would have been a perfectly good quality car in the 60s is now below average.

So if you are looking for a "new" used car, do not dismiss cars with more than 100,000 miles.

Do you have a friend who is a mechanic? Does your school, or the HS in your attendance district, have an auto shop program? Do you know its teacher? Ask them what they would charge you to give any used car you buy a good going over and tell you about any obvious mechanical problems. A pressure test on the cylinder heads can give you a good idea of how much the engine is worn. A careful check of the brakes, suspension parts (tie rod ends, shocks, etc.), transmission, differential, and exhaust. Ask them to give the car a quick once over before you buy it--looking for things like blown head gaskets or sawdust in the transmission or differential, and let the buyer know that if the after-purchase check shows something major, you will want a refund of part of the price. If the owner refuses, walk away.

Expect to replace hoses and belts, the fuel, oil, and air filters, the oil, battery, and coolant. If you can do any of these yourself you can save a lot of money. Changing the battery is very easy: AutoZone or CarQuest will test your battery for free and help you change it.

There are a lot of people who are "junk shoppers." They usually have a measure of mechanical knowledge and enjoy working on cars. They will buy a real junker car for $100-$500, then keep it working for a year or two, then sell it for scrap, and buy another. They often do this for a second car, but some will do it for their only or primary vehicle.

Monday, February 9, 2009

The mystique and reality of Moto Guzzi

Moto Guzzi is an Italian motorcycle manufacturer that specializes in bikes with a unique engine configuration. They are the oldest continuously-operating motorcycle manufacturer in Europe, and the second-oldest (after Harley-Davidson) still making bikes. They make comparatively few machines every year, assemble them by hand, and sell them in the US through a very tiny dealer network.

They have been in the past powerful agents of change and progress in the motorcycle world. Many great experiments in cycle design and manufacture have been tried by Moto Guzzi. As in all such cases, some have failed, but some have succeeded brilliantly.

The current products of Moto Guzzi are unique. No other manufacturer produces a full line of 45-degree V-twin engines set perpendicular to the main axis of the frame, using a shaft drive. The only marque that comes close is the BMW parallel twin engine, with its cylinders set at 180 degrees opposition, instead of 90 degrees. They are excellent bikes, but they are big, fat, wide bikes--in comparison to Guzzis.

Guzzis have a unique look, an unmistakable sound, and a very different feel.

They are not the biggest, the fastest, the most responsive, the cheapest, or the most fashionable bikes. They excel in no single category.

Except character. Or if you prefer, soul. Or perhaps feel. or maybe you prefer passion.

Those of us who ride them speak of the "character," or "soul" or "feel" or "heart" or "passion" of our Guzzis. We are not talking about something abstract caused by our adherence to a specific brand. We are talking about something that is real and concrete, but not quantifiable. It is something so many riders have felt that it has become impossible to say it is just a subjective impression caused by our love for our marque.

People who have no love for the marque have ridden Guzzis. When they ride them for a short time, they may feel nothing. But I have never read a review from a person who has ridden a Guzzi every day for a month that denied that there was something about a Guzzi that was different from every other bike he had ridden. He may like it, or he may hate it, but he will never deny that it exists.

It is a combination of all the characteristics of a bike: its geometry, its engine, its suspension, its riding position, its control locations, its sound, its speed, its responsiveness, its very method of moving you from one point to another. There is no single number, and no set of numbers, that can quantify it. But if you ride a Guzzi for a time, you will feel it.

I am giving every single biker who reads this log a challenge and a warning:

Go out and ride a Guzzi. Not a momentary ride around the block, a long, varied ride over several days and a considerable distance. You may be captivated, or you may be repelled.

But you will never forget.

Monday, February 2, 2009

A winter poem by Alfred Kreymburg

A Pantomime of Beads

Earth Voice
Thoughtless of life,
A lover of imminent death,
Nun Snow
Touching her strings of white beads?
Is it her unseen hands
Which urge the beads to tremble?
Does Nun Snow,
Aware of the death she must die alone,
Away from the nuns
Of the green beads,
Of the ochre and brown,
Of the purple and black
Does she improvise
Along those soundless strings
In the worldly hope
That the answering, friendly tune,
The faithful, folk-like miracle,
Will shine in a moment or two?

Moon Voice
Or peradventure,
Are the beads merely wayward,
On an evening so soft,
And One Wind
Is so gentle a mesmerist
As he draws them and her with his hand?

Earth Voice
Was it Full Moon,
Who contrives tales of this order,
And himself loves the heroine,
Nun Snow

Wind Voice
Do you see his beads courting hers?
Lascivious monk!-

Earth Voice
Was it Full Moon,
Slyly innocent of guile,
Propounder of sorrowless whimseys,
Who breathed that suspicion?
Is it One Wind,
The wily, scholarly pedant
Is it he who retorts?

Wind Voice
Like olden allegros
In olden sonatas,
All tales have two themes,
She is beautiful,
He is beautiful,
With the traditional movement,
Their beads court each other,
Revealing a cadence as fatally true
As the sum which follows a one-plus-one
So, why inquire further?
Nay, inquire further,
Deduce it your fashion!
Nun Snow,
As you say,
Touches her strings of white beads,
Full Moon,
Let you add,
His lute of yellow strings;
And, our Night
Is square, nay,
Our Night
Is round, nay
Our Night
Is a blue balcony
And therewith close your inquisition!

Earth Voice
Who urged the beads to tremble?
They're still now!
Fallen, or cast over me!
Nun, Moon, and Wind are gone!
Are they betraying her?

Moon Voice
Ask our Night.

Earth Voice
Did the miracle appear?

Moon Voice
Ask our Night,
Merely a child on a balcony,
Letting down her hair and
Black beads, a glissando
Ask her what she means,
Dropping the curtain so soon!

Sunday, February 1, 2009

The Bambi myth

Too many city and suburban people today suffer from an overly-romanticized view of animals, which some call Bambiism. They may not actually think deer, rabbits, and other animals talk to each other, but they impute to them human awareness and human emotions. Some of them say, and some may actually believe, that the life of an animal is equal in value to the life of a human.

Don't get me wrong; I hate cruelty to animals. The practices of some factory farms are revolting. But that is a far cry from believing that a sheep, a cow, a pig, or a dog, are morally equal to a human being. As between the life or safety of a human being, however depraved, and the life or safety of an animal, however noble in appearance or rare, then there is no choice in my mind. May I point out that there is also no choice in the animal's mind; a mother wolf or bear will attack a human to protect its young. The only difference is that I will attack a wolf or bear who attacks a human being who is not related to me, and a wolf or bear would not.

Nor do I believe that a swift and painless slaughter of animals for food is cruel. Our dentition alone shows that humans are not purely herbivores. If you wish to be a vegetarian on grounds of health, religion, or any other reason, you can certainly do so. But do not pretend that eating meat is unnatural for humans.

Wild or uncontrolled dogs are actually more dangerous than wolves. Dogs do not have an instinctual fear of humans, as wolves do. A dog that will attack your pet in your yard will attack you, especially if that dog is in a group. Wolves, through generations of experience, have developed an instinct to flee humans.

I wrote this post as a result of reading and hearing about several dog attacks in the last few days. In one case, a dog uncontrolled by its owner came onto a person's property and attacked a family pet. The owner of the property and the pet came out and shot the dog. As this happened outside the town limits, the sheriff said the property owner was perfectly within his rights. Several acquaintances of mine were horrified that the cruel man shot the pretty dog. I wasn't. I was horrified that the owner allowed a dog to run free without restraint.


About Me

Jacksonville, N.C., United States
Retired teacher, motorcyclist, member of the Patriot Guard Riders, the Christian Motorcyclists Association, and the Moto Guzzi National Owners Club.