Order of Kilopi
Another factor of two? This is getting spooky.Originally Posted by Ronald Brak
Ok, then the price ratio exactly cancels the fuel-economy ratio, and we're simply left with Americans being on average 41% further apart than Europeans, and consequently spending 41% more.
41% seems a little high to me.
Established Member
I believe Charleton Heston's despairing wail was:
"You maniacs! You blew it up! Ah, damn you! Damn you all to hell!"
Sorry to bring it up. It's the ape in me. The Forbidden Zone was once a paradise you know.Well, before the bankers got to it anyway.
Order of Kilopi
You know, something to keep in mind is these "cuts" aren't really cuts as most would think of it, and that's due to the bias of what they call baseline budgeting, which was put in place back in the '70s or maybe before. Anyway it works like this. There will be automatic increase in a budget item ever year, a percentage increase. This puts into place automatic geometric/exponential growth. That factor varies from item to item, and dept to dept, but it's there. Cuts and increases are relative to this automatically increasing base line ("curve" one should really say).What is all this stuff about not finding
cuts of a trillion? Heck, you just start
with a thousand million and decide where
you dont spend it! Repeat this a thousand
times and there you are. Easy Peasy!
Just leave waste water projects alone.
And...
Now, they look a things over a 10 year window and these figures are *cummulative* totals over the 10 year period. Thus 1.2T in "cuts" means the cummulative total increase is $1.2T over the next ten years than if nothing were changed. Let's look at an example. Say we're spending $100 on something and the automatic increase is 5%, and we'll look at 5 years, not 10: So the next 5 years for that item looks like this:
Year 1: $105
Year 2: $110 (rounding to nearest dollar)
Year 3: $116
Year 4: $122
Year 5: $128
That is thus the baseline. Cuts and increases will be relative to that. Suppose we make a draconian cut in the first year and only spend $102 dollars, but let the 5% baseline increase still apply:
Year 1: $102
Year 2: $107
Year 3: $112
Year 4: $118
Year 5: $124
Now let's put the together:
Old Budget New Budget Difference
Year 1: $105 $102 $3
Year 2: $110 $107 $3
Year 3: $116 $112 $4
Year 4: $122 $118 $4
Year 5: $128 $124 $4
So, we say that we have cut $18 over 5 years. And this also illustrates something else important. While the change was too small and I didn't run the time period long enough, you can see that the difference, the "cut" for each individual year will itself increase exponentially. Thus, most cuts will be in the "out years", or the last few years of the 10 year run, and this fact is a mathematical consequence of its design.
All you have to do is come along later in Year 2 or so and just bump things back up a little bit, and you erase all that cummulative difference in the out years.
Order of Kilopi
Spain had another auction today, a bill auction, and it was disaster as far as yield. The 3m came in at 5.1% and they sold a 6m as well which came in at 5.2%. Note this is very short term debt.
The Spanish Treasury also pulled something, getting the press to change which batch of bonds they use for the benchmark yield, a move which made the yields look like they dropped rather than increased. Normally, the latest issue is used, but Spain got them to use a previous issue, which was yielding lower.
Consider an older bond. If you're buying and selling on the secondary market, then the maturity date is sooner than a more recently issued bond of the same maturity and this accounts for the difference in yield. For example, consider a 10 yr bond issued in 2005. It will mature in 2015, so if you're buying it today, you're buying the equivalent of 4-yr maturity.
Order of Kilopi
And another biggie. Remember Dexia, the big Belgian bank that went belly-up and was split into a good/bank deal, with France and Belgium (and some other taking a smidge) of the bad bank guarantee? Well, that deal looks to be falling apart, with Belgium demanding France take on a bigger share of the guarantees. France is not amused. If France takes on more, it may just be the last straw that gets them downgraded from AAA, or accelerates that downgrade.
Order of Kilopi
Who's doing the demanding on the Belgian side? They still don't have a government.
Order of Kilopi
More idle analysis on driving and working:
From above, we assume that American drivers spend approx 1.41 times more than Europeans drivers. Now a person will only drive to work if he earns enough money, from the day's work, to cover at least the cost of the drive. So the "tipping point" of a day's wages should be 1.41 times higher in the US than in Europe. I can't identify the actual figure, but I think the tipping point would lie close to the minimum wage.
The minimum wage in the US is about $8/hr. Dividing by sqrt(2) and multiplying by the exchange rate gives a European minimum wage of around 4 Euros/hr. Most of the comparable EU economies have minimum wages far higher than this- France 9E/hr, Germany 8.5E/hr, UK 7E/hr, although Spain's is close to 4E/hr and Portugal's is 2E/hr.
So, it's quite likely that there are more Americans close to their drive-to-work/stay-at-home tipping point than there are Europeans who are close to theirs. And seeing as this could equally apply to any decision that has a driving as one part of the trade-off, Americans as a whole are likely to be more sensitive to changes in gas prices than Europeans. Having said that, if you were an alien studying French truckers you would probably come to the opposite conclusion.
Order of Kilopi
Gas is less than 1/3 in the US, you're mixing distance and money here.
__________________________________________________
Reductionist and proud of it.
Being ignorant is not so much a shame, as being unwilling to learn. Benjamin Franklin
Chase after the truth like all hell and you'll free yourself, even though you never touch its coat tails. Clarence Darrow
A person who won't read has no advantage over one who can't read. Mark Twain
Order of Kilopi
You mean a third of EU price? I was just playing around from earlier- posts 77 and 91. I used 1/2 there.
Order of Kilopi
Actually, I just realized I forgot the factor 2 in average mileage. sorry, you're right.
sqrt(2) times the miles * 2 times the gas/mile * ½ times the cost for gas is sqrt(2) times the cost totally.
__________________________________________________
Reductionist and proud of it.
Being ignorant is not so much a shame, as being unwilling to learn. Benjamin Franklin
Chase after the truth like all hell and you'll free yourself, even though you never touch its coat tails. Clarence Darrow
A person who won't read has no advantage over one who can't read. Mark Twain
Order of Kilopi
No worries Henrik. By the way, while doing that I noticed that Denmark has the highest minimum wage in the world- 14E/hr! And since the sky hasn't fallen over there, it piqued my interest. I've decided to have a look at it when I get some time.
Order of Kilopi
Saw a headline earlier. Partial fail of a German bond auction. Oops! I hope publius will have the gory details.
Order of Kilopi
Yep. It was E6B 10yr bond auction and they only sold 65% of it, with a yield "tail" of 14 bp, pushing the 10yr yield over 2% and over 10 yr Ts. Germany has had these partial failures before, but they were never considered a big deal. But is now, and this is the worst failure since Germany went on the Euro, I think.
They say the Bundesbank had to pick the slack of the remaining 35%. How that works I don't know. The Bundesbank used to be the central bank for the D-mark, but now they've gone to the euro, with the ECB being the central bank for that, I just don't how the former central banks really work. It may be like the regional Fed banks in some ways, I'm just not sure.
But at any rate, the central bank buying debt directly at an auction would seem to be illegal direct monetization (printing), so how it works I don't know.
Over here, we have the primary dealer (PD) system (MF Global was a primary dealer, keep in mind -- I'm now just about convinced, without any hard proof mind you, that MF's failure was the reason for the NY Fed's $1.6B loss of a few weeks ago). Any the PDs are *required* to bid at Treasury auctions. This prevents failure. (Of course, if they don't have the money, they couldn't buy any even if required to, so it really doesn't prevent failure directly, although I'm sure they're all sorts of games behind the scenes they could play with the Fed who would ensure they did have the money, which would be indirect monetization
So I imagine whatever the Bundesbank (sometimes called the BuBa) does is similiar to the PD system, just with it doing it directly. The BuBa acts as the state bank, holding the checking accounts for all the German govts, federal and local.
At any rate, this failure was bad and sent shock waves all over the place which caused other yields and CDS spreads to increase. Germany is the benchmark for all other sovereign debt in the region, with the spread between a given yield and the corresponding German yield being a critical metric that determines margin requirements and so forth. Someone I was reading quipped that's one way to lower PIIGS spreads -- raise German yields rather than lowering PIIGS.
So take this as further and stronger rumbling from Vesuvius. The wise man will put some distance there between.
Order of Kilopi
Sorry if you've covered this before, but what's a yield "tail"?
Order of Kilopi
"Tail" is how much the yield rises over the prevailing price before the auction. It's a measure of how much the new supply thrown in affects the yield and hence lowers the price.
I was looking at the "BuBa" role and it appears the BuBa "retains" the unsold bonds, then sells them later on the secondary market. Whether they immediately credit the govt account with the money, or wait until they manage to sell them all, I don't all.
Order of Kilopi
Whoops. I think I misunderstood what I read. The actual tail itself wasn't 14 bps, but somewhat lower, and the yield on the 10 yr Bund only rose that much *after* the auction. So the actual tail of the auction wasn't that bad, but the yield did eventually rise 14bps to over 2% at the end of trading.
And while the German long end was rising, there was a flight to safety in the short end, with bill yields actually going negative, I believe.
The EU is about to blow.
Order of Kilopi
The minimum wage thing is likely caused by a combination of several things, including one of the worlds highest tax levels which means it may not be all that high after tax.
I think part of why the sky isn't falling down here is that our lending market is completely different from the American and likely from several of the other European countries.
Here, housing loans are financed by a strictly limited number of financing institutions which get the money by emitting bonds rather than by reselling the loans themselves as happens in the US, that would simply be illegal to do here, so the legality of who has title to the loan is never in doubt and there's far less possibility of the banks playing pass-the-gilded-turd.
There has been a bit of a bubble, but not nearly as large.
And by not being Eurozone, we have the possibility (which hasn't been needed yet but may end up getting triggered if they start the presses) of floating the Krone relative to the Euro.
Also we didn't have the bank deregulation that allowed the banks to set themselves up to only be solvent when looked at by those who'll add 2 and 2 and get 6 including expected profit.
We've only had two banks go all-out bankrupt and in both cases it was mainly because of lending too much money to too many too large companies that failed. Straight up greed overruling basic risk assessment in both cases.
__________________________________________________
Reductionist and proud of it.
Being ignorant is not so much a shame, as being unwilling to learn. Benjamin Franklin
Chase after the truth like all hell and you'll free yourself, even though you never touch its coat tails. Clarence Darrow
A person who won't read has no advantage over one who can't read. Mark Twain
Order of Kilopi
Let's see, a year's work at minimum wage is about 66% of per capita GDP in Denmark, 52% in Australia and 33% in the US.
Last edited by Ronald Brak; 2011-Nov-24 at 03:46 AM.
Order of Kilopi
Speaking about hedging for Mad Max, I was just reading that survival gear sales are through the roof with one such chain store (St. Louis area, I think) reporting a pretty good spike in sales. They said sales started picking up when the Mideast uprisings started, and are now getting pretty strong indeed. I think they said "MRE" sales were 3 to 5 times normal. Outdoor gear and all that are selling well as well.
It seems some people are preparing "bug out" kits. Basically, these are backpacks and bags they'll fill with food and survival gear so they can bug out of the city or suburbia at a moment's notice. Some are preparing "communal safe areas", where groups of friends and family pick out some location to bug out to (out in the country), and all stock up on the gear and supplies they'll all bring. Prestocking such a safe location is also going on.
That of course seems insane, unless a collapse really happens and then it will seem very smart indeed. The thing is, if you were doing that, you wouldn't want to tell people (other than those of like mind) because they'd think you had gone nuts, and second, if Mad Max did come, you wouldn't want all the unprepared "zombies" to know you had food and other needed supplies.
Established Member
I guess they never saw the Twilight Zone episode "The Shelter"...if Mad Max did come, you wouldn't want all the unprepared "zombies" to know you had food and other needed supplies.
I may have many faults, but being wrong ain't one of them. - Jimmy Hoffa
Order of Kilopi
But how do they expect things to play out, global thermonuclear war? If everything crashes monetarily, government may institute some mandatory controls for a period of time, but food and necessities would still flow for the most part. I mean, the US still has a lot of internal resources.That of course seems insane, unless a collapse really happens and then it will seem very smart indeed. The thing is, if you were doing that, you wouldn't want to tell people (other than those of like mind) because they'd think you had gone nuts, and second, if Mad Max did come, you wouldn't want all the unprepared "zombies" to know you had food and other needed supplies.
Et tu BAUT? Quantum mutatus ab illo.
Order of Kilopi
Read up on the economic collapse in Argentina. There are many "on the ground" accounts floating around the internet, and that is sort of the blueprint.
This bubble in survival supplies was in the St. Louis area, and St. Louis is one of the top ten cities in financial trouble, I think. Look at what's happening to Detroit.
Look up "normalcy bias". That statement is an example of that.If everything crashes monetarily, government may institute some mandatory controls for a period of time, but food and necessities would still flow for the most part.
Think Kartrina in all the major US cities at once. Katrina itself is an example of the problems of normalcy bias. Those cities would become feral free fire zones quickly. Local authority would be overwhelmed in no time flat. The National Guard takes time to mobilize (and consider how thin we've spread out our forces of late).
War game out a collapse scenario. "The money runs out" completely and the financial system just collapses. All those cities depend on truck load after truck load bringing in supplies continuously and then truck load after load carrying the waste out. That comes to a stop. Store shelves are cleaned out in a day. Then the power goes out. Water and sewer fail. They'd be eating each other alive in a week writhing around in their own filth in no time.
Normalcy bias tells you that is all nuts. That will never happen. But it can. And the probability for it happening is increasing every day.
Order of Kilopi
I'll look it up later --we're on death watch for my grandfather tonight-- but I have thought about it a lot. I can see how things would deteriorate and I don't think it will get that bad that fast for most people. We have strategic supplies to keep basic services running for some time, even if the general public goes without fuel or is strictly rationed. I don't think US civilization will devolve like that, unless people start using their guns to cause problems instead of using them to prevent/stop problems. But I agree with stocking up on enough food for a few weeks to a few months. I admit I may be biased: I'm not the type who is planning to use such a problem as an excuse to ditch the concept of governance.
Of course, where I live we have to survive winter every year, so maybe we're just naturally well prepared.
Et tu BAUT? Quantum mutatus ab illo.
Order of Kilopi
So what happened in Kartrina?
Order of Kilopi
Oops. That was just me.Speaking about hedging for Mad Max, I was just reading that survival gear sales are through the roof with one such chain store (St. Louis area, I think) reporting a pretty good spike in sales. They said sales started picking up when the Mideast uprisings started, and are now getting pretty strong indeed. I think they said "MRE" sales were 3 to 5 times normal. Outdoor gear and all that are selling well as well.
It seems some people are preparing "bug out" kits. Basically, these are backpacks and bags they'll fill with food and survival gear so they can bug out of the city or suburbia at a moment's notice. Some are preparing "communal safe areas", where groups of friends and family pick out some location to bug out to (out in the country), and all stock up on the gear and supplies they'll all bring. Prestocking such a safe location is also going on.
That of course seems insane, unless a collapse really happens and then it will seem very smart indeed. The thing is, if you were doing that, you wouldn't want to tell people (other than those of like mind) because they'd think you had gone nuts, and second, if Mad Max did come, you wouldn't want all the unprepared "zombies" to know you had food and other needed supplies.
I made a pretty big purchase of camping supplies recently. My rational was camping is a cheap hobby; some food plus a modest amount of gas and a small fee for a weekend equals an instant vacation. A fishing license can be had for a small fee and a cheap pole can be as little as $10. Pick a place with a private lake/pond and you can skip the license and possibly rent a small watercraft for a couple of hours too. Forgoing the fishing entirely, camp gear makes day hikes easier.
I camp about five times a year. If my $500.00 worth of gear lasts 5 years, that is a really good investment. The gear cost $20.00 per trip. My shopping bill is typically about $50.00 per trip plus about $25.00 in other supplies for a three day trip. So for 3 people to camp for three days (my wife won't camp), my cost is less than $100.00 per trip. I don't think you can get a hotel room for three days at that cost.
If you hadn't mentioned MRE's I would seriously wonder if this was some sort of recreational reaction to prices. An MRE's vs a weekend campers bag of pancake mix and some sandwich stuff is a relatively huge investment and very long term.
Solfe
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'That was tops! Who's not good at math? I was all, "Four!"' - Finn, Adventure Time.
Order of Kilopi
I forget we're international here, but "Katrina" is something of a synonym for Mad Max, because New Orleans pretty much went Mad Max in the aftermath of that hurricane until the military (and regular army, 82nd Airborne, IIRC) finally got in there and got in under control.
Let's see Wiki has a summary here:
http://en.wikipedia.org/wiki/Effects...eans#Aftermath
That's a general overview, but here is 15 page NY Times article about what went on in a hospital. Some doctors essentially euthanized very sick patients with morphine:
http://www.nytimes.com/2009/08/30/ma...l?pagewanted=1
In short, conditions went to hell and went to hell fast, overwhelming local and state authorities. FEMA, at the federal level, was also a cluster, uh, bomb itself. While things were bad, there were false stories about even worse things happening which the media repeated and authorities believed. One was stories of "rape gangs" in the Superdome going around raping and killing people with tales of hundreds being killed. Such stories made rescue people afraid to go in.
At the time, I remember wanting to slap some news anchor who was down there reporting and actually went hysterical on live TV.
Order of Kilopi
I tried to look up how many people were murdered during Katrina and got a figure of 21 suspicious deaths: http://www.outhouserag.typepad.com/h...ious_deat.html
To me that doesn't seem too bad a figure given the situation. Of course that just might mean my opinion of humanity is set too low.
Established Member
We do some occasional camping, and have found that gear will last a long time if properly cared for. Now that I'm a little older, we find ourselves renting a spartan cabin more often than using the tent. We considered a buying towable trailer a few years ago, but the math didn't work out.Oops. That was just me.
I made a pretty big purchase of camping supplies recently... An MRE's vs a weekend campers bag of pancake mix and some sandwich stuff is a relatively huge investment and very long term.
We never take MREs camping, although they might be good for hikers. I *do* have a few cases in my basement as emergency supplies, but my supplies are more geared toward surviving a week or so "off the grid" in the event of a natural disaster rather than a Mad Max scenario. I chose MRE's for that application because they have a long shelf life.
I may have many faults, but being wrong ain't one of them. - Jimmy Hoffa
Order of Kilopi
The narrative seems to have shifted from preventing a Euro breakup, to managing the breakup. I have no idea how they're going to do it, it seems mindbogglingly complicated. Do we even have the currency plates anymore? Or were they melted down 10 years ago?
Order of Kilopi
Okay, I read an account of the Argentinian Economic Crisis by a guy named "ferfal". Even he underlines some differences between the US and Argentina. While I see some similarities in the actions of businesses and politicians, he seemed to think that some of what happened was because there were endemic problems already, and even then things didn't devolve into Mad Max hide-in-the-hills, but more like criminals got more desperate, services were reduced but not entirely absent and people still went to work. I won't get into it more here (lest I risk mod action) than to say that. Simply put, the US and Argentina are different. Moreover, it seems likely that in this current crisis and for the foreseeable future, if the US crashes, so will the rest of the world (if it didn't precede the US). Thus, some of the export issues Argentina had may not exist for the US. In other words, it probably won't get that bad that fast, like I said above. Maybe in 20 years, but not in a matter of months... except for those places in the US that would happen to experience a physical disaster.
Et tu BAUT? Quantum mutatus ab illo.
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