Bi-partisanship has been an illusion since 2001

In today's FT, Edward Luce decries the "slow death of bipartisanship". What slow death? Bush and the Republican-led congress killed it when they not only refused to include Democrats in the creation of any legislation, but even stifled their attempts to come up with an opposing strategy. The Republican house leadership made it difficult for the Democrats to even meet amongst themselves, let alone participate in the legislative process beyond being the rubber stamps that they proved to be for the Bush administration. Bush ran on a bipartisan platform, but his idea of of bipartisanship was for him to propose legislation and for Democrats to go along with it.

Luce uses Democratic support for the early Bush tax cuts and the Iraq war, but those votes were not because the Democrats wanted to cooperate with Bush. They were intimidated into supporting these disastrous actions by the feckless U.S. media, which created the illusion that a majority of the nation supported both initiatives.

The Republicans refuse to negotiate at all with Obama, and go even further by using parliamentary rules and the Democrats' cowardice to prevent the majority from passing legislation. If Obama doesn't give in to all of the Republican leadership's demands (if you can call any of those people "leaders"), they walk away from the table and resort to their usual name calling and whining.

The concept of "bipartisanship" is unreasonable; the minority party shouldn't go along with the majority just to create the impression of a united Congress, as that's not what they are elected to do. However, they shouldn't resort to tricks and adherence to gentleman's agreements (the filibuster) to block all legislation they oppose. I can't blame Senator Bayh for retiring from the senate; when a minority can block all legislation that is favored by the majority, Congress becomes irrelevant. And life is too short to devote so much time to things like raising money to keep an irrelevant job.

Explain this dollar thing to me.

The FT reported that China has been reducing its holdings of US Treasuries, leaving Japan as the American government's biggest creditor. The article says the there is a fall in demand "as countries move away from the "flight to safety" strategy they embarked on at the peak of the global financial crisis, and could mean the US will have to pay more in debt interest." Yet at the same time, the Euro was losing value (at the time I checked, it was down about one per cent, continuing its gradual decline over the past several months).

The only way the US can afford higher interest rates on its debt is to print more money (I guess they could borrow even more, which would drive up interest rates even higher, in yet another demonstration of the dangers of positive feedback in the financial system), and when the US prints more money, the dollar becomes worth less. But it isn't. Its value relative to the Euro has been increasing, and its exchange rate with the renminbi is locked, thanks to our friends in China. The dollar is even increasing in value relative to the yen. So what gives? Why is the market not holding the biggest borrowers in the world accountable? It's actually rewarding people who pay for things with dollars, which just happens to be the over-consuming Americans. How are we pulling this off?

One explanation is the Greek debt crisis. For some reason, Greece's reckless spending (which is probably nowhere near as big as California's or New York's) is devaluing the Euro, even though the Greek economy is a tiny fraction of the EU. Are people really buying dollars because of their fear of a Greek default? Where is this efficient market I have read so much about?

Disclosure: I did trade some dollars for euros a couple weeks ago, as a hedge for a trip to Europe I am planning for later this year. Maybe it wasn't necessary.

Jeff Zucker Demostrates His Ignorance (while testifying to Congress)

The LAT is finally good for something, as they covered this story about Jeff Zucker talking to Congress. Either Zucker is completely ignorant about how the Internet works (like he doesn't know what a browser is), or he just committed a felony.

Zucker accused Boxee of "illegally taking the content that was on Hulu", which is an absolute lie. His only possible defense would be he has no idea what a web browser is. Boxee provides software that lets people watch videos from the web on their TV sets. When you use boxee software, it allows you to use a browser to access websites like Hulu, on your TV set. There are lots of products that do this, but for some reason, Zucker singled out Boxee, when questioned by a congressman about why they blocked Boxee users from accessing Hulu.

Zucker has a history of not understanding the Internet, and of blaming web companies for his dismal performance. He screwed up the Leno/O'Brien deal, and has aboslutely no business running a company like NBC. He has to be a big reason why GE wants to sell NBC-U, but I don't know why they just don't fire him, they won't need approval from the government for that.

The FT Wastes A Fourth of its Comment Page

Today's FT carries an opinion by a Harvard Law School professor, Jonathan Zittrain, that makes many valid points about the closed Apple iPhone system. Apple controls what apps people get to install, unlike their computers, which allow anybody to install anything. So freaking what? If you don't like those restrictions, then don't buy an iPhone. There are lots of other options, like Android (which Zittrain mentions), Nokia Maemo, Palm WebOS, Blackberry, and even that paragon of choice, Microsoft's Windows Mobile.

The iPhone, while flexible enough to run all kinds of applications, is still basically an appliance. Most of the people who buy them don't use more than a few of the over 100,000 applications available from the app store. They don't care about the applications that Apple is not letting them have, as they are happy with the functionality they get. And for those people who don't like Apple's restrictions (count me in, even though I am an Apple shareholder), there are all those other options that will do just fine.

Zittrain doesn't actually call for any action against Apple, so I'm not sure what the point of his piece was. In any case, it was valuable ink space that the FT could have devoted to a much more pressing problem - I dunno, maybe why does the U.S. government subsidize and encourage mountain top removal coal mining, even though it damages communities, ecosystems, rivers, lakes, streams, and the health of millions of people, not to mention the impact of coal emissions on the climate and air? Or any one of the countless other issues that actually impact people's lives. Zittrain tries to frame the iPhone as a threat to personal freedom, but if he really wants to work on that problem, he should focus on the dismantling of the Constitution started by the Bush administration and the continued support of those policies by Obama. Those are the real threats to freedom.

The cheap renminbi's silver lining

Not a day goes by that some politician or master of the business universe doesn't complain about the need for China to devalue its currency. This article in yesterday's NYT (sorry about the delay) says that economists believe that the reniminbi "is undervalued by at least 25 percent and as much as 40 percent, relative to the dollar and other currencies". Amazingly, the economists might be right here. The Chinese economy is a lot stronger than it used to be, and their money should be more valuable, especially since they have been loaning so much of it to the U.S.. And it does hurt American exporters (and maybe European ones even more, since the renminbi is tied to the dollar, and the strength of the euro vs. the dollar compounds the discrepancy) since it keeps our products artificially expensive in China, and theirs cheap here.

Increasing the value of China's currency isn't going to erase the U.S. trade deficit, though. It would help other countries (like Mexico and smaller third world nations in Asia) who have lost manufacturing jobs to China. But there's no question it distorts the decision on where to build products, and is unfair to everyone, especially Chinese consumers, who have not seen their standard of living rise as much as it should have. Here they are, becoming a part of the industrialized world, yet their compensation is still not in line with other economies that have made the transtion from exporter of raw materials to value added exports.

The bright side of this is the lack of inflation. Given the massive deficit spending by the U.S., inflation would normally be rocketing. The government has basically created trillions of dollars out of thin air, and when you pump that much money into an economy, the value of the currency should decrease. But that hasn't happened, and that's because the currency that has been financing the supply of the dollars is tied to the dollar. It's as if the dollar was gold-based, and America found an unlimited supply of gold. China is effectively holding down the standard of living for its people, to suppress inflation that would devalue their dollar holdings. For this gargantuan sacrifice, people in the U.S. should be thanking, not criticizing the Chinese government.

There are lots of things the west (and especially American politicians) are upset with China about, and rightly so. But maybe we should keep our mouths shut about their currency policy, and enjoy the lack of inflation that would normally be crippling our economy. This won't last forever, eventually China will build its domestic economy enough so that they won't be as reliant on exports, and will be able to afford the devaluation of their holdings. We should look at the undervalued renminbi as a short-term gift, and get our act together.

Twit-wits

I want to thank Nick Bilton of the NYT for his column today defending twitter, as it gives me the opportunity to comment on that mostly useless service.

Bilton thinks Twitter is important because "Hundreds of thousands of people now rely on Twitter every day for their business" (I know of very few free consumer services that are sustainable when you have customers measured in hundreds of thousands). OK, food trucks make valuable use of twitter, by sending text messages to customers about specials and when their truck is in the area. I'm guessing those trucks are part of the hundreds of thousands of businesses that rely on twitter, but it's not as if people didn't patronize them before twitter (twitter may add value, but if you want to start a business that depends on twitter, don't quit your day job). Twitter may add marginal value, but they are not dependent on it.

Bilton points out that companies like Dell and Ford use Twitter to to offer discounts, but I just don't see enough people signing up to receive ads texted to their mobiles, they're just spam.

I won't argue that Twitter serves some useful purposes (the Iranian protests, although ultimately, they had no effect, as the idiot is still in power), but they get lost in the noise that comprises 99% of the twitter traffic. Twitter is a novelty that will wear off when people tire of filtering out all of the useless information.

Bilton believes that twitter is transforming the news industry, but I haven't seen any evidence to support that belief. Maybe tech reporters think it is useful because they tweet about things to each other, but it's the web and the internet that is causing the transformation, not twitter (it relies primarily on text messages, which uses time slices of the mobile phone network, not the internet).

Bilton says the twitter train has left the station, and I agree. It's on a track heading over a cliff (right after the stop where they sell pet food over the web). It's had its fifteen minutes (how's that for using one cliche to describe another?) in the spotlight, which twitter used to try to trick a larger company into acquiring it, but there is no viable business model there. They may stick around a while, as they have a good cash hoard and a loyal cult following, but they will never permeate the mass markets.

Clive Crook Now Understands American Politics

I don't usually comment on articles that I agree with, but I'm making an exception here because I have criticized Clive Crook before. In his FT column today, he says it all in the first sentence: "American voters want more public services than they are willing to pay for." And then he explains how American politicians do everything they can to make them happy.

Crook suggests the VAT is gaining acceptance in the US as a solution to our federal deficits. That's not going to happen. He thinks Democrats will support it because it will generate revenue for programs they like, but politicians in the U.S. don't view spending that way. It's all a fungible pool, and they don't care if the pool doesn't have enough money in it for everything. Oh, most Republicans will say they want a balanced budget, but that is only when they are not in power (see 2001-2009).

The U.S. is going to get a preview of what the entire country is in store for, as California is not going to be able to print money like the federal government does when it runs its deficits. The slashing has only begun here, and it's going to get worse. Maybe. Crook ends his column by saying the U.S. can always go bust, but that's not going to happen. When foreigners get tired of lending us money, we'll just print more of it. Since almost every other developed nation is in a similar position, and China ties its currency to the dollar, we may not even suffer through what would normally be guaranteed inflation. So it's not just the American voters who don't hold their representatives accountable, the rest of the world isn't holding American voters accountable, either.

FT Screws up Headline about Tony Blair

It's too bad the FT's website isn't in sync with the paper edition. The front page has a photo of Blair with the headline "Going to war is a decision 'I would take again'". But the story that accompanies it on page 3 doesn't link to that headline, so I can't directly point out the error in it.

Instead of the word "decision", the FT should have used the word "incredibly giant mistake". Apparently, Blair still hasn't realized what a disaster the invasion of Iraq was, or maybe he still thinks all those deaths and destruction, a trillion dollars burned up, and the creation of dysfunctional new state, was a reasonable price to pay for the ouster and execution of one mostly irrelevant despot (I'm not trying to minimize the horrors that Sadaam inflicted on his own people, but rather the threat he represented to the rest of the world).

Blair felt invading and de-stablizing a sovereign nation because he "thought" Iraq would have eventually made WMDs, even in the absence of any evidence, was justifiable. I guess police should be free to arrest and execute people they think will commit crimes, also. I don't know why anybody thought Sadaam would ever do anything as stupid as threaten the rest of the world; if he ever did have access to WMDs, it would be to demonstrate his power to his own country. He liked his lifestyle, the mansions, the slaves, the money, and wasn't going to do anything to risk losing that, as he had no ideological beliefs. He may have talked a lot about the U.S., like Bush did about North Korea and Iran, but he wasn't going to attack the U.S. or Israel or anybody else he didn't think he could get away with (remember, he invaded Kuwait because the U.S. sent a message that we wouldn't care).

The EU was wise to not hire this guy for any job - he is either too stupid to recognize his mistakes, or too egotistical to admit them.

Confusing Cheap Labor and Capital with Technology Leadership

This NYT article makes a very valid point that the US has probably blown an opportunity to create a very profitable new industry, critical to a nation that has lost millions of jobs in manufacturing in the past decade. But the writer, Keith Bradsher, jumps to the wrong conclusion when he says "that the West may someday trade its dependence on oil from the Mideast for a reliance on solar panels, wind turbines and other gear manufactured in China."

There's a big difference between relying on oil from the middle east and buying lots of energy equipment from China. We do the former because that's where the oil is. If we end up doing the latter, it will not be because we can't do it ourselves, but only because Chinese workers are willing to accept a lower standard of living than American workers, and the capital necessary to build such an industry is much cheaper in China than it is in the U.S. (because unlike the U.S., China hasn't been financing massive trade deficits by selling assets and borrowing trillions of dollars).

In fact, there is no technology that we import from China that we cannot build here, or in other friendlier nations. They're not ahead of us in any way, other than in deployment, and that's because their government doesn't have to pander to campaign contributors and polls that are probably no more accurate than tea leaves. We're not "falling behind" other countries in the development of energy technology, only in its utilization. We don't deploy as much new energy technology because of myopic accounting and reactionary dogmas.

It's the ignorance-based beliefs of fossil fuel proponents that has largely blocked adoption of renewable energy technology. They refuse to believe that anything can or should replace their beloved obsolete technology, and use political meausres to impede evolutionary progress. They stand behind "it's bad for the economy" arguments, even though it should be obvious to everyone that the creation of a new industry like renewable energy would be a massive boon to the economy. China is proving it now, as this article states, but the oil and coal lovers won't believe it, even after it's all done.

Complaining about Product Names

While the latest Apple new product announcement has been met with the usual mixed reaction, one criticism has focused on the name of the product: the iPad. The NYT covers the whining debate here.

The issue is that the term "pad" allegedly makes women think about feminine hygiene products. What did all those women think of IBM's, and now Lenovo's, Think Pad computers? They have been around, maybe for a decade now, and I have never heard one comment about that name.

There are lots of criticisms of this new product, but the name isn't worthy of the time and electrons it is consuming. Steve Jobs has to be laughing at how easy it is for Apple to get free publicity for just about anything they do.

I don't believe Verizon

Verizon said it took a $3 Billion charge in the fourth quarter to pay for the 17,000 people it laid off last year. I don't believe this, as it doesn't smell right.

First of all, if the layoffs took place throughout the year, why did they wait until the last quarter to book all of the expenses? And $3 billion sounds like a lot of money to lay off 17,000 workers - about $176K for each worker. Even if you want to believe it costs them $10,000 to process a layoff (which I don't, even for the most inane accountant), that still leaves $166,000 per victim in severance and unemployment costs. I can appreciate that some of the workers might have worked at Verizon for a long time, but I would bet many of them were more recent hires, who would not receive as generous of a severance package. Maybe somebody who takes Verizon at face value (I never would) could explain how it would cost $176K to layoff a worker.

Whitacre becomes CEO of GM, Doom is inescapable

The NYT reports that Chairman Ed Whitacre has decided to change his temporary status as CEO to permanent, and stop looking for somebody who knows something about designing, manufacturing, and selling cars. Instead, GM will be run for the foreseeable future by a guy who specialized in minimizing investment and paying as little attention as possible to customer satisfaction, the kinds of traits that will guarantee failure in the automotive industry.

To make matters worse, the story reports that GM is grooming their new CFO, Christopher Liddell, whom they hired from non-auto manufacturer Microsoft, to be their next CEO. It's great to have finance people in executive positions, so they can tell the engineering, manufacturing, and marketing people how much money they can spend and how much they need to make, but they should not be deciding what to spend it on, or what products to make, or how to sell it. That has been the downfall of many companies. I don't know, maybe Liddell's experience as a CFO for a software company will provide him some insight in designing economically viable and manufacturable cars that people will want to buy.

I will be personally waiting for GM to start trading on the public markets, so I can buy puts. That is, if anybody will be foolish enough to sell them.