Monthly Archives: July 2013

100-year U.S. Treasury bonds?

Here’s an interesting idea: 100-year U.S. Treasury bonds, from Todd Buchholz and Jim Carter:

The Congressional Budget Office calculates that normal, higher rates would increase the deficit by about $4 trillion over 10 years. This risk could be better managed by the Treasury locking-in today’s low rates by issuing 50-year or 100-year bonds.

The authors make a compelling case by citing the many instances of 100-year bonds issued to strong demand: Disney, Coca-Cola, IBM, Federal Express, Ford, Ohio State, Yale University, Mexico, and maybe soon Canada.

Why not issue longer-term debt that locks in lower rates? Well, the rate spread means that “lower” is relative over time. Longer-term rates are higher now, even though they would be almost certainly lower than future rates.

Political self-interest might argue for short-term debt because short-term debt yields are typically the lowest, which makes the deficit picture look temporarily better. But short-term borrowing also virtually guarantees that future generations of Americans will face higher debt burdens and higher taxes.

Larry Summers or Janet Yellen: The Safe Choice?

I think it’s time for Republicans to take a breath and acknowledge some of the things the Obama White House is doing right. The two names I have heard as top candidates for nomination to be the next chairman of the Federal Reserve are both worthy of support: Larry Summers and Janet Yellen.

There has always been something of a smear campaign against Summers that bothers me a great deal, particularly the notion that he is anti-women. Read this essay in Politico to clear up some facts:

Half a dozen women interviewed by POLITICO described Summers as a major promoter of and mentor to women in the Obama and Clinton administrations. They described him as tough, opinionated and demanding of high performance — both from men and women.

“Everyone needs to be judged on their merits, and it’s not fair to judge Larry as someone who is not supportive of women because that is not the record,” said Sandberg, who rose to become Summers’s chief of staff at Treasury and is now the COO at Facebook. Sandberg credited a major speech Summers gave in the early 1990s on the importance of educating girls in developing countries as critical in injecting the issue into public debate. “The thing that’s missing here is that Larry cares deeply about issues for women in the economy,” Sandberg said.

On the substance of monetary policy, would Summers be a good central banker? Well, he and I have a different world view, to say the least, but as far as Democrats go, yes.

Defenders of the Team Obama will say that they saved America from a true depression. Their aggressive action on the stimulus and annual trillion dollar deficits were vital to buffering the financial crisis: this is their argument. I disagree, but I do so with respect that we will never know alternatives. They had a crisis, to be sure, and had a set of options. In simple terms, they could have made a better choice (bipartisan, smaller but permanent adjustments to tax rates, and so on) but they made what amounted to a safe choice (a rigidly partisan stimulus, undisciplined expansions of jobless benefits, and in Summers ling “timely, targeted, temporary” fiscal adjustments that turned out to meet none of those three criteria).

Team Obama got a safe result — no depression, but no real recovery. The U.S. economy this very day has news of another lackluster quarter of GDP growth. The labor market appears to have permanently shed millions of willing workers from the labor force while Obama’s legislative accomplishments have shifted millions more from full-time to part-time work. But the depression was avoided.

Disagree as I might with Summers on some fiscal policy issues, I still trust him. I trust his intelligence and his fairness and most of all his good will. On monetary issues, I think he may well be great. He will be a safe choice, and a good choice too.

On the other hand, Janet Yellen is much more of an expert on monetary policy, hands down. The next decade will involve some very tough decisions about the timing of unwinding the exotic instruments of monetary stimulus that have been deployed under Ben Bernanke. Yellen’s resume is sterling, but especially valuable is her experience (see: decades of) working at the Federal Reserve. Yellen is an even safer choice for Fed chair.

It would be nice if Republicans would voice support for both candidates, now. America’s economy, as they well know, is still weak. There are far worse choices for Fed chair, which is just one reason why these two merit some bipartisan applause.

Human Capital Illiquidity: We’re All Ronins Now

So many jobs (automated), so little security. From clerks to machinists and now to lawyers, the pace of change is chewing up professions faster than ever. And that translates into a pace that clips the human capital investments as soon as they are finished but not paid off.  Megan McArdle offers a fine perspective on the legal profession’s sudden instability in a Bloomberg column:

Now the professionals are discovering what it feels like to bet your youth on something that may not pan out. These articles on the decline of the industries that absorbed decades of humanities graduates have a panicked tone. If an education doesn’t guarantee you a good job, what does? Are we living in a society in which all but the most ruthless go-getters will be economically insecure?

Well, probably. But welcome to the world most people live in — and have always lived in. Even in those halcyon days of the 1950s, union jobs were a minority of work; union membership peaked in 1954 at 28 percent of all employed people. Most people were in less stable jobs, working for small businesses, in domestic service, and so forth. Read Studs Terkel’s “Working” for a look at what employment in the 1960s was actually like, as opposed to what collective memory has airbrushed it into.

I wonder if human capital illiquidity is a rising, if not new, phenomenon. The idea of capital illiquidity (perhaps rigidity is a better phrase) was first introduced to me by Valerie Ramey based on her research with Matt Shapiro about displaced aerospace capital. A multi-million dollar aircraft cannot be re-allocated into some other physical form that is in demand such as, say, internet servers or even drone aircraft. As Ramey and Shapiro explain, “the more specialized the type of capital, the greater the discount.”

So an illiquid aircraft, or attorney, is suddenly only as valuable as its raw ingredients, whether that is steel & plastics or muscle & brains. If the churn rate in specialized capital is high and uncertain, then investments will be cautious and cash hoarding high. Is that optimal? Maybe we’re all ronins now.

Means-testing Fail, says The Atlantic

Inadvertently, America’s higher education system has become a massive lab experiment, the results of which suggest that means testing social programs can ultimately hurt the very people it is meant to protect.

… At Penn State, which uses the high-tuition, high-aid model, the sticker price for tuition at the school’s flagship campus was $15,250 for the 2010-2011 school year, the most recent year for which all data is available. Including room and board and other expenses and subtracting financial aid, public college students from Pennsylvania families making less than $30,000 a year faced a bill of almost $17,000 per year. Families had to pay more than half of their yearly income to send one child to school. That’s after factoring in financial aid from any source, including the maximum federal Pell Grant awarded to the student.

The Great Wall of Texas

Our essay “The Great Wall of Texas: How the U.S. Is Repeating One of History’s Great Blunders — Today’s immigration debate has an eerie precedent in the mistakes that brought down great empires from Rome to Britain.” on is up. I suspect it will be controversial, but maybe not in the way you might think. A sample:

The psychological impulse to protect a nation’s wealth and culture from foreign contamination is an example of what behavioral economists call “loss aversion” – the idea that people are more concerned about what they might forfeit than gain from change. History tells us that with great power comes great loss aversion.

My favorite fonts

A fascinating video The History of Fonts is on the Atlantic’s website this morning.

I suppose all authors have some level of interest in the design of the books that carry their content, but my high level of interest is probably an anomaly. It stems from my years as a software entrepreneur when Jim Coyer, Greg Lee, Ed Tiongson, and the ever-reliable Ken Herskind were all working on coding and operations, leaving me to manage legal & design (including that new-fangled thing call the World Wide Web). I purchased PageMaker and used it to design our first user manual, box, flyers, and even our print ads. I wonder if I even have any of those print ads in my files?  Probably not.  After a quick search, I found web archives of some images. Here’s the box for our English-to-Japanese product:

And the reverse (J to E):

What I loved about design – and why I think designers have the best job in the world – was playing with different fonts and layouts. Embracing white space for maximum impact was a big lesson.  As for fonts, we quickly decided that our favorite for corporate design was Trebuchet, though that was not the font we used for box titles.  Here is another product splash page we put together:

The formal font name we used for letters, flyers, and so forth is actually Trebuchet MS, designed in 1996 for Microsoft.  As a font fan, I was particularly fond of the lowercase g treatment, which is always a good signal for a font’s overall style. Here are some of the distinct treatments, via Wikipedia:


These days, I find that the classic fonts more comfortable. When word processing, I almost always shift text over to Times New Roman. I have less patience for reading or writing in the sans serifs. Garamond is something I’ll use on rare occasion. And, odd as it may seem, but I like Courier, probably because of my nostalgia for the typewriter years of my teens. I’m actually a little surprised that there aren’t more monospaced fonts like it in WORD and other common software.

If anyone reading this shares my quirky interest in fonts, I’d love to hear a quick comment from you.  What are your favorites? I wonder if Bryan Caplan or Garett Jones ever give this a moment’s thought?

Glenn Hubbard video with Foreign Affairs

So our essay IN DEFENSE OF CITIZENS UNITED in this month’s issue of Foreign Affairs is causing quite a stir. Apparently, the idea of free speech as an absolute principle is truly disturbing to some people. And those who distrust voters call themselves democrats? If folks can set aside their knee-jerk assumptions, think seriously about the empirical facts (increasing money, increasing partisan control of that money, increasing hyperpartisanship in Congress), and think seriously about monopolistic corruption of democracy — basically open their minds with critical thinking — they might be surprised.

Here is Glenn’s interview by Gideon Rose of Foreign Affairs on YouTube.