Friday, October 31, 2008

Happy Halloween!

Looking for something scary?


Yes, another death right on Halloween. Maybe Freedom Bank will become a zombie!


Thursday, October 30, 2008

Today's Candidate Schedule

Here is today's schedule for both campaigns.

As you can see, the candidates are speaking at large venues like _____ stadium, ______ amphitheater, and _______ convention center.

Well except for one that's appearing at _______ high school and _______ community college.

"One of these things is not like the others..."

Guess which one.

Monday, October 27, 2008

Stevens Guilty

According to CNN Senator Ted Stevens (R-AK) has been found guilty of knowingly and willfully concealing gifts worth more than $250,000 he was obligated to disclose to the Senate ethics committee.

Stevens is currently running for re-election in Alaska. The two most recent polls have his opponent, Mark Begich, running slightly ahead. One must imagine that this will hurt Sen. Stevens' chances at the polls.

Sunday, October 26, 2008

Unclear On The Concept

In a major military misunderstanding, rebels in the Democratic Republic of Congo have seized a gorilla sanctuary.

When reached for comment the rebels admitted that spelling was not their strongest subject in school.

Saturday, October 25, 2008

Happy St. Crispin's Day

Today is St. Crispin's day.

This story shall the good man teach his son;
And Crispin Crispian shall ne'er go by,
From this day to the ending of the world,
But we in it shall be remembered-
We few, we happy few, we band of brothers;
For he to-day that sheds his blood with me
Shall be my brother; be he ne'er so vile,
This day shall gentle his condition;
And gentlemen in England now-a-bed
Shall think themselves accurs'd they were not here,
And hold their manhoods cheap whiles any speaks
That fought with us upon Saint Crispin's day.

Henry V, Act 4, Scene III

Wednesday, October 22, 2008

Via atrios, comes this from Calculated Risk.

If the FDIC is looking for office space in southern California, well, this is bad news for Western banks. At least the FDIC is taking the southern California housing problems seriously.

Tuesday, October 21, 2008

Improvements In Commercial Credit Market

The TED spread has narrowed recently. It's still very high versus its historical average, but seeing it narrow is at least a sign the abject fear is receding somewhat.

Update: Looks like this is partly responsible for the improvement in commercial credit market.

Natalie Portman Solves Financial Crisis

See more Natalie Portman videos at Funny or Die

You have to admit, it's about as likely to work as some of the other proposals I've heard.

Best Flickr Group Evar!

via Ezra I am directed to the greatest Flickr group ever created: Robocop and Unicorn.

2000 Days

Today is the 2000th day since this picture appeared in your local paper:

(Photo by Scott Applewhite/AP)

Monday, October 20, 2008

Colin Powell Endorsement

Don't know if you caught the endorsement yesterday, but Powell endorsed Obama on Meet the Press. Here's a video montage of the interview plus his comments leaving the studio, with bits of footage of things he refers to.

Now I'm not crazy about Gen. Powell. Because of his moderate image and position as Bush's first Secretary of State he was in a unique position of public trust, especially when it came to establishment media. His presentation before the United Nations was pivotal in convincing America that invading Iraq was a good idea. Powell was in a position to know that the evidence was thin, and he's smart enough that he should have known what he was doing. He, perhaps more than anyone else, probably had a chance to stop the mad cap invasion cold. Endorsing a democrat two weeks before the election is hardly a profile in courage.

Still despite all that, he still does have the ear of a certain contingent of "conservative center-right" type. His endorsement does carry weight. More than that though, his reasoning is devastating. Take a listen.

UPDATE: It probably is worth reminding people that Colin Powell was part of a criminal conspiracy to commit war crimes.

Sunday, October 19, 2008

Tampa Sunday Sports Capital

Tampa/St. Pete is the sports hub of the United States on this Sunday night. Right now the Rays are locked in a tight ALCS game 7 at home against Boston. Across town, the Bucs are playing the Sunday night game against Seattle (and getting tarred).

UPDATE: Congratulations to the Rays. Their 3-1 win puts them into the world series vs. the Philadelphia Phillys. Worst to first is quite an achievement.

Saturday, October 18, 2008

Wednesday, October 15, 2008

Cheney Relased From Hospital

Cheney was hospitalized for an "abnormal heart rhythm" but was released later today.

Apparently his doctor became alarmed when they detected a heart beat, and they had to shock him in case he became any more human.

Say I Love You With Ed Meese

Nothing says I love you like "surprising your sweetheart" by locking her on a cruise ship for 10 days with John Ashcroft, Tom Tancredo and Ed Meese.

This is so bizarre it has to be real.

Journalism Face Off: Rolling Stone v. National Review

This is hilarious. Matt Taibbi and Byron York have a "conversation" over IM where Taibbi shows he is extremely knowledgeable about the current financial crisis and the credit default swap market and Byron York demonstrates his knowledge goes as deep as his talking points.

In a larger sense, it's very important to point out that the idea that this happened because fannie mae and freddie mac gave "mortgages to people, particularly minorities, who could not afford them" is not just wrong, it's shamefully racist and ignorant. The credit default swap market was up around $60 Trillion dollars at it's height. The total mortgage debt in the US was less than 1/10th that number, and the number of "subprime" loans and other non-AAA debt is far, FAR less than that. The Republican attempt to paint this problem as "poor people getting loans they couldn't afford" is 100% bull-pucky.

See also here, here, and here.

Death By Chocolate

Via Brad Delong, I'm pointed to the Wikipedia page with the lethal dose for an adult human:

Humans are also susceptible to chocolate poisoning if enough is ingested. The lethal dose is placed at around 10 kg (22lbs).

Not just deadly for house pets.

UPDATE: from the I.F.O.C.E (International Federation of Competitive Eating!) Patrick Bertoletti won the seven minute "St. Valentine's Day Chocolate Massacre" by consuming 1 lb 15.5 oz of chocolate. Far short of the lethal dose, but probably enough to give him a tummy ache.

Tuesday, October 14, 2008

Sarah Palin Committed Ethics Violations

Once again, the daily show presents the facts more clearly than CNN. See for yourself.

Here is what the Anchorage Daily News thinks.

Deal Or No Deal? Just Kidding It's All Deal.

The Treasury Department formally announced that it will buy $250 Billion in preferred stock about half of which will go to 8 major financial institutions. The times has a more detailed article here. The eight major banks that have "agreed to participate," Bank of America, Citigroup, JP Morgan Chase, Morgan Stanley, Goldman Sachs, Bank of New York, and State Street all pretty much had no choice. Paulson brought them in and put the screws to them.

Banks that didn't really want to participate, like Bank of America and Wells Fargo had to participate or it would look like the government was "singling out" the weaker banks. While this looks like the financial equivalent of having to give everyone in your second grade class a valentine so no one's feelings get hurt, the stakes are much higher than that. It's much more akin to the national geographic channel, with Citigroup and Morgan Stanley playing the part of an injured ewe seeking safety in the flock lest they appear weak the wolves of Wall Street.

Brad DeLong seems pleased with the deal, although he has some reservations with the concept of buying preferred shares rather than voting common stock. Quick note: preferred shares get paid first, so they're more secure, but they don't vote. Theoretically, if a bank had $10 Billion in preferred shares outstanding, with another $10 Billion in common stock, if the bank is worth only $10 Billion, that's a big problem. If it was sold, only preferred shareholders would get money, but the people who decide whether or not to sell are the common stock holders, who get $0. Thus the "Zombie Bank" problem Brad mentions, where the people running the bank have nothing to lose by keeping it running to maybe make a profit eventually, even if it would be way smarter just to sell it today.

Image from New York Times here (see sidebar) used without permission.

More Canada In The News

It's election day in Canada today. So if you live in the great white north, go vote eh?

True Bipartisanship Reaches Around The Aisle

Congressman Tim Mahoney (D-Fl) from Florida's 16th Congressional District, has made the national news.

You may remember the Hon. Mahoney as the successor to congressman Mark Foley who resigned in disgrace over a sex scandal involving high school students in the congressional page program. Well it seems the Hon. Mahoney, who ran on the platform: "Restoring America's Values Begins at Home" (I can't find an actual example but it's been repeated frequently), is carrying on the proud FL-16 tradition by becoming embroiled in a sex scandal of his very own.

It's a little disappointing that this sex scandal doesn't have any elements of abuse of power, homosexuality, or underage targets. It seems to be the standard, run of the mill heterosexual screwing someone that's not your wife and then paying her hush money. Still, it's nice to see that somewhere politicians are keeping up traditional values.

According to blogger brownsox on Daily Kos, he's not going to be missed much. From a strategic point of view, he wasn't a very reliable ally of progressive values, and his district is moderate enough that a more progressive replacement would be electable. Hopefully Mahoney can be removed quickly and someone can run in his stead.

Monday, October 13, 2008

Pie You Can Believe In

Vote Obama.

Dow Up

The Dow closed at 9,413.34 up almost one thousand points today.

The last trading day, October 10, the Dow hit a low of 7,822.51. That's a fluctuation of almost 1600 points in two days. What does that mean? I have no idea, but it's a pretty good bet most everyone doesn't know either.

Happy Canadian Thanksgiving

Canadians celebrate Thanksgiving on the wrong day.

Even though my Canadian friends suffer from a calendar malfunction, I wish them a happy Thanksgiving anyway.

Congratulations To Paul Krugman

Paul Krugman, Princeton economics professor, NYT editorialist and harsh Bush critic has won the Nobel Prize for Economics.

Nice to see someone you totally agree with be officially recognized as really really smart. Note that as much as I agree with his political commentary, he won the Nobel for his work on international trade and economic geography. My understanding is his work deals with the question of why similarly countries with similar levels of development engage in so much trade.

Update: Here are some completely incomprehensible (to me) white board equations of Krugman's Theory.

Friday, October 10, 2008

Family Values Destroyed In Connecticut By Allowing Loving Couples To Mary

Congratulations Connecticut! They're the third state after Massachusetts and California to allow gay marriage. Naturally, this means that Connecticut will become a modern day Gomorrah.

(note in that link, Massachusetts has the second lowest divorce rate in the US)

Interesting Times

Although it is widely reported, the ancient Chinese curse "May you live in interesting times" can not be substantiated as either ancient or Chinese. Sadly, the idea that the characters for "danger" and "opportunity" combine to form that of "crisis" is similarly apocryphal.

All this is to say that while it's good to look for a silver lining in turbulent economic times, perhaps it's best not to look for it in trite western concepts of eastern philosophy.

It looks like Paulson will be taking action over the weekend. I've heard that there may simply be a forced nationalization of the entire banking sector, though I don't know if it's true. After the last week on Wall Street, the idea of setting up some kind of market for distressed securities seems like it would take far too long.

Thursday, October 9, 2008


The Dow closed below 9,000 today, closing at about 8,590. It hasn't been this low for 5 years.

On the plus side, it's probably close to bottom. Well, it's closer for sure but that's ... well not saying anything at all.

Tuesday, October 7, 2008

Monkey Robot Alliance Continues Apace

The Monkey Robot Alliance (previously discussed on this blog here) has made another gain. A monkey has been taught to serve beer in Japan. You'll note that Japan is the one place where intensive robot research is seen as important and meeting a long term need.

Great, so you have one tiny country simultaneously training monkeys and robots to perform the same functions. It's only a matter of time before the discover a common interest in our overthrow.

Hey, This Guy Can Fix The Economy! He Knows What's Wrong Cause He Broke It!

The New York Times has a great piece on the change in the "Net Capital Rule" in 2004 that allowed investment banks to leverage (borrow against assets) up to 40:1 (because before they could only leverage 12:1). This dramatic increase in leverage helped drive the demand for investment vehicles in financial markets, helping in turn to cause over valuation and the subsequent collapse. It also insured that once the market did collapse investment banks were so over extended that they were sure to go broke.

And guess who helped lobby for these changes? Why Henry Paulson, then CEO of Goldman Sachs! Excellent!

Jonathan Schwartz also points out here that Paulson testified before Congress in 2000 specifically lobbying for this rule change.

TMQ Animadversion

Gregg Easterbrook has an excellent weekly sports column called "Tuesday Morning Quarterback" here. Through his funny and insightful column about football, Gregg has really enhanced my understanding and enjoyment of the game.

However, he often inserts poorly researched (or poorly thought out) water cooler editorial about current events. Now when I say "poorly researched or thought out" I don't mean it's as dumb as most of what you hear on CNN, but it is often borderline negative information value (i.e. if you read it and think it's true, you are less well informed than if you hadn't read it at all). See for example here.

Now this doesn't detract from my ability to really enjoy his football analysis. His cheering for coaches to make mathematically correct plays (such as punting less on fourth and short), his hatred of the big blitz (though I think the data is more mixed on that) and other fun commentary is great. But I actually wrote in to complain about an item he had in this week's column.

Easterbrook complains that New York State is asking the Federal Government for $6.2 Billion to make up for financial shortfalls caused by the total melt down on Wall Street. But in the same article he links to this report, which shows Federal Taxes Paid vs. Federal Benefits Received, when complaining about how much government money Alaska gets per capita. Well where do you think that money comes from? Why look, on page 32 we see that in 2005 alone New York gave the Feds $23.83 Billion more than it got in services. Maybe we can afford a fraction of that to stabilize the economy that provides so much money for the rest of America.

Beer Google Goggles

Google has a new trial feature, Google mail goggles.
"This feature is designed to prevent you from sending stupid e-mails in the small hours, when you're most likely to be inebriated and at risk of making a complete idiot of yourself."

When enabled it gives you a few simple math questions to be sure you are sober enough to make that decision.

Too bad it came to late for this person.

Fed Moves To Buy Commercial Paper

I discussed commercial paper here. The fact that the Fed feels it needs to step into this market is worrying. On the other hand, the fact that the Fed is doing something is good. So... well, I dunno what to think.

Calculated Risk notes the same issue here, but doesn't really offer an opinion.

Update: Dow down around 500 points today. Brad Delong thinks helping commercial paper is a good idea provided we really have the money to be able to do it right.

Update 2: I should mention that my friend in commercial insurance said the Dow would drop "a few thousand points" when the market was around 10.5K, so maybe more to come. Sadly he's been scary right so far.

Monday, October 6, 2008

Two Roads Diverged In Skins' Training Camp

Gus Frerotte is the starting quarterback for the Minnesota Vikings in tonight's Monday Night Football match up versus New Orleans. Frerotte was drafted in the 7th round of the 1994 draft by the Washington Redskins (that's the last round by the way). In the same draft, in the first round, with the third over all pick, the Washington Redskins selected Heath Shuler as their "quarterback of the future."

While Shuler is still in Washington, he's not playing quarterback. He's a freshman congressman from North Carolina's 11th District.

Guess life is funny sometimes.

Apologies to Robert Frost for the title.

This American Life Explains Again

As I previously mentioned here, This American Life had an excellent episode directed at explaining the underlying financial crisis called "The Giant Pool of Money."

They're back with the aptly titled "Another Frightening Show About the Economy."

Again, strongly recommended.

Keating 5 Back To Haunt McCain

Awesome short form documentary from the Obama campaign on McCain's role in the "Keating 5" scandal.

Pass it on.

Bailout Saves The Economy

As of 2:32, the DOW was down 741 points. The DOW dropped below 10,000 at around 10:20AM and has slid down hill the whole day. The market average has not been this low since October of 2004.

The headline is a bit facetious. Trying to figure out the day to day movements of the stock market is a fools game. Still, it does show that this idea that ok we'll pass this one plan and everything will stabilize is wrong. There are still big problems in the world economy, and the markets won't really be stable until all the bad debt is worked out.

Dow closed down about 400 points, just below 10,000.

Friday, October 3, 2008

Day Late Debate Blogging

I was out watching the debate elsewhere last night, but I have to say, the thing that struck me most is how every answer Palin gave came out sounding like word vomit. It's like you took a reasonably on topic article, shook it up, then poured it out. All the words are sort of related and sound generally on topic, but it's hard to find a coherent thought.

Here's her answer on climate change:

PALIN: Yes. Well, as the nation's only Arctic state and being the governor of that state, Alaska feels and sees impacts of climate change more so than any other state. And we know that it's real.

I'm not one to attribute every man -- activity of man to the changes in the climate. There is something to be said also for man's activities, but also for the cyclical temperature changes on our planet.

But there are real changes going on in our climate. And I don't want to argue about the causes. What I want to argue about is, how are we going to get there to positively affect the impacts?

We have got to clean up this planet. We have got to encourage other nations also to come along with us with the impacts of climate change, what we can do about that.

As governor, I was the first governor to form a climate change sub-cabinet to start dealing with the impacts. We've got to reduce emissions. John McCain is right there with an "all of the above" approach to deal with climate change impacts.

We've got to become energy independent for that reason. Also as we rely more and more on other countries that don't care as much about the climate as we do, we're allowing them to produce and to emit and even pollute more than America would ever stand for.

So even in dealing with climate change, it's all the more reason that we have an "all of the above" approach, tapping into alternative sources of energy and conserving fuel, conserving our petroleum products and our hydrocarbons so that we can clean up this planet and deal with climate change.

Is there a coherent thought in there anywhere? "All of the above" is her plan for combating climate change? Also, if you listen to the actual footage while you read this, you'll see that CNN did a generous job of punctuation for her. Notice how many sentences begin with a conjunction or conjunctive adverb (like "also"). Watching it live those didn't sound like new sentences, which made it even harder to parse what she was saying.

Thursday, October 2, 2008

National Debt Clock

One more bit of good news before I sign off. The National Debt Clock will soon need an additional digit. The national debt should go crashing past $10 Trillion Dollars pretty soon now. Pretty much as soon as the bail out plan 2.0 - now with extra spending - is passed.

Image stolen from Conde Nast's Portfolio online without authorization. Please don't sue, I have no money.

Cost Of War Explained

This is a nice video explaining where the "Three Trillion Dollar" estimate comes from (so often referred to on the War or Car blog). Some of the specifics are debatable, but the take away is that the three trillion dollar estimate is reasonable. Numbers based on the Joint Economic Committee of Congress and The Three Trillion Dollar War by Stiglitz and Blimes.

Ok just A link because I'm having trouble resizing it.

Via Yglesias.

Link Keeping Note

On the Other Blogs I Like at left, the "Kevin Drum" link now correctly points to Kevin's blog at Mother Jones. The previous Drum link has been renamed "Washington Monthly" since it points to Kevin's old place of blogging (but it's still good!). "War or Car?" has been moved to Fun Stuff since it really belongs there. Also, sadly I've removed the link to Fair Game, since it went off the air (actually, quite a while ago, March 2008, but since I get it on pod cast it took me a couple months to realize it and by then it seemed too late to make a big to do).

Anyway, likely no one cares but just an FYI for... well me I guess.

On The Other Hand...

Something does need to be done. I don't think a "wait until January" strategy is viable. The fourth quarter of 2008 is long enough that serious damage could be done to the US economy in that time. For example: the commercial paper markets are effectively dead (or perhaps more accurately, in suspended animation). This is VERY BAD. Look, lets say you run a business, oh, making ... bedsheets! Ok, you have a factory, you have to pay for your materials on a semi-regular basis, depending on what you are making and how much, plus there's usually 30-60 day window in any account payable. You get revenue from your accounts receivable on a semi-regular basis, since it depends on what you make, how much and again, there's the 30-60 days of fudge time on any bill. Over a year this all comes out in the wash and you make a profit (if you are a successful company), but you still have to make payroll every week. There will be times when you have a bunch of cash sitting around because you just got a $20 Million dollar check from K-Mart, and there will be times when you need to order $15 Million in raw materials but you won't get paid until next month. What to do?

Enter commercial paper. Think of it sort of like a giant corporate credit card, but one that can loan money too. So if you have a few extra million over the next pay cycle, you can get an extra 1/2% of interest on it while maintaining liquidity, and if you need to charge a few thousand tons of material, you can do that until you get that check from Linens & Things. This all works because we have a working economy, and I'm not worried that your company is going out of business next week, and there is lots of money out there (both from other companies and in "money market accounts") to insure liquidity. But as soon as people worry (especially banks) that they might not get their money back, the interest rates jack up and the amount of money shrinks. According to that Bloomberg article, the Commercial Paper market lost almost $95 Billion with a "B" dollars. There's a good chance that if I try to use that giant corporate card to make payroll, the market will just say "sorry, there isn't any money left." Now I'm looking for a short term loan from a bank... good luck. And if I don't make payroll, that's thousands or millions of dollars that doesn't get into the community for people to buy food and gas and new bed sheets and... mortgage payments! VERY BAD.

Another effect of the tightening of credit is the effect on government bonds (you know, those things you vote on to build schools, roads and, if you're unlucky, a tax payer funded stadium). Road work in Maine and a new emergency room in Billings, Montana are just some of the current victims. Even if a project does get funded, more of that cost will go towards paying interest, and less will go towards building that park or school or bypass. That hurts everyone no matter where you live.

All this is to say that while I'm not a supporter of THIS bill, I am not some sort of nihilist. It is true that SOMETHING needs to be done relatively soon, and if this is the ONLY way they can do it, it is probably better than nothing. I just don't believe that the conditional statement is true. I think a much better bill could be designed if the current proposal was thrown out the window and congress started from scratch. Best would be, I think, some combination of the "Swedish Solution" and a forced mortgage adjustment (see below), plus a real hard collar on executive compensation for any company that participated (to avoid the moral hazard problem, real collars now would make future decision makers want to avoid behaving irresponsibly enough to require a bailout).

But again, I'm not an expert at all. I'm just an interested layperson. Brad Delong, Dan Drezner, Tyler Cowen, Duncan Black and Calculated Risk. Everyone on that list has a PhD in Econ except for Calculated Risk, who is anonymous but is, in my estimation, eminently reliable.

UPDATE: And, wouldn't you know it, Clicking over to Tyler Cowen's Marginal Revolution brings me to this interesting post on Net Worth Certificates as an alternative bailout solution, leading to this interesting article.

Which is to say that there are LOTS of options out there, and the idea of using the "Paulson Proposal" as a starting point for negotiations is just foolish.

Bailout Options

Ok, take a minute to read this story. A lot has been made about irresponsible borrowers and "subprime" loans to people who were encouraged to lie about their income. And both of those things did happen, and did contribute to the crisis. But there are plenty more like poster DarkSyde's co-worker, who trusted people, mortgage brokers, lawyers and bankers, who were supposed to have the buyer's best interests in mind. People who they thought would be scrutinizing the details for them fairly, but who really just wanted to get someone to sign on the dotted line so they would have yet another loan to sell up stream to investment banks desperate for more securities to sell.

Which brings us back to the bailout. The big advantage of a top down bailout is the small number of players. If you are going to hand out money and gain oversight, it is easier to do it with a few hundred banks rather than a few million homeowners. BUT, there is no reason you couldn't structure this problem as a cram-down to change the borrowing terms in favor of homeowners.

Look, these securities are already worthless because no one expects people like DarkSyde's co-worker to keep making payments on his crazy loan, the logical thing for him and people like him to do is just move out and leave the keys at the bank. You owe more money than your house is worth, why are you paying down the loan? If he had a mortgage with a small local bank (that didn't sell his mortgage upstream) he could go down to the bank and renegotiate terms. The bank doesn't want his house. If he dropped the keys off, the bank would instantly lose money, PLUS they would have the time and expense of selling a house. A bank would much rather set up a situation where they take a significant loss spread over 25 years than a big up front loss today (for very sound mathematical reasons, see this on the time value of money). So why can't people like this go renegotiate their loans? It would be good for the banks, and it would be good for them!

Ah, but you need to understand the perverse incentives that have been created. You see, "Local Bank" that wrote you that loan didn't keep it. They sold it on to "Investment Bank" in exchange for a quick profit. Investment Bank then pooled that mortgage with hundreds or thousands of others like it, and tied the payments to special bonds, consolidated debt offerings or CDO's. These bonds were then sold to banks and other investors. So now Joe Shmoe's loan is owned not by one person, but LOTS of people. But it gets worse! Those people who bought these bonds often bought insurance. For a small percentage fee of their expected return, another company would insure them against default. The bond holders only collect on their insurance IF people default on their loans. In other words, they don't want to renegotiate your loan, because if you default, they get paid and the insurance company is left holding the bag.

And that works fine until everyone starts defaulting, and insurance companies start going out of business, so nobody gets paid.

An alternative solution would be forced cram-down. In other words, the government could force a renegotiation, or more likely a standard set of terms with lower interest rates over all mortgages. This would reduce (or in some cases eliminate) the profits to bond holders (because they were supposed to pay out higher rates of interest), but considering these assets are basically worthless now (because no one expects people to stay in houses that are under water) they would actually have value again. Losses around 10/20c on the dollar instead of 70-90 cents. Home owners would benefit because they would be able to stay in their homes and the reduction in mortgage defaults would probably slow the rate of decline in property values.

I don't know if this is the best solution. There's a lot of upside, but the problem is the transaction cost. How do you decide who qualifies? And if you set up criteria, you need to have a set of impartial people to verify these conditions. Dunno... but it sure sounds better than the US government buying billions of dollars of bonds that everyone in the private sector seems to think are worth about 10 cents on the dollar.

Could Be Worse

We're in the grip of a major financial crisis. Several major banks have collapsed. It looks likely that Congress will pass a rather ill advised rescue plan. Then again, it could be worse.

Zimbabwe currently has inflation of 40 Million percent per year (really). Thank God we only have a few more months of president Mugabe. Er, Bush.

Wednesday, October 1, 2008

Fight Over Digital Music Continues

According to CNN, the National Music Publishers' Association (NMPA) is asking the Copyright Royalty Board (CRB) to increase the royalty they receive from iTunes from 9 to 15 cents per track.

Short explanation is in order first. NMPA represents "music publishers." That's the people who obtain and license the copyright for sheet music. Music publication, now a very small part of the industry, used to be a major source of revenue. Before recorded music, a song became a "hit" when lots of sheet music was sold for people to play on their pianos at home. When recorded music became possible, it was decided that the music publisher would receive a royalty for the sale of recorded music. It was decided that the royalty would be determined by a special royalty board, the CRB. The CRB now has jusrisdiction over a number of legal issues related to copyright.

The music industry has a love-hate relationship with Apple and iTunes. iTunes is the number one seller of retail music in the United States. As such it generates a huge amount of royalties for the industry where the year-over-year CD sales are cratering. The industry NEEDS iTunes. And that's why they hate them. Apple has so much control even the entire industry combined can't really fight them effectively. When music was sold through many different retail chains, prices for their product (and their profit margins) were much easier to control. The industry has repeatedly tried to change the pricing policy of the iTunes store, and never been able to succeed. Furthermore, the digital rights management (AKA "DRM" this is software designed to prevent people form sharing files bought on iTunes) which the industry insisted on is proprietary to Apple. If you buy an "iTune" you can only play it on an Apple device. So the success of iTunes not only gives Apple a large market share, but it locks in their customers to their proprietary system.

This move by the NMPA is an attempt to get a regulatory body to do what the RIAA/NMPA couldn't get with negotiations. A few things could happen. Right now Apple is threatening to shutter the store if it loses. That almost certainly won't happen, but they may force the record industry to renegotiate their deals or eat some of the royalty increase out of their cut.

We shall see.