Latest Grand Bargain is (mostly) a Grand Waste of Time

It's so frustrating to know how the economy works(MMT), and then watch a bunch of men who don't, try and improve the national economy. Here is a one line sentence explaining how to grow an economy.

People need to spend more money so that there will be the increased demand for new jobs and new business.

That's it.  But let's look at Obama's latest Grand Bargain proposal from a critical MMT perspective.  Obama's plan has 3 parts.

1. Simplify the corporate tax code
2. Try to coax companies to "repatriate" their foreign money holdings
3. Use the tax increase to fund infrastructure jobs.

The first plan is to simplify the corporate tax code in 2 steps.  First, it's going to eliminate several deductions and so-called "special interest" loop holes.  That will increase the amount of taxes the government collects.  The second step is to lower the tax rate to the point where the money gained by closing loopholes is roughly equivalent to what's lost by lowering the tax rate from 35% to 28%.  Overall this is "revenue" neutral.  Will this help the economy grow?  Hell no!  At best it might make the economy run more efficiently(always a good thing!), but it won't grow.   It won't grow because all they're doing is changing who pays what, and not the total amount taxed.  No growth.

The second part is to get companies with foreign money holdings to bring the money into the country.  Normally, there is, apparently, a tax on doing that.  Therefore, companies leave their earnings overseas.  This estimate says there are over a trillion dollars out there.  Obama's proposal is to try and get those companies to bring in the money by offering a one time, low tax, to do so.  From an MMT perspective this would be bad for the overall economy because it's taking money out of the economy.

The third and final part of the Obama plan is to start funding infrastructure and job training programs.  From an MMT perspective, increasing government spending will be good for the overall economy because it will increase demand for jobs and business.  Hooray!

The reason I call this plan a waste of time is because, the first part offsets itself and the good in the third part is offset by the harm of the second part.  Making these plans revenue neutral will never give the economy the boost it needs.  Infrastructure jobs that aren't offset with tax increases will.  Tax cuts that aren't offset by tax decreases will also do the trick.

If there is any redeeming part of the proposed 'grand bargain' is the possibility that money will be shifted from those who are letting it sit, to those who will spend it.  That's why I added the qualifier(mostly) into the title.  If that money is truly just sitting in a foreign bank, collecting low interest dust, then shifting the money to infrastructure and creating jobs for the unemployed will help some.  My guess is that only some of that money is "just sitting there", the rest is being reinvested into other enterprises and will only end up moving around who gets it.

The thing that Obama, along with the GOP that's already dismissed the whole thing, don't understand is that the government doesn't need that money to spend on infrastructure.  The government can't run out of money anymore than a stadium can run out of points on a scoreboard.  Therefore, we can grow this economy until unemployment is back to a non-embarrassing level.

Who is the Next Big Winner in the Console Gaming Wars?

What do the Wii U, Playstation 4, and Xbox One have in common?  Answer:  All three run AMD processors inside.  AMD managed to find it's way into each of the three gaming consoles: Either as the Graphics processor or, Graphics AND Central processor.  That seems like a huge deal to me.

AMD has been a big player in the microchip market for a long time, but it's never been the biggest.  Currently nvidia is still the biggest player in graphics.  Providing all the graphics cards for the consoles might change that.  ExtremeTech explains how:

The real worry with AMD’s push for unified gaming is that games developers might shirk Nvidia optimizations. If it’s relatively simple to get Xbox One games up and running on PCs with AMD graphics, publishers might not see the need to spend the additional cash to optimize for Nvidia cards. This could be a huge hassle for the majority of PC gamers with existing Nvidia cards, but it would be even worse for Nvidia itself. While AMD has been lagging well behind lately, this PC-console strategy could help it leapfrog its competitors in a meaningful way.
Despite being the company that created the first x86 64 bit processor, and the first dual core x86 processor

It would be exciting if console and PC hardware started moving closer to each other.  Porting of top titles costs a lot of time.  If it's moving from one type of chip and hardware set to another will mean even more time to make sure it looks and plays the same.  But if the console hardware is similar to PC hardware, then it won't take as long.  That means more and quicker game ports.

AMD could really use the boost because right now, despite the legacy of creating the first 64bit x86 processor, and the first dual core x86 processor, AMD is getting it's butt handed to them by Intel in the x86 server market.  It's also losing ground on mobile devices.  Qualcomm and Samsung overtook AMD's second place in the mobile phone market.

Overall, I think this was one hell of a strategic coup for AMD.  One that keeps them a big player in the chip market.

Why eBooks should cost MORE than paper books

E-reader on top of books.

You will be hard pressed to find a title in the amazon store or barnes&noble that is cheaper to buy in paperback than as an ebook.  But why?  Well, presumably it is a lot cheaper to produce and upload copies of an ebook than it is to print and ship a paperback.  But, in my not-so-humble-opinion, ebooks should cost more than buying a print book.  Here's why I say that.

First of all, ebook will last for ever and never wear out.  Paperbacks start getting worn out after just the first read through.  If it's a good book that you reread or loan out it's gonna look pretty ragged.  Same thing never happens to ebooks.  They are always as good as they were on day 1.  In theory, my children's children could inherit all my ebooks and they will work just as well for them as they do for me.

Second, it's hard to lose an ebook.  Since most ebooks sellers allow you to redownload an ebook an unlimited amount of times, There is no such thing as misplacing an ebook.  You can't leave it at the beach, or on the bus.  Sure you could leave your DEVICE, but you can always re-download it.  Even if they don't let you redownload a purchase, it is easy enough to make several backups of a file.

Finally, ebooks are upgradable.  If you're used to reading brand new first edition books, you can come to expect a few typos or small grammar errors.  If the publisher releases a second edition, most ebook services will let you update those books to the latest version.  Print books you would have to buy the new edition.

I think that ebooks objectively provide more to readers than a print edition ever could.  I understand many people still prefer physical books.  But to me, eBooks provide so much more, that you would think people would be willing to pay more for them.  Fortunately, since ebooks are cheaper to produce they are cheaper to buy despite their advantages.  To me, ebooks are a real steal.

Recognizing who\what Really Controls Interest Rates

Just in case there was any doubt about what really controls interest rates, the past couple of months should dispel any lingering doubts.  The Federal Reserve(The Fed) is without a doubt in full control of interest rates going up or down.

Back in spring, the Fed hinted that it was going to ease up on "Quantitative Easing" or QE3.  Quantitative easing, for those who don't know, is the Fed trying to flood the market with dollars by buying stocks and bonds(*True Story)  They call it Quantitative Easing to make themselves sound smarter than you(*Not a true story).

So guess what happened?  Interest rates have been steadily rising this summer.  Despite that, many people mistakenly believe that interest rates are determined by a "Free Market" or by "bond vigilantes".  The only time "the market" really gets involved is when they start trying to guess at what the Fed is going to do.  That was demonstrated last Wednesday.  The Fed said nothing, the market reacted as if that meant interest rates were going to go up.

The policy implications for this are immense.  I won't get into all of them on this little post.  But let's just start at the bottom.  The Fed sets interest rates.  That is a fact, one that cannot be denied.  Whether or not that is desirable is a different argument.  But, right now, the only thing standing between a 0% interest rate, or a 40% interest rate is a whole bunch of wealthy, well-connected bankers.

No amount of budget deficits or surpluses can change that fact.  Granted, the bankers may make their decisions based on federal budgets or the health of the economy.  But the decision is still in the hands of a small number of people, not "the market".

Sony will win

As the Wii U, PS4, and Xbox One come to tangle in the next round of the console wars, Here is my bold prediction:  The PlayStation 4 will win the next round of the console wars.

PlayStation One and PlayStation 2 were the top selling consoles worldwide of all time.  The PlayStation 3 was set to be huge, but then the Wii came along and blew everybody away in the last round.  So why do I think sony will be back on top?

Here's what I see.  The Wii won because it was revolutionary.  It's working name was even "Revolution". It expanded the video game market instead of competing for the existing one.  It was different.  Games were excited, non-gamers were interested.  Eventually PS3 and Xbox started making back some ground, but they never caught up with the Wii's original sales and are virtually tied for second.

But now, the Wii U is old news.  It's touchscreen controller is more an evolution than a revolution.  It still uses Wii controllers.  It's working name was Wii 2, and the end product reflects that.  While the Wii U will benefit some from past success, there is not as much buzz about it.

The other competition is Microsoft's xbox One.  Originally, I thought Microsoft was going to win.  They were going to concentrate on better and better online features and integration.  Instead, they are locked into a boxing match with their own customers.  They're adding and removing features and pissing of different groups.  I can't help but think that all this confusion is going to hurt them.

All of Xbox controversy wouldn't hurt Microsoft as much if they were the only game in town like Windows on PCs.  But Sony is making huge strides to catch up with Microsoft's online advantages.  Sony is also making lots of other new changes.  You can read about them here.  Nothing is revolutionary, just evolutionary... just like the other 3 consoles.

So here it is.  All the consoles made evolutionary steps, I believe Sony made more.  And in addition, Sony isn't repeatedly pissing off large groups of users.  I believe Sony will find it's way back on top their fourth round of the console wars.