The thing that struck me in reading this article on why Jesus of Nazareth never existed is that, if you use the same standards of proof they’re attempting to apply, there’s little reason to believe that many historical figures including Socrates, Plato, Aristotle, or Julius Caesar ever existed. The farther you go back in time the fewer and fewer reliable independent sources you’ll find for just about anything. Most of what we think we know about history is made up.

I sincerely doubt that anyone will convince a believer that Jesus did not exist by the means they’re using and non-believers by definition don’t need to be convinced. It seems as though an enormous amount of effort is being expended to reassure people who already believe that Jesus is mythical.

It’s remarkable that this hasn’t received more attention:

At 1:30pm on Christmas Eve, the NSA dumped a huge cache of documents on its website in response to a long-fought ACLU Freedom of Information Act request, including documents that reveal criminal wrongdoing.

The dump consists of its quarterly and annual reports to the President’s Intelligence Oversight Board from Q4/2001 to Q1/2013. They were heavily redacted prior to release, but even so, they reveal that the NSA illegally spied on Americans, including a parade of user-errors in which NSA operatives accidentally spied on themselves, raided their spouses’ data, and made self-serving errors in their interpretation of the rules under which they were allowed to gather and search data.

The NSA admits that its analysts “deliberately ignored restrictions on their authority to spy on Americans multiple times in the past decade.”

My guess is that, consistent with the public’s acceptance of torture in the name of security, this will be tolerated as well.

I don’t know that I’ve ever described myself here. I’m average height, with a full head of grey hair, slightly more thinning on top and in front than it was just a couple of years ago, and a grey mustache. I’ve had the mustache since college. I wear wireframe glasses.

I’m somewhat overweight as is not unusual among men of my age. I do not have a pendulous belly. I have broad shoulders, long arms, and a deep chest. I’m in the 99th percentile of Americans for frame. I am very long-waisted or have much shorter legs relative to my height (depending on how you look at it) than most men do. I recall that when I was in college I noticed that most of my friends were much taller than I but when when we sat at a table together our eyes were at a level.

I have blue eyes with bags or at least circles under them. I have age spots on my hands but my face is largely wrinkle-free. I’m told that I look much younger than my age. With the exception of my hair color I think I look much as I did 35 years ago and have been told as much by people who’ve known me since then.

I do not like being photographed. It interferes with my vanity.

A Wall Street Journal op-ed from Martin Feldstein is receiving a certain amount of notice. In the op-ed Dr. Feldstein makes the fairly ordinary observation that fiscal policy and Fed policy are complementary. Dr. Krugman is astonished that a conservative like Feldstein would dare to propose tax reform and even tax increases as an alternative to monetary policy.

The paragraph that caught my attention was this:

In the United States, QE reduced long-term interest rates and raised the prices of equities and real estate. The resulting increase in household wealth stimulated consumer spending and raised overall economic activity.

As should be obvious to anyone not blinkered the main beneficiaries of quantitative easing have been the wealthy. The mechanism for this has been by increasing the value of financial assets, which the wealthy hold to a far greater degree than the rest of us do. While I’m glad to see more acknowledgement of that, I’m still unhappy that the implications of the policy haven’t been fully realized, i.e. that the Fed’s policy has been to increase income disparities in favor of the rich.

You can figure out for yourself whether the policy has been successful at least as far as real estate is concerned. There’s a handy graph of the Case-Shiller index here and a chart of the change in the DJIA here. Judging by the Case-Shiller chart, if the purpose of QE is to make banks with a lot of real estate or real estate-backed assets on their books solvent again, there’s a long way to go.

There’s a big difference between equities and houses. As the price of a house increases, the number of qualified buyers decreases. The same is not true for equities.

There’s another question that’s almost too embarrassing to ask. Should the value of houses and the number of houses being built always increase? It seems to me that as the proportion of Americans who will never be wealthy enough to purchase a house increases, it would be a limiting factor on how many houses will be built.

Kevin Drum wonders why the heck people are worried about the rate of formation of new businesses:

Over at Foreign Affairs, Robert Litan has a piece lamenting the decline in entrepreneurship in America. I’m not entirely persuaded that this is a major problem—a fair amount of it is just the result of big national retailers replacing local diners and small shops, which are hardly big engines of economic growth—but I’m still willing to accept that some of it is probably real and deserves attention.

I’m not particularly interested in “economic growth” in the abstract—I’m more concerned about jobs, so let’s take a look at the track record of the large companies that Kevin, presumably, believes are “big engines of economic growth”. Let’s start with General Motors:

A reasonable criticism is that the graph stops at 2009. Fair enough. Since 2009 GM’s total employment has decreased from 235,000 employees to 212,000, about three-quarters of whom are in the U. S. But that’s just the tip of the iceberg. GM’s first act when taken under the gentle wing of the federal government was to trim their roster of dealers. That resulted in a loss of 63,000 jobs.

How about Ford?

Oil companies have been doing pretty well in recent years. What’s ExxonMobil’s record on job creation?

or, in other words, among just these three companies, the total number of employees they employ has declined by about a quarter million workers over the period of the last fifteen years, 100,000 fewer in the U. S. alone. With the exception of a few retails, e.g. Wal-Mart, that’s what happened at all of the Fortune 500 companies. Their employment has dwindled even as their bottom lines have grown. And the situation looks even worse if you go back 30 years. Thirty years ago GM employed 600,000 people in the U. S. alone and those weren’t minimum wage jobs.

64% of all of the net job creation since 1993 has been by small businesses and since the Great Recession that number has been 67%.

Consequently, if you’re interested in employment rather than just “economic growth”, you should be concerned about the slowing rate of new business formation (Kevin has a nice graph of that in the linked post). I’ll have some thoughts on what might be done to turn the trend in business formation around in a later post.

Chrystia Freeland sings the praises of Canada’s approach to bilingualism and multiculturalism:

“Multiculturalism isn’t just about statistics, it is about attitude. It is about seeing diversity as strength,” Henry Kim, the director of Toronto’s dazzling new Aga Khan Museum, one of the world’s finest collections of Islamic art, told me. “Canadians believe that blending makes you better and stronger.”

Mr. Kim is a Chicago-born Korean-American. He doesn’t speak Korean, and his mother baked apple pie “badly.” Mr. Kim suggests that his homeland is still uneasy about incoming cultures: “Canada has a minister of multiculturalism. Can you imagine that in Washington?”

I think it all depends on what kind of country you want your country to be. The reality of bilingualism is that in every country in the world that has multiple official languages the speakers of one language dominate the speakers of the other both economically and politically. That’s true in Switzerland where the German speakers dominate the French, Italian, and Romansch speakers. And it’s true in Canada.

The Canadians point proudly to the the fact that the median incomes of Francophones in Quebec are higher than the median incomes of Anglophones in Quebec (which proves my point rather than contradicting it). However, the median income in Quebec is lower than the income of primary English-speaking provinces despite a half century of attempted remediation. Today primary French bilinguals are actually preferred among the national civil service. One wonders what the income disparity would be without the subsidy.

The kind of country I would prefer us to be is an egalitarian one and the global evidence overwhelmingly supports the idea that such a country will have a single official language. I don’t think that we should actively suppress speakers of minority languages as both the French and British have for centuries but I don’t think we should subsidize them either.

I note, too, that Ms. Freeland elides over the differences between Canadian immigration and that in the U. S. Canada has a point system that gives priority to skilled workers and doesn’t have an illegal immigration problem at the scale of ours. Even illegal immigration from the United States.

Consequently, I think the lesson we should learn from Canada’s experience is more a cautionary tale than one we should emulate.

William Galstone underscores the point I made last week:

In the 30 years that the Federal Reserve Board has been collecting these data, the gap between upper-income and middle-class families has rough doubled. In 1983, the median net worth of upper-income families was 3.4 times that of their middle-income counterparts. In 2013, that figure stood at 6.6 times. Although the increase occurred by fits and starts throughout the past three decades, it accelerated dramatically during the Great Recession and its aftermath.

The key point, however, is not that the ratio doubled but why. Corrected for inflation, the median wealth of upper-income families has doubled since 1983, from $318,000 to $639,000. By contrast, the median wealth of middle-class families has stagnated during that period–$94,000 in 1983, $96,000 today. To be sure, middle-class wealth increased to $158,000 between 1983 and 2007 but the Great Recession reversed that gain, and the middle class has not participated significantly in the stock market surge that began in mid-2009.

While we should welcome the increased pace of job creation and early signs of wage gains, the middle class is unlikely to regain a sense of security until the nest eggs of average families reclaim the ground they have lost since the onset of the Great Recession.

The emphasis is mine. While the explanation you encounter most frequently for the growing income and wealth gap is automation, I don’t buy it. I attribute the change to four, mutually reinforcing causes:

• Massive subsidization of financial assets which boosts the incomes and wealth of those with the wherewithal to join in the game.
• Chinese currency manipulation that produced an erosion of U. S. light manufacturing.
• Massive importation of mostly unskilled workers that tended to push wages down at the low end of the income spectrum and made relying on a continuous stream of minimum (and sub-minimum) wage workers a viable business model.
• Protecting some sectors of the economy (healthcare, education) while not subsidizing others (manufacturing).

Those can be summed up in two words: bad policy.

Merry Christmas, Happy Holidays, or just a good day off to all of you and yours!

The picture above is of our Christmas tree this year. Just about everything on it, from the star at the top to the tiniest ornament has a story behind it. There are pictures of pets, some long deceased, ornaments made by friends or children or children of friends, and ornaments that once hung on our parents’ Christmas trees or decorated our earliest Christmas presents. Each a story. Each a memory.

You may notice that we placed no ornaments on the lower few feet of the tree. Kara is an adolescent—she turned one year old a few days ago—and we believe in “lead us not into temptation”.

If you look behind and to the right of the tree, you’ll see a few pieces from my glass collection. That’s something I haven’t mentioned here in a long time. I have a number of collections and the pieces you see are from my collection of pre-Civil War American pressed glass. That’s just one of my collections. The perils of being a recovering antique dealer and a third generation collector of antiques.

Beneath the tree are the Christmas presents we gave to each other this year.

This year it’s a very consumable Christmas at the Schuler house. My wife gave me six pounds of honey, avocado honey and eucalyptus honey from an apiary in Ventura County. I gave her two bottles of whiskey, distilled at a local distillery. Several relatives sent us nuts. I wonder if they’re trying to tell us something?

My wife also game me a DVD copy of a wonderful old Barbara Stanwyck and Fred MacMurray picture, Remember the Night, a movie with a Christmas theme, a shirt from LL Bean, and a new bedside clock radio. I gave her a salad plate from the 70 year old set of dishes we use as our everyday dishes.

Don’t get me wrong. 5% growth is better than a kick in the butt with a brass-toed shoe. However, that’s not a trend yet and, well, we’d need a year of that kind of growth to be getting back into the territory that we’ll need to be in to put the long-termed unemployed back to work.

Let’s look a little more closely at the report:

Real personal consumption expenditures increased 3.2 percent in the third quarter, compared with an increase of 2.5 percent in the second. Durable goods increased 9.2 percent, compared with an increase of 14.1 percent. Nondurable goods increased 2.5 percent, compared with an increase of 2.2 percent. Services increased 2.5 percent, compared with an increase of 0.9 percent.

Real nonresidential fixed investment increased 8.9 percent in the third quarter, compared with an increase of 9.7 percent in the second. Investment in nonresidential structures increased 4.8 percent, compared with an increase of 12.6 percent. Investment in equipment increased 11.0 percent, compared with an increase of 11.2 percent. Investment in intellectual property products increased 8.8 percent, compared with an increase of 5.5 percent. Real residential fixed investment increased 3.2 percent, compared with an increase of 8.8 percent.

Real exports of goods and services increased 4.5 percent in the third quarter, compared with an increase of 11.1 percent in the second. Real imports of goods and services decreased 0.9 percent, in contrast to an increase of 11.3 percent.

Real federal government consumption expenditures and gross investment increased 9.9 percent in the third quarter, in contrast to a decrease of 0.9 percent in the second. National defense increased 16.0 percent, compared with an increase of 0.9 percent. Nondefense increased 0.4 percent, in contrast to a decrease of 3.8 percent. Real state and local government consumption expenditures and gross investment increased 1.1 percent, compared with an increase of 3.4 percent.

The change in real private inventories subtracted 0.03 percentage point from the third-quarter change in real GDP after adding 1.42 percentage points to the second-quarter change. Private businesses increased inventories $82.2 billion in the third quarter, following increases of $84.8 billion in the second quarter and $35.2 billion in the first.

A few observations. First, personal consumption expenditures accounts for nearly three-quarters of GDP so small moves there loom much larger for the overall economy. I’d be interested in seeing a more detailed breakdown before I make any pronouncements.

However, note that the BEA actually reduced its estimate of durable goods orders. That’s not good. The improvement in the revision there was due to increases in non-durable goods and services, most of which I would presume to be healthcare.

Nonresidential fixed investment declined from the second quarter to the third. Exports increased and imports decreased, most of which I would attribute to a lower price for oil.

Government spending increased sharply. That nearly always happens at the start of the federal government fiscal year, especially (for reasons I’ve never been able to figure out) in election years. I wonder whether that’s related to the cycle imposed by the federal government’s fiscal year? Don’t expect spending based on that to develop into a trend.

While I laud 5% growth, I don’t see a lot there that will continue into future quarters. We should probably start looking at holiday season retail sales to see what’s really going on.