Bank of America Corp. is working on sweeping changes that would require many users of basic checking accounts to pay a monthly fee unless they agree to bank online, buy more products or maintain certain balances.
The plan by the nation’s second-largest bank by assets is the latest sign of stresses in the banking industry at a time of low interest rates, slow economic growth and new rules limiting many types of service charges. Many other big banks, including J.P. Morgan Chase & Co.—the nation’s largest—and Wells Fargo & Co., have rolled out plans that aim to raise fee revenue or push customers to do more business with the bank.
Those efforts are tricky, because they risk upsetting the banks’ best customers or drawing fire from politicians. Bank of America retreated last fall from a new $5 debit-card charge following a customer revolt and a wave of criticism.
One of the things I noticed when I was going through my mom’s papers after her death a couple of years ago was that my parents, despite running pretty high balances, paid a few for checking through the 1950s and 1960s and my mom continue to pay a fee for checking throughout the 1970s.
I believe that free checking as most people have experienced it was a response by small, independent banks to competition from big banks, the big banks have always hated free checking, and they only began offering it themselves about twenty years ago. Perhaps someone with more certain knowledge can correct me on that.
However that may be free checking isn’t a law of nature and as margins tighten (as they inevitably will) I think we can expect the big banks to extract money from us in any way they can. That includes an end to free checking.
Those of you that scurried to get an early spot in the pre-order cue for Lytro’s upcoming camera, ought to carefully skim your inboxes for an email confirming shipment of your infinite focusing shooter. Per a ton of tips from you, in addition to a post from the company’s official blog, early orders of the unconventionally shaped camera that allows you to refocus after the fact are now en route to abodes stateside. When we played with it at its launch event, we came away impressed, yet ultimately longed for the underlying technology to be licensed to others — something the company maintains it’s actively exploring.
I’m excited. I’m in the market for a new digital camera and this may force me to buy a Mac.
If you’re not aware of it, the light field camera is a completely new technology for taking pictures that allows the photographer to focus the picture after it has been taken among other things. Other benefits include no shutter delay.
Andrew Breitbart, the conservative publisher and political commentator who founded Big Government, Big Hollywood and Breitbart.tv, has died at age 43:
Widely read conservative Internet publisher Andrew Breitbart has died, his attorney confirms.
The websites he founded ran a statement Thursday morning announcing that Breitbart, 43, died “unexpectedly from natural causes” in Los Angeles shortly after midnight.
“We have lost a husband, a father, a son, a brother, a dear friend, a patriot and a happy warrior,” the statement said. “Andrew lived boldly, so that we more timid souls would dare to live freely and fully, and fight for the fragile liberty he showed us how to love.”
Breitbart was a prolific commentator who founded several websites devoted to covering politics, entertainment and everything in between. Earlier in his career, he worked for the Drudge Report before breaking off to start his own outlets — including Big Government, Big Hollywood and Breitbart.tv.
He apparently died of heart failure.
Update
If you want to read an example of how to write a death announcement for someone you consider a political opponent that has style and class you could do much worse than Josh Marshall’s.
I’ve said it before and I’ll say it again: automated trading in which the programs operate in lock step, something that is facilitated by the people who design the programs, increases volatility in the market.
Or, said another way, with aid of a computer in fractions of a second you can make a mistake that would have taken you a year to make by hand.
Stan Collender does a pretty good job of making a strong case for abolishing the corporate income tax by identifying the powerful groups (and some not) who would oppose such an action:
Large companies that don’t pay any income taxes
Accountants, tax lawyers, and people who work in big company tax departments (in the thousands or tens of thousands)
Lobbyists
The IRS
People who teach tax courses
Congressmen, candidates, and political party committees who receive contributions from people seeking changes in the tax code
In the light of President Obama’s recent speech in which he took credit for saving the U. S. automobile industry and the heated discussion going on in the comments of this post at OTB and taking into account my expressed skepticism on the future of the U. S. automobile industry, I thought it was about time to put a little flesh on the bones of my thought and explain why I don’t believe that the U. S. auto industry has much of a future.
Total car sales, measured in the number of vehicles sold, has been declining for the last forty years:
Although I could ignore the increase in light truck sales from 1970 to the present, I think it calls for some explanation since it highlights the problems faced by domestic carmakers even more.
It’s an artifact of our trade policy and the CAFE standards. Japanese and South Korean carmakers for decades have forestalled Congress’s taking action for dumping on their part by imposing “voluntary” limits on the number of cars they export to the United States and making the difference up in light trucks, a segment completely dominated by Japanese and South Korean manufacturers, just as the full-size pickup truck segment is dominated by U. S. manufacturers. Additionally, light trucks aren’t taken into account in the “total fleet” accounting required by the CAFE standards and, consequently, they can escape a number of the fuel-saving enhancements mandated for automobiles. The bottom line is that you can get a lot more vehicle for a lot less money with a light truck than you can with a passenger car.
Worse yet, the U. S. carmakers’ market shares of the declining passenger car market have themselves been declining:
Here’s another chart illustrating the market shares of the ironically-named “Big 3” Detroit automakers:
As you can see over the period of the last 30 years the combined market share of GM, Ford, and Chrysler has declined from just under 70% of the U. S. market to less than 50%. Whatever the commenters at OTB say, U. S. manufacturers don’t even have 50% of the U. S. market anymore. They’re living in the past. Additionally, we don’t make small auto engines here. All internal combustion engines for small cars in the U. S. are imported, mostly from Japan and South Korea. The Detroit automakers have longstanding partnerships with Asian automakers one of the purposes of which is to bring these engines into the U. S., install them in U. S.-made chassis, and sell them as “Made in the U. S. A.”
The “burden”, the overhead costs not the production costs, is significantly higher for the Detroit automakers than it is for overseas manufacturers. Part of that is the huge overhang of pensions and medical costs for retired hourly workers but a lot of it is that they have structures with overhead built into them. Just as a measure of how persistent that overhead is over the period of the last 30 years the number of hourly workers employed by the Detroit automakers has fallen by more than half. Over the same period the number of salaried workers has fallen, too, but not in half. I believe their wages have risen faster, too, but that’s another story.
That’s the reason the Detroit automakers have concentrated on the high margin (and gas-guzzling) SUVs and minivans: they can actually make money making them. They can’t make any money selling small, inexpensive cars. There’s too much competition from competitors with much small operating costs and enormously smaller burdens.
There are no real prospects for increasing the total number or vehicles sold or improving the market share of U. S. carmakers. If anything, the future is even bleaker. Chinese and Indian auto manufacturers are truly eager to get into the U. S. market (although I’m beginning to wonder if India won’t make its mark in heavy trucks and buses rather than autos). Chinese production costs are so much lower than U. S. costs that there is no way that American manufacturers can meet them. Consequently, I suspect that, if in twenty years GM is selling a lot more cars in the U. S. than it is now, most of those cars will actually be made in China (whatever the sticker says).
So, when the president says that he saved the American auto industry, I can only ask “What American auto industry?” and “For how long?” Probably just long enough for that industry to become some other president’s problem who will, regardless of political party, step in to bail out an even smaller industry that employs even fewer people.
There’s a genuinely interesting paper on the use of Kalman filters in econometrics here. Applications considered including estimating the demand for international reserves, the persistence of shocks to stock returns, decomposing the trend and cyclic components of GDP, and measuring volatility in financial markets.
Math is definitely required so it’s not for the casual reader. This post is basically a place-marker.
Deutsche Post DHL has produced an interesting set of scenarios for the world of 2050. As you might expect it’s a bit transportation-centric.
The paper has been digested into a seven minute video:
The five scenarios they consider are:
Untamed economy—impending collapse, essentially a continuation of U. S. Aughts-style consumerism.
Mega-efficiency in mega-cities. The countryside is hollowed out with the population concentrated in enormous, efficient cities. Basically, China without the pollution.
Customized lifestyles. Fab labs and 3D printing enable even ordinary people to make their own stuff to their own tastes.
Paralyzing protectionism. Slowing growth and contention for resources brings an end to globalization.
Global resilience—local adaptation. Redundancy and survivability supplants efficiency.
I have no idea what the world of 2050 will be like—my crystal ball just doesn’t see that far. I don’t think anybody else does, either. My siblings and I are all likely to be dead. I have no hostages to fate. Some of my nephews and nieces will probably have died as well. I see the future as neither rosy nor terrifying. I doubt that the world of 2050 will be Mad Max but I doubt it will be Star Trek, either.
I’m surprised that DHL doesn’t consider what would seem to me to be the most likely scenario: everything is much as it is today except that nothing works quite as well. Worse and more frequent outbreaks of contaminated food, clothing, etc. Nobody stocks any inventory and there are increasingly long waits for practically everything.
I note that DHL seems to have surrendered to the worst case global warming scenarios. That doesn’t seem too likely at this point, either.
There are things that puzzle me about the “Peak Everything” scenarios some people seem so fond of. We’ve been there before. For example, there was a thriving obsidian trade that extended through the Middle East into parts of Europe and Asia eight to ten thousand years ago. You don’t hear much about obsidian shortages any more although I suspect it was big news a half dozen millennia ago. Why? Because substitutes were found, people began living in ways that didn’t require as much obsidian, and so on.
The universe is big. It has lots of stuff in it. Stuff we can’t even imagine yet. I suspect that eight or ten millennia from now people will still be around and we have no idea how they’ll be living or making the stuff they use. They probably won’t be any more interested in petroleum or rare earth elements than we are in obsidian.
Speaking of waste, Megan McArdle restates her case for eliminating the tax on corporations:
One of the first blog posts I ever wrote was on why we should eliminate the corporate income tax. This is not because I just looooooooove corporations, or wish to put more money into the hands of rich people–on the contrary, I want to pair an elimination of the tax with an end to the special low tax rates for dividends and capital gains, and maybe even an increase in rates for higher brackets if that’s necessary to keep the thing revenue neutral. Which would actually be considerably more progressive than the current system.
Rather, I think the thing’s horribly inefficient–companies and rich people spend an exorbitant amount of time arranging their affairs to be lower-taxed, rather than more productive. Taxing capital once, when it hits a person, as ordinary income, would in one fell swoop eliminate most of the tax-avoidance activity that goes on in this country. It’s also not necessarily as progressive as its proponents think, and well, you can read all my other reasons for disliking it here.
I agree with Megan: we should eliminate the corporate income tax. At the very least it would reduce “tax-avoidance activity” which in my view is just waste. IMO the main purposes of the corporate income tax are to enable politicians to signal that they’re on the side of the little while equipping them with a club to wield that enables them to attract campaign contributions, either to reduce the tax liabilities of contributing companies or to increase the tax liabilities of upstart competitors of contributing companies.
I don’t think that eliminating the corporate income tax and replacing it with changes to the personal income tax would remove money from politics but I sure think it would change where the battles are fought.
Meanwhile, Christina and David Romer have published a paper (hat tip: James Kwak that suggests that, at least for those in the upper brackets, the incentive effects (i.e. working harder and earning more) of a lower tax rate aren’t as significant as the avoidance effects (i.e. paying their accountants and lawyers more). As Dr. Kwak points out, that suggests that a more efficient system would have fewer exclusions and deductions. I agree with that.
Putting it all together we would have a tax system that abolished the corporate income tax, increased the personal tax rates to make up for the lost revenue, and has few or no exclusions and deductions.
I don’t think a balanced budget is necessary (or even desireable) but we aren’t remotely near that now. We’re not even in the same area code as that. I think we’d be better off in which revenues were within 2 or 3% of GDP of expenditures and we borrowed (or just spent) the rest into existence.
So what rates would we have for personal income taxes? I have no idea. Whatever would pay the federal government’s bills and keep revenues and expenditures within shouting distance.
Of course, I’d drastically reduce federal expenditures as well but that’s a different subject (and one I’ve written on at some length).
The Watcher’s Council has announced its winners for last week.
