I also wanted to pass along this piece by Tim Martin at Breaking Defense:

BELFAST — German Defense Minister Boris Pistorius used a Thursday speech in Washington to call for both Berlin and Washington to hit 3 percent GDP spending on defense, while also stating his support for reintroducing conscription to the German armed forces.

Both statements may raise hackles back in Berlin, as Germany continues to debate how it should rearm itself following Russia’s February 2022 invasion of Ukraine.

“I’m convinced that Germany needs some kind of military conscription,” Pistorius told a crowd at the American-German Institute. “We need to ensure our military staying power in a state of national or collective defense.” (He did not specify what that would look like, but elsewhere emphasized “some kind” of conscription is needed.)

I must admit my skepticism that Germany will do anything of the sort. Getting Germany to spend 2% of GDP on defense has been a heavy lift. I also wish that there were some attempt to estimate the requirements for achieving force readiness. As I’ve said before, it might be 2% of GDP; it might be 10% of GDP. They’ve enjoyed a long period of underinvestment.

As for the United States, mission accomplished. Some estimates place U. S. military spending at 3.4% of GDP.

I wanted to pass this post by David Weaver at RealClearMarkets along. It actually makes two very interesting points:

1. The Bureau of Labor Statistics just updated its classification of job titles for the first time in 50 years (!)
2. There aren’t many jobs with low educational requirements that aren’t physically demanding

While many jobs are “easy” along one dimension, it is much less common for jobs to be easy along two or more dimensions. This has major implications for policy debates about the retirement and disability programs in the U.S., as well as efforts to prepare younger Americans for the workforce.

Physically demanding jobs often require standing for much of the workday and higher skill jobs often require some minimum level of education. Figure 1 displays the relationship of these two measures using the new BLS data for the 22 major group civilian occupations in the U.S. The figure illustrates the inherent physicality-skill tradeoff that typically characterizes U.S. jobs. Jobs with low physical demands tend to have higher skill requirements.

For example, virtually all workers in a legal profession have minimum education requirements, but are required to stand, on average, for only about 15 percent of the day. At the other extreme, workers in food preparation and serving jobs are required, on average, to stand for 97 percent of the workday, but generally do not have to meet minimum education requirements.

In a slight digression a couple of years back I spent several weeks in Italy during a heatwave performing what was, indeed, a physically demanding job. I was pushing a cart up and down the aisles of a warehouse mapping the locations of shelves and bins. It also required substantial education and skill. Consequently, it was that rara avis a job that was difficult in both dimensions. I suspect that the people I was working with would have been horrified if they had known how old I am—I look a lot younger than I actually am.

I’ve expressed my views before. I see no earthly way that physically demanding jobs with few educational or skill requirements will ever pay a living wage without reducing the number of workers who fit that bill so that ordinary supply and demand pushes their wages up. Furthermore, I think that boosting the wages of such workers by providing some sort of stipend is bad policy—it’s providing a subsidy for companies to pay low wages.

Stories like this are becoming a daily or even multiple times daily occurrence. From ABC 7 Chicago:

CHICAGO (WLS) — A series of armed robberies happened to at least four businesses around the city from Monday into Tuesday night.

On Monday night, around 9:44 p.m. in the 100-block of Halsted Street a man entered a business with a steel hammer and threatened to batter the employee.

The offender then took some items off a shelf and fled the business southbound on Halsted Street

About 15 minutes later in the 4500-block of Kedzie Ave two men entered the business with handguns and demanded cash.

The offenders were seen getting into a light colored sedan with the items they stole and fled the business in unknown direction.

These all took place on the Northwest Side of Chicago. It is not known whether they are related. In some cases as many as 20 robberies have taken place in a single evening, all perpetrated by a single armed crew.

At RealClearInvestigations James Varney remarks on the discrepancies among the FBI crime data, city/local crime data, the reports of declining crime rates, and the popular percept of increasing crime:

From 2017 to 2019, the U.S. had an average of 16,641 homicides a year. In 2021 and 2022, however, the country saw considerably more bloodshed, with an average of more than 22,000 annual homicides. Even if the 2023 number drops slightly, it will still represent a large increase over the recent past, before the pandemic and racial upheaval set in motion in 2020.

Many criminologists say this illustrates one of the problems with the official numbers that are at the center of public debate: They give a distorted impression of true levels of crime. They note that crime stats have become notoriously incomplete in recent years. In some years many big cities did not report their numbers to the FBI, and there are such wide discrepancies in these tallies that the picture they provide has more blur than clarity.

Declining arrest rates and slowing police response times to 911 calls also help explain why polls show Americans believe crime is rising. The experts say the numbers only give some sense of lawbreaking, while most Americans – the vast majority of whom are not crime victims in a given year – are influenced by their largely media-driven perception of whether society feels orderly.

It’s not just “response times to 911 calls”. As I have mentioned here at least in Chicago a very high percentage of 911 calls that require a police response never get a police response. That means those calls will never appear in the police statistics or in the FBI’s data which depend on those statistics. Shorter: the Chicago crime states are bogus, far below the actual crime stats.

Here are some examples of the discrepancies:

There have also been problems with the data that was submitted, including the news in 2022 of major problems with the St. Louis Police Department data, and more recent revelations that figures for sexual crimes provided by the New Orleans Police Department were wrong.

In Baltimore, the Police Department and various news reports put the total for 2022 homicides between 332 and 336, but the FBI’s dataset puts the number at 272. Baltimore police officials did not reply to RCI’s inquiries about the wide spread in the reported numbers, and if anyone in the city’s police department had brought the matter to the FBI’s attention.

The Baltimore department acknowledges its numbers may not be the same as those it submits to the FBI, but states on its website that “any comparisons are strictly prohibited.”

Similarly, the police departments in Milwaukee and Nashville did not respond to questions about divergences between their stats on robberies and those from the federal bureau. Milwaukee police reported a 7 percent increase in robberies in 2023, but the FBI recorded a 13 percent decline.

A considerable amount of slack is cut in the post for the FBI and the other law enforcement agencies:

Criminologists cite other discrepancies in the official measurements they use to assess the situation. While FBI stats show declines in violent categories, the Department of Justice’s survey reports more people saying they have been victims of such crimes. The Centers for Disease Control figures for homicides, which have long moved in the same direction as the FBI’s, started exceeding the FBI’s in 2020 and the gap has widened since then.

“I wouldn’t say the FBI is cooking the books, but that the data they are putting out is half-baked,” said Sean Kennedy, the executive director of the Coalition for Law, Order and Security, which has pushed back against recent media reports that crime is falling noticeably in the U.S.

“So it’s not a conspiracy but a rush job, and it’s giving people a false picture,” he told RCI. “They infer something is true, and then because it’s politically expedient they don’t bother correcting it.”

I can’t help but speculate everyone is responding to the incentives they have. When the number of police officers decline as illustrated in this graph:

there are bound to be fewer responses. When the higher-ups demand that you do something, the line of least resistance is to change the statistics rather than change your policing practices.

I also wanted to call attention to this, from the St. Louis Federal Reserve. It depicts the real per capita income in the United States over time. I wish it included 2023 so we could see if the trend continues.

One more point: I wish that it broke the real per capita income down into income quintiles or deciles. The graph above is bad enough but I suspect it’s worse when you separate the population and income into segments.

So, what’s happening? I doubt it is just inflation.

I thought that this editorial from the Wall Street Journal made an interesting follow-up to my musings of yesterday. I don’t entirely agree with their editorial position but I wanted to quote some key passages:

“Vulnerabilities of nonbank mortgage companies can amplify shocks in the mortgage market and undermine financial stability,” Treasury Secretary Janet Yellen declared. A new report by the Financial Stability Oversight Council (FSOC) finds “their specialized business model means they are especially susceptible to macroeconomic fluctuations in the housing market.”

The Dodd-Frank Act established FSOC to monitor and manage risks to the financial system, and progressives want to grab more control over non-banks. Regulators are using the risks they created to justify putting non-bank mortgage servicers under their thumb—and available for taxpayer bailouts.

According to FSOC, non-banks originate two-thirds of mortgages and service 54% of balances, up from 39% and 4% respectively in 2008. After the financial panic, the report says “banks pulled back from mortgage origination and servicing in part due to heightened regulation and sensitivity to the cost and uncertainty associated with delinquent mortgages.”

What happened to cause this change? The bank capital rules put in place following the 2008 panic made the business model attractive while lack of oversight and low interest rates made them possible and profitable.

Mortgage companies are regulated by the states and don’t have to comply with the Federal Reserve’s regulation. Most draw on bank credit lines or issue debt to finance loans, which are securitized and sold to investors.

FSOC says many mortgage companies are highly levered and could experience stress if banks reprice their credit or cut them off. Why might this happen? Rising interest rates and stricter bank capital standards such as those recently proposed by the Fed.

I do not work in the financial sector and haven’t had a mortgage for some time but that raises a question for me: what is a bank? I think that if they’re accepting deposits and making loans, they’re banks and should be regulated like banks.

I also do not approve of the federal government guaranteeing private profits but I also do not approve of the federal government taking the entire mortgage business over.

What’s the right policy?

Tying the two posts together if these mortgage companies are borrowing and making loans, they, too, are creating money. I wonder if the Federal Reserve is taking that into account?

I frequently wonder whether the regulatory changes made by the Federal Reserve over the last 40 years have changed the monetary and banking systems to the degree that Paul Volker’s strategy for lowering inflation is not as effective as it used to be. Some of those changes include substantially increasing the amount of reserves that banks must keep with the Federal Reserve and the interest that the Fed pays on those reserves.

I found this story at Business Insider, reported by Michael Peck, interesting:

If Donald Trump wins a second term in the White House in November, NATO may fall apart, a recent wargame found.

As a presidential candidate, Trump has threatened to quit NATO unless European allies contribute more, and should he carry it out Europe may decide to go it alone on defense, the game suggests. “A US policy of frustrating NATO has the potential to cause the alliance to collapse, with the EU as a candidate for eventually replacing NATO’s ultimate function — defending Europe from Russia,” wrote Finley Grimble, the British defense expert who designed and ran the game.

The US doesn’t have to withdraw from NATO to imperil the 75-year-old alliance. Technically, the US is barred from leaving NATO after Congress voted in 2023 to prohibit withdrawal without congressional approval.

But the game showed how Trump — the presumptive Republican presidential nominee who said on the campaign trail that he’d encourage Russia to “do whatever the hell they want” with NATO allies who spend too little on their militaries — could undermine NATO simply by doing as little as possible to support the alliance. “What Donald Trump can do is just really hollow out what NATO does,” Grimble told Business Insider. “He doesn’t need to leave NATO to ruin it. He can ruin it from within.”

The details of the wargame are described here by its designer, Finley Grimble:

The wargame commenced on a successful Trump Inauguration Day: January 1, 2025, and running for two years into the presidency. All 32 NATO members, Ukraine, and Russia were represented by participants. These countries with ‘dedicated representation’ were given time to:

1. Develop a strategy.
2. Negotiate with allies to cohere strategy.
3. Negotiate with adversarial countries.
4. Take a series of military, diplomatic, economic, and intelligence actions for a turn that represented two months.
5. Any military actions were then carried out using an operational wargame map with bounded adjudication rules. This ran as a minor facet of the wider geo-political wargame to establish correlation of forces and battlefield situations.

Once these phases had occurred, the non-military actions were freely adjudicated by a ‘wargame control team’, then the next turn would begin with a new set of starting conditions based on the outcomes of the previous intertwining actions.

I suggest skipping the BI story and jumping directly to the post about the wargame. Most interesting and unreported by BI was that one of the conclusions of the wargame was that Russia would not invade the Baltics within the period of the wargame:

• The Ukraine conflict was still using much of Russia’s resources, so it could not open a second conflict on its border.
• That the US would not commit itself to defend Europe in full was still uncertain despite 6 months of dormancy.
• Russia assessed that the Baltic States could potentially resist an effective occupation, even without support from NATO.
• Russia assessed that the European NATO Allies could defeat Russia in the Baltic Sea & come to aid the Baltic States.
• Russia assessed that Finland and Poland alone, not to mention with support from other NATO Allies, possess the ability to counterattack into Russia, cut off Murmansk (Where Russia’s main nuclear deterrent and Northern Fleet are based), encircle Saint Petersburg, and have a path to Moscow.
• Russia risked becoming increasingly isolated globally by performing another ground invasion in Europe.

which I believe to the case.

I wish that there were a comparable wargame showing the outcome of a Biden re-election.

Both my mother and my wife’s mother died years ago. My wife and I, to our regret, have no children. Consequently, Mother’s Day has a somewhat melancholy air in our house.

I congratulate my nieces and nieces-in-law on their children and their roles as mothers. Treasure your children.

The other day as I was going about my ordinary errands I took a few moments off to stop at a house sale in nearby Park Ridge. I spent $10 to buy a few mugs made by a company my wife collects (a savings of several hundred dollars). The house, probably built in the 1930s, was interesting. One of the second floor closets held a meticulously-constructed ladder/set of stairs up to the attic. I had never seen anything quite like it before.

When I stuck my head out the back door, I was startled to see that the entire backyard was occupied by a formal English garden, something one might see in the mansions on the North Shore but that I never expected to see in Park Ridge. I should have taken a picture.

It saddened me a bit. I couldn’t imagine that the next owner won’t rip that garden out. Things change.