Thursday, March 5, 2009


The following is part of a letter I sent to my siblings a few weeks ago. In it I am explaining my rational for asserting that we have a 50-50 chance of falling into an economic depression. Here's a slightly modified version of what I wrote:

You may be aware that a component of my job is economic development. Because of this I have spent a good deal of time over the last few weeks researching economic trends and history, and that is why I have arrived at the conclusion that a depression is possible, even likely.

Here are some ways that recent events are like those of 1929:
- Bank failures (banks in the 20's were much more localized than today, so our "big" bank failures may mean more than several small closures.)

- Rising unemployment (25% of people were unemployed during the worst of the Great Depression. The official number today is "only" 7.8%, but it is measured differently today. Using the methodology from that time, today's number would be closer to 12%.)

- Massive decrease in stock prices. (We still have a way to go before we see a similar percentage loss. We have lost about 40% of the Dow Jones Industrial's high of 14,000.)

- New technologies (Cars, radio, movies in the 20's, computers and the internet in the 90's) had caused a massive economic expansion and feeling that the economy was too good to fail.

- The federal government stepped in and made things worse while trying to make things better.

Now I don't think those things alone necessarily add up to a depression. What will drive this recession into a depression with be a chain of events that I see no way around. The U.S. has lost around 3,000,000 jobs in the last year and a half. That amounts to about 1% of the workforce. (Generally these have been decent paying jobs.) Those who are out of work are obviously spending less, but so are those who still have jobs. If this condition persists, retail stores will find they can't keep the doors open. (Note that Albertson's is closing its Cedar City and St. George stores already.)

As this happens, there will be a surplus of commercial real estate on the market, meaning construction jobs in this sector will follow construction jobs in the housing sector (Downwards, if you weren't aware.). Not only will this cause less spending, but we will see the commercial real estate bubble "pop" like the housing market did. This will likely cause another round of bank failures, and it will leave commercial districts vacant, giving communities that wonderful vacated, post-apocalyptic feel.

Now, that scenario is bad enough, but what really troubles me is how things could go after that. Here are some ways that today's situation differs from that of 1929:

- The population has shifted from rural to urban. People during the Great Depression and WWII planted gardens. A large chunk of our population isn't near enough to arable land to do so today. People get mean when they are hungry.

- There are more homeowners with mortgages today than there were in the 20's. That potentially means more foreclosures and homeless people than back then.

- Because of the real estate bubble, many Americans have "upside down" mortgages. That means they owe the bank more than the house is worth. Home equity loans don't exist when there is no home equity to speak of.

- The dollar is no longer tied to a gold standard. Many people don't realize that the dollar is only backed by the government's word, and more and more Americans are doubting the validity of that word. This also opens the door to so called "hyper-inflation."

- A higher percentage of our economy is tied to governments now than in the 20's. For example, colleges are big business today. As state endowments decrease (which they will as tax revenues decrease), colleges will lay off professors and staff and/or hike tuition to cover shortfalls. By way of example, USU just announced that all employees will take a one-week unpaid furlough next month. That will not quite cover the 10% budget cut the university has to deal with. (Compare that to the rumor that UNLV will be looking at a 50% endowment cut. It's just a rumor, but FIFTY percent?)

- Americans are in debt without assets to sell. Consumer debt is around 140% GDP right now. If you aren't into the numbers, that means that a great deal of debt won't get paid off, and banks (and their customers) will have to eat that cost. [edit: it turns out that consumer debt was equally high in 1929]

- The federal government is in serious debt and may run into the end of its borrowing capacity. The national debt started to get stupid in the 80's and has been on that track ever since. (It is currently about 60% of GDP.) Because the federal government has never defaulted on its debts, it gets great rates... until there just isn't enough capital worldwide left to borrow. Then the government has to agree to pay a higher interest rate to attract new capital.

- The large "baby boom" generation is just moving into retirement. We will eventually get to the point that there will be about 1.5 workers for every social security recipient. When social security first started the ratio was about 30 to 1. Moreover, the baby boomers aren't really a healthy generation. The cost of Medicare for them will exceed that, per person, than it did for prior generations.

- The U.S. wasn't fighting two wars in 1929.

So with that said,, let us recall what Yogi Berra said. "Making predictions is hard, especially about the future." You just can't ever tell how things will shake out, so here are some suggestions to consider for the coming year(s). Not all of these will apply to everyone, of course.

- Let's all liquidate our assets, buy a big boat, and sail the high seas (that's just a test to see if you are still with me).

- Look at your budgets and see where you are playing the worst "defense" with your money.

- If you are looking at a vehicle purchase, see if you can't make your current car last a couple of more years.

- Regarding large purchases in general, consider whether the thing you buy will go up or down in price. (Hint: there aren't many things that go up.)

- If you are carrying comp and collision on your cars, check out the blue book value ( and compare that to your deductible. If they are close, drop down to liability coverage only.

- If your mortgage isn't a fixed rate, look at refinancing. If inflation kicks in like it might and you are paying a variable rate, you will be hurtin' for certain.

- As an experiment, you might try calculating the cost of meals and avoiding those that cost the most. (This isn't to say to go hungry or forego nutrition, just be aware.)

- If you have the space, try planting a small garden. I am no gardener, but I do plan on planting something this year. Fruits and vegetables have gone up in price more than most items over the last few years.

- Look at your energy consumption. If it is high, see if the cost of making your house more energy efficient will pay for itself in a year or two of reduced energy bills.

Yeah. Aside from those things, recognize that the Great Depression was a time where the country reinvented itself. New music and art styles came about during that time, Communities grew closer as people depended on one another, and the refiner's fire of that time produced what we call today "the Greatest Generation."

Sunday, February 22, 2009

$15,000 per student

I follow a twitter user that styles him/herself as Utahedfacts. This user links to information relevant to (surprise) facts about education in Utah. One of his/her recent posts linked to a pdf by the Utah Taxpayer's Association that states that spending per pupil in Utah during fiscal year 2008 was $8,032.

Just days before I read that report I had spoken to one of the local school board members about the school district's budget. He said that the entire budget for the year was about $15,000,000 and that there were 991 students in the district at present. Rounding the latter number to 1000 gives an annual cost of $15,000 per student. So what gives?

A former principal in this school district had done research into district financing for her master's degree and found that property tax accounted for about 50% of revenue in this district and 50% came from the state. My first thought was that the Taxpayer's Association number must have excluded local property tax. But then I remembered that the same principal indicated that the urban districts' revenue was more like 80% property tax and 20% state funds. That would mean that if property tax was excluded from their numbers urban districts would be spending about $40,000 per kid. There is no way that is right.

So I have to conclude that our school district is spending almost twice as much per student as the state average. If that is the case, we've got a problem. There is no way my kids are getting an education worth $15,000 per year. I have three kids, all in elementary school. If I were to receive $15,000 for each of them each year it would exceed my annual salary (excluding benefits). I would gladly quit my job and teach my kids myself if I could. And here is the kicker: they would receive a FAR superior education from me.

It's not that I view myself as a better teacher (I did teach high school math for as long as I could stand it), but there are three simple principles that can't be denied. First, I would have a class of three students. Professional teachers typically have at least 20 per class. I could provide the kind of individual attention to each child that even the best private schools couldn't touch. Second, I care for my kids more that even the biggest-hearted teacher. Third, I am more familiar with each of my kids, their respective strengths, weaknesses, and learning styles than any teacher simply because I have know them longer.

So I challenge anyone to explain to me what I am missing. Tell me, please, how our kids are getting a $15,000 education. Even if our school district were the best in the state, that would take some serious explaining. Sadly, our district isn't the best. It isn't even average. There is such a high degree of distrust and outright hate between faculty and administration that we are barely even functional.

Friday, February 13, 2009

Forbes Flays College Falsehoods

Forbes has a great piece about the scam that is higher education. I'm glad to see some of the same arguments I have used (correlation is not causation, etc.) in their article.

Wednesday, December 24, 2008


"Man is the animal that has made friends with the fire."
- Henry Van Dyke

"Ah, fire! Scourge of Prometheus! Toaster of marshmallows! Eradicator of dead wood."
-- Sideshow Bob, The Simpsons

Man, the master of elements, the creature most adapted to Earth's fickle climes, the toaster of marshmallows, owes his versatility, his longevity, his knowledge, and his wealth to fire. Though the wild beasts fear it, man is entranced, even soothed, by its sight, smell, and feel. The good servant and evil master is entwined in his past as well as his destiny. For the family from whence I come, fire is almost another sibling. This year marked the point in time for which my high school graduation was half a lifetime ago. The memories of the first half of my life are often tied to fire and the labors that provided fuel for winter fires.

When we lived in Paragonah we had a huge fireplace that could have heated three houses, or so it seemed. I remember the stonework around the fireplace. It was made of green, flat stone that must have come from the pile behind Grandpa's insurance office in Panguitch1. To the left of the fireplace was a hole in the wall to allow heat to flow into the room Steve and I shared. (That hole also worked as a portal for two boys in the months when the fire wasn't burning.) The fireplace itself seemed larger than any other I recall. I think the next size up must have been the "Shadrach, Meshach, and Abednigo" size. I remember how much heat that fireplace would produce. I'm sure it put out more heat than a small nuclear reactor2. I even remember Dad having to repaint portions of the fireplace with a special paint that came in a very small bottle because the intense heat had diminished the finish.

I don't remember how old I was, but I recall toasting marshmallows in that fireplace for s'mores. When the door was open it was easy to become almost hypnotized by the flames within.
Though I am sure we went into the hills to get wood for that fireplace, I don't recall doing so until we moved to Panguitch. I do, however, recall that it was my job to bring in wood from the back porch every night to feed the monster fireplace. It was during my evening chore that my only sister at the time decided to help me. Since we moved to Panguitch when I was ten Shanon couldn't have been more than two. I recall handing her a small log, then another. The second one must have knocked her off balance because she fell over and one of the logs smashed her finger. I felt awful. I felt worse when she had to be taken to the hospital. The whole time she was gone I felt like it was my fault the she was hurt. When she returned home, she staggered around the living room like some Irishman on St. Patrick's Day. It should have been hilarious, but I still felt guilty. The worst was when the tip of her finger turned black and fell off. I was responsible for maiming my sister. Fortunately, the end of her finger (including the nail) grew back, and I finally got over the guilt. Besides, aren't things like hard work and losing fingertips supposed to build character?

Those familiar with our house in Paragonah might realize that the fireplace was in the section of the house that was added on later, which begs the question, "How was the house heated before the addition?" I, for one, know there was a propane wall heater3. Once, after having a bath, I was standing in front of the heater trying to get warm. In order to get the most out of the heater I exposed as much of myself to the warmth as I could. (To the unimaginative, that means my bare butt was near the heater.) Ever one to push a good thing too far, I got closer and closer to the heater until...

I leaped forward in the same moment my backside touched the hot metal. I would like to think I didn't yelp like scared puppy, but I just can't recall. Dad said something like, "My poor boy. Are you at all injured?" Actually, he uttered the immortal words, "It doesn't take him long to check out a hot stove." I think it was meant as a metaphor. Future generations will carve those words into marble buildings. Fortunately, I would not be the last of my siblings to use their backside as a thermometer.

In addition to the fiery furnace of Paragonah, we had a wood burning stove in our new house in Panguitch for several years. One of the duties of summertime was to gather, cut, haul, stack, and split wood for winter. Though the work of getting wood could be tedious and exhausting, it was also enjoyable in its own way.

A typical trip to get wood took most of the day. If Dad's homemade (and in retrospect, rather ingenious) racks were not already on the old red Chevy, he and I would lift them in place. Then the hefty chainsaw box would be loaded in the back next to the spare tire. After snacks and people were crammed into the cab we would be off. (Later trips involved a second vehicle, often the old van.)

Mom and Dad would pick a spot in the hills far enough along a rough road to ensure we were properly nauseous once we arrived. Once we shook that off, it was time to get to work. We would haul logs to the truck, often in teams. As we got bigger, we would carry logs over a shoulder by ourselves. When Dad thought Steve and I were big enough, we were allowed to handle the chainsaw. Though it may sound strange, these things were a measure of our progression to manhood. The work was exhausting, yet it brought a sense of accomplishment and independence.

Of course the work wasn't done when the wood was loaded in the truck. If the logs hadn't been cut before they were loaded in the truck, they had to be cut at home. The larger logs had to be split into smaller pieces using an ax and boy-power. (I do recall the use of a log splitting machine once in Paragonah, but I'm sure that was discontinued because boys needed work to do.) Then all cut and split pieces were stacked in an orderly fashion.

Splitting wood was something that was often done well after the day-long trips to get wood. It was a solitary act, yet one requiring a certain amount of violence. The nearest act to it that I can describe is a boxer or martial artist practicing on a punching bag. It was a way for the angst of adolescence to find a physical outlet.

I recall one time Steve, some cousins, and I were unloading wood. It had all been cut to size on the mountain, so we formed a human chain to unload and stack it. I stood in truck and tossed each log to the next person, who tossed it to the next, etc. The last person in the line would then stack it on the pile. After some minutes of this Steve, who's life ambition at the time was to become a professional wrestler if I recall correctly, said something like, "Do you know how huge we would be if we did this every day?"

The last trip to get wood that I recall was just Steve and I. It seemed to complete a circle. We had the knowledge and maturity to do it on our own. It wasn't long after that trip that Mom and Dad replaced the wood burning stove with a natural gas stove.

Were all these things the only roles fire played in our lives it would be significant, but we also had our campfires. Every member of the family seemed to have the instinct to gather wood for fires as soon as we arrived at a campsite. We also had the instinct to add too much wood to the fire until taught otherwise. Around the campfire we talked and cooked and ate. We did those things together that make families what they are. In the movie Thunderheart a tribal elder says, "We will smoke the pipe and there will be no lies between us."
Perhaps sharing the smoke of the same fire allowed conversation among us that wouldn't be had at home in rectangular rooms among the clutter of everyday living.

There must be something magical to open fires because Dad built a fire pit near the little house even though a well thrown rock from the kitchen could strike the fire pit. Cooking outside near the house in the summertime is not a necessity, but a pleasure. Like the campfire it allows for good conversation. It also allows time to sit and ponder our vast surroundings and reflect in a way that few people probably do anymore.

As our lives move with the technological tide, it seems we spend less and less time with fire, and some part of us recognizes that something is missing. I am glad our parents acquainted us with this form of magic, and I'm glad my children know it too.

1. I don't know where that pile of rocks came from, but I do remember getting hit in the head by one of those rocks thrown by a cousin. I couldn't say which cousin since it was long ago and, well, I had been hit in the head by a rock. Alas, that story has little to do with the fireplace in Paragonah.

2. Author's estimate.

3. I assume it was propane fueled. I didn't notice such things back then. What follows the noted sentence is for posterity only. I derive no pleasure from telling the tale.

Thursday, December 11, 2008

Peak Oil and transportation

Last month I attended the fall conference of the Utah chapter of the American Planning Association and spent the entire time in the "sustainability" track. "Peak Oil" was the major topic. I've followed the discussion of peak oil for quite some time, but never felt the immediacy of the problem nor considered just how far reaching its consequences until that conference. To summarize my feelings at the time, I will relate what I said to a friend at the conference. I said, "Dude, we're screwed."

If there was an upside to my feelings of dread it was that my creative juices started flowing. Since 95% of our transportation energy comes from oil, transportation will be hit hard as oil is harder to come by. (I haven't met anyone yet who believes the current low in oil prices will last into next summer.) To utilize other sources of power for transportation requires batteries or compressed gasses. Batteries are still not very efficient in terms of stored energy per unit of mass, despite continual research in the field. Compressed natural gas is a proposed solution, but requires replacement of the current fleet of vehicles, experiences energy losses due to compressing the gas, and will follow a similar depletion curve to oil. Hydrogen is a storage medium, not an energy source, so it would require additional energy to produce in addition to energy losses from compression and fleet replacement costs.

The thought occurred to me that rather than spending money on the kind of infrastructure needed for the inevitable change away from oil, we should consider a different kind of transportation infrastructure. Yes, trains and light rail would fall into this category, but what I'm referring to would be different altogether.

My idea is to utilize wireless electricity transmission systems to power cars. As I sat in the conference I tried to recall an article about MIT developing the ability to transmit power using magnetic induction. I couldn't recall the content then, but here is an article that discusses their technology. (Since that time Nevada Lightning Laboratory has published results of their experiments that can push more electricity over longer distances.) I reasoned that if transmitting coils could be embedded in roadways, cars could be manufactured with receiving coils that would in turn power electric motors. The beauty of the idea is that this could be a secondary system in traditional internal combustion vehicles or in battery powered cars. When such a car turns off of a "powered" road the other systems kick in. The cars could be put on the road during (or even before) the infrastructure build out.

Like most of my ideas, I'm not the first to think of it. Here is a patent application that states, "7. The system of claim 1, wherein said energy transmission system is arranged in proximity to a roadway and said energy reception system is arranged on an underside of an electrically chargeable vehicle." That's fine. I would just like to see the thing built. (To be fair, Nikola Tesla proposed the same thing a hundred years ago, but with airships.)

Monday, November 3, 2008

Prop 8

Proposition 8 in California and other similar measures have garnered a lot of press. Like so many other things in politics, I think the question, "Yes or no on prop 8?" is misguided. I think a better questions are:
  • Why are the federal and state governments involved in marriage at all?
  • Isn't marriage a religious rite?
  • What about the separation of church and state?
I think it is time for the government to get out of our lives on this front. Stop allowing justices of the peace to act as clergy. Stop selling marriage licenses. View marriages as a civil contract when things go bad and assets need to be divided. And certainly don't tax us because we may or may not be married.

The ROI of college

At one time I had developed a fairly sophisticated spreadsheet to analyze the net present value of college. Alas, it was lost when a hard drive failed. Thankfully, other people have done a similar analysis. Thanks to April Norhanian for pointing to it. The article does a good job of pointing out that wages lost while going to college and debt servicing are often left out when college promoters quote their statistics.