Kevin Drum

Yes, the Globe is Still Warming

| Fri Jul. 24, 2009 3:21 PM EDT

Jim Manzi defends George Will: "There has not been a lot of measured warming for the last ten years."  But that's just not true.  A fifth of a degree in the trendline is still a fifth of a degree in the trendline, even if you post a chart that uses a shorter timespan and displays the results by month instead of by year.

Now, it is true that the single year 2008 was cooler than the single year 1998.  It's also true that there hasn't been much warming over the past six years.  Noisy data can usually provide any answer you want if you cherry pick it well enough.  But neither of these things is the same as demonstrating that there's been no warming during the past decade.  There has been.  About a fifth of a degree.

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Back to Square One on Pot

| Fri Jul. 24, 2009 1:55 PM EDT

Meet the new drug czar, not especially different from the old drug czar:

The federal government is not going to pull back on its efforts to curtail marijuana farming operations, Gil Kerlikowske, director of the White House's Office of National Drug Control Policy, said Wednesday in Fresno...."Legalization is not in the president's vocabulary, and it's not in mine," he said.

...."Marijuana is dangerous and has no medicinal benefit," Kerlikowske said in downtown Fresno while discussing Operation SOS — Save Our Sierra — a multiagency effort to eradicate marijuana in eastern Fresno County.

It's disappointing to hear him say that — and a bit cowardly.  But hardly unexpected.  Despite a flurry of optimism a few months ago, Obama and Kerlikowske have obviously come to the same conclusion as all of their predecessors: this isn't a fight worth fighting.  They've got other fish to fry, they know perfectly well there's no support for marijuana legalization in Congress, and there's no political upside in taking the side of a bunch of potheads.  It's better to simply denounce the demon pot, provide the culture warriors with nothing to complain about, and move on.

We might legalize marijuana someday — de facto if not de jure — but not today.  Maybe in another ten years or so.

Making Lemonade

| Fri Jul. 24, 2009 12:34 PM EDT

Ezra Klein is frustrated that Congress is going on vacation when they're within spitting distance of constructing workable healthcare reform legislation:

To be so close to a finished product and a mark-up and a vote and then, for no actual reason, abruptly stop, is insane. It means a cessation to discussions, negotiations, relationships, hearings, to the work of legislating. It means that the hard work of creating this policy will stop for a month and give way to the politics of fighting over it. That's not healthy. "Ideas can melt in the sun," Nancy Pelosi said when I interviewed her Wednesday, "especially in August."

I'm not sure there's much that can be done about this, but there's more than one way to look at it anyway.  The first way is the conventional one: Republicans are hoping that the August recess will slow things down. It gives them more time for attack ads, more time to manufacture uncertainty, and more time to drive wedges between unsteady allies on the pro-reform side.

That's all true.  But the main thing that happens during the August recess is that everyone in Washington goes home and talks to people in their district.  If their constituents are largely opposed to healthcare reform, it hurts the cause.  But if they're pissed off about the status quo and want to know why Congress can't get off its butt and do something — well, that can actually speed things up.

Now, that's not normally what happens.  And it won't this time either — unless Barack Obama's army of supporters are still ready to go out and answer the call of reform.  I've long been skeptical about whether his famous electoral machine would continue to work after the campaign was over, but if there was ever a time to prove me wrong, it's now.  If Obama's army is still willing to go out and do battle, they should show up now and start putting the fear of God into their congressmen.  If that happens, the August recess will be the best thing that ever happened to healthcare reform.

I wouldn't bet the farm on that happening.  But congressmen listen to their constituents when they go home for the holidays, and there's no reason reform advocates can't use that to their advantage.  It all depends on whether we're really as motivated and as angry as the opposition.  Are we?

Chart of the Day

| Fri Jul. 24, 2009 11:19 AM EDT

Here's a fairly astonishing survey from the Pew Global Attitudes folks.  When they polled various countries on their general favorability toward the U.S., attitudes were improved since Barack Obama's election, but for the most part not improved dramatically.  European countries were generally far more favorable toward the U.S. compared to last year, but most of the rest of the world was only moderately more favorable.

But they also asked if respondents were confident that the U.S. would "do the right thing," and the results there were stunning.  With the sole exception of Israel, every single country registered an increase in confidence toward the U.S.  A few of the increases were moderate (Pakistan, Lebanon), but most of them were stratospheric (Egypt, Spain, Canada, Japan, Brazil).

Time will certainly erode this goodwill.  That's just the nature of these things.  But for now, the rest of the world has a spectacularly improved view of how they expect the United States to act on the world stage.  As Dan Drezner says, this is a hard measure of Obama's — and America's — newfound soft power.

Yet More on Carbon Regulation

| Fri Jul. 24, 2009 10:43 AM EDT

I guess everyone knows by now what I think of the idea that Wall Street is going to turn the emissions trading market into the next trillion dollar bubble.  Basically, it seems like about #178 on the list of problems we should be worried about.  But aside from the fundamentals of the thing, one of the reasons I feel this way is that Waxman-Markey has regulation of the carbon market built in.  So what's to worry about?  Here's an update from worrier-in-chief Rachel Morris:

Well, Waxman-Markey had some good language regulating carbon and other energy derivatives....However, in the 300 pages of amendments added to Waxman-Markey just after 3.a.m on the night the bill passed, a few new sentences materialized that placed a big asterisk on those safeguards. The final text now says that the sections of the bill regulating carbon derivatives will be overridden by any derivatives legislation that the House passes later in the year.

Hmmm.  Still, that might not be so bad.  In fact, treating carbon emissions just like any other commodity, and then tightening up the entire market, might not be such a bad thing. Unless, of course, derivatives regulation gets captured by Wall Street shills like Rep. Michael McMahon of Staten Island.  Which, um, it turns out is in the process of happening:

McMahon, Bean and other New Democrats released their proposal for derivatives reform on Wednesday....Their bill would provide regulators with more information about derivatives than they have now, and it would establish an office in the Treasury for oversight of those instruments. But — similar to the proposal advanced by the Obama administration earlier in the year — it only requires standardized derivatives to be cleared, not exchange-traded, and calls for OTC derivatives to be reported to a trade repository, which is far less transparent than an exchange. Their provisions intended to prevent harmful speculation and market manipulation are also less explicit than those offered by Stupak.

Rachel has more in her piece, and it's not all bad news.  There are competing proposals that would be considerably tougher than McMahon's.  What's more, there are still some fundamental reasons to think that carbon trading isn't likely to be a huge gold rush. Still, this is obviously worth keeping an eye on.  There's really no legitimate reason to oppose fairly stringent regulation of carbon emission trading, and anyone who suggests otherwise should be given a very skeptical hearing indeed.

Sarah Palin is Sinking

| Fri Jul. 24, 2009 9:55 AM EDT

From the Washington Post:

As Alaska Gov. Sarah Palin prepares for the next stage of her political career, a majority of Americans hold an unfavorable view of her, and there is broad public doubt about her leadership skills and understanding of complex issues, according to a new Washington Post-ABC News poll.

Well, that's our elite-East-Coast-passport-wielding-NASCAR-hating media for you.  They've managed to convince everyone that Sarah Palin doesn't understand complex issues.  It's sad.  When will they ever learn that it's about country?

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Goldman's Billions

| Fri Jul. 24, 2009 12:59 AM EDT

Earlier this month Matthew Goldstein of Reuters broke the story of Sergey Aleynikov, a naturalized Russian immigrant who's been charged with stealing trade secrets from Goldman Sachs.  The secret in question was computer code.  In particular, according to the feds, it was 32 megabytes of code that Aleynikov encrypted and uploaded to a UK-owned website in Germany prior to leaving Goldman to go work for a competitor at a much, much higher salary.

And what did this incredibly valuable code do?  Answer: it ran Goldman's high frequency trading operation, and it's drawn attention to the shadowy but wildly lucrative HFT trading sector.

Basically, HFT relies on speed.  Traders buy and sell stock thousands of times a second and their profits rely on being able make their trades slightly before ordinary traders make theirs.  Speed is so important that a key component of HFT — aside from fast computers, big pipes, and rocket science code — is colocation of their servers.  That is, they set up their operations physically close to stock exchange data centers so that trading data has less distance to travel before it gets to them.  A few milliseconds in reduced latency time makes all the difference.  And that's not all: you'll be unsurprised to learn that there's a regulatory loophole that provides HFT traders with yet another advantage over ordinary schmoes. The New York Times provides an example today of how it all works:

It was July 15, and Intel, the computer chip giant, had reporting robust earnings the night before. Some investors, smelling opportunity, set out to buy shares in the semiconductor company Broadcom. (Their activities were described by an investor at a major Wall Street firm who spoke on the condition of anonymity to protect his job.) The slower traders faced a quandary: If they sought to buy a large number of shares at once, they would tip their hand and risk driving up Broadcom’s price. So, as is often the case on Wall Street, they divided their orders into dozens of small batches, hoping to cover their tracks. One second after the market opened, shares of Broadcom started changing hands at $26.20.

The slower traders began issuing buy orders. But rather than being shown to all potential sellers at the same time, some of those orders were most likely routed to a collection of high-frequency traders for just 30 milliseconds — 0.03 seconds — in what are known as flash orders. While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee.

In less than half a second, high-frequency traders gained a valuable insight: the hunger for Broadcom was growing. Their computers began buying up Broadcom shares and then reselling them to the slower investors at higher prices. The overall price of Broadcom began to rise.

Soon, thousands of orders began flooding the markets as high-frequency software went into high gear. Automatic programs began issuing and canceling tiny orders within milliseconds to determine how much the slower traders were willing to pay. The high-frequency computers quickly determined that some investors’ upper limit was $26.40. The price shot to $26.39, and high-frequency programs began offering to sell hundreds of thousands of shares.

The result is that the slower-moving investors paid $1.4 million for about 56,000 shares, or $7,800 more than if they had been able to move as quickly as the high-frequency traders.

Tyler Durden has been all over this for a while and estimates that HFT might account for as much as a quarter of Goldman's total earnings.  And here I always thought that fixed income trading was where all the money was. Live and learn.

Anyway, HFT has turned into an arms race, but it's an arms race that only the elite are allowed to play.  You and I just get to foot the bill, a tenth of a cent at a time.  Sound familiar?

MoJo Mix: 23 July 2009

| Thu Jul. 23, 2009 6:11 PM EDT

Hey, Laura again. Kevin's usually optimistic about health care reform on odd-numbered days, but the news out of Congress is none too cheery at the moment, as you know. So, consider these 4 story recommendations your reform news chasers for the week:

1) Apocalypse Ciao: When the economic Rapture comes, will collapsitarians be the chosen ones?

2) Hippie, put your clothes on. California doesn't want to see your naughty bits at the beach anymore.

3) A zombie meme returns: Vaccines still don't cause autism. But you wouldn't know it from the comments on this article.

4) The Going Galt movement protests Obama with a collective shrug.

And what the heck, 5) A video of Amy Poehler hearting on Mother Jones with Sarah Silverman and a few other very funny ladies.

Laura McClure hosts podcasts, writes the MoJo Mix, and is the new media editor at Mother Jones. Read her investigative feature on lifehacking gurus in the latest issue of Mother Jones.

Global Warming Charlatanism

| Thu Jul. 23, 2009 4:57 PM EDT

Ezra Klein is puzzled:

I've gotten a bunch of requests for a response to George Will's assertion that “If you’re 29, there has been no global warming for your entire adult life.” I'm actually puzzled enough by that comment to not really know how to respond.

Sigh.  Here's the deal: Will is being cute.  If you're 29, you became an adult in 1998, and average global temperatures last year were lower than they were in 1998. So: no global warming in your adult lifetime.

In case you've missed it, this is the new favorite talking point from the chucklehead denialist set.  The earth is actually cooling!  But as about a thousand serious climate researchers have pointed out, it's not true.  Global temps have been trending up for over a century, but in any particular year they can spike up and down quite a bit.  In 1998 they spiked up far above the trend line and last year they spiked below the trend line.  So 2008 was cooler than 1998.

Of course, you can prove anything you want if you cherry pick your starting and ending points carefully enough.  For example: The year 2000 was below the trend line and 2005 was above it.  Temps were up 0.4°C in only five years!  The seas will be boiling by 2050!

This is idiotic, and only deliberate charlatans who think they have an especially gullible audience bother with it.  It's the trend line that matters, and the trend line has been going up for decades right along with rising CO2 concentrations.  Listen to the climatologists, not the charlatans.

Is the Geithner Plan Working?

| Thu Jul. 23, 2009 3:16 PM EDT

As I mentioned last night, big banks are handing out big paychecks again.  Matt Yglesias says this is all part of the plan:

The Obama administration didn’t want large financial institutions to fail. They also didn’t want to try to get congress to appropriate funds on the scale that would be needed to take the banks over, clean house, and recapitalize them publicly. What they came up with was a strategy of implicit and explicit guarantees designed to allow financial institutions to recapitalize themselves through profits. And big profits mean big paychecks. This is an ugly solution to the problem, but for whatever it’s worth it’s working.

That's true.  The idea that banks could be safely recapitalized via earnings was explicitly part of the Obama/Geithner plan.  And maybe this was safer than pessimists like me thought, since the two weakest banks, Citi and Bank of America, had already received massive federal guarantees on their toxic assets in addition to their TARP money.

Still and all, I'd caution that it's only working so far. The Geithner plan leaves the banking sector fairly weak, and while this is OK as long as things continue to improve, it could yet become a big problem if there's another shock and things take a turn for the worse.  So let's hope there aren't any more shocks.