US Real Interest Rates: 2003 - present

I'm disappointed in you all. None of you has contacted me and asked me about my real interest rate statistical series. I mean, what am I doing, blogging for no reason? Why don't you all go and Well of course the reason for this oversight (ha ha I'm such a good comedian) is that I've been rejigging my methodology to take into account long term rates rather than short term ones - which was the problem with my previous series. Since I calculated using 10 year bond rates, every week was a new beginning or a new end for Greece or Ireland or whatever. So I've put the series into recess until I can produce something of quality that can actually mean something.

In the meantime I have tracked US real interest rates back to 2003 using data here and here. Then I put the data into something called a "Spead Sheet", which is this amazingly new office software which I have never used before until now, and begun tinkering with the equations and working out yearly inflation rates and so on. In order to come up with the raw data I first measured year on year US inflation for each month of the year back until 2002 (for 2010-02-01, the inflation rate was 2.21%). Then I measured the average 10 year bond rates over the previous month to align the inflation rate with the average 10 year bond rate (for 2010-02-01, the average 10 year bond rate was 3.73%) and I then subtracted the inflation rate from the bond rate to discover the real interesr rate for that month (for 2010-02-01, the real interest rate was 1.52%).

Anyway so here's something called a "Graph" that I made up.

As you can see I'm hardly the spreadsheet maven. The X-axis is supposed to be dates from 2003-01-01 to 2010-02-01 and "column G" is supposed to read "Real Interest Rate". Nevertheless I was able to do a screenshot and then use The Gimp to graffiti some words onto it. They are:

Too Low: During this period of the US economy, real interest rates barely exceeded 2% and even dropped into negative territory. During this period, the US economy was simultaneously recovering from the dotcom crash and investing in the subprime market. It was during this period that the medium-term seeds of economic destruction were planted in the field of financial services and fertilized by the Fed... or something like that. Anyway this is the period I have repeatedly identified as the one in which the Fed under Greenspan basically lost its marbles.

Too Little: Finally the effect of interest rate rises begin to impact the real interest rate. It is around this point that the property market reaches its peak value, but the effect of these higher real interest rates is not enough to either moderate growth or prevent the crash that is to come.

Too Lazy: Like a kid lying on a couch in front of the television playing on his XBox, so too does Ben Bernanke completely ignore reality. Inflation has spiked up considerably and neither the Fed nor the market seems worried. Money sloshes around like bilge water in a ship sailing the wide accountant-sea. Halfway through this period was when Bear Sterns collapsed and then suddenly the market decided it wasn't happy any more. Comic Sans is, of course, the lazy font, which is why I use it.

Too Late: Economy collapses and financial armageddon hits, thus bringing us back once again to the point of no return. Bernanke and the Fed, reacting to the fire in the financial field, lowers rates but, alas, is too late: the field is burning down, the ship is sinking and the Xbox has frozen. Interest rates can't be lowered any lower because of some strange mathematical rule, which means that everybody is desperately saving. 10 Year bond rates drop to a low of 2.42% in January 2009 but deflation has set in, which increases real interest rates to 5.7% by July 2009. Naturally this is the time to use a bold serif font with exclamation marks to highlight the seriousness of it all.

Now the uptick at the end is where we are now. It remains to be seen where this uptick will lead. If we are going to have a double-dip recession then deflationary pressures are beginning to hit again (inflation was 2.78% in December, but 2.21% in February) and we can expect a further rise in that line. Sadly, the line is too near the zero mark as it is, which means that it could turn back into negative territory again - a move which would precipitate and encourage an economic drop later on.

Personally I think the Fed should keep real interest rates between 2-3% over the next twelve months to prevent either an inflationary boost or a deflationary (antonym of boost). Keeping real interest rates in the "middle" like that would result in stagnation which, of course, is probably the best we can hope for.

Violence and the Right

Eugene Robinson says:

The (arrest of these Christian militia members) highlights the obvious: For decades now, the most serious threat of domestic terrorism has come from the growing ranks of paranoid, anti-government hate groups that draw their inspiration, vocabulary and anger from the far right.

It is disingenuous for mainstream purveyors of incendiary far-right rhetoric to dismiss groups such as the Hutaree by saying that there are "crazies on both sides." This simply is not true.

There was a time when the far left was a spawning ground for political violence. The first big story I covered was the San Francisco trial of heiress Patricia Hearst, who had been kidnapped and eventually co-opted by the Symbionese Liberation Army -- a far-left group whose philosophy was as apocalyptic and incoherent as that of the Hutaree. There are aging radicals in Cuba today who got to Havana by hijacking airplanes in the 1970s. Left-wing radicals caused mayhem and took innocent lives.

But for the most part, far-left violence in this country has gone the way of the leisure suit and the AMC Gremlin. An anti-globalization movement, including a few window-smashing anarchists, was gaining traction at one point, but it quickly diminished after the Sept. 11, 2001, attacks. An environmental group and an animal-rights group have been linked with incidents of arson. Beyond those particulars, it is hard to identify any kind of leftist threat.

By contrast, there has been explosive growth among far-right, militia-type groups that identify themselves as white supremacists, "constitutionalists," tax protesters and religious soldiers determined to kill people to uphold "Christian" values. Most of the groups that posed a real danger, as the Hutaree allegedly did, have been infiltrated and dismantled by authorities before they could do any damage. But we should never forget that the worst act of domestic terrorism ever committed in this country was authored by a member of the government-hating right wing: Timothy McVeigh's bombing of the federal building in Oklahoma City.

It is dishonest for right-wing commentators to insist on an equivalence that does not exist. The danger of political violence in this country comes overwhelmingly from one direction -- the right, not the left. The vitriolic, anti-government hate speech that is spewed on talk radio every day -- and, quite regularly, at Tea Party rallies -- is calibrated not to inform but to incite.

Demagogues scream at people that their government is illegitimate, that their country has been "taken away," that their elected officials are "traitors" and that their freedom is at risk. They have a right to free speech, which I will always defend. But they shouldn't be surprised if some listeners take them literally.

I posted about this a few years ago:

On the other hand, Right Wing groups are more likely to be gun owners and have members who belong to survivalist militias. These are people who have taken onboard the racist rantings of The Turner Diaries and believe with all their hearts in wild conspiracies about the UN invading America and destroying all that America holds dear. These are people who will write off even the most basic and easily provable facts reported in the news because the "MSM" is trying to destroy America, while all the time believing Fox news and their propaganda. These are people who will put up pictures of Hillary Clinton to aim at on firing ranges. These are people who think with their trigger fingers, whose fear of armed confrontation inevitably results in armed confrontation by these same people.

OSO's Debt Watch

GDP = $14.4538 Trillion (Current Dollar, 2009 Q4 final estimate)
Public Debt = $8.17638717562941 Trillion (2010-03-24)
Total debt owed to foreign holders of treasury securities = $3.7061 Trillion (2010-02-01)
Debt/GDP ratio = 56.57%
Foreign ownership of debt/GDP ratio = 25.64%
Population = 309,026,611 (Resident Population + Armed Forces Overseas, 2010-02-01)
GDP per capita = $46,772.02
Public Debt / person = $26,458.52
Foreign Public Debt/ person = $11,992.81
GDP per capita minus Public Debt per person = $20,313.50
Tax Receipts = $2.044117 Trillion (Twelve month moving average¹, Monthly Treasury Statement, 2010-02-01)
Tax Receipts as percentage of GDP = 14.14%
Debt/Receipt ratio² = 400.00%
Federal Government Outlays = $3.521637 Trillion (Twelve month moving average¹, Monthly Treasury Statement, 2010-02-01)
Federal Government Outlays as percentage of GDP = 24.36%
For every $1.00 the US government gains, it spends $1.72
Fiscal Surplus/Deficit = -$1.47752 Trillion
Surplus/Deficit as percentage of GDP = -10.22%
Interest paid on Treasury Debt Securities (Gross, Twelve month moving average, Monthly Treasury Statement, 2010-02-01) = $0.398852 Trillion
Interest paid on Treasury Debt as percentage of revenue = 19.51%
Interest paid on Treasury Debt as percentage of GDP = 2.76%

Notes:

• Debt/Receipt Ratio reaches 400%
  
• Public Debt updated
• GDP updated
• Added interest paid on debt securities. "Interest paid on treasury debt as percentage of revenue" is an indication of how sustainable interest payments are to income. For mortgages, the 28/36 ratio is used.
  

In October 2008, GDP was $14.2003 Trillion (Current Dollar, 2008 Q4 final estimate)
In October 2008, Public Debt was $6.18964742400511 Trillion (2008-10-20)
In October 2008, the total debt owed to foreign holders of treasury securities was $2.9797 Trillion
In October 2008, the Debt/GDP ratio was 43.59%
In October 2008, the foreign ownership of debt/GDP ratio was 20.98%
In October 2008, the Population (resident population + Armed Forces overseas) was 305,554,049 (2008-10-01)
In October 2008, GDP per capita was $46,473.94
In October 2008, Public Debt / person was $20,257.13
In October 2008, Foreign Public Debt/ person was $9,751.79
In October 2008, GDP per capita minus Public Debt per person was $26,216.81
In October 2008, Tax Receipts were $2.578156 Trillion (Twelve month moving average¹, November 2008 Monthly Treasury Statement)
In October 2008, Tax Receipts represented 18.16% of GDP
In October 2008, the Debt/Receipt² ratio was 240.08%
In October 2008, Federal Government outlays were $2.747197 Trillion (Twelve month moving average¹, November 2008 Monthly Treasury Statement)
In October 2008, Federal Government outlays represented 19.35% of GDP
In October 2008, for every $1.00 the US government gained, it spent $1.07.
In October 2008, the Fiscal Surplus/Deficit was −$0.169041 Trillion
In October 2008 the Surplus/Deficit as percentage of GDP was -1.19%
In October 2008, interest paid on Treasury Debt Securities (Twelve month moving average, Monthly Treasury Statements) was $0.429994 Trillion
In October 2008, interest paid on Treasury Debt as percentage of revenue was 16.68%
In October 2008, interest paid on Treasury Debt as percentage of GDP was 3.03%

The historical tables of the FY2010 budget (page 24-25) show that:

Highest tax receipts as percentage of GDP: 20.9% in 1944 and 2000.
Lowest tax receipts as percentage of GDP: 2.8% in 1932.
The last time tax receipts were lower than they are now: 13.3% in 1943.
Highest Federal Government outlays as percentage of GDP: 43.6% in 1943 and 1944.
Lowest Federal Government outlays as percentage of GDP: 3.4% in 1930.
The last time Federal Government outlays were higher than they are now: 24.8% in 1946.
Fiscal Deficit - Worst: -30.3% in 1943
Fiscal Surplus - Best: 4.6% in 1948


¹ Measures total tax receipts/outlays over the previous 12 months from the last month measured. eg April 2009 to March 2010.
² The Debt/Receipt ratio measures government revenue (twelve month moving average) as a percentage of current public debt. A good way to compare it would be to compare your current income to what you owe on your mortgage.

---

The Initial Reaction

From here. I've always felt that the "true believers" of the Right Wing represent about 20% of the population, which was why Bush's approval ratings never dropped below 20%. So it is only reasonable to view the "angry" result as being that of these "true believers" who think that the passing of the Health Bill is the beginning of the People's Democratic Republic of America headed by Chairman Obama.

This is only an initial reaction, however. How people will view this bill will change as time goes by, and I'm not ruling out any movement towards the negative.

Who opposes Health Care Reform?

It's the South:

The WSJ Real Time Economics blog has posted the letters for and against the health care reform bill winding through Congress. The most interesting thing about the lists of signatories is the geographical divide. It was so interesting, I did a fast tabulation (so, don't quote me on it), and what one finds is that of the list in favor, only 2 of 41 economists are affiliated with institutions in the South (defined using the most restrictive definition in this Wikipedia page -- so to be completely accurate, I haven't used the actual Mason-Dixon line). Of the 131 signatories to the against letter, 40 are affiliated with institutions in the South, i.e., essentially 30% of the total.

OSO's Debt Watch

GDP = $14.4617 Trillion (Current Dollar, 2009 Q4 second estimate)
Public Debt = $8.15320123557092 Trillion (2010-03-17)
Total debt owed to foreign holders of treasury securities = $3.7061 Trillion (2010-02-01)
Debt/GDP ratio = 56.38%
Foreign ownership of debt/GDP ratio = 25.63%
Population = 309,026,611 (Resident Population + Armed Forces Overseas, 2010-02-01)
GDP per capita = $46,797.59
Public Debt / person = $26,383.49
Foreign Public Debt/ person = $11,992.81
GDP per capita minus Public Debt per person = $20,414.10
Tax Receipts = $2.044117 Trillion (Twelve month moving average¹, Monthly Treasury Statement, 2010-02-01)
Tax Receipts as percentage of GDP = 14.13%
Debt/Receipt ratio² = 398.86%
Federal Government Outlays = $3.521637 Trillion (Twelve month moving average¹, Monthly Treasury Statement, 2010-02-01)
Federal Government Outlays as percentage of GDP = 24.25%
For every $1.00 the US government gains, it spends $1.72
Fiscal Surplus/Deficit = -$1.47752 Trillion
Surplus/Deficit as percentage of GDP = -10.22%

Notes:

• Public Debt updated
• Total debt owed to foreign holders of treasury securities updated
  

In October 2008, GDP was $14.2003 Trillion (Current Dollar, 2008 Q4 final estimate)
In October 2008, Public Debt was $6.18964742400511 Trillion (2008-10-20)
In October 2008, the total debt owed to foreign holders of treasury securities was $2.9797 Trillion
In October 2008, the Debt/GDP ratio was 43.59%
In October 2008, the foreign ownership of debt/GDP ratio was 20.98%
In October 2008, the Population (resident population + Armed Forces overseas) was 305,554,049 (2008-10-01)
In October 2008, GDP per capita was $46,473.94
In October 2008, Public Debt / person was $20,257.13
In October 2008, Foreign Public Debt/ person was $9,751.79
In October 2008, GDP per capita minus Public Debt per person was $26,216.81
In October 2008, Tax Receipts were $2.578156 Trillion (Twelve month moving average¹, November 2008 Monthly Treasury Statement)
In October 2008, Tax Receipts represented 18.16% of GDP
In October 2008, the Debt/Receipt² ratio was 240.08%
In October 2008, Federal Government outlays were $2.747197 Trillion (Twelve month moving average¹, November 2008 Monthly Treasury Statement)
In October 2008, Federal Government outlays represented 19.35% of GDP
In October 2008, for every $1.00 the US government gained, it spent $1.07.
In October 2008, the Fiscal Surplus/Deficit was −$0.169041 Trillion
In October 2008 the Surplus/Deficit as percentage of GDP was -1.19%

The historical tables of the FY2010 budget (page 24-25) show that:

Highest tax receipts as percentage of GDP: 20.9% in 1944 and 2000.
Lowest tax receipts as percentage of GDP: 2.8% in 1932.
The last time tax receipts were lower than they are now: 13.3% in 1943.
Highest Federal Government outlays as percentage of GDP: 43.6% in 1943 and 1944.
Lowest Federal Government outlays as percentage of GDP: 3.4% in 1930.
The last time Federal Government outlays were higher than they are now: 24.8% in 1946.

¹ Measures total tax receipts/outlays over the previous 12 months from the last month measured. eg April 2009 to March 2010.
² The Debt/Receipt ratio measures government revenue (twelve month moving average) as a percentage of current public debt. A good way to compare it would be to compare your current income to what you owe on your mortgage.

---

Random thoughts on electric vehicles

Would you purchase a car that only had a range of 160km (100 miles)? I suppose in order to answer that question you need more information, such as "How fast will it go?" or "How many people will it carry?" If I then told you that the car in question had a maximum speed of 140 kph (87 mph) and was a hatchback and which could not refuel at a local service station but, until infrastructure is developed, can only be "filled up" at home... then you'd probably then ask "Well how much?" and then be surprised that the price was actually quite high for such a range disadvantage.

This, of course, is the problem facing first generation electric car buyers. Some time this year, Nissan will release the Leaf (pictured) onto the US market and thus become the first real fully electric car available for the public (with the notable exception of the EV1 and the controversy surrounding it). For us who are concerned both with the environment (especially lowering carbon emissions) and who don't wish to devolve society into anarcho-primitivism, the Nissan Leaf represents the first real step towards reducing carbon emissions while simultaneously maintaining an industrial society with viable personal transportation (as opposed to an industrial society that relies upon bicycles and public transport).

Yet the economist and the realist in me can't help but be worried about the Leaf. As a first generation electric car it obviously will have teething problems - not least being the lack of infrastructure needed to create a viable electric vehicle transportation system. In practical terms, this includes "charging stations" for electric cars located in people's homes, in parking areas and along travel routes. Unlike a normal service station, an electric car can't be charged up in the same way as a petrol-driven vehicle. The 2-3 minutes that a petrol driven car takes to be filled up is highly convenient when compared to the 30 minutes or so it would take an electric car to be charged up - and then only to an 80% level (fast-charging has the problem of not being able to charge fully, whereas slow-charging - done at home overnight - is able to charge up to a 100% battery capacity).

Yet even if the infrastructure is developed (at great initial expense to the taxpayer, though it will pay itself over time), the question of speed and range do come into consideration. While there are a substantial amount of people who would purchase the Leaf on its environmental features alone, the only thing going for it in the mind of the mainstream public would be its fuel economy, which is estimated by Nissan to be 150 miles per "gallon gasoline equivalent" (mpgge). In terms of internal space the Leaf would be considered no better than any other car in its size range, while the speed isn't exactly as fast as people would like (at least for those who wish to go speeding).

The most serious problem, though, is the range. Each Nissan Leaf has dozens of Lithium-Ion batteries stored under the floor - see here for a cutaway view. But even with these dozens of batteries and with the sheer time it takes to recharge them (especially when you are far from home) the range - 160km (100 miles) - is most inconvenient. Yet as I studied the subject further, the more encouraged I became.

Battery technology has come along in leaps and bounds. When the EV1 first came out in 1996, the two-door coupe used standard Lead-acid batteries and had a range of no more than 89km (55 miles). Subsequent improvements to the car's batteries - namely the use of NiMH to replace lead-acid - increased the vehicle's range to 116km (72 miles), which was better but still not good. Moreover, even the newer NiMH batteries took up a lot of room which essentially prevented the EV1 from having enough luggage space to compete with similar vehicles. Now, over a decade later, Lithium ion battery technology which was developed to increase the usable life of laptop computers, is now the preferred technology for electric car energy storage. As a result, the Leaf has more electrical power storage available to it than the EV1 - which in turn is responsible for the Leaf's superior luggage and passenger space. Yet it is nevertheless clear that current battery technology still has a long way to go.

It is inevitable that an effective battery system for an electric car will be developed. Every few months science and technology websites announce improvements to Lithium-ion technology or even better alternatives. As these technological changes begin to arrive, electric cars capable of 200, 400, 600, 800km or more ranges will be developed - and this will be the result of more electric power being stored in smaller and smaller battery packs.

But what of the 1st generation Nissan Leaf and its potential owners? It's all very well to argue that battery technology will be ready one day but that is hardly going to make people want to buy the Leaf now is it? Well, actually it might be - and this is where the advantages of battery technology comes in.

Here's the key - try to think of your potential electric car as an electric torch. As anyone knows, when torch batteries run out they just have to get recharged, or else thrown away. In the latter case, the purchase of new batteries is easy because batteries are modular and designed to fit all different sorts of uses. Now check the picture of the Leaf's under floor battery packs again - click here. Notice anything? They're modular. The Leaf doesn't have one big battery but dozens of smaller ones. If a battery is faulty then all you need to do is get a new one. And at some point in the future, you will be able to buy battery packs for your Leaf that can store more power. This means that your Leaf's range might be 160km now, but in 2 years time and with some newer batteries, your range might increase to 190km. A few years later and newer batteries increase the range to 250km. Own the car long enough and there is a chance that the newest battery packs could push the range of your 2010 Nissan Leaf to beyond 1000km. You can't do that with an ordinary petrol driven car - the only way to increase the range would be to increase the size of the petrol tank.

But electric cars have all sorts of other advantages over standard internal combustion engines. The most obvious is the lack of moving parts. An electric motor designed to move an axle doesn't have valves and pistons and doesn't need a driveshaft or a transmission. In short there is less to go wrong. Moreover, the lack of a driveshaft ensures that a car with an electric motor has a very high level of torque available to it. This means that even low-powered electric cars have the ability to move heavier than normal loads and climb steep inclines.

One design that Mitsubishi is developing is the MIEV concept - the placing of an electric motor within the wheel itself. This would allow a car to have essentially four electric motors powering it - one located inside each wheel. Obviously these MIEV wheels are modular enough to ensure that any faulty motors can simply be replaced as easily as the changing of a wheel - you can imagine a MIEV electric car not only having a spare wheel in case of a flat tyre, but also a spare engine inside it in case of a faulty engine. The great advantage of the MIEV design is that it provides more space inside the vehicle for batteries (there's no motor in the car at all), as well as providing constant 4 wheel drive - which can be quite useful even if you don't take the car off road. The Nissan Leaf, however, is a "traditional" front wheel drive in that the motor drives both sets of front wheels.

The last advantage that electric cars can bring will occur once the infrastructure is up and running. Essentially it can be argued that wherever there is grid power available there can be  a charging station. Current service stations need to have large underground storage tanks and need tankers to come along and refill them on a regular basis. An electric power infrastructure can allow smaller or larger charging stations according to need, as well as the ability to set one up near the electricity grid - no underground tanks need to be installed and no regular deliveries need to be made. Charging stations can also be automated, reducing the need for labour.

Petroleum powered vehicles produce as much if not more anthropogenic carbon than coal fired power stations. If the world is serious about reducing carbon emissions then electric vehicles must replace vehicles powered by internal combustion engines. Yet it is obvious that more electric cars will result in more electricity being used, which means that a drop in one area of carbon emission (petroleum) may end up increasing the use of other sources of carbon emission (coal and gas power stations) - though the net result will be a drop in carbon emissions (the carbon emissions resulting from an increase in coal or gas power due to increased usage of electric vehicles will be smaller than the carbon emissions no longer produced by cars powered by petroleum - this is because electricity resulting from coal and gas power plants is more efficient than internal combustion engines). So while there will be a drop in demand for petroleum, there will be an increase in demand for electricity which will necessitate the building of new power plants. Given the state of carbon levels in the atmosphere and the need to remove all forms of carbon pollution, new power sources must be carbon free (eg wind, solar, geothermal or even new forms of nuclear power).

I'm looking forward to electric cars. They will be quieter and simpler to drive. They will be (eventually) easier to "fill up". The inherent advantages of increasing battery power storage technology and 100% torque will eventually make electric vehicles better to drive than anything we have now. It will take time, but I'm actually a bit optimistic.

Update 2010-03-19: By way of comparison in terms of power and torque, it is good to compare the Leaf with the Tiida - the design it is based on. The Tiida has a 1.8 litre engine capable of producing 91 kW (122 hp) of power and 170 Nm (127 ft·lbf) of torque. By way of comparison, the Leaf produces 80 kW (110hp) and 280 Nm (207 ft·lbf) of Torque. So while the electric car produces 12% less power than its gasoline powered competitor, it produces 64% more torque. So while the Leaf has less power than a 1.8 Litre engine, it has more torque than a 2.4 Litre engine. It has, for example, more torque than a Ford Focus. Add to this the fuel economy - the 1.8LT Tiida at its best reaches 8 litres per 100km (29.4 miles/gallon) whereas the Leaf runs at 1.57 litres per 100km (150 miles per gallon) in the "gallon gasoline equivalent" (mpgge).

Great band, bad album cover #1

The Who - Who's Next

You have to hand it to The Who. In an age which worshipped guitar gods like Hendrix and Clapton, The Who produced a Rhinomegaloid guitarist whose speciality was to smash his hands against guitar strings in a "windmill fashion" - a process which involved shredding... of his fingers. The Who also produced the archetypical unconcerned and bored Bass player, the archetypical crazy drummer and the archetypical muscled blond looks of a Robert Plant lookalike. In short, the Who were neither popular pretty boys like the Beatles or dark and mysterious like the Rolling Stones. Instead they were, well, just ugly blokes who played energetic music (as opposed to Pink Floyd, who were ugly blokes playing progressive rock).

There's much we can thank The Who for in this album. Without this album we wouldn't have Baba O'Reilly synthesizing over our airwaves or David Caruso putting his glasses on while Roger Daltrey screams during "Won't Get Fooled Again" (one of my favourite songs ten years ago).

But just look at this cover. A seemingly abandoned freeway pillar aka monolith from 2001 stands upright in a barren landscape, its concrete vertical presence in stark contrast to the teenage wasteland around it. In 2001: A Space Odyssey, the monolith acted as a turning point in the evolutionary history of mankind: The apes discover the black monolith sent by the unseen aliens and learn to use tools and weapons; the astronauts discover a monolith buried in a crater in the moon, which sends a radio signal to Jupiter and to a gigantic portal that Dave Bowman enters and suddenly everyone begins tripping on LSD. But what are the members of The Who doing? What are those wet patches on the concrete monolith? Yes, the band urinated on it - see, they are even doing up their flies. Forget the question of why the band didn't just wee in hole somewhere and implicitly looked for a vertical object to pee against like the proverbial dog looking for a tree and instead delve into the symbolism of it all. Yes - the Who were implicitly telling the aliens, telling the future of mankind, that they not only refuse to evolve and better themselves but will actively fight against it. The symbolic act of urination is like a defiance of a potential future, as though the embrace of Rock and Roll would lead to a devolutionary human future which, of course, became reality when the Duran Duran started dominating the airwaves.

So the cover is, on the surface, a picture of four guys who've urinated against a concrete block and, below the surface and behind blue eyes, a defiant rejection of human progress.

U2 - October

Look at the poise of the four lads from Ireland. Bono, at the back, stares vacantly into the distance, probably at an industrial smoke stack and wonders how the feck they got it stay upright; Adam, at the front, carefully examining the inside of his blond fringe; Edge, on the right, staring daggers at the roadie chatting up some groupies behind the photographer; and Larry, the drummer, blaming you, the viewer, for his diarrhoea. In the background we have, well, some sort of boat, a dock, a bit of water, the side of a warehouse and a residential tower block in the distance.

If there is a phrase that describes this cover it would be "We haven't the time of money to indulge in anything artistic - I'll just get me camera and I'll take a picture of you all in that place where the garda found that dead body last week. And don't argue - I'm your manager and I know what I'm doing." Of course, like the ugly duckling that eventually grew up to be a deformed, genetically inferior swan, so too does this bland and amateurish album cover hide bland and unfocussed music within.

The Stooges - The Stooges

Without the Stooges the world wouldn't have had the Sex Pistols singing about their chronic lack of enjoyment. Within the album there are some classic songs about wanting to become someone's pet dog, about accidentally falling over, about the effects of cold changes on average temperature, about their unease of something or other, and of miniature toys for young girls (amongst others). The songs are actually pretty good ("We will fall" is actually a proto-post-punk song).

So when the band members got together to pose for the album cover, you can imagine what went through their minds, namely "Let's scare people into buying this album!'. Iggy is at the front, his mop wig covering his cranium like a Wermacht helmet yet not long enough to hide the contemptuous "I am going to vivisection you" look. Behind him and facing the opposite direction, is guitarist Ron Asheton, silently pleading with you to run, run, RUN before Iggy captures you while simultaneously expressing his own hopelessness at being trapped inside this evil band. Behind Asheton is Dave Alexander, whose cruel eyes indicate that he is Iggy's gimp, responsible for capturing and subduing you and having his own fun before handing things over to Iggy for the torture and eventual coup de grâce. Behind Alexander is drummer Scott Asheton, Ron's brother, whose crazed eyes and hint of a smile show that he will be the one who dances around, covered in your blood and entrails, once Iggy has had his way with you.

The Smashing Pumpkins - Mellon Collie and the Infinite Sadness

What is going on here? We have a zombie Elizabeth Bennet emerging from a transdimensional portal located in the centre of a flat gold star floating in a stylized solar system. What is she doing? Well as a Zombie Elizabeth Bennet she is undoubtedly looking for the handsome, rugged and financially secure brain of Mr Darcy, who, of course, represents D'arcy Wretzky, the female bass player of The Smashing Pumpkins. How did Billy Corgan manage to successfully bully the band members into creating such a travesty of an album cover? Simple, he paid them lots of money.

Mellon Collie is obviously a play on the word melancholy, which is quite depressing really. Infinite Sadness obviously means being sad forever, or at least being as sad as anyone can get. Yet despite all their wage the band is just a bat on a lathe because, after all, Elizabeth Bennet didn't end up infinitely sad after marrying Mr Darcy did she? Yet the Pumpkins and the fans became quite sad when Wretzky left, subverting Austen's work by replacing her with Melinda Auf der Maur, who put out more and turned the wholesome 19th century romantic tale into a sordid 1980s sex and violence video nasty involving the severed trunk of an undead woman flying around on stars. Thus the woman on the cover represents the feminine purity of Elizabeth Bennet whose relationship with Mr Darcy / D'arcy Wretzky has been severed, killing both the relationship and the band's creative output as Auf der Maur takes over. Think of replacing Liz and Mr Bennet's wedding scene with the music video of The Everlasting Gaze, except with more blood and more crying, and you will see what I mean.

But then again I could be wrong. I mean, a chick on gold star flying through space can mean an infinite amount of melancholy things. What it doesn't mean is a good album cover.

Crud from the Krugster

Paul sez:

What you have to ask is, What would happen if China tried to sell a large share of its U.S. assets? Would interest rates soar? Short-term U.S. interest rates wouldn’t change: they’re being kept near zero by the Fed, which won’t raise rates until the unemployment rate comes down. Long-term rates might rise slightly, but they’re mainly determined by market expectations of future short-term rates. Also, the Fed could offset any interest-rate impact of a Chinese pullback by expanding its own purchases of long-term bonds.

OSO retorts:

A drop in the value of US currency would increase the cost of imports while increasing external demand for US goods and services. Since the US economy is geared towards imports and not exports, any long term drop in the value of the US dollar would lead to a "retooling" period whereby internal demand drops while external demand increases. The mixture of higher import prices and higher demand for US goods will be inflationary which will either result in higher interest rates from the Fed to counteract inflation or (if the Fed is stupid) result in a long term outbreak of inflation which will devalue people's savings and force people to invest in non-monetary assets such as shares or property which will, in turn, lead to yet another investment bubble.

I personally hope the Chinese sell off US bonds and force the dollar down, but to assume this won't lead to the outbreak of inflation and a (potential) increase in interest rates is wishful thinking. So there.

OSO's Debt Watch

GDP = $14.4617 Trillion (Current Dollar, 2009 Q4 second estimate)
Public Debt = $8.09178961632488 Trillion (2010-03-11)
Total debt owed to foreign holders of treasury securities = $3.689 trillion (2010-01-01)
Debt/GDP ratio = 55.95%
Foreign ownership of debt/GDP ratio = 25.51%
Population = 309,026,611 (Resident Population + Armed Forces Overseas, 2010-02-01)
GDP per capita = $46,797.59
Public Debt / person = $26,184.77
Foreign Public Debt/ person = $11,937.48
GDP per capita minus Public Debt per person = $20,612.82
Tax Receipts = $2.044117 Trillion (Twelve month moving average¹, Monthly Treasury Statement, 2010-02-01)
Tax Receipts as percentage of GDP = 14.13%
Debt/Receipt ratio² = 395.86%
Federal Government Outlays = $3.521637 Trillion (Twelve month moving average¹, Monthly Treasury Statement, 2010-02-01)
Federal Government Outlays as percentage of GDP = 24.25%
For every $1.00 the US government gains, it spends $1.72
Fiscal Surplus/Deficit = -$1.47752 Trillion
Surplus/Deficit as percentage of GDP = -10.22%

Notes:

• Tax receipts for February 2010 were higher than in February 2009. The debt/receipt ratio of 395.86% is slightly better than the 396.59% recorded last week.
  
• Federal government outlays were higher in February 2010 than in February 2009.
  
• Added tax receipt and outlay as percentage of GDP to give an idea of the size of the US government in comparison to the rest of the economy.
• Added GDP per capita figures (GDP ÷ population, which is one way of measuring GDP per capita) as well as "net worth" figures (GDP per capita minus public debt / person)
• October 2008 figures below have been recalculated. Some figures have changed from previous debt watch posts - this was because I used approximations early on in this series. Links have been provided to the raw data I have used to come up with these figures. Feel free to fact check and let me know of any errors in the comments section.

In October 2008, GDP was $14.2003 Trillion (Current Dollar, 2008 Q4 final estimate)
In October 2008, Public Debt was $6.18964742400511 Trillion (2008-10-20)
In October 2008, the total debt owed to foreign holders of treasury securities was $2.9797 Trillion
In October 2008, the Debt/GDP ratio was 43.59%
In October 2008, the foreign ownership of debt/GDP ratio was 20.98%
In October 2008, the Population (resident population + Armed Forces overseas) was 305,554,049 (2008-10-01)
In October 2008, GDP per capita was $46,473.94
In October 2008, Public Debt / person was $20,257.13
In October 2008, Foreign Public Debt/ person was $9,751.79
In October 2008, GDP per capita minus Public Debt per person was $26,216.81
In October 2008, Tax Receipts were $2.578156 Trillion (Twelve month moving average¹, November 2008 Monthly Treasury Statement)
In October 2008, Tax Receipts represented 18.16% of GDP
In October 2008, the Debt/Receipt² ratio was 240.08%
In October 2008, Federal Government outlays were $2.747197 Trillion (Twelve month moving average¹, November 2008 Monthly Treasury Statement)
In October 2008, Federal Government outlays represented 19.35% of GDP
In October 2008, for every $1.00 the US government gained, it spent $1.07.
In October 2008, the Fiscal Surplus/Deficit was −$0.169041 Trillion
In October 2008 the Surplus/Deficit as percentage of GDP was -1.19%

The historical tables of the FY2010 budget (page 24-25) show that:

Highest tax receipts as percentage of GDP: 20.9% in 1944 and 2000.
Lowest tax receipts as percentage of GDP: 2.8% in 1932.
The last time tax receipts were lower than they are now: 13.3% in 1943.
Highest Federal Government outlays as percentage of GDP: 43.6% in 1943 and 1944.
Lowest Federal Government outlays as percentage of GDP: 3.4% in 1930.
The last time Federal Government outlays were higher than they are now: 24.8% in 1946.

¹ Measures total tax receipts/outlays over the previous 12 months from the last month measured. eg April 2009 to March 2010.
² The Debt/Receipt ratio measures government revenue (twelve month moving average) as a percentage of current public debt. A good way to compare it would be to compare your current income to what you owe on your mortgage.

---

Beastie Boys / Battlestar Galactica Mashup

This is probably the best mash-up I have seen. Someone has taken the time to create a Battlestar Galactica music video parody, using the music video "Sabotage" by the Beasties Boys. It is best viewed directly after, or if possible alongside, the original 1994 Spike Jonze music video. Virtually every scene in the mash-up is edited not necessarily exactly, but certainly thematically consistent with, the original music video, using scenes from the Battlestar Galactica (reimagined) TV series.

Here's the original.

And here's the mash-up.

US unemployment + incarceration rate

The latest US unemployment rate is out. The official figure stands at 9.7%

I'm not sure if unemployment figures count those incarcerated in prison as part of the rate, so I'll just make some estimates.

Summary table A. Household data, seasonally adjusted, states the following:
(numbers in thousands)

Civilian noninstitutional population 236,998
Civilian labor force 153,512
Participation rate 64.8%
Employed 138,641
Unemployed 14,871
U-3 Unemployment rate 9.7%
U-6 Unemployment rate 16.8%

According to the DOJ, there were 2,304,115 people either in prison or in jail at the end of 2008. There are no updated figures since 2008 so we'll have to assume a static prison population. Also note that the number in prison or in jail does not take into account those on probation or on parole, as these people would be considered part of the "noninstitutional population" that makes up the employment figures.

So let's add the 2.3 million prisoners to the figures above.

Civilian population 239,302
Civilian labor force 155,816
Participation rate 65.1%
Employed 138,641
Unemployed 17,175
U-3 Unemployment rate 11.0%
U-6 Unemployment rate 19.1%

I measured U-3 as (number of unemployed) ÷ (civilian labor force) x 100
I measured U-6 based upon the original figures, namely that the U-6 rate is 1.731958763 the size of the U-3 rate.

Of course, those figures assume no addition to the prison population since 2008, so they would be classed as a statistical minimum while the actual result would be a few percentage points higher.

OSO's Debt Watch

GDP = $14.4617 Trillion (2009 Q4 second estimate)
Public Debt = $8.02665659443531 Trillion (2010-03-03)
Debt/GDP ratio = 55.50%
Population = 309,026,611 (Resident Population + Armed Forces Overseas, 2010-02-01)
Public Debt / person = $25,974.00
Tax Receipts = $2.023910 Trillion (Twelve month moving average¹, Monthly Treasury Statement, 2009-12-31)
Debt/Receipt ratio² = 396.59%
Federal Government Outlays = $3.474381 Trillion (Twelve month moving average¹, Monthly Treasury Statement)
Fiscal Surplus/Deficit = -$1.450471 Trillion
Surplus/Deficit as percentage of GDP = -10.03%

Notes:

• Second estimate GDP figures increased from first estimate but current dollar figure declined.
• Population figures updated.
• Tax receipts updated.
• I predicted a 55% Debt/GDP ratio would occur in 2009. This was incorrect but I was out only by a few months.
• Added outlays and fiscal deficits to show current size of budget deficit, including October 2008 figures below by way of comparison.
• "Twelve month moving average" was what I have been using, not year-to-date. All previous posts referring to "year to date" figures were always a twelve month moving average. Apologies for getting this wrong.

In October 2008, the Debt/GDP ratio was 43.43%
In October 2008, Public Debt / person was $20,264.04
In October 2008, the Debt/Receipt² ratio was 231.82%
In October 2008, the Fiscal Surplus/Deficit was −$0.169041 Trillion
In October 2008, the Surplus/Deficit as percentage of GDP was -1.18%

¹ Measures total tax receipts/outlays over the previous 12 months from the last month measured. eg April 2009 to March 2010.
² The Debt/Receipt ratio measures year-to-date government revenue as a percentage of current public debt. A good way to compare it would be to compare your current income to what you owe on your mortgage.

---

Australia needs to slow down

Australia has weathered the global financial crisis better than most. GDP figures out today show a 0.9% increase in 2009 Q4. Couple this with 5.3% unemployment and you have a remarkable set of figures. Most western nations - including the US - would find Australia's situation far more preferable than their own.

Australia's success has to do with a combination of good policy and luck. Good policy includes a strict adherence to Washington Consensus policies for the past 25 years - privatization of selected government owned industries (Commonwealth Bank, Qantas, Telstra), an intelligent regulatory framework for the financial industry, fiscally prudent government spending, a broad-based tax system - as well as the recent Keynesian stimulus package undertaken by current PM Kevin Rudd. Luck includes a high demand for Australian minerals and ore, which has come mainly from China: their recent stimulus package, alongside renewed consumer demand from the US, has created both an internal and external demand for raw materials that Australia can provide.

Australia: Bloody beautiful mate.
Let's throw another Western economy on the barbie.

So Australia is riding high, but there are nevertheless economic imbalances that need to be addressed, lest Australia fall. One example of this is Ireland, whose economy performed well for over a decade before it crashed so badly during the current financial crisis, exposing its fragile economic underbelly.

For Australia to avoid a future imbalance, steps must be taken to reduce domestic demand - to slow down.

Go slower when conditions are poor.
This applies to road conditions and economic conditions

The two indicators of Australia's economic problems are, firstly, the property market and, secondly, the current account.

One of the triggers of the global financial crisis were overvalued property prices in America and other parts of the world. Once property prices collapsed, households and financial institutions were lumped with bad debts which, in turn, led to a credit crisis - an absence of lending and borrowing (an essential pillar of a market economy). Eventually these economies fell like the proverbial house of cards. Yet despite Australia's own property bubble being popped, there are signs that it has begun to inflate again. Home loan affordability in Australia has improved drastically since June 2008, but recent signs indicate an injudicious addiction on behalf of the financial industry towards property. Government policies such as the First Home Owners Grant and Negative Gearing, which were instituted under the Howard Government and continued unchanged under the Rudd government, have created the conditions for overheating. I would argue that prices still have far to drop in relation to average income before property prices reach a more sustainable level. Steps therefore need to be taken to prevent this growing bubble.

Do we really want to fuel house prices?

The second problem with the Australian economy is the current account - which has been in deficit for over 25 years. The current account basically measures Australia's debt with the rest of the world. Last quarter, Australia's current account deficit was $18.48 billion, which is 4.2% of Australia's GDP. Moreover, net foreign debt levels (that is, how much Australia owes the world in total, minus what the world owes us, as a percentage of Gross Domestic Product) are 51.8% of GDP, which is better than the 56.3% figure 12 months previously. Certainly Australia's debt position to the rest of the world has improved slightly in the last year, and that can be seen in the household savings rate - the more Australian households have saved, the more money was paid off external debt. It is imperative for Australians to maintain a high savings rate if net external debt is to be reduced to zero.

People get very annoyed when debts get too high

Let me explain this further: In a currency area it is essential that a balance of savings and borrowings be maintained.^† If one currency area has an overbalance in borrowing, which is indicated by a large current account deficit, or if it has an overbalance in saving, which is indicated by a large current account surplus, then that currency area has a structural problem. In a currency area that borrows too much there will be an increase in consumption alongside an accumulation of debt; in a currency area that saves too much there will be an increase in production alongside an increase in the savings rate. Both of these are bad, since one currency area's deficit is another currency area's surplus. Each currency area should have a balance for it to remain strong. In Australia's case, high levels of external demand for raw materials has not resulted in a current account surplus. For Australia to have a more balanced economy there needs to be less domestic spending and borrowing in relation to external demand. This can be achieved either by an increase in exports (eg China demanding even more raw materials and prices going through the roof) or by a decrease in domestic demand. Since Australia cannot rely upon China (and thus the US) to make commodity prices rise even higher than they are now, it is up to the Australian Government to step in and reduce domestic demand.

Just say no to buying and borrowing.
It's the noble thing to do

Reducing domestic demand can be achieved both through fiscal policy (government spending) and monetary policy (interest rates set by the Reserve bank). In the former case, there seems little need for any sort of further fiscal stimulus on behalf of the Rudd government. Rudd's fiscal stimulus has undoubtedly contributed to Australia's economic stability, but now is not the time to increase it. Furthermore, in order to prevent any potential property bubble from inflating, policies such as the First Homeowners Grant and Negative Gearing (both of which involve government money being funnelled into the property market) should be stopped. While I would not rule out any increase in government spending on welfare, health care or education, I would argue that such increases in government spending would be a systemic increase rather than a temporary Keynesian stimulus and would thus require an increase in taxes to cover.

It's all a matter of balance.
And that's a fair cop.

In the latter case, the Reserve bank must be instrumental in promoting Australian frugality by increasing interest rates. This it has managed to do just yesterday, increasing rates to four percent. More increases are needed for me to feel settled. Increasing interest rates will stimulate household savings which will, in turn, act to reduce external debt and, by decreasing demand, act to bring the current account into balance or into surplus (the latter being the preferred way of paying off levels of external debt Australia currently has). Such an activity will, of course, slow the economy down but that is actually a good thing in the long term, as it will ensure that Australia relies more on external demand and exports than upon internal demand - which of course is needed as Australia's economy is geared more towards consumption and borrowing than upon production and saving.

Australia's answer too.

Of course if the Reserve Bank took my advice and raised interest rates further (I would feel happier with rates at 5% currently) then it would need to justify its actions as it would be acting outside of its stated objective of keeping inflation between 2 and 3% (see here for an example of this). My response to this is simple - the inflation target is too loose and needs to be tighter. Inflation needs to be kept below even 2%.

Which is, of course, just another way of me arguing that Absolute Price Stability (prices neither increasing or decreasing over the course of the business cycle) should be the sole monetary goal of Western nations.

† This does not apply to individual countries within an optimum currency area such as the Eurozone. My argument is that nations within the Eurozone can have many current account differences, with the only important factor being the current account of the entire Eurozone itself. Individual nations within the Eurozone function the same way as individual economic zones do within a nation using a common currency (eg states and counties in the USA) . Since the Eurozone current account has been running at less than ±1% for the past decade, I do not believe that the Eurozone has a current account problem. It has plenty of other problems (huge levels of government debt for a start), but external debt and the current account are not among them.

The Best Films of 1985

This is my second year of giving recognition to films that were made 25 years ago. Last year the top award was shared by Amadeus and Once Upon a Time in America, both of which scored 8.4 at imdb.com.

This year I have tightened my criteria slightly - I have decided to only include films that have had 10,000 votes or more at imdb, including the all important "dud of the year".

And so on to the awards. First place goes to:

BACK TO THE FUTURE - 8.4

Strange as it may seem, Back to the Future is a film that lasts. At the time it was the highest grossing film of 1985 and was recognised with a single Oscar (Best Effects, Sound Effects Editing). Yet despite being a popular film it has managed to tap into the emotions and other things of people who have watched it. The film was paced well, had some great characters and was able to use the theory of time travel without confusing the audience. My (distant) memories of the film include the moment Marty begins playing "Johnny B. Goode" which then segues into heavy metal distortion, leading Marty to explain to the 1950s audience that "their kids will love it". The film was certainly not one of my favourites, but it is for many others.

Second place goes to:

RAN - 8.3

Ran was Akira Kurosawa's last great masterpiece. Although he made three more films before his death, Kurosawa's Ran was ambitious in its grandeur and reminded movie buffs everywhere (especially in Japan) that his genius had not faded away. Based loosely upon King Lear, Ran follows the story of an aged medieval Japanese warlord who devolves his power to his three sons, only to be betrayed and then hunted down by two of them. In many ways the aged warlord Hidetora is Kurosawa himself, who reigned over the Japanese film industry for nearly 30 years before being snubbed and insulted by them. And just as Hidetora finds acceptance with his youngest son, so did Kurosawa regain his honour and respect with a younger audience from the 1980s onwards. A brilliant (if long) film.

Third place goes to:

BRAZIL - 8.0

This mixture of social satire, black comedy and dystopian nightmare came from the recesses of Monty Python member Terry Gilliam's brain and is still regarded as his masterpiece. Fusing together a bleak fictional world and the fantasy world of his aimless protagonist was always going to be difficult, and the film was both dogged by off-screen politics and on-screen plot problems. Brazil is a rough diamond, but it is a diamond nevertheless. Memorable moments include Robert DeNiro's guerilla repairman fixing a heating system, Michael Palin's cheery and yet disturbing torturer, Ian Holm's bumbling and stressed functionary and a rich, gaudy plastic surgeon played by future Oscar winner Jim Broadbent. Co-written by Tom Stoppard, Brazil won some serious respect from film critics as well as two Oscar nominations - a pity it grossed less than $10 million. My favourite film.

Here are the other results:

The Breakfast Club - 7.9

I never really liked this film when it came out, so consequently my memories of it are hazy and somewhat negative. I suppose I didn't like it because it was so obviously The Big Chill for Generation X, where teenagers can talk about their problems and through this process become better people. It was probably the last film I ever saw Molly Ringwald in.

The Colour Purple - 7.7

I only saw this film about 5 years ago and I thought it was quite impressive. True to form, the film was nominated for 11 Oscars and won none. It was the beginning of Whoopi Goldberg's career, and also introduced the world to Oprah Winfrey.

Witness - 7.6

A memorable film that turned Harrison Ford from being a mindless action star to a serious dramatic actor. Introduced the world to the Amish.

The Purple Rose of Cairo - 7.6

Kiss of the Spider Woman - 7.5

The Goonies - 7.5

After Hours - 7.5

A Room with a View - 7.5

3 Oscar wins (Best Art Direction-Set Decoration, Best Costume Design, Best Writing, Screenplay Based on Material from Another Medium)

-------------------------------------------------------------------------------------

MISSING IN ACTION:

OUT OF AFRICA - 7.0

Out of Africa was 1985's Academy Awards blockbuster, winning 7 oscars from 11 nominations, including best director (Sydney Pollack) and best film. It also provided Meryl Streep with one of her 16 Oscar nominations. While gaining a mark of 7.0 at imdb is nothing to sneeze at, it is not a mark of an enduring work of art. In other words, it was a good film but not a great one, and great films are what Academy Award victories are supposed to indicate.

-------------------------------------------------------------------------------------

DUD OF THE YEAR:

RED SONJA - 4.3

Arnie was having a good few years: Conan and The Terminator had brought him fame as the stereotypical Hollywood action hero. His character in this film was linked to his two roles as Conan, but in Red Sonja he had another name so it wasn't a case of Conan meets a red-headed Amazonian warrior although that was obviously what the film-makers were aiming to do. The film flopped and Brigitte Nielsen had the indignity of winning the "Worst New Star" award at the 6th Golden Razzie Awards. Fortunately Arnie starred in Commando later in the year, which allowed him to keep his tough guy image going. Nielsen then appeared in Rocky IV with Sylvester Stallone, who she later married and divorced.

By the way, although there were plenty of other films in 1985 that were pretty bad, none of them were voted on by 10,000 or more people at imdb. If we count 1,000 votes or more, the clear "loser" is, in fact, Final Justice with 1.6, which was apparently a favourite of Mystery Science Theater 3000:

Note: If I apply the "Dud of the Year" criteria to last year's award, then the worst film with over 10,000 votes was Children of the Corn (5.2), while the worst film with over 1,000 votes was Ator l'invincibile 2 (1.8). Bolero still has to be punished somehow.