August 12th, 2015

Budget deficit continues to shrink

http://www.msnbc.com/rachel-maddow-show/budget-deficit-reach-seven-year-low

Within the coverage is a pointer to coverage at The Hill:

http://thehill.com/policy/finance/250589-cbo-lowers-deficit-projection-for-2015

"The budget deficit for 2015 is expected to drop to roughly $425 billion, according to a report released Friday by the nonpartisan Congressional Budget Office (CBO).

That’s down from the $486 billion the CBO projected in March.

If it drops to $425 billion by the end of the fiscal year on Sept. 30, it would be a seven-year low for the government’s annual budget shortfalls."

US Federal Government year ends in a couple weeks -- if the CBO is saying NOW that it expects the budget deficit to be about $425B vs. the March (mid year) projection of $486, there is every reason to believe that they are right. And remember, the C in CBO stands for "Congressional" and both houses are run by Republicans currently, so if you want to assert partisan bias, make sure you get the directionality on that bias statement right be clear about whatever your assertion is and how it relates to hypothetical bias.

On the one hand, you can look at this and go, wow, that is some fiscal responsibility right up there, go Obama. On the other hand, you can look at this like a good socialist and say, holy shit look at all that lost opportunity to stimulate the economy during an era in which sure, some places are complaining about too much growth (yeah, looking at you, Seattle and Mountain View, we have too many jobs and too much growth and everyone should just Go Somewhere Else so our beautiful town/city won't ever change, with a little glance at the Boston area, omg no we don't want the Olympics we have to work on our infrastructure and we certainly wouldn't want more people getting the idea this would be a great place to live and work. That said, I'm all in favor of pushing the Olympics over to somewhere else. Those things are expensive) and the stock market is exploring new altitudes but there is effectively no wage growth and we need to do more to make sure that the economy finishes recovering for EVERYONE not just people who were well-positioned and pretty well off to begin with.

But regardless, better not complain about the budget deficit, because you'll look like a right wing tool, and possibly a not well informed one if you're laboring under a misapprehension that the deficit is not shrinking faster than expected.

Economic Cycles

Well, it took a while, but the news has finally, FINALLY become totally worthless. Usually this happens around the end of June, certainly no later than July 4th weekend. But boy, howdy, between Greece and a few other odds and ends, there was still nuanced, fact-filled (even mostly accurate) coverage all of kinds of interesting stuff right up until this week. And now? Post Fox News Republican debate, it has gotten beyond sketchy (we're actually parsing ideas as ludicrous as Ranking Republican Presidential Candidate Misogyny? Really? You'd sort of think any one of them would just break the meter and that'd be the end of it, but nooooo. We apparently need to spend minutes at a time on this and inches of text. Whatever.) . So I'm going to take a moment to explain how I think about economic cycles, because when the news _does_ get responsible again, one of the items high on the agenda is going to be another Will They/Won't They round about the Fed raising rates at the September meeting.

First: What IS an economic cycle and why do we care? Basically, there are months and occasionally years at a time where companies have a really hard time finding people to hire and workers can ask for raises without fear of the consequences and service at fast food restaurants gets beyond terrible and traffic is a nightmare. At any given time, there is probably some place you can point to like this (North Dakota had its moment while the rest of the country groaned from lack of jobs, and commutes were, comparatively, a breeze and everyone at Wendy's was friendly, prompt and could make accurate change). There are, by contrast, months and occasionally years at a time where companies are spoiled for choice -- brilliant, experienced candidates willing to work long hours for cheese sandwiches and the hope of access to terrible health insurance they mostly have to pay for themselves, when asking for a raise is inviting your boss to fire you and the service at McDonald's is beyond amazing. And there are the bits in between. So that's it: the booms are when you wait in line to be treated awful at Carl's Jr., but you're making bank -- altho you still can't afford to buy a house because they went right to the stratosphere before you had your chance. The busts are when you are praying to get hired by Subway, because your however many months of unemployment has run out and it isn't going to get extended.

Second: What is the Fed? The Fed is the banks' bank. It's where banks get money. It's where banks deposit money. And the Fed gets to decide the interest rate charged when banks need money, and what they get paid on their money on deposit. If the Fed thinks that the world has gone apeshit, and all those incompetent idiots working fast food are buying McMansions because the banks are giving money in job lots to all comers, the Fed can charge the banks more money to discourage them from doing this. If the Fed looks around and say, traffic is entirely too light, and I think I was just served by a Nobel Laureate at Papa John's, then the Fed can charge the banks _less_ money to encourage the banks to more freely loan money to enterprising people who know what Ruby on Rails is, and have already used AWS at more than one gig.

Under W., the banks went apeshit, and everybody bought a McMansion, but for a variety of reasons, some good, but mostly bad, the Fed was unable the effectively intervene to put a stop to the lending, in part because a lot of the lending to buy the McMansions was not going through the banks; it was going through another part of the economy. Anyway, the crash happened, and then nobody wanted to do anything except hoard their folding green stuff, dollars, gold, etc., and the Fed reduced rates to effectively zero -- they couldn't GIVE money away, literally -- in the hopes that someone, somewhere, would borrow some money, start a business, hire some people, etc., especially that amazingly brilliant logistics person who was pushing a broom at Sorrento's.

Third: What is the September Meeting? Well, along about the middle of September, the people in charge of the various member banks of the Federal Reserve (you know where Wikipedia is. Go read all about it) will get together and have a convo and then they will put out a press release and Janet Yellen will talk to the press. While Yellen has been ridiculously clear that rates can be changed at any meeting, with or without a pre-schedule press avail, there is this idea that a rate change -- the first in YEARS!!! -- will occur at a meeting with a pre-schedule press conference. And a lot of people are utterly convinced that Yellen will announce a rate rise.

Fourth: The rate rise, whenever it occurs, will be tiny. So tiny that it will have effectively no effect, unless a lot of people who aren't talking decide to throw another Taper Tantrum.

Read about that on your own, say, here: http://www.investopedia.com/articles/personal-finance/060415/what-taper-tantrum-and-should-you-fear-it.asp

Fifth: Wait, what?

Remember that the basic idea behind raising rates is because the economy is On Fire and the service at Burger King has deteriorated unacceptably, plus it takes so fucking long to get to work that road rage incidents are on the rise and businesses are having trouble expanding because when they hire the most competent person they can find (until recently, employed as an assistant manager at Little Caesar's), that person turns out to be unable to get along with anyone, erratic about showing up to work on time and prone to lunches involving a lot of alcohol. Is that how the world is working right now?

Crickets. I hear crickets. Loud, loud crickets.

Now, in favor of the rate rise argument are the lovely people of Mountain View, California, who put a cap on new office space. Also, an organization called Save Our Suburbs in Mercer Island which was formed in response to the possibility that the population of Mercer Island might start to rise as a result of Transit Oriented Development around their Link station. It is clear that the economy of Mountain View, and the quiet, heavily patrolled burbs of Mercer Island (don't drive in Mercer Island while black, or, hell, even if you're in a beater car. They'll escort you off if you even look slightly lost and are white) are enjoying an excellent point on the economic cycle.

Against the rate rise argument are BLS statistics indicating absolutely no wage growth whatsoever. Not only are we not at the happy cusp that is NAIRU (look it up -- best reason ever to raise rates, I do in fact worship at the altar of Volcker, while wistfully looking back in nostalgia at how _fast_ runaway inflation ate away at mortgage debt in the 70s that had been priced in the late 1960s), with energy prices plummeting and every other commodity chasing energy downhill, it's not clear we have any kind of inflation at all.

Then why do people expect/want the Fed to raise rates?

I'll tell you why. Our country has a lot of older people in it (you know, like me, only slightly more so). And they are TERRIFIED of investing their money in anything that isn't guaranteed by the US taxpayer six ways or more. And that means that the Fed rate totally determines how much they can take out each year of their retirement (or, if slightly younger, how long they have to wait before they can retire) and they aren't happy about it.

Basically, the olds want the Fed rate to go up, so they can retire. And if that happens on the backs of the middles and the youngs, well, they'll just pretend they don't know that's gonna happen and act all shocked if they get their way and then it does.

Good news! I think the Fed is a lot more clever than they are. But we shall see.

ETA: I have actually left out of this overview an important argument in favor of raising rates. It is important NOT because it is a good argument (it is breathtakingly immoral and also risible) but because the people who emit this argument look like reasonable people and often have business degrees or otherwise look like they might actually know something. Here it is: we should raise rates NOW so that if there's another downturn, we can lower them again.

Of course, given that the single most predictable result of a rate rise or series of rate rises IS another downturn, well, yeah. Immoral. Risible. Now, you might be thinking, wait, they might have a point. To which I will politely refrain from saying, Try, Try Really Hard, To Not Be a Mark, and instead say this. Well, if we have another downturn while rates are effectively at zero, we will just have to resort to ACTUAL stimulus, rather than somehow acting like the central bank is the only person who can possibly do something about a downturn. You know, ACTUALLY FUND INFRASTRUCTURE type of thing. New Deal. Etc. Ideally while avoiding the really bad scenario for jump starting the economy (you remember that one: destroy all the existing everything by having a really comprehensive war. Afterwards, the group with the biggest surviving industrial base makes a ton off of loaning the rest of the world money to buy everything they need to rebuild. Also known as the 1950s).

A Few Remarks About the Duolingo Fluency Badge

I have four languages going on Duolingo, two of which (German and French) are the languages I have spent the most time learning in traditional school contexts (French in junior high school, high school and college; German in high school and at a language school that used to be located near Pioneer Square in Seattle the name of which I've forgotten and which may not be there any more), and which I've spent almost no time on Duolingo doing. One of the languages, Dutch, I've worked all the way through the tree and maintain it completely golden; I've never taken a traditional academic class in Dutch, but at this point I've probably spent the most hours in a conversational class (one on one) setting learning it. Finally, there is Spanish, which I originally started doing so my daughter could play with Duolingo with me, and, well, Dora the Explorer.

Not too long ago (perhaps a couple months?), Duolingo added a "Fluency Badge", which you get in percentage increments ("You are now 43% Fluent!" I am not joking.) as you work through the tree. You can go backwards, just like your little golden circles can lose their golden status until you practice them again. I only discovered the "Fluency Badge" very recently, when I was bored and decided to work on the Spanish tree. At first, I laughed hysterically ("You are now 11% Fluent!" What does that mean, anyway?). Then I eye rolled. And today, I went digging around to find out why I never saw that on the Dutch tree. New feature, not rolled out everywhere yet. And then I found this comments thread.

https://www.duolingo.com/comment/8726201

a_david describes the feature and then the fun begins. One thing I've noticed about Duolingo is, that like nearly everything ever in the history of ever, way more people start than continue. And of those who continue, only a comparatively small number participate in the forums/comments threads. And it really seems like the more trees a person has worked on and/or worked up to a high level on, the more critical they are of the feature, of the concept that doing anything with Duolingo can make you fluent, or . . .

kamil.kryn says: "2 years ago I start Italian on Duolingo. I'm a meticulous type, I make my way through the skill tree inhumanely slowly (self imposed limit of one subunit a day). And then, about 2 months ago, I go to Italy. Surprised as I was - I spoke Italian. I. spoke. Italian. Given, it was a choppy version of Italian, full of stuttering, "eeeem"s and "aaaam"s, and as rudimentary as they get ("one pizza please"), but there I was. Understanding and speaking Italian. Full Stop.

Now the fluency shield pops up and tells me I'm 60% fluent. You know what? I felt like 60% :)"

This seems pretty reasonable to me. Is it the CEFR definition of fluency? (And, yes, critics of the fluency badge bring up CEFR: "While it could be useful to know the level of fluency we have achieved if it was based on a known or accepted measure such as CEFR but to just give a percentage of a very vague measure seems a bit pointless for an academically respected site.") Not at all. But it is apparently capturing some notion of what it might mean to be fluent, according to a general population of people who do _not_ aspire to be polyglots. Fluency, as understood by people who don't speak a second language well, is the ability to get through a transaction at a shop, or exchange greetings, or order at a restaurant after making sense of the menu. And that appears to be approximately Duolingo's intention with the fluency badge.

It's a little tricky, when you launch a new service or product, trying to use early adopters to get the word out about your new service or product. You can't JUST sell to the early adopters, because early adopters are finicky and fickle. They demand the moon, complain about having to pay for it, and then are dissatisfied once they have the moon: it's so big, where are they going to put it, also it isn't actually made of green cheese as they had expected. Very quickly, they are bored with the moon, and want Mars. But of course, once they get Mars, they'll complain about that, too.

Another dilemma for Duolingo is trying to figure out whether they should cynically market the service to people who show up, do a level or two, and never return, or if they should try to help people keep coming back and doing levels so they actually attain a level of proficiency that will stick and might actually be useful to them, whether they are traveling or dating someone or working in an ER.

The fluency badge seems designed to encourage people who are NOT finicky, fickle, early adopters -- they are not polyglots who are going to work through every tree in the place, complaining relentlessly about how someone this doesn't Count as language learning. The fluency badge seems intended to get the person who shows up to keep coming back and actually learning something -- and to help that person _feel_ like they are learning something, which can be really difficult with language.

While I, too, laughed at the fluency badge, it's really grown on me. I think it's a great feature, and I hope they refine it and roll it out more widely. Gamification of language learning strikes me as a really positive development, and I'd love to see more people participate.