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Ways of the World

Carol Stone, business economist & active Episcopalian, brings you "Ways of the World". Exploring business & consumers & stewardship, we'll discuss everyday issues: kids & finances, gas prices, & some larger issues: what if foreigners start dumping our debt? And so on. We can provide answers & seek out sources for others. We'll talk about current events & perhaps get different perspectives from what the media says. Write to Carol. Let her know what's important to you:

Saturday, June 25, 2016

Legends & Lies: The Patriots

We’re working on some commentary about the dramatic vote results in the UK “Brexit” vote about membership in the EU.

Meantime, especially as July 4 approaches, we want to call your attention to a very interesting TV show on Sunday nights.  Legends & Lies: The Patriots is showing on Fox News at 8:00PM.  While this is a Bill O’Reilly production, it has absolutely nothing to do with contemporary politics.  It is indeed about the American Revolution.  The first two episodes dealt with the Boston Massacre, the Boston Tea Party and Paul Revere’s ride.  This week we’ll have stories about Ben Franklin and the battle of Bunker Hill.  The material includes some dramatized scenes interspersed with commentary by O’Reilly and by university history professors who are experts in the period.

Our regular readers know that we are fascinated by the Revolution and that we talk about it every year at this time.  So this TV program obviously fits in to Ways of the World themes.  The series will run all summer on Sundays at 8:00PM.  Again, it’s on the Fox News cable network.  Check it out; we think you’ll enjoy it.


Monday, June 20, 2016

Jo Cox and the EU

Most of what you’ve been hearing about since June 12 pertains to the mass shooting in Orlando.  Clearly we are upset about that horrible tragedy.  But we want also to give attention to a not-totally-unrelated event in northern England on June 16.

This Thursday, June 23, people in the U.K. will vote on whether to remain in the EU or leave.  The EU is an association of 28 European nations enjoying free trade among each other and whose citizens can move freely among the countries, living anywhere they choose at any time.  Nineteen of these countries, obviously not including the U.K., also use a common currency, the euro.

There is dissatisfaction among some U.K. citizens over belonging to the EU, such that when he ran for re-election to Parliament in 2013, the current Prime Minister David Cameron promised that Parliament would authorize a public election over whether to stay in it.

This hardly sounds like an issue that should spawn violence.  But as the voting date has approached, two vociferous camps have emerged and campaigning has been raucous and nasty.

Still, the nation – and many others – was shocked last Thursday, when Jo Cox, a Member of Parliament supporting the Remain camp, was shot and stabbed in front of the public library in her town of Birstall.

Violence.  What is it about these days that political disagreements seem to be spurring such deadly violence?  The gentleman who murdered Jo Cox on Thursday was known to have mental problems, but still, outright killing is extreme.  Tommie Mair even used a sawed-off shotgun to do this in a country where almost all guns are outlawed, and most police don’t even carry them.

We have to talk first about Jo Cox herself.

An extraordinary person.  She is from Birstall in Northern England, just north of Leicester and south of Nottingham.  The region is a factory community; it includes a large Muslim population, apparently mainly from India, as workers were needed for factories.  Jo Cox’s father worked in a factory.  She apparently always presumed she would do the same.  But she had the opportunity to attend Cambridge and she was the first member of her family to attend university.  She spent 10 years as an aid worker, affiliated with Oxfam, the Gates Foundation and the Freedom Fund, this last an organization that fights modern slavery.  The Wall Street Journal explains that in Parliament “she pushed for international action to help Syrians who had been caught up in fighting there .” She was also a vocal proponent of the UK staying in the EU.

She lived simply, with her husband and two children on a houseboat, and, according to The Economist magazine, she commuted to Parliament on a bicycle.  Ms. Cox was on her way to conduct constituent appointments at the local library in Birstall when she was attacked.  A witness reported that the attacker shouted “Britain first” as he struck her.  In Mr. Mair’s court appearance, the prosecutor stated that he had said, “Britain first, keep Britain independent, Britain always comes first.”  Perhaps coincidentally, “Britain First” is actually an organization committed to banning Islam in the U.K.  The group denied responsibility, however, although they are concerned that immigration is the root of many of the U.K.’s current problems.  When asked to state his name during his court appearance Saturday, June 18, he replied, “Death to traitors, freedom for Britain.”

Thus, we seem to face three forces here.  First, the awful killing of a highly regarded public servant, popular in her community and respected in Parliament.  A bright, relatively young woman, age 41, who obviously had much to say and do toward the benefit of the people she represents.  Second, a raucous, divisive campaign about whether the U.K. should Remain in the EU or Leave it; indeed the groups in support of each side are “Remain” and “Vote Leave”.  Polls show sentiment is almost evenly divided and oscillates from one preference to the other, so it is not at all clear which will come out ahead in the vote.  Campaigning was suspended altogether from Thursday after Jo Cox’s death through Saturday.  Third, there is the immigration issue.  Being part of the EU means that immigration into the U.K. from Europe is relatively easy.

This last issue, immigration, even strikes us as bearing some resemblance to at least one of the factors in the Donald Trump campaign in the U.S.  Trump’s supporters tend to blame immigrants for some of our problems, similar to the U.K. citizens who blame immigrants for whatever distress they are feeling.

While we have no answers to any of this, we can offer you a prayer concerning the U.K. vote, published by the Church of England back in April.  It is obviously directed at this specific issue, but its themes can apply to many topics of public debate:

God of truth, give us grace to debate the issues in this referendum with honesty and openness. Give generosity to those who seek to form opinion and discernment to those who vote, that our nation may prosper and that with all the peoples of Europe we may work for peace and the common good; for the sake of Jesus Christ our Lord.  Amen.

And among the myriad tributes to Jo Cox, here is one offered at a prayer service at a church in Birstall last Thursday and published on the website of the Diocese of West Yorkshire and the Dales:

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Friday, June 03, 2016

Why Workers Might Favor a Businessman for U.S. President

Back at the beginning of the Presidential primary elections, a friend sidled up to me and growled, “Can you explain Donald Trump to me?”  The gentleman thought that I, as a political conservative, might have some insight into this unusual candidate for high public office.

I think I might have some modest insight about this, but it’s my penchant for economic data, not my political views that might help us out.  Indeed, there's nothing politically motivated in what follows.

Many voters are frustrated in the lack of economic progress in recent years.  We hear all the time that incomes have stagnated and inequality has worsened.  Our latest wanderings around the website of the Bureau of Labor Statistics (BLS) yield some interesting information on how pervasive these conditions are.  We can thus understand better Trump’s appeal to working-class people who think this outspoken businessman might have some ideas for helping these conditions, for “making America great again.” 

Many comments about income inequality refer to total income, which, of course, includes dividends and investment capital gains, flows that favor the high-end.  Or comments about wages just talk about CEOs’ oversized compensation as a huge multiple of average workers’ wages.  There’s little mystery in these as causes of frustration among hard-working laborers.

Wage Stagnation and Inequality Pervade Labor Market
But what we found goes deeper.  First, workers’ compensation has indeed been stagnant overall.  Average wages and benefits were $21.50 an hour in 2014, down from $21.91 in 2007, just before the Great Recession started.[1]  This overall result comes from an annual survey of companies’ pay in some 800 different occupations, summarized in 19 “groups”, from management at the top ($59.93/hour in 2014) to food preparers and servers at the bottom ($8.88/hour).  Some groups near the middle include construction workers at $24.67/hour, production workers at $21.31 and office and administrative at $20.53.  Over the last seven years, averages increased for nine of the 19 groups, but they declined in ten of them.  Among the declines are ones you’d think: office workers, transportation workers and installation and repair people.  But hourly compensation also declined for higher-skilled occupations, including computer scientists, scientists and even a bit for healthcare professionals – really.[2]  So it’s hard to generalize, to make a simple statement about wage stagnation.

Further, and in some ways more irritating, inequality measures increased, even within these narrow pay categories.  While the overall 50% median compensation number went down 41 cents an hour over the seven-year period, the 90% level increased; so the top 10% of workers made $56.73 in 2014, up from $54.31 in 2007.  And seeming to add insult to injury, the degree of inequality went up within individual occupational groups: in eight occupations where the average went down, an inequality measure went up.   Thus, high-end positions in those eight occupations, including computer techs, healthcare professionals, social service workers, installers & repairers and transport workers continued to rise even as middle and low-end salaries struggled.  Workers may not see our data, of course, but they surely have a sense of the awkward pay relationships among their own colleagues. Workers in all kinds of jobs have reason to feel exasperated.

Possible Remedies: Reorient Education, Encourage Business
I don’t know a simple answer to these compensation issues.  The economist in me says, let’s encourage business investment and better skill-training so workers can do their jobs more easily.  As you can see from the variety of occupations we’ve mentioned, “skill training” is probably a better term than “education”.  Kids can learn coding for computer apps or they can become truck mechanics rather than heading for college to get a broader, but possibly less practical cultural background.  In fact, one brand-new book, Reskilling America, by sociologists Katherine Newman and Hella Winston[3], argues for renewed emphasis on vocational education over the recent “college for everyone” approach that often leaves graduates without a well-defined, real-world expertise, but plenty of debt.

Some of you might think greater government regulation is necessary to realign workers’ pay.  But that may well have the opposite effect of diluting business’ incentives to do better, thus worsening productivity, to say nothing of the cost of designing jobs to match government specifications.  It’s a very important economy question of the 2010’s.  In fact, the National Federation of Independent Business, a trade association representing small businesses, says that government regulation already adds to the cost of hiring workers, such that businesses are tending to favor temporary employees now rather than permanent ones.[4] This adds emphasis to our main immediate point about how frustrated workers might indeed want a new kind of leader in Washington who better understands the business world.

Further, the Dean of the Harvard Business School says in a recent Wall Street Journal [5], “solutions to problems like inequality and the lack of employment opportunities or wage growth aren’t going to come from government alone. They’re also going to require imaginative businesses that find new ways to employ people and create real value.”

Other Economic Policy Questions Add to the Quandary
We see that what we have here is a can of worms.  And this is just one issue, frustration over inadequate pay and lack of progress.  We have to mix this with all the other issues of the day.  An important Trump theme is immigration, for instance.  We thought to discuss this here, but it’s really a whole separate article on some recent information about the motivations of immigrants; these facts differ markedly from Mr. Trump’s usual arguments.  But it’s still an issue that middle-class workers of today care about.  Other issues that might give them headaches include national security and the protracted wars in the Middle East.  And while gasoline prices have at least come off their highest levels with the drop in oil prices, workers in North and South Dakota and Texas are being laid off as some oil production becomes unprofitable at the lower prices.  Apparently, we also have figure out how to deal with coal miners; coal is clearly an important climate-change issue, but the economies of West Virginia and other Appalachian regions depend on it.  We can’t just leave all those people out in cold – so to speak.  And on and on.

1.  Kristen Monaco and Brooks Pearce.  “Compensation Inequality: Evidence from the National Compensation Survey”, Monthly Labor Review.  July 2015.   U.S. Bureau of Labor Statistics. .  The numbers quoted are adjusted for inflation, so we’re talking about constant purchasing power.  Also, they are median averages, in the middle; half of workers make more and half make less.

2.  Ibid.  Note that while average pay for healthcare professionals decreased somewhat, the number of those workers, including doctors and nurses, rose markedly.  We still were startled that median pay and benefits in that profession did not go up.

3.  Katherine S. Newman and Hella Winston.  Reskilling America: Learning to Labor in the Twenty-First Century.  New York:  Metropolitan Books (Henry Holt and Company).  2016.

4.  Juanita Kuggan, quoted in NFIB Small Business Jobs Report, May 2016.  Ms. Kuggan is President and CEO of the National Federation of Independent Business. .

5.  Nitin Nohria.  “Imagine an Economy Without Wall Street.”  The Wall Street Journal. June 2, 2016, page A12.  Also online:

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Tuesday, May 03, 2016

Signs of Progress in Reducing Carbon Emissions

On Earth Day, the anti-climate change agreement that had been hammered out in Paris back in December was officially signed by representatives of 175 countries.

There’s no doubt about the importance of the Paris Agreement priorities.  We keep hearing about climate change and its dramatic consequences.  On the face of it, this seems to be an overwhelming situation and is full of challenges and bad press.  For instance, we hear that car companies in Germany – no less – have cheated in their reports of gas mileage.  We hear horror stories about the poor people in China who go around the streets of Beijing wearing face masks to filter out the extreme air pollution.  We hear that the Arctic ice cap is melting rapidly.

Thus, on the face of it, it seems that nothing good is happening.  Clearly there is lots to do to rectify these conditions.  But indicators we consulted from the International Energy Agency show that some trends are headed in the right direction.  Yes, there’s a long way to go in counteracting climate change, but there is progress. [1]

Lower Emissions in Several Parts of the World
Carbon dioxide emissions are already drifting lower in industrialized regions.  For the 34 major industrialized countries belonging to the Organization for Economic Cooperation and Development (OECD), total emissions peaked in 2005 and by 2013, the latest available, they had fallen 6.1%, overall.  In the U.S., emissions are down 10.2% in that timeframe, and in Europe, 11.7%.  Granted, there is more to do toward achieving the Paris Climate Change agreement goals.  But this is certainly a start.  We’ll come back with a couple of examples shortly.

Emissions are, though, still rising in many of the world’s regions.  China and India are two obvious examples, with CO2 output up 67.5% in China from 2005 to 2013, and 72% in India.  Emissions in Africa are up 25.3%.

Even in these places, there are some signs of improvement.  In both China and India, the increase in emissions is evidently tied to economic growth, which has been quite rapid.  But notably, emissions have increased by less than GDP.  In China, GDP was up at a 10% average pace from 2005 to 2013, while emissions increased at “only” a 6.7% rate.  Two positive developments are producing the slower rise in emissions:  energy usage is also expanding less than GDP and the energy that’s being used produces somewhat less emissions over time.  In India, GDP grew at a 7.5% rate, while emissions rose at 7.0% pace.  There, energy use is also growing more slowly than GDP, although the specific kinds of energy used there are still producing increasing amounts of CO2.

By contrast in Europe and the U.S., the decline in emissions is resulting from declines in energy use and declines in the CO2 content of the energy used.  So there’s a shift toward “cleaner” energy.  Here is a little bit about the efforts of two major U.S. companies to reduce their own carbon footprints.

Specific Companies Take Specific Actions
General Electric reduced its energy use by almost 19% from 2004 to 2014.[2]  For carbon emissions, companies’ carbon footprints are often characterized as emissions per dollar of revenue, and over that ten-year period, GE cut down that measure from 59 metric tons per million dollars of revenue to 33.9 metric tons.  Among other projects, it has redesigned the engines it makes for Boeing aircraft, and it has restructured operations at a power plant in Greenville, South Carolina, by simply installing real-time sensors and instituting a measuring system.  Its plans going forward are directly tied to the 2-degree-Celsius formula emphasized in the Paris agreement

American Airlines has found several interesting ways of reducing fuel consumption, obviously the main source of any airline’s carbon emissions.[3]  They’ve learned they can taxi around airports using just one engine.  They’ve learned they can reduce the weight of a flight meaningfully by switching from paper flight plans to using iPads and also having flight attendants use small Samsung tablets instead of a 5-pound paper instruction manual on the planes.  Finally, they attached “winglets” to the tips of the wings of 240 of American’s planes, improving the planes’ “lift”; this change alone saves 700,000 metric tons of carbon emissions a year.

Low-Carbon Investment Strategies
In addition, from a different perspective, we note with considerable interest that companies with low carbon emissions or small carbon footprints constitute a growing theme for investors.  Standard & Poor’s has even devised indexes of stocks for low-carbon-emissions companies and fossil-fuel-free companies.[4]  The “S&P 500 Carbon Efficient Index” has been marginally stronger than the full S&P 500 index over most time periods in the last several years.  Since the beginning of 2012, an index of fossil-fuel-free companies has outrun the overall market by 5%.  While that’s not a huge difference, it does suggest that investors view lower-energy or clean-energy companies in a favorable light.

Here are two examples of that investment strategy.  At that Paris Climate Change conference, the New York State Comptroller, Thomas DiNapoli, announced that the New York State Common Retirement Fund would invest $2 billion in a fund created by Goldman Sachs which emphasizes companies with small carbon footprints.  The Common Retirement Fund is the pension fund for New York State employees and is said to be the country’s third largest pension fund.[5]  Similarly, the non-profit McKnight Foundation, with a total of $2.1 billion in assets, can perhaps be identified as a pioneer here; back in 2014, it invested $100 million in a broad-based carbon-efficient fund managed by Mellon Capital.[6]

The distinction for these two investment initiatives is that they are active in-vestment strategies.  Previously, funds that wanted to emphasize climate and environment concerns generally used a di-vestment strategy, eliminating coal and possibly oil companies from their portfolios.  But selling these shares has had little impact because those companies are so large that having a few shareholders sell out doesn’t mean much.  Instead, enlisting fund managers to devise investment strategies for companies that operate using desirable practices makes a more positive, constructive statement.[7]

Thus, there are tangible efforts at individual investor and company levels that encourage and support the implementation of carbon reduction actions.  Environmental issues have the advantage that they are clearly measurable, so we can see progress.  As we said at the outset, there is a lot to do, but there is progress.


[1] International Energy Agency.  CO2 Emissions from Fuel Combustion Highlights (2015 Edition).  All the country data cited comes from Chapter 6, “Summary Tables”.

[3]  American Airlines. .  Accessed May 2, 2016.

[4]  Standard & Poor’s Indices.  An option on this page permits the comparison with the S&P 500; those daily data can all be downloaded for as much as the last 10 years.  Other pages include the Fossil-Fuel Free Index and similar indicators.  Accessed April 29, 2016.

[5]  Tina Rosenberg.  “An Investment Strategy to Save the Planet,” The New York Times. “Fixes” blog.  January 5, 2016. .  Accessed April 30, 2016.

[6] Marc Gunther.  “McKnight Foundation: Investing for climate Impact,” Nonprofit Chronicles, April 24, 2016.   Accessed April 29, 2016.

[7] Tina Rosenberg.  Op. cit.

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Friday, February 26, 2016

The FBI versus Apple: A Catch-22

We knew this would probably happen sometime – a court fight over smartphone security issues.  Sure enough, the FBI is hard at it with Apple.  The terrorists in San Bernardino, California, back in December were using an iPhone.  The FBI wants Apple to hack the phone and Apple is saying no.  That would compromise one of the main features of those phones and set a most unfortunate precedent.  However, law enforcement officials of all kinds are anxious for resolution because all kinds of criminals use smartphones, which at present can be “tapped” only with great legal and technical difficulty.

We do think this issue is worthy of discussion.  It’s obviously controversial for Apple to even have objected at this point in time, since the immediate cause is a domestic terrorist attack in which 14 people were killed.  And it’s easy to say, “but of course Apple should provide the mechanism for opening the phone’s contents.”  But Tim Cook, the CEO of Apple, does have a point that this is precedent-setting and the way to deal with it should be discussed openly.

6 Weeks' Worth of Data Locked in the Phone
This San Bernardino event is a great test-case.  iPhones are secure to the owner/user.  They can be backed up to a storage area on a “cloud”.  Data that are transferred to the cloud can be obtained by investigators, and indeed, the FBI has already obtained those data from terrorist Syed Rizwan Farook’s account.  However, the attack took place on December 2, and Farook had not backed up the phone since October 19.  So plenty of fresh and helpful information was likely recorded on the phone during the last six weeks just before the attack: who Farook’s associates and ISIS connections might be, whether other projects similar to his are being planned, and so on.  The phone itself is owned by San Bernardino County, which employed Farook; those officials, the owners, think it’s fine for the FBI to inspect the phone’s contents.

But Apple Worries about Construction of a "Backdoor"
Apple, through a public statement by its Chairman Tim Cook and also in an official court filing, is objecting to unlocking the phone.  The company argues that the work it would do to enable decryption of the contents of an iPhone could be applied to any iPhone, thereby potentially eroding the extraordinary security provisions on all iPhones.  As it stands, the data on any given iPhone are associated with the owner’s “Unique ID”.  The FBI is wanting Apple to devise a workaround to get to the data without the ID.  This is known in the jargon as a “backdoor”.  Apple is, quite logically, very concerned about creating such a backdoor technology.  Conceivably, then, any iPhone a thief or other criminal got hold of could be hacked.

We were watching a Fox News program late last week in which a retired Army colonel was being interviewed on this issue.  The colonel said something like, “this is a national security issue and of course Apple needs to develop this decryption software!”  The news anchor conducting the interview instantly blurted out, “but that’s why I have an iPhone – precisely because it can’t be decrypted by anyone else.”

FBI Does See the Importance of the Phone's Security
FBI Director James Comey initially sounded impatient with Apple, claiming that Apple’s defense, spontaneously described by the anchor in that newscast, is based on marketing and reputation, not on the technology.  Apple and many of its customers would not agree; the security of the phone is a basic characteristic of the product. Given that there are in fact some 825 million iPhones around the world, their interests would seem a worthy consideration.  And evidently, Mr. Comey himself has come to a deeper understanding of what he was asking of Apple.  Later, on February 25, he testified before the House Intelligence Committee that this encryption issue is “the hardest question I’ve seen in government.”[1]

Addressing the Law Enforcement Need Now
There is legal precedent, of course, for telecommunications companies to provide call data to law enforcement agencies.  In 1994, Congress passed the Communications Assistance for Law Enforcement Act which requires carriers to build surveillance capability into their networks.[2]  So AT&T and Verizon automatically provide whatever such “wiretap” access is called for in court orders; in the last half of 2015, there were more than a quarter million such requests from all kinds of law enforcement agencies in both criminal and civil proceedings.  In the first half of last year, 998 requests came specifically for national security purposes.  Sprint also has had many thousands of such data requests.  Apple in fact does address these requests too.  It reports that it had 971 law enforcement requests for “account data” stored on iCloud or iTunes accounts in the first half of last year, and it responded to 81% of them.  In addition, it had 499 requests based on national security needs.

The difference is evidently that the information the carriers provide is only phone numbers and text message connections.  According to The Wall Street Journal, it “can’t provide access to . . . message content or calls made over mobile apps such as WhatsApp, Skype or the blue iMessages sent between two iPhones.[3]

Formal Legislation Likely Needed
Regardless of the specific outcome of the San Bernardino case itself, it is likely to add to already building momentum for formal legislation on this situation; that is, there should be some general rules so people who own phones can know what to expect, and representatives of the people should make those rules.  Indeed, the Chairman of AT&T Randall Stephenson this week noted, “The rapid pace of technological innovation is challenging laws crafted in a very different era for totally different, and much less complex situations.  Recent developments, in particular, bring home the need for legal clarity.”  And the Chair of the Senate Intelligence Committee is working on a bill that would create criminal penalties for companies that don’t comply with court orders to decipher encrypted communications.  It remains to be seen what the specific language of such a law might require.[4]

So, most immediately, the dilemma remains.  More, in the San Bernardino situation, there is considerable irony.  We noted that the county government owns the phone; Farook was only the user of that phone.  That government is in possession of software called “mobile device management” that would have enabled the county to make provision for the FBI to open the phone.  But Farook’s department did not sign up for it to be installed on their inspectors’ phones.[5]  Another irony is that, even as the federal government is fighting for the right to get Farook’s phone decrypted, the federal government provides grants to tech developers to create more encryption software.[6]

A clear summation of this Catch-22 was given last spring by a former CEO of Sprint at a cybersecurity conference: “Which CEO is more patriotic, the one who provides all the information the government requests to help catch a criminal or prevent a terrorist attack?  Or the CEO whose company creates tools that make it difficult for law enforcement . . .  to acquire a customer’s information, believing that protecting civil liberties is a higher calling?”[7]

+ + + + + +
We don’t cite all the general sources about this story, which are plentiful; most of our material is from various articles in The Wall Street Journal, beginning right after the federal court order to Apple was made public on February 16.  We also sourced The Economist magazine and, as well as Apple CEO Chairman Tim Cook's "A Message to Our Customers", a letter dated February 16 and found on Apple's homepage at

The footnotes cover specific aspects and quotes.

[1] Devlin Barrett.  “FBI Chief Says Finding Right Balance on Encryption Is ‘Hardest Question’.  The Wall Street Journal. February 25, 2016.

[2] Ryan Knutson.  “Why Encryption Fight Divides AT&T and Apple”.  The Wall Street Journal.  February 18, 2016.

[3] Ibid.

[4] Ibid.

[5] Associated Press.  “Common software would have allowed FBI to unlock San Bernardino shooter’s phone.”  Fox News. February 22, 2016.

[6] Damian Paletta.  “How the U.S. Fights Encryption – and Also Helps Develop It”.  The Wall Street Journal.  February 22, 2016.

[7] Ryan Knutson. Op. cit.

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Monday, February 08, 2016

A Lenten Task: Write Your Will

Many people give up something for Lent.  Others might approach the season differently: they take on some special task or duty during this time of penance and meditation.  What we present here takes the latter tack; our idea is hardly original, but it’s still important and bears repeating.  We propose that, if you do not have a Will and/or a Health Care Proxy, you take on the crucial lifetime duty of composing these documents.  That surely contributes to a worthy observance of Lent

We’re currently involved as the proposed executor of an estate and we’re learning a great deal almost every day about how the process works in New York State.  Our commentary here is not meant to outline this but to highlight for you a few things that have struck us as surprising.  We also include a few resources that may help.  In addition, some churches and other community groups offer classes in this project, and we urge you to take advantage of these whenever they might take place.

Resources for Writing a Will
Obviously, you can enlist a lawyer to help you write a will.  But for some simple wills, there are other ways.  Some time ago, Debbie Loeb of the Farm’s Hodgepodge page gave some relevant references.  You can see them here:   In particular, she mentions a book published by Nolo; that book is now (2014 edition) titled Quick & Legal Will Book ($24.99).  It includes links to downloadable forms for making a will.  Among Debbie’s other sources, the forms on the site cost $29.95, and the widely advertised services appear to begin at $69.  Clearly there are other books and websites, including Wills and Trusts Kit for Dummies and The Complete Idiot’s Guide to Wills and Estates.  While each of those is part of a popular series, they were published in 2008 and 2009, respectively, and with law changes, newer books might be better choices.  Look on and for their full inventories.  While we have a lawyer, we’re also into the Quick & Legal Will Book for ourselves; it – and others, we presume – are careful to explain the conditions under which one should actually consult a lawyer rather than using books or on-line forms.

Even if you already have a will, it perhaps is years old and may well need to be updated.  Indeed, this last point, an old will, is where we started in our current estate venture, with a 35-year-old instrument.  Fortunately, most of it still applies.  But it is the case that the decedent’s father is named as a substitute or “successor” executor, and he passed away 20 years ago.   In addition, the age of this will means that in our local Surrogate’s Court, extra documentation is necessary for authentication.  Witnesses to the will may need to give sworn statements that they know the decedent; in one case, it is the secretary to the lawyer who drew up the will who is furnishing some of this back-up material the Court is requiring.  This court filing process itself could thus be much easier if the will had been kept up to date.  A word to the wise here.

Be sure to keep a will in an accessible place that someone knows about.  While it might sound logical to put it in a safe deposit box, it could then become tricky to get access to it.  We did find out, though, that in New York State, we could get a court order to open a box and inventory the contents; in fact, our laws enable a survivor to do that to look right away for a will, a life insurance policy and a cemetery deed.  And the court order we used was obtained within hours of our requesting it, so if it is needed immediately on someone’s passing, that might be manageable.  In a different example, a friend we knew some years ago simply stashed some of these kinds of papers in a box on the floor of her bedroom closet; the box was labeled “for Ruth”, her niece who would manage affairs upon her passing.  That worked fine in the otherwise tense days right after that woman’s death.

Beneficiaries on Bank Accounts?  In fact . . .
We lately also learned another fact about managing assets and leaving them to people.  Bank accounts and some securities accounts, especially IRA’s, can have beneficiaries.  In this case, the assets go immediately to the beneficiary upon the person’s death.  They do not become part of the estate, so the beneficiary gets use of them right away.  We had long known this about insurance policies, but it’s true for other assets, and in fact in some cases, it is legally required to name a beneficiary.  This is a similar notion to owning real estate “with rights of survivorship”, so the property immediately becomes fully owned by the relevant joint owner.  So visit your bank or securities account manager and arrange for this.  It greatly simplifies the transfer process, and that may help a lot if your survivors need funds before an estate can be settled.

Health-Care Proxy
Another document that’s vital is a Health Care Proxy/Living Will.  In New York State, these are now combined into a single document.  Perhaps they are in your state as well.  The need for this is clear.  If you can’t speak for yourself, how do you let people know if and when it’s all right with you to let you go?  Here’s a Hodgepodge commentary about this issue, actually written by a hospice chaplain:  It’s especially hard to think about these things, particularly in the prime of life.  But doing so can help a lot.  This document, too, needs to be in an accessible place; our own lawyer advised giving copies to, obviously, the proxy person themselves and to the alternate and also to our primary care physician.  Carry a copy in your purse – maybe a man could have one on a flash drive he carries in a pocket? – and tack a copy to your refrigerator door, a place where, we understand, emergency personnel often look.

So, yes, all this is hard to think about.  But you do everyone a favor and give yourself peace of mind if you have an updated will.  And you help everyone around you by outlining your own preferences in case there is a bad time in your life when discussions of life and death are required, and when, by definition, everyone is terribly upset.  Important Lenten observances, these are, indeed.  Good luck with them.

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Sunday, January 10, 2016

Consumers' Sense of Inflation

Some weeks ago, at lunch with some friends, one of them was complaining about the absence this year of a cost-of-living increase in Social Security benefits.  Indeed, that feels irritating, and, more, for people who have their Medicare Part D premiums deducted from their checks, their net benefit will actually go down a little.

The complainer at our lunch table further asserted that the government “manages” the consumer price index so it can avoid the benefit increase.  Fortunately, the meal-time conversation then shifted to more pleasant topics, but her comments registered with me as something to talk about here.  This is especially the case because it seems people also have a sense that there’s more inflation in general than the official numbers seem to show, making them believe that the purchasing power of whatever their income, whether retirement benefits or actual earnings from jobs, is being squeezed.  Maybe it is . . . .

In the 12-months through November, the consumer price index (CPI) was up a mere 0.5%.  And in the period ended in September, which determines the following January’s Social Security “cost of living” increase, the CPI was flat: it did not increase.  And as our accompanying graph shows, that had been true in most months of 2015.  Thus, according to this measure, there was no inflation.

The CPI Comes from Thousands of Items and Thousands of Stores and Service Providers
It's important to know that the government does not, in fact, “manage” these consumer price index data.  They are collected in great detail, according to huge surveys that ask about what people buy and where they buy it.  Then,  every month, employees of the Bureau of Labor Statistics (BLS) visit thousands of stores, service businesses, apartment management offices, doctors offices and hospitals, among other outlets, to collect price information on carefully specified items; these items currently number some 80,000 every month.

The businesses they visit are selected from among those specified in an occasional “Point of Purchase” survey also conducted by the BLS from about 14,500 families.  The items themselves come from the “Consumer Expenditure Survey”, which collects information on what people buy; if you happen to be a participant in these surveys or you know someone who is, thank them for their help.  Some of them, 7,000 of them, have kept a diary of every single purchase they have made over a two-week period, and another 7,000 have answered detailed questions in a quarterly interview.  Altogether, in a recent two-year period, 28,000 diaries were consulted, along with 60,000 interviews.

Finally, when the current prices are collected, they are examined by BLS specialists who check to make sure the specifications for an item have been followed as closely as possible so quality changes are not factored in – for instance, the “car” is the same make and model with the same features as the one last month.  All these BLS survey-takers and fact-checkers are civil servants, not political appointees.

If the CPI Is Flat, Why Might People Think There’s Inflation?
If you think, contrary to these carefully compiled government data, that there is in fact “inflation”, you are hardly alone.  A couple of private surveys agree: the Conference Board’s monthly Consumer Confidence Survey shows that its 5,000 participants estimate that the CPI is running up at about a 5% rate and has been for some time.  A smaller poll of 1,200 nationwide taken for the New York Federal Reserve Bank indicates that people think the CPI will go up 2.6% in the next year.  Both of these exceed the growth in weekly earnings also compiled by the BLS.  From December 2014 to December 2015, these wages for non-management workers were up 2.1%, less than either private survey inflation estimate.  So workers’ pay as well as Social Security benefits can seem inadequate to keep up.

We tried to figure out how this discrepancy might have developed; how might people feel there is more inflation than there really is?  We identified two factors.

One is that people’s inflationary expectations vary by age and income.  In the New York Fed’s survey, participants over age 60 see a 3% advance in the CPI over the next year, while those between 40 and 60 look for 2.4% and those under 40, 2%.  Big difference.  Income matters, too:  people with incomes over $50,000 expect about 2.4%, while those whose incomes are under $50,000 believe inflation will be 2.9%.  So if someone is better able to absorb price increases, they are less worried about higher inflation.  While there are just 2-1/2 years’ worth of responses in this survey, this relationship has pretty much held throughout.

The other factor that stood out concerns energy prices.  We all know that gasoline has been much cheaper throughout the last year than it was through 2014.  That and other energy items, such as electricity, turn out to be the main force slowing the overall CPI.  Excluding energy, the CPI was up 1.9% in November from a year ago, compared with the mere 0.5% rise in the total index.  So clearly, there were a bunch of items whose prices rose noticeably.

The most visible of these include rents and homeownership costs, up 3.6% and 3.1% in November from November 2014.  The demon health insurance rose 3.6%, medicines were up 2.7% and dentists – which  many people pay out-of-pocket – 2.8%.  Local public transit fares were up 2.5%, boys’ clothes 3.6%, infants and toddlers’ clothes 4.9%, certain fresh vegetables 4.1% and restaurant meals 2.5%.

Clearly many other items either fell or rose much more moderately, for instance, prices of women’s clothes fell 2.7% and shoes and boots fell 0.5%.  But the increases in such basic items as rent, transit fares and medicines can give the subjective impression of more general upward price pressures.  And people can easily extrapolate this impression into a forecast that more widespread inflation will return, rendering their limited earnings even less adequate.

An Inflation Outlook for the Year Ahead
We checked out some economists’ forecasts of inflation for 2016.  Their projections are not as high as the consumer surveys, but they do look for some inflation.  The National Association for Business Economics survey published in early December shows the CPI up 2.0%.  Another composite, the Survey of Professional Forecasters, compiled by the Philadelphia Federal Reserve Bank, also has 2.0%, while the Federal Reserve Board’s compilation of its officials’ forecasts shows a slightly different inflation measure at 1.6%.  These numbers are close to the recent pace that excludes the drop in energy prices.   What this suggests is that if people’s earnings are up 2.0% next year, they can “keep up” with inflation, and maybe after a few more months, they will feel better about the adequacy of their paychecks.  But Social Security beneficiaries – and government workers whose pay is also tied to the CPI – are still stuck until early 2017.  Just know that the price index data are carefully and objectively collected and combined.  The government did not push the numbers down deliberately to try to save itself money.

* * * * * *
For information on the CPI data collection methods, see

The Conference Board is a nonprofit organization that studies and advises businesses in leadership issues, the economic and regulatory environment and human capital topics.  It conducts conferences and publishes articles on these topics.  Its consumer confidence survey dates from 1967.

The Survey of Consumer Expectations from the New York Federal Reserve Bank is new, just from June 2013.  It is conducted by The Demand Institute, an organization operated by The Conference Board and Nielsen.  One of the New York Fed’s motivations, besides compiling the basic information, is to provide additional background information for monetary policy decision-making.

The National Association for Business Economics forecast survey is here:  This is a composite of forecasts from 49 of this trade association’s members.

The Survey of Professional Forecasters is ; this is a similar group of economists to the NABE survey.


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