Why 463 – 20 = 0 at Citi

If you were puzzled by the explanation in this NYT article for why writing down half of $43 billion of mortgage-related assets would bring CitiGroup to the brink when it has a nominal net worth of $463 billion, you're not alone. Brad DeLong thought the piece failed to enlighten, and offered here his own explanation for other things going on in Citi's balance sheet—and not just Citi's.

Update on Monday, November 24, 2008 at 08:40AM by Skeptic

Shortly after I posted this, Citi got its next bailout commitment from the US government.  Mark Thoma aggregates early reactions here.  Among other things, we will guarantee Citi against losses on $306 billion of "troubled" assets.  Gee, and the nice people at Citi have been saying it was only $43 billion. 

Cartoonists get economists. Why can’t economists?

http://www.gocomics.com/nonsequitur/2008/11/23/

Financial Services Bubble 1995-2008. R.I.P.

It is often thought that stock market values should be expected to track along more or less in line with nominal GDP. If that had happened to the DJI 30 from March 1995, when it first passed 4000, it would be a little under 8000 now. Well, that's just about where it is, but only after plunging from over 14,000 in October 2007.

What the rise in the DJI 30 did track was the money supply, which increased 205% from 1995 to 2008 while nominal GDP was increasing only 95%. All of the extra money seems to have gone into inflating investable asset prices because there was very low inflation in the consumer price index during this period. Now the money supply and asset values seem to be shrinking, rapidly, together.

Not surprisingly, growth in earnings of companies in the financial sector was vastly greater than the earnings growth of companies in the real economy. In the 1980s, the financial services sector accounted for about 10 percent of all S&P 500 company earnings. By 2006, financial services generated 40 percent of all S&P 500 earnings. That bubble is now gone too.

A sustainable national economy cannot be built on financial engineering. We need to bury the corpse of this bubble and also quickly figure out how to grow the economy the old fashioned way.

All statistics and comparisons above are from Martin Hutchinson here.

Update on Tuesday, November 25, 2008 at 06:21AM by Skeptic

For the iconic image of this bubble and commentary by Michael Lewis, author of Liar's Poker, go here.

Update on Thursday, November 27, 2008 at 01:08PM by Skeptic

Edward Hadas says the financial share of GDP can outgrow the real economy for a while.  However, reversion to mean (and probably below the mean) is inevitable. 

Deflation should be the least of our worries.

Deflation is a symptom of economic contraction, not its cause, according to Dean Baker. The conventional wisdom is that in a period of generally declining prices ("deflation") people will defer purchases to get even lower prices and that this tendency becomes widespread and chronic and slows economic activity. Baker says that even in the worst of times the general price level declines very slowly, and he points out that the steep decline of computer prices over 30 years has caused demand to explode, not shrink. What does cause economic contraction, he says, is declining asset prices such as homes and 401(k)s if people have been liquidating that wealth to make purchases. If people stop spending, it's because they have less money, not because they're waiting for bargains. Sounds right to me.

Update on Saturday, January 10, 2009 at 10:53AM by Skeptic

In response to Paul Krugman's reference to a "deflationary trap," I posted this comment.

Dean Baker argues persuasively that deflation should be the least of our worries. http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=11&year=2008&base_name=the_post_promotes_nonsense_on

In general, consumers (accounting for 70% of GDP) don’t defer spending because they are waiting for bargains. If they defer spending, it’s because they don’t have money. For example, everybody knows that all consumer electronics will cost less and have more features next year than this year, but we buy now anyway. Rent and food purchases are never deferred to save a few percent (although a home purchase might be).

Might automobiles be an exception? It depends. Can I lower my monthly payment today by trading in my old car because interest rates are down? Has the value of my old car declined a lot? Is my lease expiring? How’s my credit rating?

Deflation would be bad for consumers if their nominal incomes go down because they would have less money to spend after paying off the face amount of pre-deflation debt–but that’s not bargain-hunting behavior.

Deflationary prospects probably would discourage some business investment but not for the reason PK suggests. When analyzing a project with deflationary assumptions, revenue projections would be smaller over the project life, and that’s the reason a marginal project would be scrubbed, not to get a lower capital cost by waiting. On the other hand, if wages are sticky and don’t decline as fast as prices, business margins would be squeezed, and that would tend to make an automation project more attractive.

Deflation would be bad for debtors (and good for creditors), but it’s unclear there’s a “trap.”

Update on Friday, January 30, 2009 at 04:26PM by Skeptic

More on the "deflation trap," by Paul Krugman, and he's worried.  In this post, though, he doesn't say the problem is spending deferral by bargain hunters.  He focuses on the problem debtors have paying the face amount of pre-deflation debt.  If they're paying off debt with shrinking incomes, their spending necessarily declines, and that feeds a downward spiral.

CitiGroup less important than GM?

Robert Reich argues here that there is nothing special about companies in the financial economy that makes it more important to bail them out than companies (like GM) in the real economy. He says investors in banks are finding the market values of their investments declining—even to zero—but that the companies are still able to function as financial intermediaries. I doubt he's right about this, but it's a view that should be developed and considered and a view that was apparently accepted by Paulson, Bernanke, and Geithner at the time they decided not to rescue Lehman. I agree with Reich's point that the financial industry thinks it's more important and more different than it really is, and it has very powerful institutional protectors at the Fed and Treasury. Somebody needs to push back.

Does trade liberalization promote economic growth?

Trade liberalization definitely and reliably promotes economic growth, according to widely and fervently-held belief. But what have been the actual measurable effects of trade liberalization in the real world? Dani Rodrik summarizes two recent papers that find it depends on what tariffs were protecting. For example, tariffs protecting agriculture were negatively correlated with growth, but tariffs protecting industry were positively correlated with growth. The other paper finds that tariffs on capital goods and intermediate goods are correlated with slower growth, but tariffs on consumer goods have little effect on growth.

Update on Wednesday, November 19, 2008 at 10:09PM by Skeptic

Dani Rodrik summarizes other research searching for, but failing to find, evidence that financial liberalization is beneficial to developing nations and refers to several prominant situations in which Asian nations had spectacular growth despite rejection of financial liberalization.  He asks why developing nations adopt the financial principles recommended by the G-7 in the absence of evidence of benefit.  His answer: Ideology and zeitgeist.

Bill Kristol gets it right.

In an epic first, Skeptic recommends an article by Bill Kristol in today's NYT. Kristol is so dismayed about the GOPs predicament that he commits candor in economic matters. I provide some background, quote him liberally, and suggest the Democratic Party has the same problem.

From the end of WWII until the 1970s, conventional economic wisdom was Keynesian and focused primarily on nurturing and controlling the economy by using monetary policy and government spending to keep the balance that was understood to exist between the unemployment rate and the inflation rate. There was recognition that investment was important to the economy, and stimuli such as the investment tax credit in the Kennedy Administration and lowering of top marginal tax rates seemed to pull the nation out of recession, but those initiatives were generally seen as Keynesian tools for stimulating demand. Probably the dominant view was that if demand growth continued at a healthy rate in a non-inflationary environment, investment and increased supply would naturally follow to fill demand.

This period was the Golden Age of middle class economic growth, but in the 1970s the Keynesian tools failed to control rampant stagflation. Thus, conventional economic wisdom had failed in a real world crisis, and that opened the door to a new economic doctrine. It should be noted that the new doctrine did not clearly address the specific problems of the 1970s, but the failure opened the door to all sorts of heterodox ideas, including the monetarist idea that "only money matters" which prevailed briefly and then "supply-side economics" or "Reaganomics." Kristol describes the shift this way:

Then there was a real moment of economic rethinking in the 1970s. Supply-side economics challenged demand-side Keynesians and austerity-minded conservatives by putting growth, entrepreneurship and incentives at the center of economic policy. Supply-side economics gave Ronald Reagan's G.O.P. a new and different economic agenda in 1980, and Republicans were able to become a governing party.

What Kristol doesn't say but could have is that the central tenets of Reaganomics—lower taxes (especially on capital and especially to reduce support for social welfare programs), minimal government regulation of business, expanding markets through globalization, greatly increased rewards to "innovators" and entrepreneurs, and unleashing of financial innovation to "create shareholder value" and wealth—were also accepted and acted on by centrist Democrats. Recall it was President Clinton that declared, "The era of big government is over."

We can debate causation, but our present economic situation is grimly obvious. Real middle class and working class incomes have stagnated and declined since 1973 and especially since 2001. Millions more American families recognize that the fabled American Dream is not available to them, yet they see elites living in a new Gilded Age. The whole global financial system was freed from meaningful prudential regulation and took crazy risks not seen in America since 1929. The system is now de-levering and driving down all asset prices, threatening prolonged deflation like Japan's "lost decade" or perhaps Great Depression II. Consumer demand (normally 70% of GDP) can no longer be supported by the massive credit expansion and is now crashing. Other nations are not picking up the slack in demand. This wasn't supposed to happen.

Kristol acknowledges that conservative and Republican economic doctrine has now spectacularly failed and says they have to acknowledge that and come up with a new economic doctrine or be excluded from federal government control for decades.

I don't pretend to know just what has to be done. But I suspect that free-marketers need to be less doctrinaire and less simple-mindedly utility-maximizing, and that they should depend less on abstract econometric models. I think they'll have to take much more seriously the task of thinking through what are the right rules of the road for both the private and public sectors. They'll have to figure out what institutional barriers and what monetary, fiscal and legal guardrails are needed for the accountability, transparency and responsibility that allow free markets to work.

And I don't see why conservatives ought to defend a system that permits securitizing mortgages (or car loans) in a way that seems to make the lenders almost unaccountable for the risk while spreading it, toxically, everywhere else. I don't see why a commitment to free markets requires permitting banks or bank-like institutions to leverage their assets at 30 to 1. There's nothing conservative about letting free markets degenerate into something close to Karl Marx's vision of an atomizing, irresponsible and self-devouring capitalism.

If conservatives do some difficult re-thinking in the field of political economy, they can come back. If they don't — well, there were a lot of admirable conservative thinkers and writers, professors and novelists, from 1933 to 1980. But conservatives didn't govern.

Actually, I think Kristol is being too hard on the conservatives and Republicans. The Democrats don't have an updated doctrine either and have an even more urgent need to develop one because they start governing in 65 days. The Democrats were elected because the Republicans failed, not because voters are convinced Democrats know what to do with the economy. A successful economic doctrine cannot ignore either the supply side or the demand side. Who will be the first to synthesize something in the realistic middle? I am not at all sure it will be the Democrats.

George Soros explains the financial crisis

If you're going to read only one article about what caused the financial crisis and what to do about it, read this one by George Soros. Since the article is itself a condensation of his recent book, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means, I hesitate to condense it further. Well, OK, here are a couple salient points.

While the real estate bubble and subprime mortgages were the triggering event, the whole financial system had generated a "super bubble." It had become far too leveraged, had too many risky and opaque instruments like credit default swaps, and was based on fundamentally unsound perceptions about how financial markets work. One can say the system is self-correcting and "worked" only if one ignores the fact that periodic government bailouts had become an indispensible part of the system; it was the bailouts, not the markets, that kept the system going through crises.

For the future, Soros proposes, inter alia, regulatory tools from the 1960s, variable margin requirements, minimum capital requirements, and loan portfolio limits, plus regulation of financial engineering and registration of new financial products. He predicts that when all the carnage is cleaned up the financial sector will be—and should be—a much smaller part of the economy.

The link to the article is active now, but when it goes into archives, you may not be able to access it without a subscription. Go there now and email it to yourself for reading when you have time.

Joe the Plumber

He has a website!

Technology breakthrough for plug-in hybrid vehicles

Primitive battery technology is holding back plug-in hybrid vehicle commercialization.  Current batteries just don't have a long enough range.  But researchers at Stanford have shown that battery capacity and lifetime can both be increased up to 10 times by substituting silicon nano-wires for carbon electrodes, according to Denis Drew here.  He has a link to the Stanford press release a year ago and suggests substantial subsidies to plug-in hybrid vehicles could be paid for by the reduced transfers to petro-states for imported oil. 

If acres could vote

For other graphic representations of the recent Presidential election results, go here. Thanks to Matt Yglesias for the link.

Update on Wednesday, November 12, 2008 at 04:17PM by Skeptic

Tallied Statewide, majorities of whites voted for McCain only in the old Confederacy plus Oklahoma, Kentucky, and West Virginia, according to this Brad DeLong post. 

Update on Thursday, November 20, 2008 at 09:36AM by Skeptic

The counties in which John McCain garnered a larger percentage of votes than George W. Bush did in 2004 are also in the old South (11 Confederate States plus OK, KY, and WV) plus, of course, AK and AZ. Of the good set of graphics The New York Times has here, this is the one that best tells the tale, 

And still they outlasted the Russians (with a little help from the US supporting the Taliban). (Guest Blogger)

During the Soviet occupation of Afghanistan, 9% of the population was killed, one third fled the country, and 11% were internally displaced. Between 53 and 67% of all villages were bombed, and 24-36% of the irrigation systems were destroyed. The agricultural community declined from 85% to 23% of the population, fertilizer use fell by 90%, and livestock declined by 70%. Those remaining in agriculture switched from productive crops to poppy to survive. James C. McMurray and A. Dan Tarlock, The Law of Later-Developing Riparian States: The Case of Afghanistan, 12 N.Y.U. Environmental Law Journal 711 (2005).

According to a recent conversation with an official working in Afghanistan, the US will not address the severe water supply problems because they think more water will only be used to grow more poppy.

International Water Lawyer

The international financial system is intolerable—and so is changing it say many.

The flaws of the current international financial system are so intolerable that we must either (i) have a global regulator and a global lender of last resort, or (ii) nations must establish their own controls over international capital flows, according to Dani Rodrik. Effective global institutions would need to be able to dictate to members of the G-8, not just to all other nations as the IMF does. Reflected in the comments to Rodrik's post are the expected complaints that international regulation would be intolerable and unworkable and that national capital controls would be "inefficient" and easily circumvented.

To those who argue that financial globalization is a fait accompli and that capital controls cannot work, Rodrik blogs from a conference in Bankok that several Asian nations are resisting financial globalization and that it is working. Those, such as China, that have resisted most effectively have been less affected by the current crisis than those, such as South Korea, that are most globally integrated. The implication is that the present international financial system is doomed even if the US and other powerful players cannot agree on a new regime, because smaller nations can and will act on their own or in regional alliances.

The G-20 is meeting in Washington next week to discuss all this. It appears the host Lame Duck Administration will oppose all material changes, including specifically proposals to regulate hedge funds. 73 days to go!

Update on Wednesday, November 12, 2008 at 03:36PM by Skeptic

To Rodrik's surprise, he finds Columbia economist Guillermo Calvo calling for capital controls and posts an explanation for the apostasy.  What seemed a radical and unthinkable government interference with international capital markets 2 months ago is definitely thinkable today, but probably not by the Lame Duck Administration. 69 days to go.

Giving US financial institutions “relief” from “mark-to-market” accounting rules would not necessarily make them more credit-worthy or raise their share prices.

This report about Royal Bank of Scotland, which was permitted by a change in international accounting rules not to write down certain assets to market value, suggests those who would do business with RBS know the problems are still there no matter what the financial statements say.

Under US and international accounting rules, financial institutions are required to consider writing up or writing down the values of certain assets to reflect changes in market value. This is "fair value" or "mark-to-market" accounting. As the current credit crisis began to develop, markets for certain assets (e.g., mortgage backed securities, collateralized debt obligations, and credit default swaps) essentially disappeared as there were no buyers at all or buyers only at fire-sale prices of a few cents on the dollar. It is widely suspected that many financial institutions would be insolvent if they aggressively marked down assets to values for which they could actually be sold. This led to calls for mark-to-market accounting to be "suspended" and, naturally, the question of what valuation rules would apply during the suspension.

The International Accounting Standards Board issued a ruling that allowed RBS not to mark to market declines in value occurring after July 1, 2008. Apparently, this is done by reclassifying assets from tradable securities to "hold to maturity" status and then applying some different, but unexplained, valuation method. At least that's what RBS did. Apparently, there is some inhibition on selling hold-to-maturity securities when prices recover.

Is the alternative valuation method cost, face value, an estimate based on modeling, or perhaps just a SWAG? Presumably, that's explained in the footnotes to RBS's financial statements, but I don't care enough to dig into that, and maybe others don't either. It's just easier to make the judgment that the markets seem to have made—we're still worried about RBS's financial condition, so let's do business elsewhere.

Update on Monday, January 12, 2009 at 10:53PM by Skeptic

Robert Waldman thinks a big use of credit default swaps ("CDSs") was not to transfer risk in a real and good faith way but to create plausible bases for not marking low quality assets to market. Such CDSs were issued by special purpose entities (remember Enron?) that would not be able to pay, but were substantial enough to satisfy the auditors.

I think a lot of this was done, that is, a lot of CDSs were totally fake CDSs which everyone knew wouldn't pay as promised if the insured instruments defaulted. I strongly suspect that a lot of CDSs were really MRSs, that is, a swap of mark to market risk, where one agent buys insurance against changes in the perceived probability of default on an instrument which hasn't defaulted yet, but not against actual default.

Update on Friday, March 13, 2009 at 08:47AM by Skeptic

Floyd Norris reports that the mark-to-market rule was around a long time before FASB Rule 157 imposed some limits on management discretion about how to do it.

It is true, as the bankers argue, that valuing illiquid instruments is tricky. And it is true that markets can overshoot. Some of these securities may well be undervalued now. But the solution is not to go to what Robert H. Herz, the chairman of the Financial Accounting Standards Board, calls “mark-to-management” accounting.

I call it “Alice in Wonderland” accounting, after Humpty Dumpty’s claim in that book that “When I use a word, it means just what I choose it to mean, neither more nor less.” After Alice protests, he replies, “The question is, which is to be master — that’s all.”

Although you would not know it from the angry complaints, the accounting board’s Statement 157 did not require mark-to-market accounting. That was already required under earlier rules. What it did do was clarify how such values should be determined. That stopped banks from defining “market value” as meaning whatever they chose it to mean.

Conrad Hewitt, who was chief accountant at the Securities and Exchange Commission when it conducted a Congressionally mandated review of the issue late last year, said at a recent Pace University accounting forum that he asked all the complainers if they had a better way to determine market value than the one prescribed by Statement 157. None did.

Update on Tuesday, March 31, 2009 at 10:06AM by Skeptic

Accounting statements are not just used by buyers—they are used perhaps even more by lenders. If a lender takes securities as collateral, which is common or even essential in this business, the only thing the lender wants to know about that collateral is its quick liquidation value. MTM shows approximately that, and hold-to-maturity value definitely is not that.  Thanks to Richard Beales for the insight.

Reconsidering financial markets

As we consider whether and how to regulate financial markets to prevent recurrences of the present crisis, it is useful to reconsider their socially and economically useful function, and then examine the parts and pieces to see which enhance and which inhibit that function. Professor, journalist and author Edward Hadas (who worked in financial services for 25 years) does a bit of that here.

To listen to some politicians, finance may sound like a bad thing from top to bottom. That's wrong. Finance is tremendously helpful. Banks, brokers and their ilk collect money from those who have and distribute to those who need. This industry helps manage inventories, build factories and spread economic risks around so societies can afford to take more of them.

But finance helps the economy in much the same way that a police force or an army helps keep the peace. Countries would be delighted to get the same order with fewer forces. They should be equally happy to get the same production and trade with less finance. Finance is a cost—not a benefit—of maintaining a complicated economy.

. . . .

A country gets rich by making stuff, not by seeming to make money from money. But when people see huge financial profits—on Wall Street or just from owning a house—they tend to want more of them. The economically illusory gains of finance distract people from more valuable tasks.

. . . .

There's more than money involved. For at least a generation, finance has been taken up as a career by a large proportion of the world's most talented people. If more of the best and brightest were to take up careers in industry, education or the arts, everybody would be better off.

(Emphasis added.) Other points made by Hadas: The "organized gambling" of financial markets greatly benefits "the house" but "does almost nothing for the non-financial economy." "The ratio of debt outstanding to GDP in the US has increased from 161% in 1974 to 345% in mid-2008."  Half of that growth has been within the financial sector itself as it levered up, and this has greatly increased systemic risk of collapse. People in financial services tend to overestimate the value of what they do.

As the electorate seems to move left, both parties could move right.

Democrats are expected to increase their majorities in both the House and Senate in tomorrow's election because the ideological center of the electorate has moved left, at least temporarily. But the most vulnerable GOP seats are those held by moderate Republicans, and they are most likely to be replaced by moderate Democrats, not left-wingers. Thus, the Democratic caucus will have a greater proportion of centrists, and the Republican caucus will have fewer centrists, according to Ezra Klein who quotes Kevin Drum and discusses this and some implications here.

To the contrary, as to economics, I see the Congressional Democratic caucus moving left from where it has been—despite the bigger tent. The leaders of the Wall Street wing of the Party, exemplified by Robert Rubin, have been gobsmacked by the reality that their theories and policies have failed rather spectacularly when continued by Bush. (I posted about Rubinomics in Crisis here.) As a result, the Democratic Leadership Council and Hamilton Project folks seem to be moving toward the labor wing in their economic understanding and policies. Rubin's apparent shift can be seen in this joint op ed today with Jared Bernstein of the Economic Policy Institute, which is the number one think tank of the labor wing of the Party.

Perhaps the Congressional Republicans will also allow recent spectacular realities to moderate their economic ideology. If not, Democratic pundit Paul Krugman says "the G.O.P.'s long transformation into the party of the unreasonable right, a haven for racists and reactionaries, seems likely to accelerate as a result of the impending defeat." Many "Conservative" and Republican pundits like David Brooks and Ross Douthat, who would not use Krugman's hyperbole, are very concerned about such a transformation and are scrambling to give the GOP a new direction focusing on middle-class economic well-being. Of course, if the Democrats fail to deliver what the electorate wants, the GOP may be able to get back into power without revamping itself, and that creates an incentive for the GOP's Congressional rump to be maximally united and maximally obstructionist.

Update on Friday, November 7, 2008 at 09:05AM by Skeptic

Add Ramesh Ponnuru, senior editor of National Review, to the list of conservative intellectuals who say shifting to the right won't save the GOP because it needs a "coherent middle-class economic agenda" and doesn't have one.  It's interesting, and I think significant, that Ponnuru, Douthat and other conservatives speak of how to move the middle toward the conservative agenda, rather than moving the party to the middle.  They may have to do both, but I applaud their intellectual and rhetorical effort to change conventional wisdom.  Think tanks and journals on the left should do more of this. 

Update on Tuesday, November 11, 2008 at 08:00AM by Skeptic

David Brooks points out here that all of the Republican institutions for fundraising, for development and spreading of ideas, and for activism are controlled by the "Traditionalist" wing of the GOP.  Thus, the "Reformers" don't have the tools they need to move the Party toward different ideas and constituencies of the future.  Meanwhile, Traditionalist heavyweights meeting last week seemed pleased that several moderate Republican Members of Congress had lost their reelection bids, making the Republican caucus more purely Traditionalist.  It was not reported whether they are concerned that the GOP seems to have become primarily a regional party of the old Confederacy.  Brooks, a self-described moderate Reformer, calls it "Darkness at Dusk." 

TARP is like water on the sand.

It was reported today that one-half of the money Treasury is injecting into selected banks in exchange for preferred stock will be paid out in dividends in the next 3 years. Here it is reported that Treasury is quietly issuing rulings—without statutory authority—that give massive tax benefits to banks that use these capital injections to acquire other banks. This includes an illegal benefit to Wells in its acquisition of Wachovia in conflict with its earlier deal to be acquired by Citi.

Update on Monday, November 10, 2008 at 08:10AM by Skeptic

Other tax rulings of doubtful legality favorable to financial institutions are reported here and here.  Thanks to Christine for the links.

Newspapers are obsolete—Part 2: Understanding the economy

Insight and influence in the field of macroeconomics are moving away from the mainstream business press and into the blogosphere. This post quotes from a writer for the Columbia Journalism Review (which BTW has its own blog) chastising the mainstream business press for not being more prescient about the current financial crisis. The post goes on to report at length and specifically about the rise of economics blogs, some of which get more than 20,000 daily views. Several of these bloggers explained that they host, read, and comment on economics blogs because the conversation is deeper, more evidence based than sound-bitey, and is a much faster way to thrash through a problem (like what to do about the current financial crisis) with other economists and real-world types. These bloggers' influence is growing, as they are widely read by reporters, government officials, and business people. Meanwhile, the print journalists tend still to limit their reporting to he-said-she-said stories. Thanks to Mark Thoma who brought this story to my attention here.

Newspapers are obsolete—Part 1: Public Opinion Polling

Newspapers report lots of new data points, but too rarely provide useful patterns, trends and context, especially in their print editions. Take, for example, public opinion polls about the Presidential race. The lead story in the Los Angeles Times yesterday morning was this:

Barack Obama is leading Republican presidential rival John McCain in two battleground states, Florida and Ohio, where voters have more confidence in his ability to handle the troubled economy, a new Los Angeles Times/Bloomberg poll has found.

The story usefully reports on which issues seem to be driving voters, but if you want to know—and you probably do—who's going to win the election, that's not in the fish wrap. You have to go to the online version of the Times where you will find an interactive graphic showing Obama projected to win 318 electoral votes, McCain 174, and 46 up for grabs. Even online it is not explained why the graphic says Florida (50% to 43% for Obama in the poll) "leans" toward Obama and Ohio (49% to 40% for Obama in the poll) is "up for grabs." Nor would you get any information about trends over time in Ohio, Florida, or nationwide to help you judge if the latest poll results confirm others or are perhaps outliers.

To get the most complete and current analyses, aggregating all the polls and showing trends over time, you have to go to the blogs. Fivethirtyeight.com is the one I have followed daily for a month or so. There you will see that Obama is projected to win nationwide by 6-7% of the popular vote and 159 electoral votes. Not only are the LATimes/Bloomberg results reported here but all other surveys for Ohio and Florida are also reported. Scroll down a little and you see that the national popular vote margin has been essentially unchanged for several weeks.

Dig deeper and you will find how much weight this blogger (Nate Silver) gives to each poll depending on his analysis of how each determines who are "likely voters," how it allocates "undecideds," any consistent biases toward one party/candidate or the other, accuracy in 2004, etc. You can scroll down and read each daily update analysis since October 9. You can click on Ohio (74 poll results) or Florida (70 poll results) and instantly pull up everything this blog has ever said about polling in those States, including chronological tables of all polls for each State.  (Corrected 11/3/08: Nate Silver says here that he allocates the undecideds himself.  Hmm.  That would introduce a consistent bias into all polls.)

Another blog that aggregates and analyzes all polls is Pollster.com. I haven't been following it (thanks for the tip, Ray), so I know less about the detail that is available or how to find it, but it seems to have very similar information and better, interactive, graphics. It shows Obama leading McCain by 169 electoral votes with 85 in the toss-up category. It projects that 272 EVs are "strong" for Obama and 39 "leaning." (Only 270 are needed to be elected.) By clicking around, I was able to see trend lines nationally and by State and learn that Pollster uses different weightings and projects slightly different margins than Fivethirtyeight.com.

Fivethirtyeight.com has an acknowledged Democratic sympathy, and Pollster.com is said to lean Republican. If I cock my head to one side and squint, I think I might see both as being influenced slightly by their sympathies. A third website that seems to have even richer data is RealClearPolitics.com. (Thanks to Ray for this one too.) I haven't dug into it much, but its analyses and projections seem very similar to the other 2 sites. Like Pollster.com, it shows Obama leading by 169 EVs, but it is more cautious about "calling" States for either candidate and classifies more as "leaning."

Finally, I love this graphic from Brad DeLong's blog because it scales the area of each State to the numbers of electoral votes.

Bottom line, in less time than it took to read the LATimes piece in print, I could have checked all 3 websites and had a very good idea where the race stands and which States are close and which are not. In fact, I did check Fivethirtyeight.com about 12 hours before the fish wrap hit my driveway and it had already incorporated the results of the LATimes/Bloomberg poll. To be fair to fish wraps, Fivethirtyeight.com and Pollster.com don't report the poll internals showing which issues are driving voters (but that information was in the free online version of the Times and probably elsewhere online as well).

Obama’s economic, energy, environmental, and national security policy

Obama "wants to launch an 'Apollo project' to build a new alternative-energy economy. His rationale for doing so includes some hard truths about the current economic mess," according to this Joe Klein interview reported in the current Time magazine.

The engine of economic growth for the past 20 years is not going to be there for the next 20. That was consumer spending. Basically, we turbocharged this economy based on cheap credit." But the days of easy credit are over, Obama said, "because there is too much deleveraging taking place, too much debt." A new economic turbocharger is going to have to be found, and "there is no better potential driver that pervades all aspects of our economy than a new energy economy ... That's going to be my No. 1 priority when I get into office.

This succinct statement of where we are, how we got here, and why we need to do something different in the future, and the focus on a new alternative-energy economy as our next growth engine is all good. It could mean big domestic investment and spending, creating millions of hot jobs with low unemployment, rising middle class incomes and spending, downward pressure on oil prices, shipping less of our wealth to petro-states, getting our balance of payments in order, and stopping global climate change.

Update on Thursday, October 30, 2008 at 11:34AM by Skeptic

And Obama put this same message into his 30-minute infomercial aired last night. A transcript is here on Joe Romm's blog.