Carl from Chicago

Business executive interested in history, economics, taxation and energy policy.

New, New Urbanism

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As a long time city of Chicago resident I have seen the immense growth of new buildings and new residents in areas near downtown which previously had been office buildings, warehouses, dilapidated structures, or simply abandoned.  From time to time when I am in an architectural bookstore I glance at books about “new urbanism” or various similar concepts that authors and “urban planners” use to overlay atop the actual growth of a city (or decline, in the case of other parts of Chicago).

If you are from a smaller town or relatively slow moving US city and haven’t been overseas to see “real” growth somewhere like Hong Kong, China, or India, then Chicago’s growth over the last decade or so that I’ve lived near down is pretty astonishing.  In River North, where I live, literally dozens of high rise buildings > 15+ stories have been built and are filled to the brim with owners and renters.  The entire South Loop has been renovated not only with town homes and large buildings, but huge retail spaces like Target, Costco, and giant movie theaters.  While there were many restaurants in River North when I first moved here, we had to walk far and wide to find even a place open for a decent breakfast; now we have a dozen to choose from within 6-8 blocks.

Since there are train tracks downtown for the Metra commuters which arrive from suburbs from all directions (except East, where the lake is) and many of these tracks are on ground level, the streets are cut up and there are sidewalks I used to take under viaducts with few people around.  Now, however, immense apartment buildings have popped up (over 40+ stories) and in the morning there is a huge population of well dressed professionals walking along these routes and sidewalks, where previously there was just debris and parking lots.  If I go to work late it is either single women walking dogs or nannies pushing single babies in strollers.

There must be 50,000+ well heeled urban residents packed into this place, all arriving from somewhere else whether it is a suburb, another state, or another country.  None of them are poor – you can’t be – since rents are in the thousands and move up rapidly, and every new building coming up has more amenities than the competitors in order to attract residents.  The demography is very fluid because many of the condominium owners rent out their units, and then the newer buildings have been built as apartments since the real estate crash of 2008.

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The Replacements and the End of Buying Music

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Recently one of my all time favorite bands, The Replacements, got back together and played three shows at Riot Fest.  Of the four original members, one of the Stinson brothers is dead, their replacement guitarist Slim Dunlop has a life threatening disease, and their drummer Chris Mars is a full time artist.  So the last two Replacements, Paul Westerberg and Tommy Stinson, played shows to rapturous reviews by fellow Gen-X’ers.

I am just kicking myself in the rear that I didn’t go see those shows.  The Chicago show conflicted with a bunch of other things but in hindsight I could have gone off and seen them in Denver (maybe).  Now I am waiting to see if they get back together (or even record some more music) and this time I’ll be sure to go, where ever they play.

After watching some of the songs on You Tube I went to put some more replacements on my iPod while working out and realized that I only had a few snippets from their albums in my collection.  Back when I first ripped the Replacements CD’s a long time ago I only put a few songs from each CD on my computer (trying to save space) and of course the quality was low, at 64 bit.  I realized that I didn’t even have “Tim”, my favorite album, at all.

I started looking around on itunes and now I need to buy these songs for a THIRD time.  I had them all on albums, then CD’s, and now I need to buy them AGAIN, on iTunes?  Really?  And all the while I can hear Dan’s voice in my head saying that he doesn’t buy any music anymore, relying on the internet and services like Pandora / Spotify and for me at least, Sirius / XM (I have it in my car and house and started paying a bit more to stream it and play on my “Jambox” speaker through my iPod or iPhone).

In this case I knew where my old CD’s were… I gave them all (more than a thousand) to my brother, and he was ripping them in some high fidelity manner.  He looked through the stack (they were all out of order because of a flood) and found three CD’s, which I took back, and I will re-rip again and put on my iPod.  After I got home I realized that I didn’t get “Let it Be”, probably my favorite, and I don’t have all the songs on my iPod.  Oh well, I may have to buy a few here and there.

But how long before I don’t buy any music at all?  It can’t be too long.  I don’t buy too many books anymore, and I probably buy less eBooks than I used to buy of the equivalent hardcover variety.  I am consuming paid media at a fraction of the rate that I used to, and can probably see a day when I get rid of everything (I got rid of all my CD’s a while ago, so these three are the last three in my house).

Cross posted at Chicago Boyz

“Let The Fire Burn” and Police in 1983 and Today

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Last night I saw a documentary about the 1985 conflict in Philadelphia against the “Move” organization which featured a shootout and finally a helicopter dropping a bomb on a fortified building and 60+ row houses in a heavily populated city leveled by fire. The documentary was called “Let the Fire Burn” and it was primarily based on archival video from an inquest that the city of Philadelphia had after the sad incident, vintage news footage that was “live” at the time, and videotaped depositions of the survivors.

One angle that I found intriguing is the relative lack of sophistication of the police in 1985. Prior to the 1985 bomb incident, there was a 1978 incident where “Move” supporters were involved in a firefight with police where a policeman was killed and many others were shot. When police captured one of the “Move” members that surrendered, they beat him up on camera, in what was likely one of the first incidents filmed in this manner (the police were found not guilty). Thus during the 1985 incident, the Philadelphia police were heavily armed and on their highest guard when it came time to attack the “Move” compound.

“Move” built a bunker on the roof of a row house, apparently out of wood but reinforced with metal, with firing ports to command the street. When the police attacked, they used a water gun from a firetruck, but it wasn’t powerful enough to knock the bunkers off the roof.

At one point the police ran out of ammunition. During this siege they fired over 10,000 rounds into the house. A local news segment shows a county policeman showing up with a trunk full of ammo that is distributed to the police, in order to replenish their supply.

After giving up on randomly shooting into the building, and noting that the fire hose wasn’t working, they decided to drop explosives on the roof with a helicopter. The explosives didn’t blow up the bunkers. However, after 15 or so minutes, the building started to catch on fire until finally there were flames shooting ten stories tall (per a local news account). The title of the film “Let the Fire Burn” alluded to the supposed order (disputed by many) to let the fire burn in order to remove that bunker from the roof where the “Move” supporters could have fired on police. In the end, the entire building went up in flames and then 60+ buildings were burned.

It is interesting to consider how different this could have turned out in 2013. The police likely have many modern war veterans in their ranks who would be accomplished shooters (the modern war brought the sniper back to the fore) and could have likely picked off the “Move” supporters had they shown themselves anywhere without shooting 10,000 rounds to no avail. There are other ways to break into / destroy a fortified location, especially given that the order to storm the “Move” HQ was given in advance and they had time to prepare. The police are full of veterans who have stormed into heavy buildings and cleared them of enemies, basically “street fighting” experts.

The police accounts depicted in the documentary are often contradictory; no automatic weapons were found in the “Move” HQ and yet it seems that the original shots fired came from automatic weapons, implying that the police may have inadvertently started the shooting war.

I hope that a situation like this wouldn’t occur nowadays but I am confident that the police have the means to deal with an armed and fortified opponent, or could call in resources that could do this. By comparison the 1985 police in Philadelphia look outmatched by a simple bunker and a few older rifles. To fight them, the Philadelphia police ended up using the oldest of weapons, fire.

Cross posted at LITGM

Power and Oil

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In the NY Times they had an article on the possible partition of Middle Eastern countries in the wake of the Syrian uprising. It long has been taught that the borders of the Middle East are a “mistake” made by the Western powers when they carved the region up amongst themselves. The unspoken message is that all the “troubles” in the area would have been avoided had the Western powers split the countries up according to tribal, religious or other lines that could have resulted in more cohesive states. Much of this may be true – many of the borders appear arbitrary – and yet lands and territories changed hands many times across the historical record.

An area of interest to me is Eastern Saudi Arabia, which the NY Times listed (as conjecture) as possibly a separate country. On many dimensions that is logical; the population of that province has a large Shiite composition and this makes it distinct from the rest of Saudi Arabia (which is supposedly 95% Sunni, although figures are not necessarily to be trusted). Historically these Shiites faced heavy discrimination, (data is sketchy and incomplete) as summarized in this wikipedia article:

They have usually been denounced as heretics, traitors, and non-Muslims. Shias were accused of sabotage, most notably for bombing oil pipelines in 1988. A number of Shias were even executed. In response to Iran’s militancy, the Saudi government collectively punished the Shia community in Saudi Arabia by placing restrictions on their freedoms and marginalizing them economically.Wahabi ulama were given the green light to sanction violence against the Shia. What followed were fatwas passed by the country’s leading cleric, Abdul-Aziz ibn Baz which denounced the Shias as apostates. Another by Adul-Rahman al-Jibrin, a member of the Higher Council of Ulama even sanctioned the killing of Shias. This call was reiterated in Wahabi religious literature as late as 2002.

While these sorts of oppressive behaviors on the parts of the majority are generally tied to rebellion and are logical for the NY Times to think of as possible separate states, this neglects the key fact that the world’s largest oil field, the Ghawar Field, is located in that province. The idea that the Sunnis in Saudi Arabia would give up their oil, which accounts for 80% of revenues, is incredibly naive. The Saudis would never give up their oil, for it is the sole engine of their economy and standard of living. It isn’t known what they’d do if there was a serious rebellion in the area, but I would have to assume that they would take whatever steps were necessary to curtail it and keep the oil flowing. It should be relatively easy for the Saudi government to accomplish this due to their wealth and strength in numbers.

One way to do this would be just to hire mercenaries, which is a tool that the (minority) government in Bahrain is using to hold onto power. Bahrain’s situation is trickier since the Sunni government is a minority in this oil-rich country, but the use of force and violence has been enough to keep the rebellion at bay. One tool for the Bahrain government has been to hire Sunni mercenaries:

For decades, the Bahraini authorities have been recruiting Sunni foreign nationals in the security forces from different countries, including Egypt, Jordan, Syria, Iraq (Ba’athists), Yemen and Pakistan (Baluch) in order to confront any popular movement that usually comes from the Shia majority.

The idea that governments will give up valuable resources in the name of minority rights is a laughable Western idea. The NY Times map is a non-starter. The wealthy and powerful will not give up the (sole) source of their wealth without a tremendous fight from a determined and powerful enemy.

Cross posted at LITGM

Robert Reich Movie “Inequality for All”

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I saw the movie “Inequality for All” starring Robert Reich, the former labor secretary for Bill Clinton and a very short guy (he’s 4′ 11″) who is pretty personable and funny. Reich uses his day job as a university professor while teaching a class to illustrate his thoughts on inequality from the movie.

In the movie he attempts to link:
– decline in average wages, in “real” terms (adjusted for inflation)
– growth in the highest wages (the top 1%)
– with various factors, including globalization, automation, declines in unions, and the financial bubble
– income inequality with lower marginal tax rates on the rich

There are certainly some concepts in here than anyone can agree with. It would be good if more people in the USA earned a higher salary, had better educations, and were more productive.

In the movie he mentions Warren Buffett, who famously pays a lower marginal tax rate than everyone else in his office, which is due to the fact that he receives long term capital gains and dividend income which are taxed at a lower rate. This is grist for the “raise taxes on the wealthy” discussion, as Buffett plays the likable old man. However, what he fails to mention is that Warren Buffett is the very candidate that the ESTATE TAX is designed to catch… rather than nickel and dime him every year on his assets as they rise in value (and cause friction and force him to sell them off to meet the tax bill), the estate tax would be levied on the super rich and it would effectively make up for the lower marginal rate during his lifetime by taxing increases on his wealth at a rate of 40%, for all amounts greater than about $5M. However, Warren Buffett is choosing to “evade” these taxes by setting up trusts and / or giving it away to his favorite causes; if Warren couldn’t avoid his estate tax through these loopholes (the same way you or I can’t avoid the payroll or sales taxes) then 40% of his $60B estate ($24B) would go to the Federal government, to fund the “investments in people” that Robert Reich is so passionate about. Funny that Reich didn’t call that out (didn’t follow his narrative, apparently).

Another element he fails to mention is the growth in illegal immigration in the USA, and the havoc that this causes with unskilled labor (as they are willing to work for far less). It is funny because two professions he specifically mentions, meat packing and short order cooks, are magnets for immigrants and their arrival is a direct cause for falling wages in these fields. Not surprisingly, Reich didn’t want to alienate a core Democratic group.

There is a rich “pillow manufacturer” who makes $10M+ / year who also describes how ridiculous it is in his opinion that his marginal rate isn’t higher. That same entrepreneur says that he invests in “funds of funds” and due to this he makes money without creating any jobs. That is quite a statement – what do you think those hedge funds invest in? They invest in commodities, stocks, real estate and debt (I’m assuming). When you are an investor and you provide money for stock and debt you are supporting companies that, in turn, hire staff. I can’t believe that Reich let this comment slide, but since it was what Reich wanted to hear, why interject?

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