New Hampshire Returning to Gold Standard?

New Hampshire House Bill 1342 (2004) would return the state a monetary gold and silver standard. I must emphasize that this bill is dead already ("inexpedient to legislate") but I'm surprised and pleased that it was introduced at all.

The United States Congress has relinquished its responsibilities that were delegated to it by New Hampshire and the other sovereign states. These delegated responsibilities are recorded in Article 1, Section 8, Clause 5 of the United States Constitution. The responsibilities the Federal government has relinquished are those of minting money and setting the value thereof. Currently the United States Congress has relinquished its minting responsibility by having delegated this responsibility to a foreign controlled power. Therefore, in this legislation New Hampshire is taking back its sovereign right to mint and set the value of our money to ensure that our money is lawful and is compliant with our constitutions.

The "foreign controlled power" is the Federal Reserve, which is nominally a private institution. In practice, of course, it isn't.

The State of New Hampshire shall mint and introduce into circulation gold and silver coins of the State of New Hampshire in the face amount of $50,000,000. The coins shall contain one ounce of fine gold or silver, must be alloyed to 90 percent fineness and must bear the great seal of the state of New Hampshire on one side and the words "Contains One Troy Ounce Fine Gold" or "Contains One Troy Ounce Fine Silver", as applicable; "New Hampshire Legal Tender"; the year of issue and "In God We Trust" on the other side.

Their hearts are in the right place, but this legislation wouldn't work. Without returning to a definition of the dollar as a specific quantity of gold, the face value of the coins would not match their gold or silver content except by accident. The coins would trade as gold bullion with a fluctuating exchange rate just as bullion coins do today.

It would be far better to omit any mention of "dollars" on the coins at all, and simply let them trade as bullion. The only assistance government could or should provide would be to make all exchanges involving gold and silver legally equivalent to exchanges in dollars. (i.e., equivalent tax treatment.)

The legislation doesn't state what the face values of the gold and silver coins would be, but it does state that they would be legal tender.

If the face value of the gold coins was $50, they would be equivalent to the Gold Eagle bullion coins produced by the United States Mint. You haven't seen any in circulation, have you? That's because their face value is much lower than their gold value. Because the dollar is no longer defined as a quantity of gold, the price of gold fluctuates, making transactions in gold as much of a hassle as transactions in any foreign currency. (Digital gold banking and payment systems such as e-gold try to reduce this hassle, but so far are less convenient than checkbooks and credit cards.)

If New Hampshire's coins carried a face value lower than their gold value, they wouldn't circulate for the same reasons that gold eagle bullion coins don't circulate. If their face value was greater than their gold value, the creation of these coins would entail significant inflation. A government could make this stick — at significant damage to the economy — due to its legal tender power. Without legal tender status, this inflation problem has been an obstacle for private currencies such as The Liberty Dollar. Why pay a huge premium for a bullion coin, when you can buy bullion coins for near spot?

The digital gold currencies have the right idea. Let gold trade as gold and silver as silver. Have a floating exchange rate rather than a fixed face value. They'd get my money, if only they were more convenient to use.

There's also a serious error in the legislation, §2.III:

If the number of coins subject to the control of the state treasurer diminishes to 500,000, the state of New Hampshire shall mint additional money in accordance with paragraph I, in the face amount of $50,000,000, unless the total face value of the coins already minted is $500,000,000, in which case the state of New Hampshire shall mint no further money without prior approval of the New Hampshire general court.

It should read "face value" rather than "number". The legislation nowhere fixes the ratio of gold to silver coins that should be minted…

To Automakers

Dear Corporate Behemoth,

I just bought a new car. My first new car. The process was a lot more time-consuming than I originally expected. In fact, I spent much more time thinking about my car purchase than my house purchase! It's within your power to improve this, and it will be profitable to do so.

Part of the trouble was the sheer number of vehicles I was considering. The tools I used (Yahoo!, Edmunds) let me search by vehicle type and price, but what I really wanted to do was search by features. For example, specifying that I'm only interested in vehicles offering telematics systems, or that offer side-impact airbags, or both.

Without this capability, I had to look through the details in order to eliminate vehicles. I decided what information I wanted to collect about the vehicles, then used the Edmunds vehicle comparison tool to examine five at a time.

Five at a time is a silly limitation. My font size and screen resolution would have allowed many more, and if necessary I'd be willing to use the horizontal scrollbar. But more than this limitation, I had problems with the way the information was reported. The tool tried to optimize by sometimes omitting fields when all the compared vehicles had the same value. I understand the purpose; the tool is intended to show differences, not similarities. But that's not what I wanted — I was trying to gather raw data. My workaround was to always include a very full-featured car in the lineup so I could expose some of the otherwise-hidden fields, but this reduced my comparison to four at a time.

A more severe problem was the lack of definitions for the fields. The results listed "head air bag" and "side air bag" separately without defining them. This confused me when, for example, the LaCrosse I'm puchasing has driver and front passenger airbags and also has side-impact airbags that protect both the front and rear passengers on both sides. The tool reported the head airbag as "front and rear" and the side airbag as "not available". Huh? And for the Impala, it said the head airbag is "not available" and the side air bag is "driver only" — correct on the side air bag, but wrong on the head airbag, which is standard equipment for both driver and front passenger. Unless these fields don't mean what I think they mean… but no definition was available! Fortunately, I noticed the airbag reporting problems early and simply ignored those fields. It should go without saying that this is not user-friendly.

Why am I telling automakers about problems with third-party tools? Because those tools are using your data. It is in your interest for third-party tools to accurately represent your vehicles. If they're wrong or confusing, you'll lose people who would have been interested in your vehicle. You have to fix the third-party tools — customers aren't going to go to your website until they've used third-party tools to prune their search.

Speaking of tools, your own websites also need a tuneup. My experience in putting together a vehicle on the manufacturer websites was the same every time I tried it — slow. When I click on an option and the page needs to refresh, it should do so immediately. Don't make me wait.

You also need more information on your website. Let me click on every option to get a detailed description of it. (I wonder how many people outside of Alaska wonder "what's an engine block heater?" Your website doesn't tell them.) Don't be bland — market the option to me! Tell me why I want it. Show me. Websites varied about how much they met this expectation, but the general issue is clear: Why would I ever select a paint or wheel upgrade if you don't show me side-by-side comparisons? In general, show me higher resolution pictures of everything. I want to know what the car looks like before going to a dealership. For example, from the website I thought the Impala was somewhat ugly, but when I saw one in person I had the opposite reaction. If I had placed more weight on the vehicle's online appearance, I might never have gone to see it! High-resolution images would ensure an accurate impression.

Make sure all the options are on the website. At the dealership I learned that there's a spoiler option for the LaCrosse — but it's not on the website, and we searched but couldn't find a photograph anywhere. In this case I searched for information, in vain, that you should have eagerly pushed at me.

Please the gearheads. I'm not one myself, but as I was flipping through the LaCrosse brochure at the dealership I saw a graph of the CXS's engine's torque curve and immediately told the salesman "this should be on the website." It should be! Why isn't it? The brochure marketed it as a feature, so the website should too. Be consistent.

Have a vehicle FAQ available for people choosing options. Make it easy to ask questions, because questions expose ways to improve the website.

I'd like to conclude with a few words for GM. Whether it was intentional or not, the lack of StabiliTrack on the Chevy Impala upsold me to the Buick LaCrosse. Well done. If not for that must-have option, I might have spent thousands less on a vehicle "almost" as nice. There might be other, similar kinds of opportunities. "You're interested in feature XYZ? This vehicle doesn't offer it, but it's available on these other fine vehicles in the GM family." I don't know if that would work in general. But it did work on me.

My most general advice is pay attention. Internet shoppers like myself want to know everything before we go to a dealership. If you don't cater to our desire for information, your competitors will, and you'll lose the sale. Take it from a guy in his 20s who bought a Buick: my demographic is unpredictable. And fickle. But one thing that will help win us over is an improved online shopping experience.

I Bought a Car

I did my last two test drives Tuesday and bought a car. It's a factory order, so it'll be about six weeks before I receive it.

I'm buying a LaCrosse. None of the bad things I noticed on the earlier test drive were true of the vehicle I drove this time. I'm glad I gave it a second chance. It was easy to choose the LaCrosse over the Grand Prix — I'm not a driving enthusiast, so I prefer the smoother and more insulated ride of the LaCrosse.

Here are the details of what I'm getting. Yes, I'm mostly posting this so I can say "it's on my blog" when people ask about it in person.

• (4WE19) 2005 Buick LaCrosse CXS
• Exterior: (22U) Deep Sapphire Metallic ("blue")
• Interior: (192) Ebony Nuance Sandstone w/ Leather-appointed Seats ("black")
• (U3L) Sound system, ETR AM/FM stereo w/ CD/MP3 player
• (P23) 17" aluminum chrome-plated wheels
• (PEC) Gold Convenience Package (steering wheel controls, heated mirrors, 6-way power adjusting passenger seat, rear parking assist, etc.)
• (R13) Chrome appearance package
• (JL4) StabiliTrack
• (AY1) Side air bags, front and rear
• (KA1) Heated front seats

I'm buying it at invoice, destination charge included, for $29,990.78. (MSRP is $32,820.00.) I'll receive the manufacturer incentives in effect on the delivery date, so I can't make the decision about how I'll finance until the new incentives are announced.

I bought it from Royal Moore Auto Center. My salesman is Al Clute, the fleet manager.

I'm only planning to write one more article about the car shopping process, reflecting on what I liked and didn't like, and some commentary directed at automakers. "Regular" blogging will resume shortly! (It's about time!)

Hillsboro Plane Crash

Tuesday evening there was a plane crash approximately a half-mile from my house. Four people died.

I was home at the time. I heard the impact.

I immediately thought it was a plane crash, but was leaving home and couldn't verify it for a few hours. I heard the sound of a propeller-driven airplane (quite common this close to a busy small airport) and then heard a sudden thud… and the sudden lack of engine noise.

Watch the video news report in the link.

Still Light Blogging

You've surely noticed that I'm still in what I'll charitably call a light blogging mode. I remain very busy. Fortunately I expect to make a final decision this week about my new car purchase. Once that's out of the way, I'll feel much less distracted.

On the amusing side of things, apparently kudzu speeds the effects of alcohol. I know at least a few of my readers enjoy a good drink…

Rep. Tim Penny on Strengthening Social Security

The Cascade Policy Institute organized a dinner event May 19^th featuring a speech by former Representative Tim Penny (D-MN 1982-1994) on the subject of Social Security reform. Rep. Penny was also a member of the 1983 Greenspan Commission.

Rep. Penny was a member of the 2001 bipartisan President's Commission to Strengthen Social Security.

We were fortunate to have him in Portland; he was asked to join Treasury Secretary Snow at a different event but chose to do this instead. You may recall that Secretary Snow was in Portland in late March. I attended Sec. Snow's event as a member of the media, and Rep. Penny's event as a regular paying attendee (there was no media).

This was, by far, the better of the two events. In addition to a friendlier environment (food, chairs, no Secret Service agents) the speech was more informative. Even better, Rep. Penny was direct and generous about answering questions. Sec. Snow fled after my first question, but Rep. Penny indulged me for several.

A politician who answers questions instead of evading them? I wouldn't believe it but for experiencing it firsthand. :)

Rep. Penny's speech was fairly long, so I'll make no attempt to summarize it. Instead I'll mention and paraphrase the things I thought were most interesting.

Social Security was originally a very modest program, meant to insure people against poverty in old age. It wasn't a full-fledged retirement program. Taxes were only 2%, and only on the first $3,000 of income. Survivor's and disability payments were added many years later.

There were often "bidding wars" between the political parties over how much to increase Social Security benefits. In one year (1972) benefits were increased by 20%! Cost of living adjustments were actually meant to save money by regularizing benefit increases instead of going through bidding wars with each party trying to outspend the other to buy votes.

Social Security has worked, as measured by its original goals. It has lifted the elderly out of poverty. However, 20% of the elderly rely on Social Security as their only source of income, and two-thirds of the elderly get at least half of their income from Social Security. Without Social Security, about half of the elderly would be in poverty — with it, the figure is only 10%. (I look at these figures with a skeptical eye. People would save more if they knew Social Security didn't exist, and they'd also have more available to save if they didn't have to pay the 12.4% payroll tax. Social Security encourages people to be dependent on it.)

UPDATE 2005-05-23 05:29:00 UTC: Doug writes, and I agree with his point:

I do my parents' taxes, and I know they would be part of the two-thirds who get at least half of their income from SS. So what? The other part of their income is withdrawals from their IRA. They could withdraw more, but they don't, because if they did they would have to pay taxes on it. And they get by just fine with the money they have. Isn't the point of retirement that you are no longer earning an income? If so, how can the government (not) classify a retired person as being in poverty, where poverty is a measurment of income? By definition, shouldn't all retired people be 'living in poverty'?

The survivor's and disability components of Social Security can be thought of as insurable events, but the retirement component is different because nearly everyone knows it's going to happen to them. People don't think about Social Security as an insurance system anymore because we've been told for 70 years that it's a retirement system.

In 1935, when the program was enacted, the retirement age was 65 but life expectancy was just above 60. Today the retirement age is rising to 67 but live expectancy is about 80, so people are drawing benefits for much longer than they used to.

When the program was started, the maximum tax was only $60/yr. Adjusting that for inflation gives us about $900 in current dollars. But the maximum tax today is over $11,000, and about $8,000 of that goes toward the retirement portion of the system. The point of this is that the program has become dramatically more expensive over time, even adjusting for inflation.

People don't save enough. Only 25% of people aged 45 to 54 have created IRAs, and for those who have, the average balance is only $13,000. (I place significant blame for low savings on the punishingly high tax rates. People would have more to save if they were taxed less.)

Rep. Penny argues that personal accounts do help the system's solvency, when it's viewed from the perspective of the system's goal as a safety net. Personal accounts reduce the amount of safety net required.

He criticized the argument that private accounts are too risky. Guaranteed benefits are already scheduled to be cut by ~30% when the trust fund is exhausted, and this assumes the government finds a way to pay off the trust fund debt. Those things should be considered risks too.

He prefers personal accounts as a carve-out, not an add-on, to the current system. This is because poor people (due to high taxes — <ahem>) would be unable to contribute an an add-on account.

In his summary, he noted that if we started over it's unlikely that we'd create a program like the Social Security system we have today. We'd create a pre-funded rather than a pay-as-you-go system.

Interesting by omission was discussion of the Social Security trust fund. Rep. Penny only briefly discussed its funny nature as an accounting entity with no backing assets. (I've written about it if that issue interests you.)

The first audience question was about financial projections. One part was fear about using too-pessimistic projections, and the other was the argument that the Bush tax cuts were the size of the shortfall. Rep. Penny said that while there is some disagreement in the projections, they agree on the fundamentals and are not created by biased organizations. We make the best forecast we can, and err on the side of caution. I don't remember him answering the part about the Bush tax cuts, but I'd answer it by saying that Social Security is and has always been (on paper) separately funded from the rest of the government. The shortfall is between Social Security revenues and benefits, so it's a Social Security problem, and there'd still be a Social Security problem even if other federal revenues hugely increased because those other revenues aren't part of Social Security.

The second audience question was my own. I observed that young people are the ones most affected by Social Security reform, and asked if he's getting enough feedback from young people, and what the best way is to be heard. He replied that there's hardly any involvement from young people, but did mention a campus group (I think he means this one). He complained that large special interest groups are effective at shutting out the young by monopolizing the attention of lawmakers. He would rather see the AARP, for example, be taken much less seriously on this issue because none of the proposals being worked on will change Social Security at all for the retired or those near retirement. (I was hoping he'd say something like, "please have yourself and your friends contact my office, here's my number, we value your input, yes yours personally." Oh well.)

The fifth audience question (sorry I'm skipping 3, 4, and 6, but it's nearing midnight and I need to get this finished or it won't get posted until the weekend…) was from a person who has several children in their 20s who won't invest in IRAs because they believe Social Security is the answer. He believes it's the problem, not the answer. Rep. Penny responded that people expect Social Security to do more than it can really do. It's unfortunate that the tax incentives for IRAs aren't sufficient to induce more people to save, and added that little can be done to make IRAs more generous from a tax perspective than they already are. (This line of questioning doesn't bother me at all, because the people not saving are in their 20s. I don't believe people need to save for retirement their whole lives, particularly when they're young and are more likely to have high-interest debt. Rather, I argue that high taxes drive young people into high-interest debt, hurting them doubly by taking their money and also by the resulting interest they have to pay.)

After the event was adjourned, Rep. Penny stuck around to talk to people and answered two more of my questions. I explained that my primary concern about personal accounts is the risk that they could become a vehicle for government to influence business. Perhaps by the selection of which funds people are allowed to invest in, or by pressure on the fund managers to vote company shares in politically correct ways. I told him that I'd prefer the shares owned on behalf of personal accounts be made non-voting. I didn't think Rep. Penny had a very good response to my concern, but he did say that the fund managers would be people from the private sector rather than from the government. I was encouraged by the possibility of opening up the personal account to a wider variety of investments once the balance had grown to a certain level. Overall, I'm still not comfortable with the possibility of personal accounts moving us unintentionally toward greater government control of the economy.

I also asked him about the possibility of individual opt-out from Social Security. He believes there aren't enough people who want individual opt-out for it to be politically viable, and in any case that the "safety net" argument would win. I would still be pleased with the improvement if we could go to a "mostly opt-out" system where I paid benefits commensurate with some minimal level of benefits (around the poverty level). This would preserve Social Security as a safety net, although I don't understand why the program called "welfare" isn't more appropriate for this purpose.

I'm extremely grateful to get a thoughtful and serious reply to my question about individual opt-out. I won't give up on it personally until I see a poll showing that my desire for opt-out is significantly out of step with the thoughts of most other young people. And I hope that even the act of polling about it would raise awareness and support. I think many young people haven't even considered it as a possibility.

I estimate there were 85 people at the dinner. I didn't speak with very many people prior to the speech, but one gave me his business card so I'll give him a plug. Andrew Svitek is an attorney who very recently opened an office in Portland. He practices in business, real estate, estate planning, and consumer law. He does have a website.

I told myself "no lawyer jokes", but it's awfully tempting to parse that as "(no lawyer) jokes" instead of "no (lawyer jokes)". I'd better quit before I succumb to the temptation…

And Then There Were Two

Car shopping has taken more time than I hoped. Rather than having nothing to blog about, I thought I'd share what I've been up to.

My first test drive was a Monte Carlo SS. It wasn't on my list because it's a coupe. I drove it because the dealership didn't have an Impala SS, but the handling characteristics of the two cars are very similar. They had Impalas, so I could evaluate the interior, but they didn't have an Impala SS so we substituted the Monte Carlo for the test drive.

I enjoyed that test drive a lot. The vehicle was great, a joy to drive. I didn't notice anything wrong with the handling at all. Bumps, cornering, acceleration, all great! I even had fun talking to the salesman (Charlie Campbell, tell him Kyle Markley sent you.) The only trouble was that I wasn't driving the vehicle I wanted to buy. This test drive could only tell me not to buy an Impala, not that I should buy one.

A few days later, I heard that my mother had once avoided an accident on slippery roads because her vehicle had StabiliTrack. After some deep thinking I decided that was a must-have feature, but it's not offered on the Impala, so Impala's off my list. Charlie has the next couple days off; I'll try to think of some way to let him down gently.

My second test drive was a LaCrosse CXS. This test drive disappointed me. I noticed four things I didn't like:

• The ceiling fabric in front of the sunroof was drooping. It wasn't being held in place by the sunroof rim.
• The data port is above the accelerator, and I could feel wires with my shoe.
• I briefly heard a rattle in the climate control system.
• When I stomped on the accelerator, the car hesitated. And once, the downshift was jarring.

In its favor, it handles wonderfully. Not quite as good as the Monte Carlo, but I expected some Buick personality. The interior is nicely understated, with knobs and fake wood familiar to Buick drivers. I like the whole interior, and particularly the gearshift. Lots of reviews complain about the fake wood; I don't think they understand that that's part of the brand identity.

LaCrosse is advertised as a quiet sedan, and they are not kidding. I left the radio off to listen to the car, and there wasn't much to hear. The engine is quiet. There's almost no wind noise. The road noise on Hwy 26 (the loudest road in the area) was quiet enough that we could talk without raising our voices much, but I had hoped it would be quieter. The salesman said the tires are relatively hard, which likely accounts for much of that road noise.

I liked it. I didn't love it. I was turned off by the problems listed earlier. My emotional reaction to the Monte Carlo was "yay!" but my emotional reaction to the LaCrosse was "well…"

I haven't done a test drive of the Grand Prix GTP yet, but e-mailed to schedule one. Originally it seemed so similar to LaCrosse (they're built on the same platform) that I was unlikely to get one, assuming LaCrosse was superior. I still doubt I'd get one — it projects more "sports car" image than I want — but I'll have to drive one to be sure.

Next steps: Test drive a Grand Prix GTP. Test drive a different LaCrosse CXS to see if the issues I noticed are systemic or isolated.

I Can't Take Radical Islam Seriously

So there's been some rioting, and the boringly standard threats of jihad against the United States, but it turns out it was all just a big misunderstanding that resulted in the deaths of at least fifteen people.

I have little to say about Newsweek's conduct. I don't see much point in hand-wringing over what Newsweek coulda shoulda done differently. What I'm annoyed about is how thin-skinned radical muslims are. (And I don't understand what's so hard about being in a world where people disagree with your beliefs. That's common, everyday experience for me.)

Let's see — you think someone flushed a common book down a toilet. So you're mad. That's all the justification I need. Yeah, let's riot! Down with the infidels! This is a belief system I'm expected to take seriously, and give deference to? Puh-lease.

The second link explains that "[d]esecrating the Quran is a death-penalty offense". On top of the gross overreaction, there's also hypocrisy:

He said investigators had so far been unable to confirm a "toilet incident, except for one case, a log entry, which they still have to confirm, where a detainee was reported by a guard to be ripping pages out of a Quran and putting [them] in the toilet to stop it up as a protest. But not where the U.S. did it."

Shouldn't this case of "down with America" be immediately and thoroughly recast as a case of "down with al-Qaeda" by the America-hating radicals themselves? You know, to direct the rage against the actual desecrator? Somehow I doubt that the radical muslims who make such a show of taking their faith seriously will actually do so in this instance.

And if they don't, I won't.

Comparison of Auto Financing Options

Last year I started examining auto incentives because I knew I'd be purchasing a vehicle soon. (Is six months "soon"?) I've taken the math from that earlier article and turned it into an auto financing option comparison spreadsheet so I could conveniently see the results.

Spreadsheets are fun because it's so easy to play with the initial conditions. (I've highlighted them in blue.) You can see how the interest rates and durations, and the financing vs. cash incentives, and the size of the down payment interact. The hardest number to estimate, however, is the rate of return on investments — and it makes a big difference.

If investing is unattractive, paying cash is best because you'll get larger discounts on the vehicle price. If investing is moderately appealing, 0% financing wins because you can invest that money over the loan duration and earn more than the cash discount. If investing is hugely profitable, you'll want to aim for a very long loan term even at a moderate interest rate, because your investment earnings are higher as a result of paying for the vehicle more slowly. (Of course this assumes your investment earnings are higher than the interest rate on the loan.)

The spreadsheet's default values are my expectations for a LaCrosse CXS tricked out with options. I've assumed an after-tax rate of investment return of only 3.5%. Yeah, I guess I'm fairly bearish. With these figures, the 0% financing option is the winner by a substantial margin.

If I modify the spreadsheet for my Impala SS expectations of $28,500 and a $4000 cash discount, paying cash is the clear winner. In fact, the cash incentive is so good that even if you don't have the cash, you should finance elsewhere (even if it's at 6%!) so you're a cash buyer from the dealership's perspective.

I'm happy my intuitions turned out to be correct when I ran the numbers, but it's important to run the numbers. You should do it too — you've got the spreadsheet, so you've got no excuse.

FYI, you can see incentives for GM vehicles all in one place. Convenient!

Almost Done Car Shopping

Don't worry, regular blogging will resume soon. I'm almost finished shopping for a new car. From my previous list of 8 finalists, I've selected 3 that I'd like to test drive this weekend.

Buick LaCrosse CXL

Rejected in favor of CXS.

Buick LaCrosse CXS

1^st preference. With my options, MSRP $32,820.

Buick LeSabre Custom

Less featured than LaCrosse, but also less expensive. I'll revisit this model if I learn from the test drive I don't like LaCrosse.

Chevrolet Impala LS (1SB)

Honorable mention as cheapest acceptable vehicle. With my options, MSRP $26,870. But they're offering a $4,000 incentive, so I'm only looking at $22,870. No heated seats or several other things I wanted, but for this kind of cost differential I might be able to live with that. Worried that this would violate the spirit of shopping for an "above-average" (>$25,000) car.

Chevrolet Impala SS (1SB)

3^rd preference. With my options, MSRP $30,160. (Same $4,000 incentive is available.)

Pontiac Bonneville SE

The SE trim was unexciting, but the SLE trim was too expensive. This vehicle didn't have any stand-out qualities.

Pontiac Grand Prix GTP

2^nd preference. With my options, MSRP $30,270.

Pontiac Grand Prix GXP

Rejected in favor of GTP. (GXP is more muscular, but I don't need that.)

At this point I have a positive desire for the LaCrosse, but it is a little more expensive than I hoped. The Impala looks like a good value, but hunting for value isn't my goal. The Grand Prix feels like some of each, so I'll go that way if I succumb to an urge for balance and moderation.

Financing a Hybrid Vehicle

When I discussed my car requirements, I mentioned I'm not interested in gas mileage because I only drive ~3200mi/yr. This provoked an interesting but more general question about when it does or does not make financial sense to get a hybrid vehicle.

The answer turns on the details, so I decided to answer the question by creating a simple spreadsheet so anyone can play with the numbers to fill in what's appropriate for themselves.

The following numbers are relevant:

• How many "city" miles you drive annually
• How many "highway" miles you drive annually
• The interest rate and duration on an automobile loan
• The interest rate on savings
• The price of gasoline
• The prices of two vehicles (one hybrid, one regular)
• City and highway mileage for each vehicle

I filled out the spreadsheet with some reasonable figures for myself:

• I estimated my ~3200mi/yr breaks down into 2000 city, 1200 highway.
• I looked at bankrate.com's auto loan averages and selected a 36-month loan at 5.91%, and also found savings account rates at 2.10%.
• I used a gasoline price of $2.439/gal, from the receipt of my last purchase.
• I compared the 2005 Honda Accord Hybrid (MSRP $30140, mileage 29/37 cty/hwy) and the 2005 Honda Accord EX V6 (MSRP $26850, mileage 21/30 cty/hwy). This pits the basic hybrid against the most expensive and least fuel-efficient regular vehicle, maximizing the benefits of the hybrid. (I used the trim levels without the satellite navigation system.)

The spreadsheet asks for the amount you're financing on each vehicle, which for simplicity I set equal to the MSRP (no haggling and 100% financing). The spreadsheet does not incorporate any tax incentives for hybrids, or differences in maintenance costs, etc. It's a simplification.

The spreadsheet assumes you could afford either vehicle, and places the difference in monthly expenditures in a savings account to earn interest. Use the Savings Account Balance column to compare the hybrid vs. regular vehicle purchase. When it's positive (black), the regular vehicle is less expensive. When it's negative (red), the hybrid vehicle is less expensive.

In my case, by the time the loan is paid off, the savings account's interest payments are almost equal to the fuel costs, so it would take longer than the hybrid's useful lifespan for it to be financially appropriate for me.

If I drove substantially more (10,000 instead of 1,200 highway miles per year) and the price of gasoline rose to $10/gal, the hybrid would become economical for me in just over 4 years.

Play with the spreadsheet. See for yourself how difficult it is for the lower spending on fuel to overcome the higher initial price of the vehicle. It's interactive. It's fun.

UPDATE 2005-05-11 20:02:20 UTC: I originally screwed up the auto loan interest. Sorry. It's fixed now, and I've changed the above comments.

UPDATE 2005-05-12 01:16:57 UTC: Brian writes on the subject of maintenance:

There are far fewer places that can service a hybrid. Assume this means much higher maintenance costs any time the engine or hybrid mechanisms need service.

The hybrid batteries have a short life span. Plan on spending $3k every 5 years for a replacement. I'd also plan on seeing a progressive decrease in hybrid efficiency as battery capacity declines, but I couldn't estimate how significant the effect will be.

On top of this, hybrids are too new to know the long-term maintenance implications. The regenerative braking mechanisms or any of a dozen other parts could turn out to be less "permanent" than the engineers thought, and replacement parts for vehicles being produced in low-volume are often impossible to come by in 8 or 10 years. The parts in question could be completely redesigned in later models to boost reliability, and there's no guarantee that the new parts would be compatible with the older model vehicles.

Thanks!

Sex and Economics

Tyler Cowen offers some humorous (to an economist) answers to the question, "Why don't people have more sex?"

Unfortunately for us economics types, economics isn't the right field to answer this question from. (Praxeologists, please don't hate me.)

The real reason is that women are nuts. I don't have a solution for this. Doing what women explicitly claim to want is the easy, rational act — but it doesn't work.

Thinning the Automobile Herd

The internet is a wonderful thing. It enables me to shop based on my requirements without setting foot in a dealership.

I entered my base price range at Yahoo! Autos to generate an initial list of vehicles, and used the auto comparison tool at Edmunds to get details on five at a time. (I wish I could have told it what I was interested in rather than scrolling through all the differences it found, but I can't complain too much about something that's free.)

Here's the data I collected on 45 vehicles. I'm leaving out details about brakes and airbags, the former because only one vehicle failed to meet the requirement (it's off the list), and the latter because the report at Edmunds was difficult to interpret and I think virtually all the vehicles met that requirement, too.

It would be unfortunate if any of the details I gathered are incorrect, but going to every individual automobile's website would have taken prohibitively long. The automakers should ensure the data Yahoo!, Edmunds, and others are displaying is correct.

My hard requirements included at least 200hp and telematics, and these alone were sufficient to thin the herd to only 8 vehicles. Somewhat surprisingly, they're all made by General Motors. The non-GM vehicles in my price range with telematics were all underpowered.

GM's push to make OnStar standard on all vehicles by 2007 will pay off for this particular buyer. (Other automakers have given up on telematics.)

I'm not sure if I'll use OnStar for anything but safety insurance, but I know it can be used to place telephone calls. As one of the last people on earth without a cell phone, I might actually use it as a phone.

I'm amused to see the LaCrosse make the short list. I've been thinking about it since December.

Why is rear parking assist so rare? Is this a new technology? I assumed it had been around for a long time.

UPDATE 2005-05-09 05:40:24 UTC: This concept car makes me salivate. It looks mean. It has eyebrows. And teeth. It's gorgeous. It's a shame it only lightly resembles what they're actually selling.

My Bank is Worried About Me

I feel loved, in a perverse financial sort of way. I just got off the phone with a representative of my bank who called me to conduct a survey of my thoughts about the bank and what incentives they might provide to increase my use of their services.

I know why they called me. They called me because (1) they need cash and (2) over the last six months I've moved a lot of money out of my accounts with them. They're hoping to learn, by surveying me and people like me, what they could do to convince us to stop drawing down — and ideally to increase — our deposits.

"Unrealistically high interest rates," I told him. I wasn't being flip, and I actually enjoyed the survey. And it was extremely educational!

I learned about the kinds of incentives they're contemplating, and boy are they desperate. (Incidentally, Jacqueline also noticed a case of bank desperation.) Assuming the survey is representative of incentives they might offer — and I don't think they'd ask, if it wasn't — we can look forward to interesting bonuses on Bank of America money market savings accounts.

• A percentage (of your balance) bonus for having your balance not decrease by more than a certain extent over a period of time.
• A percentage (of your balance) bonus for maintaining a sufficiently high balance over a period of time.
• A percentage (of your deposits) bonus for making new deposits into your account.

The amounts contemplated were ½%-1%. This would certainly make their accounts more competitive, and I told the surveyor so, but I don't think it would change my personal behavior. I moved money out in order to earn a higher rate of return, and an extra 1% in the money market account wouldn't have changed my mind.

With my intention to buy a new car soon, I'll likely be reducing my balances even further. Unless I can get too-good-to-be-true financing, which I learned exists last night when I talked to my parents about their last vehicle purchase. They got a 60-month, $0 down, 0% interest, no-fees-of-any-kind loan. If anyone else had told me of such a thing, I wouldn't have believed them. And I made my parents repeat it at least three times, to get over my shock and disbelief.

That was a few years ago, and I don't know if such fantastic deals are still available. I had been anticipating a large down payment in order to reduce financing charges even on a 0% loan… I may have been wrong about the need for that.

Anti-Money-Laundering Software

Hoo boy. Here come the feds:

Pressured by anti-terror laws, banks will be spending billions of dollars over the next few years on software to counter money laundering. The software will automatically track suspicious financial transactions, but it will also monitor millions of innocuous ones, and may make it harder to cheat on your taxes.

…

For example, Tripathi said, the software will remember that a customer is a 30-year-old engineer who is paid on the fifth of every month.

"It will study the profiles of other engineers in the same age group and build a pattern based on common traits like, say, the monthly periodicity of salary," said Tripathi. "If another customer comes along, says he is an engineer and receives deposits every week, the software will raise what we call a red flag. He is suspect."

Note to self: Make a habit of random bank transactions. Vary the frequency, the amount, and the bank. Bonus points for cash-only deposits in sizes that aren't round numbers.

When they call you asking for an explanation, do these things:

1. Boldly disbelieve their identification and insist on calling them back to protect myself from scams.
2. Ask them to cite the law that requires me to cooperate.
3. Politely explain that I was just seeing how long it would take for them to call.
4. Quote Office Space on money laundering.

Incidentally, blogging will be light for approximately the next week. I'm buried in things to do.

Weekend Activity Checklist

Saturday

• Brunch with friends — check
• Go to work, but don't work (Ronler Acres open house) — check
• Embarrass selves playing Samba de Amigo — check
• Frolic in the park and act like a monkey — check
• Watch One Piece (a link in English this time…) — check

Sunday

• Welcome our new robot overlords
• Answer e-mail (14 21 questions, Saralyn?)
• Watch the first episode of the new 4^th season of Family Guy
• Check to see if the other slackers at work have sent in their document reviews like they were supposed to, and finish your own so you're not a giant hypocrite

Postponed

• Clandestine pirate/sailor meeting (ssshhh!!!)

I was irritated to see someone wearing a Che Guevara t-shirt at the Open House today. He was evil. I wished I had been wearing my von Mises t-shirt to counter it.

But it's better to save that for Sunday, May 1^st. I will be wearing it Sunday. Apropos communist holidays, last year's May Day remembrance at Catallarchy was excellent, and I'm looking forward to this year's, too!

UPDATE 2005-05-01 18:49:30 UTC: Catallarchy's 2005 May Day Remembrance is posted now. And it includes a great Che Guevara article.