Congestion pricing in New York: who’s in?

Streetsblog has almost been New York Local Politics And Congestion Pricing Blog, lately, but it’s still interesting. Today they have a discussion of the firms that have responded to New York City’s Economic Development Corporation’s call for expressions of interest concerning congestion pricing (inhale).

In response to its “Request for Expressions of Interest,” the New York City Economic Development Corporation has received proposals from 30 companies interested in implementing New York City’s congestion pricing pilot project. “This large number and quality of responses clearly indicates that the market place believes that the implementation of the City’s congestion pricing plan is feasible,” EDC writes.

Technologically and economically feasible, that is. As for political feasibility… still working on that.

The entire list of companies can be found on EDC’s web site along with proposals from 21 of them.

They aren’t half bad. As Streetsblog identifies, IBM’s contribution is pretty freaking impressive (that link is a .pdf). They’ve adapted Stockholm’s model to come up with their entire infrastructure for congestion pricing (click the picture for a bigger version):

As well as the scarily-familiar corporation risk-assessment of the entire affair:

Including billing and vehicle identification, traffic load forecasting, etc. It’s impressive. I still hold Hitler against them, though, so (that was possibly unfairly cynical. Yes, I’m still mad about it – mostly because nobody else is).

Siemens, also, put in some worthy work (also a .pdf); very thorough, very much related to billing/pricing. They contrast nicely with KPMG’s very short submission (theirs too) – which reminds me, rather starkly, of the sort of shot-in-the-dark work I’d expect from an undergrad.

Streetsblog’s complaint about the NYCECD’s withholding of “business sensitive” submissions is bang-on. I’d like to have seen what 3M’s consortium had to offer.

“The race to invest in Zimbabwe also underscores just how far global investors are willing to stretch in search of decent returns”

An update on the laughable-if-it-weren’t-such-a-tragedy basket-case of our times, Zimbabwe. From the Wall Street Journal:

Zimbabwe is an economic nightmare. The annual inflation rate is 8,000% and rising. People don’t have food to eat.

Yet investors have started pouring millions of dollars into the country. Foreign direct investment has rebounded, reaching $103 million in 2005, up from just $4 million in 2003, according to the most recent figures available from the United Nations Conference on Trade and Development.

What explains the flood of money? Some investors are betting there’s nowhere to go but up. A slump like Zimbabwe’s can’t last, and when it’s over — perhaps with the graceful, or otherwise, exit of President Robert Mugabe, who has presided over a decades-long downward spiral — the country will rebound.

The race to invest in Zimbabwe also underscores just how far global investors are willing to stretch in search of decent returns. The turmoil in global credit markets has rippled across emerging economies, boosting yields for some of the riskiest bets around.

At the same time, in recent years, relatively sluggish returns in many developed markets have sent investors farther afield.

Africa overall is emerging as a hot destination for money. Amid a global commodities boom, investment bankers from around the world are flocking to African commercial hubs such as Lagos, Nigeria, and Johannesburg.

…

Part of the challenge of investing in Zimbabwe is figuring out how much anything is actually worth, given the plummeting Zimbabwean dollar.

The Reserve Bank of Zimbabwe fixes the exchange rate at 30,000 Zimbabwean dollars to the U.S. dollar. The problem: Zimbabweans don’t put much faith in that figure — if they did, they’d quickly lose all their money.

There is another, presumably more accurate, method of estimating what a Zim dollar is worth. Dubbed the “Old Mutual Implied Rate,” it offers a glimpse of the obstacles to doing business in Zimbabwe.

It is based on the share price of Old Mutual, a British investment company whose stock trades on three different markets — London, Johannesburg and Zimbabwe’s capital of Harare. Because all Old Mutual shares are of equal value, it is possible to extrapolate the market value of the Zim dollar by comparing the price of Old Mutual shares on the different markets.

On Friday, the Old Mutual Implied Rate stood at 2,596,784 Zimbabwean dollars to the U.S. dollar.

Blimey. Didn’t most of the credit problems begin with firms tossing risk aside in the chase for unsustainable yields? I did say that Zimbabwe could certainly recover: many countries have done so. Speculation on this sort of scale isn’t going to help that happen (although it can’t be much worse than having the IMF do their dirty work for them).

First Kuwaiti update

Which is to say, an update on the story that contractor First Kuwaiti had used kidnapped labour to build the Mother Of All Embassies. Still very little has come out, but Rolling Stone put me onto the fact that the Justice Department is having at it, now:

The Justice Department is conducting a criminal probe into the awarding of the contract and related subcontracts in the troubled construction of the massive $736 million U.S. Embassy in Baghdad, according to sources and congressional testimony this week.

The probe came to light Wednesday during a House Oversight and Government Reform Committee hearing into the actions of State Department Inspector General Howard J. Krongard. Though lawmakers appeared careful not to mention names of people under investigation, Krongard mentioned two people during his testimony, both of whom are key figures in the building of the embassy, as he defended his practice of meeting with people under investigation.

…

Krongard also said Justice has “three investigations” involving Iraq, apparently referring to previously reported probes into alleged labor trafficking by First Kuwaiti General Trading & Contracting Co. — the construction company awarded the embassy contract — and alleged weapons smuggling by Blackwater Worldwide, which supplies security for the State Department.

Back at Rolling Stone; Krongard is the fellow investigating Blackwater – the company his brother runs (no, you can’t make this up, can you?):

State Department inspector general Howard ‘Cookie’ Krongard has come under fire for attempting to investigate Blackwater, while his brother ‘Buzzy’ — the former number three at the CIA — serves on the board.

But this simple conflict of interest — and Cookie’s inconsistent answers to congress about it — is hardly his worst sin. As I described in “Bush’s Lapdogs” — Rolling Stone’s look at the rampant cronyism and incompetence of the Bush inspector generals — Cookie headed up the State Department’s investigation of whistle-blower accusations of trafficked labor being used to build the U.S. Embassy in Baghdad.

Krongard — in what investigators told me was a breach of every conceivable protocol in a case like this — took on the ‘investigation’ himself. But he gave the contractor, First Kuwaiti, several month’s advance notice of his visit. He let the contractor select the six employees he would interview semi-formally. His evidence gathering consisted of chickenscratch notes “on the backs of things” because he didn’t want people to feel “uncomfortable.”

He then published an informal report whitewashing the whole incident saying he found nothing to validate the descriptions of whistleblowers like Rory Mayberry, who later testified to Congress of having witnessed Filipino workers — who thought they were headed to Dubai to work on hotels — instead having their passports seized and getting stuck on a plane and flown at gunpoint to Baghdad.

Hey – it sure seems to me that we’re the people to go around lecturing the world on transparency and keeping out corruption.

The risk of a collision between the Federal Reserve and the markets

The risk of a collision between the Federal Reserve and the markets grew on Friday after Fed governor Randall Kroszner made it clear he believed that the US central bank was not planning to cut interest rates at its next policy meeting, but was largely ignored by investors.He said: “The downside risks to growth now appear to be roughly balanced by the upside risks to inflation.” Data and information received since the Fed’s October meeting “have not changed my thinking in this regard”, he added.

“The market” has apparently blithely ignored all such signals:

… the federal funds futures market on Friday priced in a more-than 80 per cent probability that the Fed would cut rates in December, while the yield on two-year Treasuries fell.

Why? Well, first, there is the game of bluff: are we supposed to be assuming that the federal funds futures market is entirely unbiased? I wouldn’t think so (but, then, I’m cynical like that). Previous research, however, has already demonstrated poor performance, including bias, in the futures market:

The federal funds futures market naturally embodies the market’s expectation of future Fed policy. However, the federal funds futures rate is a forecast of the average monthly level of the funds rate. The potential for bias and the fact that the federal funds futures rate forecasts the funds rate and not the funds rate target means that using it for forecasting Fed action is considerably more difficult than it might at first appear.

The paper, from 1997 (somebody ought to update the analysis, now that I think of it), found the following performance:

Overall, the accuracy was around 70% – but that was made up of correctly predicting change in the rates and no change in the rates. Guess which is the easier prediction? The market called a change only 30% of the time.

Why?

One potential source of this bias is the effect of settlement Wednesdays. The funds rate deviates substantially from the targeted level on the final day of the reserve maintenance period, called settlement Wednesday. It is unusually high if reserves are scarce or unusually low if reserves are abundant. If, on average, reserves were a little scarce on reserve settlement days, the monthly funds rate could average a few basis points higher than the target.

It is also possible that the behavior of this series has changed over time, partly in response to the Fed’s disclosure policy. Evidence (Thornton, 1996) indicates that, prior to the Fed’s policy of immediate disclosure, the market took a few days to figure out that the Fed had changed its funds rate target. If so, the funds rate would trade above the target when the Fed reduced the target and below it when the target was raised. During the period prior to immediate disclosure, the Fed changed its funds rate target 27 times. Of these, 22 were decreases, and only 5 were increases. Hence, it would not be surprising to see a positive bias in the funds rate over the funds rate target for this period, but the bias should disappear with immediate disclosure.

Formerly, the Federal Open Market Committee (FOMC) announced its policy decisions about six weeks after the previous meeting. At its February 1994 meeting, the FOMC broke this long-standing tradition and announced the decision as soon as it was made. While the FOMC made no commitment to continue the practice, the next five changes (all increases) were announced immediately. The new policy was formalized at the February 1995 meeting.

Hence the update. I would like to see whether this phenomenon has settled, at all. The authors of this paper did find, however, that the bias could be corrected, and more accurate predictions can be found by adjusting the known-to-be-off gambles observed in the futures market:

That’s still barely more than 50% of instances in which a change was predicted, that a change subsequently occurred. So…

Getting back to the story itself, though. The Fed is in the position many people were painting back after their first rate cut – little apparent credibility.

Peter Hooper, chief economist at Deutsche Bank securities, said he was “troubled” by the gap between what Fed officials were saying and what the market was pricing.

Vincent Reinhart, a former chief monetary economist at the Fed, said the central bank was clearly stating that it “views the risks as balanced and is reluctant to ease further”.

Andrew Balls, central bank strategist at Pimco, said market participants appeared more focused than Fed policymakers on problems in the financial sector that could lead to tighter credit conditions.

Larry Meyer, a former Fed governor, said the central bank “has put itself in a box to some degree.” He said credit markets had clearly deteriorated since the last Fed meeting.

It seems that, to some extent, officials are going in for verbal intervention, rather than actual:

… Hank Paulson, US Treasury secretary, kept up his increasingly vocal advocacy of the “strong dollar policy” in an apparent bid to reassure global investors that the US was not indifferent to the fate of its currency.

The Treasury secretary told reporters in South Africa that he “very much” supported a strong dollar and believed that the ­“fundamental, long-term strengths” of the US economy “will be reflected in currency markets”.

The dollar, which has shown some tentative signs of stabilisation this week, rose against the yen but fell against the euro and sterling.

Every time, one would think. Ross Gittins wrote an excellent piece, recently, explaining that/how modern Treasurers have little actual control over economies, these days: their job is to talk it up, when needed. The trouble with this administration’s bluffs, however, is that it’s been all bluff, almost the entire time.

It just doesn’t have the credibility now. Bernanke’s Fed has talked no-change only to cut rates, Paulson talks strong-dollar while no aspect of macro policy is directed at bolstering the dollar: In the macroeconomic equilibrium model

Aggregate Demand = Consumption + Investment + Government Expenditure + Net Exports

it clearly expects a low dollar to boost Net Exports, and it seems to be relying on that boost in Net Exports to buffer the US economy against recession for as long as it can (and hopefully that will be long enough).

“… a record number of men are finding they are not the fathers of children they believed to be theirs.”

Now, there are statistics and then there are statistics.

Almost a quarter of paternity tests conducted by one of Australia’s largest DNA laboratory companies show the man submitting a sample is not the father, compared to an estimated one in 10 “exclusions” 10 years ago.

Besides being just plain kind of funny, it’s an intrinsically interesting statistic. Specifically:

The number of tests taken in Australia has doubled from 3000 in 2003 to more than 6000 last year.

Thousands of men are turning to DIY testing kits – available online – to discover whether they are the biological father while they are still in a relationship and without telling their partners about their suspicions.

There is a selection problem. I would suggest that a record number of men are making the effort to find out whether or not they are the father of the children pom-tiddley-pom. By making the test cheaper and more easily accessed, the testing company (DNA Bio Services) is allowing the testing to reach further down the spectrum of doubtful fathers – previously it sounds like the tests were directed by fathers hoping to avoid paternity, which is a lower proportion of exclusiong, prima facie.

Managing director Gary Miller said: “The increase is across all social classes and ages – it affects everyone.

“Before, a lot of the work was for men who had been contacted by a woman or the CSA for maintenance and wanted a test to prove they weren’t the father.

“Now we see a lot of men in a relationship or just out of one who are just looking for reassurance that they are the father and then find out they’re not and are completely devastated.”

I can’t honestly imagine 22.22% of Australian children are being raised or otherwise supported by the wrong father. Although it would still be funny.