Mortgage tip

If you are planning on getting a mortgage anytime soon, be aware that reporting requirements are a lot tighter. They'll want all the statements for money you're putting up, obviously. What's more complicated is they'll also want statements for any accounts that are the origin of any substantial transfers shown on those statements. This isn't just about mortgage approval. If you're putting down any kind of earnest money or deposits in advance, like if you're contracting to build, the mortgage company will want to see statements with those checks clearing. And if there are any substantial deposits on those statements, they'll want to see the statements documenting the origin of those funds, just like funds for closing. And if those statements show substantial deposits, you'll need to supply documentation of that as well. Turtles all the way down.

So what should you do? A few months before you start looking, consolidate all the funds that you might use in a single account. Make sure there's at least one statement cycle in between those consolidation transfers and when you have to show a statement or write a check. Then just sit on that money in that account. Don't put any more money in, don't take any out. Don't get tempted by high interest online savings accounts. Put everything in one account and keep it there until you close. It'll make it a lot easier when it comes time to document your funds.

Overstating American Generosity

You keep reading how Americans are the most generous nation. "Superfreakonomics" states that Americans give 2% of GDP to charity. I'm suspicious that this is overstated. My guess is that most of that is giving to non-profit organizations that aren't strictly charities.

The key example of that is churches. Yes, many churches run soup kitchens, send tents to Haiti, and the like. But they also do a lot of non-need work targeted at their congregations. Is hiring a pastor an act of charity? Purchasing audiovisual equipment? Running a preschool? All of those serve to benefit their congregations, and you can't reasonably call them charitable work.

My suspicion is that the majority of church giving goes to activities like those, and not the soup kitchens, the tents for Haiti, and so forth. In other words, a lot of this charitable giving is really money spent by people to benefit themselves and their immediate community.

Maybe you don't like this example. What about public radio? I'll bet that donations to public radio are considered part of that 2% charitable giving (I assume the numbers come from the IRS). Does PBS feed the hungry or heal the sick? By and large, the benefits flow to the listeners of public radio. Their donations are not generosity so much as self interest.

Update: I read a little further in "Superfreakonomics" and found the authors obliquely hinting at the same point. I guess they wanted to avoid controversy, though, because they didn't go all the way with it.

Brilliant perspective on investing

If you invest in a risky asset class like stocks, your portfolio will nearly always be worth less than it was at some point in the past.

(emphasis his)

Also:

He doesn’t seem remotely interested in the amount he has accumulated over the course of his 20 years at the WSJ: instead, he’s only interested in the difference between that amount and its mark-to-market value on a certain date chosen to make him feel as miserable as possible.

The whole thing.

A mortgage rule of thumb

On a 30-year mortgage, take the interest rate, add one (1) to it, and multiply by the loan amount. You get roughly the total you will pay on your mortgage each year. The full skinny, normalized against a $100,000 mortgage:

Interest rate	Monthly Payment	Annual Payment	Ratio
4.00%	$477.42	$5,728.98	0.06
5.00%	$536.82	$6,441.86	0.06
6.00%	$599.55	$7,194.61	0.07
7.00%	$665.30	$7,983.63	0.08
8.00%	$733.76	$8,805.17	0.09
9.00%	$804.62	$9,655.47	0.10
10.00%	$877.57	$10,530.86	0.11

Divide by 12 to get the monthly, obviously.

Blame enough to go around in the auto industry

A scathing explanation of how Detroit made its own mess.

Health care reform as stimulus

A quote from the always interesting Marginal Revolution:

Keep in mind that no matter what your view of health care reform, the goal of our next round of health care policy changes should not be to spend as much money on labor costs as quickly as possible.

On the automaker bailout

Save the workers, let the companies die. If people are going to be hurt by the demise of the automakers, help the hurt, don't put the companies on life support. Seems pretty simple to me. Oh, right. Politics.

Financial responsibility

I saw a flashing sign at the Austin Telco Federal Credit Union advertising: "Get away with a vacation loan!"

Wow. Just.... wow. Silly me, I assumed credit unions were good and places like check cashers were rapacious villains. Turns out I had it backwards.

Panic vs. capitulation

Is it over yet? Probably not.

Time to buy a fuel-efficient car?

Heading into a recession, with auto loans increasingly hard to get, and (temporary?) relief at the pump, it seems to me that auto dealers are going to be motivated over the next few months. Maybe especially in the first quarter of the year, usually the economic doldrums.

What does it say about me that the car that inspires the most acquisitive materialism in me is the Honda Fit?

Whither the speculators?

Oddly, nobody's giving the speculators credit for halving the price of oil. You know, seeing as they're the ones who control the market and drove the price so high. More reasonable people can at least gloat that a bunch of them have probably lost a lot of money in the fall.

It's easy to call a bottom in the stock market...

... but what does that really mean?

Working weekends at The Economist

I used to get issues of The Economist pretty regularly on Fridays. Now... not so much. I guess there's just too much that happens during the week for a Wednesday night/Thursday morning publishing deadline. Now, well, now I don't get it until Monday, sometimes even Tuesday. And since this crisis is 7 days a week, not 5, even that doesn't help, because the issue is often still obsolete by the time I get it. Those poor guys.

Underwhelming Christmas sales

Used to be that retailers would place their orders months and months in advance. Manufacturers would attempt to anticipate demand and build up inventories against predicted sales later in the year. If there was an abrupt downturn in the economy, retailers would be sitting on inventory that they would have to get rid of, which meant great sales (I assume).

These days, with globally integrated supply chains, sophisticated software, and just-in-time manufacturing, companies can react a lot faster, and be a lot less likely to have excess inventory. That means that retailers will be less desperate to dump inventory this Christmas. They'll be desperate for sales, but not the sort of desperation that makes them sell below cost. That's better for them, and probably better for the economy, but not very satisfying for a skinflint for me.

On the other hand, I expect a bumper crop of discounted gift cards starting December 26th.

Is the panic over?

Maybe the panic is over, but...

"Do not confuse this moment of calm with a stock market bottom or a sign that a serious recession has been avoided."

"Put another way, we didn't just have a housing bubble and a corporate takeover bubble and a consumer credit bubble and a commodities bubble. In time, those asset bubbles led to the creation of a bubble economy, with too many airplanes and restaurant seats and hotel rooms, too many office buildings and shopping centers, too many investment banks and media outlets dependent on advertising revenue from car companies producing too many cars and home builders producing too many houses. Shrinking all that back to the right size is what the coming recession is all about."

source

Bubbles begetting bubbles

To me, it is apparent that the cause of the current financial crisis is the Federal Reserve's attempt to avoid a recession after the collapse of the dot-com bubble. They weren't able to avoid it, only delay it, and now the bill is coming due, with interest. I am concerned that the current interventions may repeat the mistakes of the past, and avoid substantial hurt now only to cause greater hurt later.

Unlike my esteemed colleague, I don't think that government intervention by itself is the source of the problem. It can cause numerous problems, but I don't think government intervention in the markets is the source of bubbles. I would be less worried about catastrophic hurt further down the line if the hurt today is severe enough. That means primarily two things: property values have to at least fall back to long-term trends (possibly as measured by the ratio of household income property value), and the banks have to see a lot of their shareholder value evaporate. That can be due to bank collapses, share price collapses, or, more likely, some combination of the two.

I can't find the link, but I read an analogy of the financial crisis to forest fires. Under normal circumstances, forests have fires on a semi-regular basis. That thins out the trees, burns out all the accumulated underbrush, fallen branches, etc. It's generally not a big problem, in aggregate. However, when there are humans in the equation, they put out the fires. The trees grow more thickly and the combustible elements have a chance to build up. The forest fires aren't avoided so much as delayed. What happens in the end is a catastrophic fire that rages and burns everything down.

That's sort of how I see the current situation. I want the fire to burn long enough to thin out the trees and to burn out all the flammable underbrush. I don't want it to wipe everything out. There needs to be enough destruction to purge all the crap that has accumulated over the last 2 decades since the last "real" recession, in the early 1990s. Obviously, I don't want to see the whole world burn. Another analogy that I won't belabor is chemotherapy. You have to suffer a lot to completely kill the cancer; you don't want to just wound it, because then you've injured yourself, but you haven't actually fixed anything.

Last week's oil spike

You remember how last week the price of oil spiked $25 on September 22 (closing up $15)? Don't read too much into that. When the media report on the price of oil, they seem to report on the spot price of the futures contracts with the soonest delivery dates. Contracts are for delivery on the first of the month. There are October contracts, November contracts, December contracts, etc.

September 22 was the last day to trade October contracts. Anyone who wanted an oil delivery for October had to buy that day. That magnified the normal market movement on that day. The contract for November went up by $6.62, which was a lot, but much less than the October one.

The price of oil isn't smooth because the market isn't smooth. There is a basic structure to the contracts to make them regular and consistent, and thus easier to trade. The down side of that is it introduces variables other than plain old supply and demand that have to do with the mechanics of trading and delivery. The oil market isn't the only market where such things happen, but that's where this phenomenon most recently manifested.

Credit to The Economist.

Does the housing bust mean Osama Bin Laden is winning?

One of Osama Bin Laden's goals was to plunge the United States into economic chaos. Well, there's chaos now, and it can be traced back indirectly to September 11th. In 2001, the Federal Reserve lowered rates to compensate for a slowing economy after the dot-com bust. Then September 11th hit, and what looked like a painful but manageable slowdown suddenly looked a lot more dangerous. The Fed slashed rates even further. Interest rates would have been low anyway, but not this low.

This was the fuel for the housing boom. With so much cheap money available, house prices got pushed much higher than was justified. With so much potential profit, fraud, recklessness, and negligence allowed people to borrow money when no sane person should have lent them any. That was the genesis of the housing boom and bust, and the trigger event for this credit crunch.

It's quite likely there would have been a housing boom without September 11th. After all, interest rates were going down as it was. They wouldn't have gone down so much, though, and that makes all the difference. This economic crisis is a non-linear, chaotic event. A difference of 0.5% in the federal funds rate, or a more rapid raising of rates leading into the recovery might have made all the difference.

Osama Bin Laden wanted a war with the United States in Afghanistan, where he thought he could win and bloody the nose of the infidel imperialists. He was wrong, but then we served up Iraq. He provoked the war he wanted, but he lost it. And then we invaded Iraq, in response to September 11th, and gave him the war between Islam and infidel that he wanted. He didn't make us do it, but he provoked us into doing it to ourselves.

The same applies to the credit crunch. Osama Bin Laden did not cause the bust. It's something he wanted to happen, but he didn't cause it. It's worse than that. He caused us to do it to ourselves. The chain of causality is different, but the result is the same.

Trusting the bailout

That there is a crisis is something that basically 99% of the country is taking on trust. We have no direct knowledge of it. We have no indicators. The stock and bond markets don't count, as they are feeding off the same indicators. What we have here is a potential crisis that only a few people in the banking industry and regulatory system can directly perceive. I don't claim it's a fiction, only noting the phenomenon. It's a good (I think) that Bernanke and Paulson are convincing with respect to the existence of the problem, if not its solution. Otherwise, how would we know until it was too late?

Prius cost increase

Toyota's $500 increase in the price of the Prius is an important reminder that the gasoline use is only part of the energy consumed. Quoth the spokesman: "Almost everything is made out of petroleum. Rubber, plastic, transportation (costs), glass, things like that." A hybrid will save some energy, but it's important to consider where you're starting. If you have, say, a 5-year old conventional Honda Civic, a Prius will likely be a net loss, energy-wise.

Of course, that assumes that you accept Toyota's stated reason. Seems more likely that the price increase is because sales are through the roof. Claiming it's due to transportation is no doubt partly true, but also a more acceptable justification for a price increase in economic hard times.

A secondary loan market for Prosper

I've been dabbling in peer-to-peer lending at Prosper for a couple of years now. It's an interesting experiment, but I think it needs a couple of economic cycles to validate the idea; it's been a little worrisome for me seeing the spike in late accounts recently.

One thing that Prosper lacks is a secondary loan market. I cannot transfer the loans owed to me to another party. I like the idea of secondary markets in general; I think they're a natural and healthy thing. More practically, it means that I can't quit Prosper. I can't liquidate my holdings; I have to wait until the term is up. Hopefully they'll eventually add that.

For the time being, one could potentially work around that missing feature by borrowing an equivalent amount through Prosper at a lower rate. That's no guarantee, but there's no guarantee of getting a "fair" value for loans sold on.

Stupid political reactions to high oil prices

Eliminate "speculators." Restrict futures trading. Levy windfall taxes on oil companies. Open up more areas for drilling. They're all dumb ideas that might actually get implemented as Capitol Hill tries to fix a problem they should stay out of. None of those will work.

Eliminating speculators reduces the liquidity of the energy market. That increases risk. Ditto for restricting futures trading. Both make oil prices more volatile and less predictable. When the outlook is risky, people tend to reduce their exposure, i.e., produce less oil.

The same applies to windfall taxes. Why should Exxon invest in more production and refining capacity, if the profits of those investments will just get taken away from by the federal government? It's hardly an incentive for them to do something that would really increase oil supplies and cut prices.

Then there's increasing drilling in places like the California coast and the Arctic National Wildlife Refuge. In the best of scenarios, those supplies will reduce oil prices by a couple percentage points in a decade, but more likely in 15-20 years. If it's going to take that long, we might as well just build nuclear plants.

I'm starting to see a silver lining here, though. Oil prices are not a concern for me at this time. What is a concern is oil use. If Congress wants to waste its time pursuing measures that are ineffective or counter-productive, that's actually not a problem. It means less production at higher prices, and thus lower use. That means less pollution and a bigger market for alternative energy sources.

As such, I'm less worried about Congress doing something stupid, and more worried about them doing something stupid that has broader costs. Any policy that directly or indirectly encourages using more coal, for example, is a net loss. Drilling in environmentally sensitive areas is also a no-go. I certainly don't want to expand subsidies, either on the producer side or the consumer side.

There's certainly going to be a cost to some people of the "acceptable" stupid policies. I don't mean to overlook that. Realistically, though, they'll be fine. Wall Street will find other places to play, and the oil companies will adapt their financial models. Congress may end up inadvertently hastening the end of the oil era.

The smarter side of Sears

Sears has actually turned into a pretty decent place to shop. They have a wide selection of items, good prices, and they've finally addressed most of the failings of what was once a pretty crappy web site. You can shop in person, order online for delivery, or order online for pickup within an hour if you're in a hurry.

They also sell books and music. Their book prices are nothing special, but their CD prices are significantly cheaper than Best Buy, and they somehow manage to be cheaper than Amazon, too, even with sales tax and shipping.

On top of the decent prices, you can usually find Sears gift cards for 10%-15% off through eBay, Card Avenue, or your local Craig's List. You'll get a similar 10% directly from Sears, but you have to give Sears your entire tax rebate check.

I was rather surprised by Sears, which is why I'm posting about it. I'm more than happy to see it if only so that Amazon, Target, Kohl's, and Home Depot have to compete harder for my business. Maybe I should buy the stock...

An engineer's best friend?

The end is near for the diamond jewelry industry.

The largest single-crystal diamond ever grown in a lab is about .7 inches by .2 inches by .2 inches, or 15 carats. The stone isn't under military guard or at a hidden location. It's in a room crowded with gauges and microscopes, along with the odd bicycle and congo drum, on a leafy campus surrounded by Washington, D.C.'s Rock Creek Park. Russell Hemley, director of the Carnegie Institution's Geophysical Lab, started working on growing diamonds with CVD in 1995. He pulls a diamond out of his khakis. It would be hard to mistake this diamond for anything sold at Tiffany. The rectangular stone looks like a thick piece of tinted glass.

Emphasis mine. The whole diamond jewelry thing is rather absurd. I'll be happy to see it go, though it won't go down quietly:

The diamond-mining companies have been fighting back, arguing that all that glitters is not diamond. De Beers' ads and its Web sites insist that diamonds should be natural, unprocessed and millions of years old. "Diamonds are rare and special things with an inherent value that does not exist in factory-made synthetics," says spokeswoman Lynette Gould. "When people want to celebrate a unique relationship they want a unique diamond, not a three-day-old factory-made stone."

People might be dumb enough to buy that initially. I give that a few years. The thing is, you can't tell, especially from casual inspection, what's natural and what's lab-grown. All it takes is a couple of women in a social circle to be willing to accept a lab-grown diamond triple the size of their friends' natural rocks at the same price, and the levee will burst.

iPhone price isn't cheap enough

I was tempted for a fraction of a second by the announcement of the $200 iPhone. Then I remembered that the phone without a plan was worthless. The cheapest plan you can get from AT&T for the iPhone is $60/month. Taxes, surcharges, fees, and other dodgy tricks will bring that up to almost $80/month. That's nearly $1000 per year for the cheapest plan. Oh, and you're locked in for 2 years. From where I sit, the price went from $2500 to $2200. That's not nearly as exciting.

Of course, a lot of people look at just the price for the device, which makes me wonder if the iPod Touch is going to stay at $300 and up. Isn't the iPod Touch just an iPhone without the phone and the GPS?

Speculator scapegoats

It has become fashionable to blame "speculators" for the rise in oil and food prices as well as the sub-prime mess. The Almighty Economist cogently explains why that is mistaken, at least if you care about facts:

Investment can flood into the oil market without driving up prices because speculators are not buying any actual crude. Instead, they buy contracts for future delivery. When those contracts mature, they either settle them with a cash payment or sell them on to genuine consumers. Either way, no oil is hoarded or somehow kept off the market. The contracts are really a bet about which way the price will go and the number of bets does not affect the amount of oil available. As Mr Harris puts it, there is no limit to the number of "paper barrels" that can be bought and sold.

That makes it harder for a bubble to develop in oil than in the shares of internet firms, say, or in housing, where the supply of the asset is finite. Ultimately, says David Kirsch of PFC Energy, a consultancy, there is only one type of customer for crude: refineries. If speculators on the futures markets get carried away, pushing prices so high that refineries run at a loss, they will simply shut down, causing the price to fall again. Moreover, speculators do not always assume that prices will rise. As recently as last year, the speculative bears on NYMEX outweighed the bulls.

The speculators by definition do not consume these commodities. They don't hoard or stockpile them. They merely hold temporarily hold the rights to them. The end result is roughly the same amount of product delivered at the appointed time for a price acceptable to the eventual buyer.

Indeed, because the speculator cannot actually take delivery (lacking tankers or silos), they are in some sense at the mercy of consumers because they absolutely must sell their rights before the futures contract's delivery date. These people are taking risks, risks that could blow up in their faces. That possibility of total loss to the speculator keeps them reasonable.

Is it possible for that price to be higher than it would be without speculation? Yes, but it is also possible that the price is lower than it would otherwise have been. This kind of financial maneuvering can help reduce risk to both producers and consumers, and thus stabilize price and supply.

Of course, the logic is different when these outsiders get into the business directly. Different, but with the same result. If these people are paying too much, they're going to get hurt by it. If they're getting a good deal, other people can get that deal, too. Worst-case scenario is that there's volatility and then things return to normal. The best-case scenario is that our agricultural infrastructure gets a lot better. I can live with that.

Google stock is worthless

The current price is $588.14/share, but the rational, fair-market value is $0. There are two ways of realizing value from a stock. One is for the company to pay out dividends out of its cash flow. The founders have explicitly said they never will do that.

The other way to convert a stock into money is for someone to buy the whole company in order to capture their cash flow. That won't happen with Google. Their current stock price translates to a market capitalization of $184 B. That's what it would cost at current prices to acquire all of the outstanding shares in the company. Nobody can buy Google. Even if GOOG went down to its IPO price of $85, it would still be worth $26 B. There have only been a handful of acquisitions at that level. Would you buy a Google hoping for a buyout, knowing that your share would have to lose 85% of its value for that to happen?

Even if that unlikely occurrence were to happen, it still has to go up against the founders, who have said they have no interest in selling out. Of course, shareholders have rights. When your management acts against the interest of the shareholders, you can overrule them. At least, that's what you can do in normal companies. Not with Google. Larry and Sergey each own about 10% of the company. Eric Schmidt owns another 3% or so. They own Class B shares, which each have 10 votes. Everyone else gets Class A shares, with 1 vote apiece. If you do the math, it turns out that those three guys have about three times as many votes as all the other shareholders put together. You read that right. So you can't overrule them. And you can't buy Class B shares, either, because they turn into 1-vote Class A shares when they're sold.

It's possible for them to change their minds, of course. Why would they, though? Larry and Sergey are each worth something like $18 B each. Even if Google loses 99% of its stock market value, they'd still be fantastically wealthy. It's hard to imagine anyone being able to offer them anything they can't already get. It's only if they lose interest that they might sell, but that doesn't help anything because the remaining founder would hold a dominant number of Class B shares. You'd have to wait for both of them to get bored. When would Larry and Sergey both lose interest in Google? Going by Bill Gates and Steve Jobs, it takes at least 30 years. That's a long time to wait for the possibility that Google will shift policy and pay a dividend or sell out.

To summarize, in other words: Larry, Sergey, and Eric won't give you anything, they won't let anyone else give you anything, and you can't make them, even if you buy up every single Class A share. It's like a piece of paper from a diploma mill.

So what are people paying for when they buy GOOG? As far as I can tell, they're all trading on the assumption that Google stock is worth something, but they haven't really thought about the implications of Google's ownership structure. It's a collective fiction. To be sure, so is the US dollar, but this is one of a whole different sort; people at least acknowledge that the dollar isn't real.

Above, I said there are two ways to realize value from a stock. I omitted one: someone else wants your share. That's the principle that there's always another sucker. It worked for a while in the late 1990s, but then the party ended. Do you want to be the one without a chair when the music stops?

Numbers supplied by Google Finance :-).

Note: this is a discussion just of the stock. The company is obviously very valuable.

We all own stolen goods

You very likely own stolen goods. The gas in your car, the circuits in your cell phone, the diamond in your ring, the chemicals in your lipstick or shaving cream — even the plastic in your computer may be the product of theft. Americans buy huge quantities of goods every day that are literally stolen from some of the world’s poorest people. These thefts are permitted — indeed encouraged — by an archaic rule of international trade that violates the most fundamental rule of capitalism: to protect property rights.

From a blogger at the Cato Institute, which is quite surprising, but makes a certain perverse sense. I don't think the prescription would work, but it makes for an interesting thought experiment:

Say that China buys $3 billion worth of oil from the regime in Khartoum. The correct response on a property rights approach is for the United States government immediately to announce a Clean Hands Trust for the People of Sudan. This trust is a bank account that the U.S. government will fill until it contains $3 billion. The money to fill the trust will be raised from tariffs on Chinese imports as they enter the United States. The money in this Clean Hands Trust is to be held for the people of Sudan until a minimally decent, unified government is in place. At that point the $3 billion will be turned over to the true owners of the stolen oil: the Sudanese people.

We only notice prices that go up

Not the ones that stay the same, or go down. I'm not sure I buy the whole argument, but that little bit of psychology is enough for me to be unconcerned about inflation.

intimidation tip

"The Senior Partner does not share your optimism." I am convinced that slightly modified Darth Vader quotes are a badly under leveraged asset. I have been using them, and I think with good effect.

I recently found The Sardonic Memoirs of a Private Equity Professional. I quite enjoy it. Your mileage may vary, depending on how mean you are and whether you have a subscription to "The Economist." She thinks Guy Kawasaki is a tool, so points for that.

deposit systems

Austin is likely to ban plastic bags sometime in the not-too-distant future. That's a dumb idea. Plastic bags aren't good, but sometimes they're the best thing. They're great for trash cans. Nor are the alternatives cost-free, either in terms of energy, environmental impact, or convenience.

I do recognize that they've got some real negatives, though I have no idea how bad those negatives are. 1 billion bags per year in the US? Sounds like a lot, but they're pretty flimsy. 4.3 million gallons of crude oil sounds like a lot, but this is a country of 300 million. Everything is going to sound like a lot. 1400 tons in Austin landfills? Is that a lot? Maybe it's just a drop in the bucket. How big are the landfills? Does it really matter to me whether it takes 1000 years for them to break down? I figure once it's more than 100 years, it's basically all the same to me. 100,000 marine mammals sounds like a lot, but maybe the Port of Houston kills that many every day. I have no context for any of these numbers. Nor should I be expected to. But one thing I can definitely be counted on the pay attention to is money.

This is a classic case of misunderstanding the problem. The problem isn't that plastic bags exist. It isn't even that producing them uses energy and oil. The problem is that we throw too many of them away. That means more space in landfills and needing to use more energy and oil to make more.

That's where recycling comes in. My completely uninformed guess is that in the history of the world, we've produced enough plastic bags to go for another century if we just keep reusing and recycling what we already have, instead of producing new ones. Of course, we can recycle them now, but people don't. Then there's the litter problem; there are ugly plastic bags stuck in trees all around my neighborhood.

Up in Vermont, we had a deposit system for beverage bottles and cans. You paid 5¢ extra, and then got that back when you brought the bottles and cans in. Anyone who sold them had to take them back. When other houses in our neighborhood were being built around us, I'd go around to the construction sites and pick up all the bottles and cans that the workers just threw on the ground. It was a little dirty, but no big deal. I'd collect a few dollars worth in a half hour of walking around. Hey, free money. It worked so well to inoculate me against throwing out recyclable products that even now I cringe when I see someone throw a crushed aluminum can in the trash.

Deposit systems work a lot better than outright bans. People who need plastic bags could still get them. I could still use them as trash bags, though having a price on them would make me consider whether there was a superior alternative. We as a society would recycle a lot more. People like recycling, as long as they don't have to expend much effort. On the other hand, if they effectively got paid to recycle, they'd be a lot more motivated. Right now you have to expend extra time and effort to do the right thing. A deposit system means that people pay themselves to do the right thing. There would be a financial incentive to avoid litter, and for poor people to pick up litter. I'm startled that there aren't more deposit systems in operation. They seem as close to a perfect solution as you can get.

We could use a lot more deposit systems. At minimum, I'd like to see:

• Plastic bags - 5¢ each.


• Glass bottles - 10¢ each.


• Plastic bottles - 10¢ each.


• Beverage cans - 5¢ each.


• Cigarette butts - 3¢ each. This is the big one for me; they're not recyclable, but they're littered all over the place. Saying "Don't Mess With Texas" isn't enough.


• Batteries - $5 for car batteries, $2 for power tool batteries, 25¢ for D, C, B, A, AA, and AAA ones, 15¢ for watch batteries and the like. Even ones that aren't recyclable need to be disposed of properly.


• Fluorescent lights - $2 for big tubes, $1 for small tubes, and 50¢ for CFLs.


• Fast food containers - 50¢?

Those amounts are just suggestions. It would make sense to let the operator of the collection facility get some of the money to pay for the overhead of collection. Maybe you'd pay 7¢ per paper bag, and collect 5¢ when you recycle it.

I don't think we need deposit systems for food cans, as people generally use them only at home, making curbside recycling sufficient. Ditto for shampoo bottles, yogurt tubs, etc. Computers could use it, but there are too many different kinds of parts for a standardized system.

I expect the more suitable items are those that are often consumed outside the home (and thus frequently littered, like cigarette butts), ones that are especially hazardous (batteries), or are impractical for curbside recycling (plastic bags blow away). They'd also have to be items that have a sufficient impact to justify a widespread retail collection campaign; obscure niche items need some other system. Perhaps I am being too limited in my thinking.

What other common items that could use a deposit system? Used motor oil? Leftover paint? Bullet and shell casings (this IS Texas)? Leftover cooking oil?