Felix Salmon

Nick Summers has found one reason for Tina Brown to shutter Newsweek.com:

There will be layoffs as the two staffs merge. (The incentive is to make those cuts from the Newsweek side of things, as the Washington Post Co. has agreed to cover some of those costs for up to one year.)

The merger of The Daily Beast and Newsweek is a merger of a website and a print magazine. To have two web staffs would be redundant, and Brown has carefully built up her own; meanwhile, Newsweek‘s costs nothing to fire. Easy, right?

Of course, it’s much more complicated than that in practice — and Summers reports that Brown “gets tripped up a bit talking about the future of Newsweek.com”. But the clear impression one gets from Summers is that Brown has been thrust blinking into this merger, and that she’s going to do her best, but that she has no more idea than anybody else how this combination of two rocks is conceivably going to float.

Brown has a powerful reality distortion field; if Steve Jobs is a 10, Bill Clinton is a 9, and Arianna Huffington is an 8, then she’s a 7, roughly in line with Barack Obama. Reality distortion fields can be monetized: the way Summers puts it is that “Ms Brown’s name brings in print-ad dollars all by itself”. That might be true, but it didn’t save Talk. (Which, incidentally, would be a good name for both the magazine and the website, and would also give the whole enterprise an aura of ambition which can look unblinkingly in the face of failure.)

That said, Brown did resuscitate Vanity Fair, and her career shows that she’s maybe a better turnaround artist than founder. If anybody can save Newsweek, then she can: think of her as the desperate quantitative-easing measure to Sidney Harman’s Ben Bernanke. It probably won’t work, but it’s the best chance he’s got.

I know this blog has been way too heavy on the QE of late; apologies for that. But Baruch has a fantastic new post up, which nails what I’m really worried about when it comes to quantitative easing.

Essentially, says Baruch, the stock market rally is like the cat in Pet Sematary: it looks real, but it isn’t. And in fact it’s likely to turn out very harmful indeed.

Part of the problem is that QE has become, in part, a game of “kill all the shorts”—a game which a glance at IOC or OPEN or even UTA will tell you is being played very well indeed. Correlations are high, which is always a bad sign, and that weakens the raison d’être of the entire market, which is to allocate capital efficiently. Instead, the stock market becomes a place where people park their money in the hope that it will go up and in the expectation that if it goes down, the Fed will step in and rescue them.

But Baruch isn’t reassured:

Will we crash? Will we carry on straight up? Will we pause and rally? Who can say? We’re in a period where anything is possible, as I’ve said before, a world of unintended consequences coming down the pipe. Some may be good, and some may be bad…

I’m not saying we’re in an undead homicidal zombie market, though we may be. But here’s an example of what the Pet Sematary market is capable of in terms of unintended consequences: QE inflates all asset prices, including commodities. This pressures the Chinese consumer, who we are relying on to pull us all out of this mess, who can suddenly not afford his new LCD TV because his Moo Shu pork Big Mac and fries is costing 20% more than it used to. Changes in commodity prices have a much greater impact on his consumption than Joe Schmoe in Idaho. The BoC has to raise rates to offset the inflation this is causing, hurting Chinese growth even more, and global GDP growth drops 50bp. Bravo the Bernank. With your Quantitative Easing you just killed off the only good thing in this market which was working naturally without outside interference.

Baruch doesn’t think this is going to happen, necessarily — but the point is that neither he nor anybody at the Fed is remotely able to judge its probability, or, for that matter, the probability that QE will actually work.

Kevin Drum makes the very good point that we’re not actually arguing about something hugely important here:

Despite the scary sounding $600 billion number, the actual impact of QE2 is almost certain to be fairly small. With interest rates already so low, there’s simply not enough money involved to move markets substantially.

But the key word here is “almost”: QE might well end up making very little difference either way, but there’s no doubt that it’s made the tails fatter. Global markets have ramped up a lot since QE2 was effectively announced, and a sudden unwind of that move would devastate confidence. There’s lots of things that can go wrong, and the chances that the stock market has its valuations right have never been smaller. If you’re buying stocks right now, I hope you’re able to withstand a very bumpy ride. Because there’s a substantial chance that you’re going to get exactly that.

There are things which could go right with quantitative easing. But on the other hand, there are big things which could go wrong too. And right now corporate America seems to be more worried about the downside than it is certain about the upside. Which is why there’s a real risk that QE is going to cause more harm than good.

Andrew Ross Sorkin loves private equity.

Sorkin finally get around to responding to Malcolm Gladwell today, and he’s unimpressed. Here’s how he frames the question:

Can financiers ever do anything beyond financial engineering?

With General Motors planning an initial public offering for Thursday that values the once-left-for-dead company at more than $50 billion, the answer to that question is more than theoretical.

How did G.M. become one of the greatest turnaround stories, at the moment at least, in history?

You can guess where Sorkin ends up. While Gladwell gives a lot of credit for GM’s current health to Rick Wagoner, Sorkin dismisses Wagoner as the CEO under whom GM went bankrupt. Instead, he says, “the GM turnaround is ultimately an act of financial engineering”—the financial engineering that Steve Rattner takes lots of credit for in his book, and which Sorkin is happy to ratify as one of the greatest turnarounds in history.

The financial engineering at GM was difficult and impressive. But in principle it’s neither difficult nor praiseworthy to take an insolvent company, put it through bankruptcy, and let it emerge under the ownership of its former creditors and people who provided DIP funding.

Bankruptcy, in theory and in practice, is essentially just a change of ownership. It’s not easy, and it carries non-negligible costs; Rattner did a good job of minimizing those costs and therefore maximizing the value of the post-bankruptcy GM. But you don’t need PE honchos to orchestrate a bankruptcy filing and rid a company of its liabilities. And the main thing that Rattner did with GM was to lubricate the process with something over $50 billion in US taxpayer money, most of which went to pay off GM’s creditors, and much of which is unlikely to ever be repaid.

Rattner deserves praise for what he did. But so does Wagoner, and so do all the workers who have worked and who continue to work to actually make the cars that GM sells. The financial engineering might have been a necessary part of the turnaround process. But it wasn’t remotely sufficient.

Let’s say I earn $50,000 a year, and a widget costs $1,000. Then my pay goes up 3%, while the cost of the widget goes up 10%—year after year. Would you say that the widget has been getting more affordable over time? Stanley Fish would. Fish is approvingly citing a new book from Robert Archibald and David Feldman, which he quotes saying that “for most families higher education is more affordable than it was in the past”:

Here their target is a way of framing the issue. Usually the question asked is, “What percentage of a family’s income goes to the cost of higher education?” Archibald and Feldman prefer to “ask instead whether the amount left over after subtracting the cost of college is rising or falling over time.” The answer they give (buttressed by statistical tables) is “rising”: what their data show is that “over long stretches of time, college costs have been rising at a faster pace than income per worker, yet the average worker’s actual dollar income has gone up by more than the costs, leaving more resources on the family to spend on other things.”

I fear to think what statistical sleight-of-hand might be hidden in that qualifier about “over long stretches of time,” especially since in recent years real college costs have continued to rise fast even as real median incomes have gone nowhere or shrunk. But in general this approach to gauging affordability is absolutely bonkers: the percentage rise in price is completely ignored, and only the dollar rise in price matters. Using this technique, just about anything can be considered “more affordable than it was in the past.” If the widget rises in cost by $100 and my annual pay goes up by $1,500, that does not in and of itself settle the question of whether the widget has become more affordable.

What’s more, I haven’t read the book, but Fish’s take does seem to be at odds with its official blurb:

A technological trio of broad economic forces has come together in the last thirty years to cause higher education costs…

A college education has become less reachable to a broad swathe of the American public at the same time that the market demand for highly educated people has soared. This affordability problem has deep roots. The authors explore how cost pressure, the changing wage structure of the US economy, and the complexity of financial aid policy combine to reduce access to higher education below what we need in the 21st century labor market.

I’m also completely unconvinced by Fish’s explanation of the main reason behind cost inflation at colleges:

Chief among these is the change in the sophistication and cost of the technology that has at once transformed the setting of higher education and become one of the areas of knowledge higher education must impart to students. Students expect to be instructed in the new technologies, and that instruction requires their installation, and then as new refinements emerge, their re-installation. “[A] modern university must provide students with an up-to-date education that familiarizes students with the techniques and associated machinery that are used in the workplace the students must enter.”

Were colleges and universities to strike a Luddite stance and hold out for pencil, paper and blackboard instruction, they would “in effect be guilty of educational malpractice.” When it comes to incurring these new expenses, they “do not have a real choice.” In no sense, then, are changes in price “driven by any pathology in the higher education industry.

It’s true that computers are more expensive than pencils, and it’s surely true that some part of the typical college-tuition fee is spent on information technology. But we’re talking about fee inflation here: in order for Fish’s argument to hold water, IT costs at colleges would have to be rising faster than inflation year in and year out. Which strains credulity, in a world where IT is getting steadily cheaper and where a lot of IT services can now take place in the cloud. Even if the move into the cloud is only now beginning, I very much doubt that it’s ever going to result in a decrease in tuition fees.

The fact is that technology is a way of reducing the costs of education much more than it is a factor in their growth. That’s why Rupert Murdoch has just hired Joel Klein:

The likelihood that Murdoch’s education strategy will involve either charter schools or online college-diploma mills is very close to zero. Instead, it is all but certain to revolve around one of the most fertile areas of innovation today: the application of digital technology to learning. In the next few years, “what you’re going to see in educational software and new solutions and online learning is going to be game-changing,” says Klein, in terms of “the ability of new technology to both improve instruction and the quality of it through new learning platforms.”

“Archibald and Feldman,” says Fish, “allow us to say that at least in the area of costs the fault lies not in ourselves, but in the stars.” Which I’m sure is convenient for Fish, who describes himself as a “dean who encountered the rising costs of personnel, laboratory equipment, security, compliance demands, information systems and much more every day.” But it’s not particularly believable.

Allan Sloan has a good point today: by implementing QE2, Ben Bernanke has become a politician. It’s an important development: for reasons I don’t fully understand, the debate over QE2 has divided along party-political lines, with the Republicans lining up against it and the Democrats attacking them. Globally, too, as we saw in Seoul, the QE2 debate is conducted at summit level, and this time the dividing lines are even starker: it’s essentially the U.S. vs the world.

Interestingly, this is one of those old-fashioned technocrat vs technocrat policy debates, in contrast to the technocrat vs populist debates which seem to have taken over far too much airtime of late. But it’s just as shrill. And as Sloan says, it does the venerable Fed no favors to find itself on one side of a debate generating so much heat and so little light: Bernanke “was already making a high-stakes economic bet with QE2,” he says, “and now it’s a political bet, as well”. If QE2 doesn’t work — Sloan raises the specter that it “could imperil the dollar and our financial system” — then it’s not just the economy which will be harmed, but also the Fed’s long-term credibility and pre-eminence. In fact, the politics of QE2 are already hobbling the Fed’s freedom of movement, as Neil Irwin explains:

The political maelstrom that erupted after the Federal Reserve’s decision two weeks ago to take expansive action to boost the economy has reduced the central bank’s maneuvering room as it considers how to get growth on track…

“It now looks like it’s going to be hard for the Fed to do another round of aggressive policy because they know the criticism is going to undercut some of the confidence-building impacts,” said Ethan Harris, chief economist of Bank of America-Merrill Lynch.

Bernanke, then, has every reason to want to reduce the volume on this debate: the mere existence of the debate itself can easily counteract any good which comes from QE2.

One way of doing that would be to admit that QE2 is an untried experiment: while QE1 worked as a weapon in the crisis-fighting arsenal, QE2 is being asked to do something quite different. So the Fed should define much more clearly than it has done until now what exactly QE2 is designed to achieve, and what criteria might be used to determine whether it is succeeding or failing. And if it’s showing signs of failing, then the Fed should also be explicit about how and when it might be unwound.

War-gaming QE2 in this way would make the Fed seem less sure in its actions, but it might also help mute some of the harsher criticism coming its way—and thereby actually improve the chances that QE2 succeeds. Bernanke is no Maestro: no one trusts him implicitly in the way they trusted Greenspan, pre-crash. So maybe what the economy needs is for him to become a little less Olympian and a little more human.

Tina Brown is a hagfish — Gawker

“I’m wondering how much of the online audience is Walking Dead” — Jon Steinberg

Ryan Avent is excellent on the political economy of the deficit — Economist

Ted Kheel, RIP — Bloomberg, Komanoff, Gothamist

I’m a big fan of OpenTable as a service. I’ve made 60 OpenTable reservations in total, using both the website and their iPhone app, and I haven’t had a single bad experience: the resy has never been lost, I’ve never had an inordinate wait for a table, and it’s extremely easy to share the reservation information with my fellow diners. There’s a few things I’d like to see added, like reservations I’ve been invited to showing up on my upcoming-reservations page, but in general OpenTable does one thing from the diner’s perspective and it does it extremely well.

If Mark Pastore is to be believed, however, restaurants hate OpenTable nearly as much as diners like me love it:

A few months ago I took an informal survey of several other restaurateurs here in San Francisco and in New York, all of whom offer seats through OpenTable, asking them about the value of OpenTable from the restaurateur’s perspective.

Only one of the dozen or so I spoke with said he felt that OpenTable increased the value of his restaurant and that he wouldn’t imagine opening a new project without it. The rest were less than happy. The recurring themes were the opinion that OpenTable took home a disproportionate (relative to other vendors) chunk of the restaurants’ revenues each month and the feeling of being trapped in the service… The GM of one very well known New York restaurant group, which spends thousands of dollars on OpenTable each month, put it to me this way, “OpenTable is out for itself, the worst business partner I have ever worked with in all my years in restaurants. If I could find a way to eliminate it from my restaurants I would.”

Pastore says that the economics of OpenTable can be devastating for the notoriously difficult restaurant business:

One independent study estimates that OpenTable’s fees (comprised of startup fees, fixed monthly fees, and per-person reservation fees) translate to a cost of roughly $10.40 for each “incremental” 4-top booked through OpenTable.com. To put that in perspective, consider that the average profit margin, before taxes, for a U.S. restaurant is roughly 5%. This means that a table of 4 spending $200 on dinner would generate a $10 profit. In this example, all of that profit would then go to OpenTable fees for having delivered the reservation, leaving the restaurant with nothing other than the hope that that customer would come back (and hopefully book by telephone the next time).

At this point it’s worth digging out that famous short thesis on OpenTable. In the second quarter, OpenTable seated 15.6 million diners across 14,128 restaurants, and made total revenue of $22.45 million, including revenue from installing its software in new restaurants. That’s $1.44 per seated diner, or $5.76 per 4-top, all included. (The actual marginal revenue that OpenTable gets from reservation revenue rather than fixed subscription revenue is 69 cents per seated diner, or $2.76 per 4-top.)

In order to get to a cost of $10.40 per “incremental” 4-top, you have to think that OpenTable has value only insofar as it drives diners to a restaurant who would otherwise not have dined there; that’s certainly the mindset that Pastore seems to have. But OpenTable can, should, and does have much more value than that. For one thing, it improves the quality of the diner’s experience: we diners no longer have to worry whether the reservation we thought we made will be honored when we get to the restaurant. On top of that, it’s reasonable to expect that a decent restaurant will remember if we’re vegetarian, or we’re allergic to garlic, or something like that, in a way that’s much harder when we’re just another name.

Much more importantly, however, the OpenTable software can be hugely valuable to restaurants’ own bottom line, even if they would be sold out every night without it. Dan Simons of Founding Farmers Fathers, a restaurant which spends $6,000 per month on OpenTable, says in response to Pastore that once he started taking advantage of its software capabilities, he managed to increase sales by 15%.

Simons is talking his book: he’s a principal of a company which advises restaurants on how to best use OpenTable’s software. But it makes intuitive sense that armed with the abundance of rich and restaurant-specific data that OpenTable’s software provides, a quantitavely-minded restaurant manager would be able to find all manner of opportunities to improve diners’ experience and maximize the restaurant’s sales. (These two things are much more likely to work with each other than against each other.)

On the other hand, it also makes intuitive sense that most restaurants lack quantitavely-minded managers who are willing and able to take advantage of OpenTable’s rich data. For them, OpenTable really is little more than a way of getting extra marginal diners in the door: after that, they do what they’ve always done, and they’re not going to change their ways any time soon. For those people, it’s easy to see why they might be disgruntled at paying large subscription fees for services they never use.

The best-case scenario here is that, armed with OpenTable software they pretty much have to pay for anyway, restaurateurs will increasingly find themselves making full use of it, becoming more efficient and more lucrative businesses as a result, running more enjoyable places to dine. Alternatively, as the short thesis puts it, OpenTable will find that its business “has absolutely no barriers to entry,” and copy-cats will do to it what they did to Tivo, destroying it with an inferior but cheaper product.

But the main lesson for OpenTable from both Pastore and Simons is that their software is, right now, far too difficult to use to its full potential. Now that the company is valued at over $1.5 billion, it should have no problem paying some very smart developers to improve the user-friendliness of its offering, not only for diners but also for restaurateurs. With luck, that will help to reduce the amount of resentment the company faces in the industry, by making OpenTable service something which more than pays for itself, rather than something which is an expensive necessity. After all, I’m sure that while on one level OpenTable would love to become the Ticketmaster of the restaurant world, it would love to do so without becoming nearly as hated.

Update: As proof that restaurateurs tend not to be the most web-savvy of businesspeople, one reader offers this, via email:

One thing I’ve noticed – restaurants never take advantage of the feedback features in open table.  I’ve probably submitted feedback on about 7 or 8 restaurants, writing specific notes about something I particularly liked or didn’t like, using their system that says that the info and my email address will be shared with the restaurant.  I’ve never gotten an email back – either to apologize for bad service or to thank me for the kind words.  That’s just nuts, a huge opportunity missed by the restaurants.  At the very least they should be asking me to join an email list if I said good things.

Maybe it’s the open table technology itself that’s bad, but I think it’s probably just as much that the restaurant business just doesn’t get the new online world we’re living in.  If I was a restaurant I’d be checking blogs and twitter and open table feedback every day, offering my fans invites to special dinners (with bigger mark ups) and offering the haters a discount if they come back and give it another try.  My guess is that restaurants are still living in a world where the local restaurant critic’s review matters 100 times more than anything else – just look at their awful flash-based websites that you can’t even access on an iPhone.  If I’m on foot, it’s easier to find a restaurant’s address on OpenTable than it is on their own sites.

Update 2: OpenTable itself weighs in, saying exactly what its fees are: $199 a month, and then $1 per seated diner if you book through OpenTable’s website, or $0.25 per seated diner if you book through the restaurant’s own website. And there’s also “a web-based product that caters to restaurants that don’t require all of the operational benefits of our Electronic Reservation Book”. But in any case, if you want to book a table at a restaurant, it’s better for the restaurant if you do it through their own website rather than through OpenTable.com.

An impressive group of right-leaning technocrats has signed an open letter to Ben Bernanke, objecting to his adoption of QE2. And it’s hard to disagree with what they have to say:

We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.

It seems clear that the G20 meeting in Seoul achieved absolutely nothing largely because of the unfortunate timing of Bernanke’s QE2 announcement. It overshadowed everything else, it put Obama on the defensive, and it made it impossible for the G20 to agree on anything. I don’t think that the FOMC anticipated the volume of the international criticism of U.S. policy, and that alone is reason to reconsider what they’re doing. After all, if a policy designed to increase confidence only serves to increase mistrust, it probably isn’t working.

QE isn’t necessary: there’s no immediate and obvious harm which will befall the U.S. if it’s discontinued. If it doesn’t increase employment or decrease unemployment, there’s certainly no reason to do it. And so far the evidence that QE has any effect on employment is slim at best. So yes, there’s a case to be made that QE should be discontinued.

The letter continues:

We subscribe to your statement in the Washington Post on November 4 that “the Federal Reserve cannot solve all the economy’s problems on its own.” In this case, we think improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus.

This is surely true, and I doubt that anyone on the FOMC would disagree. Indeed, the Fed’s own response to the letter explicitly agrees with this point:

The Chairman has also noted that the Federal Reserve does not believe it can solve the economy’s problems on its own. That will take time and the combined efforts of many parties, including the central bank, Congress, the administration, regulators, and the private sector.

But back to the letter:

We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatly complicate future Fed efforts to normalize monetary policy.

Markets have definitely been distorted by QE2. Here’s a screenshot from Reuters’s brilliant interactive graphic:

If these assets were to fall as much as they’ve risen in the past couple of months, the effect on markets could be devastating. And what’s particularly noteworthy, here, is that the main asset that the Fed is targeting—long-dated Treasuries—is pretty much the only asset which hasn’t moved at all. Bernanke’s blowing bubbles, here, and there’s an increasing chance that it’s all going to end in tears.

The letter concludes:

The Fed’s purchase program has also met broad opposition from other central banks and we share their concerns that quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.

I’m inclined to agree. In theory, QE can help jump-start U.S. economic growth, which in turn will help the rest of the global economy. But when no one in the rest of the world seems the slightest bit grateful for the Fed’s help on this front, something is clearly amiss.

The Fed’s job is not to try to replicate a fiscal stimulus by monetary means, and global policymakers don’t believe that the Fed is truly independent of the U.S. government. (I don’t believe that either.) QE is an experiment, and like all experiments it can go wrong. At the very least, the Fed should have some clear criteria by which they can determine whether it is working or not, and should commit to unwinding the program should the latter be the case.

Mark Coatney has joined at least one Newsweek.com staffer in presenting a very cogent case for saving Newsweek.com on Tumblr. Their points about SEO, and about the long tail of Newsweek.com’s archives, and about the relationship with MSN, and about the relationship with advertisers in Newsweek magazine, are all well taken.

But if you take a few step backs the decision is, if anything, even more depressing.

For one thing, it demonstrates a clear failure to understand the web. Tina Brown is a creature of print, not of the web; Ryan Tate, for one, has chronicled her difficulties making the transition from the former to the latter. In the world of print, as Coatney says, it’s conceivable that you can take one magazine’s readership and transfer it to another—think the way that Life‘s readers were steered to Time, or Gourmet‘s to Bon Appetit. But you can’t do that online, for reasons which Coatney outlines well and which the new bosses at Newsweek don’t seem to grok at all.

More generally, there’s a clear and obvious move among online media companies towards creating coherent sites for clearly-defined audiences, rather than attempting a one-size-fits-all mush. AOL has lots of sites at lots of different domains, as does Gawker Media and even the New York Times and Washington Post companies. The Newsweek Daily Beast Company is coming into existence owning two valuable and major websites with clearly distinct audiences. There’s almost certainly a strong case not to try to build a third, while Newsweek is still in turnaround mode. But equally it’s idiotic to try to cut those two sites down to just one.

Finally, it’s worth remembering Jack Shafer’s seven stages of press moguldom:

In securing Brown as editor, Harman is now entering Stage 2 of the seven stages through which all vanity press moguls pass after buying a faltering magazine or newspaper: The owner replaces the editor with a journalistic star, redesigns the publication, expands budgets, moves to better quarters, and thinks about turning the publication into a media empire. (Harman completed Stage 1 when he bought Newsweek, announcing that quality, not profits, are the immediate goal.) Stage 3 is always the hiring of big-name writers, which I’m sure Brown is doing at this exact minute. Stage 4 is grumbles from moguls, in this case Harman and IAC’s Barry Diller—owner of the Beast and now Harman’s 50-50 partner in the Newsweek Daily Beast Company. They complain that the magazine is not a charity and order cutbacks. In Stages 5, 6, and 7, the star editor gets sacked, a pushover is hired as replacement, the moguls strip the publication down to its chassis and wheels, and they look for a new sucker to buy the publication.

The point here is that you don’t amputate one of your most highly-regarded limbs in Stage 2 or Stage 3; that kind of thing doesn’t come until Stage 7. But that’s what’s going on here—the only colorable reason to close Newsweek.com is a budgetary one.

The really bizarre thing, of course, is that on a budgetary level Newsweek.com is the cheapest and most efficient part of the entire organization, losing less money and providing much more bang per buck than either TheDailyBeast.com or the print edition of Newsweek. It also has more readers than both of them put together.

The summary execution of Newsweek.com makes sense only as a power-grab by Brown, and a sign that she somehow thought of it as a threat rather than a source of ideas and readers. I understand that her job is to reinvent a failing magazine rather than to make friends with the chronically underfunded staffers at Newsweek.com. But this decision makes no sense at all.

Update: I agree with Rafat Ali, who says he suspects the DailyBeast Newsweek people don’t even know what “shutting down a website” means or entails. Which only increases the likelihood of a disaster like what happened when the NYT — normally quite a web-savvy company — shut down IHT.com and broke all of its permalinks.

Bloomberg’s Liz McCormick has an interesting take on QE: “Options Showing Quantitative Easing Working Before It Begins” is the headline on her piece, which concentrates on an obscure indicator known as “payer skew.”

Payer skew is an indicator which goes up when bond yields are rising, and goes down when they’re falling. When payer skew is high, as it is now, it’s an indication that markets see more risk that bond yields are going to continue to rise than they see risk that yields will fall.

But it’s a stretch, I think, to conclude that the rise in payer skew means that QE is working. And it certainly can’t be working before it even begins. After all, QE2 has already begun, with the purchase on Friday of more than $6 billion in bonds maturing between 2014 and 2016.

It seems to me that what we’re seeing in the payer skew numbers is the downside of QE, rather than its intended consequence. The stated aim of QE, after all, is to bring down long-term interest rates, and that isn’t happening at all:

Yields on 10-year Treasuries, a benchmark for everything from corporate bonds to mortgage rates rose last week by the most since December, surging 26 basis points, or 0.26 percentage point, to 2.79 percent.

Meanwhile, the problem with QE is that it maximizes the amount of volatility, uncertainty, and tail risk in the markets generally and the bond market in particular. Since businesses invest when they have certainty about the future business environment, QE risks exacerbating the very problem that it’s intended to solve.

My take, then, on the payer skew figures is that they’re an indicator of increased risk and nervousness in the bond markets. While traders don’t yet expect higher inflation outright, the demand for hedge against falling bond prices is definitely rising. There’s nothing here to encourage businesses to take out long-term loans and invest the proceeds in new permanent jobs.

So I can’t imagine that anybody on the FOMC is looking at the rising payer skew numbers as an indicator that QE is working. After all, the ultimate aim of QE is to create jobs. And I can’t think of a single reason why higher payer skew means more job creation.

Time change. You lose, you gain. Then all at once the frozen hours melt out through the nervous system — FT

My sister’s final passage to New Zealand — Smiling Footprints

“After paying $425 to the Better Business Bureau they received an A- grade for a non-existent company called Hamas” — Consumer Reports

The new joint venture will kill off Newsweek.com — MediaWeek

Buy a truck, get an AK-47 free — Fox Orlando

Vikram Pandit Has No Clothes — Baseline Scenario

The Campaign Against Photographs of Dead Bodies — Awl

In the wake of his excellent rent-vs-buy calculator, David Leonhardt has helped create another interactive tool, this one called “You Fix the Budget“. He writes:

The New York Times has conducted its own analysis of the federal budget, but with a different final product. Rather than making recommendations, we are laying out a menu of major options, so that readers can come up with their own plan. We have received help along the way from the deficit panel, from Congressional and White House aides and from liberal, conservative and centrist budget analysts.

It’s a good idea in theory, and I even played the game myself, solving the deficit with a mixture of 69% tax increases and 31% spending cuts. Still, I’m not a huge fan of the way it’s been executed in practice of the way that the NYT makes it both too easy and too difficult to “win” the game.

The too-easy part comes on the spending-cut side. The goal is to reduce the 2030 shortfall by $1.355 trillion, and the NYT includes an option under “health care” which simply says “cap Medicare growth starting in 2013″. By clicking on this box, which “would cap the Medicare growth at GDP growth plus 1 percentage point, starting in 2013″, you at a stroke get $562 billion of savings.

You can win the game without clicking on that box — I managed to do it — but of course the game becomes much harder if you deny yourself that easy and fanciful trick. But it is fanciful: there’s simply no credible way to enact that kind of hard cap on Medicare expenditures, in a world where the over-65 population is growing fast as the Baby Boomers retire, where that generation is also living longer than ever, and where end-of-life healthcare is becoming increasingly expensive across the board.

The too-hard part comes on the tax-hike side, where the options are far too limited. For instance, you have two choices when it comes to taxes on capital gains and dividends, both of which cap that tax at 20%. Can’t I opt to raise that tax to the same level as the income tax? Even the deficit commission does that.

Similarly, for the payroll tax, the most you can do is raise the ceiling so that it covers the same 90% of all income that it covered at inception; you can’t raise it any further than that, or abolish the ceiling entirely.

And on the mortgage-interest deduction, there’s no option for abolishing it, as I would love to do; instead all you can do is swap it out for some lower-cost credit.

Most importantly, the options for new taxes are extremely constrained. The carbon tax is relatively modest, raising $40 billion in 2015; I’d like to see something significantly larger — ideally a cap-and-trade system with credits which were fungible with Europe’s system — which would raise more money and include significant rebates for people in the bottom half of the income distribution.

The bank tax is also a good idea, but again it doesn’t go far enough, since it hits only the largest banks: why not add the option of a Tobin tax, too, which would raise revenue from financial transactions no matter who was engaging in them.

I’d also love to see the option of a wealth tax, which could raise a lot of money from those most able to afford it.

Finally, although I’m a fan of a consumption tax, I don’t like the NYT’s sole option on that front — a 5% national sales tax which applies to everybody equally. I’d much rather see something much more progressive: look at each taxpayer’s annual income, subtract their annual savings, and the difference is their annual consumption. Allow everybody say $50,000 of consumption per year tax-free, and then start taxing consumption over that point, with the tax rate rising as consumption grows. If you spend over $250,000 a year, your marginal consumption could be taxed quite highly.

In general, the NYT options on both the spending-cut and the tax-hike side tend to hit the poor and the middle classes more drastically than the rich; what’s missing here is the option to implement something much more progressive, in both senses of the word. It’s a missed opportunity, and a shame.

One of the positive effects of the deficit commission report is the way that it has brought the stupid mortgage-interest exemption back into the spotlight. David Kocieniewski’s article in the NYT is very good, although I don’t understand why simple statements of fact have to be attributed to anonymous “experts” or “economists”:

Tax policy experts say that for all its popularity, the value of the deduction in public policy is debatable. It was intended to encourage homeownership, but housing economists point out that countries like Canada and Australia, which do not allow mortgage interest deductions, have homeownership rates similar to those of the United States.

In my ideal world, Kocieniewski would also have mentioned the substantial downsides of high homeownership rates, as well as the experience of the UK, which abolished mortgage-interest tax relief in 2000, only to see house prices skyrocket afterwards.

But the broad thrust of Kocieniewski’s article is clear: the mortgage-interest deduction costs $131 billion a year, none of which goes to renters or to people who have paid off their mortgage, and all of which goes to people in the top 1/3 of the income distribution. There’s nothing fair about it at all, and in these straitened fiscal times, we’ve surely reached the point at which we have to abolish it somehow.

Given that the increased tax burden would fall disproportionately in the blue states of California, New England, and New York, you’d think that this might be something that even Republicans could get behind, but sadly I believe Kocieniewski when he says that “Congress would probably not consider it except as part of a major overhaul of the tax code.” Or, technically, when he says that tax policy experts say that Congress would probably not consider it except as part of a major overhaul of the tax code.

The problem with this kind of attribution is that it sets up a he-said-she-said equivalence between those tax policy experts, on the one hand, with people like Nancy Pelosi, on the other, who slammed the idea as a tax hike for the middle class.

In any case, I’d love to see some numbers on just what proportion of the middle class takes advantage of this deduction. And why it makes sense that $131 billion should be directed to that particular subset of the middle class, rather than to everybody on a similar income.