Quotulatiousness

August 8, 2013

Canadian think-tanks

Filed under: Cancon, Economics, Media, Politics — Tags: , , , — Nicholas @ 00:01

An interesting article in Forbes charts the rise of Canada’s distinctive collection of think-tanks:

Think Tanks in Canada have been developing policy analyses and advocating market oriented solutions for decades. Some of the oldest think tanks and advocacy groups, such as the C.D. Howe Institute, founded in 1958, and the National Citizens Coalition, NCC, founded in 1974, are still active. The idea for NCC developed from the success of newspaper advertorials.

The first one published by Colin M. Brown in 1967 pointed out that despite not being engaged in the Vietnam War, Canada’s federal government spending in the early 1960’s rose at a faster rate than government spending in the U.S. Canadian civil society took notice and reacted. The Fraser Institute was founded in Vancouver, B.C. in 1974, and its success and generosity in sharing its expertise led to a gradual but almost steady investment in think tanks across the country. Lest we forget, Canada is a big place. It is the second largest country in the world. The longest distance from east to west is 5,514 km — similar to the distance from New York City to London, or from New York City to Lima, Peru. Canada has six separate time zones and its provinces have considerable cultural and political diversity which call for a multiplicity of regional think tanks and policy efforts.

The “2012 Global Go To Report” devotes a section of its think tank rankings to institutes in Canada and Mexico. A growing number of Canadian free-market think tanks are appearing among the top.

Fraser Institute takes the lead. It received more mentions (10) than any other Canadian think tank and ranked first in Canada and 25th in the world. It is well known for its motto: “If It Matters, Measure It.” Many of its products, like the “Tax Freedom Day” and its economic freedom indices, have been replicated across the globe. Think tanks all over the world look at Fraser’s research as a guide in developing their own programs.

Brian Lee Crowley, the co-author of The Canadian Century, founded the Ottawa-based Macdonald Laurier Institute in 2010. It ranked third in the world in the category of best young institute. As it hit the ground running with great policy products, it also managed to rank ahead of other older think tanks, including the Atlantic Institute for Market Studies (AIMS) in Nova Scotia, founded in 1994. Crowley was also the founding president of AIMS. AIMS itself an organization that produces interesting work on market reforms in Canada’s maritime provinces — a part of the country that typically prefers big government as opposed to market-oriented solutions.

The Montreal Economic Institute deserves special mention for working in one of the most challenging cultural environments. It publishes in French and English, and is the only think tank in Canada to focus its efforts entirely on Quebec. The institute was founded in 1985 but became consolidated when Michel Kelly-Gagnon, a talented intellectual entrepreneur, became its leader in 1999 and restructured the organization. Kelly-Gagnon’s expertise is in high demand also outside Canada, and his team has produced tremendous materials advocating specifically for reforms to government-controlled health care.

August 7, 2013

Infrastructure does not lead development – it lags

Filed under: Economics, Government, History, Railways — Tags: , , , — Nicholas @ 08:28

In the Wall Street Journal, Larry Schweikart and Burton Folsom correct the misunderstanding that development and growth will follow infrastructure:

History says it doesn’t work like that. Henry Ford and dozens of other auto makers put a car in almost every garage decades before the National Interstate and Defense Highways Act in 1956. The success of the car created a demand for roads. The government didn’t build highways, and then Ford decided to create the Model T. Instead, the highways came as a byproduct of the entrepreneurial genius of Ford and others.

Moreover, the makers of autos, tires and headlights began building roads privately long before any state or the federal government got involved. The Lincoln Highway, the first transcontinental highway for cars, pieced together from new and existing roads in 1913, was conceived and partly built by entrepreneurs — Henry Joy of Packard Motor Car Co., Frank Seiberling of Goodyear and Carl Fisher, a maker of headlights and founder of the Indy 500.

Railroads are another example of the infrastructure-follows-entrepreneurship rule. Before the 1860s, almost all railroads were privately financed and built. One exception was in Michigan, where the state tried to build two railroads but lost money doing so, and thus happily sold both to private owners in 1846. When the federal government decided to do infrastructure in the 1860s, and build the transcontinental railroads (or “intercontinental railroad,” as Mr. Obama called it in 2011), the laying of track followed the huge and successful private investments in railroads.

In fact, when the government built the transcontinentals, they were politically corrupt and often — especially in the case of the Union Pacific and the Northern Pacific — went broke. One cause of the failure: Track was laid ahead of settlements. Mr. Obama wants to do something similar with high-speed rail. The Great Northern Railroad, privately built by Canadian immigrant James J. Hill, was the only transcontinental to be consistently profitable. It was also the only transcontinental to receive no federal aid. In railroads, then, infrastructure not only followed the major capital investment, it was done better privately than by government.

August 4, 2013

Who speaks for those neither rich nor poor?

Filed under: Economics, Government, USA — Tags: , , , — Nicholas @ 09:37

Victor Davis Hanson on the forgotten people in the middle:

There are more than 48 million Americans on food stamps, an increase of about 12 million since the beginning of the Obama presidency.

At a time of record-high crop prices, the U.S. government still helps well-off farmers with some $20 billion in annual crop payouts and indirect subsidies.

The Left mythicizes food-stamp recipients almost as if they all must be the Cratchits of Dickensian England.

The Right romanticizes corporate agriculture as if the growers all were hardscrabble family farmers in need of a little boost to get through another tough harvest.

Those in between, who pay federal income taxes and are not on food stamps, lack the empathy of the poor and the clout of the rich. Can’t a politician say that?

Illegal immigration is likewise not a Left vs. Right or Republican vs. Democrat issue, but instead mostly one of class.

The influx of millions of illegal immigrants has ensured corporate America access to cheap labor while offering a growing constituency for political and academic elites.

Yet the earning power of poorer American workers — especially African Americans and Hispanic Americans — has stagnated.

The common bond between the agendas of La Raza activists and the corporate world is apparently a relative lack of concern for the welfare of entry-level laborers, many of them in American inner cities, who are competing against millions of illegal workers.

Given the slow-growth, high-unemployment economy, and the policies of the Federal Reserve, interest on simple passbook accounts has all but vanished.

The poor are not so affected. They are more often borrowers than lenders, and they are sometime beneficiaries of federally subsidized debt relief.

The rich have the capital and connections to find more profitable investments in real estate or the stock market that make them immune from pedestrian, underperforming savings accounts.

In other words, this administration’s loose money policy has been good for the indebted and even better for the stock-invested rich. But it is absolutely lousy for the middle class and for strapped retirees with a few dollars in conservative passbook accounts.

August 3, 2013

Energy efficiency does not equate to lower energy usage

Filed under: Britain, Economics, History — Tags: , — Nicholas @ 10:48

Tim Harford talks about an obscure 19th century prognosticator and the implications of one of his predictions:

Despite Keynes’s admiration, Jevons might now be forgotten, save for one famous prediction and one intriguing argument. The famous prediction — that the UK’s economic prosperity was at risk because the country would run out of viable reserves of coal — was contained in The Coal Question (1865), a book that made Jevons a celebrated pundit at the age of 29. The coal industry did fall into decline. Production peaked exactly a century ago, when there were 1.1 million coal miners — four times as many as when Margaret Thatcher was elected in 1979. Whether this had much to do with the fall of the Empire is a fascinating question.

Jevons remains notable in some circles for an argument he made in The Coal Question, rebutting critics who claimed that a coal shortage was no problem because steam engines would become dramatically more efficient. Jevons replied: “It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is the truth.” This idea became known as the Jevons paradox: that energy efficiency does not reduce energy consumption. When light was hugely expensive, a person might read by the fickle flame of a single candle; now it’s so cheap we flood our cities with it. Double glazing could mean lower heating bills but in practice it means warmer houses.

So was Jevons right? That’s a hotly contested topic. On a microeconomic level, he was not: a 50 per cent increase in the energy efficiency of a device will lead to increased use, but rarely to the doubling in usage that would be necessary for Jevons to be correct. Aha, reply Jevons’s defenders: even if a fuel-sipping car does not induce me to drive much further, I may still spend my cash savings on some other energy-guzzling device. True. But energy is a small enough part of the economy — about 6 to 10 per cent — that the actual cash savings available to spend elsewhere will usually be modest.

August 1, 2013

Efficiency in loading is key to container ship logistics

Filed under: Economics — Tags: , — Nicholas @ 12:26

In Wired, Bryan Gardiner extracts some key knowledge from the folks who load those giant container ships:

Loading a container ship

Container ships are the pack mules of global trade, and journalist Rose George’s new book, Ninety Percent of Everything, is the latest look at how the steel boxes full of solids, liquids, and gases get to where they’re going. One huge challenge, George says, is simply loading and unloading these giant ships, a task that calls on physics, chemistry, and a knowledge of pirate tactics.

1 // Minimize the number of crane moves. Algorithms and computer systems help plan the most efficient and practical storage schemes so ships can get in and out of port fast.

2 // Cold boxes need juice. Refrigerated containers — or “reefers” — must be placed near a power source.

3 // Guard your vessel. Containers are sealed after inspection, but thieves can use simple tools to get around the seals and pop open the doors.

4 // Heaviest boxes go down low. This prevents the stack from collapsing. And they’re distributed as evenly as possible to keep the ship balanced.

July 30, 2013

The economic inefficiency of “fair trade” goods

Filed under: Business, Economics, Food — Tags: , , , , — Nicholas @ 10:26

Tim Worstall applauds you for wanting to use some of your economic surplus to help out the poor and less fortunate producers of various goods in the developing world, but points out that the “fair trade” method is incredibly inefficient at funnelling any of that extra money to the original producers of your coffee or other “fair trade” goods:

However, you might want to have a little think about this in the lights of these quite astonishing numbers:

    An interesting statistic is that in 2010, retail sales of fair-trade-labelled products totalled about $5.5 billion, with about $66 million premium — or about 1.2 percent of total retail sales — reaching the participating producers. There has to be a better way of helping poor farmers. Having only 1.2 cents out of every dollar spent on fair-trade products reach the target farmers is a hugely inefficient way of helping these people. If people wish to help these farmers there has to be charities out there that can transfer more than 1.2 cents per dollar to them.

It may well be that you are exercising your consumer choice as a way to make the world a better place. It’s just an incredibly inefficient method of doing so and thus you might want to reconsider that plan.

My own supposition is that the reason Fair Trade is so appallingly inefficient is the number of Interchangeable Emmas who have to be paid from that money supposedly going to producers. It takes very many poor coffee farmers’ incomes to pay for the PR bod advertising Fair Trade coffee from an office in central London. It might well be better to simply do as Madsen urges, and buy things made by poor people in poor countries. Then send the money saved by not paying the Emmas off to a charity of some minimal efficiency. Or even, if coffee farmers are really your thing, simply drink an extra cup or two a day and send the money by increasing demand for their production.

Update: In a marginally related item, Jonathan Katz explains why the policy of sending food to distant lands is less an attempt to ameliorate hunger than it is a corporate welfare policy to prop up US agribusiness:

The problem, says Christopher Barrett, an economist at Cornell University and one of the world’s leading experts on food aid, is that the U.S. has an entirely different goal when it comes to sponsoring humanitarian assistance. Feeding the hungry has never been its sole purpose.

Rather, the historical goal of food aid has been to stimulate U.S. businesses — the agriculture and shipping industries above all. Modern food aid was devised in the early days of the Cold War as a way to dispose of government-held surpluses, in order to regulate crop prices at home and create markets abroad. The main programs in the early days of food aid didn’t even give food away for free, rather selling it to foreign governments at a discount. “It just happened that this could get advertised as and provide humanitarian relief on occasion,” Barrett said.

Over time, things began to change. Surplus disposal became less important than other forms of domestic price control, and the cheaply sold food did not prove very effective in opening markets. When in the 1970s and 1980s, food donated during famine emergencies in Asia and Africa proved effective, free-food distributions took over as the dominant programs.

Today, the major players in food aid are nongovernmental organizations (NGOs) such as World Vision. But, because of how American laws are structured, domestic corporations still reap the much of the profit. Major U.S. agribusinesses can count on hundreds of millions of dollars in annual sales to the government.

Shipping companies do even better. Federal law mandates that at least half of all U.S. food aid must be shipped aboard U.S.-flagged vessels. With shipping costs taking up nearly 40 percent of any food assistance funding, the law guarantees hundreds of millions of dollars in contracts for shipping companies. The winner of the Mozambique shipment was no exception: Sealift Inc. has grossed $203 million in government contracts since 2011, mostly from the Pentagon, according to data at USASpending.gov. This benefit is not lost on the shipping industry: The sector’s leading coalition, USA Maritime, spent $250,000 lobbying Congress on food aid and cargo-preference laws in 2011 and 2012.

July 29, 2013

“Junk food costs as little as $1.76 per 1,000 calories, whereas fresh veggies … cost more than 10 times as much”

Filed under: Economics, Food, Health, USA — Tags: , , , , — Nicholas @ 10:35

Making a case for the McDonald’s McDouble as the greatest food in human history:

What is “the cheapest, most nutritious and bountiful food that has ever existed in human history” Hint: It has 390 calories. It contains 23g, or half a daily serving, of protein, plus 7% of daily fiber, 20% of daily calcium and so on.

Also, you can get it in 14,000 locations in the US and it usually costs $1. Presenting one of the unsung wonders of modern life, the McDonald’s McDouble cheeseburger.

The argument above was made by a commenter on the Freakonomics blog run by economics writer Stephen Dubner and professor Steven Leavitt, who co-wrote the million-selling books on the hidden side of everything.

Dubner mischievously built an episode of his highly amusing weekly podcast around the debate. Many huffy back-to-the-earth types wrote in to suggest the alternative meal of boiled lentils. Great idea. Now go open a restaurant called McBoiled Lentils and see how many customers line up.

But we all know fast food makes us fat, right? Not necessarily. People who eat out tend to eat less at home that day in partial compensation; the net gain, according to a 2008 study out of Berkeley and Northwestern, is only about 24 calories a day.

The outraged replies to the notion of McDouble supremacy — if it’s not the cheapest, most nutritious and most bountiful food in human history, it has to be pretty close — comes from the usual coalition of class snobs, locavore foodies and militant anti-corporate types. I say usual because these people are forever proclaiming their support for the poor and for higher minimum wages that would supposedly benefit McDonald’s workers. But they’re completely heartless when it comes to the other side of the equation: cost.

Update, 30 July: Stephen Dubner notes that the Kyle Smith story has triggered “about one zillion” media requests for more comment on the original post, but that he’s too busy writing to take time out to respond.

July 27, 2013

Jiangsu might as well be the Chinese name for Detroit

Filed under: China, Economics — Tags: , , , , — Nicholas @ 11:02

The South China Morning Post on the economic troubles of the provincial, municipal and local authorities in Jiangsu:

The nightmare scenario for China’s leaders as they try to wean the country off a diet of easy credit and breakneck expansion is a local government buckling under the weight of its own debt. Few provinces fit that bill quite like Jiangsu, home to China’s most indebted local government.

Hefty borrowings through banks, investment trusts and the bond market by Jiangsu’s provincial, city and county governments have saddled the province north of Shanghai with debt far higher than its peers, public records show.

Many of the province’s mainstay industries, including shipbuilding and the manufacturer of solar panels, are drowning in overcapacity. Profits are dwindling, and the government’s tax growth is braking hard.

[…]

Little public information is available on the total debt of Chinese local governments. Indeed, earlier this month China’s Vice-Finance Minister Zhu Guangyao said Beijing did not know the precise level of their debts either.

But from what ratings agencies and think-tanks can piece together, Jiangsu may be the standout debt risk among China’s 31 provinces.

Looking at bank loan books, they can see that China’s eastern provinces including Jiangsu have the highest concentration of government debt. Jiangsu then looms large because of its reliance on costlier and alternative forms of financing, which they said suggested that cheaper bank loans and land sales are not giving the authorities the funding they need.

The risk that Jiangsu might pose to the Chinese economy in a crisis is clear. On its own, the province would be a top 20 global economy with GDP greater than G20 member Turkey. Its 79 million population tops that of most European countries.

Municipal bonds and the economic law of gravity

Filed under: Economics, Government — Tags: , , , , — Nicholas @ 10:48

In the US, municipal bonds — bonds issued by city or other municipal governments — have been widely viewed as “safe” investments. Detroit may cause that view to change drastically. Reggie Middleton has been sounding the alarm for a few years:

Following up on my timely post “Here Come Those Municipal Defaults That Everyone Said Couldn’t Happen, Pt 2“, I comment on Meredith Whitney’s OpEd in the Financial Times. If you remember, she — like I — warned of municipal defaults years ago and was ridiculed for such. Ms. Whitney is quoted as saying:

    “As jarring as the reality may be to accept, Detroit’s decision last week to declare bankruptcy should not be regarded as a one-off in the U.S. municipal market.” she said.

    “There are five more towns like Detroit in Michigan alone. There are many more municipalities across the country in similar positions.”

    “The bill for promises past is now so large for some cities and towns that it is crowding out money for the most basic of services — in the case of Detroit, it could not even afford to run its traffic lights,” she said.

    “Will [lawmakers] side with taxpayers, unions or the municipal bondholders? If they back residents, money will be directed to underfunded public services at the expense of pensions and bondholders. If they side with the unions, social services will continue to be cut and the risk to bondholders will increase considerably. If they side with bondholders, social services and pensions are at risk.”

    In the case of Detroit, elected officials, for the first time in a very long time, are siding with residents, Whitney said. This is a new precedent that boils down to the straightforward reality of the survival and sustainability of a town or city, she said.

    “After decades of near-third-world conditions in the richest country in the world, the city finally stood up and said enough was enough,”

Well, this is the problem. Defaulting on revenue bonds where the underlying asset (ex. a housing project, utility, or infrastructure project) is not generating the sufficient cash flows is part and parcel of the risk of investing in said class of bonds. This is widely accepted and understood, which is likely why those bonds have a slightly higher yield.

For some obscene reason, defaulting on the general obligation bonds which purportedly carry the “full faith and credit’ of the municipality as a back stop is deemed as wholly different affair. The reason? Who the hell knows? This is a point I tried to drive home in the original “Here Come Those Municipal Defaults That Everyone Said Couldn’t Happen” article in 2011. Backing by the full faith and credit of a public entity does not make an investment risk free. To the contrary, if said entity is fundamentally insolvent, the investment is actually “riskful” as opposed to risk free.

Treating these bonds as unsecured in the bankruptcy is essentially the way to go. If you don’t want to do that, well you can still consider them backed by the full faith and credit of the insolvent municipality, which is essentially unsecured — and move on anyway — particularly as many potential collateral assets of value would have likely been encumbered by agreements with a little more prejudicial foresight.

July 23, 2013

The real aftermath of Iceland’s banking collapse

Filed under: Economics, Government — Tags: , , , , — Nicholas @ 09:01

Simon Black contradicts the media narrative that Iceland has “recovered” from the melt-down of their banking sector:

It was a spectacular collapse. And the first of many. Ireland, Greece, Cyprus, etc. were soon to follow.

Yet unlike the bankrupt countries of southern Europe, Iceland dealt with its economic emergency in a completely different way.

Politicians here are proud that they never resorted to austere budget cuts that are so prevalent in Europe.

They imposed capital controls. They let the banks fail. And, as is so commonly trumpeted in the press, they ‘jailed their bankers and bailed out their people.’

Today, Iceland is held up as the model of recovery. Famous economists like Paul Krugman praise the government for rapidly rebuilding the economy without having to resort to austerity.

This morning’s headline from The Telegraph newspaper sums it up: “Iceland has taken its medicine and is off the critical list”.

It turns out, most of these claims are dead wrong.

[…]

Meanwhile, the government ended up taking on massive amounts of debt in order to bail out the biggest bank of all – Iceland’s CENTRAL BANK.

This was a bit different than the way things played out in the US and Europe.

In the US, the Fed conjures money out of thin air and funnels it to the government.

In Iceland, since the Kronor is not a global reserve currency, the government had to go into debt in order to funnel money to the Central Bank, all so that the currency wouldn’t collapse.

As a result, Iceland’s state debt tripled, almost overnight, in 2008. And from 2007 until now, it has increased nearly 5-fold.

Today, the government is spending a back-breaking 17.3% of its tax revenue just to pay interest on the debt.

And this is real interest, too. Iceland’s central bank owns very little of the government debt. The rest is owed to foreign creditors… putting the country in an extremely difficult financial position.

At the end of the day, the Icelandic people are responsible for this. They were never bailed out. They were stuck with the bill.

Meanwhile, although unemployment in Iceland is low, wages are even lower. And the weak currency has brought on double-digit inflation.

So while people do have jobs, they can hardly afford anything.

This is most prevalent in the housing market, most of which is underwater. Interest rates have jumped so much that many Icelanders are now on negative amortization schedules, i.e. their mortgage balances are actually INCREASING with each payment.

July 22, 2013

Detroit as Ayn Rand’s “Starnesville”

Filed under: Books, Economics, Government, Media, USA — Tags: , — Nicholas @ 09:59

In the Telegraph, Daniel Hannan quotes Ayn Rand:

Look at this description of Detroit from today’s Observer:

    What isn’t dumped is stolen. Factories and homes have largely been stripped of anything of value, so thieves now target cars’ catalytic converters. Illiteracy runs at around 47%; half the adults in some areas are unemployed. In many neighbourhoods, the only sign of activity is a slow trudge to the liquor store.

Now have a look at the uncannily prophetic description of Starnesville, a Mid-Western town in Ayn Rand’s dystopian novel, Atlas Shrugged. Starnesville had been home to the great Twentieth Century Motor Company, but declined as a result of socialism:

    A few houses still stood within the skeleton of what had once been an industrial town. Everything that could move, had moved away; but some human beings had remained. The empty structures were vertical rubble; they had been eaten, not by time, but by men: boards torn out at random, missing patches of roofs, holes left in gutted cellars. It looked as if blind hands had seized whatever fitted the need of the moment, with no concept of remaining in existence the next morning. The inhabited houses were scattered at random among the ruins; the smoke of their chimneys was the only movement visible in town. A shell of concrete, which had been a schoolhouse, stood on the outskirts; it looked like a skull, with the empty sockets of glassless windows, with a few strands of hair still clinging to it, in the shape of broken wires.

    Beyond the town, on a distant hill, stood the factory of the Twentieth Century Motor Company. Its walls, roof lines and smokestacks looked trim, impregnable like a fortress. It would have seemed intact but for a silver water tank: the water tank was tipped sidewise.

    They saw no trace of a road to the factory in the tangled miles of trees and hillsides. They drove to the door of the first house in sight that showed a feeble signal of rising smoke. The door was open. An old woman came shuffling out at the sound of the motor. She was bent and swollen, barefooted, dressed in a garment of flour sacking. She looked at the car without astonishment, without curiosity; it was the blank stare of a being who had lost the capacity to feel anything but exhaustion.

    “Can you tell me the way to the factory?” asked Rearden.

    The woman did not answer at once; she looked as if she would be unable to speak English. “What factory?” she asked.

    Rearden pointed. “That one.”

    “It’s closed.”

Now here’s the really extraordinary thing. When Ayn Rand published those words in 1957, Detroit was, on most measures, the city with the highest per capita GDP in the United States.

July 21, 2013

Reason.tv – Detroit’s Tragedy and How to Fix It

Filed under: Economics, Government, USA — Tags: , , , — Nicholas @ 09:12

The key things about Detroit’s bankruptcy are that it didn’t happen overnight – and it didn’t have to happen at all.

Detroit’s long, sad slide started in 1950, when the Motor City’s population peaked at nearly 2 million people. Now it’s around 700,000.

The hollowing out of the city was on gut-wrenching display in two recent exhibits at the National Building Museum, featuring photographs by Camilo Jose Vergara and Andrew Moore.

In fat times and lean, the city’s pols and power-brokers chose to focus their energy, and the residents’ tax dollars on gigantic, big-ticket development scams while ignoring the basics that let cities thrive — or at least survive.

Detroit’s leaders poured money into a never-ending assembly line of sad-sack projects such as the Renaissance Center, the Fox Theater, Comerica Park, Poletown, the People Mover, and Ford Field.

But unlike Pompei and other cities crushed by Nature’s wrath or God’s wrath, Detroit’s destruction is completely man-made and thus can be reversed. The city that midwifed the Model T and the Cadillac, Bob Seger and Eminem, Ted Nugent and the Insane Clown Posse, still has tremendous assets in terms of infrastructure, location, and people.

Like Buffalo, Cleveland, St. Louis, and other dead cities scattered across the map of the industrial Midwest like so many cigarette burns, Detroit can stage its own comeback by reducing crime and picking up garbage; by freeing kids, parents, and property values from an abysmal school system; and getting the government out of everything that isn’t essential.

In other words, Detroit’s leaders only need to do what they should have been doing for the past 50 years. And the city’s dwindling supply of residents needs to keep them honest this time.

Because Detroit is finally out of next times.

Produced by Jim Epstein. Written and narrated by Nick Gillespie. Additional camera by Meredith Bragg.

Lessons in “Rockonomics”

Filed under: Economics, Media — Tags: , — Nicholas @ 00:01

Tim Harford has a few interesting economic examples to look at from the world of music:

Lesson two is about globalisation. A new article in The Economic Journal from Fernando Ferreira and Joel Waldfogel asks whether in a world of MTV and YouTube, national musical cultures are being crushed by American imports. Ferreira and Waldfogel have assembled more than a million data points covering chart hits in 22 countries, in some cases going back to 1960. In practice this covers pretty much the entire global music market, and the data are used to estimate the value of music sales.

At first glance, worries about the cultural dominance of the US seem justified: US artists are responsible for 60 per cent of world music sales. But US artists were responsible for 80 per cent of world music sales in the early 1960s before dramatically losing market share to the British. (We are now, alas, in sharp decline.)

In the early 1980s, less than 50 per cent of music sales were by domestic artists — that is, French artists selling in France, or Brazilian artists selling in Brazil. By 2007 that figure was around two-thirds. Domestically produced music is having a renaissance — proof that globalisation has more complex effects than we tend to assume.

July 19, 2013

Bitter reality scheduled to return on September 22nd

Filed under: Economics, Europe, Germany, Government — Tags: , , , , , — Nicholas @ 08:46

Here’s an unpleasant idea to disturb your narrative of economic recovery:

You may have noticed the small blurb recently that the ECB had eased the rules for asset backed securitizations. You may have read this snippet and thinking nothing of it you moved on. This would have been a mistake because just here you would have noticed the cracks of a crumbling empire.

The French banks, the Spanish banks, the Portuguese banks are all engaged in an ongoing charade so they do not need to ask the EU for help. They all are taking their Real Estate loans, the properties that they have confiscated, the commercial loans that are no longer paying and they have put them into massive securitizations that are pledged at the ECB as they are given cash for the collateral. The collateral, as you may suppose, has all of the value of cents on the Dollar but they are given money at par while the ECB carries them on their books at par. It is a fraudulent scheme jam packed with money created out of nothing but it is judged to be a better plan that to have to admit to accurate financials and have the banks of Europe default all across the Continent.

[. . .]

There will be nothing but lying until September 22, 2013 which is the date of the German elections. This is the drop dead date that I have been asked about for so long. Then, as soon as the celebration is over that Ms. Merkel is to remain in power, the world will turn on its axis. The status quo will disappear and there will be a “shock and horror” campaign as the Southern nations of Europe demand more help and Germany squirms and then refuses to provide it because it does not have the assets to do so.

Spain, France, Portugal, Greece, Cyprus, and even Italy are all going to line up at the trough only to discover that the promise of water was just that, a promise, and does not exist. A Biblical drought will be upon the Continent and from the political battles will emerge new alliances and new screams calling the traitors by name. The twin towers upon which the markets rest, money from nothing and fairy tale financials, will decompose in the light of this new sun and our old friend, Fear, will return to haunt us.

Sleep well.

Blaming the bankers and absolving the politicians

Filed under: Economics, Government — Tags: , , — Nicholas @ 08:23

Daniel Ben-Ami points out that current campaigns to vilify bankers (“banksters”) over their role in the economic crisis that began in 2007-2008 conveniently ignores the politicians’ dirty hands:

There is at least one area where mainstream politicians can legitimately claim considerable success: they have offloaded much of the blame for the economic crisis from themselves and on to banks and other financial institutions.

Much of the public has accepted the premise that greedy bankers were largely responsible for the economic turmoil that emerged in 2007-8. There is little discussion of the government’s role in creating the conditions for the financial crash, let alone any examination of the economy’s underlying weaknesses.

Criticism of the government’s economic policy is usually confined to it being heartless or ill thought out. Often the two are combined, in the accusation that the government is obeying the diktat of its banker friends by imposing cuts. Campaigners also often allege that a shady global financial network is the real power in the world. In this conspiratorial worldview, a labyrinth of offshore tax havens helps the rootless rich evade the power of national authorities.

[. . .]

But in truth, politicians on both sides of the Atlantic bear a large share of the blame for the crisis. To understand their culpability, it is necessary to go back at least to the early 1980s rather than just to 2007. For decades it was clear that investment and innovation were insufficient. Yet rather than tackle these underlying problems, the authorities pursued policies that ended up creating a credit bubble.

Public spending was kept high and interest rates artificially low. Often, governments also used additional measures to ease the supply of credit, such as reforming the financial markets. The hope was that such moves would keep the market ticking over in the short term and the economy would somehow correct itself in the longer term.

This was the backdrop to the financial crisis that emerged in 2007-8. Bankers certainly played a role, but governments created the conditions for the credit bubble to emerge. Underlying this development was the failure of politicians to tackle or even recognise structural economic weaknesses.

[. . .]

Underlying anti-banking campaigns is the common assumption that financial institutions are part of a giant global conspiracy to undermine nation states.

This view was most vividly put forward by Matt Taibbi, a campaigning American journalist, in a 2009 article in Rolling Stone magazine and in a subsequent book. He famously condemned Goldman Sachs, a top Wall Street investment bank, as ‘a giant vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money’. In the UK, the New Economics Foundation, a think tank, adopted the image with a short video entitled Taming the Vampire Squid: Take Back Our Banks.

There are several reasons to object to such imagery and the conspiratorial worldview that underlies it. For one thing it is strongly reminiscent of Nazi imagery of Jews as central to an international financial conspiracy. For example, in Mein Kampf, Adolf Hitler talked of Jews as being ‘like leeches… they were slowly sucking the blood from the pores of the national body’.

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