October 4, 2010
A cameo economic round-up by Monty
One of the most interesting features over at Ace of Spades HQ used to be the daily economic round-ups by Monty. Unfortunately, he had to take a breather, but we’re able to get an occasional update like this one:
[In which Monty, long away from the neighborhood, returns to save the local mom-n-pop bank from a hostile takeover through a stylish melange of breakdancing, infectious urban beats, and the rap music that all the youngsters seem to be so fond of. Thrill to the parachute pants, Jheri curls, and mirrored wraparound sunglasses! (The soundtrack, “Monty Raps! Funky Accordion and Theremin Music For These Troubled Modern Times”, now available in fine discout outlets nationwide!)]
[. . .]
I just wouldn’t be me if I didn’t point out that gold is now $1314/oz as I write this. I bought some gold five years back at about $500/oz; that’s a pretty damned good rate of return for something that’s just supposed to be an inflation hedge. The naysayers can continue mumbling that I can’t eat gold, that I will be crucified on a cross of gold, the gold is just metal and has no innate value — I will simply point to the fact that it has outperformed every other investment in my portfolio, and by quite a large margin. And as a long-term store of value, I trust it a hell of a lot more than Treasuries. (Silver has done even better in absolute terms.)
Ah, but what about those safe-haven darlings of investors, municipal bonds? The romance may be on the rocks. I’ve thought for a long time that municipal debt is the next big shoe to drop in this recession/depression/worker’s paradise that we’re living in. Harrisburg, PA made the news recently when they barely escaped having to declare bankruptcy, but Harrisburg is only one of tens or even hundreds of muncipalities in the nation in dire financial straits. There seems to be a belief that the feds will bail them out before things get too grim, but this ignores two facts: a) the appetite for another trillion-dollar bailout is at subzero levels, and b) it’s not clear that taxpayers of one state will be willing to bail out the profligate citizenry of another. Prudent residents of Lincoln, NE or Minot, ND may not wish to fund the rather more lavish lifestyles of a San Diego or Miami. However much we “feel” the federal and state debt, we’d feel a municipal crash a lot harder because it hits us right where we live (literally): trash collection, sewer, water, road repair, snow removal, all the rest. You pay more and more and get less and less from it. (Oh, and guess what the major financial burden on municipal governments is these days? If you said “public-employee pension and health benefits”, give yourself a gold star and then a smack upside the head for being an insufferable know-it-all.)
The war heckler’s latest book
P.J. O’Rourke has a new book coming out soon:
O’Rourke, the reformed ex-radical, editor of National Lampoon during the “Animal House” era, war correspondent and, lately, target of what he calls “ass cancer,” continues the anti-statist argument in his new book, “Don’t Vote: It Just Encourages the Bastards” (Atlantic Monthly Press). References to Milton Friedman, Friedrich Hayek and Adam Smith (to whose “Wealth of Nations” he once devoted an entire volume) prove O’Rourke can do the philosophical heavy lifting — yet make it all float on a fluffy cloud of wit. Among his best one-liners:
* “The free market is a bathroom scale. We may not like what we see when we step on the bathroom scale, but we can’t pass a law making ourselves weigh 165. Liberals and leftists think we can.”
* “We’re individuals — unique, disparate, and willful, as anyone raising a household of little individuals knows. And not one of those children has ever written a letter to Santa Claus saying, ‘Please bring me and a bunch of kids I don’t know a pony and we’ll share.’ “
* “The most sensible request of government we make is not, ‘Do something!’ But ‘Quit it!’ “
* “Conservatism is a flight from ideas. As in, ‘Don’t get any ideas,’ ‘What’s the big idea?’ and ‘Whose idea was that?’ “
O’Rourke, 62, is a cool Republican. It’s a lonely job. What can the rest of the party do to join him?
“I don’t think Republicans have ever been cool,” he says. “Abraham Lincoln tried growing a beard.”
Yes, and look what happened to him.
“It’s always going to be cooler to have wild visionary ideas for society and the future. All we can really do is see that we’ve got a society where as many people grow out of cool as fast as they possibly can.”
H/T to Paul Davis for the link.
October 3, 2010
Pakistan’s self-harming border closure
Strategypage shows why Pakistan is doing itself more harm than good on the Afghan border:
After a recent incident where U.S. helicopter gunships crossed into Pakistan, in hot pursuit of Islamic terrorists, and killed three Pakistani soldiers (and a lot more terrorists), Pakistan cut one of the two NATO supply routes that pass through Pakistan. Aside from the fact that the Pakistani soldiers fired on the NATO helicopters (which they often do, even when the choppers are on the Afghan side of the border), the U.S. didn’t have to remind the Pakistanis that such a gesture was self-defeating. The Pakistani government is heavily dependent on American economic and military aid, and more and more of the supplies for foreign troops in Pakistan is coming from non-Pakistani sources. This hurts Pakistani businesses that move, and often provide, the supplies.
At the moment, about half those supplies come through Pakistan. The Pakistanis only closed, for about a day, one of the two main routes. About 30 percent of the supplies come in via Central Asia railroads, and another comes from the Black Sea, via rail to the Afghan border. The remaining 20 percent comes in by air. But some of that may be shifted to the Central Asian route, which is much safer (from bandits, bad roads and the Taliban) than the Pakistan routes.
Pakistan may have helped create conditions that will actually improve the economies of several other countries:
Shipping supplies to Afghanistan via Russian and Central Asian railroads has advantages for the nations it passes through. Russia has an economic interest in this, as more traffic makes it financially attractive for Central Asian nations to invest in upgrading their rail connections to Afghanistan. Tajikistan, for example, is extending its railroad to the Afghan border by building another 145 kilometers of track. Afghanistan itself has no railroads, mainly because there is not enough economic activity in the country to make this worthwhile. Foreign donors have contributed billions of dollars since 2002 to build more paved roads in Afghanistan. Currently, there are 42,000 kilometers of roads there, but only a third are paved. There are few rivers, much less navigable ones, and no access to the sea. The place has long been a logistical nightmare. Most Afghans recognize that roads will make the country more prosperous, by making it economically feasible to export many commodities, and cheaper to bring in, and distribute, foreign goods. Naturally, the Taliban are opposed to all this road building, as it threatens the poverty and ancient customs that Islamic conservatives are so fond of.
October 1, 2010
Freakonomics trailer
Since reading the book(s), I often find myself in discussions using the term “incentives” (especially in the sense of perverse incentives: those which produce the opposite of the desired effect). I think there’s much value in this approach to problem solving, and I’m looking forward to seeing the movie.
Update: I guess I’ve gotten out of the habit of seeing movies at all. Freakonomics is in the theatres now, but I seem to have uninstalled the movie theatre information app on my iPhone . . . it figures: it doesn’t appear to be playing anywhere near here.
You think you’re struggling with the burden of old debts?
Consider the case of Imperial Germany:
First World War officially ends
The First World War will officially end on Sunday, 92 years after the guns fell silent, when Germany pays off the last chunk of reparations imposed on it by the Allies.The final payment of £59.5 million, writes off the crippling debt that was the price for one world war and laid the foundations for another.
Germany was forced to pay the reparations at the Treaty of Versailles in 1919 as compensation to the war-ravaged nations of Belgium and France and to pay the Allies some of the costs of waging what was then the bloodiest conflict in history, leaving nearly ten million soldiers dead.
H/T to Jon, my former virtual landlord, for the link.
September 30, 2010
QotD: Unintended consequences
Sometimes I think of the political blogosphere as a huge commons. An individual blogger can gain in readership or influence by attacking or ridiculing some enemy, but at the cost of making that enemy stronger in the world as a whole.
I also believe that every time the words “stimulus” or “fiscal policy” are blogged it helps the electoral prospects of the Republican Party, no matter what the content of the blog post.
Tyler Cowen, “Department of Unintended Consequences”, Marginal Revolution, 2010-09-28
Chopping off the “long tail” of Google searches?
For your daily contrarian view of the wonderfulness of Google’s new Instant Search feature, we turn to SmoothSpan:
The Internet is a Mighty Echo Chamber, and with one fell swoop, Google Instant Search has added a big ole’ Marshall Stack to turn the Echo levels all the way up to 11.
Google reports that Instant Search will save 350 million hours of user time per year. What isn’t reported is how it will cut off the Long Tail where it starts by promoting banal sameness for searchers. This is great for Google. After all, keeping up with every last oddball search someone may want to do costs them more infrastructure money. At their scale, it is significant. So, corralling everyone into fewer more common searches is a good thing.
[. . .]
How does Google Instant Search contribute to the Echo Chamber? Well anyone who has bothered to look through keyword information on their website will see that people find sites through a bewildering array of queries. Some might even say much of it is accidental, but looking over these lists gives a wonderful window onto how your content is found and perceived by others. How often do we get to commit such telepathy with our followers? Rarely. Yet, Instant Search will substitute popular searches for those individually created. More people will be driven off the back roads search trails and onto the superhighways that lead to whomever controls the first few search results connected to the Instant Searches Google is recommending at the time.
Oddly enough, I was talking about Google searches the other day with DarkWaterMuse (whose blog is offline at the moment), but it was more in the context of “how often are the sponsored links actually useful to you?” We both agreed that the correct answer fell somewhere in the range of “rarely” to “never”.
September 29, 2010
Austin Bay summarizes the demographic problems China is facing
This is all old hat if you’ve been reading the blog for a while, but it’s always good to see a good summary of key points, like this list by Austin Bay:
Internal Disorder: China’s primary threat is not the United States, or any other foreign power, but internal disorder. There are more angry people in China every day, and the government knows that this could blossom into widespread uprisings. It has happened so many times before in Chinese history. Protesting factory workers are an indicator.
Corruption: Corruption is the biggest complaint among China’s discontented; government officials, who are more interested in enriching themselves than in taking care of “the people” are particular targets. Many of the demonstrations and labor disruptions are the result of corruption among local officials, including the police.
The Communications Dilemma: In 2007, Chinese Internet use grew to over 210 million users. Cell phones are also increasingly available. China is the world’s largest cell phone market. The Internet is an economic and educational tool. However, it also undermines an authoritarian government’s ability to control (deny and spin) information. China’s 2010 “war with Google.com” illustrated this dilemma.
Ethnic Minorities and Language: China has a population of 1.4 billion. Han Chinese (“ethnic Han”) constitute approximately 92 percent of China’s population. China also has 55 “minority nationalities,” however, amounting to 100 million people. The 2009 Uighur riots in Xinjiang province (western China) and resistance in Tibet are symptomatic of the problem. They are resisting “Hanicization.”
Pollution and Water: In early 2008, China began shutting down “high pollution” factories. The reason? To clear the air for the 2008 Beijing Olympics. The growing wealth of the Chinese people is causing enormous pollution problems and water shortages. Effective pollution controls mean more expensive production methods. That makes Chinese goods less competitive.
The Marriage Gap: China’s “one child” policy crimped population growth, all right. More boys were born than girls; Chinese culture “favors” sons. As a result, there is a serious imbalance between men and women. In some places, there are 120 men per 100 women. Marriageable daughters are, reportedly, going largely to the upper social groups within each village or district. The sons of the poorest families are, to an extent, not finding wives. This is an indicator of future social trouble.
As I’ve said several times before, I’m not anti-Chinese: China has accomplished economic marvels in amazingly short time spans . . . but not without serious costs. Urban and coastal dwellers have benefitted disproportionally from the growth: rural and inland Chinese have suffered to provide the means for that growth. China is still not a free economy, and still represses dissent, imprisons critics, and controls far too much of the country’s economy both directly and indirectly. Corruption is rife, despite the savage punishment meted out to (some of) the (accused) perpetrators.
China’s miracle can’t continue for much longer unless the government starts to address these problems with the same kind of single-mindedness that they’ve brought to other problems. Introducing the rule of law would be an excellent first step, but it would directly challenge too many powerful men, some of whom (literally) have armies.
September 28, 2010
Britain in the 70’s
A review of Dominic Sandbrook’s State of Emergency: The Way We Were. Britain, 1970–1974 sounds interesting:
As prime ministers, Edward Heath and Gordon Brown had quite a lot in common. Both were monstrously self-centred, permanently grumpy and capable of astonishing rudeness. Both of their relatively short-lived premierships ended in humiliating failure. In a recent poll of academics on Britain’s best and worst prime ministers since the second world war, Heath came ninth out of twelve and Mr Brown tenth. But that is where the similarities end. Whereas Mr Brown was largely the author of his own misfortunes (the banking crash apart), Heath, as Dominic Sandbrook reminds us in his splendidly readable new history of Britain during the four years from 1970, was faced with a set of problems whose intractability and nastiness would have overwhelmed even a far more gifted politician.
Heath both appals Mr Sandbrook and elicits his sympathy. Tory mythology still insists that many of Heath’s difficulties arose from his U-turn when he abandoned the free-market ideas with which he entered office and embraced an already discredited and peculiarly British form of corporatism the moment the going got rough. The truth is that although Heath had tried to present himself as the champion of ruthless neoliberalism, he was always at heart a “one nation” Tory with little appetite for the kind of confrontation his successor as Conservative Party leader, Margaret Thatcher, relished. His burning desire was to modernise Britain and to arrest its economic decline through efficiency, pragmatic problem-solving and, above all, by joining the European Community.
My family left Britain in 1967, which was a good time to go: the economy was still in post-war recovery, but opportunities abroad were still open to British workers. My first visit back was in 1979, which was a terrible shock to my system. I’d left, as a child, before the strikes-every-day era began, and my memories of the place were still golden-hued and happy. Going back to grey, dismal, cold, smelly, strike-bound Britain left me with a case of depression that lasted a long time. It didn’t help that the occasion of the visit was to attend my grandfather’s funeral: it was rather like the land itself had died and the only remaining activity was a form of national decomposition.
Some readers will find the way the author flits about tiresome, but given that he was born only in 1974 his almost pitch-perfect ability to recreate the mood and atmospherics of the time is remarkable. He does not lose sight of the fact that although the 1970s are now seen as a nadir in Britain’s post-war fortunes, for the majority of people it was nonetheless a time of growing affluence, widening horizons and personal liberation. Many of the positive developments that are associated with the supposedly wonderful 1960s did not gain traction until a decade later. Viewed from a distance, Britain in the 1970s looks ghastly — angry, decaying, on the skids. But that is not the whole story.
Mr Sandbrook compares this turbulent period with the four years between 1910 and 1914 described by George Dangerfield in “The Strange Death of Liberal England”. As he says: “Dangerfield’s story was one of political ferment and economic turmoil, of challenges to the moral order and rebellions against traditional gender roles, of Utopian socialism and Irish sectarianism — all rooted, like the challenges of the early 1970s, in profound historical trends that no government could possibly control.” Thankfully, the discontent of the 1970s did not end in world war, but continued, mostly unresolved, until the arrival of Lady Thatcher in 1979. That may pose a problem for Mr Sandbrook’s next book, which will be an account of the second half of the decade. In many ways it was more of the same, but without a central character as oddly compelling and sad as Heath.
I’m even more interested — in a grim sort of way — in the next book. It’ll be interesting to read an account of that time from a different perspective than my brief mid-winter visit provided.
September 25, 2010
QotD: The price of locavorism
The local-food movement’s ideological parochialism would be dangerous if it were somehow enacted into law. But as persuasion, it tends to focus on the positive: the delights of local peaches and fresh cider, not the imagined evils of Chilean blueberries and prepeeled baby carrots. In this regard, it resembles the English Arts and Crafts movement of the late 19th century. William Morris, who is remembered today more for his wallpaper and book designs than for his social theories, didn’t manage to overturn the industrial revolution. But he and his allies left a legacy of beautiful things. Pleasure is persuasive.
Virginia Postrel, “No Free Locavore Lunch”, Wall Street Journal, 2010-09-25
September 20, 2010
Comparative prices for marijuana
By way of Tim Harford‘s Twitter feed, a site which claims to track the current prices for high, medium, and low quality marijuana:
September 19, 2010
The end of “ownership”?
Cory Doctorow finds Intel adopting a Hollywood-style “crippleware”/license model in new hardware. As he correctly points out, this is an attempt to move us away from the ownership model, where you buy full control of the object you pay for, to a licensing model, where you only get certain rights of use:
This idea, which Siva Vaidhyanathan calls “If value, then right,” sounds reasonable on its face. But it’s a principle that flies in the face of the entire human history of innovation. By this reasoning, the company that makes big tins of juice should be able to charge you extra for the right to use the empty cans to store lugnuts; the company that makes your living room TV should be able to charge more when you retire it to the cottage; the company that makes your coat-hanger should be able to charge more when you unbend it to fish something out from under the dryer.
Moreover, it’s an idea that is fundamentally anti-private-property. Under the “If value, then right” theory, you don’t own anything you buy. You are a mere licensor, entitled to extract only the value that your vendor has deigned to provide you with. The matchbook is to light birthday candles, not to fix a wobbly table. The toilet roll is to hold the paper, not to use in a craft project. “If value, then right,” is a business model that relies on all the innovation taking place in large corporate labs, with none of it happening at the lab in your kitchen, or in your skull. It’s a business model that says only companies can have the absolute right of property, and the rest of us are mere tenants.
September 15, 2010
Think of coach seating as “cattle class”?
If you thought it wasn’t possible to make air travel even worse, you just don’t think big enough:
Italian company Aviointeriors showed off its new “Skyrider” seat at an airshow in California. The curious-looking seats have just 23-inches of space between the seat and the row in front of you. Current airline seating configurations gives you a seemingly spacious 30-inches or so.
I’ve pretty much given up on air travel already, except for trans-Atlantic flights, but this little innovation would probably make me look for steerage class bookings on freighters . . .
September 12, 2010
QotD: Ireland’s post-boom cleanup
It’s not a good sign when the government has to intervene to prevent a run on a bank that is already owned by the government, but apparently, that’s what it’s doing with Anglo-Irish bank [. . .] One guesses that [. . .] the restructuring will cost a lot, and the “asset-recovery” bank will be worth very little. The Irish economy has a lot of fundamentals going for it — educated population, good corporate tax rates, and considerably fewer regulatory barriers to doing business than you find in Italy or Greece. But as a real economic boom, driven by European integration, brought increasing incomes, the Irish went on a borrowing binge even worse than our own, and inflated their boom into a bubble. One of my favorite stories of the period concerns a friend of mine, an Irish American who was married to an Irishman living in Galway. The level of status-competition that suddenly blossomed among her relatives and in-laws led her to consider opening a boutique that would literally specialize in ugly things which cost unreasonable sums of money.
Cleaning up after that consumer frenzy is going to be long and painful. As it will be for us, though less so.
Megan McArdle, “Ireland Moves to Shore Up State-Owned Bank”, The Atlantic, 2010-09-09
