This Foreign Affairs piece (pdf) is interesting and prescient thoughout, here is one excerpt:
Despite some testy moments, relations between Russia and Ukraine have generally been stable since the Soviet break-up. There are, however, good reasons to fear these relations might deteriorate. First, the situation between Ukraine and Russia is ripe for the outbreak of security competition between them. Great powers that share a long and unprotected common border, like that between Russia and Ukraine, often lapse into competition driven by security fears. Russia and Ukraine might overcome this competition and learn to live together in harmony, but it would be unusual if they do.
Most of all, Mearsheimer argues that Ukraine should have kept its nuclear deterrent. Here is my previous post on that topic.
For the pointer I thank Shivaji Sondhi.
…roughly half of the current inflation in consumer products is due to the dramatic drop in the value of the yen. The drop has sharply inflated the costs of imports, especially energy imports, and these have partly been passed on to consumers. While many consumers in developed countries have been benefiting from lower energy costs, in Japan the costs of liquid natural gas — now a main source of power generation — were up 17% over a year earlier. In addition, “the Japanese also saw sharp rises in prices of foreign-made home electronics, which they increasingly import: Prices of washing machines were up 13%, while prices of audio equipment and refrigerators both rose 16%”.
Even the 0.7% annual rise in core-core inflation isn’t all it seems to be, since some 40% of the increase is accounted for by a one-off rise last year in charges for accident insurance and public services. The key point to grasp in all this is that the rise is due to what we could call “cost push” rather than “demand pull”. As Takeshi Minami, chief economist at the Norinchukin Research Institute put it,“Those increases had little to do with demand and supply.”
There is this bit too:
In the words of former Bank of Japan governor Masaaki Shirakawa, “Seemingly, there would be no linkage between demography and deflation. But it may not be the case. A cross-country comparison among advanced economies reveals intriguing evidence: Over the decade of the 2000s, the population growth rate and inflation correlate positively across 24 advanced economies. That finding shows a sharp contrast with the recently waning correlation between money growth and inflation.”
That is from Edward Hugh, who predicts Abenomics will leave behind a big mess. The post is speculative but sobering throughout.
Right? That is just one piece of fallout from the current crisis. As an American, with little at stake in Ukraine per se, I am glad the country gave up its nuclear weapons, so as to limit the risk of broader conflict. But if I were a Ukrainian citizen, my view would be somewhat different.
Here is an interesting study by Robert Stephen Mathers (pdf) on the denuclearization of Ukraine. It appears to have been written as a term paper for Martin Felstein in 2003. Excerpt:
The back and forth negotiations about Ukraine’s nuclear status would finally end in Moscow in January 1994 with the signing of the Trilateral Statement by Presidents Clinton, Yeltsin and Kravchuk. The agreement held Ukraine to the promise of “the elimination of all nuclear weapons, including strategic offensive arms, located in its territory.” In exchange for these concessions, the U.S. and Russia agreed to preserve Ukraine’s territorial integrity (a primary concern for Ukraine) and ensured that no state would use or threaten to use military force or coercion against it…Ukraine’s main concerns were finally met.
It seems the value of a formal NATO guarantee is falling as well. Rapidly. Various Eastern European countries are asking for stronger or clarified U.S. guarantees. What are they thinking in Latvia? Taiwan? Japan? How about the Israelis negotiating with John Kerry?
For the pointer I thank Bill Badrick.
Second, one of the stated ambitions of both TPP and the Trans-Atlantic Trade and Investment Partnership is reduction in non-tariff barriers, which in most cases add substantially more to goods costs than tariff barriers. According to estimates by the World Bank, for instance, American tariff restrictions on agricultural imports are relatively low on the whole, at just 2.2%. But the tariff equivalent of an all-in measure of restrictiveness, which takes into account non-tariff barriers, jumps to 17.0%. The all-in rates for many of the partners in TPP negotiations are substantially higher; Japan’s all-in tariff equivalent on agricultural imports is 38.3%. South Korea’s is 48.9%. Australia’s is 29.5%.
Third, “implicit protection of services” does indeed impose additional costs. For instance, the cost to foreign providers of some crucial transport and shipping services within the American market is basically infinite. Services account for four times as much economic output as goods production in America but only around one-fifth of American trade. Many services aren’t tradable, of course; haircut tariffs will not be on the TPP agenda. But a growing array are. And rules on service trade have barely changed at all in two decades. TTIP and TPP (as well as the Trade in Services Agreement) are aimed at updating rules on services trade to make it easier to sell insurance, or financial and consulting services, or IT and environmental services, and so on, across borders. Now maybe these deals are “really about” intellectual property, and all-powerful Hollywood has convinced the government to expend a lot of time and effort setting standards for services trade, the better to provide a smokescreen for its own nefarious activities. But I doubt it.
Investment is another key item on the agenda. At present rules on cross-border investment can be pretty ad hoc; a firm interested in buying shares in a business in another country often needs to be careful not to buy too much or not to invest in politically sensitive industries, lest the investment invite political scrutiny. TPP is working to reduce the scope for ad-hockery in interference in investment, which I think we would generally consider to be a good thing. TTIP is as well (that’s what the “I” is all about).
There is more here, useful throughout. I would add that this is also a foreign policy initiative and it will, if successful, allow various smaller countries in the region to resist pressures from various larger countries in same said region.
A good system of property rights establishes clear borders. Clear borders reduce disputes, encourage investment and promote efficient trade. Software patents, however, often fail to define clear borders. I am one of the amici in a amici curiae brief to the Supreme Court (regarding Alice Corp. v. CLS Bank) on software patents that makes this point:
Such abstract claims as “displaying data in
frames,” “recommending media based on past choices,” “reproducing information in material objects at a
point of sale,” or, as in the present case, using “a third
party . . . to eliminate ‘counterparty’ or ‘settlement’
risk,” simply cannot be reliably construed to define a
reasonable area of covered technology. See Wang, 197
F.3d at 1379; Interactive Gift, 256 F.3d at 1323; Pinpoint, 369 F. Supp. 2d at 995; cf. CLS Bank Int’l v.
Alice Corp. Pty. Ltd., 717 F.3d 1269, 1274 (Fed. Cir.
A general counsel at a technology startup
would be hard-pressed to describe any concrete
bounds or permissible follow-on innovations to her
fellow engineers in the face of such claims. Any
software that resulted in a similar functional result
could be construed as infringing, and any investment
in the commercialization of those technologies could
inevitably carry liabilities, risks, and costs whose
magnitudes are impossible to predict in advance.
Thus, the property system that ostensibly exists to
assure investors that long-term rents are secure does
the very opposite, casting a pall of uncertainty over
the viability of any commercial product that happens
to be adjacent to a lurking abstract claim.
Eli Dourado and I note that the Federal Circuit seems to have quite willfully disregarded the intent of the Supreme Court regarding patents on abstract ideas and I think this case may provide further pushback from the SC.
Here is the Bloomberg account, here are Krugman’s own words. I say it’s a good move and if I were in an analogous position I would do something similar. Think of it as another form of disintermediation. Think of it also as being closer to useful airports and media centers.
More generally, the value of living in either New York City or Washington, D.C. — for those who seek influence — is going up. Krugman’s decision reflects that broader reality.
For Russia, matters in Ukraine are close to an existential crisis, as Ukraine is intimately tied up with Russia’s sense of itself as presiding over a mini-empire of sorts. Nor could an autocratic Russia tolerate a free and prosperous Ukraine, developing along the lines of Poland. America cares about Ukraine less, and cares more about Syria and Iran, or at least cares about saving face in those latter venues. Therefore there is a Coasean deal to be had between America and Russia, where Russia gets to partition part of Ukraine, create a buffer against Europeanization and democratization, keep the larger Ukraine unit weak, and also keep its Black Sea fleet. In turn Russia would do something less than totally sabotage all American plans for Syria and Iran. (Of course that is Coasean for the leaders, and not necessarily for the citizenries.)
The thing is…China. What kind of signal would such a Coasean deal of partition send to China?
That is what I worry about.
Federal health authorities on Tuesday reported a stunning 43 percent drop in the obesity rate among 2- to 5-year-old children over the past decade, the first broad decline in an epidemic that often leads to lifelong struggles with weight and higher risks for cancer, heart disease and stroke.
The drop emerged from a major federal health survey that experts say is the gold standard for evidence on what Americans weigh. The trend came as a welcome surprise to researchers. New evidence has shown that obesity takes hold young: Children who are overweight or obese between age 3 and 5 are five times as likely to be overweight or obese as adults.
There is more here, via Charles C. Mann.
At the Olympics if you want to protest a decision, you must have cash:
The reason that Mathieu — and many other coaches across most Olympic sports — make certain they always have a specific amount of cash on hand is that if they want to protest an official decision during competition, they need more than just a strong opinion and an angry yell.
They also need money.
…Depending on the sport, the fee varies: for luge, it is 50 euros (about $67). Cross-country skiing, like snowboard and Alpine skiing, demands 100 Swiss francs (about $112) but stipulates that all protests must be submitted in English. Bobsled and skeleton are among the most expensive: they require a deposit of 100 euros before any protest will even be considered. If multiple countries want to make a similar protest, sharing the tab is allowed.
Hat tip to the excellent PriorProbability who also points out that if your protest is successful you get your money back so these payments are also protest bets.
He is an economics professor at Berkeley and he recently gave a talk there on “Ukraine: A Battle for the Future of Europe?”
The slides are here (pdf)., Q&A is here, the slides are especially useful. Gorodnichenko’s home page is here.
The pointer is from @MatiasBusso.
Anders Åslund wrote an interesting piece on that question, published in 2002:
For ten years Ukraine was one of the sickest economies in the former Soviet Union. By 1999 most observers had decided that Ukraine displayed all the symptoms of economic malaise. It was hopelessly corrupt, market reforms were generally tardy and unfinished, the budget deficit was larger than the available financing, non-payments and arrears were rife. It is, therefore, all the more surprising that this country is currently experiencing an extraordinary economic surge, with industrial and agricultural production skyrocketing. Even if the present economic situation doesn’t last it is already remarkable and requires serious study. The purpose of this paper is to provide a quantitative analysis of Ukraine’s sudden economic growth and strong recovery. It begins by looking at common explanations of economic growth that have not proven relevant, discusses what concrete economic policy measures appear to have contributed to the generation of growth and ends by scrutinising how this was politically feasible. A proper understanding of Ukraine’s situation should help towards an understanding of post-Soviet transformation and offer clues about how to reform other countries.
For a more complete picture, I refer you also to his contrasting 2000 essay “Why has Ukraine Failed to Achieve Economic Growth?” Circa 2014, another piece or two could be penned on this topic.
Åslund has much more on Ukraine here, including this 2009 book. For a while now he has been predicting the end of Yanukovych, for instance in this piece. In any case he is the most prominent economist who writes regularly on Ukraine.
From a loyal MR reader, with some editing by me:
Ukraine default risk is way up, but Ukraine has barely closed the gap with Venezuela in the default probability race and Argentina, with its pari-passu case now under review for cert at the Supreme Court, is still way ahead with its CDS-implied likelihood of default. I know its hard to look at pictures of Kiev and think “that looks like a safe sovereign credit,” but even with the recent run-up Ukraine still has a market-implied default hazard at only about 60% of the level of Argentina.
Those are some graphs at the link from the CDS-implied default probabilities page from Deutsche Bank.
Part of the run-up in the Ukraine and Venezuela insurance prices is due to Argentina’s repeated losses in their pari-passu case. Should they be denied cert or lose at the Supreme Court, other nations with pari-passu clauses will find it both difficult to restructure and harder to selectively default. That is driving up CDS rates across the risky sovereign space, mostly because of lower recovery in CDS settlement auctions. On related issues with pari passu see this law and econ paper.
The difference between Ukraine and Argentina probably says something about the importance of willingness to pay versus ability to pay and willingness to pay is what really matters.
And they win the award by having a much larger crisis overall. Russia has suspended financial aid to Ukraine. There are rumors of runs on banks and long queues at ATMs. There are rumors of Ukraine possibly splitting into two countries. Here is a NYT Q&A.
Here is the one-year CDS chart. The Russian ruble is declining to record lows.
Here are interesting remarks from Timothy Garton Ash.:
I have argued that, in our time, 1989 supplanted 1789 as the default model of revolution. Rather than progressive radicalization, violence and the guillotine, we look for peaceful mass protest followed by negotiated transition. That model has taken a battering of late, not only in Ukraine but also in the violent fall that followed the Arab Spring.
When the Soviet Union first split apart, I expected something like the current scenario to happen rather quickly. Obviously it did not. It is interesting to ponder what assumptions are required to produce a 25-year lag for a similar result.
If you know of interesting or good sources on what is happening in Ukraine, please leave them in the comments.
Wal-Mart has 1.3 million U.S. employees, and about 4,000 of them currently make either a state or federal minimum wage, Tovar said.
There is more here, via @ModeledBehavior., who points out that is about 0.3%, and Clive Crook.
Spin it as you wish, we should not have a major party promoting, as a centerpiece initiative and for perceived electoral gain, a law that might put half a million vulnerable people out of work, and that during a slow labor market.
And the American people will never understand the ins and outs of the monopsony debate and the like. Overall, what kind of useful lesson is being taught here about the determinants of wages and prosperity?
I’m sorry people, but those are the bottom lines on this one.