8. Oliver Sacks on his cousin Robert Aumann. And other things.
8. Oliver Sacks on his cousin Robert Aumann. And other things.
The Brazilian macroeconomic situation is undoubtedly poor and the medium-term trend for fiscal sustainability is alarming. However, the numbers don’t support an imminent financial crisis, despite it being ‘a tradition’. It’s still an investment grade credit for now.
Gross borrowing requirements/GDP are relatively high at 16.1%, but its is structured with limited foreign currency exposure and the non-resident share of local currency debt is a modest 18.3%. It has large FX reserves ($368bn) – (short term external debt + maturing LT external debt)/FX reserves = 32%, which is ample cover against external financial shocks. The CA deficit, ~4% GDP, are covered by FDI inflows so that (CA +FDI)/GDP ~ -0.3%.
In addition, the banking system is sound. The level of NPLs is relatively low 2.9% and average baseline credit assessment score is investment grade baa3, despite economic weakness. Capital and liquidity ratios have been consistently high.
This being the case, where do you see this financial crisis coming from?
On Twitter, MarketUrbanism makes a separate point:
Canada. Click the “Prices against rents” tab: http://www.economist.com/blogs/dailychart/2011/11/global-house-prices … Huge exposure to oil and China.
The culture and polity that is Germany:
Officials in Stuttgart were among the loudest protesters against the labour minister Andrea Nahles’ new workplace safety regulations, which stated that the lifts could only be used by employees trained in paternoster riding.
“It took the heart out of this place when our paternoster was brought to a halt, and it slowed down our work considerably,” said Wolfgang Wölfle, Stuttgart’s deputy mayor, who vociferously fought the ban and called for the reinstatement of the town hall’s lift, which has been running since 1956.
“They suit the German character very well. I’m too impatient to wait for a conventional lift and the best thing about a paternoster is that you can hop on and off it as you please. You can also communicate with people between floors when they’re riding on one. I see colleagues flirt in them all the time,” he added, celebrating its reopening at a recent town hall party to which hundreds of members of the public were invited.
…In officialese the lifts are referred to as Personenumlaufaufzüge – people circulation lifts – while a popular bureaucrats’ nickname for them is Beamtenbagger or “civil servant excavator”. The name paternoster – Latin for “our father” – is a reference to one of the prayers said by Catholics using rosary beads, which are meditatively passed through the hand, just as the cabins are in perpetual motion around the shaft.
To some analysts’ surprise, books from Karl Marx, Immanuel Kant, Friedrich Hegel, Confucius and many other philosophers are more popular than before.
There is more here about some other aspects of the Fair.
1. Did carbohydrates drive brain growth? (trolling the paleos…)
5. My podcast with Erik Torenberg discusses economics, politics, chocolate ice cream, and I diagnose his dating strategy.
One of the most common mistakes people make looking at Chinese data is distinguishing between absolute and relative data. $3.6 trillion is a large amount of reserves in absolute terms but much smaller in relative terms. According to my calculations, reserves relative to nominal GDP for 1997-8 Asian tigers is 23% compared to China’s current 34.7%. However, if you compare reserves to M2 money supply the picture is much different. By that measure, China only has reserves equal to 17% of M2 versus 28% in 1997-8 Asian tigers. Given the large demand to move assets out of China, primarily by Chinese firms and individuals it should be noted, the $3.6 trillion in reserve assets looks much smaller against the enormity of its wealth and asset base. If Chinese investors and individuals start to feel significant concern about the RMB, the demand for foreign assets could turn into a flood rapidly if the PBOC fails to arrest the decline. $3.6 trillion is a large number but in the world second largest economy with 1.3 billion, that should be thought of as a small $3.6 trillion.
That is from Christopher Balding.
I was startled by these calculations for New Jersey, for example: Cutting in half the number of people sent to prison for drug crimes would reduce the prison population at the end of 2021 by only 3 percent. By contrast, cutting the effective sentences, or time actually served, for violent offenders by just 15 percent would reduce the number of inmates in 2021 by 7 percent — more than twice as much, but still hardly the revolution many reformers seek.
New Jersey could reduce its prison population by 25 percent by 2021. But to do it, it would have to take the politically fraught step of cutting in half the effective sentences for violent offenders.
In other words, the real debate over how to deal with criminals has hardly begun.
The low-hanging fruit on this issue seems to be in Kentucky, Missouri, and Texas most of all. But keep in mind another point: to the extent prison overcrowding eases, many judges will be giving longer sentences to many of the more violent offenders.
Sorry people, but Ukraine and Venezuela and Argentina are not eligible for this designation, any more than you can give “Most Likely to Succeed” to LeBron James. Have I mentioned lately that emerging market corporate debt doubled over the course of 2012-2014? But where exactly is the pot most likely to boil over next?
Here are a few contenders:
The currency declined nine percent last month, prompting reactions such as:
“It is incredible to see how dauntingly fast things are deteriorating,” Enestor dos Santos, an economist at BBVA, said from Madrid. “It’s been hard to nail down a projection.”
According to some polls, seventy percent of the population favors the impeachment of President Rousseff; political dysfunction adds to the brew and the various scandals only seem to be growing worse. Moody’s has downgraded the country to Baa3, right on the margin of junk. The economy is expected to contract 1.7 percent this year and the current account deficit is coming in higher than forecast. Financial crises are a tradition.
The country is headed for snap elections, in light of ongoing political instability, while fighting a two-front war and it has a growing current account deficit. Hmm…
That said, the economy grew at 2.4 percent last year, exports are relatively diversified, and I suspect the current dire situation will prove manageable. The Greek and Turkish ten-year yields are now about the same (which country should be happy with that comparison?). On the down side, the country is especially dependent on short-term financing, which can prove volatile.
The Russian economy shrank by 4.6 percent in the quarter ending June. Although the media has focused on the stability in Moscow and maybe St. Petersburg, the economic decline in Russian provinces has been much more serious.
Debt in Russia’s 83 regions has risen by 100 to 150 percent since 2010. Russia’s economic minister suggested that possibly 60 of those 83 regions are in crisis mode, and 20 may have already been defaulting on their debt.
The economy still hasn’t recovered from the 2008-2009 crisis, and it doesn’t seem the price of oil will be bouncing back anytime soon.
A few days ago Ivan Krastev wrote: “The Kremlin is populated not by mere survivors of the post-Soviet transition but by survivalists, people who think in terms of worst-case scenarios, who believe that the next disaster is just around the corner, who thrive on crises, who are addicted to extraordinary situations and no-rules politics.”
On the bright side, they have $541 billion in reserves. I say that’s overrated when everything else is turning sour.
The economy shrank 3.3 percent in the first half of this year, and the government responded by increasing borrowing. For further information, see Russia.
They are hanging on, and the freeing up of previously held government payments will deliver the economy a decent burst of stimulus. Still, they are one EU spat, or one coalitional collapse, away from being back in the doghouse with closed banks, Grexit, higher austerity, and plummeting exports. That said, the Not Very Serious People turned out to be the Not Very Serious Person and things are looking much better than they did a few weeks ago. Even the Finns are on board with the bailout. Staying in the euro may not be good for Greece in the longer run, but for now it means they are unlikely to win this particular tournament.
For all the current problems, I still don’t think they are next in line. Their production is crashing, but that’s not the same as a financial crisis. They don’t seem to have their debt distributed “in just that right way.” The $3.6 trillion in foreign exchange reserves — down from $4 trillion I might add — doesn’t hurt either. Still, this year China is on the list of nominees, and for the first time.
The bottom line: I’ve got to go with Russia and Belarus. Runner-up is Brazil.
Honorable mentions include Indonesia, Jamaica, and Belize (decent growth but a widening current account deficit). The dark horse pick? Colombia, with a peso down 36 percent against the dollar in the last year and a heavy dependence on oil exports. Alternatively, Malaysia. Thailand isn’t doing well, but it seems like more of a slow burn. South Africans are economically miserable, but the country does not really fit the financial crisis profile.
Here is my discussion from 2014, Ukraine ended up as the exemplar. The sad thing is that this year’s post is longer than last year’s.
Yes, I call it the paradox of Julian Simon. He is right about resource prices falling mostly when his optimism about emerging economies is wrong, and vice versa. The Ultimate Resource was published in 1981, much of the resource price spike didn’t start until the early 1990s, and when Simon published the emerging economies hadn’t yet done so much to emerge. The world where Simon is wrong about resource prices — think Chinese peak growth years — is probably the more optimistic scenario. Another way to put this is that manufactured goods are more likely subject to increasing returns to scale than is resource production.
The Bloomberg news report on oil is here.
Here is my Washington Post review of that book, which I very much liked. Here is one bit from the review:
My favorite parts of the book are about the military, an area where most other popular authors on automation and smart software have hesitated to tread. In this book you can read about how much of America’s military prowess comes from superior human performance and not just from technology. Future gains will result from how combat participants are trained, motivated, and taught to work together and trust each other, and from better after-action performance reviews. Militaries are inevitably hierarchical, but when they process and admit their mistakes, they can become rapidly more efficient.
The subtitle of the book is What High Achievers Know That Brilliant Machines Never Will.
There is plenty of debate over whether the FDA should be looser or tougher with new drug approval, but I rarely hear the question posed as “approval at what price?”
One option would be to approve relatively strong and safe drugs at full Medicare and Medicaid reimbursement rates, if not higher. Drugs with lesser efficacy or higher risk could be approved at lower reimbursement prices. It is possible or perhaps even likely, of course, that private insurance companies would follow the government’s lead.
Dr. Peter Bach has promoted one version of this idea, and produced a calculator for valuing these drugs. In essence the government would be saying to lower quality producers “yes, you can continue to try to improve this drug, but not at public expense.”
I believe proposals of this kind deserve further attention, and in general the notion of regulatory approval need not be conceived in strictly binary, yes/no terms.
No, it is not knowledge of the city’s best dish, nor is it access to all the Yelp reviews, or even an understanding of how the spices in that cuisine work together.
I have a simple nomination. If you could only know one thing about a city, you would like to know what time the best and most popular restaurants fill up.
If you know that time, you can walk around a restaurant-rich area. Wait for the best places to start filling up, and then make your move and muscle your way through the door. Voila, the wisdom of crowds!
If you come too early, you cannot glean information from watching the customer flow because there isn’t any. If you come too late, the best places are already full, or they have lines which are too long. But if you are there at just the right time, and attentive to the movement of the crowds, what really can go wrong?
In Singapore the best time to start stalking the hawker centres is about 10:30 a.m., certainly no later than 11. Otherwise the lines at the best stalls are simply too long. Just show up at the right time, and assume the Singaporeans know what they are doing. It works. In Paris you must be looking for a good lunch restaurant before 12:30.
It is a common theme in food economics that knowledge of people, or knowledge of social mechanisms, is often more valuable than knowledge of food. Knowing whom to ask and also how to ask is also often more valuable than a detailed knowledge of a cuisine per se.
From Greg Ip:
Quantifying innovation is difficult: Government statistics don’t adequately measure activities that only recently came into existence. Mr. Mandel circumvents this problem by surmising that innovation leaves its mark in the sorts of skills employers demand. For example, the shale oil and gas revolution is apparent in the soaring numbers of mining, geological and petroleum engineers, whereas the ranks of biological, medical, chemical, and materials scientists have slipped since 2006-07.
Screening job postings on Indeed, a job website, Mr. Mandel finds that the proportion mentioning “Android” (Google’s mobile operating system), “fracking” and “robotics” has risen notably in the past four to six years. But the proportion mentioning “composite materials,” “biologist,” “gene” or “nanotechnology” has trended down. His conclusion: Today’s economy is “unevenly innovative.”
You can find the whole article here. Does anyone have a link to the study itself?
1. Was 1917 the start of modern political discourse? If so, what does that say about us?
9. SXSW Panelpicker, please vote for us, thank you. Free registration is required, our panel is The Science of Learning II.