Month: December 2010
In Mono Lake, created by scientists, working together with evolution:
Hours before their special news conference today, the cat is out of the bag: NASA has discovered a completely new life form that doesn’t share the biological building blocks of anything currently living in planet Earth. This changes everything.
(That is a bad summary it turns out, try the paper itself.) And here and here. (This piece covers the skeptics.) This is important, no? It implies a lot more life out there in the universe than many people had thought.
4. Anything but art, a sad tale from New York City.
On the surface there appears to be a lot in common with the Irish, Greek, and NZ economies. All three have high net foreign liability positions, liabilities are highly concentrated through banks who are borrowing overseas, all three have experienced some form of housing boom and lift in consumption, and finally all three appeared to have a relatively strong fiscal position before the GFC before moving into fiscal deficits after the shock. And yet (so far) while the Irish and Greek economies and banking systems have collapsed, New Zealand’s has been fine.
There are two major differences that have helped reduce the implied risk on our debt, making New Zealand much less likely to experience a bank run:
- Our banking system is primarily foreign owned (Eric Crampton expands on why this is a good thing),
- We have a freely floating exchange rate – combined with having much of our debt denominated in NZ$ this is useful.
Addendum: Matt Yglesias offers relevant comment.
The full test is here, here are a few questions:
6. Find the interest of $512.60 for 8 months and 18 days at 7 percent.
7. What is the cost of 40 boards 12 inches wide and 16 ft. long at $20 per m?
8. Find bank discount on $300 for 90 days (no grace) at 10 percent.
9. What is the cost of a square farm at $15 per are, the distance around which is 640 rods?
10. Write a Bank Check, a Promissory Note, and a Receipt.
3. What are the following, and give examples of each: Trigraph, subvocals, diphthong, cognate letters, linguals?
5. Name and describe the following: Monrovia, Odessa, Denver, Manitoba, Hecla, Yukon, St. Helena, Juan Fermandez, Aspinwall and Orinoco.
For the pointer I thank Chris F. Masse.
The subtitle is Philosophical and Practical Aphorisms and the author is Nassim Taleb. Here are three of his aphorisms:
Your reputation is harmed the most by what you say to defend it.
Quite revealing of human preferences that more suicides come from shame or loss of financial and social status than medical diagnoses.
They will envy you for your success, for your wealth, for your intelligence, for your looks, for your status — but rarely for your wisdom.
TheIncidentalEconomist serves up a banquet. Austin Frakt emails me (do not take him to be endorsing the stated view, which is speculative; there were further emails):
One hypothesis is that health care costs steadied in the 1980s as care was shifted from inpatient to outpatient settings. It's possible that outpatient surgeries were both more profitable to providers and less costly to payers. The graph at the following link doesn't quite go back far enough but it is plausible that this shift began in the early 1980s. Note that the shift fully played out by 2000, though perhaps the bulk of cost savings was already wrung out of the system in the first few years or was overwhelmed by other factors: http://theincidentaleconomist.com/wordpress/inpatient-vs-outpatient-surgeries/
The caveat about financial arrangements is important with respect to Germany’s apparent prosperity. Germany, like China, is less prosperous than it seems, because its surplus production is geared to sale for claims that cannot credibly be redeemed for what the country’s citizens would want should they exercise their option to consume.
That is from Interfluidity. Is it a Keynesian point or an Austrian point? You guess.
I am surprised this has not really hit the U.S. headlines yet:
The biggest cumulative borrower from the Term Auction Facility was Barclays of the UK, which bought the US broker-dealer unit of Lehman Brothers out of bankruptcy in September 2008.
Barclays borrowed a cumulative $232bn from the TAF through various subsidiaries. The TAF provided one or three-month loans to banks from December 2007 until it closed this year.
…Bank of Scotland and RBS of the UK, Societe Generale of France, Dresdner Bank and Bayerische Landesbank of Germany, and Dexia of Belgium were all amongst the top 10 users of TAF. The second largest user was Bank of America, which bought Merrill Lynch during the financial crisis, and borrowed a cumulative $212bn.
The biggest seller of commercial paper to the Fed’s Commercial Paper Funding Facility, which bought up illiquid paper, was UBS of Switzerland followed by the insurer AIG. Five of the top 10 CPFF users were European banks.
Recall Timur Kuran's theory of preference falsification: many people follow the herd rather than revealing their true views, and this is most common in autocracies. In those cases, public opinion may suddenly flip. WikiLeaks, by making some truths common knowledge, has its biggest effects on autocracies, even if the leaks are from the United States.
Two possible results of the recent revelations could be that the Sunni Arab autocracies will have to cozy up more to Iran (their citizenries don't hate Iran so much, and so they might filp against their own leaders) or that China abandons North Korea altogether. In the former the government has to match the public opinion and in the latter case perhaps the public opinion can flip against North Korea and confirm a trend already underway in the government.
What about democracies? The most likely result (though not from this recent batch) is to encourage war-mongering attitudes against potential enemies, due to perceived slights. Such feelings are usually produced collectively, and subject to sharp triggers, following the revelation of knowledge or pseudo-knowledge. Remember the Zimmermann telegram?
Here are comments from Douthat and Wilkinson.
Drawing an analogy with the ill-fated Exchange Rate Mechanism (ERM) of the pre-eurozone era, Paul De Grauwe argues in a new CEPS Commentary that the creation of a sovereign debt default mechanism is a very bad decision that will make the eurozone more fragile by making financial crises an endemic feature.
The full (short) paper is here, recommended. Excerpt:
[apart from Greece]…the root cause of the debt problems is to be found in the unsustainable debt accumulation of the private sectors. From 1999 until 2008, when the financial crises erupted, private households in the eurozone increased their debt levels from about 50% of GDP to 70%. The explosion of bank debt in the eurozone was even more spectacular and reached more than 250% of GDP in 2008. Surprisingly, the only sector that did not experience an increase in its debt level during that period was the government sector, which saw its debt decline from 72 to 68% of GDP. Ireland and Spain, two of the countries with the severest government debt problems today, experienced the strongest declines of their government debt ratios prior to the crisis. These are also the countries where the private debt accumulation was the strongest.
Once sovereign default is in play, De Grauwe predicts self-reinforcing downward spirals can destroyithe eurozone. His points are well-taken, but I would add a few observations:
1. To be a small country, and to "play with matches" without good fire insurance, is also a form of fiscal irresponsibility. It is a more important form of fiscal irresponsibility than we had thought. A'la Robert Eisner, the government's measured budget position is not the key magnitude for measuring its fiscal stance. The three percent rule is partly to blame here, although a lot of countries couldn't even follow that.
2. The distinction between private and public debt ain't what it used to be.
3. Fiscal union was, is, and will remain a fantasy. The best the eurozone could have done was to abolish national banking systems and have a truly European banking market. It's too late for even that, though.
Something, for sure; this is expenditures on health as a percentage of gdp:
The link is here. For the pointer I thank Andrew Sweeney.
U. Chicago Press informs me:
Next month we'll be publishing e-book editions of all the twelve individual novels that make up Anthony Powell's widely acclaimed epic novel of twentieth-century English life, A Dance to the Music of Time–and, for the month of December, we'll be giving away the first volume, A Question of Upbringing, free A Dance to the Music of Time is one of the most acclaimed novels of the twentieth century.
You can get the first one for free, here, or in other eBook locales. The rest of the volumes will be $8.00 apiece.