Month: February 2016
Negative interest rates are looking worse
And eurozone banks down 41% since ECB introduced negative interest rates, notes
@johnauthers
That is from @RobinWigg. The Japanese market has not responded positively either.
Of course negative interest rates, while intended as a form of stimulus, or currency depreciation, are also a tax on financial intermediation. Negative interest rates, even if you agree with them in principle, are also a sign that more straightforward measures are politically impossible.
Here is Landon Thomas Jr. on negative rates in Sweden (NYT): “…many investors saw the rate cut as smacking of desperation and the latest sign that global central bankers are moving toward a round of competitive devaluations — also known as currency wars — as a way to stimulate their economies.”
Miles Kimball has written much in favor of negative rates, Izabella Kaminska against, if you wish to survey further opinions. Here is Matt Rognlie.
I don’t see negative rates as the main problem today, but it’s getting harder to see them as a potential remedy. They’re a sign that economies are trying to solve their core problems on the cheap.
Addendum: Here is Neil Irwin at NYT.
Toward a savanna theory of happiness?
We propose the savanna theory of happiness, which suggests that it is not only the current consequences of a given situation but also its ancestral consequences that affect individuals’ life satisfaction and explains why such influences of ancestral consequences might interact with intelligence. We choose two varied factors that characterize basic differences between ancestral and modern life – population density and frequency of socialization with friends – as empirical test cases. As predicted by the theory, population density is negatively, and frequency of socialization with friends is positively, associated with life satisfaction. More importantly, the main associations of life satisfaction with population density and socialization with friends significantly interact with intelligence, and, in the latter case, the main association is reversed among the extremely intelligent. More intelligent individuals experience lower life satisfaction with more frequent socialization with friends. This study highlights the utility of incorporating evolutionary perspectives in the study of subjective well-being.
That is from Li and Kanazawa, via Neuroskeptic, file under speculative.
Can Finnish education be copied?
The access to teacher training is highly competitive; there are ten applicants for every training place to become a primary schoolteacher. It does not seem to dawn upon those in Britain and the United States who want to implement the Finnish system that it would mean firing something like three-quarters of the current teachers.
That is from new and interesting Education Unchained: What It Takes to Restore Schools and Learning, by Erik Lidström, mostly from a Hayekian perspective. The author claims, by the way, that the Finnish model has been declining since it has been made more student-centered and less teacher-centered.
Thursday assorted links
1. Princeton Bitcoin textbook is freely available.
2. What became of Michael Jackson’s chimpanzee, Bubbles? And speaking of the 1980s, Pee Wee’s Big Comeback (NYT).
3. “The black-white income gap was cut by about a third between 1992 and 2000…” Link here.
4. Someone is building a fence.
5. A short introduction to gravitational waves.
6. Harvard faculty support Clinton over Sanders, overwhelmingly.
Claims about Woolly Mammoths
In a working paper released in December 2015, the economists Naima Farah and John R. Boyce find that the discovery and exchange of mammoth tusks is having a serious effect on the market for living elephant tusks. Since the collapse of the Soviet Union, they write, tusks from dead mammoths, found in the frozen Siberian tundra, have risen to account for as much as 20 percent of all ivory production. Crunching the numbers, they conclude, “Mammoth ivory trade may be saving elephants from extinction.” In the long run, however, it may be too optimistic to believe that such a laissez faire solution can forestall wild elephant extinction.
Most of the article, by Greg Rosalsky, deals with how researchers are using data (!) to determine whether woolly mammoths did indeed fall prey to the tragedy of the commons.
*The American Slave Coast*
I very much liked this lengthy but highly readable book by Ned and Constance Sublette, subtitled A History of the Slave-Breeding Industry, and that subtitle does indeed reflect the emphasis. Here are a few of the things I learned from it:
1. Barbados took in more African slaves than did the entire United States; Alex had a related post on the size of American importation.
2. President James Polk speculated in slaves, based on inside information he obtained from being President and shaping policy toward slaves and slave importation.
3. In the South there were slave “breeding farms,” where the number of women and children far outnumbered the number of men.
4. The price of a slave peaked in his or her late teens. There was another price spike upwards at about age eight, when child mortality declined.
5. Much of the University of Virginia was built by slaves; is anyone calling for those buildings to be torn down?
6. Quite possibly the sugar plantations model, including for slave deployment, stems from São Tomé, starting in the late 15th century.
7. George Mason wanted to cut off the African slave trade into Virginia, although the authors suggest many people supported this view because they wished to increase the value of the stock of slaves already in the state. I could not tell whether this was Mason’s motive or not.
8. The Anglo-American settlers of Louisiana were primarily from Kentucky.
9. In the time of slavery, the South was generally considered to be less anti-Semitic toward Jews than the North.
Recommended, here is the Amazon link. And here is Jason Kottke on the book. And here is a good Malcolm Harris review.
Nigeria fact of the day
Africa Internet Group is set to become the continent’s first “unicorn” after securing an investment valuing the ecommerce group at more than $1bn.
French insurer Axa will pay €75m for an 8 per cent stake in Africa Internet Group, which owns several start-ups including online retailer Jumia, mobile taxi app Easy Taxi and delivery app HelloFood, giving the company a valuation of €938m ($1.04bn).
Here is more from the FT.
Birrieria Zaragoza
This small, family-owned Chicago Mexican restaurant specializes in barbecued goat. It is the best barbecued goat I have had, the best accompanying sauce I have had outside of Mexico (you must order it separately), and the best tortillas I have had outside of Mexico. It is one of the best restaurants in Chicago, for my taste perhaps the best.
Here is a short video about the restaurant.
Note also that goats are not in general raised on factory farms. It is a significant question how steeply the marginal cost curve would climb, were we to substitute a lot of goat consumption for say pig or cow consumption. In any case, at the margin it seems like a no-brainer, especially with the Birrieria to guide you.
Strongly recommended.
Wednesday assorted links
Cruise Conspira-Sea markets in everything
Say you’re not one to believe the mainstream media. Maybe you think climate change is an elaborate hoax or the medical community is trying to hide the myriad dangers of vaccinations. Perhaps you are utterly convinced the government is overrun by reptilian beings.
Where on Earth can you go to get away from it all, and mingle with those who share your views? Well, Conspira-Sea, of course. It’s a seven-day cruise where fringe thinkers can discuss everything from crop circles to mind control on the open sea. Last month’s cruise featured a caravan of stars from a surprisingly vast galaxy of skeptics and conspiracy theorists, including Andrew Wakefield, known for his questionable research and advocacy against vaccines. Also aboard was Sean David Morton, who faced federal charges of lying to investors about using psychic powers to predict the stock market.
Is this not what Tiebout equilibria are for? Best of all, the cruise gets these people away from the rest of us, for the most part.
There is more here, sad and silly throughout, via Michael Rosenwald.
Addendum: Here are the blog posts of, Colin McRoberts, the journalist who attended.
An important new macro paper
When you disaggregate the data at the state level, wages don’t look so sticky any more:
…states that experienced larger employment declines between 2007 and 2010 had significantly lower nominal wage growth during the same time period…Our estimates suggest that real wages also vary significantly with local measures of unemployment at the state level…there is a strong relationship between local employment growth and local wage growth at business cycle frequencies.
In other words, the supply and demand model doesn’t do so badly after all.
So why do aggregate wages appear so sticky in the data?
…not because wages are sticky in the aggregate, but because different aggregate shocks have relatively offsetting effects on aggregate wages.
And in conclusion?:
…we find that a combination of both “demand” and “supply” shocks are necessary to account for the joint dynamics of aggregate prices, wages and employment during the 2007-2012 period in the US…
That is a new NBER Working Paper from Martin Beraja, Erik Hurst, and Juan Ospina. Here are ungated versions.
Mark Cuban on what has gone wrong
When private companies can’t or won’t go public, they become easy pickings for their competitors to buy them…In my not so humble opinion, this is the ultimate productivity and investment killer in the USA today.
And this:
One of the reasons today’s 3700 public companies hoard cash is because they know that rather than investing in uncertain R&D and productivity enhancements to protect them against the “Innovators Dilemma”, upstart companies that could disrupt them and their industries, they can simply buy those companies.
Finally:
It is undeniably destructive to our economy and future when many of our most innovative and exciting companies are bought by their competition. It is a “Precognitive Anti-Trust Violation” I know that sounds laughable in so many ways. But at its heart, it’s true. It’s also incredibly destructive to our standing in the world and our economy.
Speculative, but worth a ponder. The full post is here, and for the pointer I thank Michael Milburn.
@NYTimeskrugman is no longer just a bot
Paul Krugman is in fact tweeting there. His first “real tweet” is:
Prediction: By the fall, moderate Republican pundits will declare that given the Democrat’s flaws, Trump is the better choice.
A strengthening Yen, Japanese negative ten-year yields, and a falling Nikkei
My market hermeneutics is this: Japan is trying to weaken its currency by confiscating resources from its financial institutions only, using negative interest charges on bank deposits held at the Bank of Japan. The market says “we don’t believe this can work. If you really want to weaken your currency, you have to confiscate resources from your citizens, perhaps from your median voter too.” Abe won’t do that, not yet at least. And so the Yen is rising. The currency looks stronger than before, yet the overall Japanese situation looks weaker, so Japanese equities are falling sharply.
I wonder which politician will be the one to use monetary policy — not for “people’s QE” — but to confiscate resources from the median voter. It won’t happen tomorrow, or even next year, but yes it will happen in some of the developed economies, not just Venezuela. That will change macro debates by more than a small amount.
Here is an FT account, here are other, less gated accounts.
America fact of the day
US bank stocks have suffered a brutal start to 2016. Out of the 90 stocks on the S&P financials index, just seven were in positive territory for the year, after the market closed on Monday.
Two of the biggest losers, Bank of America and Morgan Stanley, are down 27 per cent and 29 per cent respectively. Citigroup, also down 27 per cent, is now trading at just 6.5 times earnings, not far off the trough of 5.9 times during the Lehman Brothers crisis.
That is from the FT.