Category: Current Affairs

Optimism about Mexico a story of compounding returns

Current per capital income measures at about 19k PPP.  Apply 2.2% growth for 30-35 years and Mexico then approaches the living standard of today’s UK or South Korea!  Since 1994, Mexico’s average growth rate has been 2.09%, including Covid times, so that is hardly outlandish as an assumption.

Here is my latest Bloomberg column on that topic.  Here is one excerpt:

In the meantime, there are reasons to be bullish on Mexico right now. One is that economic globalization has been somewhat halted, and in some areas even reversed. To the extent Americans do not trust Chinese supply chains, the Mexican economy will pick up some of the slack. Mexico is also the natural lower-wage supplier to North American industry. (Its main problem in this regard is that its wages are no longer so low, but that too reflects its progress.)

And if tourism in Asia and Europe remains difficult or inconvenient, Americans will visit Mexico more and grow accustomed to holidaying in locales other than Cancun. Some of those habits are likely to stick.

I do also cover the ifs, and, or buts.  And:

Mexico, like much of Latin America, also has a burgeoning startup scene, especially in ecommerce and fintech. Mexico City might end up as the technology capital of [Spanish-speaking] Latin America. That would help with one of Mexico’s chronic economic problems, namely that small firms decide to stay small to escape regulations and taxes. Successful tech startups, in contrast, can scale more easily and face fewer regulations on average than manufacturing firms.


My Conversation with Stanley McChrystal

Here is the audio, video, and transcript.  Here is part of the CWT summary:

He joined Tyler to discuss whether we’ve gotten better or worse at analyzing risk, the dangerous urge among policymakers to oversimplify the past, why being a good military commander is about more than winning battlefield victories, why we’re underestimating the risk that China will invade Taiwan, how to maintain a long view of history, what set Henry Kissinger apart, the usefulness of war games, how well we understand China and Russia, why there haven’t been any major attacks on US soil since 9/11, the danger of a “soldier class” in America, his take on wokeness and the military, what’s needed to have women as truly senior commanders in the armed forces, why officers with bad experiences should still be considered for promotion, how to address extremists in the military, why he supports a draft, the most interesting class he took at West Point, how to care for disabled veterans, his advice to enlisted soldiers on writing a will, the most emotionally difficult part and greatest joys of his military career, the prospect of drone assassinations, what he eats for his only meal of the day, why he’s done writing books, and more.


COWEN: If we had to shrink one capacity of the military, say, by 50 percent, and double the capacity of another, what would you pick to shrink and what to expand?

MCCHRYSTAL: This is always the tough one. I tend to think that the maneuver warfare part that we have created for ground warfare in Europe or in the Mideast is probably somewhere where we have to accept some risk. We have to have fewer capabilities there. You could even argue maybe the number of aircraft carriers — big capital things.

I think where we can’t afford — and therefore, I would invest — is in really good people. Now, that seems like a simplistic answer, but we are going to need very crafty people at things like cyber warfare. We’re going to need very innovative people. We’re going to need people with cultural acuity, which means language skills, and that’s going to be more important. So if I was advocating, I’d be leaning toward resourcing harder in those areas.

COWEN: Now, of course, your father was a general. You come from a military family. Why is it that military recruitment, right now, is so well predicted by having had a parent in the armed forces? What’s driving that? And how can we take advantage of that to recruit additional people?

MCCHRYSTAL: Well, we’ve taken advantage of it to the point where it may be counterproductive now. When I would travel the battlefields and go to small bases, invariably, the sergeant or lieutenant in charge was the son or daughter of a friend of mine. In one way, it’s comforting because you know people have entered the service with open eyes and clear expectations, and they make good soldiers, but you don’t want a soldier class in America.

Definitely recommended, there is also a segment about disabled veterans and their rights.  And again here is Stan’s new book Risk: A User’s Guide, co-authored with Anna Butrico.

What is going on in this Malaysian-Chinese libertarian video of the year?

Blocked on Weibo, by the way.  One major figure in the video is the Malaysian-Chinese rapper Namewee, also Kimberly Chen.  I put up this post, among other reasons, to show just how much there is in the way of cultural codes to crack.  How much of it do you understand?  Do you get the references to this Thai-Chinese internet controversy?  What else?  Here is further excellent commentary from Sabina Knight.  #20 on the YouTube music charts.

Via Stu.

FDA relents on mix and match for third dose

Here is the NYT account, they sound both confused and confusing.  How about “if you have had J&J, it is fine and probably preferable to get a further dose of Moderna or Pfizer”?  Yet suddenly it is fine.

And it is the usual story — people have been doing this for months, and the FDA would not say it is terrible.  Because they knew it wasn’t.  But they wouldn’t say so.  And now the status quo has shifted, and so everyone will treat it as fine, as if the supposed fears of yesterday never ever existed.

Maybe I should insult people more often?

Some of them are frauds

The panel also seemed intrigued by preliminary data suggesting that Johnson & Johnson recipients may be better off with a booster shot from Moderna or Pfizer. Although no vote was taken, Dr. Peter Marks, who oversees the F.D.A.’s vaccine division, said regulatory action to allow boosters with a different vaccine was “possible.”

While some experts emphasized that the data was based on small groups of volunteers and short-term findings, others urged the F.D.A. to move quickly with what has fast become known as a mix-and-match approach, especially for recipients of Johnson & Johnson’s vaccine, which is much less widely available.

“I’m sold already,” said Dr. Mark Sawyer, an infectious disease specialist with the University of California San Diego School of Medicine. “We need flexibility and to improve access to everyone.”

Others said they worried that the public would end up bewildered if the government kept broadening the categories of people eligible for boosters and which vaccine could be used for extra shots.

“I hope we can do this in a way that doesn’t look like we’re changing rules all the time,” said Dr. Stanley Perlman, a professor of immunology at the University of Iowa.

Health officials and committee members suggested on Friday that the single-shot Johnson & Johnson vaccine had long been less protective. In a particularly biting critique, Dr. Amanda Cohn, a high-ranking C.D.C. medical officer, said a single dose of Johnson & Johnson’s vaccine offered less protection than two doses of the mRNA vaccines made by Pfizer or Moderna — a gap that would only grow if it remained a one-shot regimen while the other two-shot vaccines were followed by a booster…

The experts generally agreed that the protection conferred by a single dose was inadequate, but at least some were unconvinced that the second dose would bolster that protection significantly.

The smart people I know who started with J&J took this matter into their own hands some time ago, typically opting for an mRNA supplement.  They are just “people,” yet they had “skin in the game” and they are miles ahead of the FDA and CDC as formal institutions.  Here is a research paper on the question.  Here is another.  And here is a Paul Sax tweet and Op-Ed: “Don’t know anyone who disagrees with this, and the data have been highly suggestive for months.”  And this is after the authorities insisted for months that all vaccines will be treated the same.

Again, I will repeat the perennial question: do our public health agencies wish to maximize their own status and control and feeling of “having done everything properly as they were trained,” or do they wish to maximize the expected value of actual outcomes for the citizenry?  If it is not the latter, and too often it is not, I say they are oppressive frauds.  (And please don’t try to tell me this kind of craperoo is boosting their credibility — in fact they have lost massive credibility with America’s public intellectual class, both left wing and right wing and for that matter centrist.)

I really do not have much sympathy for Kyrie Irving and Bradley Beal and their ilk, but in fact their views are more understandable than you might think from reading MSM.  Their generalized mistrust is not so crazy, even though they are quite wrong in this particular instance.  By the way, don’t take those aspirin any more!

Here is the full NYT article, cringeworthy throughout, and I thank Jordan for the pointer.

Is this the uh-oh moment for renewable energy?

That is the topic of my latest Bloomberg column, here is one excerpt:

American elites like to argue for a carbon tax and other means of raising the price of carbon emissions, and I fall into that camp myself. Yet higher energy prices are extremely unpopular with many voters. A recent study found that most Americans would vote against a mere $24 annual climate tax on their energy bills. Many countries now have to ask themselves if they really are ready to start paying the bills for a transition away from carbon.


…the Biden administration has been playing a two-sided game. Policies strongly discourage domestic producers from adding fossil-fuel capacity, and indeed those investments remain depressed. Perhaps that is how it should be. Yet when it comes to global capacity, America is talking and playing a very different hand.

For instance, the Biden administration has criticized OPEC for insufficient production of crude oil. National security adviser Jake Sullivan said bluntly: “At a critical moment in the global recovery, this is simply not enough.” That kind of policy talk is hard to square coming from the same government that has revoked permits for the Keystone XL pipeline, limited oil and gas leases on federal land and in Alaska, and used the Endangered Species Act to limit energy development on private lands in the West.

The federal government’s strategy seems clear. It is discouraging fossil-fuel capacity in the U.S. and Canada, but to keep energy prices low it will tolerate and indeed encourage high fossil-fuel spending in other, more distant nations. That would give the U.S. some domestic “trophies” in the fight to limit fossil fuels, yet without higher energy prices for the world at large.

The problem is that the same mix of policies won’t do much to limit overall carbon emissions. It will hurt American industry, by penalizing domestic energy production, and also damage U.S. energy independence.

So far I am not seeing a lot of evidence that the world really is willing to tolerate higher energy prices.  Countries all over are rushing back to coal — what are we supposed to conclude from that?

Tyrone, your local Straussian, comments on “Trap House”

I took it to refer to a place where drugs are sold, but you might be trapped either by the police or by the attendant lifestyle and its appeals.  The Yale Federalist Society was proclaming itself comparable to such a trap house, and thus at the same time broadcasting both its appeal and its potential danger.

By calling itself such a trap house, in a funny self-referring way it became one.  A kind of opposite to the Liar’s Paradox.  How many other claims become true by the mere act of making them?  “I am making a claim now” would be one of them.

Tyler: So says Tyrone.  But he is very consistently wrong.  And if you don’t know what Tyrone is talking about in this incoherent, philosophically naive missive, it is not worth trying to find out.

Hunting the Satanists

Michael Flynn, the former Trump National Security Advisor and QAnon promoter, is now being accused by QAnon of being a Satanist.

…Flynn’s trouble started on Sept. 17, when he led a congregation at Nebraska pastor Hank Kunneman’s Lord of Hosts Church in prayer. Flynn’s prayer included invocations to “sevenfold rays” and “legions,” two phrases that struck some of Flynn’s followers as strange.

…As video of the prayer circulated in online conspiracy theorist groups, the references to “legions” and “rays” soon sparked speculation among Flynn’s right-wing supporters that their hero had been lured to the dark side. Always on the lookout for the Satanic influence they imagine lurks at the heart of the world, they claimed that Flynn had secretly been worshiping the devil. Worse, since the congregation was repeating the prayer after Flynn, the rumor went, he had duped hundreds of Christians into joining the ritual.

…Flynn isn’t the first right-wing figure tied to QAnon to see its acolytes turn on him. Oklahoma Senate candidate Jackson Lahmeyer, whose challenge to Sen. James Lankford (R-OK) has been endorsed by Flynn, appeared at an April pro-QAnon conference with Flynn in Tulsa.

A few months later, however, Lahmeyer posted a seemingly innocent picture of his daughter wearing red shoes—apparently unaware that QAnon followers consider red shoes to be yet another sign of their imagined Satanic sex-trafficking cabal. Lahmeyer was soon caught up in a QAnon controversy of his own.

“Unfortunately, I have to say it because people are asking me,” Lahmeyer wrote in a Facebook post. “I’m in no way involved in Child Sex Trafficking, pedophilia or devil worship.”

Now, here’s another story–this one about an email sent by a Yale law student from the Native American Law Students Association (NALSA) to fellow classmates. The email in question reads:


Hope you’re all still feeling social! This Friday at 7:30 we will be christening our very own (soon to be) world=renowned NALSA Trap House….by throwing a Constitution Day Bash in collaboration with FedSoc. Planned abstractions include Popeye’s chicken, basic-bitch-American-themed snacks (like apple pie, etc.), a cocktail station, assorted hard and soft beverages, and (most importantly) the opportunity to attend the NALSA Trap House’s inaugural mixer!

Hope to see you all there!

The email seems to me like a light-hearted invitation to a party but, of course, not being one-of-the-elect I can’t read the secret, esoteric meaning. According to Yale’s Diversity office the email was actually a coded message to celebrate white supremacy with a blackface party.

Just 12 hours after the email went out, the student was summoned to the law school’s Office of Student Affairs, which administrators said had received nine discrimination and harassment complaints about his message.

At a Sept. 16 meeting, which the student recorded and shared with the Washington Free Beacon, associate dean Ellen Cosgrove and diversity director Yaseen Eldik told the student that the word “trap” connotes crack use, hip hop, and blackface. Those “triggering associations,” Eldik said, were “compounded by the fried chicken reference,” which “is often used to undermine arguments that structural and systemic racism has contributed to racial health disparities in the U.S.”

Eldik, a former Obama White House official, went on to say that the student’s membership in the Federalist Society had “triggered” his peers.

…Throughout the Sept. 16 meeting and a subsequent conversation the next day, Eldik and Cosgrove hinted repeatedly that the student might face consequences if he didn’t apologize—including trouble with the bar exam’s “character and fitness” investigations, which Cosgrove could weigh in on as associate dean.

…When the student hadn’t apologized by the evening of Sept. 16, Eldik and Cosgrove emailed the entire second-year class about the incident. “[A]n invitation was recently circulated containing pejorative and racist language,” the email read. “We condemn this in the strongest possible terms” and “are working on addressing this.”

The two cases illustrate that the worldview of QAnon and Yale’s diversity office are surprisingly similar. Both see a world in which Satan, literal or metaphorical, is an active force in the world corrupting individuals and institutions. Satan is powerful but hidden. He only reveals his influence when the corrupted slip-up and by the incorrect use of a word, phrase, or gesture reveal their true natures.

Since Satan is powerful and hidden the good people must constantly monitor everyone. The moment a slip-up is spotted, no matter how small, the corrupted must be denounced because anyone who even unwittingly associates with the corrupted will themselves become corrupted. “Legions”and “rays”? Satanist! “Trap House.” Satanist! “Red shoes.” Sex-trafficker! “Federalist Society.” Satanist society! Repeating the prayer? Duping hundreds of Christians into joining the ritual! Attending a party? We condemn this in the strongest possible terms! Condemn the non-believers to HELL! It’s all the same.

The other similarity, of course, is that both views are disturbingly common and completely bonkers.

Photo Credit: Wikipedia.

Why the IMF is intrinsically conservative and hard to reform

That is the topic of my latest Bloomberg column, here is one excerpt:

The IMF is used by the G-5 nations and their allies to put their reputational capital behind the international monetary order. Obviously, the backing countries are only going to underwrite a system that they largely approve of and benefit from.

If the IMF didn’t exist, failed nations still periodically would be bailed out by rich ones, if only because the G-5 politicians wouldn’t wish to endanger the stability of the global financial order. But problems would arise as the bailouts would have to be organized anew each time. Which nation would put in how much? Who would pull the plug on failing nations and when? Who or what would enforce repayment? All those questions are regularized and institutionalized through the existence of the IMF.

The cronyist element is that the G-5 nations use the IMF and its lending facilities to protect the creditworthiness of their own banks and financial systems. In contrast, an IMF serving “the citizens of the world,” whatever that might mean, would be an IMF without much support from the biggest and most important financial players. It would be more like the undercapitalized Unicef than an institution that can move world markets or help preserve them…

If the directorship and board governance of the IMF were picked by a vote from all 190 member countries, the leading G-5 nations would put much less of their reputational capital behind the institution. The IMF is an international public good, but such public goods only get produced when it is in somebody’s selfish interest to do so.

And to close:

Successful international economic orders typically have been based on a fair degree of hegemony, whether it was the British-led gold standard of the 19th century, or the more recent post-World War II American dominance. Once you realize that, a lot of the current questions about the IMF answer themselves rather automatically. The real issue isn’t how to improve the IMF, but how we are going to cope as current hegemonies continue to lose their sway.


Model these Sweden Denmark lower inflation rates

Sweden’s annual inflation rate rose to 2.5 percent in September of 2021 from 2.1 percent in August but below market expectations of 2.7 percent. It was the highest since November of 2011, mainly due to prices of housing & utilities (5.1 percent vs 3.8 percent in August), namely electricity and transport (6.2 percent vs 6.4 percent), of which fuels. Additional upward pressure came from education (2.5 percent vs 2 percent); restaurants & hotels (2.4 percent vs 2.6 percent); miscellaneous goods & services (2 percent vs 1.4 percent) and food & non-alcoholic beverages (0.9 percent vs 0.3 percent). Consumer prices, measured with a fixed interest rate, rose 2.8 percent year-on-year in September, the fastest pace since October of 2008, below market expectations of 3 percent but above the central bank’s target of 2 percent. On a monthly basis, both the CPI and the CPIF rose 0.5 percent.

Here is the link, they are an open economy facing lots of supply shocks, right?  So what is up?

And Denmark:

Denmark’s annual inflation increased to 2.2% in September of 2021 from 1.8% in the previous month. It was the highest inflation rate since November 2012, due to a rise in both prices of electricity (15.2%), pointing to the highest annual increase since December 2008 and gas (52.8%), which is the highest annual increase since July 1980.

I thank Vero for the pointer.  In an email to me she asks:

“If supply issues are the only cause of our inflation woes, then why is it that countries that spent less than 5% of GDP on the pandemic are experiencing average inflation of 2.15%? While countries that spent over 15% of GDP are experiencing average inflation of 3.94%? I don’t know the answer but I think it is worth asking this question.”


Stripe v. Elrond! Crypto and the Payments System

Recently Elrond, the blockchain startup for which I am an advisor, bought a payments processor (conditional on approval from the Romanian government). On the same day, Stripe, the payments processor, announced that they are moving into crypto. None of this is coincidental. Elrond understand that the payments market is a multi-trillion dollar opportunity. Stripe knows that crypto innovation could undercut them very quickly if they aren’t prepared.

How did Stripe turn into a multi-billion dollar firm almost overnight? Obviously, Stripe is a great firm, led by the brilliant Collison brothers, CEO Patrick Collison and President John Collison. But it’s also important to understand that the payments market in the United States is a $100 trillion dollar market. Yes, $100 trillion. Any firm that captures even a small share of this market is going to be big. Credit cards are actually a small part of payments, about $7 trillion with roughly a 2% transaction fee or a $140 billion market. (Quick check. Credit card companies had 2020 revenues of $176 billion).  ACH debit and credit transfers are the big market, $65 trillion, which at a .5% transaction fee amounts to a $325 billion market (this is retail price, wholesale is lower). Thus, payments revenue is on the order of $465 billion. A small share of $465 billion is a very big market (and that is just the US market).

Now consider the following. Crypto payments are in principle at least an order of magnitude cheaper than ACH payments. On Elrond, for example, a very fast and low cost blockchain compared to Ethereum or Bitcoin, someone recently transferred $17.5 million for less than a penny. Moreover, crypto payments are global while every other payments system gets much more expensive as you cross borders. I recently sent $1500 to India and it cost me $100 in transaction fees! To be sure, payments made through the banking system have to obey “Know Your Customer” regulations and also include invoicing and billing services which adds both to value and cost. The main reason, however, that payments through the banking system are expensive is because the banking system rails are taped together with two hundred years of spit and duct tape.

Crypto payments are the future. Stripe knows it. Elrond knows it. The race is on.

Thinking about broken supply chains

That is the topic of my latest Bloomberg column.  Here is one bit:

Most fundamentally, some key nerve centers of the world economy have been hit by a mix of Covid and bad luck, especially in the latter part of this year. Transportation, energy and high-quality semiconductor chips all are experiencing big problems at the same time, for reasons which are distinct yet broadly related.


This combination has fueled price inflation. The demand is hitting the market, and the supply can’t catch up. And it’s not just one problem that has an easy, direct fix, but rather a series of interlocking paths of economic chaos and delay.

Don’t expect all of your Christmas shopping to run smoothly!

Covid scam arbitrage

It sounded like the ultimate COVID-era travel bargain: five-star hotels in Manhattan at a 60 percent discount. “I do not know exactly what hotel u would be place but I know it would be 5 star hotel … be cash app ready!!” read a Facebook post hyping the deal. A Cash App–only hotel promotion might raise a few red flags, but trust that the rooms were very much real — they were just supposed to be set aside for COVID patients and health-care providers. The scam was uncovered after four months of excellent business, and this week, federal prosecutors charged Chanette Lewis with fraudulently booking New York’s emergency COVID hotel rooms using health-care workers’ stolen personal information. Lewis, 30, and three other accomplices are alleged to have advertised the rooms on Facebook and to have made a whopping $400,000 by booking more than 2,700 nights’ worth of stays in the spring and summer of last year.

Lewis, whose actual job was to book quarantine rooms on behalf of the city, had access to health-care workers’ personal information through her work at the Office of Emergency Management. But she allegedly used their credentials to book stays for her guests instead, making it look like they had been exposed to COVID. “I stole some doctor numbers and emails … I was writing down they employed ID number lmao,” prosecutors say Lewis wrote in a Facebook message. The hotel rooms, which would normally run hundreds of dollars a night, went for only $50 a night and $150 for the week. She then took the cash, prosecutors say, and the city was billed for the rooms. The grift went so well that Lewis recruited others to help her out. “I wanna teach u the ropes of it,” she messaged her co-conspirator Tatiana Benjamin, 26, in June. Her guests did the opposite of quarantine; some threw parties and, as one special agent for the U.S. Attorney ominously put it, “engaged in violence.”

Here is the full story, via Air Genius Gary Leff.

The First Nobel Prize for Marginal Revolution University!

The Nobel Prize in economics this year goes to David Card, Joshua Angrist and Guido Imbens. I describe their contributions in greater detail in A Nobel Prize for the Credibility Revolution.

It’s also fun to note that Joshua Angrist mostly teaches at MIT but he also teaches a course on Mastering Econometrics at Marginal Revolution University so this is our first Nobel Prize! Here is Master Joshua on instrumental variables.