For anyone who missed Tyler Cowen's presentation at the Singularity Conference from earlier this year.
Tuesday, December 27
Saturday, December 24
Recapping The PolyCapitalist's 2011 Predictions
For those keeping score three topics I made 2011 forecasts on were:
On Android, the verdict is in:
On Android, the verdict is in:
The U.S. housing market officially double dipped in May and then continued to fall, so that call looks correct as well.
The China prediction is a bit murkier, but here are some points worth noting:
- The Hang Seng and Shanghai stock markets are in a bear market and down roughly 20% for the year, or 30% since May. From its peak in 2008 Shanghai is off 60%.
- Housing prices are softening quickly; in Beijing new home prices dropped 35% in November alone.
- Coastal cities such as Wenzhou and Ordos appear to be experiencing a credit crisis with reports of businessmen leaping off rooftops.
- Hot money appears to be flowing out of the country: China's $3.2 trillion in foreign reserves have been falling for three months despite a trade surplus.
Things aren't shaping up too well for China or trade relations with the U.S. in 2012 either. For more on this see here, here, here and here.
Overall, does 2.5 out of 3 predictions sound about right?
Two more quick ones: bullishness on gold has been a steady theme since starting this blog in May 2010. And how did gold do in 2011? Despite the autumn selloff gold priced in U.S. dollars has returned around 10%. Not too shabby given that the S&P500 is flat YTD. I also managed a correct mid-year bearish call on the euro.
Check back later for The PolyCapitalist's 2012 predictions.
Will the Next Decade Be Dominated by America?
'Tis the season for predictions and STRATFOR's George Friedman has come up with a whopper.
The first chapter of his new book has been posted here. The main provocative claims is that the American 'Empire' will continue to be dominant over the next decade.
Will it? Here are a couple comments on Friedman's chapter:
First, I would take some issue with simplifying the Great Depression down to having originated in Germany. The role of Germany in the Great Depression does actually deserve more popular credit than it receives, but the scholarly consensus would not agree with Friedman's assertion that its "roots" reside in Germany.
Second, on his main argument, the IMF is projecting that China's economy will surpass the U.S.'s (on a purchasing power parity basis) in just five years in 2016. The EU economy is already larger than the U.S.'s. and has blocked U.S. mergers (e.g., GE's attempted acquisition of Honeywell).
Yes Europe has problems, and yes China may be experiencing the Mother of All Bubbles. But for Friedman to argue that the U.S.'s relative power in the next decade will be anything like it has been over the past 20 years seems incredibly optimistic and naive. The U.S. would appear to be at a significant cyber-warfare disadvantage compared to China at present (Update: within a few hours of this post STRATFOR's website was hacked and private client data posted on the internet). The U.S. has also failed to demonstrate that it can keep the nuclear weapons genie in the bottle in potentially hostile parts of the world. China is developing its first world class navy in 600 years. In short, examples abound of the U.S.'s relative power weakening.
Friedman writes about the U.S.'s need for a regional strategy. One interesting and rarely discussed possible outcome of the fiscal crunch facing America is the potential for unprecedented regional infighting inside the United States. For example, how difficult is it to imagine Texans questioning whether their tax dollars should continue subsidizing Maine, Oregon and Vermont? Or Californians funding Sarah Palin's Alaska?
The first chapter of his new book has been posted here. The main provocative claims is that the American 'Empire' will continue to be dominant over the next decade.
Will it? Here are a couple comments on Friedman's chapter:
First, I would take some issue with simplifying the Great Depression down to having originated in Germany. The role of Germany in the Great Depression does actually deserve more popular credit than it receives, but the scholarly consensus would not agree with Friedman's assertion that its "roots" reside in Germany.
Second, on his main argument, the IMF is projecting that China's economy will surpass the U.S.'s (on a purchasing power parity basis) in just five years in 2016. The EU economy is already larger than the U.S.'s. and has blocked U.S. mergers (e.g., GE's attempted acquisition of Honeywell).
Yes Europe has problems, and yes China may be experiencing the Mother of All Bubbles. But for Friedman to argue that the U.S.'s relative power in the next decade will be anything like it has been over the past 20 years seems incredibly optimistic and naive. The U.S. would appear to be at a significant cyber-warfare disadvantage compared to China at present (Update: within a few hours of this post STRATFOR's website was hacked and private client data posted on the internet). The U.S. has also failed to demonstrate that it can keep the nuclear weapons genie in the bottle in potentially hostile parts of the world. China is developing its first world class navy in 600 years. In short, examples abound of the U.S.'s relative power weakening.
Friedman writes about the U.S.'s need for a regional strategy. One interesting and rarely discussed possible outcome of the fiscal crunch facing America is the potential for unprecedented regional infighting inside the United States. For example, how difficult is it to imagine Texans questioning whether their tax dollars should continue subsidizing Maine, Oregon and Vermont? Or Californians funding Sarah Palin's Alaska?
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This is the exact argument which is taking place in Europe right now between Germany and Greece. Yes, there are large differences between American and European social cohesion. But I would not be surprised to see growing regionalization within the U.S. as a key emergent theme in the years to come. In the absence of existential external threats the justification for an extremely powerful and centralized U.S. federal state is more open to question.
Overall, Friedman's chapter is written from the perspective of an all-powerful emperor and not from one bearing witness to the paralysis which has gripped Congress in recent years. I'm also not sure he has a firm grasp on some of the social-demographic shifts which are emerging nor the current economic/financial situation.
In short, this chapter seems more a treatise on how Friedman would prefer to see the world than how it actually is.
In short, this chapter seems more a treatise on how Friedman would prefer to see the world than how it actually is.
Wednesday, December 21
My $0.02 on Krugman's and Delong's Inflationista Potshots
Here's Delong's OH BOY: NIALL FERGUSON PRACTICING ECONOMICS WITHOUT A LICENSE DEPARTMENT
And my comment (which for some reason won't load onto Brad's blog so I'm posting it here):
And my comment (which for some reason won't load onto Brad's blog so I'm posting it here):
I'll readily admit that I'm not an expert on CPI methodologies, and I am inclined to believe that the BLS has many well intentioned and highly educated professionals using defendable methodological practices. However, I share Ezra's feeling that something doesn't smell right on inflation numbers.
Over the past decade how can official cost of living figures have gone up so little when they supposedly take into account the following items:
-Housing
-Medical
-Fuel
-Food
-Education
These are some of the largest cost items for most consumers, and in the last decade up to the financial crisis many saw double digit price increases (in some cases in a single year).
The BLS's CPI calculator says that $1 in 2001 has the same buying power as a $1.17 in 2007, so yes, the BLS is picking up at least some of the perceived inflation in these categories. However, do the BLS number capture the full picture?
One thing is for certain: the CPI was utterly useless with respect to the housing bubble as it does not include housing prices, only rent. This despite the fact that nearly 70% of all American homes are owner occupied.
It's convenient to dismiss anyone questioning official government statistics as a conspiracy crank. However, under reporting of inflation by a government bureaucracy would be useful in terms of reducing that same government's expenses in the form of lower cost of living adjustments for government workers and TIPs expense. Under reporting inflation also provides ammunition for the Greenspan-Bernanke Fed to not have to raise interest rates and thereby dampen exuberance.
In other words, many stand to benefit from the under reporting of inflation. It is therefore reasonable to cast a skeptical eye on these numbers, especially when they fly in the face of everyday experience.
A final point I'd add is that economics is too important to be left to economists, particularly with most of the 'license' holders (econ PhDs) having completely failed to identify in advance the biggest economic event since the Great Depression.
Monday, December 19
Thursday, December 15
Wednesday, December 14
As the Euro Rolls Over, Why Hasn't Gold Rocketed?
In early May of this year, with the euro hovering in the $1.46-$1.48 range, I disagreed vehemently with euro bulls such as portfolio manager Axel Merk who argued that the common currency was no longer vulnerable to a sell-off (see Merk's May 11 FT article titled 'Dollar in graver danger than the euro' and my counter arguments here, here, and here).
Merk's argument was basically that in 2010, when the euro sank to a low of $1.18, the currency served as a proxy for the sovereign debt crisis. Now, however, investors were shorting sovereign debt directly and, according to Merk, recognized that it is a lot harder for the ECB to print euros than it is for the Fed to print dollars.
For awhile, as you can see from the below chart, it appeared that Merk perhaps had made a good point. From May the euro has shown remarkable resilience; for the last six months one sovereign after another has white knuckled its way through uncertain debt auctions and ever higher interest expense. Meanwhile the ECB kept its 'bazooka' semi-holstered with purchases of sovereign debt apparently capped at €20 billion per week. While the euro did soften from mid-May onwards it was able to keep it's head above the $1.40 mark for the summer and a good chunk of autumn.
Continue reading the full article at Seeking Alpha here.
Merk's argument was basically that in 2010, when the euro sank to a low of $1.18, the currency served as a proxy for the sovereign debt crisis. Now, however, investors were shorting sovereign debt directly and, according to Merk, recognized that it is a lot harder for the ECB to print euros than it is for the Fed to print dollars.
For awhile, as you can see from the below chart, it appeared that Merk perhaps had made a good point. From May the euro has shown remarkable resilience; for the last six months one sovereign after another has white knuckled its way through uncertain debt auctions and ever higher interest expense. Meanwhile the ECB kept its 'bazooka' semi-holstered with purchases of sovereign debt apparently capped at €20 billion per week. While the euro did soften from mid-May onwards it was able to keep it's head above the $1.40 mark for the summer and a good chunk of autumn.
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| Click to enlarge |
Continue reading the full article at Seeking Alpha here.
Friday, December 9
Video: Niall Ferguson on Charlie Rose
Video of Niall discussing his new book, Civilization, as well as his current views on the European debt crisis, Turkey's resurgence, and Iran's future here.
The Fed's $1.2 Trillion in Secret Bank Loans
Interactive chart detailing previously secret Federal Reserves loans to each bank here. Bloomberg deserves an award for their doggedness and reporting on this issue.
Thursday, December 8
Greece Has Its Own Banknote Printing Facility; Ireland Mulls Boosting Its
From the WSJ:
Most euro-zone central banks maintain at least limited capacities to print bank notes. While the European Central Bank is responsible for determining the euro zone's supply of bank notes, it doesn't actually print them. The ECB outsources the work to central banks of euro-zone countries. Each year, groups of countries are assigned the task of printing millions of bank notes in specific denominations.
The countries have different arrangements for printing their shares of the notes. Some, like Greece and Ireland, own their printing presses. Others outsource to private companies.
The assignments vary from year to year. Last year, Ireland printed 127.5 million €10 notes, and nothing else, according to its annual report. This year, it was among 11 countries assigned to print a total of 1.71 billion €5 notes.
Full story here.
Video: Carmen Reinhart vs. Paul Krugman
This event occurred back in June but the video just surfaced.
Watch live streaming video from nytimesopinion at livestream.com
Monday, December 5
Steve Keen on How He Saw "It" Coming and Why We're in a Depression
A must watch interview with Economist Steven Keen, the first part of which is embedded below (remaining parts can be found here).
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