Category: Uncategorized

The long-prophesied government

The outlines are beginning to become clear:

The word “global” has taken on sacred connotations. Any action taken in its name must be inherently virtuous, whereas the decisions of individual countries are necessarily “narrow” and self-serving…. There is a whiff of totalitarianism about this new theology, in which the risks are described in such cosmic terms that everything else must give way. “Globalism” is another form of the internationalism that has been a core belief of the Left: a commitment to class rather than country seemed an admirable antidote to the “blood and soil” nationalism that gave rise to fascism.

There is more than “a whiff of totalitarianism” about it; globalism is an intrinsically more deadly threat to Man than fascism, Communism, and Nazism combined. The sacred connotations it has taken on should cause every religious and non-religious individual alike to question just what, precisely, is the nature of the religious spirit behind it. As for me, I think it stinks of sulfur.

VPFL Playoffs Round One

Judean Front (10-4)
Bane Silvers (7-6-1)

Alamo City Spartans (10-4)
Mounds View Meerkats (8-6)

It looks like another one-and-out for the Meerkats, although that’s less disappointing this year. Getting no performance out of two of my three keepers – Clinton Portis and Greg Jennings – and making a terrible blunder by picking up Mario Manningham instead of Steve Smith (NYG) left me scrabbling to fill my roster from week to week. With every starter but one playing on the road and the Spartans up 30-7 already thanks to early points from MJD and Miles Austin, I’m just hoping to keep it halfway respectable. Besides, everyone would be disappointed to miss the big showdown between the Spartans and the Front.

The Saints have blown their perfect season, I expect the Colts will next week. I’m just hoping the Saints drop another one while the Vikes win out and claim home-field advantage.

Bank failures: the grim prognosis

Those who are skeptical of the economic negativity expressed in RGD may wish to keep in mind that I projected failed bank deposits would reach 1.4 percent of total deposits in 2009. After the seven bank failures yesterday, including four large banks with more than $1.5 billion in nominal assets each, that percentage has now reached 1.84 percent. If next week’s Bank Failure Friday is of similar size, the 2009 percentage will reach 2 percent. The chart below compares the historical failed deposits of 1929-1931 to 2008-2010; the 2010 estimate is based on 400 banks failing with the same deposit average of the 2009 failures.

While the widespread rumors of 400 banks being projected to fail next year may be exaggerated, it’s fairly obvious that more than 150 are expected to collapse since the FDIC is expanding its work force by 1,600, an increase of nearly one-fourth, in order “to help with bank closings and examinations.”

Mailvox: science is a thing of the past

A mathematician/physicist writes of the negative effect peer review has on science:

I am writing concerning some pieces of yours I’ve seen which appear to be examining the peer review process in science. There can be little doubt that the peer review system presently in place is flawed, to the extent that it is doing science a grave disservice. I have now retired after being a senior lecturer at an English university in mathematics until 2002, before transferring to physics where I remained until retirement in 2008. In that time I have seen the reviewing standards in many of the so-called prestigious physics journals, as well as more general journals such as Nature, slump. I have also noted a difference in attitude from editors. Now they usually refuse to discuss any submission; if a paper is rejected, that is normally the end of the matter.

I catalogued cases in a number of areas of physics in a book “Exploding a Myth: ‘Conventional Wisdom’ or Scientific Truth?” There is little doubt, although I cannot prove it, that those controlling science and scientific funding in the UK would not have wanted this book publicised since, if the general public became aware of what is really going on, they might be less inclined to fund these hugely expensive dubious projects like the Large Hadron Collider and LISA. Incidentally you might be interested in some of the cases I discussed, particularly the one where I and a colleague took Nature to the Press Complaints Authority – and won. It’s worth noting that “Against the Tide” by Martin Corredoira and Carlos Perelman is similarly not as well known as it should be. It too reveals much of what’s going on in science. It should be realised that everything simply supports the status quo; anything that might rock the boat is buried. Hence, truly original science is becoming a thing of the past.

It sounds like a pair of interesting books, well worth checking out. What far too many scienthologists fail to understand is that it is not the critics of science who pose a real and present danger to science, but rather the very scientists whose abuse and misuse of it are being criticized. If the public begins to tire of funding science, which is a probability in the more negative economic scenarios, scientists will have no one to blame but the charlatans and ideologues in their midst.

Krugman defends

Or, at least, tries to defend himself.

Oy. Rajiv Sethi tries to make sense of the arguments of Bryan Caplan and Tyler Cowen. So I went and looked — and what’s immediately clear is that Caplan, at least, is simply assuming that a rise or fall in nominal wages is equivalent to a rise or fall in real wages.

This was exactly Keynes’s starting point: as he said, by taking it for granted that the bargain over nominal wages sets real wages for the economy as a whole, classical economists had “slipt into an illicit assumption.”

And look: if you work through my little AD/AS exercise it should be immediately clear that in the case I was concerned with, changes in W lead to equal changes in P, so that real wages don’t change. Simple microeconomic logic doesn’t help here at all.

The problem with Dr. Krugman’s defense here is that a) microecnomic logic is not relevant, and b) he has committed his own illicit assumption, for as he stated: “in liquidity trap conditions, the interest rate isn’t affected at the margin by either the supply or the demand for money – it’s hard up against the zero bound.”

But this means that even if one accepts his AS-AD model, it is obvious that he was incorrect to state that economy in the 1930s was hard up against the zero bound. As proof of this, he cites historical interest rates on 3-month Treasury bills as being 0.14%, and forgets that present interest rates on 3-month T-bills are around 0.005%. Moreover, his own calls for quantitative easing indicate that the zero bound cannot be the firm barrier that his model requires them to be.

On a less theoretical level, it is simply not credible to assert that a lower minimum wage is going to magically cause the Fed to raise interest rates. Japan’s highest minimum wage is lower than the U.S. federal minimum and this has obviously not caused Japanese interest rates to increase in 20 years.

Keep this in mind

Should you ever find yourself pondering the probability of evolution by natural selection being true:

PZ Myers: “Yes, it is quite probable that global warming has a significant anthropogenic component. About as probable as the idea that HIV causes AIDS, species diversity is driven by evolutionary processes, and that the world is round.”

For once, I quite agree with the chicken-hearted biologist.  The idea that global warming exists and has a significant anthropogenic component IS about as probable as the idea that evolution by natural selection creates new species.  It’s also about as probable as the reported economic recovery being anything more than a short-term statistical artifact caused by the fiscal and monetary authorities pumping a massive amount of liquidity into the financial system.

Banks strategically default

But remember, it’s immoral, wrong, and VERY bad for a homeowner to execute his contractual right to relinquish property to a lender:

Morgan Stanley, the securities firm that spent more than $8 billion on commercial property in 2007, plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market.

If you’re underwater on your mortgage, strategically defaulting and walking away from your property is not only your legal and contractual right, in many cases it is the financially responsible thing to do.  Worrying about impaired credit hardly makes sense when the banks don’t want to lend to anyone regardless of how good their credit is.  And recent history demonstrates that once the banks decide they want to start lending again, they’ll lend to anyone with a pulse.

Correcting Krugman

I completely understand if some people think I’m attacking strawmen rather than Krugman’s actual arguments. Except I’d create more convincing strawmen:

It seems that more and more Serious People (and Fox News) are rallying around the idea that if Obama really wants to create jobs, he should cut the minimum wage.

So let me repeat a point I made a number of times back when the usual suspects were declaring that FDR prolonged the Depression by raising wages: the belief that lower wages would raise overall employment rests on a fallacy of composition. In reality, reducing wages would at best do nothing for employment; more likely it would actually be contractionary.

Here’s how the fallacy works: if some subset of the work force accepts lower wages, it can gain jobs. If workers in the widget industry take a pay cut, this will lead to lower prices of widgets relative to other things, so people will buy more widgets, hence more employment.

But if everyone takes a pay cut, that logic no longer applies. The only way a general cut in wages can increase employment is if it leads people to buy more across the board. And why should it do that?

First, a reduction in the minimum wage doesn’t mean that EVERYONE’S PAY is going to get cut. There aren’t a lot of surgeons and computer programmers who are suddenly going to face competition from those whose labor is worth less than 7.25 per hour. Second, there are two ways that a general cut in wages could lead people to buy more in the aggregate. If labor costs are reduced, then the price of consumer goods are reduced. The Law of Supply and Demand states that there will be more demand for those lower-priced consumer goods… as well as more demand for the lower-priced labor. Also, it is an established fact that higher-income people save a greater portion of their income and spend less of it than lower-income people. Therefore, creating a larger pool of people making less money on average is going to cause people to buy more across the board.

Please note that I do not agree with the Keynesian aggregate perspective nor do I believe it is the responsibility of government to micromanage the economy, I am merely showing that Krugman is incorrect even from his chosen perspective.

Now, Krugman attempts to evade the obvious criticism in his subsequent post by stating: “the whole point is that reducing all money wages doesn’t necessarily reduce real wages. And for what it’s worth, the little AS-AD analysis I linked to is Econ 101, at least if you use a good textbook.”

This argument against reducing the minimum wage boils down to the possibility that cutting the minimum wage will cause interest rates to rise. That is simply not credible in the current monetary policy environment, as the 20-year example of Japan should suffice to demonstrate. Krugman rests his case on asking us to “suppose that the AD curve is vertical“, but a request for a supposition is a very long way from demonstrating that the AD curve actually is vertical. And even if Krugman’s simplified model had been correct, once one considers the fact that the U.S. Treasury auctioned 3-month bills at 0.005 percent in December 2008, it becomes obvious that America was not liquidity trapped at 0.14 percent in the mid-1930s as Krugman imagines, but actually had room for expansion by an order of magnitude… 28x to be precise.

Climategate keeps growing

Skeptical economists and statisticians are simply killing the climate change charlatans:

Climategate just got much, much bigger. And all thanks to the Russians who, with perfect timing, dropped this bombshell just as the world’s leaders are gathering in Copenhagen to discuss ways of carbon-taxing us all back to the dark ages.

On Tuesday, the Moscow-based Institute of Economic Analysis (IEA) issued a report claiming that the Hadley Center for Climate Change based at the headquarters of the British Meteorological Office in Exeter (Devon, England) had probably tampered with Russian-climate data.

The IEA believes that Russian meteorological-station data did not substantiate the anthropogenic global-warming theory. Analysts say Russian meteorological stations cover most of the country’s territory, and that the Hadley Center had used data submitted by only 25% of such stations in its reports. Over 40% of Russian territory was not included in global-temperature calculations for some other reasons, rather than the lack of meteorological stations and observations.

No wonder the climate “scientists” are so protective of their data. The more people look at it, the more it becomes obvious that they’ve been cherry-picking the data in order to “prove” what they’ve already decided will be reported. I don’t read Russian, but as far as I can tell, in order to calculate global land temperatures the CRU used only 121 of 476 Russian stations, 73 of which were among the 78 stations that had been moved, presumably because of proximity to heat-producing urban expansion. This would explain why the purported increase in temperatures that could not be observed in the United States, Asia, or the rest of Europe was appearing in Siberia, which accounts for about 12.5 percent of the global land mass. The upshot is that this would eliminate 31.1 percent of the reported global warming. So there is not only no statistically significant global warming from the long-term perspective. There has been a lot less of it in the short term than was previously claimed.

As for the reported consensus, it is now obvious that scientific consensus should be given no more credence than real estate consensus, economic consensus, or stockbroker consensus. Intriguingly, it is now clear that the climate scammers have at least known that the Russian data possibly incomplete for five years. Phil Jones, the suspended director of the CRU, incriminated himself in an email to to Michael Mann of “hockey stick” fame in March 2004:

“Recently rejected two papers (one for JGR and for GRL) from people saying CRU has it wrong over Siberia. Went to town in both reviews, hopefully successfully. If either appears I will be very surprised, but you never know with GRL.”

Ah yes, and here we also see the way in which peer review is so conducive to good science.