The Opinions Expressed

Occupy

2011-10-27T16:41:00.000-07:00

I think it’s going to be interesting watching how governments handle the Occupy protesters. So far the protests have been peaceful and confined to public spaces, but what happens if these locations are then denied to the protesters? If the consequence of occupying a public space is arrest, and these spaces increasingly become unavailable, why not actually occupy the locations of the corporate entities that you are protesting? Or the streets surrounding the communities where the obscenely wealthy live?

Comparisons were made at the outset between the Occupy protestors and the Tea Party. At this point I think there are some fundamental differences. The Tea Party protesters were all rich enough that they were concerned that higher taxes or government spending would decrease their income. The Occupy protesters are out because they have no income to start with. It strikes me that they have much less to lose, and a great deal more time to devote to the cause. Sure, you can have your voice heard once every four (or two as the case may be) years at election time, but if the CEO of Goldman wants to talk to the President, he certainly doesn’t have to wait until the next election cycle. I think it’s going to be very difficult to convince the Occupy protesters to pack up and go home…wherever that might be.

Can Only a Republican President Raise Taxes?

2011-09-29T16:53:00.000-07:00

I guess I could broaden this to “Can only a republican fix America’s economy?” Republican opposition to any kind of tax increase seems too fierce to be overcome, even with a Democratic president and Congress since it doesn’t seem possible that the Democrats will get 60 seats in the Senate to overcome Republican filibusters. Any reasonable person should accept that both tax increases and spending cuts will be necessary to put the American economy back on track…or even to avert catastrophe.

This leads me to the heart of the issue. If a Democrat talks about raising taxes, they’re a socialist bent on destroying America. If a Republican suggests it, might they be able to accomplish it because they have been against tax increases for their entire political career. And if they are suggesting it, it must be because it’s the only answer. In my mind this seems plausible because as President, a Republican would be held responsible for the economic situation, and I see no hope of reasonable recovery without something that amounts to tax increases. Doing nothing would not an option as the new incumbent would be turfed out at the end of four years owing to continuing stagnation, and closing the budget gap only through cuts to spending would seem to alienate too much of the electorate. This plan could draw in Democrats because it is one of their major policy goals, and they at least seem willing to compromise for the good of the country even if it means handing the Republicans a political victory. And while a Republican president could not count of the support of the entire contingent of Republican congressman, it might be possible for him to bring over a sufficient number who would be concerned with their electoral chances in a perpetually depressed economy to pass legislation in cooperation with Democrats.

It pains me to suggest this, but maybe electing a Republican to the presidency is the only way of avoiding another 4 years of stagnation in American politics and the broader economy.

Romney to America, 2012.

On Helping Revolution Abroad

2011-08-04T16:50:00.000-07:00

So there are protesters outside what I imagine is the Syrian consulate in Vancouver. When I first went by, they had placards saying “Expel the Syrian Ambassador”. My questions is, what does that accomplish? I don’t think the Syrian government would really care. They aren’t having problems killing their own people, why would it bother them that Canada has expelled their ambassador? And beyond that, don’t we need the ambassador if we are to communicate with the Syrian government? I guess maybe we could just do it through our embassy in Syria if it exists.

But this leads me to another question. There is little that our government can do. As far as I know we don’t import from, or export to Syria anything of consequence. What leverage do we have, especially since we’ve spent the last decade plus hiding from any international contribution other than in Afghanistan.

I want to tell these people that if they really want to make a difference take all their worldly belongings and go to Syria. Help out as best you can. If you think that providing food and water with the wealth you accumulated in Canada is the way to help, DO IT! If you think picking up a rifle and manning a checkpoint is the contribution you can make, DO IT! If someone with a Canadian passport gets killed by Syrian security forces as they are doing something suitable non violent, that’s as sure a way as any to get the government involved. If that doesn’t work, I don’t see any hope.

There is very little that the outside world can do to topple rotten regimes short of military intervention, so if you truly believe in your cause, get over there and contribute your boots on the ground. Anything short of that is a waste of time.

The Two Greatest Words in the English Language: De-Fault

2011-07-26T16:30:00.000-07:00

First off, I think it’s pretty disingenuous for congress to have passed a budget, then turn around and refuse to allow the government to borrow the money in order to pay for it. There shouldn’t have to be two rounds of budget negotiations.

My second thought, is why does Obama have to worry? Either the government shuts down and no one notices because they don’t care about anything the government does other than its “essential” services which will continue, or they will be upset at the shut down of things that would be required to close anyway under the Republican’s “all cuts, no tax increases” plan.

But now I’m trying to put an optimistic spin on the most catastrophic situation. How bad could a default really be? Clearly Americans will stop paying foreigners first, so no real loss there. Even if credit dries up in America is that a real loss? Wasn’t a massive part of the current…or I suppose previous crisis that there was TOO MUCH credit, and not enough real value being generated? Now firms are sitting on huge plies of cash that they are unwilling to spend. Sure interest rates might spike, but that should encourage SENSIBLE allocation of SCARCE capital instead of the fire hose approach we seem to have been witnessing over the last decade. If the crisis can lead to a more productive investment of the resources that are available, bring it on!

On the social side of things a lack of investment will certainly hurt employment. Likely both in terms of overall employment levels, and on the wages that are paid to those people who are actually working. This will likely force some rethinking of our social priorities. If the government has to choose between financing nutrition for people below the poverty line, and F-35’s it seems obvious to me which choice they will make. Even if incomes were to decline, would that be such a bad thing? It seems to me that too much of what people spend money on doesn’t bring any long lasting happiness. If people have to get out to the park, or spend time socializing with their friends and families instead of going to the movies, I don’t really view that as a bad thing either.

Maybe a US default is just what the US, and the wider Western world needs in order to reorient its priorities.

Should Having Kids Make you Special?

2011-07-26T16:22:00.000-07:00

From the Globe a while back...

“My opinion … was that if leave would be available to parents, it should also be available to people who choose to make some other significant commitment of their time. I didn’t see any moral distinction between having children and having a life goal of, say, climbing Mount Kilimanjaro or something. I was the only person in the room who felt that way.”

Really? This guy can't see a moral distinction between climbing a mountain, and caring for a defenseless human being?! If you fail to climb the mountain, you've just failed. If you fail to care for your child, you go to jail. That seems like a PRETTY CLEAR MORAL DISTINCTION TO ME! While I somewhat agree with some of the other points in the article it just strikes me that this is blind selfishness. We need children to continue society, that's why we value the contribution. If people are willing to help out with that, I'm willing to give them a free pass on a few things.

Unnecessary Elections

2011-03-29T13:50:00.000-07:00

I see Harper calling this election “unnecessary”. Now, I don’t know about other people, but it seems that if the parties which received a majority of the votes in the previous election don’t like the direction being taken by a minority government, it is their prerogative to precipitate an election. I certainly think there have been better times when this could have been called, but I find it offensive that the government feels that giving me an opportunity to cast judgement on their policies is “unnecessary”. This seems to be an excellent starting point for a critique of their entire time in office. Consultation is unnecessary. We’re just going to do what we want and Canada is just going to have to deal with it. That’s no way to run a country, ESPECIALLY not with a minority government. It’s just a shame that it has taken the opposition this long to came up with the backbone to topple the government.

Were I in charge of the Liberal campaign, I would be focusing on how the government has used the threat of an election like a gun for their entire time in office. Vote for this bill you disagree with or there will be an election. This is not how a minority government should operate. ALL of the opposition parties need to get together and make that known to Canadians. And they need to be upfront about it at the start of the campaign. The current opposition parties need to let the electorate know that if there is another election in a year it’s because the government is trying to run the country like they had a majority while in fact they only have a minority.

Fears of a coalition also need to be overcome. Lots of countries in Europe are governed by coalitions. Even the UK is governed by one now and shows no sign of catastrophe, at least not one due to issues of coalition governance.

If Canadians are unable to deal with an election every two years, maybe they need to have a look around the world today to see what people elsewhere are willing to sacrifice for the privileges we currently enjoy.

Developing World Unrest

2011-03-29T13:49:00.000-07:00

I had been pretty disillusioned with the state of the world since the campaign for the US mid terms began in earnest. I’m feeling a bit better now. With America essentially sidelined from impactful international engagement it’s heartening to see others taking matters into their own hands. Maybe the new Libyan licence plates will say “give me liberty or give me death”.

A few people have suggested to me that America has got to be behind the unrest, or that they have some sort of hidden agenda because they are not coming to the aid of their despots. I think this is a questionable read of the situation. During the cold war the Americans supported these dictators with the aim of containing the Soviet Union. That time has passed, and I think finally the Americans are getting what they wanted all along.

In my view, the US interest in the middle east boils down to three issues: oil, basing, and Israel. What’s happening now may cause short term problems on one or all of those fronts, but even in the medium term Arab democracies should alleviate many of those problems in America’s eyes.

First off oil. The US has protected dictators with the goal of securing their oil supply. During the cold war, this may have been of great importance, but less so today. Since oil is traded on an open and quite liquid market who sells to whom is much less of an issue. Any supply diversion will result in more oil available from a different source, assuming consistent demand. Civil war might temporarily disrupt supply, but both sides have a strong interest in getting their hands on oil revenue so the actual disruption is not likely to be overly severe.

The next issue is basing. While during the cold war, the ability to station troops abroad ready to respond to an emerging threat may have been viewed as a necessity it is certainly less so today. The US has the capacity for rapid response short of an invasion even without fixed bases in theatre. Combined with America’s current fiscal situation the shuttering of regional bases might even be in the governments interest. It’s much easier to sell when you are being booted out, than if you can be portrayed as unilaterally reducing your commitment.

The final issue is Israel. It seems unlikely to me that any Arab country is itching to invade Israel. Repelling their aggression is one thing, but taking the fight to them is quite another. I find the threat of a traditional style war with Israel far fetched. The Israeli’s certainly have the capability to hold out until US help arrives, if not repel the invaders on their own.

Another argument that parallels the fear of an invasion of Israel I frequently here is that the new governments may be more friendly to extremists or terrorists who aim to do America harm. This is possible, but safe havens already exist. If there was a motivated Egyptian who wanted to commit terrorism against the US it seems likely that he could have made it to somewhere where he could have made that happen. Travel to Pakistan is relatively cheap and reliable. I don’t know that the difference between having to travel to Cairo instead of all the way to the North West Frontier Province would cause a marked uptake in terrorism.

In addition, even if a radical government were to come to power the day to day struggles of having to provide for the electorate is likely to trump a great deal of the desire to cause trouble abroad. If the US embraces the new governments with an open hand, they will lose a convenient scapegoat for their national problems. If citizens have an outlet for their anger which is not violence, and the government has priorities larger than fermenting unrest, the situation seems to improve for all involved.

Now the US is in a situation where they can sever relationships with dubious leaders while having a replacement government in waiting that will have at least some legitimacy with citizens as a whole. The entire process aligns with America’s interests in the region and at home, and as such should be embraced with open arms and as much support as is asked for.

Education Reform

2011-03-29T13:48:00.000-07:00

In pondering the usefulness of standardized testing, I came to something of an idea. What if instead of having standardized tests, students were simply evaluated on their grasp of the skills necessary for their current grade, and this evaluation was used to grade their previous teachers. Given the proper algorithm, the data set should be large enough to address whatever data related issues may arise such as differences in what constitutes an “acceptable” level of knowledge in students, or forces that influence performance which lie outside the prevue of the education system.

This would seem to solve the problem present with using standardized testing of teachers simply teaching to the test while leaving their students without the proper fundamentals. It could also be an impartial method of calculating pay for performance, especially if a teacher is able to improve the record of a student that is habitually underperforming.

Now granted, this isn’t really something which could be rolled out over a short period of time. It will take a reasonable number of students, and time to properly calibrate the algorithms before any findings could be made with any reasonable degree of confidence. This seems more like a project which would require financing for a long timeline from an organization such as the Gates Foundation. It would also require the buy in of the teachers, as evaluating incoming students against their baseline of what is acceptable would be a time consuming process.

At its most basic level, this system could be used to remove or retrain teachers who are failing their students and to monitor performance across a large education system. Beyond that, with a sufficient volume of data, I believe that the system could align students who learn a particular way with teachers that would be able to teach in a way that they can learn more easily from. While this may have been relatively useless even a decade ago, enhanced communications technology means that a greater pool of potential teachers is available now because of the ability to communicate without being in the same physical location. It may also even be possible to identify broader trends which might only become apparent once a large volume of data has been available for analysis, or even to track historical trends. By collecting this large amount of data, and aggregating it centrally, different educational strategies and initiatives could also be assessed against a much larger data set.

What this would really require is the buy in of a large school board to ensure that the sample size is large enough to be useful. It would also be important to be able to deliver some sort of preliminary and ongoing reports to demonstrate the utility of the mechanism.

The hardest issue I think would be setting up the evaluation framework. It would have to be the same across the area of data collection so that the data is consistent and useful. Perhaps it would just amount to a multiple choice survey that each teacher would fill out a month or so into the school year. The question then becomes which questions should be asked, and how are the answers evaluated.

A Poorer Future

2010-07-28T14:03:00.000-07:00

The current global economic dislocation has been happening for almost
two years now with nothing resembling an end in sight. Sure we have
pulled out of the nosedive, but as of yet there is no sign of a return
to normal rates of growth and employment. Our political leaders can’t
even seem to agree on how to move forward in the short term, much less
over the long run. It seems like they are hoping that once the current
crisis is over, the other problems will attend to themselves, or at
least they will become the problem of some future administration. This
concerns me for one major reason. It is likely that the rich world will
be poorer for the foreseeable future than we are today.
 
I see four major drivers of this decline – two internal to the
developed world, and two external: 
 
The first is the massive debts which have been accumulated in an effort
to prevent a second great depression. While these are small in
comparison to other government obligations, they increase with each year
that the global economy stagnates or grows at a low rate. Automatic
stabilizers in Europe and bailouts in both Europe and America will
continue to add to the public debt burden. Governments will have to
raise taxes or reduce benefits in order to manage this additional debt,
which will lead to reduced wealth which can be devoted to consumption or
other necessary expenditures. This will have to be addressed at a time
when government in the developed world should be saving for what will
become the other two drivers of declining wealth in the west: the
retirement of the baby boomers and spending to deal with climate
change.
 
The second driver of decline will be the state’s obligation to the
baby boomers. With the cost of medical treatment increasing at the same
time as people are living longer, the burden on the state increases from
both of those factors. While it is possible to mitigate the worst
outcome in this area, it will require a reduction of services provided,
as well as an extension of the average time of employment for workers.
While this does not directly reduce the income of citizens it will
certainly have a negative impact on quality of life and people will
certainly not feel as wealth as they once did. Reductions in government
spending on pensions and other services for retirees would however have
a noticeable and direct impact on feelings of wealth.
 
As to external influences, a large driver will be climate change and
the costs necessary in order to alter our energy infrastructure. Costs
will need to be borne no matter if the choice is to do something,
nothing, or some middle ground regarding climate change. It will require
a massive expenditure of resources to transition our infrastructure away
from one based on fossil fuels, or alternatively to deal with the
consequences of global warming as they happen. Attempting to address
climate change is likely to increase the cost of nearly everything, and
until alternatives are available and commercialized this cost will be
paid by nearly every consumer. On the other hand if nothing is done, the
costs will simply be more hidden, and perhaps distributed somewhat
differently. Strengthening flood defences, increased insurance premiums,
fluctuations in the cost of food due to changes in weather patters, the
list could go on, but all of these will impose costs on society that
will have to be paid.
 
A second external factor is inflation driven by the rise of the
developing world. Over the coming decades a great many people in the
developing world will hopefully be brought out of poverty and put on
course to something resembling a western middle class lifestyle. As we
saw in the summer of 2008 rapid growth of developing economies drove
resource prices to new highs. While there have been many explanations
for this, I am convinced that the prices we saw that summer were the
result of supply constraints rather than simply speculation. Once the
world economy begins to grow again we will encounter rapidly climbing
commodity prices which will reduce the real gains from economic growth.
Even with recovery it is unlikely that wages will be able to purchase as
much as they were before the crisis.
 
On their own each of these issues is difficult to address, and dealing
with them will require both solidarity within nations as well as
cooperation amongst them. This is difficult at the best of times. It
seems nearly impossible in the dire circumstances in which we now find
ourselves. If these issues are not addressed, not only will future
generations be poorer for having to pay for the costs of addressing
these problems, they will be additionally poorer for having to pay the
extra costs associated with not addressing the issues sooner rather than
later.
 
This leads me to a final related concern: the stability of our
political system. If these costs must be borne by citizens, but
politicians are not willing to deal with them, or even discuss them in
an open or honest manner, what remains of our trust in governance
institutions? If our trust in these erodes or collapses at the
international, or even more frighteningly the national level, what does
that mean for western society, or the world more generally? If our
political leaders do not begin to address these issues in a serious and
focused manner, it might not take much longer to find out.

Fucking Badass

2010-07-16T13:54:00.001-07:00

I didn't realize being Minister of Defense qualifies you to evaluate the latest in military hardware. But I guess this proves that Peter MacKay is a fucking badass!

Saskatchewan's Greatest Export

2010-07-07T14:52:00.001-07:00

Google and Global Productivity Update

2010-05-25T13:45:00.000-07:00

Apparently other people had the same question as me, and the answers are in!

Google cost mankind an estimated 4.8 million person hours. I wonder how many pyramids that would build?

Google and Global Productivity

2010-05-21T13:11:00.000-07:00

I wonder how much Google cost the world economy in lost productivity today by letting people play Pac Man on their search page...

I Should Work For The Onion!

2010-05-13T14:14:00.001-07:00

Paying with Chickens

2010-04-30T08:36:00.000-07:00

I laughed pretty hard when this story was first brought to my attention, but now that it’s been rattling around in my head for a few days, I’ve reached the following conclusion: This plan is 100% in line with the Republican agenda! How can you tax a barter economy? If everyone starts paying for things which chickens, government will have to become so small that it can be drowned in a bathtub. Brilliant!

Other EU countries’ interests in Greece

2010-04-28T09:40:00.000-07:00

I’m again looking for a silver lining to the Greek debt crisis. People seem to be making a big deal about the fall of the Euro, but is this really so bad? For all the talk I hear about countries wanting to export their way out of economic difficulty, devaluation seems like the ticket. Are countries which are dependent on exports really going to be that upset if a Greek default leads to an even more devalued Euro?

Looking at the distribution of Greek debt, it may be that France and Germany have more interest in preventing a default than in a devaluation, but who knows. If the default results even in a 50% haircut, how much of that could be recouped through enhanced exports. A further question I have is whether France and Germany would rather pour more money into Greece in the hopes of bailing them out, or simply to bail out their own banks if Greece in fact defaults.

Even using the high estimate of debt owed to the Eurozone banks, doesn’t it just make more sense to let the Greeks default and then simply use the bail out money to bail out banks instead of Greece? If the only consequence of a Greek default is a loss in value for the Euro, and potentially more instability in the other PIIGS countries, this doesn’t seem like a real problem. Especially when voters in those countries seem very opposed to helping Greece out of problems it created for its self. A devalued Euro would also encourage more intra union trade as local products would become more competitive as the cost of imports rise.

Greece is restored to some sort of sustainable debt burden. Good money which would have been thrown after bad is instead used to recapitalize Euro banks with the governments taking a share. If need be, the Eurozone can offer Greece concessionary loans if they can’t get the additional financing they need from international markets.

I think in the end what we will see is a bailout of Euro banks as opposed to the Greek government.

Bonus Crazy Theory

2010-04-19T12:25:00.000-07:00

Maybe the Icelandic volcano eruption is really just a secret weapon designed to gain leverage with the UK over the massive debts owed by Icelandic banks. “You forgive the debt and we’ll turn off the volcano that’s wreaking havoc with your economy!”

Greek Blackmail

2010-04-19T12:24:00.001-07:00

I’ve been doing some thinking about the Greek loan crisis and the possibility of default. This post was originally going to talk about how I think people getting 7% on Greek bonds are either very foolish, or are investing with other people’s money. I apparently view the chances of a Greek default as much higher than whoever is lending to them at only 7%.

Anyway, on to the more interesting topics. The Germans negotiated what amounts to a veto provision into the bailout text. Now, the speculation is that the Germans could use this to derail any attempt to bail out the Greeks that doesn’t meet with their approval, but is there a way for other EU members to exploit this agreement? I’m thinking here about other countries holding the Greek bailout hostage in order to advance their own agendas.

The first country to come to mind is the UK. The Brits hate the CAP. Could they threaten to veto the bailout without reforms that are pleasing to their government? Admittedly this strategy could harm UK banks as a Greek default would likely cause substantial losses to their banks. These banks may have to be bailed out as a consequence, but it would cause damage in France and Germany too, and that seems to me that this could generate quite a bit of leverage.

Now think about if you are the leader of a country without a developed banking system with billions in loans to Greece. What could you extort from the bigger EU players in order to ensure payment? I don’t know what Slovakia wants, but maybe now is a good time to start making quiet demands of Germany and France. Maybe being a small state in the shadow of the big players isn’t so bad as it’s sometimes made out to be!

Mulroney in the Globe

2010-04-16T08:25:00.000-07:00

So Mulroney is out stumping for the Saudis in the Globe today. Hopefully it works out better for the Sheiks than it did for Schreiber.

Parity!

2010-04-07T08:25:00.001-07:00

The Canadian dollar is once again on par with its US counterpart. I had written about this back in August, and seeminly no real policy discussion has taken place on this. I suppose no matter what the value of the dollar, people will still want to buy our oil. Perhaps this leads our current government to assume that they are safe from any backlash due to the higher than usual value of the dollar. Still, it's not possible for a government to get a majority without Ontario and Quebec which will both be hit hard by a high dollar.

Anyway, that's not really the point of this post. What I wanted to get to was a Globe and Mail article I read on this subject today.

From the article:

"It now costs Canadian sports teams less to hire U.S. players and pay them in the U.S. currency."

Well THANK GOD there is an upside to our entire manufacturing/exporting sector becoming EVEN MORE uncompetitive. All those unemployed workers can take some solace in the fact that their local sports team will more easily be able to hire players making two orders of magnitude more money than their unemployed viewers formerly did! Woo!

The Service Revolution

2010-03-26T10:46:00.000-07:00

I read an interesting article today on services being a potential alternative to industrialization as a path to growth. This article got me thinking about two other aspects of this method for growth.

The first thought related to the cost of service growth compared to industrial growth. Even if a service based economy grows more slowly, there seems to be less in the way of costs down the road. China will pay a heavy price both to take care of its citizens who have been poisoned by its industrial development, as well as the cost to clean up their polluted country. Even if this does not consume most of the “growth” that has been achieved in recent decades, it will still impose a heavy burden on future generations of Chinese. If a cost for carbon emissions is added on, then the math becomes even better for service based economies.

The second thought is really a problem in applying this model across a wide range of developing countries. India is a unique example in that many people are able to speak English which is a strong requirement for entry into the service sector. In addition, the service sector requires a more educated population which may not be present in sufficient quantities in other developing countries.

This perhaps points to the benefit of spending on education as it would offer developing countries the ability to grow through service based development, at the same time as sparing themselves the social and environmental costs of dirty industrialization even if "development" occurs more slowly.

Litter Tax

2010-03-15T10:53:00.001-07:00

I see so much crap strewn on the side of the road walking from my office to get coffee, lunch, or whatever. It looks terrible, and it pains me that people are just willing to drop their garbage on the ground, or throw it out the window of their passing car. I would like to put more of the responsibility for this on producers, but that seems unlikely. Today it hit me that the solution is simply to expand the deposit system used for beer bottles to packaging.

It would take some doing to implement such a measure. There would have to be some establishment of what this tax should apply to. A cursory review of what I see on the side of the road is probably a good place to start. Fast food items – from the drink container to the bag it comes in would all have to be taxed. On top of that, things available from convenience stores: chips, bottled things, cigarette packages and the like. All of these things should add 10 cents each to the cost of whatever is being bought. This money would be transferred to a government account to repay people when they returned their items.

Now obviously it would be very resource intensive for each company to set up their own collection centres, but having a tax instead of a deposit solves this problem. The government could simply set up generic collection facilities and repay people for any items which they return. Surplus revenue stays with the government to fund whatever it takes to make this program politically saleable.

For 10 cents an item, this may not change the behaviour of people who just really want to get rid of their McDonald’s bag as they drive down the highway, but it would certainly provide an incentive for people to pick up garbage on their own initiative. If people are willing to go through the trash and recycling looking for beer bottles to return, they also seem likely to walk the streets picking up trash which could be returned.

I don’t have a good idea on how to pay for the infrastructure and wages out of the proceeds collected, but I suppose we can always raise taxes!

More China Stats

2010-02-25T07:16:00.000-08:00

I’m a bit behind the times on this one, but it still brings a smile to my face. I saw in the Globe an article about China using unofficial avenues to continue to buy US Treasury bonds while slowing or reversing its official purchases. Of course, I wondered what China Daily’s take would be.

It only took me to the second paragraph of the China Daily article to start laughing.

“China sold more than $34 billion in short- and long-term bonds, leaving its total holdings at $755.4 billion, according to US Treasury data released on Tuesday.”

This information didn’t come from China’s government but from the US government! It’s amazing to me that a mouth piece of the Party needs to rely on America’s figures.

I suppose it’s all really for domestic consumption, and without access to outside media sources you have to believe that you are told. But it must strike a lot of Chinese as odd that the information is coming from an American source instead of their actual government.

If they trust the US govermnet account of this, why not other things?

China, Statistics and the Environment

2010-02-11T07:55:00.000-08:00

An interesting article in the NTY this week on a new report on water pollution in China. I find this all very interesting as the Party’s quest for growth at all costs seems to be imposing some staggering long term costs on the country. The article went from interesting to frustrating pretty quickly in a manner typical of anything involving Chinese statistics.

From the article:

“China’s government on Tuesday unveiled its most detailed survey ever of the pollution plaguing the country, revealing that water pollution in 2007 was more than twice as severe as was shown in official figures that had long omitted agricultural waste.”

DOUBLE?! So your statistics failed to include AT LEAST HALF of the appropriate sample?! I can understand the benefit, at least domestically of mitigating the horror of the environmental destruction that break neck industrialization is causing to the country, but this leads me to other more disturbing questions. How much omission or deception is there in statistics which matter on an international level such as the banking sector’s non performing loans? What about projects which are qualifying for Kyoto’s Clean Development Mechanism, or heaven forbid a true accounting of national emissions? The list could go on and on. Take your pick of any statistical reporting the government does. I wonder if I had simply failed to include half the sample in my stats classes if that would have been ok.

But it gets worse! Officials are attempting to explain how the problem isn’t really as bad as it seems:

“The census keepers had also used updated methodologies and reached many more parts of the countryside and industrial sites than had official statistics, which helped account for the much larger figure in the census, Mr. Zhang said. Were it not for the vastly expanded scope of the survey, the chemical oxygen demand level in 2007 would stand at only 5.3 percent higher than previously calculated, he said.”

So basically he’s saying that things aren’t so bad because if you just use a sample which is not at all a depiction of reality, then things don’t look as bad. Wow. Why even have statistical reporting anyway? Let’s just take samples which make everyone happy and then assume that there are no problems! What should be a call for massive government action is just being brushed off as a difference in reporting.

Things like this only add to my skepticism of anything the Chinese government publishes.

Avatar and the Future of Cinema

2010-01-13T06:47:00.000-08:00

I saw Avatar on the weekend. I can’t believe the Ewoks won. I can’t wait for Avatar 2 where the humans come back and drop some super Agent Orange from the future on all of those worthless plants. I mean, if they are willing to commit genocide, why not do it right?

Anyway, that’s not really what I wanted to talk about here. I think that Avatar will do for 3-D what The Matrix did for action movies. Basically every action movie since The Matrix had some sort of bullet time gimmick in it, and I think that two years (or whatever the production timeline of movies is) from now we will be seeing mostly 3-D action movies.

Apparently the NYT doesn’t really agree with me, and they point to cost as a problem. Sure, that may be true, but as soon as more than 1 movie a year is being produced with 3-D in mind costs will go down and quality will go up. The way I see it is this: If you show up at a theatre and have the choice between generic action movie A and generic action movie B, and one of them is in 3-D, you will chose the 3-D one. With SO MANY releases every week, those that are not in 3-D just won’t be able to cut it profit wise, so even with the additional expense of the 3-D technology it will be the only way that a movie will be able to get audiences.

I’m not willing to extend this to other genres as of yet, but I’m very confident that it will be the case for action movies, especially if 3-D TV is as close as some people seem to think.

Voodoo Economics

2010-01-13T06:39:00.000-08:00

I do love Chavez. As much as he is leading Venezuela down a road to ruin, at least he is able to make me laugh on occasion. There is a priceless article on the BBC about his currency devaluation.

From different parts of the article:

"But on Friday, President Chavez announced that it would now have two rates - 2.60 to dollar for "priority" imports, and 4.30 to the dollar for other items considered non-essential - a 50% devaluation.

Hugo Chavez, has said troops will seize control of any business that raise prices in response to the devaluation of its currency.

He said there was no reason for prices to go up, and speculators' businesses would be handed over to the workers."

So the costs of importing things is going to go up 50% and yet somehow there is no reason for prices to go up. Wow! I guess those evil capitalists operating in Venezuela were making such good margins on their imports that a 50% increase in costs is not really going to impact their profitability.

The other thing that really confuses me is the split between “priority” and “non-essential” imports. Who is going to sell anything to Venezuela at the “priority” exchange rate when you might only be able to buy things worth half of the value if what you are purchasing is deemed “non-essential”! So this policy is going to halt any imports of “priority” goods – which I suppose would help domestic producers if they have spare capacity, or any capacity – and there will be massive inflation on the “non-essential” goods.

In the end, I’m sure that any economic problems that arise as a result of this policy will actually be the result of US meddling. There are probably CIA agents on the ground right now conducting covert economic warfare against the Venezuelan people.

It will be interesting to see how this plays out, but I can only imagine the popular outrage this will cause when prices rise and staples become unavailable. At least the oil price is back on the rise!

Modern Economics as Ancient Catholicism

2009-12-16T07:37:00.000-08:00

I was thinking recently about economics and its place in the modern world. It strikes me that it now occupies a quasi, if not full blown religious status. The ascent of economics to the place of one of the defining elements in our lives is an interesting one, made even more interesting by the fact that the majority of people are ignorant about even the basics of economic history and theory. This is my link to ancient Catholicism.

The Church was able to control people much more easily because the Bibles of the time were written in Latin, and only the clergy and other societal elites were able to read it. This cut off the masses from actual contact with their holy book, and their only path to understanding was to have it interpreted for them by the clergy. We face a very similar situation today with regard to economics. There is a great deal of literature out there, but few people have the capacity (or at least the desire) to understand it. Instead they go through life listening to politicians and talking heads interpret it for them. This concentrates a GREAT deal of power in the hands of those who are interpreting. You must accept their word as truth because you have no capacity to test it.

This leads to a great deal of danger. If no one is questioning those interpreting the text, then their power is almost absolute. Much as the church used their power over scripture to maintain power and enrich themselves, it seems like those with a mastery of economics are doing the same today. Bankers and traders get rich, control governments, and use public funds to bail themselves out if things go wrong. If we don’t listen to their advice, we are doomed to economic hell. We pay astronomical fees for them to look after our earthy future, much as people paid great sums to the church to look after their eternal souls.

Luther and others eventually broke the Church’s monopoly over the scripture, and subsequently the power of the Church has eroded. People think more for themselves, and societies were able to explore avenues of research and philosophy which had been closed to them by the Church. European society was reborn and we are still reaping the benefits of that renaissance today.

What I’m suggesting is that we need a new renaissance in economics. People need to get out there and educate themselves for the benefit of everyone. The more they understand, the less those in positions of power will be able to deceive them, and reap massive rewards for themselves while keeping the rest of the populace in ignorance. We need a modern Luther who will be able to open people’s eyes to the need to think for themselves, and create a new church of economics free from the control of those who have a great stake in the current order.

I would suggest Paul Krugman, Dani Rodrik, and Joe Stiglitz as potential modern Luthers but I’m sure there are more. But above all else, people need to liberate themselves. Even a basic understanding of macroeconomics will enable people to test the truthfulness of statements and analysis far better than they are capable of doing without. If economic growth is the benchmark against which we judge governments, citizens need to have a much better understanding of economics to render proper judgement.

Copenhagen

2009-12-09T09:08:00.000-08:00

It boggles my mind that policy makers in the West are so resistant to doing much of anything to tackle climate change. I’m a firm believer that human activity is changing the climate, and that the risks to humanity are grave. But lets for a moment assume that climate change is in fact not real. The variations we are experiencing are in fact natural variations in the earth’s climate, or the result of sun spots, or whatever other theory you would choose to substitute.

Both Europe and America have overwhelming security incentives which should be encouraging them along the path of non-fossil fuel energy. The US imports a massive quantity of fossil fuels each year, and even if this is not directly subsidizing regimes such as Saudi Arabia and Iran, US demand drives up world prices which benefits some of America’s greatest adversaries while harming its own economy. The Europeans are in a similar boat, being beholden to Russia for gas supplies. The Russians have demonstrated that they are not opposed withholding energy in order to strengthen their negotiating position. Add on to that the likely increase in prices of those fossil fuels when the world economy starts to actually recover, and there is yet another incentive to be moving away from fossil fuels as quickly as possible.

China and India have similar, yet different interests in moving away from fossil fuel based economies. While energy prices will have some impact on their economic growth, their concerns should stem mainly from the ecological impact, with an added security focus for China. Since both China and India have populations of over one billion, the future demands for energy will be staggering. China continues to build coal power plants at a rate of at least one per week, in addition to the other energy generation infrastructure they are building. The ecological costs of this are staggering, and sooner or later will have to be addressed. There is little point in 10% economic growth per year if a decade or two down the road you need to spend all the gains on cleaning up your polluted country.

China also has increasing energy security concerns. The country has gone form a net exporter of oil to a net importer coinciding with its rising economic power. Chinese oil in transit is protected by the US navy, which makes their government nervous. For a government so concerned with sovereignty, shifting to domestically produced energy resources should be a high priority.

Added to this, there is the economic incentive which should motivate those countries with an existing research infrastructure and capital to allocate. The market for energy is huge and growing. The technologies for creating renewable energy, even if they are not able to replace power generation facilities in the developed world still represent a large market. So much of the world lacks transmission infrastructure, so there is a large market for renewable energy in areas which are not already connected to the grid.

Self interest alone should be sufficient to spur the largest emitters to action.
But going back to the assumption that climate change is real, we are not talking about saving the planet. Earth will continue to orbit the Sun, and support a great deal of life no matter the climate. What we are in fact talking about is saving human civilization as we know it.

One Term Limits

2009-11-17T08:38:00.000-08:00

I’m nearly done A History of US Foreign Relations since 1776 and it paints a pretty disturbing picture of the driving forces in US foreign affairs. Frequently decisions are made with an eye to elections as opposed to the best policy. There is also nearly constant infighting amongst members of congress and the executive on foreign policy. The idea that by appointing top bureaucrats you get a bureaucracy that is easier to manage because the top bureaucrats share your objectives is a sham.

This got me thinking about term limits. Maybe two terms is too many. Maybe elected officials should be limited to only a single term. This would ensure that they spend their time doing the people’s business instead of having to worry about funding their re-election campaign. It would also make them less beholden to the special interest groups that bankrolled their campaign. It could mitigate against the advantage of incumbency in politics. The biggest advantage however would be that decisions would not be made with an eye to re-election. This might require a change in the electoral system, to perhaps give longer terms to members of the house, but then again if they were able to spend their full two years legislating, instead spending one year out of two doing fund raising, the idea seems worthwhile. There must be more than 1200 competent legislators in America at any one time!

The only concern I really have here is that without the threat of being thrown out of office, there is little incentive to fulfill the will of the people. I suppose that’s a fair argument, but for the most part I find average voters uninformed and or misguided so I don’t see that as much of an issue. When I see The Economist instead of Vogue at the supermarket checkout, maybe I’ll reassess that point of view.

Chinese Non-Performing Loans

2009-11-16T11:13:00.000-08:00

I came across this very interesting graph of non-performing loans in Chinese state banks. It looks like since the first quarter of 2008 the volume of non-performing loans has declined dramatically. This would address one of my recurring concerns about the future of the Chinese banking sector, but I find myself questioning what it really means. My interpretation of this graph is not that there has been some clean up of Chinese banks, but that they have issued so many new loans that haven’t yet had time to become non-performing that it skews the statistics. I don’t see how there is any other explanation for a two thirds reduction in non-performing loans during an economic collapse!

Developing Countries and Climate Change

2009-11-10T11:21:00.001-08:00

I often hear discussion about developing countries and their need for resources in order to allow them to develop as the world begins to increase the price of carbon in order to combat climate change and mitigate its impacts. Some thoughts below:

If developing countries haven’t managed to do their dirty development in the last 50 years, what reason is there to expect that they will manage to develop before we have new energy sources? They cry about their ability to develop being hampered by a climate deal which doesn’t dump boatloads of money on them, but aside from a few choice examples, there is little development to speak of! Would we not simply be better off to spend the money that would be sent to the developing world on programs to encourage the development of non carbon energy sources and then simply let the developing world acquire the new technology in the same manner that they acquire modern technology?

I do not find argument that because the West has benefited from the past emissions of green house gasses, we have a moral responsibility to help those countries which will be worst affected by it while having the least capacity to adapt very compelling. The West benefited from colonialism, slavery and post colonial dictatorship, yet none of those injustices have managed to convince Westerners that they have some sort of responsibility to help the developing world. In fact, I think the green house gas argument is even less valid because the developing world has benefited from the wealth generated by developed world emissions. There would have been no green revolution in India if America hadn’t been rich enough to fund research which had no great domestic benefit. There would be no cell phones or internet, two technologies frequently referenced as driving real development. There would be no outside resources for dealing with HIV/AIDS or any of the other tropical diseases which are no longer prevalent in the West.

Aside from India and China, no developing world country, or even the entire rest of the developing world emits enough green house gasses to matter in the grand scheme of things anyway, so why should we care what they have to say. Listening to more people simply makes negotiations harder for an insignificant potential reduction in emissions. Even if there were support for a transfer of funds to developing world countries, sending money to China and India seems like a hard sell. Countries building aircraft carriers and sending people into space don’t strike me as worthy candidates for Western largess.

China’s Emerging Entanglements

2009-11-10T11:01:00.000-08:00

I was reading an article today on China’s involvement in Afghanistan. It spoke of the economic commitment made in paying to open a profitable copper mine while bearing no security responsibilities in the country. This combined with some reading I have been doing on the history of US foreign relations has me thinking about some interesting parallels.

China has been making deals with regimes which are unsavory in the eyes of Western powers in order to receive resource concessions, which Beijing views as of paramount importance to its economic security. Britain and the United States both displayed similar drives for secure resources during their rise to global power. The difference this time, is that China does not seem willing to back up its stake with anything more than money. That’s great, but what happens when the unsavoury regime that China is currently backing is overthrown by a different one. Or what happens when the country ends up being destabilized by domestic violence. China can’t expect the international community to defend its resource interests wherever they lie. Will China be willing to commit troops to protect its assets? To build military bases and airfields in distant corners of the globe? Is it possible to manage this under the rubric of “peaceful rise”? What threat is there of these assets being nationalized if a more accountable government comes to power?

As with many things here, I think that China is treading a fine line, and perhaps sooner than many people expect, the government will have to make real decisions about their involvement in the world. Words and cash only go so far, especially in places where governments have very little to lose. Maybe China is willing to spend the money that will be necessary to prop up friendly regimes in most of the regions where it has resource interests, but that seems like an expensive proposition when there are so many pressing domestic demands.

I guess much like with industrial development, China is well within their right as a sovereign country to not learn from anyone else’s history and make all the same mistakes to the world’s detriment.

US Health Care Debate

2009-10-30T11:55:00.000-07:00

I’m sure that most, if not all of you are being driven insane by the health care debate in the US. I haven’t really written anything specific about it because it just depresses me too much, but I want to get two things down that I’m shocked aren’t being shouted from the rooftops in the US.

The first involves fears that “some bureaucrat is going to get between me and my health care”. Well, if you have private insurance, there is already a bureaucrat getting between you and your health care. The problem is that they are an insurance company bureaucrat whose incentives are aligned with denying you care. The less they approve, the more money they make. Sure government bureaucrats may be apathetic, but at least their incentives aren’t aligned to oppose yours! Give me the apathetic government bureaucrat over the private sector bureaucrat that gains by denying me care!

The second more recent issue is the Democrats ploy of putting in a public option which can be opted out of by the states. I find it crazy that congresspeople are able to object to this. Why should you override the wishes of the states? If you are so confident that the people don’t want a public system, let the states prove you right. The only basis I can see for this objection is ideological which seems unacceptable when it comes to something as basic as health care. How are those up in arms about this option not simply being branded as blatant ideologues, bent on denying choice to American citizens?

WMD Terrorism Musings

2009-10-27T10:44:00.001-07:00

I got to thinking on the weekend about terrorist attacks using a WMD. I occasionally ponder what would happen if America were to be attacked in such a manner. My train of thought generally doesn’t end well for the world’s Muslim population or for any Westerner who isn’t a fan of crusades. But it occurred to me recently, that the first use of a WMD by terrorists may not in fact occur in America, or even Europe.

I came to this thinking for a number of reasons. First, getting a weapon to America is likely more difficult than getting it anywhere else in the world. The weapon must at the very least pass through a port in the country of origin, then an American, or at least North American port, and subsequently be moved undetected to the target location. That presents many opportunities for discovery. In addition, all the travel takes time, which adds to the possibility that the loss of material may be discovered and actions taken to recover it. This makes getting a WMD to America much more difficult than to a target in Eurasia.

Europe would likely be the target of greatest opportunity was the attack not destined for America. Still, the EU border represents some degree of an obstacle, and getting it to the UK (which in my mind is likely to be the preferred target) would be even more difficult. This leaves Russia and China as potential targets for domestic WMD terrorism. My thoughts turn to Russia for a number of reasons.

First, Russia has many more nuclear weapons than China, and seemingly less control over its military, making the potential for sale to terrorists more likely. Second, Russia has a much more restive population if my analysis of the situation counts for anything. This trend is likely to continue as the white Russian population declines and Islam gain more prominence in the country. If the Russian economy continues to experience turbulence, there may be more aggrieved people willing to resort to terrorism, and more Russian military officers willing to conduct shady deals in order to enrich themselves.

These domestic problems, coupled with the difficulties of shipping WMD material outside the borders where it was procured lead me to believe that the world’s first act of WMD terrorism may be more likely to occur in Russia than in the West.

Canadian Currency Conundrum

2009-10-27T08:09:00.000-07:00

There is an article in this week’s Economist regarding the value of the US dollar and its impact on economic conditions in other countries. My interest here is specifically regarding Canada and currency markets. The article contains the following paragraph:

Others have resorted to talking their currencies down. In a statement released after its monetary-policy meeting on October 20th, Canada’s central bank said the strength of the Canadian dollar would more than offset all the good news on the economy in the past three months. The currency’s strength would weigh on exports, said the bank’s rate-setters, and mean that inflation would return to its 2% target a bit later than previously forecast. Foreign-exchange markets took the hint: the Canadian dollar fell by 2% against the American one after the bank’s statement.

I was a bit shocked when I read about this last week. I’ve written previously about some of my concerns on a rising Canadian dollar. My concerns were much more related to the Canadian dollar rising for reasons other than a relative decline of the US dollar, but the end result is the same. Canadian competitiveness is harmed, and the economy will suffer because of it. What disturbs me is that the people who are the big players in the market seem to be obvious to this fact without the governor of the Bank of Canada telling them so.

Now maybe a movement of 2% was in fact due to new, specific information contained in the report, but I would think that if there was any independent analysis happening, this information should already have been priced in. The fact that it is not happening makes me concerned for future financial stability. If I’m seeing issues long before the people actually trading the currencies do, there are problems. Either I need to switch careers to currency trading, or currency traders need to start reading my blog.

Music Pricing

2009-10-27T08:06:00.000-07:00

There is an interesting article in this weeks Economist on maximizing value from downloadable music sales. There were some numbers in the article I found very interesting:

“The exercises showed that even a uniform price per song that maximised revenue among the students was quite high—$2.30 in 2008 and $1.46 in 2009.”

So between 2008 and 2009 the amount people were prepared to pay for a download decreased by almost 40%. What is the implication of this for the recording industry? My read of it is that the quality of music has declined, and that people are willing to pay far less for new music. Now a one year gap seems too short for such a dramatic decline in price, and I suppose much of that shift could be due to changed spending priorities in the wake of the great recession, but it still leaves some interesting questions.

I would be interested to see if music were grouped by the year in which it was released, how much people would be prepared to pay for a song from that year. I wonder if in fact there would be a downward trend over the decades. I’m sure there is a PhD thesis as well as a looming threat to the music industry’s business model in there somewhere.

Emissions by Food

2009-10-23T09:18:00.000-07:00

The NYT has a very interesting article on Sweden's attempt to put carbon emissions information on food. It makes me pretty sad about my eating habbits.

I would be curious to see it on a per calorie or per "recommended daily intake" as I don't think you get quite the same nutritional value out of one "serving" of beans as you would get out of a "serving" of beef, but who knows, at least this is a start.

Democratizing International Relations

2009-10-05T10:30:00.000-07:00

I’ve seen a few references recently to China wanting to democratize international relations. Now in fairness, those are probably not the exact words of the Party, but I think my question is still valid: How can any country that is not a democracy argue for greater democracy in international relations? If it’s not good enough for you at home, why should you feel entitled to it in a global system where democracy has NEVER been a consideration?

Google Book Search

2009-10-05T10:29:00.001-07:00

I was listening to a CBC doc on Google’s attempt to digitize and make searchable as many of the world’s books as possible. I think it will represent an incredible advance for humanity, even if it some may perceive it as a threat.
There were however a few puzzling counterarguments presented over the course of the doc. One was from academia where some scholars were concerned that simply being able to search books instead of having to read them mean more work is being done at the last minute perhaps without the care and consideration that would have gone into it previously. I do share some of this concern. You can certainly miss out on interesting ideas if you are simply searching for information that backs up your position, but if you are simply looking for that information, do you really retain the other things you read anyway? I don’t think this will spell the end of academics reading entire books. They do read just generally to expose themselves to new ideas right? If not, this seems to be a non issue.

Being able to search even half of every English book ever written would be a historic achievement, and we shouldn’t be concerned that academics will simply stop reading because of it.

Providing What the People Want

2009-10-01T11:10:00.000-07:00

I hear the argument that "we are just producing what the people want" with reasonable frequency. This was the auto industry's defense of making bigger and more polluting vehicles, and it is often the media's excuse for programming that is more entertainment than news.

I've reached the following conclusion:

If you argue that you are simply producing what people want, that's fine. But if you advertise that product, then your argument is hollow. If people really wanted what you produced, they would seek it out without the need for advertising. The only reason to advertise is to convince people to buy a product they have never used before, and so clearly do not need.

Oil Warning

2009-09-22T08:24:00.000-07:00

I found this article on BBC about Total warning of a looming oil shortage very interesting for a few reasons. First, why is Total concerned about a shortage? At first glance it would appear that they would be huge winners from a shortage. Oil prices should rise and because virtually everything else in the oil industry is a fixed cost, their profit would simply increase with no extra effort on their behalf.

This leads to two thoughts. The first is that there must be very little oil left in the world that is not in states which do not have state run oil companies. If there were oil available for private firms to drill for, given this prediction, it would seem that Total should be picking up those rights and keeping its mouth shut. If there is a lack of exploration happening now, it would make even more sense for them to do the work while capital and labour are cheap. Seemingly the only conclusion to draw here is that most of the world’s remaining untapped oil production capacity is in countries with a monopoly on oil production. This doesn’t strike me as a particularly good omen.

The second thought is then why is Total saying anything? Wouldn’t it be better for them to simply sit on their holdings, wait for the supply crunch to hit, and subsequently reap massive profits? Governments did not seem willing in the past to pass laws to claw back windfall profits, does Total now believe that such a trend is shifting? Based on the bonuses that bankers are being paid only a year after a near total collapse of the financial system, that prospect doesn’t appear likely either.

This leads me to one of two conclusions. The first is that private companies, much like oil exporting nations are worried about the price of oil climbing too high. Their concern is that this will motivate the world to migrate to other sources of energy to the detriment of their financial interests. The second potential conclusion is that the fear of a shortage might be used as leverage to open markets currently closed to private investment in oil concerns.

I have no problems believing Total’s message, but I think the goal is far more self interested than they let on. At least it bolsters my claim that when the world economy starts a vigorous recovery we will be seeing oil at $150 a barrel again.

Patent Issues

2009-09-17T08:01:00.000-07:00

There was an interesting article in this week’s Economist about an increasing market in owning patents. I find this both interesting and terrifying at the same time.

First I find it interesting because it seems to me that we are nearing a crossroads in IP where the result is likely to be a reduction in protections for IP. Maybe I’m misguided in that assessment, but two factors illuminate my thinking. As the rate of technological change increases, the use of old ideas to build new creations, as well as the need to use many ideas to create a single product will increase. This, combined with the rise of powers like China who are less willing, or simply unable to enforce IP laws will make enhancing, or even maintaining existing protections unfeasible. This would seem to imply that investing in IP like this is an investment doomed to have its value substantially reduced if not eliminated entirely.

But that line of thinking raises a concern. At the moment, patents expire after 20 years. That timeline is similar to that of other copyright laws, but lobbying by the likes of Disney has led to extension after extension when Disney’s copyrighted property has been nearing its public domain date. My concern is that once private investment money is mobilized to buy IP, a similar type of lobbying will arise which will increase the monopoly timeline associated with patents, and will pressure governments not to enact policies which open more IP to the public. Where the are massive profits, there will be massive lobbying to the detriment of the general public.

I’m interested and a bit frightened to watch this develop.

Nationalist Solidarity and Development

2009-09-16T08:02:00.000-07:00

I’ve recently come to the conclusion that a key ingredient for economic development is nationalism. It is something not widely considered in the economic literature, but a broad sweep of history seems to point to its importance.

The European states were bound together, and rose to greatness because of nationalism. Constant conflict encouraged innovation, and nationalist tendencies ensured that economic gains were predominantly allocated to strengthening the nation state. Asia also seems to have evolved in a similar – albeit less driven by military conflict – manner in the decades since the end of the Second World War. The elites of the nation that developed fastest – Japan and the other tigers - were intensely nationalistic and this focused their efforts, and ensured that their rewards were reinvested in their countries. China’s stirring nationalism has greatly aided its government in balancing dirty and oppressive growth with the strong legitimacy it still appears to hold in the eyes of its citizens.

This is the biggest problems that I see with countries today which are on the lowest levels of development, excluding those in the midst of fighting a civil war. The problem is that of those who get rich, few reinvest their money in their home countries. Too much is stashed in Swiss bank accounts, or transferred to other investments outside the country. This dooms developing countries to perpetual poverty as any surplus which could be used for investment at rates far below those charged by international financial markets on loans to developing countries.

Until there is a stronger sense of nationalism and solidarity in these developing countries, their governments will continue to be extremely corrupt and their wealth will continue to flow out of their borders to countries with more capital than they know what to do with. Nationalism isn’t a sufficient condition, but it is a required one.

This leads me to a concern for the developed world. Our societies seem to be losing a lot of the cohesion which was necessary in the past for our development. Societies can’t function properly when education standards are low, when accessing healthcare is a stressful and potentially financially ruinous. Where small segments of society reap massive financial rewards, but where the middle class is shrinking. Those at the top of they pyramid seem to forget that there are far more people at the bottom than at the top. If we do not change our self centered, purely profit driven systems, we may quickly find ourselves having lost so much of what we have struggled over the past century to build.

China and Perceptions

2009-09-16T07:36:00.000-07:00

China Daily today has an article urging the US to correct mistaken remarks in its National Intelligence Strategy which lists China along with Russia, Iran, and North Korea as the four major countries challenging US interests.

Foreign Ministry spokeswoman Jiang Yu said “We urge the United States to discard its Cold War mindset and prejudice, correct the mistakes in the NIS report and stop publishing wrong opinions about China which may mislead the American people and undermine the mutual trust between China and the United States,"

Well first of all, it’s a report from the intelligence services. The US government can’t really go back and “correct” it after it has been released. Those are the opinions of America’s intelligence community and it is their responsibility to report them. What makes the comment even more troublesome is that she is asking specifically for the US government to stop publishing “wrong opinions”. How can an opinion be wrong? It’s a subjective analysis. Just because you arrest people at home for having an “incorrect opinion” doesn’t mean the rest of the world obeys that standard as well.

Perhaps China isn’t among the four countries presenting the largest challenge to American interests. But who else is there? Both countries that frequently block Western initiatives on the Security Council are named. Since China harps on about the evils of unilateralism, and how actions taken in the international arena require UN “legitimacy” doesn’t that make them a key challenger to US interests? China’s growing economy is also a direct challenge to US interests. They are driving up the prices of commodity imports the US needs to keep its economy moving. This is also a challenge to US interests.All things considered, the major threats facing the US from China are economic and political, not military or related to regional or global stability. Perhaps it is time for China to discard its cold war mentality and look at things from the American side. No one wants to be on a list with Russia, Iran, and North Korea – with the possible exception of Venezuela – but China is there for a completely different reason. The sooner they realize this, the sooner everyone can calm down.

Recession's End

2009-09-10T07:31:00.000-07:00

In the last few weeks, it seems like the worst is now over. Growth in most of the Western world is happening again, albeit at a rate which is hardly greater than zero, but that’s at least better than decline, and forecasts seem to indicate that the situation is at least likely to stabilize if not improve. This leaves me with a few questions, some of which relate to whether this stability/recovery is simply an illusion, and some of which relate to how the world will be reconfigured in the wake of this calamity.

So first to the questions about whether the worst is yet over. The things which were going wrong at the outset of the crisis – housing price collapse and credit freezes – do seem to have been averted thanks to massive government intervention. Things aren’t necessarily good again, they are just getting worse less quickly, which I suppose is an improvement. Still, I worry about commercial properties, and other types of lending instruments like interest only loans. The combination of devalued property and a collapse of retail purchasing is going to make it hard to continue paying the bills, and if a development goes bust, there may be little value left for the banks to recoup. Could this be the start of another credit crunch?

A great deal of damage has been mitigated by massive government spending (at least if you believe Krugman and company), but this must at some point end, as current levels of spending are unsustainable in the long run, or maybe even in the short run. When that extra stimulus dries up, where will demand come from? Consumers are likely to be tapped out and still attempting to pay off their debts from the run up to the collapse. Businesses will be reluctant to invest when no one is buying. This leads me to my second area of concern: What will a “recovery” look like?

It doesn’t seem that a recovery, whatever form it takes will mean a return to business as usual. On a global level, many jobs, especially in the West will be gone. Detroit isn’t going to expand its production anymore. Wall Street will not contribute as much as in the past to tax revenues, or private wealth. Jobs in retail that depended on massive consumer credit and rising home values will not return.

At the same time this is happening, the Chinese government will be faced with a growing problem. Demand in the West which depending on what you read either contributes a substantial amount, or at least a non-trivial amount to Chinese GDP will disappear at least for the foreseeable future. It may be possible to realign the economy to take advantage of domestic demand, but it seems unlikely that the Party will be able to alter consumer behaviour that quickly. This means that even as jobs are disappearing in the US, the Chinese government may continue to finance industrial expansion in China, further reducing prices in the rest of the world and making American exports even more uncompetitive. In this environment a revaluation of the Yuan is especially less likely, which will not help America export its way out of the recession.

This leads me to ponder what sort of a world we will be living in over the next two to five years. Employment will be down, consumption will be down, debt repayment or default will be up, standards of living in the West, if not the entire world will slide. The expectations of many people about what they can afford will have to change substantially, even as taxes will have to rise to pay for the bailout as well as to finance obligations to retiring workers. This may lead to the first generation in decades that doesn’t really get to retire. It would certainly be good in the respect that government finances are likely to be stronger because of it, but for those new workers, their prospects of finding meaningful employment, or employment at all will be harshly reduced, even as they have to compete against developing world workers earning pre-industrial revolution level wages.

What does this mean for life in the West? It seems like a lot of people are living with the illusion that when the “recovery” happens, it will be back to life as usual – or at least what had become usual over the last decade – but this to me seems a fantasy. No governments (with perhaps the notable exception of the UK) are presenting this reality to their citizens. A depression scale crisis may have been averted, but it by no means ensures that we will be able to return to living as we had in 2006.

Intellectual Property Issues

2009-09-02T07:45:00.000-07:00

ellWith the Disney purchase of Marvel, I’ve gotten back to thinking about intellectual property and ownership. Disney is the champ of protecting their IP seemingly in perpetuity which is frightening enough, but now they own the rights to characters that were created by others, and have a substantial existing fan base. As is often pointed out to me, many of these characters are well developed and multi faceted, not necessarily falling into categories of absolute good or evil. This is what makes the characters and brings the Marvel universe to life. In Disney’s attempt to woo male teen viewers, how much of this will have to change? Will their target demographic be interested in conflicted characters, or is all they are looking for mutants involved in cool action scenes? This leads me to my real question about this deal’s relation to IP.

Disney now owns the rights to all of these characters and can do with them what it sees fit, but there is a huge community that will be upset if the characters are changed to suit Disney’s ends. The characters will be changed forever. The ability to use them to tell stories in their traditional sense will be gone because Disney controls all the rights. In the end, they may very well destroy something which is dear to many people.
This leads me to a bit of a rethink of how IP like this should be dealt with. A case should be made that if a subsequent owner of a creative IP modifies it substantially from the original source material, the classic interpretation should be up for grabs. If characters are altered so much that they are only a shadow of their former selves, their classic personalities should be opened up to the public domain. I do realize this would be a bonanza for IP lawyers, and would likely bog down many a production in lengthy legal proceedings, but there needs to be a way to protect the origins of IP that people still hold dear from a corporatization that I fear Disney will bring.

I don’t want good stories and multidimensional characters locked away in the Disney vault simply because it doesn’t suit their ends to let them out, or flesh them out as they should. Come to think of it, if now new product has come from an IP in say 10 years…maybe even 5, it should automatically be placed in the public domain. All this would take a radical reversal from the way IP laws are headed today, but in the age of the internet, global collaboration, and mash ups of genres and form, it is probably the way the world is headed. I can already hear the lawyers rubbing their hands.

Refugee Camps and Some Thoughts on Africa

2009-09-02T07:14:00.001-07:00

I was reading something recently about the decline in the number of refugees at the same time as the numbers of internally displaced people is rising. This got me thinking about whether the UN (or really the rich West as the greatest funders) is now essentially in the business of running concentration camps for unsavoury regimes in the name of humanitarianism.

My thinking is like this. The groups of IDPs have been forced out of wherever they lived either by the government, or the de facto power in their area. People flee, and international organizations intervene to save people from the problems associated with their flight. The problem is that there seems to be little capacity or desire to resettle these IDPs. The local powers have achieved their goals. Those they sought to remove are gone, and there is little prospect of them returning. Even if the situation calms down enough that the IDPs feel safe returning to their former locales, what will remain there for them? How will they rebuild their lives? What of the people who have known no life other than in the camp? Because we can’t answer these questions, people languish, and those who forced their relocation continue to do whatever it is they wanted to do with the land.

If there is little prospect of returning, do we go on running these camps in perpetuity? What other options do we have? Neighbouring countries are unwilling to take in the flood of migrants, and their country of origin either has no desire, or insufficient resources to take them in. Do we in fact encourage greater displacement because refugees and IDPs are reasonably sure that someone will look after them if they flee, or they flee because they are aware of some UN sponsored safe zone? This leads me to wondering how developing countries will go about solving their own problems, instead of simply relying on the rest of the world to help them out.

If we got rid of refugee camps, would we simply witness additional suffering as those attempting to flee conflict would simply face starvation and the elements? Or would it force those who flee to instead fight for what is theirs? Why is no African country’s motto “Live Free or Die”. This would certainly result in a lot more of what would be viewed as brutal civil war, but to me it makes more sense for those involved to attempt to solve their problems instead of having the rich world aid and abet unsavoury regimes by running their concentration camps for them.

Much of the world seems to think that simply through economic development and more open societies there can be peace in the world. How quickly we forget how open and integrated Europe was before World War I. Sometimes the only way for people to realize they are better off working together than fighting each other is for them to live through a calamity. Instead we are letting conflicts simmer for decades, destroying hope for development and causing societies to bleed themselves dry over the years.

Civil war and the brutality that goes along with it is not something anyone in the West wants to see, but sometimes it may be the only way for those involved to realize what is truly important.

Energy Policy

2009-08-24T07:51:00.001-07:00

It’s not often that I come across something in Foreign Affairs that I strongly disagree with, but I do have some big problems with elements of Edward Morse’s September/October article “Low and Behold”.

In an attempt to reassure the reader of the coming spare capacity in global oil production, he says:

"Further disproving the peak oil theory, since 2003 Saudi Arabia has also successfully engaged in a massive campaign to increase its production capacity (not just its actual production). This means it has committed to being able to raise its output quickly and massively in the event that supplies from the second- and third- largest producers in OPEC are disrupted."

Well that’s great I suppose, except that I don’t simply trust that Saudi Arabia has done this, or is capable of sustaining those levels of production in the event of a crisis. If western governments or oil industry analysts ask for information to back up these claims, they are told that it is a state secret. I’m sorry, but I don’t want the world’s and specifically the West’s energy policy guided by something that is in fact a state secret.

Why would Saudi Arabia lie to the world? Good question! Fortunately, on the SAME PAGE, Mr. Morse tells the reader why:

"Saudi Arabia wants spare production capacity for multiple reasons, including, importantly, to give it influence in the G-20 and other international forums. Riyadh’s ability to increase production is the key to its being taken seriously.

Saudi Arabia will also likely use its surplus capacity to keep prices moderate in order to spur global economic growth, maintain long term demand for oil, and deter investments in alternative sources of energy. In addition, by increasing Riyadh’s ability to keep prices low, surplus capacity will help it reduce the revenues of oil producers- such as Iran, Russia, and to a lesser extent, Venezuela- that use them in ways that undermine regional stability. And it will help Saudi Arabia ensure discipline within OPEC by enabling it to, at any time, threaten to increase production and thereby lower prices."

So clearly there are many strong reasons for Saudi Arabia to be deceptive about its production capacity as well as its total reserves. It strikes me as profoundly misguided to structure our energy policy around information where the incentive to deceive is high, and the ability to monitor or investigate is non existent.

In fairness to Mr. Morse, he presents some figures on production increases and demand reductions which are somewhat more reassuring, but since Saudi production capacity is key to any assessment of the future of energy markets, the assumptions we make about it matter a great deal more than most, if not all others.

Euro Zone Recovery and its Impact on American Politics

2009-08-18T07:34:00.000-07:00

France and Germany appear to be coming out of their recessions, and bringing the rest of the euro zone economy along with them. East Asia also appears to be on the dramatic rebound. These figures certainly would seem to indicate that I was wrong – at least in the short term - about American recovery coming faster than in Europe because of America’s more flexible labour markets.

The question this leaves me with is what ammunition is going to be left in the Republican arsenal come the next presidential election, or even on the next mid terms. How could they argue for fiscal restraint, and a diminished role for the state, if the countries with the largest public provision of services in the capitalist domain are recovering fastest? I don’t think arguing that state intervention on a European scale is un-American is going to fly when people are out of work and receiving little or nothing from their government.

I will be interested to see if the current European recovery is sustainable, or if there is another shoe to drop in the US, or somewhere else in the world. It would be a double blow to the right in the US if the economy is recovering by mid terms, and if Europe’s recovery continues. Maybe then there will be less ideology, and more common sense in America’s political debates regarding the role of the state.

If Europe is now growing and America is still stuck in a recession, is that going to weaken the Republican case in the mid term elections. If Europe is recovering, then doesn’t that mean that America should be more and not less like Europe?

If this doesn't end up happening, despite a demonstrable solid recovery in Europe, I'm going to put it down to yet another example of hegemonic ossification. Even in the presense of clearly better options, nothing gets done.

China, the Environment, and Questions of Sovereignty

2009-08-12T07:42:00.000-07:00

China likes to beat its drum about the need to respect national sovereignty in international relations. Now the fact that they are latching on to a centuries old concept which in my opinion at least has been rendered obsolete by the pace of globalization and the ease with which actions taken in one country can impact others is questionable enough, when it comes to environmental issues, I wonder if this standard will hold up.

This has come up again after reading an article on the damage cause in China, as well as to the rest of the world because of the use of outdated incinerators. It turns out that at least some of the contaminants such as dioxin and mercury are in fact drifting to North America. I realize that the Pacific Ocean is pretty big, and that there is a lack of research on how much material created in China is being deposited on North America, but does the fact that it’s happening at all qualify as an attack on North American sovereignty?

The way I look at it is this: If one of China’s neighbours started to dump mercury into a river jut before it exited their territory, China would surely be upset and make claims about how this action was causing damage to China and that this was a violation of their sovereignty. The same thing is basically happening with these airborne contaminants except that the link is less obvious.

Not that I think outside pressure will actually do much to change the behaviour of players inside China, but I do take some consolation that they are killing themselves much faster than they are killing North Americans. Also, another example of Beijing’s hypocrisy always brings a smile to my face. America might not be perfect, but neither is anyone else.

Dollar Dilemma

2009-08-11T10:22:00.001-07:00

I was reading a while back about the problems that the rising value of the dollar is creating for Canada’s economic recovery. While this may seem like a problem now, what is going to happen when the world economy really starts to recover and the price of energy rises again. Canada is going to continue to export vast amounts of energy to the US, and this will drive the value of our currency up which will in turn choke off any recovery in the manufacturing sector. Since there is unlikely to be a recovery in Canada without a broad based recovery in the global economy, and such a recovery will inevitably result in higher energy prices, Canada is certain to face this dilemma again, and in a much stronger form in the near future.

Does this mean the end of manufacturing or the export of widely available commodities like timber? It would seem paradoxical that a global economic recovery might actually cause more damage to those sectors instead of helping them to recover but this is certainly a possibility. Is Canada prepared for a world of high energy prices where our currency will almost always be overvalued because of our energy exports?

What impact will this have on the structure of our economy, and what measures are being discussed at the federal and provincial levels to address this looming concern. It seems we are all too focused on throwing money at the problem now, and not focused enough on figuring out what unforeseen consequences will accompany the recovery. We should start asking these questions now so that Canada is not faced with the specter of stagflation in the aftermath of the recovery.

Poor Pakistan

2009-07-31T11:23:00.000-07:00

Pakistan is upset that India is launching a nuclear submarine, joining only a small number of countries with that capacity. Pakistan somehow thinks this launch is directed at them, and they worry about how it will destabilize the region.

It’s a bit sad that Pakistan thinks that India is building nuclear submarines to intimidate it. I can’t imagine that any Indian politician or general would be happy with invading Pakistan. The Pakistani military can barely keep a lid on existing insurgency in their country. If India were to invade, not only would they have to deal with Pakistani resistance, they would also have to deal directly with the Taliban threat. Far better to just sit back and let Pakistan deal with the problem themselves.

India has left Pakistan in the dust, and is now really worried about China. Indian GDP: almost $1.3 Trillion. Pakistani GDP: $160 Billion. The Indian economy is over eight times the size of Pakistan’s despite having only slightly higher GDP per capita. India can afford expensive new equipment to deal with a rising potential threat from China. Pakistan can’t even exert some semblance of control over a great deal of their territory. Pakistan needs to get over its equality complex with India and work on sorting out its internal problems rather than worrying about invasion or attack by India.

Summer of Obama?

2009-07-31T08:29:00.000-07:00

The Economist has a timely article on what Obama must do this summer in order to ensure a positive outcome for his agenda. I was really starting to wonder when something like this was going to come, as it does seem that much of what he said he wanted to accomplish on the campaign trail is being distorted, if not destroyed by the congressional law making process. I agree that without a positive resolution to the health care debate which involves a universal public program, or a real bill to reduce green house gas emissions, Obama will have a much harder time being elected in 2012. Based on the lunacy of the Republican party at the moment, I would greatly prefer that not happen.

Still, I’m optimistic. What I hope is that Obama is in fact playing a brilliant hand with Congress and these important bills. His plan is to simply let congress fight it out in order to demonstrate their dysfunction, and prove to the American people that in fact, they are not capable of crafting the necessary legislation. Then, while everything looks like it is falling apart, Obama will pull out the bills he wants, and that his wonkish technocrats have actually been working on in secret, and lay them out before congress and the American people, have a few news conferences to sell them, and then ask Americans to force their congressional representatives to pass the bills without changes. They will have little choice because of their failure to craft good legislation so far, and Americans will be outraged if nothing continues to be done. This way congress gets to fail spectacularly and Obama can ride to the rescue, instead of him trying to force something down congress’ throat only to be rebuffed as was the case with Hillarycare.

This is perhaps too much to hope for, but I’ve hoped for a lot from Obama so far, and he has been reasonably good at delivering.

Pakistani Objections

2009-07-22T07:50:00.000-07:00

So Pakistan seems to think that American and Afghan policy ought to be dictated by what is best for Pakistan. Now it certainly seems reasonable that in closed door sessions, the powers that be in Pakistan would think this way. It seems absurd to me that they would actually come out in public and say as much.

From the NY Times article:

Pakistani officials have told the Obama administration that the Marines fighting the Taliban in southern Afghanistan will force militants across the border into Pakistan, with the potential to further inflame the troubled province of Baluchistan, according to Pakistani intelligence officials.

Ok, so how is it America’s fault that your border is not secure? Should Afghanistan have to put up with insurgents just to make your life easier? This seems to be an unfortunate consequence of the Pakistani government not dealing with their own problems in a timely manner, and now the problem has redoubled, and there is little they can do about it. Better to have disruption in only one country than in two.

But then it gets even better…or I suppose worse. The article goes on to say that:

Pakistan does not have enough troops to deploy to Baluchistan to take on the Taliban without denuding its border with its archenemy, India, the officials said. Dialogue with the Taliban, not more fighting, is in Pakistan’s national interest, they said.

Yes, I suppose dialogue is your preferred option because the terrorists being forced through your porous border care more about destabilizing Afghanistan than about causing trouble in Pakistan, but what about Afghanistan’s national interest? I bet they have some harsh things to say about Pakistan’s policies in the tribal areas. Does Pakistan seriously believe that their issues trump those of Afghanistan? But then comes the real point, which was hinted at by the previous statement, but is put in crystal clear terms by the following:

A Taliban spillover would require Pakistan to put more troops there, a Pakistani intelligence official said, troops the country does not have now. Diverting troops from the border with India is out of the question, the official said.

So what Pakistan is saying is that they do have the resources, but they are unwilling to alter a strategic position which they have maintained for decades. Well, I have news for them. The threat from the Taliban is FAR more real than the threat of India sending tanks across the border. If the ISI wants to continue to believe that the real threat is coming from India, that’s their prerogative, but the policies of other countries shouldn’t be determined by the outdated defense posture of Pakistan.

I can certainly see where members of the Pakistani armed forces are coming from in relation to this, but it’s really a discussion they should be having behind closed doors with the US government. Doing it in public simply makes them look intransigent and incompetent, and ill prepared.

Doubts About China

2009-07-22T07:08:00.000-07:00

Oh China Daily, you do constantly give me good material...

I have a hard time reconciling the title of "Peace Mission 2009" with the image of tanks rolling across an emply plain. Now I don’t think that China is planning to invade any of its neighbours tomorrow, but such a display of military hardware and collaboration with the Russians doesn’t strike me as terribly peaceable. I think this gets to the root of my problem with the Chinese government. They think that just because they call an activity one thing that the world will simply accept it and move on. Then they get upset if an outsider tries to call a spade a spade.

At least when the US conducts operations like this, they use names which do not strike me as contradictory. Their March 2009 exercises with South Korea were called “Key Resolve” and “Foal Eagle”. Now maybe that means something to someone…maybe in the Koreas, but the names don’t strike me as disingenuous from the outset. Everyone knows that the exercies are meant to send a signal to North Korea.

What the Chinese government needs to get its head around is that the West, and I’m sure their neighbours as well, don’t care about the fact that peace, or peaceful is placed in front of any action China takes which might be considered provocative by outsiders. If they simply were upfront about what was happening, people would be less fearful that the CCP was trying to cover up a hostile act.

China is an emerging power, with a large stake in the future of the world. It’s time for them to be up front about that. Global powers have large, modern, well equipped armies that aren’t always doing “peaceful” things. If China wants to be taken seriously, the need to be more honest to the world, and maybe even to themselves about what being a global power is all about. It may go a long way to easing the paranioa in some western, and probably asian capitals.

Hi Hillary!

2009-07-21T11:17:00.000-07:00

Well it seems that Hillary Clinton has been reading my blog and that my ideas are now becoming official American foreign policy! I had written here, and here, about things North Korea has been doing, and what the US response should be. Well it now seems that Hillary has gotten the message.

China Daily has the following to say:

"We were not going to give the North Korea the satisfaction they were looking for, which is to try to elevate them again to center stage," said Clinton.

The secretary even linked Pyongyang's behavior to that of "small children and unruly teenagers."

GOLD! Now if only I was working at the State Department instead of at my actual job. I AM willing to move to DC, even if it’s only for just over three years!

On Harper at the G-8

2009-07-16T11:57:00.000-07:00

Here is another unpublished letter to the editor:

What kind of a leader uses an international event to attempt to score points against the political opposition at home? I know Berlusconi’s behaviour in the lead up to the meeting sets the bar pretty low, but it by no means should give our leaders the impression that they only have to do marginally better. Real leaders score political points with ideas instead of attacking the opposition. There are far greater problems facing the world than what the leader of the Canadian opposition is saying. Mr. Harper should realize this. Sadly he seems to maintain a desire for power above all other considerations, even at the expense of the world’s opinion of Canada. In addition to the apology he gave to Mr. Ignatieff, he owes Canadians as a whole an apology for embarrassing the country with his self serving comments.

What’s worse is that this quote - whoever said it - is probably right. Pretending that this isn’t an issue won’t make it go away. We are a small, rich country in a world full of larger and increasingly rich countries. If we refuse to do anything on the international stage, as the Harper government seems satisfied with, we will lose our place at the table, and if that’s what the future holds, the government should at least be honest with Canadians. What reason is there to keep inviting Canada to these summits if we can’t bring forward anything innovative?

We paid for our seat at the post war table with blood in the Second World War, and we are letting it slip away because the PM is more concerned with maintaining power at home than with making Canada’s voice heard internationally. At the very least we should be having an open conversation about the consequences for Canada’s standing in the world if we are content to be concerned only with what’s going on at home. Contrary to what Mr. Harper believes, floating these ideas is in Canada’s interest, because if we don’t address them, we have already lost our seat at the table.

Crystal Ball Gazing

2009-07-16T11:54:00.000-07:00

Now I’ll freely admit that I know next to nothing about Iran, but that really just makes speculating all the more enjoyable. Why would the head of Iran’s nuclear agency be resigning when the president who has come out most strongly in favour of it has been reelected and what looked like a potential revolution now seems to have been suppressed?

Is it because there really are deep divisions in the Iranian government and he doesn’t think that Ahmadinejad can hold? Could it be because the nuclear program isn’t actually as developed as the West has been led to believe and he is trying to get out before that becomes apparent to the powers that be in Iran? Has he found a buyer for some Iranian nuclear technology and he wants to distance himself from the government for person gain, or to give plausible deniability to a government which was a party to information sharing? Do the Americans have some intelligence that could prove damaging to him in his former role?
Aaah so much speculation!

Hegemonic Ossification

2009-07-15T07:42:00.000-07:00

I am more worried these days than I have been in the recent past about the potential decline of the American empire. A lot of people begrudge America this position, and from time to time, I do as well. Their leadership and electorate often frustrates and infuriates me, but when I think about the other options, they suddenly seem less bad. For all the failings, I would pick even the leadership of Dubbya’s USA over that of China or Russia.

The seeming inability of America to move forward on pressing problems has gotten me thinking of late about how the hegemonic position imposes constraints on domestic policy changes, and how that could lead to the eventual decline of the hegemon.

As the hegemon, you are on top. You are expected to offer global leadership, and pay for global public goods. For as much as people complain about the massive amount of spending by the American military industrial complex, it does in fact provide valuable services to the world. Who is there at the drop of a hat when there is a catastrophe anywhere in the world? It’s the Americans because they are the only ones with the capacity to respond in force with the resources necessary to mitigate at least some of the damage. Who much worse would piracy off Somalia be if there were no US naval vessels patrolling the seas? What about anywhere else that the US navy patrols? Just think of how much better off America could be if they spent those hundreds of billions of dollars at home instead of providing global public goods.

But this gets to the root of the problem. You can’t be the hegemon without the military power to back it up. If the Americans were to decrease their spending, this would weaken their position at the top, and it doesn’t seem that anyone on top is ever inclined to willingly cede that position. Thus, America must continue to spend vast sums on its military which with the cold war over, could probably be better spent elsewhere. Being the hegemon traps that cash. If Russia or China wants to allocate their funding away from the military, it does not threaten their positions as regional powers, and thus they have a much greater degree of flexibility.

This is related to another burden of being the hegemon. If you are on top, it is much harder to incorporate positive lessons which may be evident in other countries. Why should you adopt their systems while you are on top? Doesn’t being on top imply that you already have a better way of doing things? If not, how were you able to get to the top, and maintain your place there? This gives an even more powerful bias to the status quo. Non hegemonic countries do not have this problem, and may even have an advantage in this respect. Since they are not at the top, their governments are more open to incorporating successful ideas from elsewhere. They are obviously superior because they come from a more successful country, and it is easier for them to gain political traction.

Even international organizations lose their influence on the hegemon. The world bank, or IMF will never be able to impose conditions on America because the Americans in effect control those organizations as they do with any other international actor of consequence. Because only America has the means to enforce international law, it can ignore it when it sees fit. A lever for necessary reform in most other countries is thus removed from the toolkit of the leaders of the hegemon. While conditionality is often viewed as negative, it can often give political cover for governments to take necessary but unpopular political or economic measures. It would be impossible for the hegemon to use this reasoning, as the expectation of the electorate would be that they could simply ignore this decree and continue with business as usual. Even if the government were in favour of the reform, selling it becomes no easier with the endorsement of, or pressure from international organizations.

This constrains the hegemon’s potential for reform and raises twin dangers of internal inefficiency leading to a collapse, or alternatively allows would be usurpers to continue their progress while the hegemon ossifies.

G-8 Climate Disconnnect

2009-07-10T08:25:00.000-07:00

The G-8 did not in my view come to any real decisions about climate change. While it is true that they agreed that warming should be limited to two degrees or less above 1900 temperatures, it is also true that nature does not obey G-8 statements. I’ve had a few thoughts recently.

Tom Friedman makes a point in this column that I’ve been trying to push for some time. If China doesn’t want to be involved in green energy projects it is their loss because whoever creates the technology will reap the financial rewards by selling it to others. China knows that there is a great deal of political resistance in the US to pricing carbon. By sabotaging any climate negotiation, China can essentially ensure that there is no strong action take to curb emissions in the US. Without a carbon price in the US, there will be little incentive for American companies to produce the newest technologies to reduce our reliance on fossil fuels. Every day the US delays is another day that China’s lead in the sector grows.

Energy is far and away a larger industry than IT. The fortunes made in the IT revolution will pale in comparison to what will be made in the energy revolution. It may be painful at the beginning, but it will be even more painful for America if they let China claim the biggest share of the pie because they were able to move first.

The point here is that the developed world does not need the developing world in order to come to a solution to this problem. Whether we are past, at or approaching peak oil isn’t really relevant. There is an increasing demand for energy world wide (or at least there will be once the global economy recovers) and energy prices will rise to reflect this. Eventually we will cross a threshold where it will actually be cheaper to produce energy from renewable sources, and at that point it’s not going to matter who signed what treaty when. Simple economics will dictate a massive transformation in those places which have not experience it already. And that’s without even considering the positive implications of denying revenue to places like Iran, Saudi Arabia, Venezuela, and Russia.

The US electorate needs to decide if they want to take the biggest share of that pie, or leave it to China and Europe to be the beneficiaries of that revolution.

Lost in Translation

2009-07-09T07:25:00.001-07:00

Apparently Taro Aso's joke lost something in the telling...

From L-R: France's President Nicolas Sarkozy, Russia's President Dmitry Medvedev, Italy's Prime Minister Silvio Berlusconi and Japan's Prime Minister Taro Aso arrive for a family photograph at the G8 summit in L'Aquila July 8, 2009.

Jackson Funeral

2009-07-07T09:44:00.000-07:00

I don't really care about Michael Jackson. Clearly other people do...which I guess is good for them. But my biggest question coming out of all of this is: Who are they mourning? Michael Jackson, or The Joker?!I bet Heath Ledger is spinning in his grave!

Also, maybe playing the part of The Joker in the post 9/11 world is a recipe for disaster. After seeing rehersal pictures like that above, it seems like we are 2 for 2.

Oil Price Nonsense

2009-07-06T11:16:00.000-07:00

The NYT today has an article titled “Swings in Oil Price Hobble Forecasting” and the meaning given to this statement by reading the article is basically “uncertainty generates uncertainty”…thanks NYT…

But what is even crazier, is that what they are attributing to uncertainty can be explained, and most of the examples they cite ARE actually explained IN THE SAME ARTICLE!

From the article:

“To call this extreme volatility might be an understatement,” said Laura Wright, the chief financial officer at Southwest Airlines, a company that has sought to insure itself against volatile prices by buying long-term oil contracts. “Over the past 15 to 18 months, this has been unprecedented. I don’t think it can be easily rationalized.”

But later on, the article says:

Many factors that pushed oil prices up last year have returned. Supply fears are creeping back into the market, with a new round of violence in Nigeria’s oil-rich Niger Delta crimping production. And there are increasing fears that the political instability in Iran could spill over onto the oil market, potentially hampering the country’s exports.

The OPEC cartel has also been remarkably successful in reining in production in recent months to keep prices from falling. Even as prices recovered, members of the Organization of the Petroleum Exporting Countries have been unwilling to open their taps.

Those sound like pretty rational explanations to me…but hey, I guess the CFO at Southwest doesn’t think so, and they are a highly paid private sector employee clearly well worth their compensation package. At least she isn’t working at a bank…

Then there is this explanation:

But unlike last year, when the economy was still not in recession and demand for commodities was strong, the world today is mired in its worst slump in over half a century.

OH! So when the economy is not in recession prices are higher than when it is in recession! SHOCKING! And when that recession is being billed as potentially as bad, if not worse than the GREAT DEPRESSION, prices slide even more. And when it is now being billed as the worst being over, oil prices are climbing. Once again, it seems that there is a pretty rational explanation for the shifts in oil prices I’ve been seeing.

Finally:

Top officials said that OPEC’s goal was to achieve $75 a barrel oil by the end of the year, a target that has been endorsed by Saudi Arabia, the group’s kingpin.

So ok. If I had to forecast where oil prices will be by the end of the year, I’d bet around $75.

Plus a random bit of misinformation:

The automakers General Motors and Chrysler have been forced into bankruptcy as customers shun their gas guzzlers.

Which isn’t really true. It might be part of the explanation, but it certainly isn’t all of it. The credit crunch didn’t cause high oil prices, or vice versa.

So I guess in the end, my real problem is with the CFO of Southwest, not the NYT.

The article closes with probably the best line in it, from the just retired CEO of Royal Dutch Shell:

“Oil has never been very stable,” Mr. van der Veer said. “If you look at history, you have to expect more volatility.”

I’ll close with a bit of my own advice. Don’t invest in Southwest until they replace their CFO.

China Stimulus Numbers and Thoughts

2009-06-24T10:23:00.000-07:00

I’ve been questioning for a while now how much more stable the Chinese banking system is compared to the West’s in the wake of the current economic meltdown. I’ve found some interesting figures from the Economist that shed some light onto the situation.

From one article:

According to Josh Felman, of the IMF’s Asia research department, state banks and others issued 5.5 trillion yuan ($800 billion) of new loans in the first quarter—more than in the whole of 2008.

If American banks were being reckless in their lending in the lead up to the current crisis, I question how China will be able to productively invest that much money in that short of a time frame. In fact, a different article has a potential answer:

There is widespread concern that this investment boom is adding to China’s excess capacity. Investment amounted to 44% of GDP last year (compared with 18% in America), which many economists reckon was already too much. Worse still, as well as forcing state firms to invest, the government is directing state-owned banks to lend more, despite falling corporate profits. Many of those loans could turn sour. Like Japan in the 1980s, it is argued, an artificially low cost of capital causes chronic overinvestment and falling returns. If so, it will end in tears. To assess that risk you need to ask two questions. How much excess capacity was there already? And where is the new investment going?

In fairness, the rest of the article basically says that this investment is well targeted in infrastructure, and in areas where there is little existing capacity, but I still have reservations. Where Beijing says the money should be spent, may not in fact be where the money ends up. In places further from central control, I’m concerned that there might be skimming from infrastructure money to line the pockets of local party members, as seems to have been the case in areas of China hit by the 2008 earthquake.
I’m very much of two minds about China these days, and I guess the fact that they are building useful infrastructure while also saddling their state owned banks with a lot of what will likely turn out to be bad debt is strangely comforting.

A Colonialist Future?

2009-06-24T07:10:00.000-07:00

I had written just over a year ago about the passing of the torch of African exploitation from the West to China, and I’m pleased to see that this topic is once again in the headlines.

This has gotten me thinking once again about many of the positive aspects of colonialism, and the possibility that we will need to return to an era which we thought was gone forever.

My first thought is this: However much a colonial power may be exploitative, they will protect their territory from exploitation by other powers. As much of Africa stands now, countries are being exploited by domestic forces, neighbours, far away countries and corporations. If there is only a single exploiting power, that power also has incentives to invest in infrastructure and education in order to make their exploitation easier. When many factions seek to exploit their incentives are much more short term. Would it not be better in places where governance is weak or non existent to simply revert to a colony, or at least a system of government with final accountability to a wealthy and stable power? If the developing world wants aid, why shouldn’t we insist on having it spent as we see fit? How many decades of failure does it take for people to start seriously considering these questions.

If we look to our current neo-colonial adventures in Iraq and Afghanistan, the picture comes much more into focus. In Iraq, troops and money have solved a great deal of the post occupation problems, but Iraq has a history of statehood, education, and governance ability. On the other hand, Afghanistan has none of that tradition. We are having to build institutions and governance from scratch. Is it really feasible to try and put Afghans in those positions right away? Based on the corruption that seems endemic in the Afghan government, the answer seems to be a resounding no.

Unfortunately, the problem of failed states is not confined to Afghanistan. What about Somalia, or the Congo? What hope do they have of emerging as prosperous societies without strong and prolonged outside intervention? And that’s just the start. So much of the developing world is growing at low or negative rates (See Paul Collier’s The Bottom Billion) of between -0.5% and 0.5% per year. With other emerging economies such as China and India growing in excess of 5% per year, the gulf between the poor and the poorest is widening at an increasing rate. How happy will the people in the low growth countries be when they see much of the rest of the world getting rich while they stay poor?

This in my mind sets the stage for something most people in the West are not prepared to think about. In the end, we may have to spend considerable resources in terms of both GDP and lives of our young people in order to build stable and prosperous societies in the poorest parts of the world. As much as I believe in self government, you can’t eat or live in freedom, and malaria doesn’t seem to discriminate between democracies and tyrannies.
What is even more mind blowing is that most of the worse off countries are tyrannies, and I think it’s walking a pretty morally dubious line to say that a native dictator is acceptable, while a foreign power acting in its enlightened self interest is not.

Weep for Society

2009-06-22T12:56:00.000-07:00

Step 1: Watch this.

Step 2: Read this.

Step 3: Weep for our society

After reading that article, I'm willing to bet Will.I.Am wasn't the only one in the room that wanted to hit this guy.

BREAKING NEWS!

2009-06-19T06:50:00.001-07:00

Pakistani piggy backing technology lags substantially behind Western rivals

EDIT:

I'm going to post a back and forth between myself and a friend of mine based on this picture and caption.

2Belts:

Clearly they'll need to close the piggy back gap if they are ever to becompetitive with the western world.

Me:

Maybe I should be the campaign advisor to one of the opposition parties. If JFK could win on a non existent missile gap, my guy could certainly win on demonstrable piggy back gap.

2Belts:

Just make sure you aren't standing by your candidate when the other
campaign "goes negative".

Revolution’s a Brewin’

2009-06-16T06:22:00.001-07:00

Iran’s Guardian Council has said that there will be recounts of ballot boxes from specific sites where the opposition alleges irregularities. I can’t see this working out well for the old guard. As I see it, this leaves two options:

Option 1: The recount shows that everything was ok.

In this situation, it seems that the opposition will claim that the recount suffered from the same irregularities that the original vote did, that the same people who handled the original vote handled the recount. People will be back in the streets because the situation won’t have changed.

Option 2: The recount shifts votes in those areas in favour of the opposition

If this happens, then I can only assume that there will be demands for recounts everywhere else. Either the Guardian Council complies and then basically changes the original results of the election, or they refuse and people are back in the streets. Either way, their legitimacy will be greatly compromised.

It turns out that Ahmadinejad is actually in Russia. I wonder what is going through Putin’s head right now. Iran and Russia seem to be cut from the same cloth when it comes to their “democratic” electoral systems, so maybe Putin can offer some lessons in how to properly rig elections.

Iran’s Tiananmen?

2009-06-15T11:48:00.000-07:00

I don’t know much about Iranian domestic politics, but I’m happy to see people taking to the streets to protest what they feel is electoral fraud. Iran has never really pretended to be a “free” country, but what I at the very least hope this illustrates is that it’s very difficult to pretend to be a democracy when you’re not. The Americans got burned by calling for elections in the Palestinian territories only to have Hamas win. Now it looks like the Iranian old guard is being burned by a similar phenomenon.

I worry that this could end with a lot of blood on the streets of Tehran, but unlike the Chinese government, I’m not convinced the Ayatollah’s can offer an economic growth for political freedoms tradeoff. The blood of Iranian’s today could be a down payment on freedoms in the near future.

All I can hope is that some Iranians have been reading their Jefferson.

Artists Could Benefit From Economics Education

2009-06-15T07:36:00.000-07:00

I laughed when I read this story in the NYT today: "Use Their Work Free? Some Artists Say No to Google" It seems that some artists are complaining that Google wasn’t going to pay them for their work it wanted to use on Google Chrome skins.

Some of their thoughts:

“You’d think that if anyone can afford to pay artists and designers it would be a company that is making millions of dollars,” Mr. Ciardiello said in an interview.

or

In a posting to Drawger on April 28, Mr. Taxali bemoaned the Google request — and that some struggling publications were reducing fees to illustrators by nearly half.

…well there is certainly a big difference between “can” and “must”. There are a lot of aspiring artists out there. Many of them would kill for the distribution the skin of a Google browser would give them. Apparently Mr. Taxali’s “work has appeared in publications like Time, Newsweek and Fortune”, but I’ve never heard of him. I doubt I would think his art is much better than something done by a 20 something college drop out when it comes to creating a browser skin. Maybe Google’s mistake was even asking these people. They clearly don’t need an opportunity to break into the market as they have already had high profile work. Why would Google pay for something it can have done for free?

Still, with the value of their fees declining in publications that are still willing to pay them, perhaps aspiring professional artists should pick up an econ textbook so they have something with which to supplement their income. I bet there are a lot of people out there to whom the ability to say “Hey, you should download MY Google Chrome skin” would be worth more than what these guys get paid by reputable publications.

In a somewhat more serious vein, perhaps instead of complaining about not being paid, these artists should lobby Google to include a branch for the fine arts in its philanthropic endeavors. After all, Google does seem to have more money than they know what to do with, and there’s gotta be someone in their organization with an eye for art.

A Palestinian State

2009-06-15T07:09:00.000-07:00

Some of the things coming out of Israeli politician’s mouths I just can’t believe.

From the BBC:

Israeli Prime Minister Benjamin Netanyahu, in a major policy speech, accepted the creation of a Palestinian state but only if it was demilitarised. He said a Palestinian state must have no army, no control of its air space and no way of smuggling in weapons.

Well I’m sorry, but if the country is demilitarized I don’t think it counts as a state. If it is imposed by an outside power, or as the condition of receiving state hood, then it amounts to nothing more than a protectorate. I wonder how the Israeli government would take it if the world decided that they should be demilitarized…After all, we could just leave some UN peacekeepers there to make sure everything was in order. I bet that they would rail against an unacceptable violation of their sovereignty, and they would be correct to do so. On the last point, I’m even more confused. Currently the Palestinian’s don’t have an army, or control over its airspace, or borders and there is still smuggling. How will imposing those conditions on a new state change the situation?

Now I understand that Israel doesn’t want the Palestinian army buying weapons only to have them sold or given to terrorists. Fine. At the same time, when weapons arrive to a government I assume there is some sort of control regime in place. If those weapons are used, they should be easily tracked back to whoever is distributing them, and that person can be dealt with. I doubt that there are the same rigorous controls on weapons arriving from Iran presently.

If the Israelis are concerned about an attack using conventional weapons, this must also be a mirage. If a terrorist manages to steal a tank, I would hope that the IDF would be able to deal with that in very short order. In fact, the IDF should be able to deal with any conventional threat as they have ably demonstrated in the past. If Palestinian tanks start rolling towards the border they would be quickly destroyed, and no one would have anything ill to say to Israel.

It’s just frustrating that the Israelis are attempting to impose the same basic conditions that already exist, on a future Palestinian state in order to solve problems which are currently unsolved. I can’t believe that the politicians in Israel are all more blind to this reality than me, so either I need to go there and run the government, or they don’t actually want a peace deal. One way or another, the international community should call them on it.

Don’t Worry About Climate Change!

2009-06-15T06:49:00.001-07:00

It seems like the atheist left are the ones most worried about climate change. I wonder why this is? Don’t they believe in evolution? Aren’t they always trying to force their belief that nature is wonderfully adaptable on the rest of us? If evolution is so wonderful, why are they worried about climate change? Shouldn’t nature be able to evolve its way out of climate change? If anything, it’s the (religious) right that should be concerned. God created his creatures to live in a world that hasn’t changed in the last 4000 years. How are we supposed to deal with a changing climate?! THIS ISN’T WHAT WE WERE CREATED FOR!

I tell you, if the climate is changing at 100 times any previous rate, we are going to see some REALLY COOL new creatures as evolution begins to follow at the same pace!

AAARGH Bankers

2009-06-09T09:23:00.000-07:00

I just can’t believe how disconnected banking executives still seem to be from how ordinary people view the world. This NYT article on new bank add campaigns was interesting to read, but still, there are some parts that are unbelievable.

Bankers also contend that a Wall Street version of natural selection has already culled the industry’s worst offenders.

“Some of the people who were the most egregious players, they’re not around,” said James E. Rohr, the chief executive of PNC. “The fact that they haven’t stepped up and said they’re sorry, well, they don’t have a platform.”

Really? No platform? I bet that if any CEO or CFO of a big bank who was in charge before the crisis called up CNN and offered to do a mea culpa they would get as much air time as they wanted. It’s a 24 hour news cycle for god’s sake! They have to fill the time some how?

Even beyond that, what about Youtube? Did these former execs not manage to pocket enough money to afford a webcam? There are plenty of platforms out there, the fact is that they aren’t really sorry, or at least aren’t man enough to apologize to all the people they have screwed over.

Twit-ter

2009-06-09T07:20:00.000-07:00

Well here is a more fleshed out story about a guy who thought he got robbed because he posted on Twitter that he was going out of town. I laughed pretty hard when I read about this the first time. The only way I could possibly have appreciated it more is if the burglar had signed on to his victim’s Twitter and written “Being robbed” before he left the house. That would have been pure gold.

Cost Incentivisation

2009-06-03T07:23:00.000-07:00

Some people are skeptical that minor price adjustments can change consumer behaviour. A lot has been said against charging people for plastic bags at grocery stores, and I admit that I had my doubts as well. Yesterday, the power of pricing was demonstrated right before my eyes. The person after me in line was asked if they wanted a bag. When they were told there was a cost associated with it, they declined. A five cent charge can alter consumer behaviour! Victory for the hand of regulation. Now if only we can shift this sort of disincentive to carbon, we will be almost home free.

Natal

2009-06-03T06:30:00.000-07:00

I was watching some E3 coverage last night, and much of what I saw was very cool. Still, based on what Microsoft was presenting, I’m prepared to hand back the mantle of most evil company in the world to them.

On the surface, Natal seems really cool. It can essentially motion capture and make the character on the screen do whatever motion you are doing in your living room. Awesome. That is pretty close to the gaming holy grail of a holodeck. But it even goes further than that! The system is actually able to recognize voices so that it can for instance determine if the correct person is answering in a game show style game. Also awesome…until you think about it a bit more.

Microsoft is basically getting you to install a device that monitors what you watch, what you do, and what you say. Because of the voice identification software, this can be broken down by demographic, even more so if there is (as I’m sure there will be) some sort of profile builder included with the software. How valuable will this information be? I can only guess what movie studios or game developers would be willing to pay for a transcript of what their audiences have said lined up exactly to the point in the movie or game when they said it. Microsoft will know everything that goes on in your living room or even beyond depending on the sensitivity of the mic.

One of the MS reps was saying that this is technology that hasn’t even been dreamed of in sci-fi. It has. It was called 1984.

When this product comes out, I suggest that you read the EULA VERY VERY carefully, and that on top of that, the US government needs to keep a close eye on Microsoft and this product especially.

Chinese Sausages

2009-06-02T10:00:00.000-07:00

Krugman posted an excerpt from the WSJ (no actual link because I’m too lazy to register) talking about Chinese energy consumption statistics and implications for its stated GDP growth. Electricity demand is declining, but industrial value added growth is increasing. This seems to go against all past trends, and leads some observers to speculate that the government is cooking the books. The fact that China’s association of electricity generators has simply stopped publishing data is not overly reassuring.

This leads me back to one of my biggest problems with, and concerns about China. While cheery news from Beijing helps our stock markets in the short term, it also blinds us to potential future problems. As I’ve said many times before, I worry about the implications for the West of political turbulence in China since we are so dependent on it for financing and production. If GDP is actually growing at a much slower pace than the Chinese government suggests, problems which need to be addressed will grow, and the longer they are left to fester, the harder they will be to solve.

Chinese transparency would help everyone. Since it does seem to be forthcoming, Western countries need to at least prepare some form of contingency plans. Being unprepared for the loss of our bank and factory at the same time for me spells problems ahead. I suppose that speaking of this publically is perhaps untenable, but I sincerely hope that there are a few paranoid people working in a dark basement somewhere in the State Department writing plans for when things go bad.

North Korea

2009-05-25T08:26:00.000-07:00

So North Korea is beating its war drum again; not that we should be taking them seriously anyway.

Granted this isn’t generally what countries should be doing, but I’m not overly concerned. As easy as it would be for them to rebuild and reopen Yongbyon, they haven’t, so every test they conduct uses up enriched material that they can’t for the moment replace. What it is important to keep in mind is that North Korea also lacks any kind of delievery mechanism, so while they may be able to detonate a nuke as their country is overrun by invaders from somewhere else, they aren’t really in a position to threaten anyone outside their borders with it.

The world has far bigger problems than a crack pot dictator who wants a seat at the big table. The six parties should just ignore North Korea until they are willing to come back to the table without the bluster of weapons testing. I’m sure nothing would annoy Mr. Kim more than western apathy towards his test. Maybe when we fix some of the other problems we face, we can get back to dealing with Mr. Kim.

Stupidity and Ignorance in the NYT

2009-05-22T11:59:00.000-07:00

It makes me sad when I read something very wrong in a paper I like, but the NYT is doing that to me today. Their article “U.S. Jobless Rate May Soon Top Europe’s” starts as follows:

For many years, unemployment in the United States was lower than in Western Europe, a fact often cited by people who argued that the flexibility inherent in the American system — it is easier to both hire and fire workers than in many European countries — produced more jobs.

That is no longer the case. Unemployment in the United States has risen to European averages, and seems likely to pass them when international data for April is calculated.

“The current economic crisis,” wrote John Schmitt, Hye Jin Rho and Shawn Fremstad of the Center for Economic and Policy Research, a research organization in Washington, “has turned the case for the U.S. model almost entirely on its head.”

It seems that the Center for Economic and Policy Research needs to relearn some fundamental economics. The US system is indeed good at creating jobs, but what is happening now is not the creation of new jobs, but the destruction of old ones. The American system is also much better than the European system at doing that. Europe is not beating the US in creating new jobs, they are simply better at protecting existing ones.
The real test of the US model will be when the recovery starts, not in the midst of the downturn. I’m willing to predict that the US recovery will be much more rapid and vigorous than anything that will be seen in the Western European welfare states. If this doesn’t happen, then maybe the Center for Economic and Policy Research can talk about systems being turned on their heads.

Af-Pak Turning Point?

2009-05-22T07:13:00.000-07:00

I’ve been heartened reading the news from Afghanistan and Pakistan over the last couple of days. Starting with this BBC article about how the tide of public opinion in Pakistan is turning against the Taliban. Finally the people, if not the ISI are starting to appreciate the danger that the Taliban pose to their own country. Hopefully more and more are starting to realize that fighting the Taliban does not simply mean that they are being an American puppet.

My second hopeful sign are the reports that people behind the Taliban line are starting to take up arms against them. If some Pakistanis are actually going to start living by the creed of “Give me liberty or give me death” the situation might actually start to turn around. With more troops in Afghanistan, and a (hopefully) real push from the Pakistani authorities, the Taliban will be trapped in a pincer from which there will be no escape or hope of reconstitution.

This leads me to my third point; that the Taliban in Afghanistan are talking about talking about some sort of peace deal. While this is all still very vague, I think it shows that the Taliban, or at least some elements within it are scared, or at the very least realize that they stand a better chance of a good life siding with the government instead of the Taliban.
No one wants a war on two fronts, which it increasingly looks like the Taliban have. At the same time, the populations under their control seem to be willing to stand up to their oppressors. A war on two fronts, and disquiet in your safe havens, all this augers will for progress.

Tim Horton’s

2009-05-21T12:08:00.000-07:00

I went with a few people from work to Timmies because they were giving away free small iced coffees today. Not wanting to waste a cup, I didn’t get one, but I did observe some interesting and frustrating things while I was there.

First the price. The small iced coffee costs as much as a large normal coffee. The iced coffee amounts to a double double over ice, where half of the cup is filled with ice so you are basically paying for a large, and getting a small, half of which is ice. It seems to me that people would be better off just buying a large and getting some ice from home.

The second thing that is mind boggling is that the coffee is heated up while it is being made, then cooled down in the iced coffee pouring device. That’s just great. Using energy to boil the water, then using more to cool it down again…I guess I don’t really have a better solution off the top of my head, so maybe it’s energy costs, instead of lust for profit that account for the small coffee volume at large coffee price.

Finally I have a problem with the amount of waste this is likely to generate. After McDonald’s had their free coffee give away days, the streets were littered with small McDonald’s coffee cups for days.

Some Thoughts on Chinese Development and Regional Implications

2009-05-14T07:11:00.001-07:00

I was reading the DOD’s 2009 Annual Report to Congress on the Military Power of the People’s Republic of China, and I came across an interesting portion. It mentions that both Japan and South Korea are suffering form acid rain being generated by China’s coal fired power plants. I think this is a very interesting problem. China enjoys banging on the drum of sovereignty when its interests are threatened, but what about the sovereign right of other countries not to have your pollution dumped on them?

I realize that Japan and South Korea might not be in good situations to force China to change its behaviour, but I wonder what the consequences for China will be if it continues to produce problems for its neighbours. Clearly these countries will have something to say when the acid rain begins to cause noticeable problems, if it isn’t already. Unlike for climate change, it doesn’t seem likely that China will be able to point the finger at Japan and South Korea and accuse them of having gained earlier without having to deal with this problem.

This leads to some interesting considerations when thinking about how Japan and South Korea will react. Do they attempt to force China to clean up its act on its own? And if so, how do they manage that? Do they simply pay for the technology to clean up China’s coal power plants? Or maybe these questions aren’t even relevant. If the consequences of China’s coal usage are having direct impacts on its neighbours large enough for them to complain vocally, will China’s own population have forced a resolution before it reaches that point? Maybe Japan and South Korea will simply fund Chinese environmental NGOs in an effort to incite change from within. I can’t see China being happy with that sort of foreign medeling, but I think it’s going to be hard to convince the international community that it is out of line. They can harp on about sovereignty all they want, but if their sovereign emissions are causing large problems in other countries I don’t expect them to get much sympathy in the international community.

Japan is short on trees, and if the German experience is anything to go by, acid rain does a lot of damage to forests. It would be interesting and somewhat terrifying, if an airborne, sulfur-dioxide assault against Japan’s forests led to conflict – diplomatic or military – between China and Japan.

Federal Liberals and Carbon Pricing

2009-05-14T06:56:00.001-07:00

The Globe has a good article today saying basically what I said yesterday about the BC election demonstrating that you can implement a price for carbon and not lose the next election. What scares me now is an Ignatieff quote from that article.

Mr. Dion's defeat on the issue so unnerved the Liberals that Michael Ignatieff, who embraced a carbon tax as a leadership contender in 2006, later shied away from it.

"We took the carbon tax to the public and the public didn't think it was such a good idea," he said earlier this year. "I'm trying to get myself elected here and if the public, after mature consideration, think that's the dumbest thing they've ever heard then I've got to listen."

This is where I think he is very wrong. Just because the people you talk to say it’s a bad idea doesn’t mean you should give up. If anything, it just means that you have to educate them about why it’s a good idea. This is what Obama at least seems to be trying to do in the US, and I would certainly like a government in Canada able to do that as well. Dion couldn’t do it because he couldn’t speak English. Ignatieff is a far more persuasive speaker, and I have faith that if he put his mind to it, he will be able to sell Canadians outside Alberta and Saskatchewan on the merits of Carbon pricing. If he can’t sell it to Alberta and Saskatchewan, no great loss there, it’s not like the Liberals would be winning many seats in those provinces anyway. If it gives him more support in BC and Quebec, it seems like a good idea to me.

On the bright side, we will basically have to accept whatever the American’s decide on continental climate policy, so even if we do nothing now, we will only be putting ourselves at a minor disadvantage in the future. Thankfully we emit such low levels of greenhouse gasses in the grand scheme of things, so our absolute climate impact is low, and our inaction only harms our future economic interests and much less so the planet.

Conservative Attack Ads

2009-05-14T06:54:00.000-07:00

Well it has finally come to pass. The Conservatives are attacking Ignatieff as an American. At first I thought this might be a fatal accusation. If there is anything Canadian’s don’t like it’s American politicians telling them what to do, but I’m not convinced that’s still the case. Obama’s election seemed to change the way a lot of Canadians think about the US, especially after 8 years of GW Bush. I almost think this attack could be turned around as a positive for the Liberals. While they might not be able to say it on TV, I’m sure they will be saying it to voters, that Ignatieff is basically a white Obama, ready to lead Canada into a hopeful new future. Based on the turnout at parliament hill during Obama’s depressingly brief visit, I’m willing to bet there are a lot of Canadians who would be OK with the US annexing Canada so long as Obama is in charge. If the Liberals can convince Canadians that a vote for Ignatieff is a vote for Obama I don’t know what the Conservatives will do to counter that message of hope.

Carbon Pricing

2009-05-13T07:19:00.000-07:00

Two good news stories today. The BC Liberals won reelection so the BC carbon tax will continue. Hopefully this will demonstrate to other politicians that it is possible to put a price on carbon without it being political suicide. The second good news story is that Quebec is putting in place legislation to meet its requirements under the Western Climate Initiative.

I was happy to hear about the WCI in 2007, especially since the Bush administration was doing noting on the issue, and I’m still happy to hear about progress now. Despite reassuring words from the White House and some members of congress, I’m still not convinced that we will see a real price for carbon set in the US during Obama’s first term.

This leads me to a concern I have about this group moving forward in advance of some national frameworks being in place. If the WCI manages to reduce emissions across its membership, that is certainly good. My concern is that when it comes time to negotiate the US climate deal, the base year will be set in the year of negotiation, not 1990, or even 2009. The progress that WCI members make may simply be of no value in the future if the base year is set after their reductions took place. The only real hope that I have is for California to be able to set the US’ national policy since they are so big. Still, because of the 2 seats per state in the senate, there could still be substantial opposition despite California’s massive contribution to US GDP.

This brings me back to the debate over cap and trade vs. carbon tax. While the cap and trade system may appear to be the most economic, because reductions will take place where the cost is least, it does create some problems when it is implemented in the real world. The debate over the base year is just one factor. Should the credits be auctioned, or allocated based on emissions? Will they be allocated on a national or state by state basis? What is the volume, and how quickly will they be reduced? All these are questions which have important implications on the ease of implementation and the final result of the process.

A tax on the other hand eliminates many of these problems. There is no need for a base year to be set. If you have been reducing emissions in the lead up to the new tax regime, you will just pay less tax. There is no political decision to be made about whether to auction or give away credits, so the battles which that will bring are eliminated.

I suppose I’ll be happy simply to see a price on Carbon, and even if it isn’t perfect, at least it will be a step in the right direction. Much like the iPod, once these technologies get started, I have faith that they will rapidly become superior to our existing fossil fuel technologies. The US has the capital, infrastructure, and the concentration of brainpower that must be brought to bear on this problem. All that it needs is a properly structured system of incentives to unleash it.

Ask your friends on the right why they believe that the market can solve all problems…except climate change.

SHENANIGANS!

2009-05-07T12:35:00.000-07:00

Manny Ramirez failed his most recent drug test. He’s been suspended for 50 games and will lose about a third of his $25 million salary for this season. I’m happy to see that baseball is taking drug use seriously, even if I’m embarrassed that congress has seen fit to involve its self in the proceedings. Still, I just have a hard time believing the denials.

From the Times article:

Ramirez said in a statement released by the players’ association that he had been given a medication, not a steroid, that a doctor had recently prescribed him for a personal health issue.

“Unfortunately, the medication was banned under our drug policy,” Ramirez said. “Under the policy that mistake is now my responsibility. I have been advised not to say anything more for now. I do want to say one other thing: I’ve taken and passed about 15 drug tests over the past five seasons.”

Really, your doctor prescribed you a medication which was banned under the MLB drug policy? So what you are telling me is, your $25 million a year salary doesn’t buy you a doctor who can look at the components of a drug and compare them to the list of MLBs banned substances? Apparently private health care in the US doesn’t actually buy you a better doctor.

What I find EVEN MORE shocking is that the teams don’t have a doctor on staff for that sole purpose. Anytime you are prescribed something, or want to take something, it has to be cleared by this team doctor. As an owner/manager I would insist on it, just to avoid this sort of problem. Apparently Ramirez is pretty good, and him being gone for 50 games will hurt the team, so it’s in management’s interest as well.

I wonder if baseball is contemplating some sort of "three strikes you’re out" policy for drug use. They probably couldn’t stand the irony.

Proper Valuations

2009-05-07T06:40:00.000-07:00

When I saw the headline “Homeless man rescues teen, gets baseball tickets as reward” my first thought was “baseball tickets?! I really don’t think that’s a reward that fits the deed”. I was however happy to learn that in fact, the tickets were given by the Mayor because that’s what Mr. Hall had asked him for. Ok, I feel a lot better.

I get to the end of the article, and I’m upset again. There is no mention of the family of the kid that Mr. Hall pulled from the river. Where are they? I was happy to read that after seeing the rescue “Ms. Willis…a former social worker…has been housing Mr. Hall since the rescue while several local groups work to put a more permanent roof over his head.” WHAT ABOUT THE FAMILY OF THE KID HE SAVED?! Shouldn’t THEY be the ones putting a roof over his head. HE SAVED THEIR SON’S LIFE!!! And after a few days they haven’t even been by to say thanks?! I’m really hoping that this is just a case of information not making it into the media because if it isn’t, the behaviour of the family whose son has been saved is really shameful.

I’ll make a commitment right now that if a homeless person ever saves my kid, I’ll put them up in my house for as long as they want to stay.

Ah Language

2009-05-07T06:31:00.000-07:00

Sometimes I really appreciate living in Canada. While the Americans argue about whether senior officials in the previous administration should be prosecuted for their use of torture, we argue about the language ability of our politicians. Thankfully Canada doesn’t face any pressing problems these days.

After some accusations about his inability to speak French while being in charge of bilingualism in the Federal civil service, Treasury Board president Toews responds with “For some reason, I'm less of a Canadian, I'm less entitled to hold public office because I only speak one of the official languages” I wonder if he has ever taken a look at civil service job postings. It is very difficult to get a job or advance in the civil service without being able to speak French, or being willing to learn it as you go along. I think Lawrence Martin hit the nail on the head when he pointed out that Toews has been in Ottawa for 8 years, but has not taken the time to learn French.

I also think it’s funny that the Conservatives are trying to fall back on the excuse that the Liberals previous TB president was unilingual. Well…why didn’t they bring that up while they were the opposition party? I think it says more about them than it does the Liberals.

Anyway, I can’t really say I’m complaining. This won’t play well in Quebec, and I’m willing to bet that people in Ontario aren’t going to be overly impressed with seeing a Conservative cabinet minister throw a hissy fit over what seems to me to be a reasonable question. His answer really should have been that there are plenty of ministers with little expertise in their portfolios and that no one is accusing them of not being able to do their job properly, but I guess being offended is easier.

I’m starting to get into election mood!

Television Influences

2009-05-05T08:21:00.001-07:00

We worry a lot about what our kids see on TV influencing how they conduct themselves in the world. There is no shortage of shrill voices railing against violence and sex on TV because of the supposedly negative impacts it has on our kids. I wonder about the other impacts TV, specifically advertising might have on kids.

I’m thinking here in the context of drug advertising. Audiences are constantly bombarded with ads for drugs ranging from painkillers to Viagra. The message this seems to send is that there are drugs available to solve your problems, and that you should consume them whenever you are having a problem which a drug can solve. This seems like a message which is easily transferable to drugs of the illegal variety. If it’s ok for people to take drugs to solve their problems, what is the difference between a drug produced by a big pharmaceutical company and the drugs sold by your local drug dealer? They both offer usually temporary respite from whatever problem you are having.

It seems like telling your kids not to do drugs while you take pharmaceuticals yourself, and tell your kids to take whatever is in the medicine cabinet when they fell bad, you are setting up an untenable position.

I would be interested in seeing a comparison of drug advertising on TV plotted against youth drug consumption. I’m willing to bet it would, or at least will a few years down the road, show a disturbing trend.

Harbinger

2009-04-28T05:54:00.000-07:00

I’m scared and excited about the swine flu outbreak all at the same time. SARS and Bird Flu were certainly scares in their day, but were mostly confined to Asia. A few people in North America died, but we were sheltered from the worst of the impact. Not so with the swine flu. Coming from Mexico, it may have more of an impact on how the US administration views its neighbourhood and the world.

They can build as many fences as they want and it’s not going to stop disease from spreading. The real problem America faces is that they have what amounts to a third world country directly on their border, and their mentality has been to wall themselves off instead of attempting to solve the problem. Instead of lecturing the European Union on how it is important for them to bring in Turkey, maybe America will start to realize that they need to take a European style approach to dealing with their less well off neighbours. It would be much easier to prevent pandemics from spreading if there was better funded health care in Mexico. I sometimes wonder how many Americans will have to die from a pandemic before they realize that. Maybe this will be the one.

As much as I don’t want to see a lot of suffering, it would be a stark demonstration of the interconnectedness of the world. Unlike 9/11 there isn’t really anyone you can blame for this problem, unless you want to blame the Mexican government. Still, I’m not convinced that it would be pretense to invade. I would however be interested in seeing a new administration declaring a global war on communicable diseases. If we spent half what we are spending on the war on terror, many problems could be solved, and much goodwill towards America generated.

Two closing thoughts.

I read somewhere the suggestion of turning Guantanamo Bay into a US funded centre for research into tropical diseases once it is closed. I think that’s an incredible idea which the current outbreak may serve to reinforce. It could turn one of the symbols of American hypocrisy into a beacon of American idealism.

My second thought is about the medical staff we poach from the developing world. Are they really needed more in the rich west than back in their countries of origin? If rich westerners start getting killed by diseases which originate in places they have never heard of, maybe we will reconsider our policy…or at least start spending on medical schools in the developing world.

Trust me...this time we understand our financial instruments

2009-04-09T08:48:00.000-07:00

The "guy on main street" is going to be able to get involved in the up side of the Wall Street bail out! Just listen to how confident the bankers sound!

From the article:

The funds, the thinking goes, would buy troubled mortgage securities from banks, enabling the lenders to make the loans that are needed to rekindle the economy. Many of the loans that back these securities were made during the subprime era. If all goes well, the funds will eventually sell the investments at a profit.

“This is an opportunity to forge an alliance between Main Street, Wall Street and K Street,” said Steven A. Baffico, an executive at BlackRock, referring to the Washington address of many lobbying firms. BlackRock, a giant money management firm, is playing a central role in the government’s efforts and is considering creating a bailout fund. “It’s giving the guy on Main Street an equal seat at the table next to the big guys,” he said.

Does anyone seriously expect this to fly? Fool me once, shame on me fool me twice...well I don't have the cash to get fooled a second time.

Didn't the "guy on main street"just get taken to the cleaners as the value of their houses AND investments have plummeted? Where are they going to scrape together the cash to make these investments? Isn't the federal government supposed to be our representative at the table with the "big guys"? We are still LIVING THROUGH a crisis that was based on new, untested financial instruments, now we want the "guy on main street" to put up money again?! Does my "seat at the table" entitle me to the same contact with the administration as the CEO of one of the companies receiving bail out money? A better question...WHY ARE WE STILL LISTENING TO THE SAME PEOPLE FIRMS AND MODELS THAT GOT US INTO THIS PROBLEM IN THE FIRST PLACE?!

What kind of comissions are the money management firsm going to be taking from the "guy on main street" in order to manage his investment? The more transactions that must be taken, the more people end up taking their cut. If in fact the "guy on main street" is going to be protected form loss, then why not just let the federal government administer the whole thing and socialize all the benefits to EVERYONE on main street, not just those fortunate enough to have gotten through the crisis so far with cash left...CRAZY.

Under Seige

2009-04-08T10:08:00.000-07:00

Maybe American sailors have watched one too many action movies…maybe crews of other nationalities have watched too few. Maybe second amendment rights are alive and well on the high seas. Either way, I’m happy to see that the American crew of a ship taken over by pirates has potentially managed to retake the vessel.

I still have a hard time understanding why there is a need for an actual person to captain the ship across the ocean. Why not just have it directed by computer. Imagine the pirate’s horror when the board the ship and can’t actually divert it from the course it is already on. Since most of the tricky maneuvering is done in and around ports by local operators familiar with their local circumstances this seems like a win win situation to me. People may not trust a computer to fly the airplane that they are on, but what about a ship carrying nothing but goods?

Trust Pakistan?

2009-04-07T06:48:00.000-07:00

There is an interesting article on BBC today about Holbrooke’s visit to Pakistan. I really can’t believe some of the things I’m reading. Hopefully the American’s aren’t taking them at face value either.

This is probably the best part of the article:

Mr Zardari said Pakistan needed "unconditional support" to fight terrorism and extremism.

Unconditional support you say…well how about this, we will only impose one condition…that you actually start fighting terrorism instead of 1. cutting deals with the terrorists, or 2. waiting until something goes REALLY wrong and then arresting a few people. What real action has been taken in the wake of the last 2 attacks in Pakistan? Not much is seems to me. I’ve said it before and I suppose I’ll keep saying it, the sooner the Pakistani’s realize that this is a problem for them, not just the Afghans and the Americans, the better off we will all be.

It makes me sad that the Pakistani doesn’t think that they can deal with this problem themselves, especially when money from the West can easily be used to label the government as simply a stooge of Washington. I find it interesting when contrasted with the energy devoted to Pakistan’s efforts to build a nuclear weapon.

From Kapur’s “Pakistan’s Nuclear Development”:

As far back as 1965 Bhutto had said: “If India builds the bomb, we will eat grass or leaves, even go hungry, but we will get one of our own. We have no alternative.”

Where is this drive and determination when it comes to rooting out terrorists? Especially when President Asif Ali Zardari, is telling Holbrooke that Pakistan was "battling for its own survival". You are battling for your own survival, and you think you are in a position to ask for unconditional support? Maybe the Americans should be spending the billions you want for aid on preparing to lock down your nukes when the government does collapse. One would think that fighting for survival would concentrate minds and encourage results in dealing with terrorism…unless what you really want is not to eliminate terrorism, but simply to collect cash with no strings attached…

I would like to see some good faith on the part of the Pakistani’s before we continue to hand over cash with no accountability. We have already given billions of basically unconditional dollars to Pakistan when Musharaff was in charge and have gotten next to no return for them. Simply showing me casualty figures doesn’t count. It doesn’t take a motivated effort to root out terrorists in order to get your soldiers killed.

Urge to Invade Rising...

2009-04-01T12:37:00.000-07:00

From the G-20 meeting in London: Sarkozy looks exuberant as always. Merkel looks ready to release the Panzer divisions to get him to calm down.

Yes, I'm a Neo-Con

2009-03-24T09:50:00.001-07:00

I was reading Niall Ferguson's "Colossus" today and I came across something which was phrased in a way far better than I had been able to put into words at this point. Ferguson writes that "It was not American diplomacy that failed [in the lead up to the second Iraq war]. It was the diplomacy of those who believed they could stop the war or at least isolate the US."

With this I wholeheartedly agree, and I think history will judge the unwilling Western European powers much more harshly than most of the world has judged them so far. They knew that the US was going to invade with or without them. They ignored more than a decade of actions by Saddam which flew in the face of UN resolutions. What could have been a moment where the democracys of the world said "no more" to despots, instead fractured the Western "alliance". Who knows how different the world could be today if there had been broader participation in America's Iraq misadventure.

More China Based Boggle

2009-03-20T08:25:00.000-07:00

The Economist had an interesting article last week on protectionism in Asia, with a focus on China. Now China has been beating the anti-protectionist drum pretty hard since the financial crisis has started to bite, and for that I applaud them. Now it seems that what is good globally, is not so good locally; provincial barriers to trade are being erected at a rapid pace. This again goes back to China pointing the finger at America while they are digging the hole deeper for themselves. Decline is all relative, and the more China imposes their own decline on themselves, the more time they are giving to the West in general and America in particular.

As each province erects trade barriers, they provide protection for their own local firms. Job are protected, and the party official doesn’t have to worry about being lynched in the street. I can appreciate that appeal! Still, it works well for the West. The most competitive national firms are handicapped by trade restrictions, and are unable to benefit from the economies of scale they could reap otherwise. Investment will flow to inefficient firms, and crowd out that which could flow to the best ones. Inefficient firms will build up debts and bring on workers which they will not be able to sustain against real competition from other domestic producers.

When the current situation is resolved, hard questions will have to be asked. Do you lower the “temporary” barriers in order to encourage efficiency, or are you stuck with the inefficient firms because they owe your local banks money and employ large amounts of people who will be very angry if they are laid off? Solving one problem is setting the stage for another one, especially if demand does not pick up from the developed world when recovery begins. Instead of using the crisis to weed out the most inefficient producers, more time is being bought by low input prices and protectionism. If they US and EU can hold back the worst of their protectionist instincts, they will come out far better from this crisis than the Chinese.

Working Out the Rage

2009-03-20T06:46:00.000-07:00

I had suggested to someone on the way to work this morning that maybe the solution to getting employees of firms which received bailout money to return their bonus’ was simply to publish the addresses of all those that did not online. Well it seems that people’s rage is actually working at pace with mine. Sadly I’m too far from any of these people to throw rocks myself.

I do understand that some of the people are perhaps being unfairly targeted. They may “not have been involved” but they still reaped the fruits of other’s less than prudent behaviour because the firm was successful, and thus able to shower them with benefits. But to listen to their complaints…

Mr. Haas walked on, his pink shirt a burst of color on a slate-gray afternoon. The words came haltingly. "You have to understand,” he said, “there are kids involved, there have been death threats. ..." His voice trailed off. It looked as if he was fighting back tears.

Kids involved eh? I wonder how many of those receiving eviction notices have kids? At least you still get to keep your house “with its three chimneys and its views of Southport Harbor and Long Island Sound in the distance.” Must be nice. I bet the calls from collection agencies feel like death threats to the people getting them. Again, I have no sympathy. Maybe it’s time for you to explain to your kids what exactly you were involved in, and why people are so angry at you. It might be even better if when an NYT reporter comes to talk to you, instead of giving some story about how bad you have it, maybe you should at least apologize and demonstrate that you have SOME capacity for understanding why people would be so upset. Sure things are “bad” for you, but they are A LOT worse for MOST of the rest of America. Maybe getting a few rocks thrown through your window will be a reality check.

The article goes on:

One A.I.G. executive, who spoke on the condition of anonymity because he feared the consequences of identifying himself, said many workers felt demonized and betrayed. “It is as bad if not worse than McCarthyism,” he said. Everyone has sacrificed the employees of A.I.G.’s financial products division, he said, “for their own political agenda.”

Worse than McCarthyism? Really? The reds didn’t (nearly?) destroy the American or perhaps global financial system in their lust for money! YOU feel demonized and betrayed?! How about all of those people who’s money has been lost, or who will have to shoulder the burden of paying for hundreds of billions of dollars of federal government bailouts? They probably don’t feel demonized, but I bet a lot of people out there feel betrayed. It wasn’t long ago that these banks were telling us that self regulation was the best option when it has resulted in a colossal failure.

More China Frustrations

2009-03-18T07:47:00.000-07:00

A few days ago, China’s top climate negotiator proposed that importers of Chinese made goods should be responsible for the CO2 emitted during their manufacture. I can certainly see the logic from the Chinese perspective. Why should they have to deal with the costs of something which is not consumed by them. Fair enough.

My question then is why do they not simply add that cost to the cost of what they are exporting, thus having the cost passed on to the consumer, as they seem to be advocating? I can only imagine that their response would be something along the lines of losing out on their competitiveness for having to increase this price. But this leads me to another question. Are we now allowed to impose tariffs on goods imported from China so that they reflect the true cost of what the final consumer will have to pay for the product? I can’t see China being happy with that either, because it would amount to the same thing as them increasing their export prices. I guess perhaps they expect prices to be unchanged, and that importing governments will simply tax their populations in order to buy emissions credits to compensate for their imports. Well sorry, I don’t want to have to pay for other people’s rampant consumerism, and I certainly don’t want to be subsidizing dirty Chinese production.

In the end, it seems like this plan will simply result in more jobs being brought back to the developed world where energy efficiency is manifold greater than in China, and where our power production emits less CO2 per unit of energy produced. Once savings on shipping are taken into account (especially if one assumes that oil will be back in the $100 a barrel range when the world economy recovers) and added to the cost of paying for China’s dirty energy, the labour costs of having those jobs closer to home will not likely seem as daunting. I worry that China here is sowing another seed of its own economic collapse.

Depressing...

2009-03-17T05:59:00.000-07:00

The first two headlines on theglobenadmail.com thismorning were:

Pope says condoms not the answer to fighting AIDS

Science minister won't confirm belief in evolution

How is it that anyone who is influential enough to get on the front page of the Globe can hold these beliefs? It makes me pretty depressed about the state of the world.

China Drivin’ Me Crazy!

2009-03-13T07:30:00.000-07:00

There has been a lot of noise coming from China over the last week or so coming out of their People’s Congresses on many issues of global economic importance. I feel like a lot of the conversation has essentially amounted to the pot calling the kettle black except that the kettle is on the stove, while the pot is hidden away in the cupboard. I’ll expand on that in a bit.

From the NYT:

The Chinese premier Wen Jiabao expressed concern on Friday about the safety of China’s $1 trillion investment in American government debt, the world’s largest such holding, and urged the Obama administration to provide assurances that its investment would keep its value in the face of a global financial crisis.

So ok…I can understand a lot of what is going on here. The world is in a financial crisis and no one really knows how we are going to get out of it. It is precisely this insecurity which is driving down the values of EVERYTHING! First, what kind of assurances would be satisfactory? Sure, Obama can stand up and say that the US intends to honor its debts, but isn’t that what anyone who desperately needs money will say? Why should the Chinese believe him over any other indicator of America’s creditworthiness? It reminds me of an old adage, if you owe the bank $10,000 you are in trouble. If you owe the bank $1,000,000,000 the bank is in trouble. Sorry China, but you are the bank, and if America is in trouble, so are you.

The article goes on to point out that:

Some believe that China’s investment in American debt is now so vast that, should it need foreign exchange in some emergency, it would be unable to sell its Treasury securities without flooding the market and driving down their price.

This is a statement that I very much agree with. If China starts to sell, or stops buying, what will that do to confidence in the dollar? China can’t sell out without destroying the value of its holdings, and if China stops buying, it could encourage other holders of US debt to try to sell out before the Chinese can. All of this while causing problems for America will also cause a lot of problems for China. This is the downside of global economic integration. Oh to be North Korea at a time like this!

But even more frighteningly:

At Friday’s news conference, Mr. Wen said he believed that China’s economic problems were less severe than in many Western nations because, he said, China’s banks remain relatively healthy. While the United States and Europe are battling both a recession and financial-system collapse, he said, “we haven’t had to use money to fill a financial hole.”

This goes back to one of my biggest problems with the Chinese government. They seem to assume that we should take whatever they say at face value, and that any questioning of the veracity of their statements, or thier actual intentions is somehow an insult. This is not a productive way to discuss policy, especially when it needs to be constructed in an international environment.

But going back to Mr. Wen's quote, I think what he means to say is “we haven’t had to use money to fill a financial hole…yet.” Chinese banks are being ordered to lend to keep the economy moving. There was no political will to look at bad debts in these banks before the current crisis, and there certainly isn’t now. In fact the opposite is happening. The west is taking criticism from China based on how well they have avoided catastrophe. In the end, they are setting themselves up for a fall. Capital is being misallocated by banks ordered to spend by the central government. I have no doubt that these banks are piling up bad debts to keep companies in business so they do not have to acknowledge their existing inventory of non performing loans. As these volumes increase, the final bill will be much larger than it might be. The west is paying the price for their financial overindulgence now, and we will come out of it with a reformed financial system which should prove more efficient and resilient in the future. China on the other hand is simply building up greater and greater problems.

My final point is this. If the US government defaults on its debts, their concern over the repercussions this may cause will not be high on their list of priorities. If the US and world economies have collapsed to that point, everyone will have bigger problems to deal with than getting their money back from America.