Posts tagged ‘Europe’

Wealth and China Through History

The media tends to talk about the growth of the Chinese economy as if it is something new and different.   In fact, there probably have been only about 200 years in the history of civilization when China was not the largest economy on Earth.  China still held this title into the early 18th century, and will get it back early in this century.

This map from the Economist (via Mark Perry) illustrates the point.

economic map

 

Of course there is a problem with this map.  It is easy to do a center of gravity for a country, but for the whole Earth?  The center in this case (unless one rightly puts it somewhere in the depths of the planet itself) depends on arbitrary decisions about where one puts the edges of the map. I presume this is from a map with North America on the far left side and Japan on the far right.  If one redid the map, say, with North America in the center, Asia on the left and Europe on the right, the center of gravity would roam around North America through history.

The True Poverty Rate

I thought this was interesting.  I guess I never realized that poverty rate excludes anti-poverty programs, nor that frequent comparisons made by the Left that our poverty rates compare unfavorably to those in Europe are essentially completely disingenuous as they are comparing apples and oranges.

the only way anyone’s ever really found to reduce the number living in poverty is to give the poor money n’stuff so that they’re no longer living in poverty. But if we don’t count the money n’stuff that is being given to the poor then we’re not going to be able to show that giving the poor money n’stuff alleviates poverty, are we?

And that’s the point at the heart of this necessary correction to the US poverty numbers. The 15% number is not the number living in poverty. It is the number who would be living in poverty if it weren’t for all the money n’stuff we give to the poor. For when we calculate the poverty number we ignore almost all of what is done to alleviate poverty. We leave out all four of the largest anti-poverty programs in fact. We don’t count the money spent on Medicaid, we don’t count the EITC, we ignore the costs of SNAP and we completely overlook Section 8 housing vouchers. That’s hundreds of billions of dollars worth of spending on poverty alleviation right there and all of it is entirely ignored when calculating the poverty numbers. What’s worse, we could double the amount of money we spend to alleviate poverty and the number under the poverty line wouldn’t change by one single digit.

 

uspoverty2

 

 

These alternative measures are explained in WAY more depth here (pdf) by Bruce Meyer and James Sullivan

Differing Perspectives

I have been taking a course in World War I, something I know little about relative to the rest of the 20th century.

We often think of WWI as a horrible, wasteful, pointless war that solved nothing and WWII as an expensive yet "good" war that achieved positive aims.  But as we approach the 75th anniversary of the Munich conference, it is interesting to note that if you ask someone in Eastern Europe, you are likely to get the opposite answer.  Most Eastern European countries can date their modern statehood from the end of WWI, while WWII led to 50+ years of Soviet subjugation.  WWI was their good war.

Blast from the Past

I have not reread this little classic article from 9 years ago, until a customer in California found it and complained that it was outrageous that the state would actually allow such a person as its author to operate anything in a state park.  So I suppose it is worth relinking, if just for that reason.  Most of it holds up pretty well, though I regret the jab implying that progressives supported suicide bombers.  Here is an example:

Beyond just the concept of individual decision-making, progressives are hugely uncomfortable with capitalism.  Ironically, though progressives want to posture as being "dynamic", the fact is that capitalism is in fact too dynamic for them.  Industries rise and fall, jobs are won and lost, recessions give way to booms.  Progressives want comfort and certainty.  They want to lock things down the way they are. They want to know that such and such job will be there tomorrow and next decade, and will always pay at least X amount.  That is why, in the end, progressives are all statists, because, to paraphrase Hayek, only a government with totalitarian powers can bring the order and certainty and control of individual decision-making that they crave.

Progressive elements in this country have always tried to freeze commerce, to lock this country's economy down in its then-current patterns.  Progressives in the late 19th century were terrified the American economy was shifting from agriculture to industry.  They wanted to stop this, to cement in place patterns where 80-90% of Americans worked on farms.  I, for one, am glad they failed, since for all of the soft glow we have in this country around our description of the family farmer, farming was and can still be a brutal, dawn to dusk endeavor that never really rewards the work people put into it.

This story of progressives trying to stop history has continued to repeat itself through the generations.  In the seventies and eighties, progressives tried to maintain the traditional dominance of heavy industry like steel and automotive, and to prevent the shift of these industries overseas in favor of more service-oriented industries.  Just like the passing of agriculture to industry a century ago inflamed progressives, so too does the current passing of heavy industry to services....

Take prescription drugs in the US - isn't it pretty clear that the progressive position is that they would be willing to pretty much gut incentives for any future drug innovations in trade for having a system in place that guaranteed everyone minimum access to what exists today?  Or take the welfare state in Continental Europe -- isn't it clear that a generation of workers/voters chose certainty over growth and improvement?  That workers 30 years ago voted themselves jobs for life, but at the cost of tremendous unemployment amongst the succeeding generations?

Government "Investment" Of the Day

Over the course of Lance Armstrong's career, the US Postal Service paid him over $40 million in sponsorship money (at least according to the radio report I heard this morning).

I don't necessarily begrudge advertising -- the USPS was nominally acting as a business enterprise, and businesses advertise to promote their services.

But I do find this expenditure odd in the extreme for a couple of reasons.

  • First, sponsorship money of this sort generally can only build name recognition.  Paying to name a ballpark "Chase Field" builds name recognition for Chase, but by necessity does not communicate anything else about its services or value proposition.  The same is true for putting one's name on Lance Armstrong's jersey.  Does the US Post Officer really need name recognition?  Are there people wandering around unaware of the US mail?  I could understand advertising such as "this is why our express mail is better than Fedex" or "you should send a real paper thank you note and not just an email to really thank someone."  But name recognition for the USPS?  "Oh, so that is what that funny box in front of my house is...."
  • Second, to the extent one did indeed feel the need to build name recognition, why in the hell would one do it in a sport primarily competed and followed in Europe?  This seems an odd strategy for a service that is essentially limited by statute to US operations.

The only thing I can guess is that someone in the USPS decided, "Hey, everyone hates us.  Let's sponsor someone (preferably in a tangential sport that we could actually afford) who is beloved so some of those positive feelings might transfer to us."   That worked out well, huh?

European Auster-Yeti

There are people who will swear to this day that, despite all evidence to the contrary, Bigfoot exists and they have seen it.  Paul Krugman similarly is just sure he has seen European austerity.  The rest of us are left scratching our heads for the evidence -- he doesn't even have a blurry photo or footprint.  Just tales from a friend of a friend, who is not only sure there has been austerity, but that it caused an old lady to dry her cat in a microwave and that if you swim 20 minutes after eating you will get cramps.

The official Keynesian story is that the PIIGS of Europe (Portugal, Italy, Ireland, Greece and Spain) have been devastated by cutbacks in public spending. Austerity has made things worse rather than better – clear proof that Keynesian stimulus is the answer. Keynesians claim the lack of stimulus (of course paid for by someone else) has spawned costly recessions which threaten to spread.  In other words, watch out Germany and Scandinavia: If you don’t pony up, you’ll be next.

Erber finds fault with this Keynesian narrative. The official figures show that PIIGS governments embarked on massive spending sprees between 2000 and 2008. During this period, their combined general government expenditures rose from 775 billion Euros to 1.3 trillion – a 75 percent increase. Ireland had the largest percentage increase (130 percent), and Italy the smallest (40 percent). These spending binges gave public sector workers generous salaries and benefits, paid for bridges to nowhere, and financed a gold-plated transfer state. What the state gave has proven hard to take away as the riots in Southern Europe show.

Then in 2008, the financial crisis hit. No one wanted to lend to the insolvent PIIGS, and, according to the Keynesian narrative, the PIIGS were forced into extreme austerity by their miserly neighbors to the north. Instead of the stimulus they desperately needed, the PIIGS economies were wrecked by austerity.

Not so according to the official European statistics. Between the onset of the crisis in 2008 and 2011, PIIGS government spending increased by six percent from an already high plateau.  Eurostat’sprojections (which make the unlikely assumption that the PIIGS will honor the fiscal discipline promised their creditors) still show the PIIGS spending more in 2014 than at the end of their spending binge in 2008.

As  Erber wryly notes: “Austerity is everywhere but in the statistics.”

Cyprus and the Rule of Law

There was no particularly good way to resolve the banking mess in Cyprus.  But what worries me about how things played out is that there appears to be no rule of law that applies to bank failure in Europe.  There should be some clear principle that guides a bank resolution - e.g. equity holders and bondholders get wiped out first, then uninsured depositors, then insured depositors.  Or perhaps there is some ratio of pain between insured and uninsured depositors.

It is clear that no such rule exists across Europe (or if it does, it does not enjoy any particular force such that folks feel free to ignore it in real time).  That is the real danger here.  Results, however bad, should be transparent and predictable in advance, which is far from what happened in Cyprus.  Without a rule of law, one gets a rule of men -- in other words, rules are set by individual whim, often based on which government or corporate interests wield the most influence.

Think I am being too cynical?  Here is a detail that was new to me about the depositor haircuts in Cyprus:

A few weeks ago, the Central Bank of Cyprus published a curious set of "clarifications for the better understanding of the resolution measures." The principle of a bail-in—that uninsured creditors should suffer losses before taxpayers are on the hook—turns out to contain a few lacunae. "Financial institutions, the government, municipalities, municipal councils and other public entities, insurance companies, charities, schools, and educational institutions" will be excused from contributing to the depositor haircuts, though insurers later were removed from the exempt list.

Apparently, individual parties are lining up for special exemptions as well (much like connected corporations did with the Obama Administration to get exemptions from early provisions of the PPACA).  Essentially, all bank losses will be assigned to depositors who don't have access to powerful friends in the government.

The Shifting Concept of "Dystopian"

Some professors are arguing about online education.  I will not comment on that particular topic right now, though it sounds a bit like two apatosauruses arguing about whether they should be worried about the comet they just saw.

I did, however, want to comment on this, from an SJSU professor to a Harvard professor, I assume pushing back on online course work designed by Harvard.  Emphasis added.

what kind of message are we sending our students if we tell them that they should best learn what justice is by listening to the reflections of the largely white student population from a privileged institution like Harvard? Our very diverse students gain far more when their own experience is central to the course and when they are learning from our own very diverse faculty, who bring their varied perspectives to the content of courses that bear on social justice…

having our students read a variety of texts, perhaps including your own, is far superior to having them listen to your lectures. This is especially important for a digital generation that reads far too little. If we can do something as educators we would like to increase literacy, not decrease it…the thought of the exact same social justice course being taught in various philosophy departments across the country is downright scary — something out of a dystopian novel

I would have said that teaching social justice at all and requiring students to take it at many universities was something out of a dystopian novel.  In fact, the whole concept of social justice, wherein it is justified that certain groups can use the coercive force of government to get whatever they may fancy merely by declaring that there is a right to it (e.g. health care), actually underlies a number of dystopian novels.

Postscript #1:  If find it hilarious that the SJSU rejects Harvard-created course materials because they are the product of white privilege.  I cannot speak to Harvard undergrad, but my son is at Amherst which could certainly be lumped into the same category (any college named after an early proponent of biological warfare against Native Americans has to be up there in the white privilege category).  My son actually gave up his earlier plan to study history when he looked at the course catalog.  It was impossible to simply study, say, the political and economic history of Western Europe.  All the courses are such things as "the role of women in the development of Paraguayan aboriginal rights."

Postscript #2:  I don't have the larger context for this letter but it strikes me the professor is stuck in the typical leftist technocratic top-down and centralized single mandated approach to anything.  Why is it that online courses would end up with no viewpoint or content competition?  The Internet has increased the access of most people to a diversity of ideas that go beyond what they got in the morning fish-wrap and from Uncle Walter on TV.  Why would it have the opposite effect in education?  Or perhaps that is what the professor is worried about, a loss of control of the education message by the current academic elite, to be feared in the same way the Left hates Fox News.

The "They Will Not Assimilate" Argument Rising Yet Again From the Grave

How many times does an argument have to be wrong, and for how long, before it finally loses credibility?  I suppose the answer must be nearly infinite, because the "they will not assimilate" argument is rising again, despite being about 0 for 19 on the groups to which it has been applied.  Germans, Irish, Italians, Eastern Europeans, Chinese, Mexicans and now Chechnyans.   This argument always seems to be treated seriously in real time and then looks stupid 20 or 30 years later.  As an extreme example, here is Benjamin Franklin writing about Germans in 1751:

why should the Palatine Boors [ie Germans] be suffered to swarm into our Settlements, and by herding together establish their Language and Manners to the Exclusion of ours? Why should Pennsylvania, founded by the English, become a Colony of Aliens, who will shortly be so numerous as to Germanize us instead of our Anglifying them, and will never adopt our Language or Customs, any more than they can acquire our Complexion.

(By the way, if you want to retain an unadulterated rosy image of Franklin, who was a great man for many reasons, do not read the last paragraph at that link.  People are complicated and sometimes even great men could not shed all the prejudices of their day.)

The only good news is that the circle of those acceptable to the xenophobic keeps getting larger.  It used to be just the English, then it was Northern Europeans, then much later it was all Europe and today I would say it is Europe and parts of Asia.  So that's progress, I suppose.

Fun fact:  Ironically, the English King at the time Franklin wrote the quote above was George II.  He was actually a German immigrant, born in Germany before his father came to England as King George I, jumping over numerous better claimants who were Catholic.  His son actually assimilated very well, as George III spoke English as a first language, and his granddaughter Victoria practically defined English-ness.  By the way, Victoria would marry another German immigrant.

We've Gotta Keep Bailing Out Banks Because...

...uh, just because

Iceland vs Greece

via Zero Hedge

 Update:  Whenever I argue with people about this, I find out that we share different assumptions.  Those who seem to support the bailouts assume that given some breathing space, the reckoning in Europe can be avoided.  I assumed the reckoning is unavoidable, and will come either soon or at best in the next cyclical downturn.  And it will be far worse in, say, 2015 than it would have been in 2010.  Every time we delay the reckoning, we make it far worse.

And then there are politicians.  I don't think they honestly know or care if the reckoning is unavoidable. They only care if it does not happen this minute.  For politicians, the discount rate on pain is infinite.  Future pain is thus always better than current pain.

The Biggest Economic Story of 2013

Frequent readers will know that last year, I declared that the end of full-time employment in the American service industry (due to Obamacare) would be the biggest economic story of 2013.  The mainstream media either has not yet noticed or cannot be bothered with a story that does not put Obama in the best possible light, but the story is starting to get out none-the-less.

Expect a lot more of this.  The service industry generally does not operate 8 hours a day, 5 days a week anyway, so its labor needs do not match traditional full-time shifts.  Those of us who run service companies already have to piece together multiple employees and shifts to cover our operating hours.  In this environment, there is no reason one can't stitch together employees making 29 hours a week (that don't have to be given expensive health care policies) nearly as easily as one can stitch together 40 hours a week employees.   In fact, it can be easier -- a store that needs to cover 10AM to 9PM can cover with two 5.5 hour a day employees.   If they work 5 days a week, that is 27.5 hours a week, safely part-time.  Three people working such hours with staggered days off can cover the store's hours for 7 days.

Based on the numbers above, a store might prefer to only have <30 hour shifts, but may provide full-time 40 hours work because good employees expect it and other employers are offering it.  But if everyone in the service business stops offering full-time work, there will be no reason not to go to such a plan, and thousands of dollars per employee to do so.

Krugman Dead Wrong on Capital Controls

I am a bit late to the game in addressing Krugman's comments several days ago when he said:

But the truth, hard as it may be for ideologues to accept, is that unrestricted movement of capital is looking more and more like a failed experiment.

This was in response to the implosion of Cyprus banks, which was exacerbated (but not necessarily caused) by the banks being a home for a lot of international hot money - deposits so large they actually dwarfed the country's GDP.

I generally rely on Bastiat's definition of the role of the economist, which I will quote from Wikipedia (being too lazy on this Friday morning to find a better source):

One of Bastiat's most important contributions to the field of economics was his admonition to the effect that good economic decisions can be made only by taking into account the "full picture." That is, economic truths should be arrived at by observing not only the immediate consequences – that is, benefits or liabilities – of an economic decision, but also by examining the long-term second and third consequences. Additionally, one must examine the decision's effect not only on a single group of people (say candlemakers) or a single industry (say candlemaking), but on all people and all industries in the society as a whole. As Bastiat famously put it, an economist must take into account both "What is Seen and What is Not Seen."

By this definition, Krugman has become the world's leading anti-economist.  Rather than reject the immediate and obvious (in favor of the larger picture and the unseen), he panders to it.  He increasingly spends his time giving intellectual justification to the political predilection for addressing symptoms rather than root causes.  He has become the patron saint of the candle-makers petition.

I am not naive to the fact that there are pools of international hot money that seem to be some of the dumbest money out there.  Over the last few years it has piled into one market or another, creating local asset bubbles as it goes.

But to suggest that international capital flows need to be greatly curtailed merely to slow down this dumb money, without even considering the costs, is tantamount to economic malpractice.

You want to know what much of the world outside of Western Europe and the US would look like without free capital flows?  It would look like Africa.  In fact, for the younger folks out there, when I grew up, countries like China and India and Taiwan and Vietnam and Thailand looked just like Africa.  They were poor and economically backwards.  Capital flows from developed nations seeking new markets and lower cost labor has changed all of that.  Over the last decade, more people have escaped grinding subsistence poverty in these nations than at any other time in history.

So we have the seen:  A million people in Cyprus face years of economic turmoil

And the unseen:  A billion people exiting poverty

By pandering to those who want to expand politicians' power based on a trivial understanding of the seen and a blindness to the unseen, Krugman has failed the most important role of an economist.

Other thoughts:  I would offer a few other random, related thoughts on Cyprus

  • Capital controls are like gun and narcotics controls:  They stop honest people and do little to deter the dishonest.  In the case of Cyprus, Krugman obviously would have wanted capital controls to avoid the enormous influx of Russian money the overwhelmed the government's effort to stabilize the banks.  But over the last several weeks, the Cyprus banks have had absolute capital controls in place - supposedly no withdrawals were allowed.  And yet when the banks reopened, it become increasingly clear that many of the Russians had gotten their money out.  Capital controls don't work as a deterrence to money that is already corrupt and being hidden.
  • No matter what anyone says, the huge capital inflows into Cyprus had nothing to do with the banking collapse.  The banks had the ability to invest the money in a range of international securities, and the money was tiny compared to the size of those security pools.  So this is not like, say, a housing market where in influx of money might cause a bubble.   The only harm caused by the size of the Russian investments is that once the bank went bad, the huge size of the problem meant that the Cyprus government did not have the resources to bail out the bank and protect depositors from losses.
  • Capital controls are as likely to make bubbles worse as they are to make them better.  Certainly a lot of international money piling into a small market can cause a bubble.  But do capital controls really create fewer bubbles?  One could easily argue that the Japanese asset bubble of the late 80's would have been worse if all the money were bottled up in the country. When the Japanese went around the world buying up American movie studios and landmark real estate, that was in some sense a safety valve reducing the inflationary pressure in Japan.
  • Capital controls are the worst sort of government expropriation.  You hear on the news that the "haircut" taken by depositors in Cyprus might be 20% or 80% or whatever.  But in my mind it does not matter.   Because once the government put strict capital controls in place, the haircut effectively became 100%, at least for honest people that don't have the criminal ability or crony connections to beat the system.  Cyprus basically produces nothing.  Since money is only useful to the extent that it can buy or invest in something, then bottling up one's money in Cyprus basically makes it worthless.
  • Capital controls are a prelude to protectionism.   First, international trade is impossible without free flow of capital.   No way Apple is going to sell ipods in Cyprus if they cannot at some point repatriate their profits.  Capital controls can also lead to export controls.  If I can't export money, I might instead buy jets, fly them out of the country, and then sell the jets.
  • Let's not forget that the core of this entire problem is a government, not a private, failure.  Banks and investors treated sovereign euro-denominated debt as a risk-free investment, and banking law (e.g. Basil II) and pension law in most countries built this assumption into law.  Cyprus banks went belly-up because the Greeks, in whom they had (unwisely) invested most of their funds, can't exercise any fiscal responsibility in their government.  If European countries could exercise fiscal responsibility in their government borrowing, 80% of the banking crisis would not exist (housing bubbles and bad mortgage securities have contributed in some countries like Spain).  There is a circle here:  Politicians like to deficit spend.  They write regulations to encourage banks to preferentially invest in this government paper.  When the government debt gets iffy, and the banks face collapse, the governments have to bail them out because otherwise there is no home for their future debt.  The bailouts get paid for with more debt, which gets crammed back into increasingly over-leveraged banks.    What a mess.
  • All of this creates an interesting business school problem for the future:  What happens when there are no longer risk-free investments?  Throughout finance one talks about risk free rates and all other risks and risk premiums and discussed in reference to this risk-free benchmark.  In regulation, much of banking capital regulation and pension regulation is based on there being a core of risk free, liquid investments.  But what if these do not exist any more?
  • I have thought a lot about a banking model where the bank accepts deposits and provides basic services but does no lending - a pure deposit bank with absolute transparency on its balance sheet and investments.  I think about a web site depositors can check every day to see exactly where depositors money is invested and its real time values.  Only listed, liquid securities with daily mark to market.   Open source investing, as it were.  In the past, deposit insurance has basically killed this business model, but I think public confidence in deposit insurance just took a big-ass hit this week.

Postscript:  I don't want to fall into a Godwin's law trap here, but I am currently reading Eichmann in Jerusalem and it is impossible for me to ignore the role strict capital controls played in Nazi Germany's trapping and liquidation of the Jews.

PS#2:  Oops, Hayek beat me by about 70 years to the postscript above

The extent of the control over all life that economic control confers is nowhere better illustrated than in the field of foreign exchanges. Nothing would at first seem to affect private life less than a state control of the dealings in foreign exchange, and most people will regard its introduction with complete indifference. Yet the experience of most Continental countries has taught thoughtful people to regard this step as the decisive advance on the path to totalitarianism and the suppression of individual liberty. It is, in fact, the complete delivery of the individual to the tyranny of the state, the final suppression of all means of escape—not merely for the rich but for everybody.

Why Europe Won't Let Banks Fail

Dan Mitchell describes three possible government responses to an impending bank failure:

  1. In a free market, it’s easy to understand what happens when a financial institution becomes insolvent. It goes into bankruptcy, wiping out shareholders. The institution is then liquidated and the recovered money is used to partially pay of depositors, bondholders, and other creditors based on the underlying contracts and laws.
  2. In a system with government-imposed deposit insurance, taxpayers are on the hook to compensate depositors when the liquidation occurs. This is what is called the “FDIC resolution” approach in the United States.
  3. And in a system of cronyism, the government gives taxpayer money directly to the banks, which protects depositors but also bails out the shareholders and bondholders and allows the institutions to continue operating.

I would argue that in fact Cyprus has gone off the board and chosen a fourth option:  In addition to bailing out shareholder and bondholders with taxpayer money, it will protect them  by giving depositors a haircut as well.

The Cyprus solution is so disturbing because, hearkening back to Obama's auto bailout, it completely upends seniority and distribution of risk on a company balance sheet.  Whereas depositors should be the most senior creditors and equity holders the least (so that equity holders take the first loss and depositors take the last), Cyprus has completely reversed this.

One reason that should never be discounted for such behavior is cronyism.  In the US auto industry, for example, Steven Rattner and President Obama engineered a screwing of secured creditors in favor of the UAW, which directly supported Obama's election. In Cyprus, I have no doubt that the large banks have deep tendrils into the ruling government.

But it is doubtful that the Cyprus banks have strong influence over, say, Germany, and that is where the bailout and its terms originate.  So why is Germany bailing out Cyprus bank owners?  Well, there are two reasons, at least.

First, they are worried about a chain reaction that might hurt Germany's banks, which most definitely do have influence over German and EU policy.  There is cronyism here, but perhaps once removed.

But even if you were to entirely remove cronyism, Germany and the EU have a second problem:  They absolutely rely on the banks to consume their new government debt and continue to finance their deficit spending.  Far more than in the US, the EU countries rely on their major banks continuing to leverage up their balance sheets to buy more government debt.  The implicit deal here is:  You banks expand your balance sheets and buy our debt, and we will shelter you and prevent external shocks from toppling you in your increasingly precarious, over-leveraged position.

Update:  Apparently, there is very little equity and bondholder debt on the balance sheets -- its depositor money or nothing.  My thoughts:  First, the equity and bondholders better be wiped out.  If not, this is a travesty.  Two, the bank management should be gone -- it is as bad or worse to bail out to protect salaried manager jobs as to protect equity holders.  And three, if depositor losses have to be taken, its insane to take insured depositor money ahead of or even in parallel with uninsured deposits.

My New Favorite Store, and I Haven't Even Been There. Plus, Christmas Game Recommendations

In my high school days, I used to play a lot of wargames from Avalon Hill and SPI.  I once spent an entire summer playing one game of War in Europe, which had a 42-square-foot map of Europe and 3500 or so pieces.     Each turn was one week, so it was literally a full time job getting through it in a couple of months.

All that is to say I spent a lot of time hanging out at game stores, particularly Nan's in Houston (a great game and comic store that still exists and I still visit every time I am in Houston).  I play fewer wargames now, but I still like strategy games that are a bit more complicated than Monopoly or Risk.  But it is hard to find a game store with a good selection (if there is one here in Phoenix, I have not found it).

But I definitely want to try this place -- the Complete Strategist in New York City.  Click through for some good game pr0n.

His list of games is good, though I have never played Gloom and I have never been a huge fan of Carcassonne.  Ticket to Ride is an awesome game and is perhaps the most accessible for kids and noobs of either his or my list.  If you recognize none of these games, it is a great place to start (there is also a great iPad app).   To his list of games I would add:

All of these games tend to present simple choices with extraordinarily complex scoring implications.  In most cases, one must build infrastructure early to score later, but the trade-off of when to switch from infrastructure building to scoring is the trick.  Five years ago Settlers of Catan would have been on any such list, but it is interesting it is on neither his nor mine.

Once you catch the bug, there are hundreds of other games out there.  My son and I last summer got caught up in a very complex Game of Thrones expandable card game.  Recommended only for those who love incredible complexity and are familiar with the books.  There are also a couple of games I have liked but only played once so far.  My son and I last summer played a fabulous though stupidly complex game of Twilight Struggle (about the Cold War, not hot vampire teens).  This is considered by many to be one of the greatest war / strategy games ever.  We also tried Eclipse (space game, again not the teen vampires) which we liked.  I have played Le Havre and Puerto Rico as iPad apps.  They were OK,  but I think the fun in them is social and the of course does not come through in the iPad app.  In the same vein, tried to play Agricola with my kids and they were bored stiff.

Update:  When in doubt, research it on Board Game Geek.  Their game ranking by user voting is here.

Actually Dr. Krugman, They Are Unrelated

Via Cafe Hayek, Paul Krugman says:

And surely the fact that the United States is the only major advanced nation without some form of universal health care is at least part of the reason life expectancy is much lower in America than in Canada or Western Europe.

If I were a cynical person, I might think that the tortured and overly coy syntax of this statement is due to the fact that Krugman knows very well that the causation he is implying here is simply not the case.  Rather than rehash this age-old issue here on Coyote Blog, let's roll tape from a post a few years ago:

Supporters of government medicine often quote a statistic that shows life expectancy in the US lower than most European nations with government-run health systems.  But what they never mention is that this ranking is mainly due to lifestyle and social factors that have nothing to do with health care.  Removing just two factors - death from accidents (mainly car crashes) and murders - vaults the US to the top of the list.  Here, via Carpe Diem, are the raw and corrected numbers:

lifeexpectancy

And so I will fire back and say, "And surely the fact that the United States is the only major advanced nation without some form of universal health care is at least part of the reason life expectancy related to health care outcomes is so much higher in America than in Canada or Western Europe.

And check out the other chart in that post from that study:

US cancer survival rates dwarf, yes dwarf those of other western nations.    Even black males in the US, who one would suppose to be the victims of our rapacious health care system, have higher cancer survival rates than the average in most western nations (black American women seem to have uniquely poor cancer survival rates, I am not sure why.  Early detection issues?)

All this data came originally from a post at Carpe Diem, which I refer you to for source links and methodologies.

Well, I Was Wrong

I have been a stock market bear for some months now.  I don't really think the US economy is going to double dip on its own, but I felt like Europe and Asia would bring us down.  Well, I simply underestimated both the Fed's and the ECB's willingness to goose financial assets.  If the Fed and ECB are going to inflate our way out of, uh, whatever it is we are in, then I certainly don't want to be holding bonds, particularly at these absurdly low interest rates.  Stocks are not as good of an inflation hedge as some hard assets, but they are a hell of a lot better than most bonds.  I'm  certainly not going to buy back in the current euphoric highs, but I am giving up on trying to predict that market based on fundamentals.  It seems that fundamentals are a suckers game, and you better not be timing the market unless you have an inside line to government policy, because that seems to be what drives the train.

PS-  I wish Milton Friedman were still around.  QE was as much his idea as anyone else's.   I wonder what he would have thought of the results, or of this particular implementation.

I Like to Hear This

In the past I have been critical of First Solar, like I have most solar companies, for having business models that were almost entirely dependent on huge government subsidies, particularly in Europe.  When these go away, the businesses start to crash.

I have not had time to dig into their financials to look for shenanigans, and to parse out how much is still dependent in some way on either direct subsidies of solar projects or incentives that cause utilities to buy solar electricity at above market rates, but First Solar reversed their large losses to a profit in the last quarter.  I am not sure if this is BS or not, but I like this attitude if true:

The company's cost per watt is the lowest in the industry, but it increased slightly during the quarter, to 72 cents per watt, because of the under utilization of its factories. If the factories had run more, the cost would have gone down, officials said.

Hughes said First Solar is making headway on its plan to target regions of the world with ample sunshine and a need for electricity, where solar power can compete without subsidies that make it cost-effective when compared with traditional energy sources.

Those places include Australia, India, the Middle East and other regions, he said.

That would be terrific.  I would love to see a solar boom driven by real economics and not taxpayer largess.

It's A Mystery Why the European Economy is Not Growing

European economic problems must be due to the "austerity" (which means, in popular Leftist use, not growing government spending faster than the rate of inflation).  I am sure this kind of thing has nothing to do with high unemployment rates.  I would certainly be really excited to hire more employees under these conditions:

For most Europeans, almost nothing is more prized than their four to six weeks of guaranteed annual vacation leave. But it was not clear just how sacrosanct that time off was until Thursday, when Europe’s highest court ruled that workers who happened to get sick on vacation were legally entitled to take another [paid] vacation.

“The purpose of entitlement to paid annual leave is to enable the worker to rest and enjoy a period of relaxation and leisure,” the Court of Justice of the European Union, based in Luxembourg, ruled in a case involving department store workers in Spain. “The purpose of entitlement to sick leave is different, since it enables a worker to recover from an illness that has caused him to be unfit for work.

Tax Increases are the Austerity

Veronique de Rugy is doing an awesome job debunking the myth that European countries have cut spending in any meaningful way, and that the "austerity" that Krugman et. al. keeping going on about mostly consists of raising taxes.  Perhaps because they so desperately want to raise taxes in the US, Krugman and company seem willfully blind in recognizing the tax increases in Europe and their negative consequences.

I'm Happy About the French Election

Apparently, the fall of the Soviet Union is far enough in the rear view mirror that its time for another object lesson in the real effects of communism.   It's incredible to me that any country would want to actually emulate Greece, but France seems hell-bent to do so.  So all I can say is "way to go, France!  Better you guys than us."

Apparently Obama is already cozying up with Francois Hollande.   These two may be the socialist-corporatist answer to Reagan and Thatcher.  It is interesting that Europe seems to produce an analog to the American President in each generation (or vice versa).    Reagan-Thatcher, Clinton-Blair, now Obama-Hollande.

Myth-Making By the Left on Europe Continues

The Left continues to push the myth that government "austerity"  (defined as still running a massive deficit but running a slightly smaller massive deficit) is somehow pushing Europe into a depression.  Well, this myth-making worked with Hoover, who is generally thought to have worsened the Depression through austerity despite the reality that he substantially increased government spending.

It is almost impossible to spot this mythical austerity beast in action in these European countries.  Sure, they talk about austerity, and deficit reduction, and spending increases, but if such talk were reality we would have a balanced budget in this country.  If one looks at actual government spending in European nations, its impossible to find a substantial decline.  Perhaps they are talking about tax increases, which I would oppose and have been occurring, but I doubt the Left is complaining about tax increases.

Seriously, I would post the chart showing the spending declines but I can't because I keep following links and have yet to find one.  I keep seeing quotes about "commitment" to austerity, but no actual evidence of such.

Let's take Britain.  Paul Krugman specifically lashed out at "austerity" programs there are undermining the British and European economy.  So, from this source, here is actual and budgeted British government spending by year, in billions of pounds:

2007: 544.0

2008: 575.7

2009: 621.5

2010:  660.6

2011:  683.4

2012:  703.4

2013: 722.2

Seriously, I will believe the so-called austerity when someone shows it to me.  And this is not even to mention the irresponsibility of demanding more deficit spending without even acknowledging the fact that whole countries already have so much debt they are teetering on the edge of bankruptcy.

Here is the European problem -- they are pouring hundreds of billions of Euro into bailing out failed banks and governments.  They are effectively taking massive amounts of available resources out of productive hands and pouring it into failed institutions.   Had they (or we) let these institutions crash four years ago, Europe would be seeing a recovery today.  The hundreds of billions of Euros used to keep banks on life support could have instead been used to mitigate the short term effects of bigger financial crash.

Wal-Mart's Bribery Problems

Walter Olson has been writing a lot about Wal-Mart and FCPA.  I don't have a lot to add except my own experience working for a large corporation in third world countries.

I worked for a manufacturer of industrial equipment for years.  In most countries in Europe and North America, part of our strategy was a dedicated in-house sales force that could provide a high level of technical support.  But we went away from that strategy when we went into third world countries, just the place where we needed more rather than less technical support for our customers.

Why?  A big reason was the FCPA.  There are many countries where it is simply impossible to do business without paying bribes.  Bribes are absolutely wired into the regulatory process.  In Nigeria, public officials are paid less with the expectation they will make it up on bribes, similar to the way we pay waiters who get tips.  The only way to legally work in these countries is to work through third party resellers and distributors and other such partners, and then tightly close your eyes to how they get things done.

What always ticks me off about these cases is the fake attitude of naivite in the press that seems to be constantly amazed that corporations might have to pay bribes to do basic things we take for granted here, like get the water turned on or have your goods put on a ship.  But in fact reporters can't be this naive, as they almost certainly have to deal with many of the same things in their business.  I would love to see an accounting of the grease payments the NY Times pays in a year in foreign countries.

I think most people when they hear these foreign bribery cases assume corporations were paying to get a special advantage or to escape some sort of fundamental regulation.  And this is possibly the case with Wal-Mart, but more likely they were simply paying because that is what you have to do just to function at all.

The Bankrupt as Victims

One of the amazing aspects of our new post-modern outlook on personal responsibility and obligations is that folks who are profligate and take on too much debt are increasingly considered victims to which other people owe something (generally a bailout).

We see this no only among US mortgage holders but in Greece as well

Greek Prime Minister Lucas Papademos told lawmakers to back a deeply unpopular EU/IMF rescue in a vote on Sunday or condemn the country to a "vortex" of recession.

He spoke in a televised address to the nation, ahead of Sunday's vote on 3.3 billion euros ($4.35 billions) in wage, pension and job cuts as the price of a 130-billion-euro bailout from the European Union and International Monetary Fund.

The effort to ease Greece's huge debt burden has brought thousands into the streets in protest, and there were signs on Saturday of a small rebellion among lawmakers uneasy with the extent of the cuts.

So outsiders generously agree to pay for 130 billion Euros of past Greek spending if only the Greeks will cut their current spending by 3.3 billion Euros (at which spending level the country would still be running large deficits).  And people riot as if they have been gang-raped.  Incredible.

Let the Greeks go.  Of course, this is not actually about bailing out Greece, but about bailing out, indirectly, European banks that invested in Greek bonds.  The banks seem to run public policy in Europe, even more so than in the US.

Can I Have Some of Those Drugs?

Kevin Drum apparently believes the reason Republicans are not passing further stimulus spending is because such a stimulus would be too likely to have immediate results improving the economy and thus will help Democrats in the next election.

This is the kind of politcal bullshit that drives me right out of the system.  I am perfectly capable of believing Drum honestly thinks that further deficit spending will improve the economy this year.  I think he's nuts, and working against all historic evidence, but never-the-less I believe he is sincere, and not merely pushing the idea as part of some dark donkey-team conspiracy.  Why is it that he and his ilk, from both sides of the aisle, find it impossible to believe that their opponents have similarly honest intentions?

I mean, is it really so hard to believe -- after spending a trillion dollars to no visible effect, after seeing Europe bankrupt itself, and after seeing the American economy begin to recover only after crazy stimulus programs have mostly stopped -- that some folks have an honest desire to see economic improvement and think further stimulus programs are a bad idea?

Public vs. Private

Folks on the Left prefer public institutions over private ones because they percieve them as more "fair."  But the power of lawmaking and police and prisons allows public institutions to be far more abusive than private entities could ever be.  We spent months and years torturing ourselves about accounting abuses at Enron, but these are trivial compared the accounting shenanigans state institutions engage in every day.

Or consider this, from Europe, particularly the first bit

“In the event of default (i) any non-official bond holder is junior to all official creditors and (ii) the issuer reserves the right to change law as needed to negate any rights of the nonofficial bond holder.

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“We should not underestimate the damage these steps have inflicted on Europe’s €8.4 trillion sovereign bond markets. For example, the Italian government has issued bonds with a face value of over €1.6 trillion. The groups holding these bonds are banks, pension funds, insurance companies, and Italian households. These investors bought them as safe, low-return instruments that could be used to hedge liabilities and provide for future income needs. It was once hard to imagine these could ever be restructured or default.

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“Now, however, it is clear they are not safe. They have default risk, and their ultimate value is subject to the political constraint and subjective decisions by a collective of individuals in the Italian government and society, the ECB, the European Union, and the International Monetary Fund (IMF). An investor buying an Italian bond today needs to forecast an immediate, complex process that has been evolving in unpredictable ways. Investors naturally want a high return in order to bear these risks.

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“Investors must also weigh carefully the costs and benefits to them of official intervention. Each time official creditors provide loans or buy bonds, the nonofficial holders become more subordinated, because official creditors including the IMF, ECB, and now the European Union continue to claim preferential status.”

This is not to say that bondholders in private entities don't get crammed down in a refinancing or bankruptcy.  But here we are talking about differential treatment of holders of the exact same class, even issue, of securities.