Robert Young's Open Salon Blog

Snakes on The Paten

Thu, 31 May 2012 07:05:45 -0400

For those who haven't been paying attention, here is an example of the sort of folks the Koch brothers want to run the country. I do the NY Times crossword most days, and there was a clue to a recent Sunday puzzle that went something like, "Daddy Warbucks' henchman". Of course, Daddy Warbucks had two: Punjab (which fit the space, and I remembered) and Asp. Turns out, the answer was TheAsp. Can't trust them liberals to tell you straight.

Harold Gray knew the answer to the question decades ago; the rich use snakes to kill people. The strip ran until well after Gray's death in 1968. When? 2010. I had no idea.

Triple Crown

Tue, 22 May 2012 10:05:11 -0400

"A horse! A horse! My kingdom for a horse!" Market quants are always seeking a better horse, never quite getting there. And occasionally falling off onto their ass; and the rest of the world's while they're at it. The debacle at JP Morgan, and the obfuscation attendant thereto is just the latest installment.

Quant methods (one position I had early on was in the Office of Analytic Methods, so I've been there) can be quite useful. The issue, and for market quants a major one, is that quant methods assume, and that's something they have to do, that whatever human behaviour is being investigated responds just like a natural system. Engineering of human behaviour. For the very short term, say the trading day, one can measure money flows among some set of instruments, and with sufficiently detailed data and sufficiently powerful computers, anticipate where the money is going to be before it gets there. But that's just the USofA/Russia MAD paradigm. No economic good comes of it, of course. It's casino activity. It's a zero sum game.

In the long term (a decade or longer), macroeconomic forces take over. Or, as Galbraith said: "financial genius is a rising market". Japan is the explanatory counter example. To the extent that an economy (speaking of nationally bounded entities) moves from real investment to fiduciary investment (the term still hurts my teeth, but it's common), real growth dissipates. The reason is clear: economic growth is driven only by technological increase, and that means physical investment.

It is not a good thing that Facebook would be valued at $100 billion. Nor is it a good thing that Young People seek to make fortunes building Farmvilles. I'm not, I'll suppose, the first to point out that shifting smart people into zero-sum software gaming (stock market or otherwise) from physical sciences (assuming they are really smart enough to do EE, for example; I've never been convinced that they are, by the way) is also not a good thing. It is said of Texas and Saudi Arabia: you can't eat oil. In Texas, these days, you can't even raise cattle. They're being shipped north (not, alas, to Blue States) where there's some water and grass. You can't eat virtual food, either.

Uruguay, in the 1960's, did the segue from real economy to fiduciary economy. It ended up with severe income inequality and civil war. That lesson has been ignored. Well, a tiny country south of the equator; out of sight, out of mind.

Welcome to Oz

Tue, 22 May 2012 10:05:29 -0400

IBM (IBM) announced the opening of a branch office in the city of Da Nang in Central Vietnam as part of the co's continued geographic expansion initiative to increase its presence in key growth markets.

from: Briefing.com

For Want of a Merkin...

Thu, 17 May 2012 14:05:37 -0400

As I, not alone but lonely, have written many times: the Euro can't work without a partner of fiscal policy. Just as the Blue States send $$$ billions to Red States (ingrates though they are), so Germany, France, etc. must have a de facto fiscal policy towards their poor Southern Brethren. Germany, in particular, has to face the music: the PIIGS took an awful lot of product off your hands. Just because you think you should still get full (unearned, largely) price for the effort, you won't. Get over it.

Well, Ms. Merkel has shed her merkin. I'll suppose it was news everywhere; I happened to see it in my dead trees Times.

Along similar lines (really), there is this story (from Time magazine, via Yahoo! News) that the Fed is responsible for Jamie Dimon's brown undies. The reasoning, to be generous, is that by keeping "the" interest rate low, banks et al were compelled to make money the fiduciary way since "the surfeit of dollars in the marketplace have nowhere productive to go." Read the quote again. Read it? Read it again.

That quote is the crux of the argument of this endeavor: only through improved technology, which increases production and/or reduces cost, can capital "earn" a return. Putting capital only into fiduciary instruments, leads to the *need* for inflation, since without it, there's no source of $$$ to pay the return. Consider that thought again. If you've borrowed $1,000 to "invest", but you've no productive place to put that money, or you've lent it for residential housing, your $1,000 generates nothing new or increase in the economy. Nada. Zilch. Zippo. The only way to get more cash, to pay the vig, is if your other income(s) rises. For that, it's mostly wage push inflation. We don't have that.

But more importantly, these "pundits" have said the words, but seem to be utterly ignorant of the import: "nowhere productive to go". Yet, these .1%-ers want 10% per year for the right to have some of their cash. The fact the JP Morgan, and all the others to be fair, would rather trade fiduciary instruments rather than build plant and equipment here in the Red Blooded USofA says about all you need to know. They've killed off the productive sectors of our economy, now scream bloody murder that the Devil made them do it. Fact is, capital isn't worth nearly what the banksters and .1%-ers want it to be. Welfare queens, yeah.

Dee Feat is in Dee Flation, Part 18

Tue, 15 May 2012 10:05:54 -0400

Well, the Flation Numbers came out this week and last. And, as usual, the Prosperity Through Austerity And Inflation's The Issue folks can't be happy. Here they are:
Core PPI 0.2%
Core CPI 0.2%
PPI -0.2%
CPI 0.0%

I'll leave it to the reader to see the forest and the trees. All that free money from the Fed sure ain't getting into the hands of people who spend. That's why there's no inflation. As the planet runs out of arable soil and hydrocarbons, with an exponential population growth, prices will rise due to shortage. The Idiots of the Central Banks will be too stupid to see this, and immediately raise interest rates, hoping beyond hope to play the role of Volker the Saviour. But they will only make matters so much worse. A Confederacy of Dunces, I'll say.