Monday, December 22, 2008

The NFL Screws the Pats

The Patriots need to win next week in order to make the playoffs. In addition, they need either the Dolphins or the Ravens to lose. Complicating the matter, if the Pats lose and the Jets beat the 'Fins, the Jets go to the playoffs.

Thus, if the Patriots win, the Jets don't have much to play for: they'd need an unlikely Baltimore loss in order to get in. But that won't matter much, since all the games are scheduled for 1pm starts.

At least, that was the case until today, when the NFL in all its wisdom moved the Dolphins-Jets and Ravens-Jaguars games to 4pm. Thus, the Jets will know by kickoff whether they control their own future or not. If Baltimore pulls away from the Jaguars early, the Jets have no reason to keep fighting hard, and with Eric "Revenge" Mangini at the helm, they could happily let the game slip away, putting the Dolphins into the playoffs ahead of the hated Pats.

Still, the Patriots need to win next week, and it's only fanboy bloggers who are all atwitter over the scheduling changes. Belichick and his troops won't say a thing about it.

Friday, December 19, 2008

Two Cheers for the (Latest) Bailout

As an opponent of the bailouts, I'm thrilled to see that President Bush has unilaterally extended $17 billion to the auto companies, conditional on their being financially viable by March. No really, I'm actually happy about this, at least given the little we now know.

Why? Because the money came out of the already-allocated $700,000,000,000. Rather than waiting for the next Congress to throw good money after bad in January, Bush (probably without meaning to) diminished the amount that my generation of taxpayers is likely to be on the hook for.

Given that the government stole $700,000,000,000 from me and my friends, I'd rather see that go to moderately wealthy autoworkers than to obscenely wealthy investment bankers.

It will be up to the Obama administration to make the rest of the hard decisions on this case. Hopefully, he'll show them tough love, call the loans if the automakers (especially Chrysler) don't become viable, and avoid spending even more money taxpayer money propping up the affluent.

Thursday, December 18, 2008

Holiday Cheer

What do these Christmas-related bits of data have in common?
  • Eating a lot at night is worse for you than eating a lot during the day
  • Sugar makes kids hyperactive
  • About 40% of body heat is lost through the head
  • Suicide rates are highest around the holidays
They are all false, according to IU researchers. The most interesting is the one about kids:
At least 12 randomised controlled trials looking at levels of sugar and behaviour - even in children with attention deficit hyperactivity disorder - were unable to detect any difference. Scientists also found that when parents think their child has had a sugary drink they rate their behaviour as more hyperactive - so it is all in the mind.
In a related finding, the researchers say there is no cure for a hangover.

Sovereign(age) Default

With mounting debts, high current account deficits, and an angry population carrying a lot of private debt, the U.S. monetary and financial authorities are squirming. For a while, I've been predicting that the only way the U.S. will get out of the vortex of rising debt is by cheapening the dollar massively.

In the long run, a country carrying trillions of dollars of debt and populated by an indebted populace cannot be trusted to fulfil its obligations. Sovereign default has always been a problem in the developing world - and even sometimes in Europe. The U.S., which has avoided crippling levels of debt, has never defaulted, and probably never will - technically. There's a much cleaner way to get away from debt.

A massive, rapid dollar inflation will effectively shrink the amount of debt carried by anyone who owes dollars. Thus, a 50% devaluation could drop the U.S. public debt from 66% of GDP to 33% of GDP, once prices adjust*. Borrowers would win big - half their debts would effectively be written off. Lenders would lose big - half their dollar assets would disappear.

This scenario has never developed because most of U.S. debt has been held by Americans, and there's a hefty deadweight loss associated with inflation. However, if the government keeps doling out trillions, and American debt (public and private) is held increasingly by China, Dubai, and Russia, the benefits of devaluation begin to outweigh its costs to Americans.

How would the government do this? Usually, the Federal Reserve likes to change the value of the dollar the classy way, by shifting interest rates and buying and selling Treasury bills. When that doesn't work, they've got to do it the Robert Mugabe way, by printing greenbacks. And in case you think they'd never do that - or it wouldn't work - check the news today. The Fed used the promise of printing money to achieve a 3% one-day drop against the Euro.

It may be 10 or 20 years before debts get so cripplingly large that the president starts to pressure the Fed into abandoning its non-inflationary mandate. In all likelihood, the bank will never have to respond: when holders of U.S. dominated debt (read: China) get antsy about the future prospects of the dollar, they'll dump them at a loss, causing a devaluation the same as if the Fed printed money. We might get a devaluation much sooner than we'd planned just because our creditors lose faith. In the short term, at least, this is a more likely scenario, similar in spirit to Krugman's 1979 effort "A Model of Balance of Payments Crises".

Whether it's a sneak attack by the printers at the Fed, or a pre-emptive strike by Beijing, look for the dollar to depreciate - a lot - in the coming decades.

* It's unlikely that the benefit of devaluation would be 1-for-1: the chaos, loss of trust in the dollar, and retaliation by other countries would eat up a big chunk of the gains.

Wednesday, December 17, 2008

It's the Eponymy, Stupid

Anyone remember the "Books Never Written" jokes popularised by Boys Life? E.g. "Why Should I Walk?" by Iona Carr. Well, here's one book that was written:
"Field Guide to Cookies"
The author? Anita Chu.

Besides humorous authoring, Ms. Chu is a structural engineer and a baker. She tells the NY Times, "Butter is like the concrete you use to pour the foundation of a building, so it’s very important to get it right: the temperature, the texture, the aeration." (Home bakers, by the way, may benefit from the article on butter).

Tuesday, December 16, 2008

Stimulus Spending

The Wall Street Journal has an excellent run down of a decade of Keynesian policy in Japan.
In 1992, Japanese Prime Minister Kiichi Miyazawa faced falling property prices and a stock market that had sunk 60% in three years. Mr. Miyazawa's Liberal Democratic Party won re-election promising that Japan would spend its way to becoming a "lifestyle superpower." The country embarked on a great Keynesian experiment:

August 1992: 10.7 trillion yen ($85 billion). Japan passed its largest-ever stimulus package to that time, with 8.6 trillion yen earmarked for public works, 1.2 trillion to expand loan quotas for small- and medium-sized businesses and 900 billion for the Japan Development Bank. The package passed in December, but investment kept falling and unemployment rose. By the end of the year, Japan's debt-to-GDP ratio was 68.6%.

April 1993: 13.2 trillion yen...

September 1993: 6.2 trillion yen... The economy didn't respond. By the end of the year, Japan's debt-to-GDP reached 74.7%.

February 1994: 15.3 trillion yen...

September 1995: 14.2 trillion yen...

April 1998: 16.7 trillion yen...

November 1998: 23.9 trillion yen... By the end of the year, debt-to-GDP hit 114.3%.

November 1999: 18 trillion yen... Debt-to-GDP reached 128.3%.
Since 1992, U.S. debt-to-GDP has hovered around 40%. Meanwhile, Japan's grew from 60% to a high of 180% in 2006. Back in 1990, plenty of people thought that Japan would overtake the U.S. as the world's economic superpower. That's not a worry you hear much anymore.

The U.S. has a unique opportunity to reassert its strength and economic vitality by giving the economy tough love in the coming year. We also have the possibility of reverting to the patterns of the rest of the developed world, the folks who have had 10% unemployment and massive public debts since the end of the Marshall Plan.

Friday, December 12, 2008

The Spirit of Washington

David Brooks sings an elegy for sober governance:
Once America was a decentralized country, but now all roads lead to Washington. Mighty C.E.O.’s abase themselves before junior House members. Governors and mayors come groveling. The status of the lowliest bureaucrat has risen delightfully, and there is a feeling of overflowing abundance amid the national scarcity as Washington spends the trillions it doesn’t have. Such is the local boom that your humble ambassador can drive from his residence, and in a few minutes he can count 10 McMansions under construction.
But lo! There stands Corker like a damned stone wall... rally behind the Tennessean! As Horatius at the bridge, he stands his ground and keeps the hordes of voracious Tuscan CEOs at bay.

Tuesday, December 9, 2008

Rich and Poor in Haiti

My sister Kez has a terrific post about bridging the gap between Haiti's richest and poorest in her daily work there.
"He's 2 years older than me?" Abraham gawked. "But he's tiny! How is that possible?" Oh, Abraham! You have been so fortunate to be born into your family. You've never lived alone on the streets, you've never known real hunger...

Fares looked very seriously at me and said, "Miss [Keziah], I am going to be a radical and I am going to change this country."
Go on over and check it out - and lend her your prayers and encouragement as well if you know her.

Monday, December 8, 2008

Germany v. France in the BCS WWII Bowl

Nittany Line has an excellent parody of the BCS rankings, applied to World War II. Here's a hint:
The BCS commented " France had a single loss against Germany and following a preseason #1 ranking they only fell to #2."
Hat tip to Inos.

Thursday, December 4, 2008

What's Best for Canada

Stephen Harper is shutting down the Canadian Parliament for the next month and a half. That makes him the wisest, most benevolent head of government on this side of Bhutan. While the rest of the West falls over itself passing ill-advised stimulus packages - the stimulus will last a few weeks, the debt will last for decades - Harper figured it was better to shut down his own parliament than to let the opposition take over and practice voodoo economics.

Better for him? Maybe. Six more weeks as Prime Minister of a non-meeting parliament isn't much of a prize, and his reputation will no doubt suffer for being so intransigent. But better for Canada? Almost certainly.

(evidently it's Canada Day at Global Review)

Health Insurance versus Health Care

In the looming discussion of nationalizing health care, I would like to add a helpful note on jargon: let's distinguish between health insurance and health care. Too often, those are considered synonyms, and the confusion in language has led to some confusion in policy.

Health care is, clearly, the receipt of medical services, including treatment and prevention. Universal health care is desirable for a host of reasons - humanitarian, economic, epidemiological, etc. I haven't met anyone who wishes health care was flatly denied to someone else. The debate over nationalization typically hinges on how to balance quality against distribution. Both are worthy goals; good people can disagree on the best balance.

Heath insurance, by contrast, is one means of paying for health care. Specifically, it involves pooling risk so that the unforeseen expenses don't bankrupt one's family. As with other kinds of insurance, risk-averse people are willing to pay somewhat more in expectation than if they self-insured; they are also prone to morally hazardous decisions.

As this country likely decides how to go about providing health care to as many people as possible, we should consider getting away from the insurance model. Most nationalized systems are basically big insurance plans, and the inefficiencies are substantial. The current system in the U.S. has broken down essentially because the inefficiencies associated with private insurance have become ponderous.

Whatever balance the new American health care system strikes, the goal we should all be able to agree on is that inefficiency - whether it comes from bureaucracy, externalities, or moral hazard - ought to be minimized. I and others who care more about the well-being of the American people than about telling them what to do will be favorably disposed toward the plan that offers the most health care with the least inefficiency.

A Worthwhile Canadian Initiative

Nicholas Kristof today highlights the most cost-effective way in the world to save lives and spur development.
Almost one-third of the world’s people don’t get enough iodine from food and water. The result in extreme cases is large goiters that swell their necks, or other obvious impairments such as dwarfism or cretinism. But far more common is mental slowness.
This is cheap and easy to fix.
Development geeks rave about the benefits of adding iodine and other micronutrients (such as vitamin A, iron, zinc and folic acid) to diets. The Copenhagen Consensus, which brings together a panel of top global economists to find the most cost-effective solutions to the world’s problems, puts micronutrients at the top of the list of foreign aid spending priorities.

"Probably no other technology," the World Bank said of micronutrients, "offers as large an opportunity to improve lives ... at such low cost and in such a short time."

Yet the strategy hasn’t been fully put in place, partly because micronutrients have zero glamour. There are no starlets embracing iodine. And guess which country has taken the lead in this area by sponsoring the Micronutrient Initiative? Hint: It’s earnest and dull, just like micronutrients themselves.

Ta-da — Canada!
So, for those of you who want to make a difference... I'm not sure what we're supposed to do. The MicroNutrient Initiative doesn't seem interested in donations. Anyone know of a way to contribute to ending iodine deficiency?

Wednesday, December 3, 2008

A Long Shot for Steroids

Six players were suspended for doping by the NFL. Pat and Kevin Williams, the (unrelated) blocks of granite in Minnesota's run defense - suspended. An aging RB for the Saints, plus two defensive ends - suspended. And Bryan Pittman - suspended.

Bryan Pittman, the backbone of the Houston Texans, who had not missed a game since his 2003 debut, is gone. Who - tell me, who - will fill his shoes at long snapper? More to the point: was a long snapper really taking steroids? What for? The better to snap you with, my dear?