Chile Review

Some highlights and lowlights from my first visit to a South American country. Everything´s listed worst to best.

Seafood

• Empanada Mariscos: this mess of seafood lacks distinct flavor in 2 tries.
• Machas (Razor Clams) in butter sauce: unspectacular.
• Fried whitefish: cheapest fish, but still tasty. The batter was soggy, though.
• Grilled Reineta: Light flavor, not fishy, and substantial.
• Shrimp with cheese in butter sauce: a winner, if a bit over the top.
• Reineta Ceviche: delicious in its onion and lemon marinade; not `fishy´ at all.
• Fried conger eel: the batter crust pairs perfectly with tender and boneless flesh.

Wine

• Urmeneta Carmenere: has a serious kick; was drinkable with spicy food.
• Santa Emiliana Chardonnay: a bit of a sour taste develops late.
• Ocho Tierra Cabernet Sauvignon: well-balanced table wine.
• Montes Malbec: sophisticated and dry, but not bold enough to really impress.
• Santa Emiliana Carmenere: bold and smoky, this wins compliments at $3.

Cultural Curios

• Creepy hustlers dressed as clowns and mimes.
• Walk on the right. Or the left. Or the middle.
• The lack of brewed coffee; Nescafe is a Spanish portmanteau for no es cafe.
• Nightlife ends at 7pm... and then restarts around midnight. Where do they all go?
• National pastime: making out in the park.
• El pueblo of Colo-Colo: it´s like a class-conscious Red Sox Nation.
• Fresh salsa at the table as a condiment.
• Friendly dogs have the run of the city.

Another highlight I'll brag about until I die: while hiking in the foothills of the Andes, we got buzzed by a condor. It was huge: 7 to 9 foot wingspan, and flew past just 10 meters overhead.

Jeans

George F. Will is sending the commentariat into a sustained collective conniption with his preposterously huffy raking of American denim culture. It is worth a read, whether you love or hate jeans, if only for this quote:

This is not complicated. For men, sartorial good taste can be reduced to one rule: If Fred Astaire would not have worn it, don't wear it. For women, substitute Grace Kelly.

One assumes Will scathes in good fun, and one appreciates the humor.

Growth, Ireland, and Short Memories

Former economist Paul Krugman writes today about the disaster facing Ireland in the wake of the global recession. And he may be right about some things: Ireland´s own leaders certainly believe they´re in for it, and a painful contraction has already begun. But is that too high a price to pay for the free-marketeering that led to the boom of the past 15 years in Ireland? As a former economist, Krugman should know about tradeoffs, but if he does know he doesn´t let on here.

The average Irish resident was earning $16,600 (inflation and PPP-adjusted) in 1993. A quick accounting using basic OECD data shows that from 1993 to 2008, Ireland´s economy grew 120% per capita, or up to $36,700. The EU and USA grew about 32%, and the UK did better at 44%.

Suppose that instead of becoming a low-tax, low-regulation corporate favorite, Ireland had followed Krugman´s stolid advice and stayed with the pack. We´ll generously grant them the U.K.´s robust 44% growth over the period. That would mean current income per Irishman of $24,000. If Krugman´s ¨depression¨ materializes, and Ireland´s economy shrinks by 10% (a drastic figure) from its current high, the 2009 level would be $33,000. In order to fall to the hypothetical peak that Ireland would have reached under UK growth rates would take four consecutive years of 10% contraction, a decline far worse than the Great Depression. And even then, the sum of lifetime earnings of the average Irishman would be far higher under the boom-and-bust regime than under the slow-and-steady one.

If a country is willing to stomach the ride, the rollercoaster of high growth and harsh recessions delivers much higher standards of living much faster than the alternative. Some wisdom should be applied: the booms can fund national savings, and the government can ease the crashes with the resulting savings. As Krugman does note, public debt in Ireland is low. But he doesn´t tell you why: Dublin used the growth to lower its debt-GDP ratio from above 90% in the 1980´s to below 40% today. If the country had grown more slowly, this would have been much more difficult to achieve.

Ireland is in good shape today: despite drastic contraction, living standards are among the highest in Europe, and Ireland´s government has room to take on debt if it must.

Lousy Economist: Jeffrey Sachs

In several papers (1995, 1997, 1999, 2001), Sachs and Warner argue that there is a resource curse: countries rich in natural resources experienced slow growth from 1970-1989. This may actually be true, as shown by Stijns (2005), but not for lack of poorly presented evidence.

A good summary of Sachs & Warner´s stunning oversight comes from their 2001 paper:

Empirical support for the curse of natural resources is not bulletproof, but it is quite strong. First, casual observation suggests that there is virtually no overlap in the set of countries that have large natural resource endowments and the set of countries that have high levels of GDP. Many resource-rich countries have been resource rich for a long time. If natural resources really do help development, why do not we see a positive correlation today between natural wealth and other kinds of economic wealth?

Very casual observation, in fact. Sachs omits the U.S.A., Canada, The Arab Gulf states, the U.K., Germany, and Australia, among others. All of these countries are resource-rich, in oil, coal, agriculture, other minerals, or all of the above. In all of their analysis, Sachs and Warner look at the share of exports that are primary commodities as indicative of resource wealth. This begs the question: since the resources are, by their nature, limited, any rich country must be one that exports many other goods as well. The U.S. even now extracts prodigious amounts of raw materials (and is the world´s leading food exporter), but is not considered `resource rich´ by the bizarro-world definition of Sachs and Warner.

So the next time Jeff Sachs tells you to send billions of dollars here or there for aid and development, remember that he´s not even a good economist. (Wright, Ferranti, Stijns, and others have since taken Sachs to task for his sophistry).

A Land Far, Far Away

I depart tomorrow for South America. This will be my fifth continent in the last 12 months. I've been to twelve countries scattered across more than half the world: three African, one Asian, two European, two North American, one Caribbean, and now one South American!

This trip will be more special than the others - I'm going to visit the woman I love, to continue living out my own fairy tale in a land far, far away.

Yahoo Comes From Boston?

The Yahoo! MLB preseason predictions guesses are out, and Brown, Passan, Edes, and Henson seem like a bunch of Boston homers: they unanimously predict the Yankees will finish 3rd again; they unanimously pick the Cubs and Red Sox to make their respective Championship Series; they unanimously pick the Sox to go to the World Series, and only Brown expects the NL team (Cubs) to beat the consensus Sox in the World Series.

Let's hope there's no Yahoo! Curse... and can someone explain to me how the Yankees can pick up Texeira, Sabathia, and Burnett and NOT improve? They won 89 games last year - but the experts are predicting wins in the [87, 92] range! This I do not understand (though 'tis devoutly to be wished).

Disengagement?

I read with hope Kathleen Parker's WaPo column suggesting that a new generation of the Christian Right might not be following their elders into politics. The problem, she notes, is pragmatism: 'defined as the compromising of principles'.

Global Review is a proponent of sharper distinctions between Christianity and politics (see here and here). I believe there is a place for people of uncompromising faith in politics, but that faith can only be invoked to defend issues that are clearly and purely moral (like abolition of slavery and protection of life).

Krugman on China

In December, Global Review noted:

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".

Today, in the NYTimes, the same Krugman writes of 'China's Dollar Trap':

China chose instead to keep the value of the yuan in terms of the dollar more or less fixed. To do this, it had to buy up dollars as they came flooding in. As the years went by, those trade surpluses just kept growing — and so did China’s hoard of foreign assets...

And just the other day, it seems, China’s leaders woke up and realized that they had a problem... [T]hey are, apparently, worried about the fact that around 70 percent of those assets are dollar-denominated, so any future fall in the dollar would mean a big capital loss for China.

And, just as I proposed, they're torn between dumping dollars at a big loss, or continuing to float down this river in hopes that something, somehow changes. Hence, Krugman writes, the vain idea of a global currency:

So what Mr. Zhou’s proposal actually amounts to is a plea that someone rescue China from the consequences of its own investment mistakes. That’s not going to happen.

Note: observant readers will note that this blog is not generally a fan of Paul Krugman, who abandoned a career as a good economist to become a lousy blogger. He remains generally sharp on his own fields of economics, like currency crises, though he gets pretty sloppy, as with the 'absence of mind' reference in today's piece.

Hype

For the record, Global Review is not buying the hype: the Tampa Bay Rays aren't that good. When a team has a collective career year, the following year is usually a regression, not an improvement. Certainly, they're done being doormats, but the Rays will ultimately not be able to hold their own in the pressure of a serious three-way pennant race. The Sox and Yanks will be in the usual battle for first place, with the usual Wild-Card sideshow race for the runner-up.