Article Collection 06/15/14

first economistMacroeconomics

What happens when the economy baffles economists? Excellent and easy read.

Are the lack of major wars hurting economic growth? Great article by GMU’s Tyler Cowen (responsible for one the internet’s most popular economics blogs – Marginal Revolution). This is a subject near and dear to me, and I find myself in complete agreement. The standard argument for the end of the US Great Depression was an “increase in demand” brought about by entry into WWII, a conclusion I’ve never bought into. It has always seemed to me the end of the Great Depression wasn’t just an “increase in aggregate demand QED.” I see it as a result of the productivity revolution created by the technological, mathematical, scientific and organizational advances which constituted structural reform of the US economy – most of which were government funded – that came about directly as a result of fighting and winning a total war, a war for survival. Any increase in or resumption of aggregate demand came about only after US and global structural change occurred (being the only one not bombed into pieces and hence the world monopolist of currency and manufacturing helped as well).

Neat brief Paul Volker interview with The Daily Princetonian.

US CEOs expect Q2 growth to be weaker than forecast. The IMF, BOA and others confirm this in their expectations as well. In particular the IMF has stated the US “will need to keep interest rates lower for longer than the markets expect” which I find entertaining, as I’m not convinced the US can raise interest rates at all, even BOA agrees the natural rate of interest has likely fallen to a new historical low.

The Baltic Dry Index continues to be abysmal, suggesting falling global growth from lower Chinese economic growth and continuous shortfalls in demand for goods in deflationary Europe and stagnant US. (Really this should not come as a surprise given Fed tapering and Chinese slowdown.)

Microeconomics

Author of best-seller Drive The Surprising Truth About What Motivates Us (youtube intro here) gives a Ted Talk about motivation. To summarize, rewarding fixed goals and rewarding creativity are two different problems and the ideal incentives differ.

Now Bill Ackman’s “Everything you need to know about finance and investing in under an hour” is most certainly not everything you need to know, but nonetheless it lifts the lid off financing in business, which is important in understanding the microeconomics of the firm.

Decentralized cab company impersonator Uber has run into problems expanding into Europe’s heavily regulated and unionized taxi markets. Across Europe from London to Madrid to Berlin cabbies recently went on strike in protest of Uber, and in a beautiful and predictable Streisand effect, at least according to the London data Uber new registrations were up over 850% during the strike. Who knew denying service would encourage customers to seek alternatives? In NYC the right to operate a taxi costs about $1.3 million, a clear result of regulation which has created a market for taxi medallions.

From NPR, 4 Decades of College Degrees in One Graph. Self explanatory.

In 3 charts, Vox shows US workers falling behind global peers in key skills, resolving this skill gap will be imperative given global competition, high US wages, and the inevitable growth of automation.

Fracking has turned out to be a success, significantly reducing the US trade deficit, thereby relieving pressure on the US fiscal deficit, and otherwise turning the US into what others have called “the Saudi Arabia of natural gas.” This surge in production has allowed tougher regulation on less clean forms of energy like coal, with little negative effects. All in all, even greens have begun to embrace natural gas as a stopgap while we wait for solar energy to become financially feasible to implement; there’s hope here as solar in fact has already come a long way.

A visual aid on how fracking works to obtain natural gas. Charting world carbon emissions shows the extent to which China has become the world largest carbon polluter, also of note is India’s subtle but definite emissions trend upwards.

A tumblr showing Detroit falling apart.

How Walmart is killing the American Flag Business, encouraging protectionism by another name and with patriotic strings attached.

Elon Musk says he lost a multi-billion-dollar contract when SpaceX didn’t hire a public official, an article from Quartz describes suspected corruption in the awarding of contracts to ferry satellites into orbit (among other badass things). Overall an excellent anecdote concerning problems that are no doubt pervasive throughout the system.

Lies, damned lies and sex-worker statistics – interesting and another example of how vested interests have an incentive to keep the money flowing.

Legal Pot is Crippling Mexican Drug Cartels; surprise, surprise.

The trend of video-game firms hiring economists has been an interesting one, this article by Reason interviews one of the better known economists to be hired by a firm and goes into what he’s doing there. It’s interesting stuff.

According to ZH, so far in 2014 GM has recalled more cars than it sold in 2012 and 2013 together. I suppose this is one area where the Jihadists have it correct.

Iraq/Syria

As background, the 2012 NYT article Imagining a Remapped Middle East explaining how 5 countries could turned into 14. Earlier a 2011 article in the New Yorker does comprehensive coverage of the roots of Obama’s foreign policy (a great read btw), importantly his administration considers crises as unique and uncorrelated. Now Al-Qaeda fan-boys ISIS and its army of veterans from the conflicts in Libya, Egypt, Chechnya, Afghanistan, Iraq, Syria, and Yemen taking weapons from the US in Syria to then use against US ally Iraq would seem to thoroughly discredit the Obama view that individual conflicts are unrelated. For an up-to-date vision of future Obama policy in Iraq, I think Vox is on point.

What about ISIS? Well this overview is a must-read, if for no other reason than the author is a phenomenal writer. Similarly, who makes up the Jihadists? What is ISIS about to do? Well this nifty powerpoint explains some ideas.

An estimated 800 ISIS/ISIL (no relation to Sterling Archer) fighters seized Mosul, defeating two Iraqi divisions totaling as high as 30,000 men in a stunningly lopsided victory – I suspect simply because the 30,000 Shia were not willing to die to protect Sunni Mosul who hate their Shia defenders from Sunni ISIS. Not to be Captain Hindsight, but it also seems clear US troops were pulled out before the Iraqi military was a capable fighting force, something both Iraqis and Kurds told us as we were pulling out. ISIS/ISIL summarily looted banks for nearly half a billion dollars of fiat (Iraqi dinars) and gold bullion (more by IBT here), becoming the world’s richest terrorist organization with around $2 billion in the process. What kind of US military gear did ISIS capture? Check out their celebratory slideshow and more from ZH.

For the broader overview on why the seizure of Mosul came as a surprise (to the US at least, again the Iraqis and Kurds saw this coming), as per usual Foreign Policy has an excellent piece.

It seems some US special forces will be deployed to Iraq. Iran has also deployed attack helicopters and elite forces of the Republican Guard into Iraq to halt ISIS advances; furthermore Iran has offered to cooperate with the US. China also has a vested interest in the region (oil) and has offered assistance to the Iraqi government. Incidentally our NeoCons, NeoLibs and US media are already in fear-mongering mode proclaiming ISIS is plotting the next 9/11. First, this threat is as overblown as “homemade terrorism,” second, one could hypothesize the NeoCons are conveniently ignoring ISIS exists as a result of US foreign policy, rather than in spite of it. I think the moral of the story is, when you’re a terrorist organization you have to balance on a knife’s edge between being too unknown to recruit, and being too successful wherein you attract big foreign adversaries. ISIS would appear to have slipped into the latter category; when Iran and the US are talking about military cooperation, you know shit just got real.

If you’re familiar with insurgencies and rebel groups, you’ve probably noticed one distinct commonality across regions and religions – they seem to adore Toyota pickup trucks.

More ISIS/ISIL overviews in Mapping Jihadist Resurgence Across IraqIraq Update: Kurds Take Kirkuk, Al Qaeda Surges Toward Baghdad, insurgents gobble up Iraq’s largest refinery, Jihadists seize two more towns 30 miles from BaghdadTeenagers rush to join the call to defend city from ISIS militants who are fighting just 45 miles away – and Iraq’s last Christians say they fear being wiped out, Deutsche Bank on risks to Iraq’s oil infrastructure.

Also maps: Jihadist activity and major pipelines, a strategic overview, 5 key maps of the Middle East Crisis, Sunni/Shia distributions.

According to the NYT (and ZH summary) ISIS/ISIL claim to have executed 1700 captured Iraqi soldiers, and released pictures (full pictures here, note a few near the end are graphic) although that number hasn’t been confirmed. It wouldn’t surprise me to find they’ve rounded up and executed military-age Shia men, not just Iraqi soldiers.

Other

What’s happening in Eastern Ukraine is very simple, rational, and straightforward. This guy always manages to hit the nail on the head.

Pentagon’s

An overview of the huge polarization gap in US politics, and a ZH summary with visuals. Also some analysis on the midterm elections by Goldman Sachs. Personally I expect a narrow Republican victory resulting in majority control of the Senate.

Nice piece about our patronizing of nerds, the “princess complex” and the problems that can arise when they clash. Props to the author.

We’re nearly to the 100th anniversary of World War I, what for my money is the most terrible and unnecessary war we have ever fought against our fellow man. World War II emerged directly from festering wounds of WWI, and in the case of WWII there was clearly a good side and an evil side. WWI though is not so simple to categorize in black and white terms, there are no clear “bad guys” and yet it was the pinnacle in the mechanization of slaughter. The Independent has been assembling 100 articles on WW1 in a list here, and they are phenomenal. A more humorous article assembles German quotes about American soldiers in WW1.

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