Monday, May 21, 2018

Q&A - 21/5

Question

How do you empirically prove interest rates do not cause increase or decrease in GDP growth?

There is a test for that

Data, Code

We download two time series, one for short-term rates, the other growth, then there is a test (Granger causality test) that can tell if one depends on the other. The result is clear, interest rate rise or fall follows economic growth or decline. Rates do not cause anything. This paper also checked long-term rates against growth, again no cigar. Also, the correlation (of causation) is positive not negative, so rising rates follow rising econ and vica versa.

Question

But economists talk about rate changes all the time

They are blowing smoke up your ass

Or they are plain misinformed. Greenspan is of the former category - this guy is the master illusionist. From Princes of the Yen: "No one disputes the power of the Fed to move markets and the economy. Yet this power is used without many actual democratic checks and balances. [..] Nobody monitors and imposes limits on the amount of credit the Fed is creating. Thus Greenspan, through his interest rate policies, has publicly given the impression that he wanted to slow the economy most of the time from the mid-1990s onward, such as with his famous 1996 speech on "irrational exuberance." The fact is, however, that he has continued to increase the credit creation of the Fed during this time. [.. T]he Bank of Japan in the 1990s [..] publicly wanted to demonstrate that it was doing all it could to reflate the economy by lowering interest rates, the truth of its policy intentions was revealed by its quantitative policy: It failed to reflate for most of the 1990s [because it decreased credit]. Likewise, Greenspan has expressed surprise at the strength of the U.S. economy. But whenever he raised rates, he accelerated his printing of money. The Fed has moved the economy through its quantity policies while focusing its public statements strictly on interest rates in the same way as Japan"

Japanese central bank used the interest rate illusion for decades to hide its intent on forcing "structural changes".  ECB used a variation of this game to create artificial crisis' in EU periphery in order to force "more union" later.

It seems there is a sock puppet show for politicians, who are mostly unknowing buffoons, even some "insiders", and another one, the real one, based on credit guidance. The real show guides the economy.

Comment

It is also a relevant subject of future research to investigate how central banks have exerted influence over the research conducted by academics. For instance, the Swedish central bank established a pseudo-‘Nobel Prize’ by awarding substantial sums of money to selected economists – none of them supporters of the credit creation theory of banking – and calling this prize the ‘Riksbank [Swedish central bank] prize in economic sciences in honour of Alfred Nobel’. The fact that journalists would abbreviate this as a ‘Nobel Prize’ in their reporting of the award could neither have been a surprise nor unwelcome to the Swedish central bank, which lobbied for the involvement of the Nobel Foundation in the award of this prize. Through the award of this central bank prize, a particular branch of economics, usually based on the deductive methodology, received a significant boost internationally.

Daeeemn

Oh no you didn't

Q&A - 20/5

Question

What cybercurrencies other than Monero, BTC, Ethereum are hot?

I hear good things about EOS

The creator is the same coder who designed Steemit. EOS is supposed to be much faster than Bitcoin and Ethereum, its largely focused on smart contracts and it makes them extremely fast.

Question

Why are even some non-mainstream economists against cybercurrencies?

Bypasses government

With the current fiat system banks create money, money=debt, this is the monetary base. Centralized money creation would not be possible with cyber$, so left could not guide the creation of credit for more public spending. Bummer.

Older libertarian econs dont like it because cyber$ competes with their precious gold. But there is nothing special about gold, similar dynamics that made gold what it is, can easily make something else that.  My take on this is at the very least cybercurrency is a portable, digital gold which can keep its value. 7 grams of 22 carat gold still buys you ~400 liters of cheap wine and this did not change in the last 2000 years. Woha! Cyber$ as a store of value could be like that. The next best thing - cyber$ stores value, and eases transactions, a glue between fiat, but fiat still remains. The best, best thing is we have decentralized digital money, with smart apps, contracts, something can allocate some money for social needs, creates little inflation, with an expanding monetary base  + anonymity, etc.

Note: Werner supports something called EquaCoin.

Comment

United States never defaulted on its debt obligations

Wrong

From New Paradigm in Macroeconomics: "Excess credit creation in the US would also be reflected in increased foreign investment. [I]n the 1960s the US dollar was effectively the world’s currency, and thus additional creation of dollars could be expected to be diffused around the world, without any adjustment in exchange rates – until the world rebels [US was basically printing excessive dollars and "buying up Europe", the French caught on]. When France decided to convert US dollars into gold at the official fixed price, as the Bretton Woods system formally provided for [calling US's bluff], the US had to make the decision whether to make good on its promise to redeem the excessively created dollars into gold, or whether it should break its promise – and with it bring down the Bretton Woods System of fixed exchange rates. France proceeded to demand conversion of dollars into gold, in an episode later called the ‘French raid on Fort Knox’. The US leadership decided to break its promise. It ‘closed the gold window’".

That is a default on debt. Money in this old system is an IOU for gold, French wanted their gold for their IOU but did not get it.

You could argue of course then US switched to petrodollar system and those dollars become even more valueable but still.. A default is a default.

Question

Laurel or Yanni

He or She

[On the voice recording who some people hear as Laurel some as Yanni]. Apparently gender is a major factor on what people hear. Dude here did the science (as much as he could based on Twitter surveys),  women are 55%/45% Yanni, men 60%/40% Laurel. Using actual counts, and Fisher's exact test

fm = np.array([[65.0,80.0],[142.0,96.0]])
uo35 = np.array([[60.0,56.0],[21.0,22.0]])
import scipy.stats as stats
print (stats.fisher_exact(fm))
print (stats.fisher_exact(uo35))

(0.54929577464788737, 0.0059272092668501948)
(1.1224489795918366, 0.85850083655070586)

So the differences are significant for gender, but not for age.

Question

I hear about Web 3.0 all the time

Yes

That thing can hit like a freight train, all of a sudden and without warning. Watch out.

Wednesday, May 16, 2018

The Forgotten Legacy of the Six-Day War

Link

Forty-nine years ago this week, Israel fought Egypt, Syria and Jordan in the Six-Day War. As a result of this war, Israel captured the West Bank (which had belonged to Jordan), the Golan Heights (which had belonged to Syria) and the Sinai Peninsula (which had belonged to Egypt).

Israel waged the perfect war, as much as this is possible. It had superb intelligence, struck with strategic and tactical surprise, rapidly broke the Egyptian command structure, and then systematically secured both the West Bank and the Golan Heights. In doing this, Israel secured something it never had: strategic depth. It forced Egypt across the Suez Canal, drove Jordan behind the Jordan River and forced Syria back off the Golan Heights and out of artillery range of Israeli settlements.

As important, the Israelis established a reputation for military invincibility that remains today. It uses this reputation to shape the psychological framework of the region. Israel’s performance in the war was an extraordinary military achievement. It was also the last time Israel either maintained control at the beginning of a war or achieved its intended strategic outcome.

The 1967 war did not end hostilities. In 1969, the Egyptians imposed the War of Attrition along the Suez. Then, in 1973, only six years after Israel’s destruction of the Egyptian army, Egypt (along with Syria) struck Israel in a stunning assault. Egypt carried out a complex canal crossing with multiple divisions, taking Israel by strategic and tactical surprise. In six years, Egypt reconstructed its entire military.

But it was on the Golan Heights that the most threatening battle for Israel was fought. During the first night, the Syrian army almost recaptured the Golan Heights, opening the door for an invasion of the Galilee. The army was stopped that night by a handful of tanks – all that was available since Israel was taken completely by surprise and hadn’t mobilized.

The Israelis held on the Golan by the sheer will of its defenders. Protecting the homeland by will and courage, rather than by a capable and appropriate military force, is obviously dangerous. In the Sinai desert, the Egyptians declined to go toward the passes, preferring to stay under the protection of their air defense system, which imposed severe casualties on the Israeli air force.

Israel went on the offensive there, but only after a massive American airlift of supplies, which was delayed in order to open channels with Egypt. Without that resupply, Israel could not have conducted its cross-canal attack, since it had massively miscalculated the amount of materiel required to defeat Egypt’s new Soviet-supplied weapon.

Israel won, but it was a victory that exposed multiple weaknesses, from intelligence to logistics to misunderstanding the significance of the AT-3 Sagger wire-guided anti-tank system, which wreaked havoc on Israel’s armor. It was also a victory that required foreign assistance. The weakness of the Israeli position became obvious. Its troops could fight even after reverses, but its logistical train could only function with strategic resupply.

Israel went to war in Lebanon twice. Neither war achieved a strategic decisive end. In the last war against Hezbollah, Israel failed in the air strategy designed by Chief of Staff Dan Halutz. Israeli ground forces were unable to break the interlocking fortifications constructed by Hezbollah due to delayed deployment of key forces and logistical problems.

For the past 43 years, Israel’s military has performed well, but nowhere near the brilliance shown in 1967, nor in 1956 when it took the Sinai. Yet, Israel has retained a reputation for military omnipotence.

The most important consequence of this has been the paradox built into the Israeli self-conception. On the one hand, they see themselves as a small embattled nation surrounded by enemies. On the other hand, they see their military as strong enough to challenge any other. From this, they draw the strategic conclusion that their only option is to use their military to guarantee their security. The assumption is that their military is not simply a tool at Israel’s disposal, but a guarantor of its security.

The performance of the Israeli military since 1967 has not been disastrous, but Israel should not draw the conclusion that it is the solution to its fundamental strategic problem. Israelis are right when they say that Israel is a very small country, and they are reasonably correct when they say it is surrounded by enemies. What is baffling is why they believe that a total dependence on Israel’s military superiority provides a guarantee that permits them to avoid other options.

At this moment, that perception is correct because the forces on Israel’s border do not pose a substantial threat. Egypt has a peace treaty with Israel and common interests against jihadists. Jordan is something of an Israeli protectorate. Syria is in chaos. And any threat from Lebanon, namely Hezbollah, is something that Israel can readily manage. It is difficult to imagine any improvement in Israel’s strategic position.

It is easier to imagine strategic deterioration, given the uncertainty in the region. The future for Egypt and Syria is unclear. Jordan constantly faces internal threats. The future of the Islamic State or a successor entity is unknown. And there are nearly 2 million Palestinians within areas under Israeli control. The idea that countries Israel has fought wars against (Egypt, Jordan, Syria, Lebanon) cannot evolve politically and technically in the coming generation is far-fetched. There is an upheaval underway in the Arab world, and its outcome cannot be predicted. As for whether these states can develop better technical military capabilities, simply look at the difference between the Egyptian army in 1967 and 1973.

Circumstances can change. What cannot change are demographics. In conventional wars – which have always been rare compared to insurgencies, but have not been abolished – the Arab states have the ability to absorb far more casualties than Israel. Israel has avoided this problem in the past by winning wars quickly.

To do that, Israel has to have an army generations ahead of the Arabs. I will not guess whether this is possible, I will simply say that a national security policy cannot be based on an assumption that it is possible. Yet, Israel is assuming just that, in spite of the fact that all the wars it has been involved in since 1967 have shown some weaknesses in Israeli forces.

All armies have weaknesses, but Israel assumes its army is invincible. Its victory in 1967 created a mindset that continues to define the Israeli view of its military. Israel has survived the wars since and may be said to have won them. But the Israelis’ performance does not justify absolute reliance on the military. Nor does the possession of nuclear weapons, which it is said Israel considered using in the darkest hours of 1973. Their problem was how to stem an invasion already under way near their own territory.

The Israelis have a fine military. But regardless of what it achieved in 1967, its other victories were flawed, as are most victories. Therefore, assuming that the Israel Defense Forces can guarantee the security of Israel in a sea of enemies is dangerous.

Israel is a small country with a good army. It cannot always succeed and should not only pursue a military solution. But Israel’s strategy assumes it will always perform as it did in 1967. 

Monday, May 14, 2018

#noOccupation


It's like, Jews have been improsened in ghettos, now they have to imprison others the same way. Brutalized, now they have to do the same to someone else. This reminds me the Firefly, Bushwacked episode.

Q&A - 21/5

Question How do you empirically prove interest rates do not cause increase or decrease in GDP growth? There is a test for that Data ,...