Prolific Programmer on the Internets!

Mish claims that everyone is jumping on the Keynesian bandwagon. Want to know why this is, Mish? It's because there is no credible solution from the other side. That's right, I have yet to see anything remotely resembling a solution to the crisis from anyone aside from Keynesian economists. Sure, there are Libretarians like Ron Paul, but their views represent the extreme of the present condition.

If the definition of insanity is repeating the same thing, while expecting different results, then prescribing less regulation is falling off the deep end.

John Robb writes:

If similar data on manufacturing is showing up in Asia, it will be a disaster there soon.

Well, similar data is beginning to show up in Asia now.

The Consumerist is on about recession-proof cities today, concluding that the more a city relies on education, medicine, and government, the less suseptible it is to economic downturns. In that vein, the top city is Arlington, Virginia. Just outside of Washington DC, and home to the the Pentagon, it's not a basketcase, rather, it's supposedly, a happening place.

Don't get me wrong, I'm still a big believer in the power of feelings. But Barbara Ehrenreich, one of the American commentators I respect, says that the country was founded on realistic thinking. In our bipolar world of extremes, realism has been merged with negativism. Here's a good example of this. From 1997 to 2005, property prices in Spain increased 247%. In order to believe that this boom was forever, humans need to be wildly optimistic to the point of denying logic and history. And it is this denial of logic and history that is precisely what gets the world into trouble. Supreme overconfidence in any system, to the point where criticism or alternatives are ignored, needs an, often painful, correction. So let the banks fail, they needn't be rewarded for insanity.

Concurrent Opinions' Lawrence Cunningham asks whether the US can regulate itself or should it, as the Treasury suggested, invite the IMF to audit its books. Cunningham points to the 1997 Asian Financial Crisis as an example of the IMFs track record.

Now, I did read The Shock Doctrine, which has a chapter on what happened in Asia from a different perspective. The Asian dragons (Hong Kong, South Korea, Taiwan and Singapore) developed, not by exposing the economy to free trade, rather by nurturing their companies by protectionist policies before they were able to compete and then letting them take over the world. Incidentally, this is also how Britain and the US industrialised, and is the diametric opposite of what the west, through the IBRD and the IDA, is shoving down the throats of the third world. After years of doing this, to disastrous effects wherever it has been tried, the US is subjecting itself to this treatment. Maybe the Federal Reserve is an self-serving entity independent of any oversight after all.

... is the end of the world as we know it...

There's a debate raging amongst my friends and probably yours too on how to achieve the best in life. People will often say that "knowing what I know now, I should have x and life would be better". Such a statement is predicated on the premise that if you could go back and change just one thing, keeping everything else the same. This is false. Just as economics students are taught to use the phrase "other things constant" when making future projections to cover their posteriors and are often proven wrong, if you plan this way, you most likely will be wrong. In conclusion, the best long-term outcome comes from making the best short-term decisions. Nothing more, nothing less. Hindsight is 20-20, but only in small doses.

Our mates at the Consumerist bring us news that there's a new government superagency in the works. Historically, downturns have yielded a large growth in government (the Great Depression brought us the FDIC, the SEC and a few other government regulators), while I'm far from the most anti-government person, I'm wary of this. Why? Because this is supposed to be a conservative administration. I can't be agreeing with them on anything! This cannot pass.

Some of my foreign readers, who are from parts of the world where it rains damn near every day, ought to skip this. For the rest of you, here's my theory:

Rain is caused by an over-abundance of water vapour in the atmosphere. Carbon monoxide lengthens the water-cycle process, because the Carbon atom competes with the Hydrogen for Oxygen bonds. By Friday, the Carbon and other exhaust fumes have reached their maximum level. At the weekends, the rate of increase slows, causing the hydrogen proportion to increase, bond with water, and cause rain.

I would like some other viewpoints on this.

From the BBC:

Northern Rock is to be nationalised as a temporary measure, Chancellor Alistair Darling has said.

What's the point of having a bank be private if, when it fails, the government takes it over anyway? Anyone have ideas? Anyone?

Everyone and their economist father (well, me dad works in VC and has an MBA, so I guess you could say he plays an economist at work) knows that a recession is 2 consecutive periods of negative growth in GDP. However, Christopher Penn seems to have his own definition. Namely, when the the number of google hits mentioning the word has a sharp increase, though I am more inclined to agree with one of the commenters, in that it's gauging more fear than reality. The above said, we are overdue for a downturn.

So far, the Bush administration has managed to give billions upon billions of dollars in free money to companies like Halliburton and Bechtel, while giving me a sum total of $350. There are now rumours of $800-$1600 more in economic stimulus from the Bush administration. I hope this doesn't count for my annual bonus!

I'm currently reading about peak oil. Which lead me to think that there must be a peak price of oil. With the way capitalism works, oil will have to reach a peak price before alternatives to it become economically feasible. Whether it's hydrogen, ethanol, or another source, there's still a cost to making it.

Given a price-point p at which it is economically viable to use, say, solar cells in lieu of fossil fuels, and given the price of oil at present as pⁱ and t as time, we have:
p=pⁱ*t
Now, pⁱ is known and changes every day. According to a friend in Alberta, Canadian oil is economically viable at a price point of $30~$35. At the moment, Brent North Sea Crude trades for $89.75/barrel. So the assumption of a constant supply is not a valid one, add a variable s to the equation. We now have:
pⁱ*t/s
But supply only changes after a given price point. So our final equation for oil is:
p=pⁱ*t/(s-s₀)

In other words, peak oil is a concept that rests on an assumption that there is a finite supply of oil. While it is true that there is a finite supply of crude oil, that supply is a lot larger than previously assumed.

The subprime meltdown has lead Citigroup to write down $18.1bln. How is a write-off different from a write-down? How many more quarters can the economy take before something happens? Any ideas? I'm curious to hear your thoughts.