Ice cream store art (Daniel Francisco Roncesvalles)

In Ellicott City, Maryland.

In progress

…

Finished Tutti Frutti

Oldie of the week – I don’t want to talk about it (Rod Stewart and Amy Belle)

I discovered this while recuperating in Arizona.  It was part of a concert by Rod Stewart at the Albert Hall in 2004.

The song dates back to 1971, and Rod Stewart recorded it twice – in 1975 and 1989.  Amy Belle gives something extra to this 2004 version.

We now know whom to blame for poll automation snafu

The mother chip, of course.  Not the chipmunk.  Not the potato chip.  Not the fish and chips.  So sayeth Frank and Ernest in their Dec. 8, 2009 cartoon.

Oldie of the week – The end of the world, and Both sides now (Skeeter Davis)

Skeeter was up there with the divas of country like Loretta Lynn, etc. Her real name was Mary Frances, but she was called Skeeter by her grandfather.  The end of the world was her no. 1 hit in 1963.

Both sides now is from a 2006 album released after her death in 2004.

Scientific progress

is hard to predict.  Partly it’s economics. Here’s a funny documentary on modes of transport by Chris Bucholz.

I would bet the Fairey Rotodyne failed because the per-passenger cost was too high.

Where does the US dollar go?

Frank and Ernest know.

Riddles schmiddles

1. Why can’t a bicycle stand alone?

Yellow just like a Mini C

2. What does a clock do when it’s hungry?

3. Distinguish between honesty and insanity.

Answers:

1. Because it’s two tired.

2. It goes back four seconds.

3. Honesty is the best policy; insanity is the better defense.

Hey, corny is good.  On the cob, too.

Hat tip to whoever wrote this.  No. 3 was supposedly written by one named Anonymous.

Oldie of the week – The Puppy Song (Harry Nilsson)

“A wish is just a dream..”

From Nora’s 1998 flick, “You’ve Got Mail.”

Will the US dollar fall forever?

On a clear day, the US dollar cannot fall forever.

That the dollar is now weak because the United States is more willing than Europe or Japan to create money is a story that is easy to accept.

But it is altogether a different question how long Europe or Japan would be willing to see the United States do better in terms of maintaining employment, Keynesian style.  That is, if textbook macro works as conventionally thought.

This means that at some point the European and Japanese central banks will be willing to tolerate more inflation than in the United States.  The question is when.  But when it happens, the US dollar should stage a strong recovery.

Yet, the behind-the-scenes debate must be all about the effectiveness of Keynesian policies.  The Americans believe, while the Europeans and Japanese are skeptics.

But times and opinions can change.  As spectators, we can only watch and guess.

If Keynesian policies ultimately don’t work for Obama, his economic team will have to give up and look for more “micro”-based solutions, such as those  a la Hayek.  This would also set the stage for a dollar recovery no matter what happens outside the US economy.

Either way, the dollar fall cannot last.

The Philippines and the IMF – pesky questions

The face of the IMF

In a press report, the goals of a team of IMF economists visiting the country were given as based on a duty to “promote ‘orderly economic growth with reasonable price stability’.”

This leads one to ask how many cases there are of “disorderly” growth or “unreasonable” price stability.  In these times of global financial crisis and recession, nil.  So, what gives? Is the IMF after bogus culprits?

And there is talk of a “Principals’ Meeting,” where the “economic managers” get to listen to  the IMF team.  What exactly is a “Principal”? Aren’t government officials mere agents of the sovereign? And what do these government officials do with the IMF staff’s advice? Do they talk about it with the general public?

Somehow, the language of macroeconomics has gotten more convoluted as time goes by.  Why is the mystery.

Guess who’s buying the IMF’s gold, and whither the price of gold?

Gold has lately become an almost-bubble asset.  Recently it has reached new highs, and the easy but half-baked explanation is that it’s because the U.S. dollar is weak.

Gold bugs have some reason both to be afraid and comforted.  The IMF has announced it would sell 400 tons, or 1/8 of its total holdings, if only so the proceeds can be used to generate income to pay staff salaries.  But the IMF sale comes amidst a five-year agreement among European central banks also to sell gold, but only for limited amounts.

It is almost as if many of the largest official holders of gold (i.e. central banks), including the IMF, are saying that while gold is passe as a reserve asset, they really don’t want to let it go.  Better to keep gold’s ownership close to their collective vests is the apparent message.

So who recently came to dine at the gold ownership club table? India.  And folks thought it would be China, given some talk in the media that China might be thinking it has too much US dollars in its reserves.

The last time gold made important highs was in the early 1980s, amidst global inflation, and just before Volcker decided to tighten US monetary policy.  It isn’t quite the same today, though gold has been a Johnny-come-lately to the run-up in 2008 in oil prices.

So, does this mean gold is headed for a fall? Not while the IMF is telling its membership to adopt loose Keynesian policies and the global recovery is fragile.   Ironically, gold is also driven by prosperity in the Middle East and Asian countries.  So a firm global recovery is not necessarily bad for gold, even if by then just about every central bank will be talking about its “exit strategy” from old-fashioned Keynesian stimuli.

And of course, the Buffett-PIMCO bear-dollar story helps prop up gold too.

So there you are.  Gold seems to be just fine where it is.  It can’t go up by much because the world economy isn’t exactly roses.  It can’t go down much because the world is awash in paper money because of Keynes.  And central banks are still hung up on owning this so-called “barbaric relic.”

Did Lucas pick up after Hayek?

I had thought that Hayek’s use of the markets concept helped to explain why Keynesian economics would ultimately fail.  Each market participant would contribute his iota of information to determine prices, which would then reflect collective wisdom.  Any tinkering by a “smart policy maker” would be undone, and thus this ended up as the kernel of the Lucas Critique.

But it seems Lucas became the foundation of later work, called RBC and then DSGE models, that came to be touted as “the best there is.”  This is of course vainglorious and premature self-congratulation, what with the advent of the 2008 global financial crisis.

The explanation is perhaps that Lucas never really read Hayek.  Very few mainstream economists did or do.  But here’s an explanation by Paul de Grauwe.  In short, de Grauwe considers DSGE/Lucas as “top down” models built on the short-circuitry of rational expectations (“If it doesn’t succeed, it must not have been rational; so it could not have happened”).  But models running on Hayek’s ideas are “bottom up” models of incomplete information, which provide an alternative explanation of unemployment even as markets try to do their thing. It is better than Keynes because Keynes simply assumed wage and price rigidities (a failure of some kind of markets) and injected “animal spirits” to explain the Depression.

Bottom line:  Lucas was a detour into not-quite-useful rationality.  That is why macroeconomics is back to the drawing boards.  Kind of like the Wise Guys having to stock up on home-made pasta and mattresses, waiting for a solution to their “territory” problems.

The economics of blinking, or the case of disappearing gas and diesel

PDI Cartoon

When to blink is an art.  Do it too soon, and you’re “easy.”  Do it too late, and you run the economy to the ground. Two editorials, by the Tribune and Malaya, predict the blinking will happen sooner or later.  The Daily Inquirer opines that due obedience from industry players is “wishful thinking.”

What is this blinking all about?  Retail petroleum. The Executive has ordered a price freeze.  The industry claims they cannot sell profitably at the mandated price.  It is apparently a matter of when the inventory runs out. Then, the story goes, no more traffic.  No more pollution.  We can ride bicycles.  Not a bad sight for the Al Gore-Loren Legarda wannabees.  The smart ones (and I don’t refer to the ones making PCOS machines for May 2010) think it is a poker/bluff game.

But for now what does the average Juan consumer do?  Rationally, he fills up every tank he can find, and many have cars that just sit in the garage.  Some, more equal than others, have Ford Expeditions, which can hold a lot of gas.  So, Juan consumer will bring the day of inventory-run-out sooner than otherwise.  The so-called poker game will then have to be played out, and not in the World Series in Las Vegas.

This is supposedly an Economics 101 piece of cake.  The textbook  answer is to ration the available supply (give it only to the “deserving”) and to demand that those with “excess” gas give it back.  This is, interestingly, easier said than done.  Not even Wowowee can corral the gas-challeged into tv contests that promise a heavenly gas-available-at-low-prices dream.

Here’s a modest suggestion.  Declare independence from the Big Three.  Nationalize them all since at some point, it will become an Economic Emergency.  And let Manny (Pacquiao, of course) decide where the nationalized gas goes, and at what price.  Boxing is so much easier, but hey, everybody believes in the Pacman magic.  And thus and yet, all will live happily ever after.

IMF wisdom, or how Aristotle came to predict a W-shaped global recovery

Sometimes I just have to wonder about macroeconomics and macroeconomists, the latter being aplenty in Washington, DC where the IMF has its main office.

In effect, Anoop Singh is saying that the global recovery is not yet there.  But it’s an Either Way I Win Story.  If it’s not there, it’s the fault of all these officials who don’t believe in Keynesian economics.  If it’s there, it’s because they followed IMF staff advice on the “zombie” state of many industrial-country banks. But doesn’t That take a long while?  So it isn’t really a W but more like half a W, with a horizontal.

Of course, the lead story is how Japan is way ahead in solving bank crises.  If so, why is Japan not the main engine of recovery at least in Asia?

Claus Vistesen gives an example of the sober (or sobering) outlook on the Japanese economy. Even the IMF staff cannot disagree because they also claim that Asia will go nowhere until it can export its way out, and that applies as well to Japan (less so to China and India, of course).

Moral of the story:  If the IMF staff is right, don’t bet your bottom investment dollar on Asian emerging markets.  But seriously, where else would an investor go?  T-bills?  Sounds like (good old) Taleb advice!  I’d say (with a little tongue in cheek) that the Buffett-PIMCO US dollar story is perhaps on its last legs.

Oldie of the week – Under my thumb, or It’s the same old song (Stones or The Four Tops?)

So, what’s the diff? Is it the riff?  What’s a riff anyway?

On time line, the Four Tops’ was a single in 1965; the Stones put it out in 1966.

For more on “copy cat” songs, read Ben Greenman of the New Yorker. This one focuses on Beyonce’s Halo and Kelly Clarkson’s Already Gone.