Economics

Economics
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Updated: 9 hours 44 min ago

The Imperial War Machine Marches Forward Under Donald Trump

6-Apr-2017

Now here’s the most disturbing aspect to all of this. Many of us assumed that anti-war protests under Trump would be far more vibrant and massive than under Hillary Clinton. This probably would’ve been the case if not for the non-stop Russia fear mongering from the corporate media and the Democratic Party, but they’ve pushed themselves into a terrible corner with horrible consequences for the rest of us.

If Trump now escalates American intervention in the Syria war, Democrats and other fake liberals will feel compelled to support this disastrous adventure because it’s against evil Russia. See how this works? You got played people.

Read the rest here.

Uncertainty and the Humility of Forecasting an Unknowable Future

5-Apr-2017

Certainty and uncertainty come in a variety of flavors. “Certainty” seems rather definite, but lurking beneath certainty is the more scientifically verifiable notion of probability: the probability of outcomes can be high enough to qualify as certain and low enough to qualify as unlikely.

We can’t know with perfect certainty that our neighbor hasn’t invented a death-ray and may decide to test it on us due to that simmering feud over his dog Fluffy’s antics on our yard.

But we can make an assessment of the probability of this occurring, and conclude the probability is low with a high degree of certainty.

This assessment should change, of course, if we hear strange noises in his shop and notice shrubs in his back yard are now charred in peculiarly symmetric circles–and we learn he previously worked at a national lab on high-energy weapons but was dismissed for pursuing crazy ideas about developing handheld death-ray devices, i.e. phasers. (Star Trek fans, please raise a cheer.)

This brings us to a critical distinction between low-probability events, i.e. known unknowns a.k.a. highly unlikely “long-tail” events, and unknown unknowns, a.k.a. “black swans” made famous by author Nassim Taleb.

What is a known unknown? Death qualifies as a known unknown: we know with a high degree of certainty that the vast majority of living things eventually die (even cancer cells die once their host dies)–but the timing of their individual natural death is inherently uncertain, due to the great number of inputs, variables and causal factors intrinsic to life.

Statistically, there is a high degree of certainty that any dynamic data series will eventually revert to the mean. Spikes in asset prices will typically drop back to the trendline, but the timing of this reversion is intrinsically uncertain due to the unpredictable interactions and feedback loops inherent in complex systems of dynamic inputs and causal factors.

Thus statisticians who are tracking a tulip-bulb (or South Seas Company) like bubble in a speculative asset can forecast the eventual collapse of the bubble, but not the date and time of the reversion.

This collapse (reversion) can be forecast with a very high degree of certainty. (If tulip bulb prices had continued rising with no reversion, tulip bulbs would now cost $1 trillion each).

There are causal mechanisms that explain this eventual collapse: the market eventually runs out of “greater fools” willing to outbid other buyers seeking to buy tulip bulbs, and sellers deciding to cash in their gains overwhelm the few buyers still in the market.

Once the speculative frenzy driven by certainty of staggering profits evaporates into a fear of equally staggering losses, the bubble loses its momentum and prices revert to the long-term trend (often after briefly falling below the mean, requiring a reversion higher).

The bubble in tulips could not be forecast like a reversion to trend. We can forecast that humanity’s attraction to speculative frenzies will not disappear, but we can’t predict the next manifestation of this human trait.

Then there are the unknown unknowns–the stuff that can’t be forecast except as a generalization, i.e. that there are unknown unknowns that will crop up with some regularity– a regularity we can’t forecast with any certainty.

All this should nurture a profound sense of humility in all who dare to forecast an inherently unpredictable future. While humans love a good speculative frenzy that promises unearned wealth for everyone who gets into the game, they also love the illusory certainty of comforting forecasts based on past trends.

Thus we are reassured by long-term forecasts that claim a high degree of certainty that our comfortable lifestyle and all the promises issued by governments and pension plans will come to fruition as promised without any untidy or distressing reversions, phase transitions, collapses triggered by highly unlikely events (those pesky known-unknowns) or even peskier unknown-unknowns).

We are now facing an unpredictable collision of these conflicting sources of certainty and uncertainty. On the one hand, we’re constantly assured our status quo is durably permanent, and all the lines that assure us all the promises that have been issued will be met without any sacrifices or disruptions have been extended with handy pencils and rulers.

But on the other hand, we’re also assured that a certain number of unlikely events will occur despite the low probability we calculate. We’re also assured that unknown-unknowns black swans) will crop up and surprise everyone from time to time.

Can both of these assurances be true? Can we be assured that the odds of something completely upsetting our apple cart of predictable comforts, entitlements, pensions, etc. are so low we needn’t worry about them, and also be assured that highly unlikely events and unanticipated events (black swans) will arise from time to time, threatening the comfortable certainty of all these systemic promises?

The answer is “yes and no.” We can say that based on current trendlines, the future should be predictable with a high degree of certainty, but these trendlines could be completely disrupted by low-probability events and/or black swans.

The question boils down to: are “current trends” the bubble equivalents of the tulip bulb craze? Please glance at this chart of skyrocketing federal debt before answering.

In essence, While we’re being reassured that all these grandiose promises are resting on trends that are as reliably predictable as the tides, the next easily predictable crisis will very likely reveal the trends are speculative bubbles that will predictably burst in a devastating reversion. The wise approach forecasting the future with a profound humility, while the soon to be bankrupted foolish are confident in their grasp of what’s knowable, unknowable and predictable.

It’s Russia, of course!!

4-Apr-2017

So now Putin is being blamed for the continued and growing popularity of Andrés Manuel López Obrador in Mexico!

Yes, indeed, first the article says Russia is responsible for Trump, Brexit, LePen, the ‘no’ vote in Italy and attempted to rig the Dutch election but those wily Dutch hand counted their votes instead! (Nothing to do with the fact that privacy activists had demonstrated how easily they were hacked and thus decisions stemmed from this).

And, in fact, it is MAX KEISER himself who is rigging the elections in Mexico by interviewing local guests who aren’t allowed on the mainstream media there!

Al que no le asusta ese submundo es a John Ackerman, el consejero más cercano de López Obrador. El conductor de RT, Max Keiser, se refiere a Ackerman como “nuestro hombre en México” (RT, 21.4.15, visible en You Tube). Ackerman se presenta, no como analista sino como representante de Morena. La primera colaboración de Ackerman en Keiser Report fue el 22 de noviembre de 2014. Al aire, Ackerman le comenta a Keiser: “Si recibiéramos el apoyo por parte de los medios internacionales, como ustedes, Morena triunfaría como Syriza y Podemos”. Por lo visto esa solicitud de apoyo se concretó pronto.

Notice also that the new paradigm is that populists are authoritarians and elites are democrats!

In Mexico:

En todos estos casos su propósito es actuar para que accedan al poder líderes populistas autoritarios.

And around the world:

Western press is now just equating populism with authoritarianism to try to remake elitism as democratic pic.twitter.com/SW1IKUV1zh

— Zaid Jilani (@ZaidJilani) April 4, 2017

And, remember, in 2020, if you don’t support Chelsea, you’ve been duped by Putin:

Dear god pic.twitter.com/3GYsaNgB9V

— Stacy Herbert (@stacyherbert) April 4, 2017

Fed Reportedly “Tired of Waiting for Inflation,” Plans to Give Every Household $1 Million in Cash

3-Apr-2017

The Federal Reserve has been trying to boost the official inflation rate for eight long years, and apparently patience with current policies is finally wearing thin.Rumor has it that the Fed is readying a new “nuclear option”: distributing $1 million to each household in the U.S.

The Fed can create any sum of dollars it chooses with a few digital keystrokes.An unidentified source at the Fed reported, “The handheld calculators at the Fed only have 12 digits, so there’s a bit of confusion about how much money we’ll have to create to give $1 million to all 100 million U.S. households. The consensus answer is $100 trillion, but they’re putting the numbers into the current econometric models to verify this.”

The basic idea is that giving each household, regardless of wealth or income, $1 million each will spur consumption so mightily that inflation will skyrocket. “What the Fed has wanted for eight long years is to generate an expectation of inflation,” our source explained, “so that consumers will spend whatever cash or credit they have now, knowing that it will buy less in the future.”

Once people expect substantial inflation, they realize the best course of action is to borrow as much money as possible now before interest rates rise–an inevitable consequence of inflationary expectations.

They also realize it’s best to buy whatever you can now before the price rises next month.

“The advocates of this program see asset prices leaping higher,” the source said. “Why would a seller of a house asking $500,000 before ther giveaway maintain an asking price of $500,000? of course the price will immediately jump to $999,000.”

Debt repayment becomes much easier with $1 million in cash. The source iside the Fed noted, “Imagine how much money the federal government is about to lose in student loan defaults. With $1 million in cash to each household, naturally the government will deduct any student loans, overdue taxes, penalties and so on up front. The banks will love this and so will the federal, state and local governments.”

Skeptics are uncertain that households will feel any motivation to pay off private debt such as home mortgages. If interest rates are set to jump higher, it makes sense to hold onto your 4% mortgage rather than pay it off.

The Fed insider noted that advocates expect a tremendous surge in big-ticket consumer durables such as RVs, muscle cars and vacation getaways. “It will be a bonanza for every company selling whatever the middle class aspires to,” the source said.

Skeptics believe the money would be better spent on rebuilding America’s crumbling infrastructure, but the Fed source said that’s already been factored in. “Every level of government can reap a fortune with consumption taxes, user fees, transfer taxes, sales taxes, you name it. With a million bucks to blow, how many people are going to complain about higher sales taxes, transfer taxes, registration fees, higher property taxes and all the other new revenue streams? Very few.”

When asked about the potential of triggering Venezuela-like hyper-inflation that ends up destroying the currency and the economy, the source demurred. “The Fed is very confident it has the tools to manage inflation as well as it managed the 2008 Global Financial Meltdown: whatever the problem may be, the solution is to create more liquidity and credit.”

So how are you going to spend/invest your $1 million?

DISCLAIMER: this essay was written in the spirit of April Fool’s Day.

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