Latest Stories

• Credit Default Swaps: Proudly the Tool of the Devil Again
• Protectionism and the Chinese Box of the Renminbi
• QOTD: John McCain’s 15% U.S. GDP Cut
• Who Files for Bankruptcies?
• Books of the Week

 

Road to Recovery: Yo, We’re Good

[via Dshort]

 

Iceland Loses McDonald’s: New Rule?

It used to be a favorite of pop globalists everywhere to say that two countries with McDonald’s had never gone to war. Sadly, that no-war Big Mac rule has been broken various times in the last decade.

I’d like to propose a new McDonald’s rule for such folks: When McDonald’s leaves your country you are entering a new status of undeveloped economy – as is now the case with Iceland. Then again, at least we can now go to war without Iceland without worrying about the former rule.

The move will see Iceland, one of the world's wealthiest nations per capita until the collapse of its banking sector last year, join Albania, Armenia and Bosnia and Herzegovina in a small band of European countries without a McDonald's.

….McDonald's blamed the closures on the "very challenging economic climate" and the "unique operational complexity" of doing business in an island nation of just 300,000 people on the edge of the Arctic Circle.

More here.

 

Readings: Asset Bubbles, Banks, etc.

• Central Banks Hitting Asset Bubbles Show No Faith in Greenspan model (Bloomberg)
• American bank failures: An uncelebrated century (The Economist)
• Adjustment and the dollar (Krugman)
• Eighty years after Wall Street crashed, what did we learn? (BBC)
• Keynes vs. the classics, Round 2 (Skidelsky)

 

Dollar Up YTD Against Only Nine Currencies Worldwide

With the U.S. dollar is in full decline against all of its major trading partners, I thought it would be fun/interesting to see the currencies against which the U.S. dollar hasn’t declined this year.

There is a total of nine (!) currencies worldwide against which the U.S. dollar is up in 2009. Here is the list and YTD dollar performance:

Maybe that Ghana holiday needs to be back on again.

[Data via Pacific]

 

The U.S. Dollar, Then and Now

A graph of the U.S. dollar against currencies of some of the U.S.’s largest trading partners since 1971. The bifurcation is the interesting thing.

[via Pacific]

 

Super-oarsmen vs. Lying Historians

A story about a study (reported in the New Scientist in 2007) purporting to show that modern fit athletes can't match the performance of ancient oarsmen was the subject of an email discussion over the past few days. Here is the gist:

In 427 BC, the Greek city-state of Athens crushed a revolt in Mytilene on the Aegean island of Lesbos. The Athenian assembly decided that all men in Mytilene should be killed in punishment and dispatched the order by the fastest means it knew - a trireme, the classic oared warship of the ancient Mediterranean. The next day, the assembly relented and sent a second trireme to call off the massacre. Mytilene was 340 kilometres away and the first ship had a day-and-a-half start - but by rowing non-stop for 24 hours, the crew of the second ship arrived in time to stop the slaughter. Modern crews who tried to match this feat in a reconstructed trireme have never come close. Were ancient Athenian oarsmen supermen?

...Even the most practised crew, though, came nowhere close to matching the [endurance of their forebears. They managed just under 9 knots in a sprint - a reasonable ramming speed - but could keep it up for only a few seconds. Over distance they could sustain a top speed of no more than 5 knots. Yet the historian Xenophon implied that even a moderately good crew could manage 7 knots for many hours. In the race to Mytilene, as recounted by Thucydides, who had himself once commanded a fleet of triremes, the pursuing ship must have averaged this sort of speed for more than 24 hours.

While it's possible that ancient oarsmen were super-rowers, isn't it at least as plausible that our data about ancient feats is suspect? If history is written by the victors, sports history is written by the over-testostoroned victors.

 

Canadian Flu Fears Go Parabolic?

This likely has to do with the anomalousness of the current flu season and the poverty of prior data, not with what’s actually happening on the viral ground. Nevertheless, Google Flu Trends has Canadian flu tracking going parabolic:

 

Rethinking World Income Distribution: Not So Bad?

Some controversial and potentially important findings in a new paper on a global income distribution changes over the last 40 years:

Parametric Estimations of the World Distribution of Income
Maxim Pinkovskiy, Xavier Sala-i-Martin

We use a parametric method to estimate the income distribution for 191 countries between 1970 and 2006. We estimate the World Distribution of Income and estimate poverty rates, poverty counts and various measures of income inequality and welfare. Using the official $1/day line, we estimate that world poverty rates have fallen by 80% from 0.268 in 1970 to 0.054 in 2006. The corresponding total number of poor has fallen from 403 million in 1970 to 152 million in 2006. Our estimates of the global poverty count in 2006 are much smaller than found by other researchers. We also find similar reductions in poverty if we use other poverty lines. We find that various measures of global inequality have declined substantially and measures of global welfare increased by somewhere between 128% and 145%. We analyze poverty in various regions. Finally, we show that our results are robust to a battery of sensitivity tests involving functional forms, data sources for the largest countries, methods of interpolating and extrapolating missing data, and dealing with survey misreporting. [Emphasis mine]

 

Weekend Reading: iPhone, Oil, Rails, WaMu, etc.

A few links from my weekly Weekend Reading column:

• The iPhone app industry (BusinessWeek)
• The rise and fall of oil production (Telegraph)
• Speed-Riding the Rails (Bond Buyer)
• Missing data problems in the world of oil (EIA)
• Reckless strategies doomed WaMu (Seattle Times)
• Sequoia branches too far (Fortune)
• Record bidders lift auto plate prices (Shanghai Daily)
• The Role of Institutional Investors in Rising Commodity Prices (Journal of Investing)

 

NOAA Winter Outlook: Wet(-ish) West

Here, in graphical form, is NOAA’s latest El Nino precipitation outlook for the U.S.: Wetter than usual for California, but dry in northern Oregon and Washington.

 

Roubini: No Commodities, Oil, or Gold For Me

With commodities, gold and oil having becoming the de facto investment choice for many investors, it’s good to have someone noisily taking the other side. Here is my amigo Nouriel Roubini on gold:

I don’t believe in gold. Gold can go up for only two reasons. [One is] inflation, and we are in a world where there are massive amounts of deflation because of a glut of capacity, and demand is weak, and there’s slack in the labor markets with unemployment peeking above 10 percent in all the advanced economies. So there’s no inflation, and there’s not going to be for the time being.

The only other case in which gold can go higher with deflation is if you have Armageddon, if you have another depression. But we’ve avoided that tail risk as well. So all the gold bugs who say gold is going to go to $1,500, $2,000, they’re just speaking nonsense. Without inflation, or without a depression, there’s nowhere for gold to go. Yeah, it can go above $1,000, but it can’t move up 20-30 percent unless we end up in a world of inflation or another depression. I don’t see either of those being likely for the time being. Maybe three or four years from now, yes. But not anytime soon.

He has similarly unhappy views of action in commodities and oil, so check the rest here.

 

Readings: 17th C. Derivatives, Bankers, Rural Life, etc.

• Why Do Bankers Make So Much Money? (Bookstaber)
• Michael Green: New Lucasian Chair at Oxford (Guardian)
• Tax Records Open in Norway (NYT)
• Rural Amenities: Current Trends (USDA)
• The smartest boys in the alley, early derivatives on the London stock market (Economic History Blog)
• Schlumberger’s outlook is unhappy for energy sector (Minyanville)

 

Matt Drudge vs. the Dollar

In case you hadn't noticed, Matt Drudge has become fascinated with the U.S. dollar. Admittedly, he's not the only one, what with the dollar swan-diving in the last few weeks, but it feels like Drudge has ramped up his number of stories of late.

Some are arguing that Drudge is part of the cause of the dollar's decline, which seems a bit much. Others are arguing that Drudge is just helping the political right focus in on an easily-demagogued data point.

I'm not going to touch either argument, but I did think it would be fun to have a look at the data. Has Drudge really upped his dollar headlining, and has it been tied to a change in the value of the dollar?

To answer the question, I scraped Drudge's site back to 2002 for dollar-related headlines, of which there were 477. I then bucketed the headlines by month. At the same time, I grabbed the dollar index over the same period (a measure of the U.S. dollar's performance against other major currencies), and calculated the month-over-month change of that index during the period from 2002 to October of 2009.

This first graph shows the dollar index's changes and the number of Drudge dollar headlines per month from 2002 to now. As you can see, there has been a significant increase Matt's fascination with the dollar over the last two years. It's not that he never had dollar-related headlines before, but the interest was more episodic prior to 2007. Now it's fairly consistent -- with intermittent spikes higher coinciding with price moves.

Is Matt influencing the dollar's decline, or at least its volatility? That's unlikely, but it's also nearly impossible to answer. About the closest we can come is to see if Drudge's dollar headlining matches up with major changes (in an absolute sense) in the dollar index. As the following figure shows, there is a relationship, but the spread is very large, with some big moves attracting his attention, while others don't.

Do things change if you split the Drudge dollar fascination by up versus down dollar moves? As it turns out, things do change. The following figure shows that Drudge is more fascinated with dollar declines than with dollar advances.  Granted, there is more of former than of the latter, but the point still stands -- Drudge likes to headline a down dollar.

 

Art Editor Maps Drive Around World, Then Drives It

This is a lovely thing, something that crosses both the art and physical worlds: Former AP art editor Nicolas Rapp created a map of how you might (mostly) drive around the world, and now he is leaving to take a year to try to do it. Note the dark stretches of the map, gaps where Mssr Rapp isn't entirely sure how he'll get from A to B.

More here.


 

Friday Frivolity: Label the TSA Picture

This photo is too good not to mess with a little, so let's have some Friday frivolity by competing to come up with the best label. Winner gets huzzahs, etc, and the contest closes tomorrow mid-day. Be sure to vote up on labels you like best. And don't cheat. Much.

Photo is © Julie. Don't mess with or redistribute it.