Awaiting sanctions…

A little humour from the web :-)medved 3

Ukraine: an Ender’s game

A monument to Mr. Keynes

November 7 — the day of celebration of the Bolshevik Revolution in the USSR, magnificent parades in Red Square, leaders waving to the masses from the Mausoleum.  Ironically, this is the day on which we learn the result of the 2012 presidential elections in the US.

I agree with Charles Rowley’s view that the American exceptionalism is no more.

In particular, he writes:

“The Democratic Party makes one major error in quietly gloating over this transformation. Social market economics is not the monopoly jurisdiction of any single party. By 2014, the Republican Party will have adjusted to political reality. Mitt Romney was its last shot in support of American exceptionalism. Both parties henceforth will become social democratic in nature. And American exceptionalism will be a historical relic.”


From the Newseum

Trade deficit: How to beat China and other exporters

It is known that the U.S. has a very large trade deficit with China.  It appears to concern many.  But there is a perfect solution.  I have heard rumors :-) that Chinese labor is no longer as cheap as it used to be.  China has been a successful exporter, it has been growing, standards of living have been rising and so have the wages.  Now, companies start hunting for cheaper labor in other parts of the world (this is assuming that they are hunting the cheaper labor because skilled workers naturally cost more).  The solution is to stop worrying about beating China in export war, let it export away, which will raise standards of living and cost of labor in China even further, and maybe one day American labor will even become cheaper than the Chinese — well, anyway, theoretically speaking.  A little humor will do, as I do not really believe in wholesomeness of Chinese government that much.  At least not today.   // *

++++ Please see links in comment provided by Andrey.  These are an excellent edition to this topic.

In response to a comment — Soviet statistics, Russia’s modernization, and electricity usage map

I would like re-post here an insightful comment to The Economist post by Andrey:

“Достаточно взглянуть на достижения даже за последние 10 лет, все эти реформы оказываются обычным трепом и в лучшем случае откатом. В 1987 году Новосибирские экономисты, оценили реальное состояние в советской экономике на основе затрат электроэнергии. Все данные по выпуску продукции тогда были фальшивыми, во много раз завышенными. Но никто не фальсифицировал расход электричества, и на этой основе было доказано, что советская экономика не приболела, а издохла.

Оказалось, что расход энергии это надежный показатель производства. А поскольку вечером промышленность уменьшает потребление, то энергия перебрасывается на бытовой сектор и на освещение. Вот и видно все, как на ладони. Все успехи Сколкова и модернизации, “Назад в Архангельск” (послушайте Гребенщикова).”

The first link above is to a map, which  can be viewed on an English-language site here and description here.  It is a NASA project, which registers electricity usage and type in various parts of the world and shows growth or decline of human activity during a period of time.  This data has been used to draw conclusions of a country’s or region’s economic development.  It is the nighttime (consumer) usage that really gives an idea about the standard of living.

The second link is to an 1987 article on Soviet production and growth statistics.   It exposes the problems of accuracy in reporting and incentives or lack thereof :-)  In my own work I drew on the research by two outstanding U.S. scholars, Warren Nutter and Naum Jasny, who successfully battled the lack of information on the true state of the Soviet economy and inaccuracy of existing information in the 1950s-1960s.  In the light of the information released in the 2000s from the Soviet archives, it became evident that their conclusions were right on the mark.   This 1987 article with a very witty title has one interesting point.  While it is conventionally believed that the Soviet growth turned in the 1970s, it is not quite accurate.  The authors show it had happened a decade earlier.  The mitigating factor was… the price of oil.  Reminds of a recent situation, doesn’t it?  Here’s the direct quote:

“Заглянем в справочник “Внешняя торговля СССР в 1984 г.”. Из 74 миллиардов рублей годовой экспортной выручки 38 миллиардов (больше половины) получено за нефть и газ, в том числе 31 миллиард за нефть. Не будь этих денег, как страна покупала бы технику, хлеб, одежду, сахар? В 70-е годы ситуация была как раз благоприятной для нашего экономического развития. Исключительно благоприятной. Добыча нефти увеличивалась фантастически, цены на нее на мировом рынке пли круто вверх. Такого стечения обстоятельств, вероятно, больше уже не будет. Объективные трудности начинаются только теперь — добыча нефти стабилизировалась, увеличивать ее экспорт вряд ли удастся, а цены на мировом рынке упали в 3 раза. И, скажем, за тонну зерна сегодня надо отдавать три тонны нефти, хотя недавно меняли практически тонну на тонну. А покупная техника? В 1984 году ее приобрели на 24 миллиарда рублей. Это главная статья нашего импорта. Учтем, что не в пример нефти техника на мировом рынке дорожает. [195]”       // *

Romney’s riches: A Russian perspective

Romney refuses to put his riches at the center stage of the election campaign.  I wonder why.  Probably because he is quite affluent.  The truth is that either candidate cannot complain of being poor.  But somehow this makes Romney look richer.  The Russian perspective on this seems very sensible then:  the one who is richer, will experience diminishing marginal returns from additional wealth; therefore, is less likely to exploit his position for personal gain.  Who said Russians are bad economists?  // *

Survey result: Pessimistic economists

Just released, survey points to pessimism among majority of economists regarding near-term future.  Well, it is about time to recognize the fact.  There are a couple of possible explanations why it took  so long.  First, there is a certain lag in data collection and processing, and economists by nature  are wary of drawing premature conclusions.  Or that the majority surveyed now happened to be left-leaning economists.  In my experience, most free-marketers are more optimistic in general, while the left is dooms-day-coming.  I am afraid in that respect I do not conform :-).  // *

The Piggy Bank of EU

More European centralization is in the works:  Euro zone officials are devising a plan for the central bank.  This will allow banks to be bailed out directly, without going through the national governments.  So it seems that the crisis has not moved Europe in the direction of disintegration, but instead moving it in the direction of more centralized control.  The Fed was conceived in 1913; its European counterpart may come into existence a 100 years later.   // *

Turboprop vs. Jet

WSJ (July 9, 2012) reports that “Turboprop aircraft makers ATR and Bombardier are seeing orders swell as more carriers switch from jets.”  But the economics of this decision still is and will be muddled with regulations, and the final outcome is uncertain.  The switch to turboprop may be used as another example of economic decision making when a resource (fuel, in this case) becomes cost inefficient.  For more details on turboprop vs. jet, read here.  Currently the turboprop technology is more efficient for short routes and small airplanes, but the airlines apparently would like to see a larger size of aircraft.  General  Electric is looking to develop turboprop engines with greater efficiency.  // *

Who wrote this for The Economist???

This is a bad one for The Economist.  An outrageously bad one…

In May 26th issue, on p. 7, under the title “It’s my party”, it says:

“Russia’s president, Vladimir Putin, unveiled a government dominated by loyalists, tightening his grip on the economy and national security after popular protests.”

So far – ok, even though it comes as no surprise.  But then it continues:

“The new government is likely to curtail the ability of Dmitry Medvedev, the prime minister, to pursue market reforms.”

Where in the world has the author of these words been for the last decade?  Medvedev, Putin’s puppet, is the driver of market reforms?  Maybe The Economist is also saying that Medvedev fairly won the elections and was implementing market reforms while president?!

Gold prices

Gold prices have been on the rise recently, which is not surprising, given the uncertainty of fiat.

Here is an interesting article shared  with me by Reem, one of the bright bunch in Econ 310:  Abu Dhabi hotel ATM dispenses gold bars.   A German entrepreneur tried it first in his home country and apparently it was a success.  Can we import this please?

Additionally, this website looks like a good source on tracking precious metal prices.  Chart here tracks monthly price of gold from 1995 to 2012.


Oil Price Movements: A History Lesson

With oil prices rising again, this is an excellent historical review of oil price movements by James L. Williams.


Groundhog Day at the Fed

There are  many humorous ways to interpret the fact the Fed’s chairman testified today, in particular, the movie “Groundhog Day” comes to mind.

Ben Bernanke’s eloquent testimony is here.  Shadow or no shadow, but the rates are safe ;-) through 2014!


“Нам нужна новая экономика”: Denying protectionism and supporting competition as way forward, Putin still anti-Ricardian and anti-Smithian

The full-text article appeared in Vedomosti in Russian and abridged version in FT, in English.

The gist of Putin’s Russian-style “State of the Union” address is this:  “Готовы ли мы так сильно рисковать будущим России ради чистоты экономической теории?” which loosely translates as, “Are we ready to risk Russia’s future only to satisfy the postulates of [free-market] economic theory?”  Here Putin is defending some steps towards vertical integration and state control that his government exercised in the past.

It is apparent now that “privatize everything” approach does not work in Russia because free market institutions and the rule of law are not there.  However, historically, state control and state sponsored innovation have not produced the long-term growth to which Putin alludes.

Putin emphasizes development of new innovative technology and raising productivity, which echoes the recent rhetoric in the EuroZone.  Meaningless job creation and liquidity injections may only be a short-term solution and just do not make an economy more competitive in the long run.  In other words, G is not a ‘giant’ anymore in the Keynesian Y=G+C+I+NX.   [Although Keynes probably did not envision his legacy to last so long beyond depression, and he did say that we all would be dead in the long run ;-) ]

And, of course, the state should not forget to tax the rich!

As far as the “Russian Silicon Valley”, “Сколково”, that warrants a separate entry….


К портрету Путина…

…Виновны ль мы, коль хрустнет ваш скелет

В тяжелых, нежных наших лапах?

Скифы Блок

Великолепный портрет!  Taken from The Economist (December 2011).


Просьба к будущему президенту

У меня просьба к будущему президенту, перефразируя искандеровского кролика :-)
“Дяинька Путя, медвежатки хоцца…”

Russian elections

Неужели? Или как всегда…

This photo is from the Wall Street Journal (December 27, 2011).  It appears that thousands of people gathered in central Moscow on December 24, 2011.  There would be nothing unusual about a large crowd, if not for the fact that it was a demonstration against the rigged election, which by itself is not an unusual occurrence in Russia.  But Russian ‘usual’ and ‘unusual’ do not always obey the conventional Western definition.

However, it would not be unusual that Putin’s position strengthens if he is elected in March because the victory would mean that he managed to convince a sizeable and outspoken opposition.  Then he really must be the right guy for Russia! :-)  Putin’s victory after this exercise in democracy would also silence the West.  I am in no way denying that there exists a real opposition to Putin’s government in Russia and that many people joined protests by free will.  Prokhorov, of course, is a hoax, unless he is Medvedev II.  Just my two kopeks in…

I recommend reading David Satter’s opinion piece on these recent protests.  One of his other, very much worth reading, works on Russia is Darkness at Dawn.

The Russian elections in 2008 were commented by a LiveJournal blogger, Podmoskovnik.  I highly recommend reading Podmoskovnik’s blog.  There you can find stats and discussion of non-Gaussian distribution (distribution that is not bell-shaped, but is expected to be) of votes in past and recent elections.  Podmoskovnik cleverly called this ‘Churov distribution’ (дистрибуция Чурова) after the Chairman of the Election Committee.  Here is an example of a graph from this blog (December 2011).

If I remember right, one commentary in 2008 said:  “Подмосковник, пакуй чемоданы.”  Но Подмосковник пишет и ныне, хотя, впрочем, и выборы идут своим чередом.  Как всегда в России…

Novaya gazeta (in Russian) reported how local administrations were preparing for elections.  This article from November 9, 2011 provides a document titled “Instruction.”

The ‘instruction’ presented a schedule and rules of conduct for a group of citizens from a suburban town of Kirovsk.  These lucky citizens were supposed to be taken on a tour of St. Petersburg, coincidentally, on the day of elections.  They were to be fed breakfast after visiting 5 ‘sightseeing spots‘ and fed dinner after visiting another 8.  The instruction prohibited them from participating in any exit polls (!!!!).  Naturally, it is St. Petersburg museums and art galleries, not polling places that have exit polls ;-).  (Certain loopholes in the Russian law permit the same person to vote at multiple locations in the same election.)  The citizens were also promised some financial compensation at the end of their busy day.  What more to say?


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