It's never easy to get back into the groove of blogging after a long (in this case, one month) hiatus, so I figured I'd just reset with a hodgepodge of topics, and slap down some old bookmarks that Mr. Ham has finally seen fit to help with, after getting wind of a hamster hero in Overwatch.
Beginning with some follow-ups on recent posts, the unrest brewing in China over slipping home prices (despite best-effort media gags) might be a pertinent case study for Singapore, given the similarities between our economic structures in that respect - up to and including historically moribund and/or suspected-manipulated domestic stock markets driving investors to property. The fissure between global and Chinese networks, postulated in academia, may yet also extend to the Internet itself, so says a former Google CEO. Well, it's not like Google's going to stand on free speech principles on that, given that they're unilaterally censoring in the US of A.
I hope that the danger of having a single entity being able to "disappear" information at will doesn't need further elaboration, which is why I'm striving to work DuckDuckGo and other search engines into my routine, even if they might be comparatively slightly lacking, especially in localization.
On the MEME WAR front, the absolute rout continues. Fresh off the hilarious OK = White Power hand gesture trolling, in which a bunch of 4chan autists managed to spark a media frenzy over how the innocuous (okay, most of the time) OK sign was actually a secret white supremacist signal - thereby exposing the eager and biased sensationalism of the American left - the chansters have moved on to characterize SJW normies as NPCs blindly regurgitating whatever position their thought leaders have seen fit to endorse, which seems to have struck a raw nerve... and, of course, invited unwarranted censorship.
This, as it happens, is why the GEOTUS-backed Republicans are now winning the culture war; they're now the edgy outsiders subverting their way across mainstream Big Tech-sponsored politically-correct diversity-whether-or-not-it-makes-sense, appearances-above-all tyranny. Remember when all the teens flocked to hippy communes, or togged out in skater gear, or grunge rock tees? Well, there's no cooler way of thumbing one's nose at stuffy authority nowadays, than donning a red MAGA hat. And, let's just face it, the guy's hilarious. Compare that to the contemporary eternally-offended can't-meme left, and it's easy to see the attraction of the New Creative Right.
Seriously, how can one hate this guy?
Key quote at 2:15: "The Establishment had become too full of themselves... they needed to be humiliated... they needed to be trolled."
[N.B. The Queen of England's not half bad at the trolling gig too]
As it happens, CNN and company don't seem to be taking this lesson to heart. Their cratering reputation probably wasn't helped by entirely groundless slander on the President having "racist thoughts" (I guess they can read minds now?), even as they roasted the very-woke Kanye West as "a token negro" and "what happens when negroes don't read". Not at all coincidentally, Taylor Swift's ratings would take a 25% hit in the GOD-EMPEROR's latest display of unadulterated MEME MAGIC.
And while we're on NPCs, Goblin Slayer might be worth a watch... or read. It's a fresh take on the D&D and gamebook genre, what with references to dice and Firetop Mountain, and manages to be engrossing despite the protagonist being interested in exactly one thing - goblins. Yes, that low-tier crap XP trash mob. Sorta Berserk-lite, for manga connoisseurs.
Earlier this month, eleven European countries (including Britain, for now) have committed to "Plan S": all scholarly work resulting from national agency grants must be published in freely-accessible open-access journals. Unsurprisingly, major academic publishers weren't charmed, with those in charge of Nature and Science stating that the move would "undermine the whole research publishing system" and "would not support high-quality peer-review, publication and dissemination" etc, without much in the way of elaboration. Elsevier's take was that "if you think information shouldn't cost anything, go to Wikipedia", perhaps not realising what happened to Encarta and the likes of the Encyclopedia Britannica.
It has been noted here last year, it happens, that the current academic publishing system makes little sense - scholars produce research funded by taxpayer money, submit papers to journals (oft edited by unpaid scholars), which are then reviewed (again unpaid) by yet more scholars. Upon acceptance, the publishing house arranges for proofreading, typesetting and printing (increasingly optional, these days), for which it reaps almost all the monetary benefits. The end product is then sold back - often to the very same community of scholars that produced the work - at monopoly prices. And people wonder why I doubt the efficacy of academic economic theorists when they operate in the real economy.
This overriding sense of injustice - taxpayers paid for the research, why should some private organizations charge them again for perusing it? - had been rankling for some time, alongside the ethos that knowledge should be free in the first place, and stakeholders have reacted in a variety of ways. One option was of course to simply make the papers available - they're just PDF files, after all! This was the tack that Reddit co-founder Aaron Swartz took at MIT, for which he hanged himself after being confronted with 35 years in jail (compare kiddy diddlers in more tightly-knit organizations, but more on that next time). His spiritual successor was probably Alexandra Elbakyan (now in hiding), who founded *ahem* Sci-Hub.
Everyone does it, nobody admits it, like so many other things
They might not have bothered for some fields; mathematics and its closest offshoots - such as physics and theoretical computer science - have always had a robust preprint culture, which has expressed itself as arXiv. Basically, the good stuff's expected to be there, though it can admittedly be challenging to sort through given the sheer volume of papers (but for which there are services such as Karpathy's Sanity Preserver).
Academics in these fields also appear somewhat less beholden to the lure of journal status, perhaps exemplified by Perelman not bothering to submit his proof of Poincaré conjecture to any journal after posting it on arXiv, because its truth was all that mattered. Closer to my own area, the editorial board of Kluwer's Machine Learning journal up and resigned to found the open-access Journal of Machine Learning Research in 2000, which has arguably long eclipsed its (still-extant) forebear because, in the end, it's the academics' content and regard that makes or breaks a journal. Nature's upcoming Machine Intelligence is facing a boycott from many prominent computer scientists, for much the same reasons.
This exercise of academic power to punish non open-access outlets has not found as much purchase in other areas of study, despite occasional calls. Nobel-winning cell biologist Randy Schekman, for example, is boycotting the "Big Three" of Nature, Science and Cell, but it is hard to overlook the fact that his four most-cited papers, and eight of his ten most-cited, were in these very "glamour mags". Aspiring young scientists might thus quite fairly question whether this is good advice for their career - a recognized Nobel winner's not going to have too much trouble acquiring reasonable funding either way, but how's a new kid on the block going to make a reputation?
[N.B. By the way, I am not entirely persuaded by Schekman's argument over "luxury" journals, even if they tend to have relatively more irreproducible research and retracted claims; the reason is that, as with most people, academics are as a group desirous of exclusivity and distinguishment. Given a venue with a restricted publication rate (and higher impact factor), and another venue with an unrestricted one, it is only natural that participants first shoot for the former to signal the value of their product, even if the curation process is noisy. This is observed with the usual submission order of e.g. Nature → Nature Comms (already fully open-access) → Scientific Reports, and would persist even if the current top journals were to suddenly disappear - new ones would just spring up in their place.]
Anyway, the state of academic publishing has long been regarded as a Prisoner's Dilemma (for the academics, at least). So this telling goes, academics (in the STEM fields particularly) would actually prefer open access and widespread dissemination of their work, because it's not like there's money in it elsewise. The problem, however, is that current top journals are mostly non (or at best, delayed) open access, and they have to publish in these very journals to get exposure and be credited by the admins for promotion and tenure. It would be ideal, then, were all academics (or minimally, enough of them) to shift to open access journals. However, without coordination, those who move "lose out" in terms of placing their work in less-competitive venues, while those who don't "win" in terms of easier publication in the still higher-prestige non open-access venues - hence the dilemma.
The pan-European Plan S can then be recognized as a bid to break that impasse through overt coordination. If the plan goes through as-is, a fair chunk of high-quality Euro work would immediately be out-of-bounds to CNS and other prestige outlets, with the recepients being open-access journals. Admins, who might otherwise be content with the old assessment metrics, would then be forced to accept that NewOpenAccess Journal is high-quality, given that it is indeed putting out some of the best work, which in turn attracts academics who aren't bound to Plan S, which further reinforces the open-access journal's status, in a virtuous circle.
What's more interesting is how the existing big non open-access journals will respond. It could be noted that if revenue is their concern, it may in theory be possible to maintain that while moving to open-access, by just charging upfront (i.e. the authors) upon acceptance, rather than downstream (i.e. libraries and private readers). Author costs would then be factored into grant funding (unfunded work is near non-existent in modern Big Science), with library funding withdrawn in tandem (since subscriptions are no longer required). The question, of course, is whether this model can preserve existing supernormal levels of profit.
We might consider arguments against open access, given that the AAAS for one has not seen fit to go into detail, and in truth not many of them are convincing. For example, one enduring argument is that academic papers can be misinterpreted in dangerous ways, to which the immediate response is that the news media already does that anyway, with the next observation being that the existing model suggests that such misuse is acceptable, as long as one is willing and able to pay (and which also smells of past religious proscriptions towards knowledge). The better objections are to me field-specific, as in some humanities disciplines expecting monographs instead, or relying on subscriptions to support their learned societies. Still, he who pays the piper should be able to call the tune.
One other worthwhile objection is that open-access journals that charge authors upfront have an added incentive to be predatory, since the more papers they accept, the more they earn; this is not the case under the existing consumer-pays model, since libraries would have no reason to subscribe to a dodgy title. However, it isn't as if this sort of thing isn't going on already, Plan S or no Plan S.
So, how will the big publishers react? They could cave, of course, by switching wholesale to the open access model (with the hybrid option of having only some papers being free explicitly disallowed by Plan S). That said, there is another possibility, which is said journals instead standing their ground and relying on non-European submissions - and I can see Asian (read: mostly Chinese) scientists being more than happy to pick up the slack. The decider, as I see it, would be whether Europe can rope the Americans into Plan S; if so, I can't see a journal holdout being tenable. If not - which is far from unlikely, given how motivated the publishers' lobby can be - we may be looking at a geographic split in the academic publication landscape...
The trouble with getting behind on blogging, is the speed at which events pass by; topics, once fresh and recent, can go stale with astounding rapidity. But, like an unfortunate serviceman who's neglected to exercise for too long, we've all got to restart somewhere...
As the incumbents might have realised with UMNO's fall back in May, political fortunes can turn on a whim (see also: the steady rise of the anti-immigration right in Europe), and one of the admittedly relatively few triggers that might have locals turn on their longstanding rulers would be a big hit to their pocketbooks (admittedly, much the same as most elsewhere). Following this chain of reasoning, given that a large proportion of local wealth has been plunked into property, the fate of HDB prices is of paramount importance.
As repeatedly noted here, the issue of leaseholds preserving value indefinitely is difficult to reconcile with reality, and the administration's tack has, up till very recently, been to double down on "HDB value will only go up". Of course, the hard truth would have to hit eventually, with our brave Minister for National Development courageously admitting that not all flats would be SERS-ed. Of course, this was by far the most likely outcome, but it was still a rude awakening to citizens who had blissfully assumed the best; and, dare we say, irresponsibly encouraged by those in charge about this illusion.
Quite a lot of the debate has returned to whether HDB flats are owned or leased, with the official line remaining that they are owned. Now, this is broadly true in the sense of owning a leasehold; note that there have been rather less rumblings about whether 99-year private property owners are lessees (The State's Times has put their best face on it by referring to the HDB as a "super landlord", but you've got to pay to read sloppy propaganda nowadays). However, this is missing the actual point, which is the expected residual value of the units.
Explaining this more concretely, existing HDB prices likely have incorporated an expectation that the government will reclaim old flats at SERS market value, which is more or less effectively topping-up the lease. As such, lease period becomes largely immaterial, since the owner just gets recycled into a spanking new pad. While owners and agents probably recognized that not all flats would be SERS-ed, it was reasonable to hold out hope, encouraged by the government's intentional vagueness on the SERS scheme (no doubt leaving the option of wielding it as a political weapon, as upgrading - quite shamelessly touted as a "subsidized benefit" by The State's Times - had been)
This ad-hocness, however, becomes very troubling when housing prices have become more or less synonymous with retirement benefits by design, given all the CPF funds that have been drained by the HDB. Proper planning no doubt becomes very difficult given that the bedrock upon which the ultimate value of a HDB flat rests - its residual/buyback value - is left undefined. This has led to a response, the Voluntary Early Redevelopment Scheme (VERS), in which 70 year-old flats may be bought back by the government.
The trouble is that there are next to no details on VERS as yet, which is probably at least partly a side-effect of co-mingling housing and retirement funding. To wit, a public retirement fund should be well-diversified and equitable, in the sense that citizen retirees should receive the same payouts, irrespective of the location of their home (at least for a city-state). However, forcing a disproportionate amount of retirement savings into a home disobeys the diversification and equity principles - should one fellow receive a significantly better return, simply because he chose a flat in a new hub area (e.g. Jurong East?) long ago? This is definitely an issue where the Opposition can have plenty to work with, if they can keep it together.
Crazy Rich Asians
Read the book, watched the movie, saw the outrage over how it isn't representative of Singapore, to which I have to concur with Calvin Cheng for once - it's a bloody Hollywood movie! I mean, fine, they could have thrown in a handful of Malays and Indians to quell the loudest critics, but considering the male lead isn't even Chinese as originally written (English-Iban instead), it's not like Hollywood often lets authenticity concerns trump over marketability in any case. It's sort of as if New Yorkers had complained about how The Great Gatsby didn't represent their everyman - it simply was never meant to.
Seen as an exotic rom-com, it was alright, I suppose. Fiona Xie overacted a little to me, but hey, there's an upcoming lead role in it for her (which reminds me, remember when we recommended that the Suicide Squad producers just milk Harley Quinn for all she's worth? That's just what they're doing). A couple of nice touches too, such as the dead fish the mean rich girl clique put in Rachel Chu's bed (thoughtful symbolism, with whiffs of Godfather), as well as the usage of mahjong in the finale (Chu's game theory background, plus reference to Hollywood's last Asian-centered work, Amy Tan's The Joy Luck Club)
The more concerning aspect is perhaps the revelation that not all Singaporeans are created equal, which while not exactly a secret, got heavily rubbed in. Case in point, book author Kevin Kwan (and sorta-rich Asian himself) implying that he had returned to Singapore several times despite having defaulted on National Service, to which the Ministry of Home Affairs could only sniff that they had no records of that - clearly not a good look, either way this goes.
More generally, fault lines are opening between rentiers (landlords of all forms) and rentees (largely coinciding with HDB dwellers, whetever the government might say) locally, which is reflected in the freehold/99-year tenure divide - in one case, value accures perpetually; in the other, it simply doesn't. Personally, it's not hard to suspect that inflation is higher than the official figures (the OCK curry puff now S$1.80 for one, doubled from S$0.90 a decade ago, translating to a 7% per annum rate that I think representative of food prices), which may not be fully appreciated by those in charge (which, to be fair, extends to America's out-of-touch Democrats too)
BCash Dumpster Fire
Deferring the general crypto discussion for a bit (yeah, not been the best of weeks for the altcoins in particular), it's been sort of funny to watch the aftermath of the Bitcoin Cash fork unfold (drama previously documented in Men Against The Machine and Maxican Standoff). The bigblocker diehards had flocked to Bitcoin Cash (BCash) following the UASF event, recall, with BCash value struggling to maintain the 0.10 ratio against Bitcoin, after early hype (as expected)
As it so happens, that unsavoury cabal of ne'er-do-wells is squabbling over the spoils yet again, with Bitmain's Jihan challenged by nChain, backed by Craig Wright (a.k.a. Fake Satoshi, who has gone as far as to try and patent Bitcoin [??]) and a billionaire pal. Jihan has apparently finally recognized our dear Dr. Wright as a fraud, which given how patently obvious it was, sounds like just desserts for this alliance of convenience.
Other crypto personalities couldn't pass up the chance to get some top-grade trolling in, with Vitalik making a personal appearance at the BCash summit (where, we're guessing, he didn't get on too well with Fake Satoshi). This may however be topped by a proposal to keep the existing BCash chain running as-is (similar to Ethereum Classic), making the contentious fork produce not two, but three chains. We tip our hats.
Bitmain has other largely self-inflicted troubles of its own, foremost of which must be their dedication to propping BCash up with their mining power, which has left them holding a humongous illiquid stash of the token... even as their ASICs are getting obsoleted by new offerings from a former engineer (there's a limit to how much one can stiff the tech guys who are actually designing the product, after all)
This has brought an off-hand suggestion to switch to proof-of-stake (conveniently, given that they're stuck with much of the stake), but more significantly, an attempt at a US$3 billion IPO, ostensibly to move into A.I. [?!], but which not a few have analyzed as trying to cash out on an inferior position while the going's tolerably good. Our Most Successful Investment Firm were for one rumoured to be a potential key investor, which does feel like their usual modus operandi. They have fortunately denied any involvement, to the great relief of my CPF account.
Today's rebuttal is on another Krugman op-ed in that doyen of the mainstream media, the New York Times, on "Transaction Costs and Tethers: Why I'm a Crypto Skeptic". One would scarcely have time to devote to other, mostly more pleasant, matters, if the aim is to address all of his claptrap. However, this particular piece was so egregiously misinformed, that one could not help but try to level the scales a little.
Although the reader may wish to read the original article in the interest of fairness, I believe the following summary captures Krugman's intent faithfully: he is a cryptocurrency skeptic mainly because cryptos have high transaction costs, and because cryptos lack a tethering of value.
On that first point, Krugman claims a clear direction of progress "in the broad sweep of monetary history": first, the use of precious metal coinage - inconvenient and labour-intensive to mine. Next, banknotes backed by said precious metals, and further operating on fractional reserves. And then, a trend towards greater and greater convenience: paper cheques, credit cards, and finally today's mobile e-payments.
Therefore, Krugman explains, cryptocurrencies are strange in that they buck this trend - Bitcoin, which has returned to dominating the crypto landscape, has relatively high transaction costs, as well as a wasteful production process. Indeed, it is probably not a coincidence that this process is termed "mining", as that for gold and silver was. To this, Krugman wonders: "...in other words, cryptocurrency enthusiasts are effectively celebrating the use of cutting-edge technology to set the monetary system back 300 years. Why would you want to do that? What problem does it solve? I have yet to see a clear answer to that question."
To this query, we might delve somewhat further back into the past, which might cast some doubt on Krugman's simplified unidirectional precious metal → representative money banknote → fiat banknote → fiat electronic money narrative. Cribbing liberally from Weatherford's The History of Money, Ferguson's The Ascent of Money and Martin's Money: The Unauthorized Biography, one might recognize a certain pattern going on. To begin with, consider this description of the Roman economy, almost two thousand years ago, from Weatherford:
"Faced with climbing government expenses, emperors searched for new revenue and new ways to make existing revenue stretch further. Nero began to tamper with the coinage itself. In A.D. 64, in a naive attempt to deceive the populace, Nero decreased the silver content in the coins and made both the silver and gold coins slightly smaller. By collecting the existing coins and remining them with his portrait bust but using less silver, Nero produced a momentary surplus of silver and gold. The same pound of silver that had formerly produced 84 denarii now produced 96, giving Nero almost a 15 percent 'profit'..."
Decline and fall of the Roman coinage
One good turn deserved another, and by the reign of Gallienus some two hundred years later, the denarius - once almost pure silver in Nero's time - had degraded into the antoninianus, which contained less than 5% silver... but was supposed to represent twice the nominal fiat face value. Of course, that didn't work out, as price inflation in coin terms simply took place.
Skipping from some 1800 years ago to about 800 years ago, Marco Polo observed that Kublai Khan had set up a system whereby all private gold and silver had been confiscated, and paper money issued in its place. Foreign merchants like himself too had to convert their precious metals at specified exchange rates, to paper notes for internal use. Arabic traders of the same period also noted the extensive security measures, which included having their portraits sketched for easy distribution, in case they fell foul of the law (which is being echoed by modern China's surveillance state); this Mongol paper money also repeatedly fell to rapid inflation from their introduction about 1300, and the following Ming Dynasty would suspend printing by 1450, to return to silver.
Even restricting ourselves to Krugman's chosen time period of the last three hundred years, it can firstly be noted that fiat currencies have tended to continue failing at worst, and relentlessly devaluing at best. And, it has to be emphasized that the latest iteration of unbacked fiat currency - not backed by precious metal, i.e. representative - is very, very new, dating from Nixon's 1971 taking of the U.S. dollar off the gold standard. But wait, isn't this - and Roosevelt's 1933 confiscation of private gold - simply more or less Kublai Khan's policy of the 13th century? As Marco Polo sagely noted then, "this system of paper money could work only where a strong central government could enforce its will on everyone within its territory", which Krugman at least recognizes in admitting that, "...if you like, fiat currencies have underlying value because men with guns [i.e. Big Uncle Sam] say they do."
Rewinding to the next previous example, the depreciation of even the U.S. dollar - surely the dominant fiat currency of our age - uncannily mirrors that of Roman coinage. In the two hundred years from Nero to Gallienus, the same quantity of silver that had minted a single denarius, would later mint some twenty antoniniani with a face value of two denarii, a roughly 97% depreciation. Well, the Fed Dollar has depreciated about 95% in purchasing power terms in a century, and over 60% (if well over 90% at certain times) against gold, despite all the fixing taking place to sever that connection. Unlike the Romans, however, contemporary governments do have the option of printing prettier banknotes, rather than having their sins reflected by debased coins. This of course doesn't change the reality.
And part of why TRUMP's bid to correct the trade deficit is so timely
If we may go yet further back, we might realize that near-frictionless transactions - the Holy Grail that Krugman's monetary narrative has us headed towards - was actually where humans started from! Per Graeber's Debt - The First 5000 Years, our ancestors began with informal credit: Ugg gave Thar a rabbit, Thar would fix Ugg's stone axe in return, and if there was anything left over or uncovered, it simply went on the tab. Sure, this may have worked only in small social groups, but the general point is that Krugman's presentation of monetary development as linear is fundamentally incorrect. Money is more properly described as developing cyclically: some ruler "cleverly" realises that he can leverage political power and monopoly over violence into profits, and abstracts the nature of currency away from commodity to fiat; then, when his empire weakens, the currency reverts. Thus was it with Nero and Gallienus, thus was it with Kublai Khan, and thus it will be with our latest tokens.
Definitely, this is far from an original observation. As David Ricardo wrote about 1817, "...experience, however, shews, that neither a State nor a Bank ever have had the unrestricted power of issuing paper money, without abusing that power". The thing, then, is whether economics is at its base a humanistic or a scientific affair. I submit that it is far more the former, since the temptations of today's governors towards over-issuance of money are basically little changed from those of the Romans, from two thousand years ago and beyond - riches and popularity for me today, who cares about tomorrow?
More specifically towards Krugman's transaction costs argument, there are two main avenues by which it can be answered. The first is that Bitcoin at least is more a commodity than a currency by nature, as analyzed back in 2014, and this should be factored into arguments against it not being a good currency (a misunderstanding that Buffett also appears to exhibit). The problem it solves, then, is that of unilateral confiscation of value through intentional devaluation, or loss via depreciation, with this value stored in a decentralized and largely-trustless manner throughout the globe, without permission needed from a third party, without physical encumbrance, and with a completely transparent and public supply schedule. There might be some demand for this.
The second is that, for all of Krugman's enthusiasm towards technological progress in money (i.e. digital methods), he seems to entirely discount the possibility that cryptos - most of which are barely five years old - might have much room for improvement in transaction speed and cost. The existing Bitcoin network is best understood as a settlement layer, or a backed monetary base; further layers can then be built upon the settlement layer, e.g. with Lightning Network being a TCP/IP stack that trades off certain reserve requirements for speed.
The Lightning Network has been silently and steadily growing since February, but what's fundamentals against 1 million TPS ICOs?
Once more with reference to monetary history, the cost of Bitcoin mining can then be seen as the price of "honesty". Consider why relatively-primitive peoples bothered to collect shells, or carve huge stone wheels - even at some risk to their own lives in the procurement of the stone - which also answers in part Krugman's critique on value tether.
Within a society, there is a demand for two broad categories of things: actual goods and services, and monetary tokens. Absent a strong central authority, the value of the tokens has to be commensurate to the goods and services. If the society accepted, say, fallen leaves instead of huge stone wheels as money, then their economy might not make sense simply because leaves are too abundant and easy to acquire.
Or, from an individual viewpoint, consider a group of ten men who hunt and farm, and another group of ten men who band up to collect and carve the stone. If the first group acknowledged the produced stone wheel at only a tenth of their food output, then the men of the second group should logically conclude that they are better off hunting and farming instead of creating tokens. The commodity token is itself a good in the society's wider free marketplace! This should go some way towards explaining the necessity of crypto proof-of-work thus far. Of course, having a central authority issue the monetary token has to be cheaper... but how long will that state of affairs last, before self-interest and corruption sets in? As seen time and again from past experience - not very. Proof-of-work, whether with gold or crypto, may be an inefficient equilibrium, but autocracy tends to descend into anarchy.
Gentlemen, we stand by all our past analyses - crypto is here to stay, and Krugman is wrong... but that's not saying very much.
Me: ...well, since you're back, you might as well help in sorting out some leftover bookmarks. That last week went by quicker than I expected; that said, good to be back doing some light exercise, and meeting up with old pals in RT.
Mr. Ham: What do you take me for, cheap labour?
Me: Never was certain about the "labour" bit myself. Anyway, let's go over the big happenings from the last few weeks: one possible local opposition coalition headed by Dr. Tan Cheng Bock in the works, thanks to an SDP initiative. However, while this might go some way towards mitigating the local opposition's longstanding problem of "too many chiefs, too few Indians" - not literal ethnic Indians, of course - but the reputation of the minor parties is going to take some rehabilitating. Got to say, whatever one may think of his politics, Dr. Chee's fitness bod is impressive.
Now, it may be fair to ask - why think of supporting the Opposition? Isn't the incumbent track record second to none? To that, one has to respond that a healthy opposition is necessary for the proper operation of a democratic system, and a weak opposition does not really benefit a country, as a corporate monopoly seldom helps consumers in the longer run. There may be a certain point in a small city-state needing to concentrate (and effectively bribe, unlike with the Old Guard) its talent, but when the rules themselves start changing just to preserve every scrap of power, as seen with the latest Presidential Election, one has to start to worry.
This, as it happens, also undergirds my reservations about China's recent rise, which might otherwise be interpreted as a banana mentality - my estimation remains that they will not reach their potential without some form of liberal democracy, and that Asian culture being incompatible with a democratic system is so much piffle - see Japan, South Korea, Taiwan, etc. While China might yet go some further distance with their existing essentially-authoritarian setup, I am willing to claim that it will be a dead end, and one that will engender much pain before it hits the wall... and thus, my consistent support for a TRUMP Trade War Victory, which is broadly on track.
Whoops. Who knew a tweet could be that influential?
Mr. Ham: Yeah, there's that old story about a wolf cub capturing a duckling, and being asked by its parent about what the mother duck did. The cub replied that the mother duck screamed and threatened, at which the wolf told the cub that it was okay to eat the duckling. The next time the cub took a duckling, however, the mother was entirely unconcerned (see: TRUMP after a U.S. drone got stolen); given this, the wolf told the cub to return the duckling. Well, it sure sounds like there's a lot of screaming going on from China's side right now, as the trade war heats up...
Me: Yeah, basically it's all going as anticipated, but I'll leave the in-depth analysis to Mr. Robo, who's been holed up researching the geopolitical situation. But just to bookend the previous trade deficit discussion, I'll begin with an old joke:
This happens to be the essence of what's going on with TRUMP's efforts to corral the American trade deficit, and its consistent misrepresentation in the mainstream press. Take the constant hammering on bilateral deficits, previously explained to be a strawman - the bottom line, however, should be that the only way to reduce an overwhelming aggregate deficit is through cutting bilateral deficits. Recycling the grocery store analogy, a person may cut down on spending at his grocer, or his barista, or his town vagabond, not because any of them have done him wrong per se. It is just because he has to balance his books - and can we really fault a man, or an institution, for not wanting to continue building what is already an enormous debt?
To this, there are the more-academic dissents, such as protectionism with tariffs not being a cure to the trade deficit. It is further claimed that recessions are the surest way to reducing deficits, in support of deficits "paying for themselves" through general growth, and that national consumer behaviour - and not tariffs - drive trade deficits.
The first reponse to this, is that the TRUMP Trade War was never about imposing permanent tariffs. From the get-go, the intention was to utilize tariffs as a bargaining chip for more favourable trade terms - to win the trade war, and move on. This weapon, it must be said, has actually been wielded by just about everyone else in defence of their own interests. It is just that TRUMP's stick is much bigger, and the basic facts are on his side anyway - even his detractors have had to admit that the U.S. has on aggregate among the lowest tariffs in the world to begin with.
That settled, a more complete answer would involve examining skin-in-the-game, and who benefits from the deficit status quo. Going back to Buffett's fundamental analysis, the losers are easy enough to identify - future generations of Americans. In some hazy future, Billy Bob Jr. will have to toil an extra hour each day, Sally Doe will have to retire a few years later, as America fumbles about in its pockets to honour its debt to the outside. The basic mechanism is not in question: "I don't think it's a problem for the U.S. to have a large trade deficit.", yet another think-tank senior research fellow will say. "Countries such as China and Japan accumulate vast piles of U.S. currency, [they] have to exchange those dollars for something, and for a long time they've used them to buy U.S. assets, such as stock, real estate and Treasury bills... it's a win-win for the U.S.!"
We might identify two broad frames here. From the individual point of view, shorn of all obligation and context, free trade should always win - since trade is assumed to take place only when mutually beneficial, anything that hampers such exchange from taking place must necessarily reduce potential utility.
From the national point of view, however, the deficit matters because much of a nation's responsibility is communal in nature. Even if one argues that America doesn't practice socialized health care, it is undeniable that the government still has to fulfil many needs - defence, administration, infrastructure, education, etc - that all draw upon the public piggy bank. Running an internal budget deficit does not preclude the minimization of external trade deficits, which is the objective here.
The next realisation is that a disregard of national trade deficits makes the most sense for the wealthy - what does any particular citizenship mean to the average billionaire, and the oh-so-educated economists they fund in their various institutes and think-tanks? If it all goes to pot in America, they'll simply be on the next flight out to Canada, or Switzerland, maybe Germany or Britain (but not Mexico, for all their exhortations towards open borders). Their kids won't be stuck with the bill - instead, it'll be the Billy Bob Jrs, who have nowhere to go to, who will inherit the consequences and the tears. But they don't count, do they?
No, it takes a man of extraordinary vision and courage to go against the grain, and fight for the birthright of the yet-unborn, who have no lobby or constituency to defend them; and in the GOD-EMPEROR TRUMP, America has finally found such a man.
Me: ...so, we'll need to hedge against a CBOE ETF rejection, though they do have reason to be confident... and what are you doing, hiding in the grass out there, Mr. Ham?
Btw, is lunch ready?
(Original source: r/hamsters)
Mr. Ham: It was horrible, horrible! England almost won the World Cup! I had to flee the country preemptively when it looked like they were actually going to do it - you'd never believe how many bets I managed to lay on them - but more than it, it was a sign of the End of Days.
Me: I see. Welcome back, then. Mr. Robo here has been running the firm of H.L. Ham quite competently in your absence, if I may add; the strategy for the next quarter has just been set.
Mr. Robo: Still enough time left for a chat.
Me: About that. I'd just like to comment about how humans in general appear to love to be told what and how to think by "experts", such as from last week's discussion on trade deficits. To me, this is justified in some areas - maybe pure maths and the technical parts of the sciences - and rather less in the social sciences and humanities.
The really intriguing bit, I gather, is how people reconcile evidence that runs counter to what they would like to believe. Prolonged exposure to contrary narratives tends to be exhausting, since - I do still believe - the mind naturally prefers self-consistent mental models. One possible solution is that taken by religious reasoning, specifically the acceptance of beginning from fantastic axioms.
Say that one agrees that crimes such as theft and murder are wrong, because of a comprehensive theological framework given exclusive suzerainty by a fellow floating into the sky. Once that is conceded, other behaviours such as slavery and child genital mutilation might - and indeed have been - also completely acceptable under the same framework, because frankly, being lighter-than-air does not confer particular moral legitimacy. Here, I'm not saying that submitting to this sort of thought process is not reasonable given practicalities - just that it has its concomitant drawbacks.
Another approach would be to dismiss conflicting evidence out of hand, which is what the ongoing War of Information is all about. Establishment objective is generally as follows: consolidate and confer status upon selected sources (e.g. major newspapers and cable channels), which then publicize topics and "popular" viewpoints favorable to their backers, and ignore those that are detrimental - perhaps only occasionally putting out a dissent to maintain an appearance of impartiality. Note that, by doing this, they can claim to be reporting "the truth", while being nowhere near "the whole truth".
This intellectual sleight-of-hand may sometimes be partly self-inflicted. Consider, for instance, the attraction of various flavours of Progressivism to the young, a phase that yours truly had duly undergone. In this depiction of history, there is a steady movement from the bad to the good, the wrong to the right, the outmoded to the new. In this telling, the first stand tends to be held by the elderly, the provincial, the fuddie-duddies. The second, improved, stand is held by the young, the educated, the future. To oppose progress, then, is evil and moreover futile. In the American context, this has basically been the line sold by the Democratic Party - that Republican-conservatives are dying out, that the youth are on their side, and therefore that their ultimate triumph is inevitable.
In keeping with observations about the War of Information, however, the full picture is quite different:
The victories of progressive-reformists (not quite liberal, which is a hijacked term), then, have been presented under the lens of survivorship bias - changes that have been acknowledged to be broadly beneficial are emphasized, and those that were, on hindsight, hare-brained and harmful quietly unmentioned. The point is that such policies, for instance eugenics and temperance, were too held to be obviously correct and true in their era. As such, it is only reasonable to accept that present-day progressives may also be going down a lot of blind alleys, rather than being on a direct journey from "bad" to "good"... which the young adult millennials are picking up on.
Honestly speaking, I'm uncertain if the bulk of the polarization in American politics can even be placed on Republicans and conservatives, given the latent tribalism displayed by the left - only that they are less apt to openly admit it. Put another way, if the right are held hostage by appeals to the authority of religious and political leaders, the left is no less beholden to the opinions of academics and Hollywood celebrities.
Mr. Ham: Yeah, like the current craze for banning plastic straws, which has also hit Singapore. This is one of those movements that appears unambiguously positive to begin with, but turns out to have questionable impact when the actual numbers come in. Unsurprisingly, progressive bastions such as San Francisco have been lampooned for eagerly criminalizing straws - which possibly carries a prison sentence, mind - while ignoring used syringes and human waste on their streets - which has only solidified their growing reputation for being sensationalist-reactionary, and out of touch with actual problems.
Trust me, he knows *exactly* what he's doing
Me: Anyway, what I hope to get through here is, that it is important to maintain one's own intellectual integrity. There is always huge pressure to conform, even against one's own judgment, and there's always the threat of having one's capacity for independent thinking, subsumed by the group. Feigning agreement is one way to fit in, of course, but the trouble is that one's internal thought processes may adjust accordingly despite the intent, which is how indoctrination and re-education processes work.
Protip: when choosing a venue to watch the World Cup Finals, check to make sure that its stream isn't half a minute behind its neighbours
It's been a great World Cup. Despite it ultimately not coming home, it had everything else - penalty drama (with Modric setting Russia up and England prepared for once with stats), general drama and powerful emotion, accompanying performance and design art, Cantona ribbing Neymar (who's copped his fair share of cave rescue jokes), dabs of self-deprecating humour (which didn't save Sweden), a new record for passes made (I still don't understand what Spain were thinking), a ton of in-depth metrics and analyses, and last but not least, the wonderful fans (FIFA is reportedly coming under pressure not to do close ups of pretty chicks, because sexism; considering the likely alternative, we have to say - be brave for once and do the right thing, FIFA...)
About the prediction business, the Goldman Sachs experts have wound up mostly wrong once again, having plumped for a Brazil-Germany final, with France out in the semis. To be fair, they had France as second-favourites, but such examples continue to persuade me that so-called "experts", especially in fields such as economics, aren't exactly reliable. They did outdo a local EDMW punter, however, who threw out tips for just about every match, guaranteed by a particular part of his anatomy. His readers quickly learnt to bet the other way.
VAR seems likely to become a permanent feature of major tournaments, after being extensively utilized, and it should eliminate the most egregious injustices (e.g. "ghost goals"), which however arguably takes away some of the potential for larger-than-life lore. There have also been other little tweaks, such as the ball not having to be passed forward at kick-off (thus all but obsoleting the classic two-man start).
Whatever (reasonable) happens, football should remain perhaps the most accessible and egalitarian team sport I know of. One has practically no hope at the highest levels of basketball without being about six and a quarter feet tall, in American footie without being well over 220 pounds besides, and plenty of other sports without meeting similar physical constraints, and perhaps additionally access to expensive equipment. But soccer? Messi was a dwarf. Zlatan was a giant. Pelé was in between. Modric was a wisp. Lukaku was a battering ram. Owen sprinted. Riquelme didn't. Scholes had asthma. They all thrived.
As long as they aren't Singaporean, it appears. Ben Davis, Fulham hopeful and by that measure the best prospect we've got in a long while, has effectively been forced to choose between that opportunity and his citizenship, even as FAS has set the lofty target of getting the Lions back in the Top 100 (currently 169th). But really, if South Korea - still officially under a state of war - can allow deferment until almost the age of thirty, why not us? The way it's going, the only way we'll get our flag at the Finals is to buy a ticket.
Winning the Inter-Divisional Title (reward: two days off),
instead of dancing the ballet with Vida
The natural comparison with Schooling was deemed irrelevant because Davis had not shown himself to have world-class potential at his chosen sport, but given how Schooling's parents had to figuratively bang on the table to get him off and fund him nearly wholly privately besides - only for our dignitaries to pile on after he had won gold - it's quite understandable why Schooling's advice is for Davis to "follow his dreams". I have to agree. Maybe the swimmers can conjure something up.
The intersection of medicine and technology has seen a steady stream of progress, such as in identifying diabetes subtypes, engineering anti-cancer cells and preventing deaths due to doctors' bad handwriting. However, there's also the other side, which came to the fore with the revelation that SingHealth's database had been hacked, with the personal details and prescriptions of 1.5 million patients leaked.
The immediate question was whodunit, to which local detective wannabes have mostly converged on an answer - China. This deduction followed from the given assumption that the hack was most probably a sophisticated state-sponsored attack, which in turn raised the usual suspects: Russia, North Korea, China, the USA, Israel, mayyybee Malaysia and Indonesia. I'd say America is an unlikely perpetrator (bar a false-flag op), because they have better data from Facebook, Google, etc anyway. But hey, we get paid in funny pet photos and dank memes for that.
It would be unproductive to overspeculate before the official investigative report, or at least more details, are released, and as such we might consider the reaction instead. Tellingly, the chief of the Cyber Security Agency of Singapore is apparently of the opinion that it's no big deal because only basic demographic data was stolen, to which it was pointed out that said chief would probably not be willing to disclose his own "basic information" for a reason, and which further runs counter to all previous governmental directives.
The optimism that the data isn't being sold on the Dark Web or elsewhere also seems rather unfounded, but personally, my worry would be the sheer comprehensiveness of this dataset. 1.5 million would represent a good chunk of citizens - perhaps a quarter at least - and basic data alone should allow the possessor of such a dataset to build up quite a profile. Cross-correlating NRICs and addresses would likely allow inference of family structures, for example. It gets even more interesting when tied further with prescription history (if maybe not totally trivial: refer Watson Health's troubles), which can possibly reveal embarrassing personal secrets.
As it is, the clean-up process has seen the data hack check webpage itself being spoofed. The fun continues.
On Trade Deficits
I had a prolonged discussion with some old classmates about various matters, including that of international trade deficits, over supper the Friday before last. Dishearteningly, I heard an assertion of the form of "most economists agree that trade deficits don't matter", which therefore seems to have become popular received knowledge among the very well-educated set (guy has a PhD from Stanford, just for perspective)
Is it really so obvious?
To kickstart the discussion here, I turned to Google by searching for "trade deficits don't matter", and considered the top three links - in order:
It seems true, at least, that the establishment news media (The NYT) is willing to claim that most economists don't hate the trade deficit. Considering actual economists quoted, Lawrence Summers claims that "The trade deficit is a terrible metric for judging economic policy". Cornell's Eswar S. Prasad, while admitting that China did not keep their end of the WTO bargain, is cited as agreeing with "most other trade experts" that "bilateral trade deficits are not a good measure of whether countries are living up to their promises on market access, or ...better negotiators of trade agreements". Cato Institute fellow Scott Lincicome sums it up: "A bilateral balance doesn't really tell you anything about what the economy is doing, just like my bilateral deficit with my grocery store doesn't tell you anything about whether I'm in debt."
This line of reasoning is mostly mirrored by the other two sources. Tori K. Whiting, writing for The Heritage Foundation, also uses the homespun grocery store analogy. "I added to my trade deficit at my local grocery store last week... The grocery store did not purchase from me, but I was able to get milk, meat, produce, and other consumable goods... In fact, I have a trade deficit with every business I encounter, from my favorite clothing retailer to the electronics store. The only exception is my employer, which pays me in dollars for my daily work. I have a trade surplus in this case."
Similarly, Tim Worstall - senior fellow at the Adam Smith Institute - expresses basically the same idea, if slightly more scathingly. He does take an additional detour by devoting the bulk of his analysis to bilateral trade balance, but recovers in time to support overall trade balance being irrelevant by asserting that it is ultimately private citizens, not governments or countries, that trade with each other, and therefore it is unclear how tariffs should be mandated.
To this, the key to me lies in the bolded bit from Whiting's piece. It can be accepted that individual bilateral deficits mean little in isolation. It is however not at all evident as to why a persistent aggregate trade deficit - country vs. everybody else - is okay. Building on the grocery store example, an aggregate deficit would mean that Whiting's salary from her employer does not cover her expenses. In such a situation, there are two main recourses: either draw on savings (i.e. national reserves, for countries), or borrow (i.e. issue [Treasury] bonds). America has basically been borrowing. A lot.
Cumulative U.S. Trade Deficit, Up To 2014
I hope, at this point, that the reader might understand why the prevailing deficit narrative hasn't been convincing to me. The economists seem strongest when speaking about bilateral deficits (because they're mostly right on that), which is however largely a smokescreen, a strawman. What America has is a ginormous and growing aggregate deficit, of which a significant portion can be attributed to China.
Here, I defer to Warren Buffett, who I personally think has a rather better grasp on the true situation than the abovementioned experts (no offense intended, though he never listens to them either. Doesn't seem to have done him much harm). His classic article from 2003 on "America's Growing Trade Deficit Is Selling The Nation Out From Under Us. Here's A Way To Fix The Problem - And We Need To Do It Now" first acknowledges that the American trade deficit is a problem, emphasizes that it is an urgent problem, and proposes a solution, which we'll get into here.
Buffett's chosen analogy involves two island-countries, Squanderville and Thriftville. To simplify the model, there is only one capital asset, land, which is used to produce the only desired good - food. When the story begins, both islands have been at equilibrium for a long time; each worker on both islands works about eight hours a day, which produces enough food for himself. While unstated, we might also assume that there is some trade between workers to obtain a wider variety of food (this assumption does not detract from the general argument)
Now, at some point, the Thriftville workers discover the Financial Independence subreddit, and begin to save and invest. Instead of working just eight hours a day, they begin to work sixteen hours, and start exporting their excess food to the only available destination: Squanderville. The Squanderville workers, being lazier, are delighted, and pay for the imported food with Squanderbonds, denominated in Squanderbucks, privately thinking the Thriftvillers silly for providing goods in return for paper (okay, assume an insignificant paper industry)
Years pass, and the Thriftvillers slowly use their Squanderbucks to buy up Squanderville land (productive capital). Eventually, Thriftvillers own all of Squanderville; Buffett notes that Squanderville has effectively been colonized by purchase rather than conquest. About this time, the current generation of Squandervillers are confronted with a sad reality: not only do they have to return to work, they will now have to work extra to service their debt, which was run up by previous generations of wanton squanderers.
And where are those clever economists now?
With the understanding that this explanation also works with multiple countries - just think of Thriftville as the rest of the world, in contrast to Squanderville-America - Buffett agrees that this is "fair" in the sense that the future Squandervillers are merely paying the debt that their predecessors have run up. However, as he so succinctly explains, "...since one generation of Squanders gets the free ride and future generations pay in perpetuity for it, there are - in economist talk - some pretty dramatic 'intergenerational inequities'."
Buffett, of course, understands that there is one way for future Squanderville-Americans to solve their burden: to default on their debt. This isn't even that rare a last resort, really - among larger nations, Argentina and Russia have done it in the last couple of decades. However, in America's case, complications due to them being the reserve currency issuer apart, this would be a total death blow to their global leadership.
Finally, Buffett signs off with an innovative free-market solution: Import Certificates (ICs). Under this scheme, each U.S. exporter would be issued ICs in an amount equal to the dollar value of their exports. Then, mandate that foreign exporters and/or domestic importers have to obtain ICs equal to the value of imported goods. Trade balance is thus maintained, with ICs available to trade in an open market.
Leaving aside the merits of that suggestion, the main takeaway here is that Buffett recognizes persistent trade deficits as a huge problem, which appears diametrically opposed to the mainstream media-sanctioned opinion of "most experts". Definitely, another interpretation is that deficits don't matter because no matter what, somebody gets the money, somebody gets the goods, it automatically balances out by definition. However, intergenerational inequities besides, there are other very real consequences. Should America accept China buying up their land and factories (free trade!), when it has been next to impossible to do the same in China?
I know of three other popular arguments that trade deficits don't matter - firstly, specifically in the case of America, because they issue the global reserve currency, they are able to borrow relatively cheaply. However, cheap borrowing remains borrowing; unless they default, as discussed above, the claims on their assets still have to be addressed by future Americans.
Secondly, trade deficits might be acceptable if they are used to obtain assets for production. For example, one might borrow to buy a computer to produce software, which when sold produces a profit on what was spent on the computer. However, from the evidence of the previously-presented U.S. cumulative trade deficit chart, this scenario seems very unlikely.
Consider the case of a medical student who takes on student debt. He might run at a deficit for ten or so years, before starting to pay off that debt as he starts to earn an income. His cumulative deficit thus first increases during his schooling, before going down as he starts to pay it back. Some years later, the cumulative deficit becomes a surplus. There is no evidence of this pattern in the American trade deficit, which has been relentlessly increasing at a fairly constant rate.
Thirdly, it may be that a country runs a (physical) goods deficits, but a services surplus, which is Merkel's argument with respect to Europe. However, even considering this, studies suggest that America's cumulative deficit simply went from staggeringly huge, to half as staggeringly huge, and the problem remains.
What do we want?
We want free shit!
When do we want it?
We want it now!
In summary, after reviewing the evidence, my conclusion is that the experts, if they are right about trade deficits not mattering, are right only in very narrow and specific senses. However, when applied to trade deficits as commonly understood, they are entirely mistaken. To employ an analogy: when a layman says that the Earth is a sphere, an expert would be technically correct to state that "the Earth is not a sphere". It is slightly flattened at the poles, for one, and has many landscape features besides; clearly, from the precise definition of a sphere as having all points the exact same distance from its centre, the Earth is not a sphere. However, considering the general intent, describing the Earth as a sphere is probably very useful.
With this, we return to the original question - how then has it become so unquestioningly accepted, then, by even the well-educated... nay, especially the well-educated - that a people can consistently spend more than they produce, and that there will be no real consequences?!
Faced with this, one can only conclude that "most experts" have to be some combination of deluded, irresponsible or malicious. Congruent to this, TRUMP, as the only present-day POTUS to devote serious effort towards balancing the books - not even eating into past deficits, mind - rather than rehashing ineffective measures, is ironically the only grown-up in the room. Think of him as a redneck busting into his dependant college kids' dorm room and cutting up the credit cards they got from fraternity promoters, if you will; TRUMP may not know his Homer from his Hesse, but when it comes to the practical implications of finance and money, I daresay he understands much, much more than any random three Nobel prize-winning economists that you gather in a room... and only partly because they won't agree with each other to begin with.
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