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Journalism and other myths.

Global Policeman, Again

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Another year, another war in Iraq. Like the sunspot cycle, they seem to come ‘round about every 11 years. But this is not a natural cycle – this is caused by the instability built into a planet that is closer than ever before. Artificial “nations” created by outside powers with inherent instability, such as Iraq, are a burden on everyone.

There’s little point going into the strange history of Iraq and other nations like them because as it currently stands there are few ways to fix the problem. The climate of constant war makes redrawing boundaries in the Middle East (or, for that matter, in Ukraine) hard to imagine without making the situation worse in the short run. It usually takes years of peace and stability to contemplate a peaceful transition, such as the one that Scotland will vote on next week.

One question we can contemplate is why the burden always falls on the US. The short answer to that question is that we are by far the dominant military on the planet. But why?

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Bizarro World Finance

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This last week, the yield on a 2-year Irish Government bond turned negative, garnering a rate of -0.007%. That means that if you want to loan the Irish government some of your money, you have to pay for the privilege of doing so. Negative interest rates are not exactly new, but in the case of Ireland it’s particularly bizarre. Just three years ago, amid a potential default crisis, the same bonds were yielding 23%.

What changed? The short answer is no one knows. Shiela Kinsella, an Economics Professor at the University of Limerick, was exasperated. “The market is still in an irrational stage. It’s telling me that markets are lumping the same countries in again, and it’s just proof that nothing is ever learnt.”

Why did this happen? Investors in the Eurozone still can’t find anything to invest in as the European Central Bank (ECB) started a weak bond-buying program to goose investment. It’s a last ditch attempt to goose the economy and produce much needed jobs. But all it has created so far is a Bizarro World in finance.

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Maglev Trains in Our Future

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Is the US ready for high speed rail? If The NorthEast Maglev (TNEM) gets its way, a solid demonstration project between Baltimore and Washington might be built sometime in the future for an undisclosed amount of money. The project is hardly scoped out yet, but the promise of being able to rocket between the cities at over 300 mph (500 kph) has attracted attention – and $5B in potential backing from the Central Japan Railway, the Bank of Japan, and the Japanese government. It’s a good downpayment on the guesstimated $10-15B the line will take.

How serious is this proposal? The government of Japan would love to start exporting some of its best technology, and it’s hard to pass up that kind of dough. And if TNEM gets their way, it’ll go on from there on a 240 mile line from Washington to New York, making the trip in just one hour. How much will that cost? The guesstimate of $100B is such a round number that you know it’s vague. But it’s a tantalizing worth investigating for a lot of reasons – and the money would come from private investors, not any government.

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A Can’t Lose War He Can’t Fight

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Russian troops have invaded Ukraine, this is not in question. Whether or not they have the official sanction of Russia itself or are merely “on vacation” fighting for a good cause is up to the reader to decide. The main contention so far is what exactly Putin is doing by playing a very silly game by trying to invade without invading, telling the world a fairly transparent fairy tale that no one believes

I think that the key question has to lie in Putin’s head, which is to say how he is responding to the forces on him. That requires a lot of speculation in the absence of any good information. Good reporters (and bloggers) don’t go deep into speculation, so if you don’t want to read this I’ll understand. But it seems that Putin is eyeballs deep into a war he can’t lose but also can’t fight.

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Labor in a (Jackson) Hole

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The Federal Reserve of Kansas City puts on the big event every year – and why not throw a big party when your territory includes Jackson Hole, Wyoming? This year’s production concluded after presentations and official pronouncements from all the top central bankers of the world – Mario Drahgi of the European Central Bank (ECB), Haruhiko Kuroda of the Bank of Japan (BOJ), and our own Janet Yellen. It’s a must-see event if you want a front row seat for the big show of policy changes among the most powerful people in the world.

This year, the theme was “Re-Evaluating Labor Market Dynamics”, and the power players from around the world made it clear that nothing is going to change in the near future. If that sounds like the biggest let-down for a big show ever, you’re right. The Fed never intended for this to be a huge theatrical spectacular. It’s a place for central bankers to get together and agree on things. And what they agreed on, more than anything, is that in the developed world there is nothing more important than figuring out just how much “slack” there is in labor markets and how to take it up.

But it’s more exciting than it seems if you want to predict what will happen in the next year.

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