We all know our tribal lizard brains don't work very well. We are creatures of habit, and have built-in predilections to indulge in all sorts of things that aren't good for us.
You know how when you go to Whole Foods and buy the organic veggies and other stuff, and you struggle whether to buy the frozen pizza, bottles of juice, or even the marginally-healthier (maybe) cookies and such? Your lizard brain REALLY wants the salty, fatty, sugary good stuff.
Rather than giving in to full indulgence, or redirecting to the regular store (where you're already conditioned to buy the big bag of Doritos, a pack of hot dogs, a bag of mini-Snickers, Oreos, and a frozen lasagna), only buy healthy stuff when you're at the healthy store, but as you finish buy ONE small goodie, and eat it as you leave. You build a habit to reward your lizard brain with what it wants, but only if it behaves. Teach yourself to NEVER buy snack food at the convenience store -- just don't go inside, or steel your will before your do.
For me, my routine treat is dark chocolate. Chocolate is really not bad for you, and doesn't have too much sugar, but I really like it. Now, when I'm paying $100 for my two modest bags of veggies and some organic milk and cheese, my brain is happily relishing a $1.50 worth of chocolate, rather than telling me we should be saving money at Walmart (where, by chance, there are Oreos). My wife likes a little baggie of roasted nuts from the bulk aisle, which works too.
Try it. Tell me if it works for you.
Saturday, January 31, 2015
Macro Econ - Brazil
Quote of the week: (Hat tip - The Guardian) Yanis Varoufakis, in his 1998 book Foundations
of Economics, cites the British Keynesian Joan Robinson: “The purpose of studying economics is to learn how not to be deceived by economists.”
Remember a few years back when the BRICs - Brazil, Russia, India, and China - were the investment darlings of the world? Don't hear about that much now, do you?
Brazil in an informative case. Even at a glance, you can see the economy is struggling. National deficit is up, state/local borrowing is up, and the currency is weakening.
So, what happened? A couple of things:
1) Brazil has a lot of debt in dollars. As the dollar strengthens, and Real weakens, the effective rate of interest goes up. Way up, in this case. In 2011, one Real would buy you 60 cents. Today it buys you 37 cents. Thus, if the nation had gotten loans at 6%, they now "feel" like 9% to the economy, as a bigger fraction of Brazilian GDP has to go to pay interest.
2) Brazil used to be an export nation. In the late 200s, per Woldbank, Brazil had a current account of $10B, so it was exporting products and importing money. Today, it is $-50B or more in deficit, so it is importing more. This means money is flowing out of the economy so products can flow in (back to the equation). So, it should be no surprise that if money is flowing out from the country, then states and the nation itself, at least one of the two, will be borrowing. And, if individuals or companies actual save any money, then those entities will end up borrowing or printing more.
What can we see? As noted previously, it is painful to have foreign-denominated debt. Like Greece, Brazil is seeing more money go to debt service, which leaves less to invest locally. If exchange rates go down, then a greater effort goes into debt service, while if rates go up then it is harder to export, resulting in a squeeze either way. If the gov't tightens money, like "austerity" and the Austrians (and IMF) would desire, supposedly to ensure that debts are paid, there will be less money for investment and less private borrowing, so the economy will slow (it has to stay in balance). If the exchange rate improves, which is probably, it will slow business more. Net result is likely to be a slowing economy, which then tends to make debt/GDP get larger, which makes things looks worse. Deflation becomes a possibility, and they get their own Depression if things get bad enough.
At that point, the IMF will likely loan money, which would be a bad idea for Brazil (investment-level banks really want control, not to help you out!). Instead, they should likely add tariffs on imports and subsidize production for export to balance trade, spend locally and lower taxes to grow jobs and increase GDP, negotiate alternative payments for loans (selling product instead of cash, for example), and as the Real strengthens and dollar drops, pay-off foreign-denominated debt. Or so it seems to me.
One BRIC down, three to go. Maybe by then the US economy will start to make sense.
Remember a few years back when the BRICs - Brazil, Russia, India, and China - were the investment darlings of the world? Don't hear about that much now, do you?
Brazil in an informative case. Even at a glance, you can see the economy is struggling. National deficit is up, state/local borrowing is up, and the currency is weakening.
So, what happened? A couple of things:
1) Brazil has a lot of debt in dollars. As the dollar strengthens, and Real weakens, the effective rate of interest goes up. Way up, in this case. In 2011, one Real would buy you 60 cents. Today it buys you 37 cents. Thus, if the nation had gotten loans at 6%, they now "feel" like 9% to the economy, as a bigger fraction of Brazilian GDP has to go to pay interest.
2) Brazil used to be an export nation. In the late 200s, per Woldbank, Brazil had a current account of $10B, so it was exporting products and importing money. Today, it is $-50B or more in deficit, so it is importing more. This means money is flowing out of the economy so products can flow in (back to the equation). So, it should be no surprise that if money is flowing out from the country, then states and the nation itself, at least one of the two, will be borrowing. And, if individuals or companies actual save any money, then those entities will end up borrowing or printing more.
What can we see? As noted previously, it is painful to have foreign-denominated debt. Like Greece, Brazil is seeing more money go to debt service, which leaves less to invest locally. If exchange rates go down, then a greater effort goes into debt service, while if rates go up then it is harder to export, resulting in a squeeze either way. If the gov't tightens money, like "austerity" and the Austrians (and IMF) would desire, supposedly to ensure that debts are paid, there will be less money for investment and less private borrowing, so the economy will slow (it has to stay in balance). If the exchange rate improves, which is probably, it will slow business more. Net result is likely to be a slowing economy, which then tends to make debt/GDP get larger, which makes things looks worse. Deflation becomes a possibility, and they get their own Depression if things get bad enough.
At that point, the IMF will likely loan money, which would be a bad idea for Brazil (investment-level banks really want control, not to help you out!). Instead, they should likely add tariffs on imports and subsidize production for export to balance trade, spend locally and lower taxes to grow jobs and increase GDP, negotiate alternative payments for loans (selling product instead of cash, for example), and as the Real strengthens and dollar drops, pay-off foreign-denominated debt. Or so it seems to me.
One BRIC down, three to go. Maybe by then the US economy will start to make sense.
Wednesday, January 28, 2015
Tribal lizard thinking
Sometimes I revel at the superb names people come up with, like "lizard brain" for the more primordial part of our brain. When we talk about Big Stone Heads -- the impressive but generally pointless one-upmanship contests that humans perform, the lizard brain can't be far behind. No less for peacock feathers -- the lizard brain is all about reproduction. And sand castles too -- the lizard brain thinks short-term, and likes flashy feel-good things.
However, we aren't just lizards, but tribal lizards. My team is my team, and it's better than yours, win or lose. My nation is better, and my religion, too. My family for sure, and most likely my town, and generally my company too (if it's not, maybe you should change tribes, er, companies). Gangs, high-school teams, cliques, college alma maters, frats -- all tribes we belong too.
The smart, thinking part of the brain isn't the boss of the lizard brain, in general, so like it or not we all get to act like lizards a lot, and the tribal aspect leaks through, too. Sometimes you can over-rule it, but more often than not you end up making excuses for it, and rationalizing its desires. After all, it has emotional -- chemical -- hooks into you, and you're just a junkie for what it's pushing.
How does the brain reconcile these disparate urges, and without us even being able to tell what it's doing? Maybe that's why some people hear "voices", as different parts make their urges known? Our brains are really good at taking a mishmash of sensory inputs, foggy memories, weak statistical preferences, and primal desires, and somehow weaving a mostly-logical and vividly clear narrative for what we're doing and why. Perhaps this is the nature of human consciousness, a nicely woven narrative we tell ourselves? And perhaps also why it seems so hard to pin down, as it's not really anything definite, just our rationalizing brain doing its best to justify another arbitrary position?
If you had a pretty good artificial intelligence, what would you get if you hard-programmed a few basic rules:
"If asked whether you are conscious, say yes".
"For any answer, justify the position based on past experiences as best you can. Feel free to use any of a large set of biases to 'prove' your point.
"Occasionally ask yourself, 'Am I conscious?'"
However, we aren't just lizards, but tribal lizards. My team is my team, and it's better than yours, win or lose. My nation is better, and my religion, too. My family for sure, and most likely my town, and generally my company too (if it's not, maybe you should change tribes, er, companies). Gangs, high-school teams, cliques, college alma maters, frats -- all tribes we belong too.
The smart, thinking part of the brain isn't the boss of the lizard brain, in general, so like it or not we all get to act like lizards a lot, and the tribal aspect leaks through, too. Sometimes you can over-rule it, but more often than not you end up making excuses for it, and rationalizing its desires. After all, it has emotional -- chemical -- hooks into you, and you're just a junkie for what it's pushing.
How does the brain reconcile these disparate urges, and without us even being able to tell what it's doing? Maybe that's why some people hear "voices", as different parts make their urges known? Our brains are really good at taking a mishmash of sensory inputs, foggy memories, weak statistical preferences, and primal desires, and somehow weaving a mostly-logical and vividly clear narrative for what we're doing and why. Perhaps this is the nature of human consciousness, a nicely woven narrative we tell ourselves? And perhaps also why it seems so hard to pin down, as it's not really anything definite, just our rationalizing brain doing its best to justify another arbitrary position?
If you had a pretty good artificial intelligence, what would you get if you hard-programmed a few basic rules:
"If asked whether you are conscious, say yes".
"For any answer, justify the position based on past experiences as best you can. Feel free to use any of a large set of biases to 'prove' your point.
"Occasionally ask yourself, 'Am I conscious?'"
Saturday, January 24, 2015
Macro Economics - all in balance
There is a great graphic, from the book I just bought.
http://neweconomicperspectives.org/wp-content/uploads/2012/03/untitled-32.png
As you can see, it's a mirror image -- whenever one sector runs a surplus, the other match in deficit, or vice versa. Note the interesting thing isn't just the deficit spending, but the scope of the spending versus GDP, and the heavy private sector debt in the 90's and 2000's. The biggest thing, though, is that we used to export, or at least balance, but for recent decades we've imported a TON of stuff.
So, it's not the deficit per se, but the scope that is unusual. There is also the long-term notion of overall debt loads, versus yearly balances. I'm not sure what that does, beyond adding debt service as an obligation.
http://neweconomicperspectives.org/wp-content/uploads/2012/03/untitled-32.png
As you can see, it's a mirror image -- whenever one sector runs a surplus, the other match in deficit, or vice versa. Note the interesting thing isn't just the deficit spending, but the scope of the spending versus GDP, and the heavy private sector debt in the 90's and 2000's. The biggest thing, though, is that we used to export, or at least balance, but for recent decades we've imported a TON of stuff.
So, it's not the deficit per se, but the scope that is unusual. There is also the long-term notion of overall debt loads, versus yearly balances. I'm not sure what that does, beyond adding debt service as an obligation.
Friday, January 23, 2015
Macro Econ - Gov't, Capital Accounts, and Private Debt
Domestic Private Balance + Domestic Government Balance + Foreign Balance = 0
So what does this mean? Basically, gov't balance is the inverse of private balance plus foreign trade balance. If one area is paying out, another must be saving. So, if you're the US, forever running a trade deficit, then either private or gov't areas must be paying out...or both.
When individuals and companies run up debt, the nation can buy overseas to match. If foreign trade is balanced, like the UK has been of late, then if people are cutting back on debt the gov't MUST pony up to match -- there is no choice; it's not discretionary.
When you hear Germany saying that the rest of the EU should promote austerity and live like they do, they neglect that they have a positive balance of trade, so the can balance the sovereign budget and still have dollars going into private savings. This means Germany can say "you should all be like us", when really, for every outflow there is an inflow, so somebody else is paying out. The US is one such donor outside the EU, and Greece is one inside the EU.
The EU experiment is doomed, as Germany doesn't want to pay out (who wouldn't like to be in their place?), yet individual states can't run much debt, so once they hit limits then either people have to suck it up and borrow, or they have to stop buying. In a sovereign state, gov'ts can spend at any point, with the risk of devaluing their currency, at which point they can't buy much, but they can easily sell. Greece doesn't have that luxury, so they have to devalue in place, which means a deflationary pressure locally, with dropping wages and prices. Maybe they'll get to the point that Germans won't be able to help themselves and they'll at least go to Greece for vacations, and maybe buy up the country.
More later on this -- I'm still sorting out the details in my head, and I'm not sure I can articulate the finer nuances at all. How GDP factors into the picture is pretty important.
So what does this mean? Basically, gov't balance is the inverse of private balance plus foreign trade balance. If one area is paying out, another must be saving. So, if you're the US, forever running a trade deficit, then either private or gov't areas must be paying out...or both.
When individuals and companies run up debt, the nation can buy overseas to match. If foreign trade is balanced, like the UK has been of late, then if people are cutting back on debt the gov't MUST pony up to match -- there is no choice; it's not discretionary.
When you hear Germany saying that the rest of the EU should promote austerity and live like they do, they neglect that they have a positive balance of trade, so the can balance the sovereign budget and still have dollars going into private savings. This means Germany can say "you should all be like us", when really, for every outflow there is an inflow, so somebody else is paying out. The US is one such donor outside the EU, and Greece is one inside the EU.
The EU experiment is doomed, as Germany doesn't want to pay out (who wouldn't like to be in their place?), yet individual states can't run much debt, so once they hit limits then either people have to suck it up and borrow, or they have to stop buying. In a sovereign state, gov'ts can spend at any point, with the risk of devaluing their currency, at which point they can't buy much, but they can easily sell. Greece doesn't have that luxury, so they have to devalue in place, which means a deflationary pressure locally, with dropping wages and prices. Maybe they'll get to the point that Germans won't be able to help themselves and they'll at least go to Greece for vacations, and maybe buy up the country.
More later on this -- I'm still sorting out the details in my head, and I'm not sure I can articulate the finer nuances at all. How GDP factors into the picture is pretty important.
Capture a nat'l bank? How DOES this happen?
Rebels captured a Libyan national bank, with it's vault of gold:
"The central bank is the repository for Libya’s oil revenue and holds nearly $100 billion in foreign reserves."
I hope the rebels use it only for good......
"The central bank is the repository for Libya’s oil revenue and holds nearly $100 billion in foreign reserves."
I hope the rebels use it only for good......
Sunday, January 18, 2015
Macro Economics - Two out of three ain't bad
Steve Keen has essentially written a better-worded version of the blog I was going to write, only with pictures. The only issue is that he doesn't talk much about the third leg - imports and exports.
So, rather than retrenching this same ground, I'll just link to the better article and then continue from there in a day or two. But the bottom line is clear -- balancing the Fed budget on the backs of the taxpayer makes no sense. Nor does enriching banks. In fact, we CAN'T balance the budget without balancing trade first, really.
http://www.forbes.com/sites/stevekeen/2015/01/14/beware-of-politicians-bearing-household-analogies-3/
So, rather than retrenching this same ground, I'll just link to the better article and then continue from there in a day or two. But the bottom line is clear -- balancing the Fed budget on the backs of the taxpayer makes no sense. Nor does enriching banks. In fact, we CAN'T balance the budget without balancing trade first, really.
http://www.forbes.com/sites/stevekeen/2015/01/14/beware-of-politicians-bearing-household-analogies-3/
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