It’s not the growth rate, it’s the level, stupid !

Gobal Warming?

What would a time series model (say, a simple AR2) predict if it was fit to the following graph(s)? That a new ice-age is upon us. But of course we know better, everybody knows it is global warming which is the main problem faced by humanity. And, by the way, the average global temperature has actually fallen since 1998.

Persecution and the Art of Writing – Leo Strauss (1952)

Leo Strauss (September 20, 1899 – October 18, 1973) was a German-born American political philosopher who specialized in classical political philosophy. He spent most of his career as a professor of political science at the University of Chicago, where he taught several generations of students and published 15 books.

Strauss on reading

In 1952 Strauss published Persecution and the Art of Writing, commonly understood to advance the argument that some philosophers write esoterically in order to avoid persecution by political or religious authorities. A few readers of Strauss suggest esoteric writing may also seek to protect politics from political philosophy – the explosive reasoning of which might well shatter fragile opinions undergirding the political order. Stemming from his study of Maimonides and Al Farabi, and then extended to his reading of Plato (he mentions particularly the discussion of writing in the Phaedrus), Strauss proposed that an esoteric text was the proper type for philosophic learning. Rather than simply outlining the philosopher’s thoughts, the esoteric text forces readers to do their own thinking and learning. As Socrates says in the Phaedrus, writing does not respond when questioned, but invites a dialogue with the reader, thereby reducing the problems of the written word. One political danger Strauss pointed to was students’ too quickly accepting dangerous ideas. This was perhaps also relevant in the trial of Socrates, where his relationship with Alcibiades was used against him.

Persecution and the Art of Writing.

Ultimately, Strauss believed that philosophers offered both an “exoteric” or salutary teaching and an “esoteric” or true teaching, which was concealed from the general reader. For maintaining this distinction, Strauss is often accused of having written esoterically himself. Moreover he also emphasized that writers often left contradictions and other excuses to encourage the more careful examination of the writing.

Seven Soul-Searching Shakespeare Sonnets

SONNET CXXIX

The expense of spirit in a waste of shame
Is lust in action; and till action, lust
Is perjured, murderous, bloody, full of blame,
Savage, extreme, rude, cruel, not to trust,
Enjoy’d no sooner but despised straight,
Past reason hunted, and no sooner had
Past reason hated, as a swallow’d bait
On purpose laid to make the taker mad;
Mad in pursuit and in possession so;
Had, having, and in quest to have, extreme;
A bliss in proof, and proved, a very woe;
Before, a joy proposed; behind, a dream.
All this the world well knows; yet none knows well
To shun the heaven that leads men to this hell.

SONNET CXXXVII

Thou blind fool, Love, what dost thou to mine eyes,
That they behold, and see not what they see?
They know what beauty is, see where it lies,
Yet what the best is take the worst to be.
If eyes corrupt by over-partial looks
Be anchor’d in the bay where all men ride,
Why of eyes’ falsehood hast thou forged hooks,
Whereto the judgment of my heart is tied?
Why should my heart think that a several plot
Which my heart knows the wide world’s common place?
Or mine eyes seeing this, say this is not,
To put fair truth upon so foul a face?
In things right true my heart and eyes have erred,
And to this false plague are they now transferr’d.

SONNET CXLI

In faith, I do not love thee with mine eyes,
For they in thee a thousand errors note;
But ’tis my heart that loves what they despise,
Who in despite of view is pleased to dote;
Nor are mine ears with thy tongue’s tune delighted,
Nor tender feeling, to base touches prone,
Nor taste, nor smell, desire to be invited
To any sensual feast with thee alone:
But my five wits nor my five senses can
Dissuade one foolish heart from serving thee,
Who leaves unsway’d the likeness of a man,
Thy proud hearts slave and vassal wretch to be:
Only my plague thus far I count my gain,
That she that makes me sin awards me pain.

SONNET CXLIV

Two loves I have of comfort and despair,
Which like two spirits do suggest me still:
The better angel is a man right fair,
The worser spirit a woman colour’d ill.
To win me soon to hell, my female evil
Tempteth my better angel from my side,
And would corrupt my saint to be a devil,
Wooing his purity with her foul pride.
And whether that my angel be turn’d fiend
Suspect I may, but not directly tell;
But being both from me, both to each friend,
I guess one angel in another’s hell:
Yet this shall I ne’er know, but live in doubt,
Till my bad angel fire my good one out.

SONNET CXLVII

My love is as a fever, longing still
For that which longer nurseth the disease,
Feeding on that which doth preserve the ill,
The uncertain sickly appetite to please.
My reason, the physician to my love,
Angry that his prescriptions are not kept,
Hath left me, and I desperate now approve
Desire is death, which physic did except.
Past cure I am, now reason is past care,
And frantic-mad with evermore unrest;
My thoughts and my discourse as madmen’s are,
At random from the truth vainly express’d;
For I have sworn thee fair and thought thee bright,
Who art as black as hell, as dark as night.

SONNET CLI

Love is too young to know what conscience is;
Yet who knows not conscience is born of love?
Then, gentle cheater, urge not my amiss,
Lest guilty of my faults thy sweet self prove:
For, thou betraying me, I do betray
My nobler part to my gross body’s treason;
My soul doth tell my body that he may
Triumph in love; flesh stays no father reason;
But, rising at thy name, doth point out thee
As his triumphant prize. Proud of this pride,
He is contented thy poor drudge to be,
To stand in thy affairs, fall by thy side.
No want of conscience hold it that I call
Her ‘love’ for whose dear love I rise and fall.

SONNET CLII

In loving thee thou know’st I am forsworn,
But thou art twice forsworn, to me love swearing,
In act thy bed-vow broke and new faith torn,
In vowing new hate after new love bearing.
But why of two oaths’ breach do I accuse thee,
When I break twenty? I am perjured most;
For all my vows are oaths but to misuse thee
And all my honest faith in thee is lost,
For I have sworn deep oaths of thy deep kindness,
Oaths of thy love, thy truth, thy constancy,
And, to enlighten thee, gave eyes to blindness,
Or made them swear against the thing they see;
For I have sworn thee fair; more perjured I,
To swear against the truth so foul a lie!

Turning point and Ninjas…

This weekend’s Financial Times contains a number of articles which appear to be signaling a change in market sentiment, possibly resulting in the much-anticipated follow-up slump in equity markets. First of all, the one-quarter gain o 21% of the FTSE is the largest (or steepest) gain every recorded in its history. This looks and feels a lot like bubblenomics. Secondly, US labour market data has disappointed and it seems as if much of the pick-up observed in production activity may be completely down to the bangers-for-cash schemes – which upon removal – have led to a fall in factory orders in the US. There is therefore much reason to believe that a similar fate may await other economies which have opted to prop up demand in their economies using similar methods. It is quite possible that the coming week may be of telling importance regarding the general direction markets are likely to take.

Aside from this, I find it ironic how certain acronyms frequently used in government departments are also used elsewhere, but mean something completely different. BIS (The department for business, innovation and skills) uses NINJA as an abbreviation for “New Industries, New Jobs”… but in the banking industry, NINJA means “No Income, No Job, No Assets”, which describes a category of high-risk borrowers.

A truly historic (emotional) moment – Olympics 2016 to be held in Rio

Yesterday, Rio de Janeiro, the former capital of Brazil and home to the local sun-loving cariocas (who are always mocked by the paulistas, the inhabitants of Sao Paulo, whose larger metropolitan area alone can be linked to an approximate 70% of overall economic activity of the whole of Brazil) won the bid for hosting the Olympic games in 2016. This was a truly historic event, as for the first time in history this important sports event is set to be held in a south-American country. The current president, Luis Inacio da Silva – also known as Lula – broke out in tears when Rio’s victory was announced. Indeed, it must have been a truly emotional event for any Brazilian. Commenting on this momentous and emotional occasion, Lula exclaimed:

“We are going to have to sleep less, think more and work more.  Now our term of reference is going to be work, work, work — work for Brazil to do better than any other time in its history”

Spoken like a true leader infusing his people with the right sort of motivation and energy needed to prepare Brazil for a great leap forward. What a brave new world unfolding before us!

Archduke Franz Ferdinand of Austria and Chaos Theory (and else)…

An isolated event taking place in Vienna, Austria today, triggering a wave of violence in Punjab (India) bears an eerie resemblance to the way another isolated event (the assassination of Archduke Franz Ferdinand) led to a then unprecedented escalation of violence in Europe between sovereign states, now remembered as World War I (unfortunately dubbed by Lloyd George – the then British prime minister – as The War to end all Wars). To be sure, the scale of things is of course very different – all I want to highlight is how one single local event can trigger wider-spread violence elsewhere – much akin to Chaos Theory’s butterfly analogy. Besides this, one should not fail to recall the Scramble for Africa (or Race for Africa) and the associated wave of colonialism (or new imperialism) occurring before and during WWI. According to newspaper sources, there appear to be two new scrambles (or races) going on at the moment, one of which is the scramble for the (deep-sea) ocean – in particular the Arctic and the other the scramble for Africa – again.

What else is new?

Shortly before European parliament election day, the U.K. has now officially joined the ranks of political banana republics and it’s public debt-to-gdp ratio is forecasted to be at or exceed the magic 100% threshold in the not-too-distant future – likening it even more to the former European champion of the bananas, Italy. Meanwhile, the latter country’s president has announced to make a statement before parliament to finally explain (or add  further spin to) his involvement with a minor – as his own (soon-to-be ex-) wife likes to put it.

Today, North Korea has successfully tested a nuclear bomb and – visibly unaffected by a storm of international protest – launches a short-range missile and announces further nuclear tests. Language at the diplomatic level between North Korea and the U.S. is turning very frosty. Also, last week Barack Obama visited Israel to press the two-state solution. Ahead of his visit the U.S. administration broke convention by openly calling Israel a nuclear-weapons state.

Else, China holds so much of it’s reserves in predominantly short-term U.S. debt that it appears to not only have cornered the market, but indeed cornered itself into having to continue buying more of the same stuff – amazing, the world of Finance!

Also, in spite of the U.S. Fed’s attempts to reduce yields on long-term bonds, the short-long maturity spread is rising again, keeping long-term finance dear. Not to mention equivalent spreads implied by the current return on commercial paper. Here are two recent articles by members of the St. Louis Fed on this (invoking the good old expectations hypothesis of the term structure):

Turbulent times like the ones we are living in at the moment ought perhaps be met with the right kind of attitude so as to avoid unwarranted and exaggerated despair. Franz Kafka’s diary for instance contains the following entry on the day Germany declared war on Russia (August 2,1914):

“Morning -Germany declares war on Russia. Afternoon – swimming.”

Long-term memory loss…

In my mid-teens I visitied the concentration camp Buchenwald -  situated near Weimar, the historical home of Goethe and Schiller and the epicentre of the Weimar Republic. This visit and the impressions I gathered there have always accompanied me and will continue to do so for the rest of my life. All the more worrying to read the following in this weekend’s edition of the FT

A visit to Auschwitz

By Gideon Rachman

Published: May 19 2009 03:00 | Last updated: May 19 2009 03:00

Gideon Rachman’s blog: I was in Krakow over the weekend and took the chance to visit Auschwitz – which is about an hour’s drive away. The experience was not what I expected.

In my mind’s eye, Auschwitz was isolated, empty and covered in snow. In reality, I drove there in bright sunshine and found myself in the suburbs of a small Polish town. You drive to Oswiecim, it’s left at the garden centre, and there it is: Auschwitz. There is a big car park full of coaches. Auschwitz is a big tourist destination. There is nothing to be done about that. And I’m sure it is better that lots of people visit than that the place is forgotten. But it is not an atmosphere that lends itself naturally to silent contemplation.

The Polish authorities make some effort to preserve an atmosphere of quiet and solemnity. At Auschwitz 1 (the camp, with the famous “Arbeit Macht Frei” gate), all large parties have to take a guided tour. Things seem a bit looser and less dignified at Birkenau, 3km away, which is where the prisoners arrived and where most were murdered on the spot. Birkenau is a vast place and there are more people wandering around on their own. I saw one group of boisterous, laughing men, who were speaking Swedish. They were wearing stag-party-style T-shirts which proclaimed – “Warsaw, Krakow, Auschwitz – 2009″. It was a genuinely appalling experience. But not quite for the reasons I had expected.

www.ft.com/rachmanblog

Copyright The Financial Times Limited 2009

A fair weather friend… pardon me??

First the NHS informs the public of the radical and possibly unprecedented (alas, 2009 is quite likely to be called the year of unprecedented events anyways) dangers emminating from the Swine flue and how it’s quite likely going to kill us all in one sweeping lethal strike not seen since the days of the Bubonic plague and urges everyone to establish a network of so-called flu friends. That’s cute, do you want to be my Swine flu friend?

Now, the Department of Health has cooked up a National Heatwave Plan just in case the sun decides to skip millions of years of stellar evolution so as to spontaneously go ahead turning itself a red giant this year just before ceising it’s existence through a supernova – in the meantime bringing a massive unprecedented heatwave to the U.K., which – beyond the shadow of a doubt – is going to lead to an unprecedented number of heat victims this year, rest assured! And, yep, I don’t need to tell you what’s coming up now… the DoH recommends all of us to get a fair weather friend, I am not kidding you!! Doesn’t that make you scratch your head in utter disbelief? Here is the list of tips published by the DoH to help the public to stay cool (you know, just in case that red giant of a sun really does swallow our planet this year around):

1) Shade south and west-facing windows

2) Paint buildings and surrounding walls white to reflect heat

3) Plant small trees and shrubs around buildings

4) Replace metal blinds with curtains with white linings to reflect heat outwards where possible

Who came up with this term of fair weather friend, anyways? Is this a practical joke playing on the hyphenated expression fair-weather friend? Seems like the treasury lost out in this game by failing to catch on quickly enough. I mean, following Alastair Darling’s unravelling of this year’s budget, the treasury could have warned all of us to prepare for a shocking and unprecedented tax rate shock, recommending all of us to get a fair tax friend (perhaps no need for making up a new term here, I suppose, as they already go by the name accountants) , no?

Tis the season for scapegoating

Scapegoating or musical chairs, this is what repeatedly comes to my mind as I follow the news headlines of the past months. So here is another one…

Musical chairs is a game played by a group of people (usually children), often in an informal setting purely for entertainment such as a birthday party. The game starts with any number of players and a number of chairs one fewer than the number of players; the chairs are arranged in a circle (or other closed figure if space is constrained; a double line is sometimes used) facing outward, with the people standing in a circle just outside of that. A non-playing individual plays recorded music or a musical instrument. While the music is playing, the players in the circle walk in unison around the chairs. When the music controller suddenly shuts off the music, everyone must race to sit down in one of the chairs. The player who is left without a chair is eliminated from the game, and one chair is also removed to ensure that there will always be one fewer chair than there are players. The music resumes and the cycle repeats until there is only one player left in the game, who is the winner.