Central Asia, the next Gulf?

One of the more amusing -- and predictive -- economic indicators is the "skyscraper index."  Rapidly constructed skylines tend to signal a credit bubble.  The best example of this is the Persian Gulf states, where places like Abu Dhabi and Dubai raced one another to get the highest skyscrapers.  The bubble finally burst in the Gulf, and many of the edifices sit unoccupied.

This same race to blow the bubble is on display in Central Asia.

Bloomberg is reporting on Azerbaijan's new fortunes as an oil country. What caught my attention the most is the story of Tajikistan's one-upsmanship in building a bigger flagpole than Azerbaijan.  This isn't quite the destructive use of capital as a 100-story skyscraper, but it's in the same spirit.

With Russia looking to control the flow of oil into Europe, oil-rich places in Central Asia like Azerbaijan will benefit.  But without a change in the underlying institutions or attitudes toward capitalism, this will be a fleeting moment.  Eventually, the inflow of interest payments will not be able to get repaid, and that flagpole may not be such a symbol of pride.

#DDay70

There have been a lot of anniversaries lately, namely Reagan’s death and D-Day.  Along with commemorating the event, these anniversaries have showed us how much the world’s technology has changed.  Even ten years ago, there was no Twitter when Reagan passed.  It makes the D-Day assaults almost impossible to fathom.  How was the largest military operation in history accomplished without the Internet?  Think of all the calculations and communications that had to be coordinated for the storming of Normandy. 

While there was no Microsoft Office in the 1940s, there were great leaders.  We can have all the technology at our disposal, but without the right man at the helm, they become idle Tweets. 

Think of Reagan 30 years ago (even then, no Internet) and Obama today.  Even with all of today’s technological advances, is Obama a better commander-in-chief? 

Recycle Smarter than a Third Grader! | Learn Liberty

PERC ought to be much better-known.  Unlike most think-tanks, they are not located in DC.  This is greatly to their credit.  It baffles me to think that a think tank advocating a lesser federal government would locate their offices in the federal capital!  I thought DC was supposed to be a seasonal city?



Anyway, PERC tears down the false dichotomy between environmentalism and market economics.  Just think markets when you're recycling!

Prager's Commencement Address

Dennis Prager hits another home run in this Prager U video.  

The wisest point of them all I believe was his first.  This summarizes the liberal versus conservative viewpoint so well.  Is man's primary conflict man vs. society or man vs. himself?  This is a driving theme of Western philosophy and literature.  Thanks to people like Marx and Rousseau, most graduates believe that society is the cause of all their problems.  They do not wish to look inward for flaws.

Although I have some problems with Gandhi, one of the wisest quotes of the twentieth century is certainly: "Be the change you wish to see in the world."

Big Data and disperse knowledge

Economists are frequently turning to Twitter, Google and other online data sources to analyze the markets.

In an economy less focused on manufacturing and more on information and connections, it only makes sense to use internet-created data in economic modelling.  Just as car sales were tantamount to analyzing the Rust Belt economy of the past, Google and Twitter are means of generating value in the information economy.
 
What’s really exciting about these changes is the possibility of exploring disperse data.  In the past, industrial surveys focused mostly on managers and their plants.  How many people did you hire?  What is your inventory?  If the individual was surveyed, it was only among a set list of questions.  Then it would take a few weeks to compile this data among classical statistical assumptions (You need the right sample size…and what is your margin of error?)

No more waiting weeks for top-down approaches.  Now anyone can log onto the web real-time and research what individuals share.  What a great way to gather disperse information and develop trends. 

 

Piketty on CNBC

And he's got the accent to boot!

Thomas Piketty was on CNBC to talk economics.  From the video, he doesn't seem to understand the duelling forces of liberty and equality. 

But when it comes to the Fed, we can all conclude that the Federal Reserve *does* promote inequality.  Credit expansion does not spread evenly to the economy.  It tends to concentrate among those who are already the most protected -- bankers and other establishment types.  The Fed's credit creation has been a bad deal for the rest of us.  I'm glad Piketty got something right!

The Bubble in Higher Education

It's always frustrating when an article delves into an interesting point and a decent conclusion, but gets there through incorrect thinking.

This MarketWatch story is a perfect example.  The author insists that college just *has* to get cheaper.  It's inevitable!  At a certain point, things well level out.  He concludes that for people who would be in college in 20 years (.i.e. those being born today), college will be affordable.

The author doesn't go into the mechanics of why the rising cost of college won't last forever.  It's a classic bubble.  The government has incentivized loads of young people to take on piles of debt in exchange for a college degree.  Once creditors have a hard enough time getting their money back on these poor loans, they will have to stop lending.  Unfortunately, this lender is mainly the federal government.  Government's overbearing role in the higher education system has led to some serious overinvestment in education, and at some point this will be corrected.

It's not that there is just some mystical economic law that predicts all overbuying must end.  In this case, we have a bubble.