Remember Argentina: The US trade gap and the charity of strangers

BBC NEWS | Business | US trade gap expands to $58.4bn

...The trade deficit makes up much of the red ink in the US's current account [deficit], the measure of the divergence between the US's incomings and outgoings.

Both the current account and budget deficits - the latter currently close to $500bn - are funded largely by the purchase of dollar-denominated debt by foreign central banks.

The inflow of about $2bn a day, estimated by some economists to be about 80% of the world's excess savings, also keeps the dollar from sliding further and faster.

We Americans keep spending, you foreigners keep sending us money so we can spend. What a deal! I think I'll buy another Mac. Or maybe a Mercedes.

Meanwhile Manhattan, previously sold to the Japanese and the Saudis, is now being sold to the Italians. Somehow I suspect New Yorkers came ahead on each sale.

We Yanks are partying like the boom and bust never happened. We don't pay taxes, and foreigners pay for our government's services and invasions. We buy Armani and foreigners keep our credit card rates low. Those bogeyman bond traders who are supposed to threaten irresponsible nations just wink at us. Greenspan keeps the taps runnin' and foreign money flows out. Yeah, our homes cost bazillions now, but that's not inflation, that's wealth. Right?

Ok, I'm no economist. Modern economics reminds me of modern physics -- both have far outstripped my dwindling intellectual resources. The universe is an infinite pile of infinitely expanding grapefruits, and the flow of capital between the US, China and India means we can party forever.

All the same, I'd be interested in an investment strategy that allowed me to make a goodly bet that the house of cards collapses before 2010. I'm willing to lose the bet (but not all my assets!) if the game goes on. Anyone know a legitimate place that offers such wagers to non-billionaires? (There's a name for this kind of complex financial instrument but I need more coffee to remember it. [1])

[1] Google came to my rescue. The search on "complex financial instrument" provided a nice list from DeloitteLearning (course costs money and is IE only!). The term is "Derivative and it takes one deep into the bowels of finance -- a field where mathematicians have gone to play. So all I need is a packaged derivative that won't wipe me out if it goes south, but lets me bet that the wheels come off the train.

Phil Bradley's posts on search and net services: March 7-11

Phil Bradley's Blog: March 7-11

Phil is a librarian, with a special interest in net search and design. I always enjoy following his blog, but in the past few days (3/7-11) he's had some exceptional entries. I wonder if he's been at a conference recently. I'll post separately on a few of the things he mentioned, but it's worth going through the March archives and reading from 3/7 onwards.

Blogger outage

Faughnan's Tech: Blogger was a mess today!

Blogger/blogspot has been out of order for at least the past day or so. I don't know how reliable it will be today. If anyone needed proof that Google was imperfect then they need only turn to Blogger. It's the Google equivalent of Microsoft Word.

The disadvantage of "free": no threats!

Faughnan's Tech: Blogger was a mess today!

A real mess. Sadly, Blogger is a "free" Google property. I can't threaten to deprive them of a revenue stream because I don't pay them. Blogger needs a business model.

Plagiocephaly and the law of unintended consequences

Baby's First Helmet (washingtonpost.com)

This is an intelligent and accessible discussion of plagiocephaly, aka 'funny looking baby heads'. We ask parents to place babies on their backs to reduce the incidence of sudden death (seems to work!), but this has an unintended consequence -- squished heads. The problem probably resolves on its own, but noone can guarantee full resolution. The helmets seem to speed up head rounding and they seem troublefree. They're not cheap though!

Prodigies and their futures

Boston.com / News / Boston Globe / Magazine

An interesting article on the prodigy and their outcomes.

I was never a prodigy, but I knew a few in my undergrad days. Those I knew were more or less like most bright people, but they could learn just about anything with astounding speed. A typical trait would be to goof off throughout much of a semester, then cover the course material in the last two weeks and finish with an excellent grade. They didn't necessarily have exceptional ideas or insights (though they did ok!); there doesn't seem to be a strong correlation between unusual creativity and being a prodigy. Reading between the lines in this article, it seems some of the pressure prodigies experience is caused by the false beliefs of parents, teachers and the children themselves that their extraordinary ability to learn also implies an extraordinary ability to create. If they turn out to be only as creative as other very bright people, they may feel as though they've failed. The children mentioned in the article also seemed to have somewhat intense parents.

Lastly they all seem to feel a frustrated obligation to try to fix the world. Hmm. I'm neither a genius nor a prodigy, but that I can understand.

One of the curiosities of a prodigy's life is that while they start out immensely far ahead of their peers, but by their twenties they start to slide into the 99% percentile rather than the 99.999%. To them that can feel like a big drop. A prodigy seems to be a mixture of both genius and accelerated maturation of the brain; by adulthood they lose the maturational advantage but may continue to be a genius.

Of course genius (based on IQ) doesn't translate to "success" (fame, wealth, offspring, sex - whatever) either. Glorious success is a funnny thing, a mixture of talent, luck, perseverance, and inclination. IQ helps with the talent part, but learning ability is only a portion of a quarter of the "success equation". If IQ alone is less than 1/8th of the "success equation", then it's no surprise that most of the adult prodigies are not "successful" on a national stage. Of course an enhanced ability to analyze and understand the world may also limit one's desire to sell body and soul in the pursuit of fame and power.

UK: National programme for IT

Medify Solutions

A UK vendor has put up a nice non-technical overview of the UK's ambitious (to put it mildly) national IT program.

The US put men on the moon. The UK is launching a massive healthcare IT programme. I think the US took the easier challenge. I'm hoping the UK puts their team on the "moon".

Upgrading mice

Boing Boing: Mice with human brains coming?

...the university's ethics committee approved the research, under certain conditions. Prof Henry Greely, the head of the committee, said: 'If the mouse shows human-like behaviours, like improved memory or problem-solving, it's time to stop.'

It's reassuring that these guys know when to stop, I am now confident these mice will not acquire any civil rights.

Next up: augmenting fly brains and flying jets with mouse-human neural tissue.

Medicaid: it's the Alzheimer's and the strokes

Economist.com | Medicaid reform

The Economist thinks that Bush's social security redesign will fail and that attention will turn to Medicaid. They helpfully illustrate the article with a picture of a Hispanic family. Idiots. The article is mostly worthless, save for one prize paragraph:

Set up in 1965 to provide health care for the poor, Medicaid, with a total cost of over $320 billion, is now, alongside Medicare, America's biggest government health-care programme. Uncle Sam pays between 50% and 77% of the tab, depending on how poor a state is: on average, 57 cents out of every dollar Medicaid spends. Over 50m Americans rely on the programme for their health care. Most of those who enroll are poor families with children, but most of Medicaid's money is spent on old and disabled people, particularly on nursing-home care. (Medicare, the federally-funded programme for the old, covers only doctor visits, hospital visits and, from next year, prescription drugs.) Medicaid pays for two-thirds of all nursing-home residents in America.

Idiots and cowards. They ought to have featured a picture of an elderly middle class person in a nursing home bed. The medicaid fight is really about nursing home care, most nursing home care is for demented persons, and the vast majority of long term nursing home residents are white middle and upper-middle class adults. The latter group most often managed an informed divestiture of assets that allowed them to pass wealth to their children and transfer their ongoing expenses to medicaid.

To put it mildly, this problem has been predicted for while. We've known for decades that unless we came up with way to slow the onset of Alzheimer's (stroke reduction we may be able to do) there was no solution short of Soylent Green that was going to prevent an explosive increase in nursing home costs. The future is now.

I'll make the bold and radical prediction that the Bush administration will cut costs by denying benefits to the family in the Economist's photo. This will advance the cause of the "ownership agenda" but it will do nothing about Medicaid's costs. (Sound familiar?) True cost reforms will come only by preventing asset transfers from demented adults, encouraging euthenasia, preventing Alzheimer's, setting up nursing homes in low wage nations, or developing fully automated nursing homes (preferably with virtual reality entertainment for the residents).

Of this list I like the Alzheimer's prevention part. Make me president and I'll match 10% of the yearly federal medicaid bill ($32 billion or so) with research funding. (Not likely! :-)

Otherwise I've long considered the other two options (Guatemalan nursing homes and robotic care facilities with virtual reality entertainment) to be great investments.

Now you can completely ignore the Bush medicaid kerfuffle to come.

How to write a paper in one draft

Brad DeLong's Website: Advice on Paper Writing

In way too many years of writing papers, I'm ashamed to admit this trick has never occurred to me. As someone who wrote too many one draft papers, I would have benefitted greatly from Professor DeLong's advice:

Nobody ever told them that if you are going to hand in a first draft, an easy way to significantly improve it is to, when you are finished, cut the last paragraph from the paper and paste it at the beginning. Your final sum-up paragraph--written at the end, as you have by trying to write down what you think discovered what you really do think--is almost always going to make a better first paragraph than the first paragraph that you wrote.

Alzheimer's "disease": the decline of denial and the redefinition of "normal"

It may be Alzheimer's, not old age

Many years ago it was popularly believed that senility was a normal outcome of aging. Then, in the past few decades, many academics came to believe (hope?) that the brain did not decay all that much with aging, and that senility was the result of infrequent or preventable disease processes.

Hah.

Those of us who know the glass is half-empty (and poisoned besides) never bought this obviously false hope. We of the dark and suspicious nature have long suspected that it was (by definition) abnormal to avoid brain decay, and those "sharp as a tack" 90 year olds represented very anomalous genes. Happily for we skeptics the data is increasingly supporting the depressing hypothesis that Alzheimer's is a "normal" consequence of aging that, like bad joints and bad hearts, very few will entirely avoid.

Not that denial is dead. Note below how the researchers and journalist confuse "normal" with "healthy" or "optimal". Bah. Weak muscles and flabby hearts are a normal part of aging. So are bad brains. If normal is what happens to most of us, and if most of us develop forgetfulness with aging, and most forgetfulness is due to Alzheimer's or vascular disease, then most of us (if we live long enough) will get Alzheimer's -- so Alzheimer's is "normal". What clearly does vary is the age of onset, not the common process.

Get used to it. If you don't like it, then support funding for research to slow the "normal" decay of the brain. (Not that I personally have anything at stake here.)

So read the article, but also appreciate the profound confusion afflicting both the journalists and (less forgiveably) the researchers. I've added a few comments to help out :-).

A new study refutes the notion that forgetfulness is a normal part of aging. Among elderly people who had mildly impaired thinking and memory before their deaths, autopsies revealed that more than three-fourths had Alzheimer's disease or small strokes. ...

... Researchers examined the brains of 180 elderly nuns, priests and brothers who had volunteered to undergo annual cognitive tests and to donate their brains after their deaths.

Of the 37 volunteers who had exhibited mild cognitive impairment, autopsies showed that more than three-fourths had suffered brain damage from Alzheimer's disease or stroke. Less than one-fourth showed no evidence of disease.

.. Everyone has memory lapses, such as forgetting a name. Mild cognitive impairment is more severe. A mildly impaired person might, for example, forget a conversation or read a story and remember only bits and pieces. However, the person would not have other symptoms of Alzheimer's, such as impaired judgment or reasoning. [jf: note the emphasis is on an inability to acquire new information.]

... There was one piece of good news in the Rush study. One-third of the participants showed no evidence of cognitive decline, even though their average age at death was 82. [jf: 2/3 had cognitive decline. That means it's "normal". but ...]

Surprisingly, autopsies revealed that about half of the people with no cognitive impairment had Alzheimer's disease. And nearly one in four had experienced strokes. Their brains apparently had a reserve capacity that enabled them to function normally despite damage done by disease, Bennett said. [jf: So even those who didn't have obvious cognitive decline still shared the same disease processes. They just weren't symptomatic yet. Might as well admit we're talking "normal" here.]

Buffett and the share cropper society

From the Berkshire-Hathaway annual letter. There are very few comparable overviews of the worldwide economy. Most such reviews are either proprietary or are political documents. I do wonder about his trade policy ideas though. They remind me of the Nixon era attempts to beat inflation through price controls. Is it our trade policies or our fiscal and monetary policies that are the problem? I'd like to see DeLong and his ilk comment on this.

I thought his most interesting comments were about how huge the 1990s bubble really was, and how we're still very much experiencing its effects. I wonder how the real estate bubble will feel. As The Economist has written recently, if we treat asset inflation as "true inflation" we're now experiencing early 1970s style inflation. We know how that story turned out.

IHT: Buffett profits on weak dollar

... When the stock market was soaring in the late 1990s, Warren Buffett now says, he should have sold stocks rather than just complain about overvaluation. Now, with the dollar still headed down in his view, he says he is acting on his opinions even though it makes him nervous that so many agree with him.

The annual report showed that of the $3.5 billion in pretax gains on investments Berkshire realized in 2004, well over half came from betting against the dollar. Of them, $1.8 billion came from foreign exchange contracts, and a portion of the $730 million in profit on junk bonds also came from foreign exchange gains. The bonds were purchased in 2001 and 2002 when such bonds traded at relatively high interest rates.

... Berkshire ended the year with $43.4 billion in cash and short-term investments, up from $36 billion a year earlier and 12.7 billion at the end of 2002. He said he was looking for good investments but having difficulty finding them.

..."The evidence grows that our trade policies will put unremitting pressure on the dollar for many years to come," he wrote. He added that Berkshire owned $21.4 billion in foreign exchange contracts, denominated in 12 currencies, at the end of 2004.

..."There are deep-rooted structural problems that will cause America to continue to run a huge current-account deficit unless trade policies either change materially or the dollar declines to a degree that could prove unsettling to financial markets," he said.

... "A country that is now aspiring to an 'Ownership Society' will not find happiness in - and I'll use hyperbole here for emphasis - a 'Sharecropper's Society.' But that's precisely where our trade policies, supported by Republicans and Democrats alike, are taking us."

Buffett's reputation was built on buying stocks, and sometimes whole companies, cheaply, and on rarely selling stock in what have become Berkshire's principal holdings. In the report, he said that Berkshire's "Big Four" stock positions - American Express, Coca-Cola, Gillette and Wells Fargo - had performed well in terms of their businesses but that he had underestimated how overvalued they had become during the bubble. Of the four, only Wells Fargo now trades for more than it sold for in 2000; Coca-Cola is worth less than half its peak value.

Should a government insure citizens against bad outcomes?

The New York Times > Opinion > Krugman: The Debt-Peonage Society

The bankruptcy bill was written by and for credit card companies, and the industry's political muscle is the reason it seems unstoppable. But the bill also fits into the broader context of what Jacob Hacker, a political scientist at Yale, calls "risk privatization": a steady erosion of the protection the government provides against personal misfortune, even as ordinary families face ever-growing economic insecurity.

Throughout most of human history self-insurance was the rule. If calamity fell, and it usually does, then financial and family assets were the main form of protection. Then came tribes, clans, feudal holdings, states and more. Each form of social organization had its own approach to risk mitigation, and its own set of trade-offs.

In the late 20th century a group of wealthy nations developed an approach that provided considerable personal freedom while also mitigating the harshness of life in a seemingly dispassionate universe. This approach has reached its most mature state in the Scandinavian nations, where there is a dynamic struggle between the limitations of human nature and the desire to help the weak.

America followed the European path from about 1945 through the 1970s. Since then we've taken a different approach. Now, in the era of the most radical presidency since Roosevelt, we seem to be moving to something that's a cross between feudalism and and 19th century England. It is an approach that may well optimize returns on investment, at the cost of creating a hereditary subclass of warriors and servants. Warren Buffet's "sharecroppers' society" or Krugman's "debt-peonage" society, or what I've called neo-Feudalism.

In all of its thousands of years of civilization, I wonder if China did something like this at least once. How did it turn out?

MetaFilter profiles infamous London Underground Map(s)

Stand clear of the closing doors | MetaFilter

I've given a lecture on computational visualization at the U of MN for the past two years. It's a fun talk. The London Underground map features in my lecture, thanks to this collection of links I'll have a better story next year.

Explore Minnesota: Firefighters Hall & Museum

Explore Minnesota: Firefighters Hall & Museum

The twin cities has a new children's attraction - fire engines to climb on. I'll add this to our family rec page.