People sometimes say “Banks create money”. This is true, more or less, but it’s not a helpful way for the uninitiated to think of money creation.
When people hear “money creation” they think of the Jack Nicholson in clown makeup, rolling down the street spraying the poorly dressed 1980s masses with freshly printed cash. This isn’t what banks do when they ‘create money’.
Dios meo this movie doesn’t hold up well…
Instead, what banks do, is they ‘trick’ people into thinking they have money at the bank, when really 90% or more of their money has been lent out. Those lent funds in turn end up with a bank somewhere, only to be lent out again, and on and on. This money multiplier process creates a massive structure of perceived cash that isn’t really there.
Unlike certain internet cranks and dead Austrian exiles, I don’t think this is monetary fiction a bad thing. The economy is absurdly stable. Not as stable as it might be, but the Anglosphere demand-side is well-run, compared to the EMU or Japan or most anywhere else. Fractional reserve banking works fine, and in a pinch, in a banking panic, the central bank can presumably step in and give deposit holders the cash-money they thought they had in the bank.
Still, bank’s aren’t literally making money “out of thin air”, they’re making perceived money. They’re fooling people who don’t really understand deposit banking at all (97% of people) and convincing the remaining 2.999% that they’ll have access to their cash whenever they want.
That’s it. Just a small point.
The U.S. economy doesn’t have the ‘nominal head of steam’ to sustain higher interest rates. Maybe if the macro shocks go our way we can sustain 0.5% rates, but I’d be shocked if rates were, say 1.5% in 2017.
It goes back to the old Sumnerian point: A Fed Funds rate at 1.5% in 2017 is consistent with both a markedly weaker economy, and a markedly stronger economy. If you wanted the policy rate at 1.5% in 2017 (or even 2016) you’d come out and say “We want NGDP growhth to be 6% in 2016, and 5.5% in 2017 and 5% per year thereafter.” The Chuck Norris effect would take care of everything else, and you could proceed to raise rates in following meetings.
We don’t live in that world though, and we probably never will. The Fed never the less, is going a good job, as well as can be expected at least. I don’t know if the Fed will raise rates in 2015. I do know that if they do, they’ll back off in 2016.
I expect that if rates do go higher, they won’t go much higher. I also expect that if the markets tank in a sustained way, and if inflation expectations dip, and if data worsen, that the Fed will back off right away and use stimulative language. Yellen is a highly able macroeconomist and a good central banker. She is also somewhat insulated from media criticisms and pressure. I think she’ll make smart moves, not Market Monetarist Smart, mind you, but the best moves that the broadly New Keynesian playbook allow for.
I would feel safe going long the U.S. economy now, and be ready to go longer still, if the Fed raises rates and stocks dip.
The EU gives Germans a way to signal that they’re not nationalistic. This is an easy way to get status feelz for Germans (and Europeans in general, but most of all Krauts and Scandis).
The EU gives former Yugoslavia and Warsaw Pact Europeans a way to feel like they’re in the cool kids club. You don’t have to wear the Adidas suit (aka a Bosnian tuxedo) to show you’re cool now, because your country is in a quasi political union with Germany. You’ve arrived!
I have a poorer sense of why Iberians or Italians would want the EU, or the French for that matter. I suppose they get the cheap status whoring benefits of promoting antinationalism too. Maybe they’ve just swallowed the propaganda.
I was wrong, I thought Greece would be out of the Euro by 2013. I was only wrong about the Greek people’s willingness to go through economic deprivation though, the macro economic situation has gone as I expected it would, zero nominal growth.
The Hellenes need to end the madness. They also need to weigh who their true friends are.
Given the current demographics, who will shield Hellas from the Turk in 2030? In 2050? I propose that Russia is a better potential sponsor than the morally exhausted Western Europeans.
Russia’s interests are aligned with those of Greece, there is a deep cultural connection too. Indeed, there is a longstanding pattern of Russian geopolitical desires aligning with the Greeks, only to be thwarted by the West.
I was listening to NPR this morning in my car. The first time in years I’d heard a broadcast. Some might say it was concern trolling over nothing.
The story I caught was about how evil salad companies in California were throwing away salad in land fills. Apparently the packaged salad industry isn’t able to operate with zero production waste.
It was bad enough that salad was going uneaten, but the worst part was it wasn’t being composted. You see, when lettuce is thrown away in a landfill, it rots and gives off methane, which is bad. However, when it’s composted, it…doesn’t rot or something… Whatever though, the important thing is that composting is good, it’s like going to confession or saying your prayers was in 1650, if you don’t do it, you can’t be saved.
Big Salad causing big problems.
I’m unsure why America has been so out to get Bashar Al Assad all these years. We are told he’s a “brutal dictator”. So what? Is he worse than the Ottomans? Than the Umayyads or Abbasids? Than the Romans? Than Alexander the Great? Than the Achaemenid Persians or any of the other rough types who’ve ruled Syria? Do Americans or their government know a goddamm thing about the near east? Have they earned the right to an opinion?
Al Assad is a member of a watered down, laid back, minority sect of Islam. He is seen as a heretic by Sunni Muslims, the branch behind every major Islamic attack on America and Europe. He is allied with the remnant Orthodox Christian population in Syria as well as many of the minority branches of Islam that characterize Syria and make it so different from other Muslim areas. In a sane world, a Western power like the U.S. might begrudgingly back Assad, or at least leave him be. However, a group of German and Polish nationals decided to play the Iron Age Barbarian card and conquer Syria’s neighbor, the old Roman province Palaestina Prima, starting at the close of the First World War, and culminating the late 1940s. The German and Polish conquerors colonized these already long-populated lands with Europeans for their exclusionary, razor-wire-ringed, ethno-nationalist state. Hengest and Horsa would have approved. Syria, which lost a few colonial wars to the Poles and Germans, was now stuck in a subordinate stalemate.
America, apparently, must bend over backward to do whatever the Polish and German colonists want. This is because it’s important to have a “western state in the middle east”. You see, it’s bad to support western states in South Asia (Portuguese colonies conquered by India in the 1960s), or East Asia (Hong Kong, Macau, Malaya) but it is good to have Western representatives in West Asia where there are deep roots….unless we’re talking about Patriarch of Constantinople Bartholomew I, then we shouldn’t lift a finger to save a 1700 year old continuous tradition, at the very heart of Christianity and the West, even if it’s being strangled for no reason, by the West’s oldest living foe, over whom we have enormous influence. And so we must root out Al Assad…or something! “HE KILLS HIS OWN PEOPLE LOL OMG!!!1″
My sources tell me that the Syrian government forces are waning. ISIS marches to new victories. Weapons flow from the Turk, the Saudis and as far as I can tell, from the drooling dolt Uncle Sam (but only to the good ISIS, because there are always good guys, who love freedom). Russia and Iran send weapons to Assad, but weapons are not the problem, it’s men that the Syrian forces need.
If Assad should fall, and Syria should fall under ISIS’ neo Caliphate, America will have presided over a genocide. Every liberal and every nonSuni in Syria will be at the mercy of ruthless barbarians. Our tax dollars and geopolitical incompetence will have witnessed the transition from a flawed dictatorship (not new to Syria in the last 10k years) to a nightmare, a living hell for one of the oldest Christian communities. I emphasis the Christian Syrians because I think as Westerners, even if we don’t go to church or even believe in God, we share a special memetic conection to these Arabic speakers. Had the continents been ordered differently, it might be us who faced the Caliphate’s blade and they who looked on, without understanding from the distance of the cable news program. The heretical Muslims of Syria of course also face a grisly future worthy our sorrow and shame, but it is especially disgraceful that we leave our spiritual cousins to the dogs. The Chinese and Russian historians will not be kind to us.
If Syria falls to ISIS and all that we fear comes to pass, America will have participated in an irredemeable act of fratricide, we’ll be kin-slayers, and beyond forgiveness.
I just saw the film Ex Machina. I hadn’t heard of it before, but then that donation-funded, era-defining journalist in Los Angeles whom we all pretend not to read called it “high brow” so I thought I’d better check it out.
It’s a good movie. I think I enjoyed Mad Max: Fury Road more, but that’s only because Mad Max was an action movie for smart people, and I have a safe, boring life and high testosterone.
I didn’t actually want to write about the movie though. Instead I thought it was a good spur write a post I’ve had brewing in my brain for a long time now. It’s a common thing these days to see a headline like “Elon Musk shits pants at thought of AI: Will we all be killed by Google robots?”. Now, it could be that Elon is privy to higher-level technology than I, yet I remain skeptical. I’ve seen little improvement in my life in functional AI.
Take tonight. I moved to my current city about seven months ago and still don’t know it so well. I’d never been to the destination movie theater, it wasn’t far but I used Google Maps on my phone all the same. As you may know, phone app GPSes are sometimes a bit slow to tell you where to go. It said “turn left” but I was already turning right, wrongly anticipating the directions. Then it tells me to “turn right” at the next intersection. I obey, thinking it is just going to have me keep turning until I’m back on the original path. Instead, it sends me on this absurd route along the highway and then through a suburban neighborhood, taking much longer than the original route which it turned out was just within the city grid. On my way back, I realize that only about 5 or 6 turns are needed to get from my building to the theater. Google Maps failed me because it can’t think. GPS programs get a little better over time, but only because more and more contingencies get built into the code, it’s not actually thinking, it’s ‘just’ good programming, and the improvements face diminishing returns.
Another area where AI is demonstrably not progressing is in video games. I remember being so impressed with the AI in games like the original Half Life when I was a kid. Then I started building maps for the game and realized that it was all scripted. The characters in the game were only fiendish-seeming in their efforts to kill you because the developers had built in various ‘invisible’ trip wires and ‘action zones’ that would trigger different responses by the AI. When I play video games now, with an awareness of programing and how the environments are built, I can see things haven’t changed much. Similarly for strategy games, AI might be good, but if it acts at all like a human, it’s because it’s been given an excellent ‘cook book’ by the developers. It’s essentially no different in kind from the automata which have existed since the 10th century. The popularity of online multiplayer games, which are fun because other people make better teammates and foemen, bespeaks the failure of AI.
The same idea applies for translation engines. Anyone who has a solid grasp of at least a second language will know that you can’t trust Google Translate any more than Google Maps. It’s a useful tool, but when I really need to translate something, I type what I think the clause should be into Google/Bing in quotes, and see if I can find it used by a native speaker. Or I ask a native speaker. Google Translate can more or less handle the Germanic languages, particularly Dutch and the Scandis which are grammatically similar to English, but it still misses loads of subtext. Translating from more distant languages is harder, the Latin languages are sort of readable in English translation, but it chokes on the highly inflected and analytical yet folksy Slavic languages. Forget anything non Indo-European.
The reason I point to these mundane examples of AI making the same mistakes AI has always made is because I think consumer-level AI is pretty close to the cutting edge. Unlike Ex Machina‘s world, I don’t think it’s likely that massively advanced AI could be cooped up in Sergey Brin’s basement. Sure, it could be that some new paradigm for generating AI has been hidden and in the works for years and will come out next week. But given the poor progress we’ve seen in consumer industries to-date I’m doubtful.
I still think AI is inevitable, if only because eventually we’ll be able to scan the brain at such a high resolution that a computer simulation of the scanned activity will lead to contentiousness. But it might take 200 years a team of cloned John von Neumanns to do it. I think if the singularity happens in my life time, it will be because they’ve found effective aging treatments and I’m very, very old.