Relevant and even prescient commentary on news, politics and the economy.

The Singapore Deal

The Singapore Deal

I have refused to forecast what two unpredictable leaders will do, and I shall continue that, other than to say I do not believe North Korea will denuclearize.  Otherwise, well, the written deal was mostly aspirations while there seem to be disagreements about the verbal deals.  DPRK says US has agreed to lift sanctions but US says no.  As it is, at least it happened and there will be more talk, according to the paper agreement. As some famous person said (forget who), “Jaw jaw is better than war war.”

So, let me make people aware of a useful source, which has been putting out things either ahead of regular media or even in disagreement with it recently.  This is North Korean Economy Watch at https://www.nkeconwatch.com . Here are some tidbits.

They were the first to report that Chinese-DPRK trade began increasing after Kim Jong-in met with Moon Jae-in at the DMZ.  “Maximum pressure” has been over for some time already.

A further sign that max pressure off is that there were stable prices in DPRK in the month of May, no noticeable shortages.

A group that Kim Jong-in may be paying attention to is the elite in Pyongyang who now have higher incomes and access to western goods.  They would like more.  The rest of the population does not matter to him.

ROK companies are hot to get into DPRK.

ROK has a plan to engage in infrastructure investment in DPRK, much of this for transportation, focusing on three corridors, all of them going north-south: one in the west going to China, one in the center focusing on between the two Koreas, one in the east focusing on reaching Russia at Vladivostock (I have seen commentators unaware that DPRK and Russia have a common border, if just a small one).

Finally, all the talk of DPRK opening up and liberalizing looks overblown, at least in the near term. Just before the summit a major meeting there involved strong statements that there will be no opening up or moves to more marketization, probably to dampen down expectations of most of the population given how much foreigners are talking about it. The ROK companies may need to wait awhile.

Oh, and as a further point, in recent global hacking competitions, North  Korean teams have won.

Barkley Rosser

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Backstabbing Over Cows

Backstabbing Over Cow

What is it with cows?  I mean their flatulence does add to global warming, but they seem so benign, chewing their cud while producing milk and meat.  Why is it that national leaders get into fits of backstabbing over them, or especially over all that milk they produce?

Well, of course, that is it; they produce a lot of it, and a variety of products come from the milk, which sometimes markets do  not want as much of as some of the other products. This is probably the main reason that in international trade agreements, where highly protected and subsidized agriculture is always a difficult topic, dairy products are often at the top of the list.  For years, the predecessor of the EU, the EEC had “butter mountains” from all the excess butter governments bought to stabilize the market and keep the Danes and the  French from stabbing each other in the back too viciously.  The US also  had a butter mountain problem for a long time, much of it stored in Madison, Wisconsin where it caught fire back in 1991 and burned for 8 days.  Yes, we must protect those Wisconsin Dairy State cows as Trum is struggling to dop!

Back in 1972, when I was a grad student at U of Wisconsin, then Wisconsin Senator William Proxmire thought briefly of running for president (he didn’t in the end) and showed up at the econ department one time to give a speech.  For those who do not know, he was very popular and although a Dem had a bipartisan appeal.  A major part of this was a reputation he had for being very clean and not taking money from special interests.  He had an image of saving taxpayers money as he handed out “golden fleece” awards to people or entities he determined were wasting public funds.  So, of course, in his speech “The Prox” went on and on about all his money saving efforts.  At the end one prof asked him, “Senator Proxmire, if you are so much for efficiency and saving money, why do you support dairy import quotas?”  To this The Prox just smiled and said, “Well, after all, I am the senior senator from the state of Wisconsin.”

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Robert J. Samuelson Also Exaggerates Social Security Problems

Robert J. Samuelson Also Exaggerates Social Security Problems

Not really a surprise, after all, it is Monday, and RJS has been at this for quite a long time at his post at WaPo.  But the recent release of the Trustees’ Report has not only gotten the Associated Press all bent out and shrieking “insolvency,” but I think with the push coming from the recent massive tax cuts that are swelling the budget deficit, the usual old gang of “cut the entitlements!” VSPs are out in force and raging pretty hard.  So Samuelson is denouncing “The Cowardice of the political class,” just unwilling to cut those benefits like they should, darn them, and calling for us “to rewrite the contract between the generations,” even thought about the only new thing in the report is that indeed Medicare is looking more financially troubled, and it has always been in much bigger trouble than Social Security.  But it and Medicaid involve medical care, and we know that is a political nightmare, so time to go  after those Social Security benefits in the name of helping out those young people by cutting their future SS benefits now, because otherwise they might get cut later.

Dean Baker has an excellent post on this today (I am never abler to link to him for some reason) at Beat the Press, and makes lots of valid and excellent points about how totally misguided RJS is, which I shall not repeat here.  I shall simply pound the point in more with some further observations.

One is that while RJS starts out going on about the Trustees report as if it is telling us something new, it really has no new news about Social Security.  While he hyperventilates quite dramatically, late in the column he admits that “The trustees’ reports don’t help us much, because they focus on the minutiae of various trust funds rather than fundamental questions about the proper role of government” (which should not be to help old people so darned much!).  Darn.  The “us” here, of course is all these ranting VSP ninnies who keep crying out that the sky is falling so the benefits must be cut, but the report simply does not say anything of the sort or particularly support such a push.

Also near the end, RJS does admit that “Yes, taxes have to go up…” but that is it on the tax issue, with not a whisper about the massive tax cut we just had.  No, undoing that nonsense is not the priority, it is cutting those darned benefits now! Maybe we could have cut the benefits more gradually if we had started way back when the VSPs started all their whining about this, but no, now only drastic action will forestall SS recipients in 2034 receiving real benefits equal to what they do now (no, RJS has never heard of the Rosser equation, poor thing).

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AP Exaggerates Social Security Problems

AP Exaggerates Social Security Problems

Dean Baker at Beat-the-Press has pointed out (sorry, not able to link to it) that Associated Press put out a tweet that presents an essentially hysterical story about future prospects for Social Security following the recent release of the Trustees.  This report says that as of 2026 Medicare and as of 2034 Social Security will face a “shortfall.”  However, the AP tweeted that what they face is “insolvency.”  Needless to  say, “insolvency” is much more serious than “shortfall” and simply feeds the overblown hysteria that so many think about these programs, feeding political pressures to mess with them.

The new report provides the latest update on what would happen if the forecast happens and nothing is done.  Given that the projection is that Social Security benefits are set to increase by about 20% by 2034, if somehow nothing were done and benefits were set to be reduced so that they could be paid by expected tax revenues, the benefit would be cut back by about that amount to about what they are now in real terms.  In short, this is not the hysterical crisis AP suggested or that so many think is out there. We have seen this nonsense before.

Of course, Dean accurately points out that by law the benefits must be paid. This may also be a time to remind everybody that the US is really in much better shape demographically in terms of life expectancies, retirement ages, and expected population growth rates than most other high income nations, with such cases as Japan and Germany in much worse shape than the US.  However, all these nations are making their public old age pension payments.  In the case of Germany the payments are higher than in the US, but the payments are being made, and its economy is humming along very well.  There simply is not basis for any of this hysteria in the US regarding the future of Social Security.

Barkley Rosser

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Rejoinder To Rauch’s Response To Me On The Happiness Curve Overhyped

Rejoinder To Rauch’s Response To Me On The Happiness Curve Overhyped

On May 15 I posted here on “Overhyping the Happiness Curve,” a critique of the recent book by Jonathan Rauch, The Happiness Curve: Why Life Gets Better After 50. After it was linked to on Marginal Revolution, author Jonathan Rauch wrote a Response to my post on May 25, which was also linked to on MR. I did not immediately reply as I was in Santa Cruz and did not have my copy of the book. I shall now comment on his reply.  He makes three main points.

The first is that he says I made a false dichotomy between unadjusted and adjusted studies of the age-happiness relation, and that I failed to recognize his discussion on pp. 69-75 of how factors besides age affect happiness.  Certainly he recognizes that other factors impact happiness, even as his focus is on the particular effect of age, which requires focusing on adjusted relations taking account of the impact of those other factors. He cites Blanchflower and Oswald (the apparent originators of the U-curve idea and among its strongest advocates) to the effect that going from age 20 to 45 reduces happiness by as much as a third of what becoming unemployed does, which is a lot.  Some other studies along such lines are cited.  Then a formulation from psychology is brought in that says that happiness is a function of one’s “set range” (basically one’s general happiness propensity), of circumstances not under one’s control, and of things under one’s control.  While he cites Martin Seligman, this argument has been widespread in psychology, with a common finding being that 50% is the set range, 10% is circumstances, and 40% is under one’s control, although Rauch does not mention this finding.  As it is, he proposes time as a separate variable, although offhand it would seem to fit in the category of those things we cannot control, “circumstances.”  (I have some serious questions about what is under our control and what is not, but let us leave that aside.)

This is all well and good, more or less, but it does not deal with the point I made that a quite a few of these other things that can impact happiness tend to be pushing one towards being happier in middle age than not, which can easily lead to a finding that age makes one unhappy in middle age when one pulls out the estimated effects of these other variables.  Again, we are talking about employment, income, marital status, health, and broader social relations, among others.  Rauch simply never notes this, although it is implicit in his contrasting a global finding that shows unadjusted happiness tending to gradually rise from 20 to 64 with a global finding adjusting for non-age factors that shows the U-curve bottoming at 50.  So, yes, he talks about how other factors are important, but he never addresses their own relationship with age, which is what makes this so difficult to parse out.

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When Big Sur Met Silicon Valley: Remembering The Santa Cruz Nonlinear Dynamical Systems Collective

When Big Sur Met Silicon Valley: Remembering The Santa Cruz Nonlinear Dynamical Systems Collective

I spent Memorial Day weekend with extended family members in Santa Cruz, near where many of them live, but with none of them right there  It was most pleasant, but explaining the nature of the place and the University of California branch there led me to think more deeply about the place.  I am not aware of anybody else saying this before, but it struck me that Santa Cruz is a place where some decades ago Big Sur met Silicon Valley.

The place remains a very pleasant Northern California beach town, where tourists like to go and long have.  It was fully crowded this past weekend, difficult to get to the Wharf and Boardwalk downtown and Natural Bridges State Park.  All of this has little to do with these other matters.  But sharp local  observers note that there is an “old” and a “new” Santa Cruz.  The old is symbolized by older wooden houses, some with funky sculptures in the yard and funny mailboxes. This all has a touch of Big Sur somewhat further south along the coast.  One can run into Air Bnb landlords who are cameramen for the Dalai Lama and talk about how well they knew Timothy Leary and own 41 acres in Big Sur and so on.  Yes, really.

The new Santa Cruz is symbolized by newer more expensive places, some with funky mailboxes, but they are not falling over.  Many of these people earn often substantial their money over the Coast mountain range in Silicon Valley a half an hour away.  Big Sur may have been there first, but Silicon Valley is fully there now, and the place is gentrifying fast,.

As it was, from the time that Silicon Valley first got itself going in the 1960s and 1970s, there was a parallel development in Santa Cruz that both fed off of that and in its own way fed into it, if not as much as Stanford University did.  This was the founding in 1966 and subsequent early history of UC-Santa Cruz, sitting on top of a hill northwest of the center of town.  From the beginning it combined an ideal of innovative and progressive education with a highly mathematical, scientific, and technical focus with much emphasis on computers, perfect for its proximity to the developing Silicon Valley.  The former fed off the nearby Big Sur with such places as the Esalen Institute, which was always about serious intellectual and philosophical matters (and still is) as well as the more famous artistic and beat/hippie carryings on there.  On the technical side a curious aid for UCSC upfront was the propitious proximity of the Mount Lick Observatory on Mount Hamilton, then second only to Mount Palomar in size, which helped attract top astronomers, who helped bring in the physicists and the mathematicians and computer scientists.

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Iran Responds to Plan B

Iran Responds to Plan B

Juan Cole reports that Iran’s supreme leader, Ayatollah Khameini has responded to Trump’s withdrawal from the JCPOA and Pompeo’s Plan B 12 demands with 6 demands for Europe: 1) condemn the US withdrawal, 2) stop pressing Iran on missile development, 3) criticize any further US boycotts, 4) undo damage to Iran economy of boycotts especially to buy any oil not able to be exported because of them, 5) support financing of Iran economy, and 6) respond rapidly to these demands.  According to Cole they are not optimistic the European nations will be able to withstand the US sanctions, with the impending withdrawal of France’s Total a harbinger.  Macron may be key.

If demands not met, Iran will return to enriching uranium to 19.75%, enough for medical use and to fuel a nuclear submarine (Iran has none), but not to make a weapon.  Oh such fun.

Barkley Rosser

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Plan B on Iran

Plan B on Iran

Earlier today (Monday) ne US Secretary of State, Mike Pompeo, presented this administration’s “Plan B” at the Heritage Foundation on how to deal with Iran following the US’s withdrawal from the nuclear deal, the  JCPOA.  Pompeo presented 12 demands and threatened to impose “the strongest economic sanctions in history.”  The Trump administration may wish to do the latter, but the  refusal of all the other parties to the JCPOA to go along with this effort will certainly guarantee that even if the sanctions are strong, they will not match what preceded the negotiation of the JCPOA.  As it is, Jeffrey Sachs (as reported by Juan Cole) has argued that if Trump tries to sanction European companies dealing with Iran through non-dollar currencies, the  EU should take the US to the WTO as well as the UN Security Council and General  Assembly. After all, this extraterritorial action would violate international trade agreements, and given that the JCPOA is an officially recognized agreement by the UN Security Council, the US is in fact in violation of international law with its withdrawal, not that those supporting this recognize this.

As it is, the 12 demands are chock full of hypocrisy and nonsense, some of it unacceptable even to a government that would be secular and pro-US.  I shall not go through all of them, but will note just three that will not be accepted by Iran, to the extent the are even possible to be carried out. One is for Iran to “cease threatening its neighbors.”  Well, the problem with this is that it is largely in the minds of such neighbors as Saudi Arabia and UAE that Iran is “threatening” them.  KSA has the third highest level of military spending in the world, but somehow Iran is “threatening” it. KSA has called for the military overthrow of the Iranian government.  I am unaware of the Iranian government doing the same regarding KSA.  Of course many of the demands involve Iraq and Syria, but last time I checked the governments of those nations have invited what Iranian military units are in their nations, with them in Syria battling against rebels backed by KSA and UAE attempting to overthrow that government.  Really, this is just ridiculous, although  Bahrain might  have a complaint about Iran providing some military aid to majority Shia elements in that nation opposed to its dominant Sunni  government, but Bahrain has had a problem with this for a long time.

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ZTE and the Iran Nuclear Deal

ZTE and the Iran Nuclear Deal

The whiplash that many observers have felt on learning of President Trump’s about-face on China’s ZTE telecom company from condemning it as violating US national security and violating sanctions rules by selling to North Korea and Iran has been pretty easily explained by our soon thereafter learning that China has provided a mere half a billion dollars to a project in Indonesia where Trump interests are deeply involved.  This is probably the most blatant violation of the Emoluments Clause of the US constitution yet, but do not hold your breath that anything formal will come of it, despite widespread outrage.  Rather his backers will accept that this is necessary for obtaining Chinese support in dealing with Kim Jong-In in the possible forthcoming summit.  This is supposed to trump all other considerations.

Of course the supposed forthcoming summit and related events, such as the  recent release of hostages held by North Korea, have been trumping Trump’s withdrawal from the JCPOA nuclear deal with Iran, which has been praised by his supporters as an action that “fulfills a campaign promise” and thus just simply wonderful.  However, a little noticed aspect of this in the US is triggering considerable reverberations abroad. It is the hypocrisy that while Trump seems to be blithely forgiving ZTE for breaking already in-place sanctions against Iran, he and members of his administration such as John Bolton have been unyielding to the Europeans that all of their companies must cease any economic dealings with Iran ASAP now that Trump has scuttled US participation in the deal, even though it is widely accepted in Europe that Iran is in full compliance with the deal.  The spectacle of the freshly arrived US ambassador issuing an immediate “order” to German companies to immediately comply with US demands on this has raised especial hackles.

Pretty clearly the Europeans need to identify some budding Trump Organization project somewhere on the planet that they can dump a pile of money into so that their companies can get exemptions like ZTE has from having their markets in the US cut off if they continue to operate in Iran.

Barkley Rosser

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Blowing Up The Iran Nuclear Deal

Blowing Up The Iran Nuclear Deal

This is probably Donald Trump’s biggest mistakes, his refusal to certify Iran’s compliance with the JCPOA nuclear deal with Iran and his fullout abrogation of it by announcing the reimposition of full economic sanctions against Iran, although we had not fully undone those sanctions anyway.  An immediate victim in the US of this action will be Boeing workers who were to benefit from a $3 billion contract Boeing had with Iran, now cancelled by order of the US government.  Needless to say, Trump has simply lied repeatedly about this matter, claiming the Iranians are not in compliance, when the IAEA and all other parties to the agreement say they are.  Trump has strutted some reports stolen by Israeli intelligence, but those show almost nothing we already did not know, most particularly that Iran did have a covert nuclear weapons program prior to 2003 that it shut down.

I have posted on this topic regularly over a long period of time, going back all the way to the predecessor of this blog (Econospeak), MaxSpeak.  I shall not reiterate all that I have said over those years, although I think my track record has been pretty good.  I have long heavily relied on Juan Cole’s Informed Comment for information on what is going on in Iran, and his track record on that has been excellent.

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