Archive for the Category Misc.


They Must Be Stopped

Next to mankind and his livestock, is there any animal more dangerous to the global ecosystem than this one:

Screen Shot 2014-12-17 at 9.38.27 AMEager beavers are rampaging across the Canadian wilderness, chomping down trees and creating enormous methane emitting manmade, er, beavermade ponds. The ponds currently emit 800 million tons of methane per year, out of a total global emissions of 6.875 billion tons.

[Update:  Randy pointed out that it was 800 million kg, and the total figure is CO2 equivalent. Two mistakes. Apologies to the beaver population.]

Modest, but not insignificant. But what’s scary is that this total keeps rising:

Researchers at the University of Saskatchewan in Canada have found this methane release from beaver ponds is now 200 times higher than it was a century ago.

.  .  .

Whitfield said: “The dynamic nature of beaver-mediated methane emissions in recent years may portend the potential for future changes in this component of the global methane budget. Continued range expansion, coupled with changes in population and pond densities, may dramatically increase the amount of water impounded by the beaver.

“This, in combination with anticipated increases in surface water temperatures, and likely effects on rates of methanogenesis, suggests that the contribution of beaver activity to global methane emissions may continue to grow.”

And keep in mind that beavers don’t just menace humans, other forms of animal life are also affected by the changes to the environment.

What can be done to stop this threat to the planet? Environmentalists need to encourage people to wear beaver skin coats, a style that was popular in the 19th century, and which resulted in a dramatic reduction in beaver numbers during that period. Hollywood trendsetters need to take the lead—starting with Brad and Angelina. A worthwhile Canadian initiative would be to breed more wolves and set them loose in the beaver infested areas.

A small reserve for beavers should be set aside in northern Canada, but for God’s sake keep them away from civilization.

PS.  This post is not a joke, I’m deadly serious.

PPS.  I don’t have much to say about Russia, other than that they should let the ruble float.

PPPS.  People seem to want more opinions about Russia.  OK, they should ditch the statist model and adopt a neoliberal model.  They should pull out of the Ukraine and Georgia.  They should respect human rights within Russia.  They should stop voting for evil people like Putin.  They should kill beavers.  What other opinions do you want?

America’s industrial boom (what is it telling us?)

Over the past few years I’ve done a few posts on an underreported story, the fact that industrial production (IP) has been rising much faster than RGDP during the recovery.  Early on I argued that this was evidence that a cyclical recovery was actually occurring, and that this refuted those who argued otherwise by pointing to the low LFPR.  (It also suggests that tight money, not re-allocation out of housing, caused the recession.) Recently the industrial recovery has gained momentum, so much so that it can no longer be brushed aside.  Before discussing what it means, consider that IP was up 1.3% in November, and is up nearly 6% since August 2013.  By comparison IP only rose by a total of about 9% during the entire period from the 2000 peak to the 2007 peak. The level is still mediocre, but the momentum is undeniable.  The new IP figures seem to confirm the strong November employment data; the economy is now recovering at a faster rate.

Screen Shot 2014-12-15 at 10.34.05 AMSo what does the IP boom tell us?  First let’s recall that IP includes mostly manufacturing, but also mining and utilities.  I prefer the IP aggregate, because when people wring their hands about the loss of “muscular” jobs in manufacturing for men without a college education, it’s clear they are concerned about blue collar jobs in general, including coal mining, oil drilling, etc.  In any case, the manufacturing data are quite similar.

First some international comparisons.  In the US, IP is up more that 73% in the past 25 years. In Japan it fell by 1.5%.  Some of that is population, but not all. After all, Japan’s population is higher than it was 25 years ago, and America’s has risen by roughly 30%, not 73%.  America industrializes as Japan de-industrializes. Germany reunified 25 years ago, which might affect the data, but their IP is up only about 30% since 1991.  France is up only 9% in 25 years. (The 35-hour workweek?).   Britain is similar to Japan, down by about 1%.  (Falling North Sea oil output?) Italy is down 11.2% in 25 years.  (Berlusconi spending too much time at orgies?) It’s the US that stands out as an industrial power, at least if the data is correct. (I suspect it is not—too much hedonics?)

So what’s wrong with American manufacturing?  Jobs, jobs, and jobs.  In recent decades we’ve been losing jobs at a rapid rate.

And why have we been losing jobs at a rapid rate?  Some people point to imports from China.  But the recent IP data suggests that’s not the problem.  We are an industrial juggernaut.  The problem is quite simple:

It’s the PRODUCTIVITY, stupid.

Agriculture went through this in the late 19th century and early 20th century.  And now it’s manufacturing’s turn.

Update:  US capacity utilization pushed above 80% in November, roughly the rate during the 2005-07 boom.  We need more service sector jobs.

Update#2:  I erred in saying the manufacturing numbers were similar.  I was lulled by the fact that they have also been rising rapidly in the past year.  But commenter allen pointed out that manufacturing has only just regained the 2007 peak, and that oil and gas output (part of mining) have grown much faster.

HT:  am

Update on how to donate to iPredict

Update:  I received this information, which may help answer some donor queries:

The U.S. Friends of Victoria University of Wellington, Inc. (“US Friends”) is an approved 501(c)(3) charity incorporated in 1995 as a supporting organization of Victoria University. US Friends is required by applicable law to maintain its independence regarding the causes it supports.  However, US Friends will consider and be responsive to the wishes of contributors who have indicated any preference with respect to the application of their donated funds, where consistent with its charitable purposes.

The Directors have determined that in principle the NGDP project is consistent with the charitable purposes of US Friends.

AFAIK, this is the standard approach of any charitable organization.

I’ve been so busy at school I lost track of the donation process for the NGDP futures market.  In addition there were some bureaucratic errors on the other end, and hence many donors were not contacted about where to send the money, while others had their donation go through.  My apologies.  Below is the information necessary to complete your donation (and please note the email address for queries:

U.S. Friends of Victoria University of Wellington Inc. (“US Friends”) is an independent U.S. non-profit organization with tax exempt status under section 501(c)(3) of the U.S. Internal Revenue Code. It was established to provide support for the work of the University using donations received from U.S. residents and taxpayers. US Friends performs a crucial role in raising funds from alumni of Victoria and other supporters based in the United States.

Board of Directors of the US Friends:
Yvonne Y.F. Chan (President)
Alexander Blades (Secretary)
James Genever (Treasurer)
Peter Bryant
Professor Roger Clark
Mark Cook
Gerald Hensley
Fleur Knowsley
Erica McLean

U.S. taxpayers’ donations to the US Friends are tax deductible in the United States of America to the full extent permitted by the Internal Revenue Service under applicable law and can be sent as follows:

Payment by check in US dollars:

Payable to the U.S. Friends of Victoria University of Wellington Inc.
Please provide also a short letter including your name and address mentioning “donation for VUW iPredict NGDP project” and do not forget to enclose it with your check so we can thank you and send you a formal tax receipt.

Send to:
Jennifer Elmes
US Friends of Victoria University of Wellington
Chapel & York Ltd
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Electronic payments:

US Friends can receive US Dollar payments via wire, SWIFT, direct payment from your internet banking (ACH) or PayPal (including credit/debit card transactions).

For these options, please email to to request further instructions. Please mention in the email text “donation for VUW iPredict NGDP project” and preferred payment method. We will also need your name and address so we can thank you and mail you a formal tax receipt.

Any questions :
Please email to
In the US phone James Genever +1-646-596-7343 or in NZ Shelagh Murray Executive Director of the Development Office and Foundation at Victoria University + 64-4-463-5991.

The dog still isn’t barking

I always try to find something interesting to say about the jobs report.  The obvious headline was the 321,000 new jobs, plus an upward revision in previous months totaling another 44,000.  The past three months are very strong.  Hourly wages were up a strong 0.4%, but over the past 3 months, or 12 months, we are still seeing only about 2% trend wage growth–no real breakout yet.

In my view it’s the bond market that is the most interesting—the dog that isn’t barking.  I’ve been talking about low interest rates being the “new normal” for quite some time, but I would have expected somewhat higher interest rates with this sort of strong jobs growth.  The argument that the Fed is artificially holding down bond yields no longer holds, for two reasons; QE has ended, and more importantly TIPS spreads have been falling.  They are only 1.74% on the 10 year, and 1.98% on the 30-year.  The 10 year yield of 2.26% really drives home the point that low rates are the new normal.  People at the Fed think they’ll be “normalizing” rates at about 4% a few years down the road.  That now seems like a pipe dream.  The old rules no longer apply.

A trend wage growth of 2% isn’t enough to get you 2% trend inflation, because while productivity growth has been slowing, it’s not zero.  The Fed is a long way from achieving a 2% trend rate of inflation.

What does this say about current monetary policy?  Just what I have been saying for months—we don’t know if it’s too easy or too tight until we are told the Fed’s objective–in clear, easy to verify terms.  Many of the conservatives at the Fed would prefer they simply focus like a laser on 2% inflation, and ignore unemployment.  For that group (assuming they are intellectually honest) money is clearly too tight right now.  It’s not even debatable.  For the dual mandate doves like Yellen, things are less clear.  If the goal is 3% NGDP growth long term, then money may well be too easy.  If it’s 5% trend NGDP growth, then money is too tight.  If it’s 4%, then perhaps the Fed is close to being on target.  The Fed won’t tell us what outcome they think would be desirable, in terms of a single number that is a weighted average of its dual policy goals.

Then why was I able to say money was unambiguously too tight for so many years? Because it was too tight in terms of any plausible Fed goal.  That’s no longer true.

PS.  If my comment on the hawks and doves didn’t startle you, read it again—you weren’t paying close enough attention.

PPS.  I have a new post at Econlog, on the 1921 depression.

Update:  Greg Ip has a post speculating that the Fed may engage once again in “opportunistic disinflation,” only in the opposite direction:

Two decades ago, inflation was above any reasonable definition of price stability. In contemplating how to get it lower, Fed officials came up with the moniker of “opportunistic disinflation.” The Fed would not deliberately push the economy into recession, but it would exploit the inevitable recessions and resulting output gaps that came along to nudge inflation closer to target. In 1996 then governor Laurence Meyer defined it thus:

Under this strategy, once inflation becomes modest, as today, Federal Reserve policy in the near term focuses on sustaining trend growth at full employment at the prevailing inflation rate. At this point the short-run priorities are twofold: sustaining the expansion and preventing an acceleration of inflation. This is, nevertheless, a strategy for disinflation because it takes advantage of the opportunity of inevitable recessions and potential positive supply shocks to ratchet down inflation over time.

Of course positive supply shocks are a fine time to engage in disinflation, but recessions are the worst possible time.  That didn’t stop the Fed from engaging in disinflation in the 1991, 2001, and 2009 recessions.  It’s a procyclical policy, which makes the business cycle worse.  Let’s hope they don’t use the next boom as an “opportunity” to raise inflation, and then the inevitable recession that follows as an opportunity to reduce it.

Capex rising strongly during Japan’s “recession.”

If there’s one business cycle regularity, it’s that investment tends to fall more sharply than the other components of GDP.  Keep that in mind as you read the latest data dump from Japan:

TOKYO (Reuters) – Japan’s fall into recession between July-September could turn out to be less severe than feared, with new capital expenditure figures out on Monday suggesting revisions will put third quarter economic growth in a more positive light.

The 5.5 percent year-on-year rise in capital expenditure over the third quarter reported on Monday followed a 3.0 percent annual increase in April-June, which could ease concerns about recovery from a sales tax increase earlier this year.

“The revised data will show a smaller contraction in GDP that could be close to zero,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co.

“Other data on consumer spending, factory output and business investment show these three factors will drive future growth.”

Compared with the previous quarter, capital spending excluding software rose a seasonally adjusted 3.1 percent, versus a 1.5 percent decline in April-June in an encouraging sign of vigorous business investment.

Preliminary data showed the economy contracted an annualized 1.6 percent in July-September, confirming Japan had entered its third recession in the past four years as a sales tax hike in April hurt consumer spending and business investment.

In preliminary GDP data, capital expenditure shrank 0.2 percent, versus the median estimate for 0.9 percent increase.

OK, so capex didn’t fall 0.2%, it rose 3.1%, quarter over quarter.  Just a tiny mistake.

Now about that “recession .  .  . “