Miscellaneous Quick Hits
There’s nothing that catches my eye today as needing a long exposition, but a number of stories worth a brief comment or two.
The Iraqi Car Bombing
Car bombs killed 136. One of the main ways the US lowered violence in Iraq was to simply pay various insurgents to stop shooting and them and other Iraqis and go kill al-Q’aeda in Iraq. Think of it as a security tax, or protection money. As long as you pay, no one gets hurt. Stop paying, and violence reoccurs. Since the US has reduced its payments and the Shia central government doesn’t want to pay, violence is flaring back up. The government can either pay the security tax, crush the insurgents, or find some other way to get money to the Sunnis and others who feel left out and are willing to be violent about it. Until they do, the killings will continue.
Taking money from the IMF is always like making a deal with the devil. You may get something you want, even need, but you will pay and pay and pay. And somehow it’s always ordinary people who pay, while the elites pretty much skate. It’s not all on the IMF though, if the Ukraine wants to have a flat tax and also have populist pay and pension raises they’re living in a dream world. My sympathy for individual Ukrainians is deep, my sympathy for their moronic government and idiot politicians following conservative voodoo economic cant is minimal. (The paradigmatic example of doing what Chicago school economists recommend by the way, was Iceland. Worked real well.)
Shipping Banks Move to Mark to Model From Mark to Market
It seems shipping banks want to value ships not based on what they can be sold for, but for what their models say their future earning potential is. Regular banks have been doing this for a while on other sorts of assets. Problem is that shipping traffic has fallen through the floor and a huge chunk of the world’s merchant marine is idle. As Dagfinn Lunde of DVB Bank said “Would you buy a ship today if you could not have the price so low that you could afford to lay it up for at least two years before you earn any money?”.
An item is worth what a buyer will pay for it.
Asset Bubbles Again Already?
Wolfgang Münchau thinks so and he has some technical fixes. When he discusses technical fixes though he can’t quite bring himself to note that if you include assets in inflation and then inflation adjust, well, suddenly bubbles become brutally obvious and central banks can’t ignore them, while crushing wages whenever the wage economy seems to have some inflation.
Japanese Industrial Production Rises 7%
Despite the strong Yen. Hrrrm. It’s notable that keeping the Yen weak, forever, didn’t do much for Japan. Maybe the strong Yen isn’t so bad after all? Much of what Japan imports is resources and inputs for manufacturing. A higher Yen means those inputs are cheaper. Whether that outweighs the increased Yen, I don’t know, but it’s quite possible it does. In addition the consumer side of the economy benefits from cheaper imports of food and so on, while Japanese tend to buy Japanese consumer goods, and not foreign ones. It could well be that a higher Yen (or at least a Yen that isn’t artificially kept low) is in Japan’s interest.