Yotta Point

Reads for June 24

It's been a while since my last round-up of interesting posts, so here is a reading list for this weekend (updated).

Economics & Finance

• Henry Blodget at Business Insider: Corporate Profits Just Hit An All-Time High, Wages Just Hit An All-Time Low
• Ben Cassel at Real Time Economics (WSJ): "Number of the Week: Corporations Not Hoarding Cash"
• Eric Platt at Business Insider: America's Debt Levels Are Falling To Pre-Crisis Levels - but also see David Cay Johnston at Reuters looking at income as well: "America's Long Slope Down" and Mish Shedlock's comments at Global Economic Analysis
• Tyler Durden at Zero Hedge: The Chart That Scares The "1%" The Most
• Joe Weisenthal at Business Insider: Yesterday's Philly Fed Report Implies A Horrendous Jobs Report
• Joe Weisenthal at Business Insider: The Difference Between Obama's First Term And Bush's First Term In One Devastating Chart
• New Deal Democrat at Business Insider: Inflation Is Under Control, And It's A Sign Of Bad Things
• Zarathustra at Also Sprach Analyst: Quantitative easing and the (lack of) responses in bond yields
• Paul Krugman at NYT: Interest Rates: Varieties of Error
• Scott Barber at Alpha Now/Thomson-Reuters: "Crude Oil Futures Bouncing Near Their Lows of 2012" - has interesting charts comparing historical and recent behavior of oil vs. economic indicators and stocks; also see Sober Look's related analysis: "Crude oil vs. US equities: dislocation continues"
• Sober Look: "Dr. Copper Says Watch Out Below" & "Summer of 2011 Redux"
• Mark Thomas at Economist's View: Did Income Inequality Contribute to the Great Recession?
• Jie Jenny Zou at Real Time Economics (WSJ): Inequality Has Increased in Income and Consumption, Economists Argue [via]; here's the link to the paper by Attanasio, Hurst and Pistaferri: "The Evolution of Income, Consumption, and Leisure Inequality in The US, 1980-2010" [and a related post on income inequality across recent Presidents here; links here and here worth a look as well]
• David Cay Johnston at Reuters: "The Fortunate 400"
• Econompicdata: "Valuation Matters: Equities vs Bonds Edition"; "Dividend vs. Treasury Yields"; "Stocks For The Long Run?"
• Jared Bernstein at On The Economy: "CBO’s Long-Term Budget Outlook: What It’s Telling Us"
• Zarathustra at Also Sprach Analyst: "Coal inventory in various Chinese ports hit record highs" [also see Sober Look's post on this]
• Zarathustra at Also Sprach Analyst: "Is China massaging macro data? (Ans: Yes)"
• Sober Look: "India's Currency Spirals Out of Control" [see this older post as well]

Energy & Environment, Climate Change

• Climate Central: The Heat is On: U.S. Temperature Trends
• National Research Council: Sea-Level Rise for the Coasts of California, Oregon, and Washington: Past, Present, and Future (2012)
• Climate Central has a neat interactive online tool that allows you to assess the impact of sea-level rise on your coastal town or city
• Stefan at Real Climate: "What makes sea-level rise?"
• Andrew Freedman at Climate Central: "Did Global Warming Set Stage for Duluth Flooding?"

Healthcare

• Lane Kenworthy at Consider the Evidence: "Is rising obesity a product of income inequality and economic insecurity?"; "Why the Surge in Obesity?"
• Duff Wilson and Janet Roberts at Reuters: "Special Report: How Washington went soft on childhood obesity"

Miscellaneous

• Elizabeth Flock at US News/Washington Whispers: "Five Charts That Show How Our Democracy Isn't Working"

That's it for today.

Reads for Dec 4/5

Economics & Finance

• Catherine Rampell at Economix: Rating the Credit Raters
• Rebecca Wilder at News N Economics: Malicious ECB Rate Hikes [also see her post from September: The European debt crisis in charts]
• Michael Darda of MKM Partners: Memo to the ECB - Money's Too Tight
• James Kirkup at The Telegraph (UK): Euro doomed from start, says Jacques Delors [Delors was a key architect of the Euro] (via Credit Writedowns)
• Kash Mansori at The Street Light: Italy and Japan
• Joe Weisenthal at Business Insider: Guess Which Country Has Debt Of Nearly 1000% Of GDP...; The Entire Sovereign Debt Crisis Can Be Understood By Looking At Sweden Vs. Finland
• David Cay Johnston at Reuters: The Taxpayers Burden and Closing Wall Street's Casino [absolutely fascinating chart showing bank failures, de-regulation & income inequality in the US since 1910 and another on fewer Federal financial prosecutions in 2000+ era]
• Hannah Shaw at CBPP's Off The Charts Blog: Exploring Income Inequality, Part 5: The Concentration of Income and Wealth
• Mish's Global Economic Trend Analysis: Banks Make $13 Billion on $7.7 Trillion in Secret Fed Loans; SEC Stands by Does Nothing
• Mike Konczal at Rortybomb: Comparing the Federal Reserve's Reaction to the Financial Crisis Versus the Unemployment Crisis [Wow!]
  • Konczal says: "To recap: Lehman Brothers goes worse than the Federal Reserve’s projection and the Fed goes to the most extreme lengths it can find to extend emergency lending. Every single unemployment number turns out to be worse than all of the Federal Reserve’s projections, and the Federal Reserve finds every excuse to look the other way. Only Charles Evans has the courage to say that we should let inflation go to 3% while unemployment is over 7% to catch up to trend growth. Amazing."
• Historinhas: The "hole theory of unemployment" (via)
• Bill McBride at Calculated Risk: Employment Summary, Part Time Workers, and Unemployed Over 26 Weeks
• Menzie Chinn at Econbrowser: The November Employment Situation
• Mark Thoma at Economist's View: Unemployment Falls, But Is It Good News?
• Brad DeLong: The Household Survey: A Note on the December 2, 2011 Report
• Barry Ritholtz at the Washington Post: Did Black Friday save the season? Beware the retail hype.
• Kenneth Rogoff: Is Modern Capitalism Sustainable? (via)
• Paul Krugman at NYT: British Debt History; Bleeding Britain; Explaining Business Investment; The Summer of Confidence; Memories of VSPs Past; Oh? ECD;  There is Something Not Rotten (in the State of Denmark);
• Noahpinion: Harrison & Kreps 1978: The power of irrational expectations (via)
• Vivek Wadhwa in the Washington Post: China opens doors of state-run companies to world's top talent
• Vivek Wadhwa in the Washington Post: Why silicon valley should fear India

On that last article....I agree with much of Wadhwa's observations about India based on my experience - in particular, these passages:

India’s information technology sector may have started by running call centers and maintaining old computer code for American companies. But, today, instead of starting more I.T. services companies, a new breed of Indian entrepreneurs are developing high-value technology products based on intellectual property.

[...]

But something is missing in India: The angel investors, venture capitalists, and, most critically, experienced mentors. This problem will fix itself as more companies achieve success and seasoned entrepreneurs decide to give back to the next generation. When that happens, Silicon Valley better watch out. It is in for some very real competition.

Energy & Environment, Food Security, Climate Change

Reads for Oct 23

Jobs, Economy and Financial Markets

• Stratfor: Special Series (Part 1): Assessing the Damage of the European Banking Crisis
• Scott Sumner in National Affairs: Re-targeting the Fed
  • Also see this video, where he discusses the idea of Nominal GDP targeting, something that's getting a lot of attention
• Joe Weisenthal at Business Insider: Goldman Advises The Fed To Go Nuclear, And Set A Target For Nominal GDP
• Rob Parenteau at Credit Writedowns: Leaked Greek bailout document: Expansionary fiscal consolidation has failed
• Famous Peruvian economist Hernando de Soto in the Washington Post: The Cost of Financial Ignorance
• Simon Johnson at The Baseline Scenario: European Debt - The Big Picture
• Kash Mansori at The Street Light: Where Exactly Are Those Lazy Southern Europeans, Anyway?
• Simon Johnson at The Baseline Scenario: Jon Huntsman: Too Big To Fail Is Too Big
• Karl Smith at Modeled Behavior: Greg Mankiw on Fiscal Policy
• CBPP's Off The Charts Blog: Jared Bernstein and Chuck Marr Discuss a Tax Holiday for Overseas Corporate Profits
• CEPR's Mark Weisbrot et al: The Argentine Success Story and its Implications
• Kenneth Rapoza in Forbes: US Businesses Not Being Strangled By Regulation And Taxation, World Bank Says
  • World Bank report: Doing Business 2012
  • also see this earlier piece by Larry Mishel at EPI: Regulatory uncertainty - A phony explanation for our jobs problem]

Food

• Justin Gillis at the Green blog in the New York Times: Deep Thinking About the Future of Food
• Darcy Palmquist in the Christian Science Monitor: The world can feed itself without ruining the planet, study says
• Both of the above, refer to this paper...Foley et al. in Nature: Solutions for a Cultivated Planet
  • The gist of their paper: "To meet the world’s future food security and sustainability needs, food production must grow substantially while, at the same time, agriculture’s environmental footprint must shrink dramatically. Here we analyse solutions to this dilemma, showing that tremendous progress could be made by halting agricultural expansion, closing ‘yield gaps’ on underperforming lands, increasing cropping efficiency, shifting diets and reducing waste. Together, these strategies could double food production while greatly reducing the environmental impacts of agriculture."

Climate Change

Q&A with President Bill Clinton at the 2011 Clinton Global Initiative - Part 2B: More on Food Security

[Part 1 is here and included links to President Clinton's comments on a number of topics; Part 2 is here and was focused on his comments on Greece, the Euro and the financial crisis in Europe; Part 2A is here and was focused on the role of commodity market speculation and corn-ethanol conversion on food prices]

In this post, I discuss some of President Clinton's comments around food security at CGI2011. He was asked a question on his views about the impact of climate change on food security, especially in Africa. He started by saying that the countries likely to be affected are mostly in Africa, but not exclusively so - he also mentioned Haiti, Afghanistan, other Caribbean states, etc. He then emphasized the importance of local agricultural infrastructure as a critical element of preserving food security in places like Africa. I've not provided the complete transcript but only the most pertinent excerpts from his comments, with any bold text being my emphasis and italics representing President Clinton's emphasis. There are sections where my audio recording was unclear and I've included question marks in those portions:

In the places which can clearly feed themselves based on their top soil and their agricultural practices, and that’s virtually every place in Africa [...] what we should do is what Bill Gates said [...] we should rebuild the infrastructure of sustainable agriculture. I think it’s really, really important. Therefore I am strongly opposed to the completely understandable efforts of the Chinese, the Saudis and others who cannot possibly produce enough food for themselves, to either lease long-term [???] land and in effect turn these farmers into cogs [???] because what they will do is they will quickly use up the top soil and undermine their long term sustainability, but that doesn’t mean they’re bad people [...] I’d like to see the world get together and actually develop a food sustainability model for the 21st century. And that at least in the early years, not to cut these countries out of the market, but to build their own agricultural [practices?], I think the US and Canada and Europe, coz we have big surpluses [...] we should offer longer-term contracts to the Chinese and Saudis for the basic grains at prices that will guarantee decent profits but not exorbitant ones and stop price spikes. Keep price high enough to get investment into agricultural activities in Africa, Latin America, South-East Asia. I don’t have any objection to big money going to Africa but the most important thing is until you develop a sustainable agricultural framework in these countries, they’re not going to benefit. [He then discussed Ethiopia and the dearth of sustainable agricultural infrastructure, food storage capacity and food co-op mechanisms there and that with a "boom crop" they were not able to transport and store food effectively].

President Clinton's points of emphasis were:

• Self-sustainability of farming communities (a theme also advanced by Secretary of State Hillary Clinton)
• Stable prices and profits over the long run while avoiding exorbitant prices
• Paramount importance of food security

Let's explore this topic further, by looking at a few distinct but related threads.

1) Impact of Free Trade Policies

It's instructive to start with some history that runs closest to president Clinton's comments - his public apology in front of a Congressional panel in 2010 for the impact of trade liberalization policies that the US pressed Haiti to implement, that devastated local agriculture in Haiti. Here's a short video clip on that and a partial transcript of the Kim Ives interview of President Clinton in the video (via Amy Goodman at Democracy Now):

Q&A with President Bill Clinton at the 2011 Clinton Global Initiative - Part 2A: Food Security -- Commodity Market Speculation & Food Prices

[Part 1 is here and included links to President Clinton's comments on a number of topics; Part 2 is here and was focused on his comments on Greece, the Euro and the financial crisis in Europe]

One of the discussion topics in the Q&A with President Clinton was the topic of food security, an area that he said could use more attention from the journalist/blogger community. In a follow-up post [see here], I'll discuss some of President Clinton's comments on this topic, but before I do that, I'd like to lay a better foundation by exploring the role of market speculation on food prices, and by extension food security, across the world. That's the focus of this post.

Summary

The key findings in this post, discussed in the ensuing sections, can be summarized as follows.

1. Massive food price increases/bubbles were not unique to the 2000s but the recent price increases do appear to be unprecedented in modern history. Since the massive food price spike in the early 1970s, food prices experienced a long period of decline or relative stability until roughly late-2006, after which prices spiked. (Section I)
2. The two huge spikes in food prices - in 2007-08 just before the darkest period of the Great Recession and since late 2010 during the ensuing recovery - have been accompanied by food-related riots or unrest in several countries across the world, some of which were part of the so-called Arab Spring. Addressing the cause of the price spikes is therefore paramount to maintaining stability in the world. (Section II)
3. Recently published research shows that food price increases in the 2000s have been dominated by two factors - a secular shift upwards in the price baseline due to corn-to-ethanol fuel conversion (which reduces the supply of grains available for food consumption) and massive spikes tied to speculation in commodity markets. (Section III)
4. An assessment of key market data indicates that the first food price spike in the 2007-2008 time period was fueled at least in part by money moving out of a collapsing housing market bubble looking for alternative safe-havens. However, since the depth of the Great Recession, food prices have become strongly correlated to the broad stock market. (Section IV)
5. The strong positive correlation between commodity/food prices and stock markets since mid-2008 is historically anomalous and is suggestive that in the absence of alternative investments (e.g., housing), trillions of dollars are finding their way into commodity markets as primary investment options, not merely as a hedge against equities. (Section V)

Implications: The implications of the data presented in this post are fairly grave. For one thing, the criticality of appropriate regulation of commodities has likely increased even more during the recovery from the Great Recession than was the case during past recoveries. A world in which food or other essential commodities become not low-yielding hedge investments for businesses that are in the commodities sector and sometimes for outside entities like pension funds but mainstream speculative investment vehicles with returns equaling or exceeding equities - is a world that could become staggeringly more unstable and prone to crises. We therefore ought to invest enormous attention to solving this challenge.

Section I: Historical Food Prices

The massive rise in food prices in recent years appears to be unprecedented as noted by Randall Wray at Credit Writedowns. Sharp food price increases are not unique to the 2000s - for example, there is evidence from the early 1970s that speculative bubbles were at least partly behind large commodity price increases at that time. However, since the early 1970s and prior to the second half of the last decade, the historical trend in food prices has generally been downward to flat, as can be seen from this chart published earlier this year in the report "Hungry for Justice - Fighting Starvation in an Age of Plenty" by the NGO aid organization Christian Aid.

Around the Blogosphere (Oct 1)

Some interesting articles....(UPDATED Oct 2)

Jobs, Economy and Financial Markets

• Kash Mansori at Street Light: Causes of the Eurozone Crisis (Part 2): Policy Implications [I hope to come back to this topic in a future post]
• Kash Mansori at Street Light: Moral Judgment and Bad Economics from the ECB
• Menzie Chinn at Econbrowser: De-Mythologizing Fiscal Consolidation
• FDL Book Salon: Lost Decades - The Making of America's Debt Crisis and the Long Recovery (by Menzie Chinn and Jeffry Frieden)
• David Dayen at Firedoglake: The Shattered Foreclosure Fraud Settlement - An Unlikely Victory Against a Cartel of Oligarchs
• Joseph E. Gagnon, Nicholas R. Lardy and Nicholas Borst at China Economic Watch: The Internal Cost of China's Currency Policy [via Wonkblog]
• Avinash Persaud at Vox EU: EU's financial transaction tax is feasible, and if set right, desirable
• Economic Cycle Research Institute (ECRI): U.S. Economy Tipping Into Recession
• James Bianco at The Big Picture: Another Huge Earnings Miss Coming?
• Jake at Econompic Data: Nominal Mortgage Rates Never Lower
• Tim Taylor at Conversable Economist: How Does Inequality Affect Economic Growth? [via EV]
• Andrew G. Berg and Jonathan D. Ostry at IMF, Finance and Development: Equality and Efficiency
• Toby Sanger at the Progressive Economics Forum: Who's over- or under-paid?
• Sascha O. Becker, Marion Jensen and Marc Muendler at Vox EU: Making globalization work for workers
• Jake at Econompic Data: Extended Corporate Profits
• Christina Romer at New York Times: A Plan on Jobs Deserves a Hearing [related study by IMF here is worth a look]
• Larry Mishel at Economic Policy Institute: Regulatory uncertainty - A phony explanation for our jobs problem

Healthcare

• Uwe Reinhardt at Economix: The Role of Prices in Health Care Spending
• Uwe Reinhardt at Economix: On Health Care, the Devil's in the Details
• Uwe Reinhardt at Economix: The Money Flow from Households to Health Care Providers
• Dean Baker and Jagdish Bhagwati in CNN/CEPR: How Global Trade Can Rein in Health Costs
• Center for Economic and Policy Research: Health Care Budget Deficit Calculator
• Sarah Kliff at Wonk Blog in the Washington Post: Our budget problem in two charts (and one issue)

Education

• Dana Goldstein at Slate: Still Waiting for Superman [via Wonkblog]
• Flashback - some critical responses to the documentary "Waiting for Superman": Rick Ayers at The Answer Sheet, Valerie Strauss at The Answer Sheet, Diane Ravitch at The New York Review of Books

Environment (Cost of Natural Disasters and Pollution)

• Infographic on Natural Disasters in the US by Digital Surgeons [via Wonkblog]
• Nicholas Z. Muller, Robert Mendelsohn and William Nordhaus in American Economic Review: Environmental Accounting for Pollution in the United States Economy [related post: Paul Krugman]

Food

• Joe Romm at Think Progress: Global Food Prices Stuck Near Record High Levels [also see here]

Miscellaneous

• Yves Smith at Naked Capitalism: Friedrich Hayek Joins Ayn Rand as a Hypocritical User of Medicare
• Yves Smith at Naked Capitalism: Why Liberals Are Lame: McCarthyite Identity Politics as Cover for Bankrupt Policies [related post: Daily Howler]

That's it for this Saturday.

Why Yotta Point?

As Wikipedia states:

Yotta is the largest unit prefix in the International System of Units (SI) denoting a factor of 10²⁴ or 1000000000000000000000000. It has the unit symbol Y.

The prefix name is derived from the Greek ὀκτώ (októ), meaning eight, because it is equal to 10008. It was added to the SI in 1991. [1]

I started this blog because of my interest in challenges of immense scale and designing and implementing solutions to such challenges. For example:

• How do Governments devise solid policies to address a problem impacting tens to hundreds of millions to billions of people?
• How do non-governmental organizations (NGOs) and non-profits take solutions that might work within small populations and scale them to address much larger populations?
• How do businesses that are growing (either organically or inorganically) scale everything they do successfully to meet the demands of growth?

...and so on.

I consider these challenges ones of scaling. As the world grows, the challenges of scaling get more pronounced. Solving real-life problems of scaling excites me. Hence, the use of the term Yotta Point to denote a place where issues tied to scale will be discussed.

Welcome!