March 31 5:50 AM

 Department of "Huh?": Default Discounts in U.S. Treasury Interest Rates????????? Edition The term premium on U.S. Treasury debt is low because even though long-term nominal (and real) rates are low, short-term rates are even lower, for we are deep in recession with an enormous fight-to-safety still going on in financial markets populated by spooked investors.  Megan McArdle disagrees, but it is not clear why: Why is the Term Risk on Long Term US Debt So High?: Perhaps people are worried about future inflation–but while the spread between inflation-indexed bond prices and regular treasuries is rising, it’s still rather low. And of course, there’s the dreaded default risk.  If people stop thinking we’re good for the money, they will demand higher interest rates, and tip us into crisis. When investors start to fear an increasing chance of default because the government’s finances don’t make any sense and to price that default into bond yields, it looks like this–for Latvia:That is not repeat NOT REPEAT NOT!! what we see in the U.S. Not at all. We have $3 trillion more of U.S. government debt held by the public than we did two years ago–and lower long-term interest rates.
 

 The Maturity Transformation (and Liquidity Transformation, and Safety Transformation) Industry – Paul Krugman writes: Don’t Be Narrow-Minded: I see that Greg Mankiw seems to favor narrow banking: require banks to hold all their deposits in liquid, short-term assets, thus obviating the risk of financial crises…. I’d argue that this is all wrong, on two levels: if it were possible, it would do away with the main purpose of banks, and anyway, it’s not possible….Let me focus on Krugman’s first objection to narrow banking. It helps, I think, to ask the economist’s question: What is the market failure? What is the market failure that would justify narrow banking–which means using the fist of Leviathan to shut down the maturity-transformation industry? Why not let those who promise that they can turn long-term illiquid risky sow’s-ear investments into short-term safe liquid silk purses carry out their trade?

Magnets ‘can modify our morality’ – BBC – Scientists have shown they can change people’s moral judgements by disrupting a specific area of the brain with magnetic pulses. They identified a region of the brain just above and behind the right ear which appears to control morality.  And by using magnetic pulses to block cell activity they impaired volunteers’ notion of right and wrong. The key area of the brain is a knot of nerve cells known as the right temporo-parietal junction (RTPJ).  The small Massachusetts Institute of Technology study appears in Proceedings of the National Academy of Sciences.  Lead researcher Dr Liane Young said: "You think of morality as being a really high-level behaviour. "To be able to apply a magnetic field to a specific brain region and change people’s moral judgments is really astonishing."

Sex infection gonorrhea risks becoming “superbug”(Reuters) – The sexually transmitted disease gonorrhea risks becoming a drug-resistant "superbug" if doctors do not devise new ways of treating it, a leading sexual health expert said. Catherine Ison, a specialist on gonorrhea from Britain’s Health Protection Agency said a World Health Organization (WHO) meeting in Manila next week would be vital to efforts to try to stop the bug repeatedly adapting to and overcoming drugs. "This is a very clever bacteria. If this problem isn’t addressed, there is a real possibility that gonorrhea will become a very difficult infection to treat," she said in a telephone interview.

 Stopping the Clock on SOE Land Sprees_English_Caixin (chart) By the end of 2009, the 16 central SOEs accounted for a major share of the total real estate business in total assets, revenue and net profit. China’s government plans to order some central state-owned enterprises (SOEs) to quit the real estate business in an aim to curb surging land and housing prices. The State-owned Assets Supervision and Administration Commission (SASAC) will require 78 centrally-administered SOEs, whose major business is not property development, to withdraw from the business. The government’s move comes after a land shopping spree right after this year’s NPC and CPPCC, which was blamed for driving up the country’s property prices. However, a total of 16 central SOEs, centered on property, such as the China National Real Estate Development Group Corp. and the China Poly Group Corp., will be allowed to continue real estate business.

Bill Black: To Own a Country, Rob a Bank (5 videos) New Deal 2.0 readers know that Roosevelt Institute Braintruster Bill Black isn’t afraid to tell it like it is, and in recent weeks he’s been turning up the heat on the banksters who defrauded the American public and brought the country to the brink of economic collapse.  Now a revealing interview with the Real News Network, entitled “To rob a country, own a bank,” has one blogger asking, “Why hasn’t Bill Black been killed?”While we don’t believe Bill is in any real danger, his brutal honesty does pose a serious threat to the financial sector’s status quo.  You can watch the entire interview below and see why Bill is enemy number one among the opponents of financial reform.

Rent party – America is controlled by what economists call rent-seeking behaviour. Virtually everyone important has a revenue stream, and they don’t want anyone to take that revenue stream away. So pharma and insurance companies, who would have been damaged badly by single payer (they would have lost hundreds of billions) made sure that a plan to provide everyone with better health care for a third less than current costs was never even considered.The most important game in America today is the contest for control of government, so that government can directly or indirectly give you money. Health care “reform” in which the government decided to force Americans to buy private health insurance or be fined is merely the latest (and most blatant) example. Virtually every industry, from finance to telecom to agriculture is involved in this game. It is in all their interests to make sure the game continues, but they do fight amongst each other for the spoils.This game will continue until the US can no longer afford it.

Who Will Protect Your Future Self From Your Present Self… A common framework for economic analysis is to assume that people attempt to maximize lifetime utility subject to a discount rate. But should economic analysis be concerned that your future self has different preferences than your current self? Are you really two different selves whose desires should then be weighed separately? A new paper from the Boston Fed argues that neuroeconomic evidence suggests that the answer may be “yes”, because when we make  choices that affect both our current selves and our future selves, we think about the preferences of our future self in the same way we think about the preferences of a different person: …our central idea is that essentially the same brain system is utilized when individuals attempt to predict or empathize with others and when they attempt to predict or empathize with themselves in the future. So if the way we think about our future selves is as distant as we think about strangers, then is our current self really adequately considering the wants of our future selves when they make choices that affect our selves in the future?

 Some Say Trade Numbers Don’t Deliver the Goods – WSJ – They make for dramatic reading: The WTO says world trade fell 12.2% in 2009. On Friday, the organization predicted that trade would bounce back sharply this year, rising 9.5%.  But these figures don’t tell the whole truth about trade. According to some economists, trade in finished products—the things consumers actually buy, such as cars, computers and iPods—declined by much less than 12.2% last year. That is because as much as two-thirds of the value of goods that go into trade statistics represent intermediate parts, which are imported from other countries and used to make finished products that then get re-exported. By ignoring the multinational composition of goods, conventional trade data also make trade imbalances between some trading partners seem larger than they really are. China imports a huge quantity of parts from places like Japan and South Korea, but when those components are assembled into finished goods and shipped to the U.S., all the pieces count as Chinese exports, inflating the U.S. trade imbalance with its most polarizing trade partner.

A/B testing for the homeless – To prove a point about the utility of A/B testing, a marketing blogger helped a homeless man modify his begging approach and increased his earnings by over 100%. What we did here was quite different than what most homeless people would do. We focused on a different angle. We already have the "I’m homeless, help me" stigma attached to people that are sitting on the side of the street with a cup, so we don’t necessary need to make that a prominent part of our banner. The next big difference is that we changed colors and went from cardboard to white to spark the interest of people walking by instead of automatically having negative associations that they have with cardboard and homeless people.

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