Thursday, May 17, 2007

Capital Flight: Will the supports hold?

The other day I was checking the US TIC data for March 2007 and was surprised to see yet another large exodus of capital from the US by US investors. Thus far this year, US investors have purchased US$78B of Foreign Long Term Securities, which equates to US$312B over the year.

That means, in order to keep the value of the US$ stable, foreigners will need to purchase enough US assets to cover not only the US Trade Deficit of, let's call it US$750B (assuming a US$62B/month Trade Deficit) but also that extrapolated US Capital Outflow of US$312B (or more if capital flight intensifies). This assumes the Net Income figures for the US remains around zero.

I wonder if the US$ supports, provided so willingly by Asian and ME Central Banks in pursuit of mercantile advantage, will be able to withstand the additional burden of capital flight from the US?

Tuesday, May 08, 2007

Evolution and other modernist Shibboleths

O'Reilly: Possible, but do you right now? Do you want the United States to win in Iraq?
Letterman: First of all, I don't -
O'Reilly: It's an easy question, If you don't want the United States to win -
Letterman: It's not easy for me because I'm thoughtful.
The Late Show

Although I didn't watch the recent Republican Presidential Candidates debate, I did see a few snippets on Youtube including the response to this question, "I'm curious, is there anybody on this stage who does not believe in evolution?" The question was asked with a hint of incredulity, as if to answer in the affirmative was to be a fool.

This question reminded me of Judges 12:6- the shibboleth test: Then said they unto him, Say now Shibboleth: and he said Sibboleth: for he could not frame to pronounce it right. Then they took him, and slew him at the passages of Jordan: and there fell at that time of the Ephraimites forty and two thousand.

According to Wikipedi: The term [Shibboleth] originates from the Hebrew word שבולת, which literally means "stream, torrent".[2] It derives from an account in the Hebrew Bible, in which pronunciation of this word was used to distinguish members of a group (the Ephraimites) whose dialect lacked a /"sh"/ sound (as in shoe) from members of a group (the Gileadites) whose dialect did include such a sound.

A shibboleth question in the biblical sense is a test of belonging to a tribe. Faith in evolution, then, has apparently acquired shibboleth status in somewhat similar fashion to the modern Central Bankers' necessary faith in fractional reserve banking or fiat money. It is a test to determine if one is a member of, at least in my understanding of the question, the modern world. Those who do not believe in evolution, apparently, are not part of the modern tribe.

I have no desire to wear the ring of power that is the office of the US President (nor, I imagine, would the people of my country wish me to wear it) but had I been asked the question I too would have raised my hand.

Re-read the opening exchange between Bill O'Reilly and David Letterman, if you will, as preamble to my explanation of this iconoclastic view.

I don't think it is a simple question as it depends on the content of the faith.

If the question had been framed as, "Do you, in the main, agree with Darwin's thesis in Origin of Species that the ancestors of currently living animals, including man, had evolved into their current forms from, in some cases, radically different and simpler forms, that is biologically adapted to changing environmental conditions over time?" I would have answered yes, but that is not what I think the simpler question, asked in the debate, "Do you believe in evolution?", implies. Indeed, Darwin's view as presented in Origin of Species is rarely at issue in evolutionary debates, the focus has shifted to the age old assumed conflict between spirituality and reason, religion and science.

About a year ago, I shared my two cents on the shibboleth in question in Evolution, less than meets the eye? The key passage from that argument came from J. Krisnamurti in a 1985 Q&A with the UN: Madam, I am afraid we haven't understood each other. We have lived on this earth from the historical, as well as ancient enquiry, on this earth for fifty thousand years or more or less. And during that long period of evolution psychologically, inwardly, subjectively, we have remained more or less barbarous - hating each other, killing each other. And time is not going to solve that problem, which is evolution. And is it possible, we are asking, for each human being, who is the rest of the world, whether that psychological movement can stop and see something afresh?

In my understanding of the modern aspects of evolutionism, one tenet is that the natural world is not only responsible for man's ascent to the top of the food chain but is also expected to continue improving the breeding stock. It is materialism- a faith in mother nature, sometimes described as Gaia worship. In graphical terms, if one charted man's greatness over time evolutionists hold that the line would resemble that of modern stock markets, generally rising.

Modern man does have an affinity for a positively sloping curve as the expression of our age.

Another tenet of evolutionism holds that one cannot both believe in god, religion, or spirituality (terms which have apparently become interchangeable) and evolution, or more broadly, science and progress. In the modern shibboleth test, faith in some sort of spirituality, the notion that one's sense of the world, one's awareness, is not the same as reality, and additionally, that man is driven, animated, if you will, by his spirit, or mind, which is distinct from but related to (as William James put it; to each mental state there is a corresponding brain state) the physical organ, the brain, is presumed to be an anachronism.

In these modern times, the mind/body duality expressed by, inter alios, Descartes is seen as an error- an argument laid out by Antonio Domasio in his Descartes Error.

This is, as earlier noted with reference to Central Bankers' faith in fractional reserve banking and fiat money, but one of many modern shibboleth tests. These tests are often administered by those who share Bill O'Reilly's sense of simple certainty, which recalls Bertrand Russell's quote about such a view; The whole problem with the world is that fools and fanatics are always so certain of themselves but wiser people so full of doubt.

Faith in the virtue of the battle of ideas, which was the basis of what used to be thought of as the quintessential American faith of Pragmatism, and was hoped to provide, over time, the best ideas upon which to live, has degenerated. It is as if those who are incapable of thinking for themselves became jealous of the benefits of those who could and usurped their position through propaganda. Why, these usurpers think, waste time and effort seeing the truth, a most difficult task, if one can fake it and get the same, and, in many cases, more benefits.

As Nietzsche argued; As long as a man knows very well the strength and weaknesses of his teaching, his art, his religion, its power is still slight. The pupil and apostle who, blinded by the authority of the master and by the piety he feels toward him, pays no attention to the weaknesses of a teaching, a religion, and soon usually has for that reason more power than the master. The influence of a man has never yet grown great without his blind pupils. To help a perception to achieve victory often means merely to unite it with stupidity so intimately that the weight of the latter also enforces the victory of the former.

From a broader perspective, the degeneration of the American faith in the battle of ideas into simplistic shibboleth tests might be more easily understood using a sports metaphor. Imagine if, after a few generations of pro athletes being paid massive salaries and getting all the women, of course, other, much less talented, but politically powerful, wealthy people decided to take their place. Thus instead of true genius, either at sport or at thought, battling it out, what you have is a mockery of the old game- Baudrillard would have called it a simulacrum.

Imagine going to a pro baseball or ice hockey game and instead of seeing truly qualified individuals battling it out, one had to watch Hiltons, Rockefellers and Du Ponts fumble around. Wait a second, we already, in a sense, do that - see People magazine. The Roman Emperor Commodus was one so jealous of the admiration earned by gladiators that he reportedly fought in 1000 contests.

Sadly for those who depend on the system, the battle of ideas is far more important than a pro sports match. Imagine if there actually was intelligent debate on the wisdom of invading Iraq or staying longer? Imagine if there was intelligent debate with real consequence on prolonging the credit bubble, or peak oil, or global warming? I'm not arguing one position or another here, my point is that there is no debate, just shibbeloth tests of tribal affiliation, with each side almost as willing to slay the other. Krisnamurti might have been on to something.

To square the circle, i.e. merge the mention of mind/body duality with that of shibboleth tests for modern tribalism, it is necessary to believe that one's sense of the world is still incomplete, able to be improved, in order to see the virtue in the battle of ideas. The moment we think, as Christopher Hitchens argues in his God is not Great, that we know (actually Hitch thinks only the modern tribe knows how the world works) there isn't really much use in trying to learn more- and another fanatic in Russell's' sense is born. Christopher Hitchens becomes Bill O'Reilly.

This sensibility of certainty is, as Hitch should be and used to be aware, not new, and often crops up in cultures (and people) in decline.

Friday, May 04, 2007

Too much of a good thing?

ROSALIND (as Ganymede): Why then, can one desire too much of a good thing?
Shakespeare - As you like it

The sun is shining brightly outside my humble abode today so I'll be hitting the links (actually, to be precise, I'll be hitting a little white ball while walking ON the links....ah the perils of thinking about the idioms we use) but before I head off, I'll share a thought.

While reading an article from Bloomberg, Asia to draw on $2.7Trillion of reserves to safeguard currencies, I started to laugh.

A decade ago, the Asian Tigers, as the fast growing Asian economies were called, were suffering through a bout of currency flu, due to, in their view, as one can surmise from their policy reaction, a lack of currency reserves. Is it possible to jam more clauses into a sentence?...... fear not I won't try.

How funny to think that the next bout of currency flu they suffer may well be worsened by the abundance of currency reserves.

A lack of reserves is a drag when the value of the reserves is rising, as occurred to the US$ during the Asian crisis. A surplus of reserves is a drag when the value of those reserves is falling, as looks likely to me this time round.

The reaction of Asian policy makers does remind me of one of the guiding faiths of modern culture, the belief in the curing pill, rather than a policy of health. Why not, I wonder, on a medium term view, run a balanced economy, instead of an imbalanced one that requires all sorts of magic pills and new theories.

If the USD$ falls much further I reckon I won't be the only one wonder such things.

Time to swing that club.