Colonial Ties

I thought it was interesting that Jeb Bush recommended Margaret Thatcher be on the $10 bill when asked which women should be honored on US currency.  Umm…that’s awkward, given that the US fought a war of independence to be free of Britain.

Apparently, historical amnesia is common throughout North America.  September 15th is when Mexico celebrates its independence from Spain, or according to almost half the population, just celebrates (forgetting the whole Spain part of the picture).  In a recent survey, only half of the polled population knew that Mexico got its independence from Spain.  13% actually thought the colonial master had been the US!

Here’s some other depressing tidbits:

a. Despite the fact that the Mexican President gives his yearly “grito”, where he loudly proclaims the heroes of Mexican independence, when asked about the identity of these heroes, only 26% of the polled could name Miguel Hidalgo, who started the independence movement, 12% didn’t know what to respond, and 25% named figures from different eras of Mexican history.

b. Poor Hidalgo is probably spinning in his grave when he learned that 25% of the polled thought Mexico would be better off today if it was still a colony of Spain.  And Spain still has an unemployment rate of over 22%!

h/t to Alejandro Villagomez, a friend and former colleague (@favillagomez)

Much ado about nothing

As all the world knows, the Fed announces tomorrow whether or not they go through with a  rate hike. Social and old media are choking with punditry denouncing the possibility.

I say, “meh”.

Sure, asset markets will probably swing tomorrow, but there’s nothing in the Fed’s plans that would have any real influence on the fundamentals of the real economy.

How so?

Firstly because rates will still be really low after the “hike”. I’m not sure how they will state it, but the current position is a range “from 0.0 to 0.25”. So suppose it’s announced a new range from .25 to .5. Katie bar the door!

Secondly and I cannot stress this enough, monetary policy really has little to do with economic prosperity. Sure draconian tightening or hyperinflation can mess up an economy, but we are nowhere near that point. There is precious little evidence for the US that monetary policy affects output or employment.

Of course that’s the last thing you would conclude from the raging progressive punditry of the past few weeks.

Now it is true that inflation has been below the Fed’s target for like 3 straight years and the Fed doesn’t forecast it to hit the target until 2017, but rest assured, our economy, left to its own devices, won’t even notice the looming hike.

Again, I do expect asset markets to gyrate, but I don’t hold to a Sumnerian linkage between short term swings in asset prices and permanent changes in economic fundamentals. I’m more of a Shillerian when it comes to asset markets.

“We move forward not backwards”

Wishing you weren’t a HIPC (highly indebted poor country) sadly doesn’t make it so.  Ghanaian officials seem to have read a few too many self-help books.

Here’s some background from a 2012 working paper by Todd Moss and Stephanie Majerowicz entitled No Longer Poor: Ghana’s New Income Status and Implications of Graduation from IDA.”

Ghana has long aspired to reach middle-income status. The Government’s Vision 2020 plan launched in 1995 targeted higher growth rates for the country with the aim ‘to transform Ghana from a low-income to a middle-income country within one generation.’  In November 2010 the country reached this milestone a decade early through a somewhat unconventional and in many ways unexpected way: a technical statistical adjustment. While Ghana’s real GDP growth rates had, according to the World Bank, steadily improved over the previous three decades—from 1.4 percent in the 1970s to 5.5 percent for the past decade—a GDP rebasing exercise recalculated how to measure the economy and Ghana suddenly found that its official GDP per capita was not under $800 as previously thought but rather $1,363. This accelerated leap put the country into a new income category overnight.

The joy of reaching middle-income status (albeit by technical shenanigans) was short-lived, as Ghanaian officials realized that the country was no longer eligible for the amount of aid that it had been (the day) before.  Now the country is undergoing the indignity of being officially classified by the World Bank as a Highly Indebted Poor Country (HIPC).  This was after the IMF had already labeled it a “high-risk, debt distress country.”  I’ve never heard of that classification but it certainly doesn’t sound good.

So what do officials have to say?

“Deputy Finance Minister, Mona Quartey in June ruled out the possibility of Ghana going back to HIPC status. We are not going to HIPC. We are going into a three-year IMF programme. We have been there [HIPIC] once and we are not going back there. ‘We move forward not backwards’ she encouraged, saying Ghanaians should “declare and decree” positive confessions.”

I don’t even know what “declare and decree” positive confessions means in this context, but I think the facts take issue with her assertion that “we move forward not backwards.”

Sometimes a brick is not just a brick.

Sometimes it’s your paycheck. At least in Russia.

So bricks run between say $0.25 and $0.50 apiece.

The factory has $64,000 in unpaid wages.

That’s like between 128,000 and 256,000 freakin’ bricks!

If your monthly salary was $500, thats from 1000 to 2000 bricks!

People I’m all for a commodity standard but I put it to you that the brick is not an excellent medium of exchange.

Try making change with one of these babies.

Or putting $10 worth in your wallet for a night out.

Hat tip to Tyler who sadly buried the lede.

Hungry for a new life (but not in Hungary)

It turns out that beggars can be choosers.  Desperate Syrian refugees are flooding into Europe, but not just any European country.  They don’t particularly want to stay in Hungary, and Noemi Szecsi, Hungarian writer in a NY Times op-ed says that she can’t blame them.  She writes:

“It was mortifying to see refugees hurling themselves on the tracks at a Hungarian railway station — as they did last week when a train they thought was carrying them to Austria was stopped by the police in Hungary to take them to a detention camp. The migrants’ despair was because they didn’t want to be stuck here — in the country where we Hungarians are destined to live our shabby little lives. I have often felt like throwing myself on the tracks at a country railway station — just thinking about being Hungarian. And many of my compatriots have, out of sheer melancholy, successfully executed this act as a train arrived.”

She has harsh commentary on the state of Hungarian politics and notes that the Syrians aren’t suicidal but rather are “hungry for life. Only, they don’t believe they can find that life here.”

She talks about the dysfunction and hypocrisy that are rampant in the political class.  Here’s another fine description of this type:

“You’ll find them in the ruin bars of Budapest. These are an institution that could exist only in this country: pubs set up in abandoned buildings and vacant lots of the city’s old Jewish quarter that trade on a faded Austro-Hungarian glory. After a few drinks, when people drop the mask of political correctness they wear for the rest of the week, they quietly team up to express ‘how tired’ they are of the ‘dirty mob’ around the railway stations and loitering downtown.”

Seems like the Syrians were right to want to keep moving.

Legalize them?

Cool study forthcoming in AEJ Applied about how legal immigration status reduced recidivism of foreign prisoners in the EU. Here’s a link to an un-gated version of the paper.

Here’s the abstract:

We exploit exogenous variation in legal status following the Jan- uary 2007 European Union enlargement to estimate its effect on immigrant crime. We difference out unobserved time-varying fac- tors by i) comparing recidivism rates of immigrants from the “new” and “candidate” member countries; and ii) using arrest data on foreign detainees released upon a mass clemency that occurred in Italy in August 2006. The timing of the two events allows us to setup a difference-in-differences strategy. Legal status leads to a 50 percent reduction in recidivism, and explains one-half to two-thirds of the observed differences in crime rates between legal and illegal immigrants.

So the good news is that the identification scheme here is pretty darn good. The bad news is that to achieve this strong identification, the paper ends up studying a fairly small sample of foreign criminals:

We are left with 725 and 1,622 individuals in the treated and control groups, respectively.

Then they came for the cabbage…

Alec Luhn, a journalist based in Moscow, tweets this wonderful photo and comment yesterday:


Moscow mayor Sobyanin executes a cabbage with a cavalry sword on city day as part of ban on imported food.

Well, I should be clear.  The photo is wonderful for fans of satire and irony, but obviously very bad for consumers in Russia.  Kevin thinks he just likes to be dramatic when he makes coleslaw.