Miljenko's Blog

In a book I just finished (and can't really recommend) "Damned Lies and Statistics" the author quotes what he thinks is the worst statistic ever. In a Ph.D. prospectus a student apparently said "Every year since 1950, the number of American children gunned down has doubled." This he apparently got from a scientific journal which in turn reworded a statement made by Children's Defense Fund in 1994 - "The number of American children killed each year by guns has doubled since 1950." Quite a bit different. The author points out the two blatant mistakes - one of geometric progression - if the number had truly doubled every year, it would by now be in the trillions. The other mistake is not really a mistake but an omission - the overall population increased 73% over that period or almost doubled and with higher proportion of overall population being children, the number of deaths caused by guns may not have proportionately increased at all.

The United States military budget is currently approximately $450 Billion annually. The closest next are China, Japan, UK and France in the $40 Billion range. If there is anything close to "getting what you paid for" when it comes to military spending, the US will further extend its global military dominance over the next decade to the point where it will be unlike any other dominant global power in history. A point is sometimes made that current military spending is on par with Cold War levels of spending. But the difference is that in that time although arguably nuclear power gave a certain kind of dominance it was not a dominance you could do anything with. You could not really influence political developments, you could not remove dictators with it, it was just one massive end of all things hammer. The current American military is not only technologically the most advanced military in the world and by an order of magnitude at that. It is also the most combat tested milit...

In recent days numerous forecasts have been issued about the negative effect Katrina is going to have on US GDP growth rate over the next couple of quarters. The first of those I saw was by Goldman Sachs and said growth rate will be reduced by 0.5 % and many more have followed. There is unanimous agreement on that point directionally. They are all wrong. The effect of Katrina will be to stimulate growth and not hinder it. I have no idea by how much but certainly to some degree. In normal times, the area affected by the hurricane accounts for approximately 1% of total US retail sales. Because the area is not in any obvious way likely to account for higher percentage of the total output one can safely assume that not a significantly larger proportion of productive capacity of the US economy is located there. While the normal 1% of output in that area will certainly be smaller than that over the next year, the amount of consumption that the area accounts for will increase significantly. T...

CNN did a special on climate change over the weekend and one particular point struck me as brilliant. An MIT scientist asked how is it that people are so prepared to accept the inaccuracy of weather forecasts even 3 or 4 days out but on the other hand seem to be willing to accept that it is possible to essentially forecast weather 100 years from now? It is puzzling since one of the more notoriously unpredictable things is weather and that is fundamentally understood by everyone but then people take forecasts of 3 to 5 degrees warming over the next 100 years as undisputed fact. Over millennia weather patterns have been nothing but variable so past experience would also seem to caution against predicting long term trends. There is some debate over what would happen if the melting of the Arctic polar cap introduced so much fresh water into the Atlantic that the "great conveyor" effect of ocean circulation would disappear. A Woods Hole Oceanograhic Institute study says that this ...

I could never be a politician in Canada because of the required orthodoxy of opposing Quebec separatist movement. If one has a difference in opinion with his party over abortion, that can be tolerated. Same for gay marriage or even the sacred cow of the health system. But on the issue of Quebec separation, there is no space for anything but vocal expressions of support for bi-lingualism and opposition to separation. The position is equally absolute, if opposite, for politicians in Bloc Quebecois. I think Canada has simply been left behind by the times. The experience of EU shows that countries can achieve significant economic and political integration while keeping cultural autonomy and that is what everybody cares the most about anyway. They all want to be able to dictate domestic content on TV and radio and preserve the cultural uniqueness (and the right to smoke in restaurants and such). Free movement of goods, people and capital can be achieved (or in the case of Canada maintained)...

when they found him in his hole. As George Gilder points out recently, Soros and Buffet would have had him convert to Euro. Bottom line is that the panic over foreigners holding US financial assets is overblown and misunderstood. There are many reasons to like US $ and, for the record, Buffet is going to loose money on his short USD position (unless he is really smart and covered it recently). Some other useful numbers from David Malpas, chief economist at Bear Stearns. During 2004 US households added 590 Billion of financial assets. Against that, the total stock of credit card debt is 800 Billion. On a per capita basis Americans hold $89,900 each of financial assets which is more than the Japanese, the biggest savers in the world, with $76,900 per capita.

This is the first in what will be a series of posts about issues that come up in B.C. that to anyone who is not familiar with this part of the world might seem as if they are from another planet. Today it is about the unions, which in B.C. have managed to enforce even a particular special terminology over the discourse. A "strike" is not that, it is a "job action" or a "work action". How about a "non-work action"? Recently, there were ads running on the radio in which the union representing workers at Telus, the local phone company, was urging Telus customers to call and cancel value added services such as call waiting and call display in a show of support for the workers. The workers of the company telling customers to diminish revenue of the company and nobody finds that odd? Even more recently, the issue of a possible teachers strike has emerged. The issue is that the current provincial government wants education to be considered an "esse...

For some time it has been bothering me that when I look around there is a lot of prosperity but if you read the newspapers, it's all just a house of cards - all about to come down when the "kindness of strangers" has run its course. What I was seeing was not what those people who write about "twin deficits" were describing. So finally, at long last, I came across somebody else who believes in "follow the money" - Andy Kessler whose book " Running Money" I have just finished. Although many of the things he writes in his conclusions I've had in my head for a while, I have certainly not been able to come up with as simple and self-evident examples of why the economists don't really get it. The fundamental problem is that economists don't know (or don't care) about profits. As a consequence, they don't look at relative numbers such as a profit margin and instead look only at the absolute numbers such as imports and exports. T...

There is absolutely no question that in the next 3 - 5 years there is going to be a "nuclear event" of unspeakable horror. I don't know if it will be North Korea or Iran or perhaps even India and Pakistan getting off track in their recent warming of relations. The thing is, your regular North American, European and in particular Canadian citizen is totally incapable of contemplating such an event. Much like 9/11, it will be something that forever changes the way people think of the world but unlike 9/11 it is much more predictable. People are simply not paying attention and have the usual "people are inherently good bias". Most people are completely unable to fathom the way a leader like Kim Jong Il thinks. If there is a silver lining to it, it is that once it happens, the pre-emptive action against any such country will be much more morally acceptable. A pre-emptive strike against North Korea, which has demonstrated in every way a country can demonstrate that i...

The previous post reminded my of one of my favorite and least-likely-to-ever-gain-any-traction ideas. Poverty is mostly a matter of money (duh!). Therefore, poverty can be eradicated if a sufficiently large source of money can be found. I know of a large global expenditure which is totally unnecessary and if those funds were shifted to a fight to end poverty, they would suffice several times over. The world cosmetics industry is a business with revenues in the hundreds of Billion annually. Cosmetics are totally unnecessary because they are nothing but an arms race among women. Everybody does it only because everybody else does it. If all cosmetics were eliminated tomorrow, the better looking women would remain better looking and the less so the less so. At some point in time cosmetics may have been a significant differentiating factor in that so few could afford them that rich women who could were able to jump a few rungs on the attractiveness ladder. This is clearly no longer the case...

At a concert in Vancouver, Bono stopped the music for 5 minutes to talk to the crowd about ending poverty in the world. He flashed Prime Minister's number on a giant screen and encouraged the crowd to call the number to remind the PM of his promise to increase Canada's donations to the less developed countries to 0.7% of the GDP. One of the fans said "He (Bono) totally empowered us last night ..." Huh? He empowered you how? Took $100 from your wallet and told you to call the Prime Minister? I did not hear of him saying he will give 1/2 or 3/4 of the ticket proceeds to eradicate poverty. Instead of working on the fans Mr. Bono should work on where the money is - himself and the other entertainers who take enormous amounts of money for just doing what they claim they would do anyway - sing, act, play basketball. There are the Mother Theresa's and there are Bono's. My thing will always be with Mother Theresa's who actually live the way the people live who the...

A headline from today's National Post - "House Prices Skyrocket 50% in 10 years: Study". Does anyone actually read what they write before publishing it and where are all the editors? To say that prices have "skyrocketed" over 10 years 50% is ridiculous. A gain of 50% over 10 years is equal to annual compounded rate of 4.07%. Would anyone write a headline - "Your time deposit at the bank has skyrocketed 4.07% p.a. for 10 years." And yet the result is the same - a 50% appreciation over 10 years. Another item, this one from a newsletter says this about oil: "Global demand is rising exponentially, global supply is dwindling." How can anyone get so many things wrong in so few words? First of all, global supply of oil is neither dwindling or diminishing, it is growing and nobody disputes that. The question is whether it is keeping pace with rising demand and on that score does the writer know what "exponential growth" means? Would anyone ...

For a long time I have been wondering about the difference in perception of the value of a human life which depend on circumstances, culture, cause of death, geopolitics and who knows what else. I find the numbers and the relative attention paid to them to be beyond rational explanation. Every year 5,000 coal miners die in China in coal mining accidents. Amnesty International reports that in 2004 there were 3,797 known executions in the World (of which 3,400 were in China). If the resources of Amnesty International were devoted to improving mining safety in China would that not save the most lives? (Coal mines in other parts of the world are much much safer therefore it is not a matter of attempting the impossible, it is a matter of transfer of technology and safety practices.) Latest estimates of the death toll from Boxing Day tsunami are of 217,000 deaths. The number of victims of genocide in Rwanda is estimated at anywhere between 500,000 and 1 Million with a kind of a convergence n...

Well, the report is in and the conclusion is that the intelligence community was "dead wrong". To me the two most interesting conclusions are that first, all insinuations that the Administration knew there where no chemical and biological weapons but pretended otherwise to continue with the policy objective of regime change were dead wrong too. They did not know, nobody did, it was the world's greatest head fake. Which brings me to the second point and that is that the intelligence community was wrong because if followed what was being said among Iraqi politicians and the Army. When they intercepted radio conversations of Iraqi military talking about use of chemical weapons, the intelligence services did not know that those same Iraqi soldiers were being deceived themselves. Until the very last day they believed that they will crush the invading Americans with their secret weapons which, it was intimated to them, were there. So when some of them defected or offered inform...

For a while I have been wondering about what makes certain societies / cultures more receptive to a veracity vacuum. One such society is Russia where everyone simply expects, but also goes along with, the idea that most of what they hear (from the government, from the media, from others) is not true. The default option is to assume it is not true and somehow this is OK. Another example is the Arab countries where the public at large seems to be curiously accepting of the most preposterous of lies. Or at least is not challenging them. Examples that come to mind are many. The "mother of all wars"; the Iraqi Information Minister; the widely held belief by the "man in the street" across the Arab world that 9/11 was really work of the CIA (and the shock that followed recent admission by Bin Laden in a video that they did it). The most recent example are rumblings in Arab media about what the "reasons" were for the tsunami disaster in Asia. Some of the choice lu...

but that does not make it any less funny. Apparently last week in the Weekly Standard an article characterised Canadians as: "a docile, Zamboni-driving people who subsist on seal casserole and Molson. Their hobbies include wearing flannel, obsessing over American hegemony, exporting deadly mad cow disease and even deadlier Gordon Lightfoot and Nickelback albums." The title of the article was The Great White Waste of Time. This is in the category of "cheese eating surrender monkeys" or Conan O'Brien's - "so you are French Canadian - you are boring and obnoxious!"

A small irritant as of late has been the undifferentiated talk of “commodities”. The very idea of lumping into the same group oil, steel and corn is non-sensical. One of them is a non-renewable resource with high degree of scarcity, the second is a partially (scrap metal) non-renewable resource with very low degree of scarcity while the third is a renewable resource of no scarcity whatsoever. What is the point of calling them all the same and even more of trying to see “trends” in “commodities” I wonder. Demand and supply for oil are in a very tight balance and flexibility on the supply side is limited – the order of magnitude of additional supply that can be brought to market is significantly less than 5%. Not so with steel where the issue really is not one of availability of iron ore but rather the processing capacity. Huge amount of mining and steel mill capacity has been shut down over the past 10 years and much of it is being re-started now all over the globe. There is a very...

Having recently looked at the list of Russia's 100 richest people I was overwhelmed by anger. Anger over the monumental fraud that has been perpetrated on the people of Russia. As I look at that list and compare it to the Forbes 400 list, none of the people on the Russian list can claim they got there as a result of decades of hard work. None of them can claim past record of excellence in entrepreneurial activity or business in general. All that they ever excelled in was at playing the game of influence at a unique time in Russian history. They have very simply just taken advantage of the situation and while I cannot blame them individually for doing so, it is simply not right and there is nothing admirable about it. If you look at the top 10 of the Forbes list, you have people who have truly invented things that nobody has seen before or built enterprises unique in their excellence or people who simply did something very well for a very long time (Warren Buffet). There are in som...

A letter to the editor at WSJ makes a brilliant point (which I wish I made first) about the recent Harvard study that shows that aspirin affects women differently than men. He says we should either a) attack the politics of the scientists who published the study, or b) apologize to Larry Summers for the attacks on him for "having the temerity to suggest that there may be differences between men and women". If men and women react differently to aspirin isn't it just possible that there are other differences? "It seems increasingly difficult to be both polittically correct and scientifically correct at the same time."

Is the title of a book that has been sitting on my shelf for years and which I have yet to read. It perfectly describes the sentiment that arises when one faces the multitude of ways in which Canada as a society appears to wants to snuff out excellence. From the "everybody is a winner" attitude toward sports in school, to the charge of "elitism" against Universities that dare to suggest that pursuit of excellence is OK, to the health system that puts egalitarianism as its highest objective. In debates over health care the quality of services delivered, the economics of the system take a back seat to the value of egalitarianism. God forbid that those who can pay more can get more. That would not be Canadian. If it works for cars, clothes or food, why not to deliver other services? Why is health so different than shelter or food? The drive towards universal mediocrity is showing remarkable signs of success. It is in fact working and pervasive blandness is spreading.

In today's Wall Street Journal in a letter to the Editor, a Canadian living in Boston says how Canada does not need a missile defense system as "a result of not having anyone attack the country for hundreds of years, itself a result of Canada not engaging in any offensive wars". Oh, really? And exactly who would have attacked Canada? The Brazilians? Or to Congolese perhaps? And if they did, they would not at all consider the possibility of being spanked by the US for messing around in its back yard? Further on he says "you should ask yourself why no one wants to kill Canadians" repeating the just-under-the-surface argument of apologists for 9/11 terrorists - you brought it on yourselves. This type of attitude is pervasive in Canada and only the truly idiotic go out and voice it publicly while the majority simply thinks it. Another idiot explains how many Canadians are "very apprehensive about the buildup of weapons of mass destruction". Huh? A purely d...

Microsoft is a strange company. Nobody loves it. It's customers use the product and their emotional attitude towards the company is in the range from being disappointed with its many failings to not having any emotional involvement at all. I wonder if MSFT ever gets letters from customers praising their experience. It's peers either loathe or fear them or both. It is hard to find anyone who shows much love for MSFT although one would think that as an undisputed industry leader and a "winner" people would give it at least some grudging respect. Nobody writes to Exxon either to tell them how they love their gas either (or at least I think they don't) but at least industry peers surely give credit to them for being the leader and for their excellence.

I am quite bemused by the widespread puzzlement over decline in long term interest rate over the past year in the face of continuous rate hikes by the Fed. If all of these economists and market analyst just read more Marx, they would be much less puzzled. They would know that Marx said money is just another commodity. The price of goods depends on their supply and demand and the price of money is the interest rate. The prevailing interest rates reflect the market conditions in terms of supply and demand for money (savings VS profitable projects in which those savings can be invested). The interest rates have been going down because more and more liquidity is available as economic growth continues and relatively few additional opportunities for investing are available. The Fed can no more dictate the level of all interest rates than could a real estate market seller who would simply post a price for his house where his house accounted for 1% of the total market turnover in the city. For...

US GDP numbers for the fourth quarter were just revised upwards to 3.8% from 3.1%. Growth for the year was 4.4%, just a tad below the 1999 growth of 4.5%. The source of the revision were stronger exports which means that things are working the way they are supposed to and the way they always have - the weak USD is making exports more competitive and over time this will work to reduce the trade deficit. Business investment is increasing and consumer spending is keeping pace. The economy is no longer resting solely on the shoulders of the consumer. Inflation still remains benign with Greenspan's favorite metric of personal spending minus food and energy running at an annual rate of 1.9%. Things are as good as they have been in 30 years and yet there is no widespread jubilation. This is very good and makes it more likely that the good times will be sustainable. Which would you rather be - Japan and Germany with large trade surpluses and no growth or the US with large deficit and treme...

In a newspaper commentary this week David Suzuki laments how he does not understand why in the world where so many electronic gadgets are being miniturized "are cars fatter, bigger and more polluting than ever". Yes, some of the cars are bigger, some may even be fatter (whatever that means) but none of them are more polluting than ever! In fact, even the Hummer is much less polluting than the smallest cars were 20 years ago. This is not an argument of values and principles, this is an argument of measurable science and quantities of emissions. Both emissions and fuel consumption of cars have improved dramatically in the last 30 years. Peter Foster points this out in the National Post column today.

Recently the man from ForestEthics by the name of T. Berman wrote an op-ed piece entitled Threat To Boreal Forest is Real. In it he mentions the statistic that 5 acres of boreal forest are logged every minute. What he fails to do is add that with natural forest growth and human interevention in additional forestation, the rate at which wood is growing is 20 times the rate of logging. If the boreal forest was disappearing at such an alarming rate as he implies, he would be hard pressed to explain how is it that the tree cover of North America is now bigger than it was 100 years ago. The other thing he fails to point out is that for his purposes, second-growth beech and maple forests "don't count". He only looks at the white pine forest which was logged off in the 1800s. They actually show maps of "frontier forest" as it was 8000 years ago and compare it to today. Much of North Amercia shows as devoid of trees when in fact there is much tree cover, only of differe...

Now that Korea has proudly announced the world's worst kept secret, namely that it has nuclear weapons, I wonder if anyone will wake up and realize that the missile shield (and free to boot for Canadians) is not a bad idea at all? Korea also has fairly sophisticated ballistic missiles so far tested to a range of less than 2,000 km but under development for 6,000 km. Teapo Dong 2 based on old Soviet Scud designs will have a range of 4,000 to 6,000 km and is obviously designed to reach the U.S. Of course, on the way over, they have to fly over Canada and in particular Western Canada. I for one would feel much better knowing there is something out there that can shoot them down before we all glow in the dark. Thankfully, there will be such protection irespective of the Canadian position.

Everybody everywhere is talking about it so why should this be any different? About 60% of the people voted in Iraq, facing danger unlike any other people who have ever voted in any other democracy. That is simply staggering. Even the usually anti-American and even more anti-Bush Toronto Star simply had to agree that - "on the defining, fundamental question, Bush was right. He understood that to defeat an idea, no matter of how perverse and brutal it might be, it was necessary to have an opposite and superior idea. He understood ... that the only way to win the war against terror is to turn it into a war for democracy. This is now happening." It was gratifying to see the pretty much universal amazement on Monday that what so few have said has actually come to be - people of Iraq, just like any other people anywhere, are deeply committed to being part of their own future and will step up against some pretty poor odds in order to make it happen. The world'...

This was a while ago after the U.S. election but it is so good it is worth posting at any time. It's by Pete McMartin of the Vancouver Sun: "By my reading of national and international opinion, the average Republican voter is a slack-jawed cracker named Cletis who lives in a double-wide in Hogspittle, Miss., where he worships rapturously at the First Baptist Church of the Second Coming. He loves NASCAR, hates hockey. He likes his beer with a shot, his shot in a double-barrel, and his double-barrel trained on gays, Darwinists and anyone with pigmentation duskier than his own. Cletis - quelle houreur! - believes in the Bible, the sanctity of heterosexual marriages, the war on terror and the idea that any peckerwood who buys a Honda Civic instead of a Dodge truck is a traitor. Cletis is not just a southerner by inclination or geography: His IQ is south of the Mason-Dixon line, too. He cain't read or write good, except to mark his "X" beside George Dubya's na...

The recent incomprehensible shenanigans over the Canadian flag in Newfoundland were just that - incomprehensible. In most countries, the national flag is the most powerful national symbol, something to shed blood over. Not an "optional" symbol and a bargaining tool to be used for negotiating royalty sharing with the Federal Government. It reminded me of this piece by Andrew Coyne of not too long ago: "You see, in Canada we gave up believing years ago: in religion, in ideals, in much of anything, really. Secure as we were under the American defence umbrella, we were infantilized; having no need to defend ourselves, we could not understand why anyone would have more. Or perhaps it was this: having renounced even the wish to defend ourselves, having absorbed the notion that the country could be destroyed at any moment by a vote of half the population of one province, what was left to believe? If we cannot bring ourselves to believe in the country's existence - ...

For a while now I have been asking a (rhetorical) question: Is Iran having nuclear weapons a good idea? If not, who is going to do something about it? Recently, Germany and France have reiterated their opposition to any kind of military or even firm action along the lines of sanctions against Iran. But if the approach of working through the IAE and the UN has not worked in the past what makes anyone think that it will work in the future? A temptation for an American Commander in Chief is going to be great a year down the road when the problem continues and he has to make a decision whether to bring 150,000 troops home only to face the possibility of having to ship them back out in an action against Iran in not too distant future. The temptation and the pressure will be great to just deal with the problem while the military capability is in place.

A term PM Martin uses referring to the GDP per capita differential between the US and Canada. Apparently, in 1981 the per capita GDP of Canada and the US was roughly equal at $30,000 per person. The gap is now around $7,200. Each American citizen has a "share" of the annual GDP of the country that is $7,200 more than that of each Canadian. If you read the papers you would get the impression that the decisive issues for the future of Canadians are gay marriage, foreign aid, waiting times for MRI's or non-functioning helicopters and submarines. Those are not the decisive issues for the future well being of Canadians. You cannot spend that which you do not have. The US gets to spend significantly more because it makes significantly more. The first order of business of the politicians and topic No. 1 of the national public discourse should be how to achieve maximum possible economic performance in Canada. First priority should be given to debate over policy and measures...

Which would you rather have - a positive balance of trade and 1% or less GDP growth like Germany and Japan or a growth rate closer to 4% while running a large trade deficit? The misconceptions repeated without thought in the press are repeated so often that people start assuming that somehow they are true. For example the notion how the rest of the world is buying US financial assets out of the goodness of their heart and might change their mind about it sometime soon. The simple fact of the matter is that if China wants to sell dolls to Wal-Mart, it will receive dollars in return. It has only two things it can do with those dollars - it can buy goods in the US or it can buy USD denominated financial assets. That is it, period, end of story. (If they sell their dollars for Euro or Yen that only passes the "problem" one step to the next holder.) So unless they want to keep their cash under the mattress the foreign central banks will continue to buy US Treasuries as lo...

The research which looked at the now infamous "hockey stick" graph showing world temperature data over the last 1000 years is finally getting published in a peer reviewed journal (Geophysical Research Letters). The arguments were around for a while but were pushed aside by the politically correct crowd which accepted as orthodoxy that of course, the Earth is getting warmer and, of course, it is caused by human activity. The problem with the hockey stick graph appears to be that whatever set of data ("red noise") one feeds into the model used, in 99% of cases it produces a "hockey stick" graph. You could feed in the milk consumption data in 50 countries and out would come the hockey stick graph. That I knew for a while. What I did not pay attention to was the fact that the initial data series for the entire study was the tree-ring data of only one particular species of trees - the high altitude bristlecone pine. How this part was not questioned before...

It must be hard to be a politician in Canada. The missile shield debate is around again this time over a report that Bush asked Martin about it during his visit although the agreement was not to talk about that topic. Apparently, Bush did not understand how Canada can be against something that will protect it from bad-aiming North Korean missile operators who could drop one short of New York or Chicago, if that protection was going to cost Canada nothing. And now the Canadian government has to somehow get to the point where it does the right thing, which is protect its citizens but not appear to be assisting or even acquiescing to "weaponisation of space". Weaponization of space is going to happen and there is absolutely nothing Canada can do about it. The same way Canada itself could not weaponize space. It just does not have the resources and whatever is going to happen will happen because the U.S., China, Russia and a few others so choose.

My first post will be about a letter to the Editor in the National Post the other day. It was from Dr. Chris Landsea and it was his resignation from the Intergovernmental Panel on Climate Change (IPCC). Essentially, he resigned because another scientist on IPCC spoke at a Harvard conference and said "experts to warn global warming likely to continue spurring more outbreaks of intense hurricane activity". This after Dr. Landsea was asked to analyse recent hurricane activity in the Atlantic, which he did, and where his conclusion was that "no reliable, long-term trend up in the frequency or intensity of tropical cyclones" can be extrapolated from the data. IPCC's own previous assesments in 1995 and 2001 also concluded that there was no global warming signal found in the hurricane record. So he is resigning because the political corectness requires that one "believes" in global warming existing and causing all sorts of havoc in weather patterns. ...