Archive for May, 2009

May 31, 2009

Sixth sense – fluid interface

I have seen the future of devices and interfaces, here is

Pattie Maes giving a talk in TED! Just Brilliant, I think this will truly transform how we use information.
May 29, 2009

Thinking on the Margin: Do You Know What You Don’t Know?

Thinking on the Margin: Do You Know What You Don’t Know?

May 29, 2009

The Econophysics Blog: Tyranny of the Power Law (and Why We Should Become Eclectic)

The Econophysics Blog: Tyranny of the Power Law (and Why We Should Become Eclectic)

Interesting read, but I don’t agree with the author that we can change our behavior to be more eclectic… 
May 27, 2009

The Crisis and The Response – An interesting panel debate

Here is a very interesting debate by Bill BradleyNiall FergusonPaul KrugmanNouriel RoubiniGeorge SorosRobin Wells et al.

My Summary:
1. The US banks have to be nationalized
2. We need better regulations around derivatives and bank capital norms
3. The US needs to grow through normal sustainable means like investing in technology and innovation and increasing productivity
4. The US consumer would have to scale back on their consumption and increase savings, at the same time the rest of the world needs to increase their consumption and decrease their savings
5. All the stimulus in place would have to be reversed at the first sign of reversal as it has huge implications to the US balance sheet and its credit worthiness
May 25, 2009

Points to ponder…

1. Why does it cost more to get healthy non-processed food than processed unhealthy food?

2. Why are there more people living as singles in a large city than in a small town?
3. Why does popcorn cost more in the movie theatre? ( I think Steven Landsberg has attempted an answer in his book “The Armchair Economist“)
4. The more connected we get with people through gadgets and technology the less connected we are with the person at the other end of the gadget?
5. Why is water more expensive than oil? There has been some debate on the true cost of water here
… I will update the list once I get more thoughts on this
May 25, 2009

Icelandic Government & Choices before it & some modest suggestions…

I saw a very disturbing development in the news in Iceland, the Government is thinking of cutting cost in schools and education. This is precisely what one of the MP said that they will not do before the election, but of course they have a change of heart when they are in the Parliment.

Here is a perspective of the debate before the election, I think Icelandic government has a lot of tools in front of it to deal with the burden of debt, for example if a case could be made to the public of Iceland that a 5% increase in tax is needed to maintain and build the Education System, Infrastructure, Healthcare and Elderly care services everyone will pay up without any question. The increase in tax could be temporary, say for the next 2 years or 3 years until a majority of the burden is resolved. 
Where do I think the Icelandic government needs to cut its expenses? Here is a no-brainer:
Oil imports – put a tax on car owners and oil users, I think Iceland is small enough to provide incentives for people to switch on their mode of transportation. You can even get creative, have the tax during the summer months when the weather outside is not as bad as when it is during Winter. Almost every household that I know has atleast 2 cars, whereas you can get by with one… We have been living in Iceland for the past 3 years and we have got by with one car not because we cannot afford one! On the contrary it makes us plan ahead and coordinate our days so we can do all the things with just one car. I don’t understand why this cannot be adopted in Iceland for every household. I mean if you want to own more than one car then you just pay a higher price, which I think is a fair bargain.
There were so much talk about Iceland becoming Oil independent in the past, here are all the links… 
I think Iceland will be a very interesting candidate for the Pigou Tax
May 22, 2009

Why do economists get it wrong…

Greg Mankiw is writing about Star Trek economics here and refers to Andrew Leonard‘s post, I read that post and here is a paragraph that I thought was particularly interesting…

” As Warsh explained to me during an interview three years ago, Romer’s great contribution was that he mathematically proved “that the economically important thing about knowledge is that it is ‘nonrival’ — everybody can use it at the same time.” “

Here the author talks about Romer’s great contribution was that he got the math right… Awww come one give me a break. Why are economists so obsessed with being able prove “trivial” things with Math? I think this obsession with math makes economists positive bias to ideas that are mathematically proven even when it is wrong!

I kept reading through the links to this story, I bumped into the paper written in 1978 by Paul Krugman, The Nobel Laurate Economist, here is the link to that paper. The paper talks about Interstellar Trade, given that Mr. Krugman won his Nobel for work on Trade patterns I thought it might be an interesting read… well I stopped short the minute I came across the following sentense:

In fact, I will assume that investors,  human or otherwise, are able to make perfect forcasts of prices over indefinite periods.

What a load of baloney… here is more

“The second feature of interstellar transactions cannot be so easily dealt wtih (physicists are not as tolerant as economists of the practice of assuming difficulties away).” 

Maybe this is why we don’t have bridges and other things built by physicts not collapsing on its own weight. We cannot say the same about the Theories that economists spew. This is the reason that I don’t want to take any economist seriously as they don’t have a clue what they are saying either.

BTW, I trained to be an economist and now I just look for assumptions like this and try to prove that economists who write theories that are weak on assumptions like the one above don’t deserve any credit for original work. Maybe economists should just stick to writing narratives that way atleast it becomes interesting prose to read!
May 18, 2009

A story on a personal credit crisis…

I thought the post by Greg Mankiw was very interesting and an eye opener to all those who are outside of the US to learn what can typically go wrong. Given that I live in Iceland, the above story is closer to home and a number of households without much of the issues described in the article have fallen into a big debt trap due to the Icelandic currency.

May 15, 2009

Iceland A Better Place…

I have been following the work of Shai Agassi, the former VP of Products at SAP… he is the founder and CEO of Better Place. I have also been reading his blog. I have to say I am impressed, no wonder he was positioned to become the CEO of SAP but he quit that job founded Better Place and is on the way to change the World or at least some of the bad habits we have formed in the last century… Driving Gas Guzzling Cars.  here is a video that describes what is A Better Place

I want to try to get this concept implemented in Iceland, I am not sure how susceptible the Government of Iceland is going to be for new investment given what has happened to Iceland economically… but I think the best way to get out of the current condition in Iceland is to look for bold ways to invest and get out of the financial mess. The world is changing and I believe a better way to change is to lead and define how history will remember you. Was it not Winston Churchill who said “History will be kind to me for I intend to write it!”? 

Here are a couple of bold steps for Iceland:
1. Be the first country to be totally Oil Independent – It is easier to do in Iceland because of the size of the country and given its rich resources in renewable energy and in using it.
2. Be the first country to convert 95% of all its vehicles to Electric power – Again easy to do and makes economic sense as electricity in Iceland is the cheapest in the world.

The above two ideas are achievable in a single term i.e. 4 years, lets think about it… main use of Oil in Iceland is for vehicles, trawlers and some industrial machines. I don’t have the facts but I can bet without looking at the numbers that over 60% of oil is used for Vehicles, if Iceland can stop importing 60% of the Oil, the country will have a much higher trade surplus which would help it support its own Currency. There is a huge debate going in Iceland related to joining the European Union, in my view the options are very clear… the only way to keep the Icelandic Krona is to invest in new technology, be hyper productive thereby creating a demand for the goods and services being produced in Iceland. This cannot be achieved without investment and the original argument of going back to the roots of Iceland being a Fishing Nation is not valid in the current context, if the country wants to be just a fish processing country why build so many universities and have such a highly educated work force? I am sure majority of Icelandic population is happy that Fish as a resource has helped Iceland but would rather do something else than process fish.
May 14, 2009

The worst is yet to come…

I have been following this link, which is basically all the press citation of Nicholas Nassim Taleb, based on which I have created another link which basically has the following search term:

Nicholas Taleb OR Dr.Nouriel Roubini OR Jim Rogers

Ok, these are the only three guys who are saying that things are going to get worse before they get better but we still need to do certain things before we see a recovery. I think and the authors above agree that the Stock Market is celebrating prematurely and we are going to see another downturn before things start to recover, maybe by 2010 or 2011. The biggest problem is the dollar and the pending assets in the Real Estate market that is going to hit main street in the next couple of quarters.

here is a figure comparing Commercial Mortgage Backed Securities Credit Spreads and Deliquencies, Spreads are high, deliquencies are low…
good indicator that the worst is yet to come. It has not come because of the bail out the banks who hold these instruments have basically locked the box and thrown the key, however they cannot keep at that level for a prolonged period of time as the Economy goes through a slow down. For crying out loud the unemployment rate in the US is 8.9% and the earning season is not giving any cheer as no one knows how bad it is going to get.


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