Further regarding my previous post about the Swiss move to de-peg the Swiss franc from the Euro — In John Mauldin’s Thoughts From The Frontline letter this week, he notes:

Early Thursday morning the Swiss abandoned that policy. Much of the press coverage in the (largish) wake of their surprise move has focused on the costs to banks and hedge funds around the world, but you have to realize that serious pain is being felt in Switzerland itself. Every bank and business that held non-Swiss-franc debt or investments took an immediate 15–20%+ haircut on its holdings. Swiss investors lost at least 10% on investments in their own stock market and more on shares they held in other stock markets. Forty percent of Swiss exports go to the Eurozone, and the Swiss franc is now over 30% higher than it was five years ago – with almost half that movement coming in one day. Those exporters just got hammered.

And this was not a painless policy decision for the SNB. Citibank estimates the SNB’s losses to be close to 60 billion Swiss francs.

Those are a lot of gored oxen. But keeping in mind that currency trading is at root a zero-sum game, what I want to know is — who were the big winners? For sure, there’s a chess game going on behind the scenes here. Some players knew this was coming and profited mightily from this scam. More »

In a conversation with an economics PhD friend of mine last Thursday, I was indulging in my usual bloviation about the insanity of the notion that a weak currency is good for the economy. As I have ranted here previously, it may be good for debtors, who can pay back their obligations in inflated currencty, and it may be a short term benefit for some exporters, but it certainly isn’t good for the economy. As my friend pointed out, it may also be good for politicians, since the resulting inflation may cause a nominal increase in the income subject to taxation, with the net effect of pushing it into higher tax brackets.

In the course of our conversation (and in my previous post), I cited Switzerland as a country that clearly should be able to get the benefits of both a strong currency and strong exports, simply by adjusting prices instead of trashing the currency.

The very next day, the SNB announced that they were dropping the CHF1.20 ceiling vs. the Euro, causing a great deal of wailing and gnashing of teeth in the financial world, and no doubt laughing all the way to the bank. What a sucker play! More »

I have always been a big fan of iconoclasts and dissenters. Partly, this has to do with the smugness of the defenders of the accepted wisdom, whatever it is — there’s something about the phrase “every reputable scientist / economist / historian / etc agrees” that sets my teeth on edge. It isn’t so much that whatever it is that they’re agreeing on is necessarily wrong — it’s that it’s boring. I can think of very few breakthroughs in science or technology that didn’t start out as off-the-wall ideas that were objectively crazy according to the accepted wisdom at the time. That doesn’t mean that the iconoclasts are always right or even frequently right — obviously, they’re usually wrong, because they’re making what amount to risky bets, and by definition, risky bets usually lose. But the clever ones nearly always have something to say that’s worth listening to, and their writings are often a great source of creative stimulation. They may be wrong a lot, but they’re almost always colorful and interesting. More »

A year or so ago, while we were still living in the Phoenix area, I decided to build a patio roof over the concrete slab outside the back door of our house.  Visiting the Building Safety Department of our suburban city, I learned that, yes, this would absolutely require a building permit. The application fee would be more than $500, and I would need plans, signed off by an architect.  In other words, it would cost more to get the permit than I was planning to spend building the patio cover.

That was the end of that project.  Just as well, given the subsequent trajectory of Phoenix area real estate.

Now I live in the southern Philippines. Neighborhoods here tend to operate on a principle that may seem strange in modern America: it’s your property, you can do whatever you want. More »

(My friend Tom, certainly among the most analytical and intellectually capable people of my acquaintance, posted two long and thoughtful comments to my post of a few weeks ago about computational models in general and climate models in particular. I thought that Tom’s comments deserved better billing so with his permission I have converted them to a guest post, which follows, with some slight editing for flow. Tom raises some valid and interesting points, which I will probably revisit in a future post. Also, I highly recommend the Guardian podcast linked in Tom’s post below, in which I can find very little to take issue with other than the implicit assumption that anthropogenic climate change is a proven fact, forever settled, and about which no reasonable disagreement is possible.)

Here’s Tom:

Jack, I won’t pretend to any ability to state properly the scientific case in favor of the many nonpolitical and serious climate scientists who are presently convinced that dangerous anthropological global warming exists and is increasing. I do, however, think that your posting gives too much weight, like the litigation lawyers we both know who want to win for their clients by fair means or foul, to the possible or, as you put it, inevitable computer modeling hocus pocus and political jabberwockiness that exist in the science dispute. I personally believe, and feel it’s OK to use this, since your posting also contains a fair amount of opinion, that existential evidence of global warming caused by increasing CO2, apart from intricate computer models and hypocritical politicians, is gathering apace. Can anyone rational turn a blind eye to that? More »