Negtive Interest Rate in Europe.

As many have noted, the European Central Bank, or ECB, just announced negative interest rates on money held with it. The ECB announced this because the inflation rate in Europe has come dangerously close to deflation. The ECB is concerned with a deflationary spiral taking hold in Europe and damaging the world's economy. A deflationary spiral is when prices drop encouraging people to save more and spend less. This would further depress the economy and accelerate deflation. As no one buys anything unnecessary, anticipating their cash to gain value, the economy shrinks, people lose their jobs and output recedes.

Much of the current commentary focuses on how the negative interest rate is supposed to stimulate lending. Basically, since the negative rate penalizes banks saving excess funds with the ECB, they will need to do something else with that money. This something else, the ECB hopes, will be investments that grow the economy. The problem here is that there are a ton of things banks can do with the money that have no impact on global growth. Because of banking regulations, a large portion of bank holdings have to be in government debt. So the most likely effect will be that short term excess funds will be used to buy short term government bonds, which still yield a small return on investment. Unfortunately, this is not the lending the ECB wants. The ECB wants these banks to lend to private businesses to fund hiring and wage increases. Unfortunately, lending to private companies is risky and current banking law discourages it in favor of government debt. So the likely effect of this rate change is, at best, psychological.

The real problems in the European economy do not stem from banks not lending, and as a result, this policy change is not going to be a panacea for the worlds economy. The problem most of Europe faces is that the cost of doing business on the continent is much, much higher than it is in the developing world, or the third world. As a result, there has been little growth in employment or wages over the years. More over, Europe has one of the most protected labor economies in the world. It is very expensive to hire workers there, and very difficult to downsize operations once they are opened. This acts as another regulatory impediment to growth. Without loosening the labor economies on the continent, lowering regulatory barriers to entry and exit and generally lowering the cost of doing business in Europe, companies are going to have a strong incentive to move their operations out of Europe. While this pressure remains, European recoveries, if they exist at all, will be tepid, regardless of what the ECB interest rate policy is.

An Open Letter to the Video Game Industry

Dear Video Game Industry,

I'm writing to you as a life long gamer. A person who has owned and played just about every game system that has been made to date. I say just about, because I do not own either the Xbox One or PS4. Why don't I own either of these machines? In short, because there aren't any god damned games for them that are remotely interesting to me. Note, I used the term god damned to emphasize how much it frustrates me that you seem incapable of making any good games anymore, not as an indictment of gaming in general. This is a problem that you could easily fix, but probably wont. This isn't a problem unique to the new gaming systems. There are few new games worth buying for any system currently.

So, how did we get to this point? This point being producing new hardware for games that don't exist. I think a lot of it has to do with the video game companies EA and Activision. Both of these companies work in very similar fashions, they buy up existing video game makers who have successful intellectual property (IP) and then cut costs, cut quality, and shit out sequels until no one wants to buy any more. Then they liquidate the company, fire all the staff, and look for their next acquisition. The end result is that most quality gaming studios get killed. Perfect example of this is when Activision bought Blizzard. Blizzard made the old War Craft strategy games, Diablo I & II, and Star Craft. These games were all hugely popular in the gaming world. After they were bought by Activision, they crapped out Starcraft II a game decidedly inferior to the original in every way except graphics. Then it did the same thing with Diablo III; worse, they didn't have enough server capacity so the game constantly crashed thanks to the required always on internet connection. Diablo III is in every way worse than Diablo II. If I could return it to get my money back I would. I don't even like the graphics any better. And just so you don't think I am shitting on Activision exclusively, here's one for EA. Bioware was a software company that made such games as Baldur's Gate, Neverwinter Nights, Mass Effect and Dragon Age: Origins. Once EA got a hold of them, gaming quality quickly deteriorated. Dragon Age II and Mass Effect 3 were roundly criticized and were, again, in every respect worse than the games that went before them. And since EA and Activision dominate the gaming industry, the end result is no new quality games.

So how do we get around this and get to a point where new gaming studios can flourish? First and foremost, game makers, when you have a successful game that is roundly adored, DON'T SELL YOURSELF TO EA OR ACTIVISION! I put that in caps to stress how important that is. Follow the lead of Bethesda, just keep on trucking and making quality games. Elder Scrolls: Skyrim was such a huge hit that people are still playing it religiously years after it was released. The fear here is that even Bethesda is somewhat susceptible to the money game, after all they did license their Elder Scrolls IP to another company to make an MMO (I have no idea if the MMO is any good because I hate MMOs so haven't even so much as read a review of it). Second, have some faith in the IP you are making. You do not need to sell out to these companies to take advantage of their huge marketing infrastructure. If you are making a good game, people will find out about it and buy it thanks to the internet. And lastly, you do not need to keep making the same cookie cutter games to generate sales. Not every game is going to be Call of Duty, and more over, as creative people, you should aspire to better. Innovate with new and novel ways of telling a story. Invest in quality writing. I can't tell you how important a good plot and strong characters are in a game. If you create a world with a compelling story and good characters, you may well be surprised by how many people will be willing to pay you money to explore it.

I love video games. I have spent a large portion of my life playing them. It pains me to see where the industry as a whole is today. The once proud dynasties from Japan now an afterthought, most new IP being sequels or first person shooters, the new hardware coming out without any compelling launch titles... It's a sad state of affairs. I can't tell you how disappointed I have been watching it happen. Video games for me were escapist fantasy, interactive combinations of books and movies where I was the hero. They told me stories and created worlds that I had never seen or heard of before. They sparked my imagination in myriad ways. Gaming can be this again, but it is going to take some help from you, the industry that makes them. Because otherwise, kids are going to start playing outside again, and we can't have that.

Crimean Crime Drama

Take some time to review the BBC time line on the crisis in the Crimea (Here). It is interesting to see how the crisis progressed from general protests, after the President threw away a deal with Europe and its Western allies, to a near civil war condition. After the events in the Arab spring, you would think that world leaders would understand that persecuting and killing protestors is a good way to escalate a political protest into a government destabilizing crisis. Still, once President (now ex-President) Yanukovych got anti-protesting laws on the books and used them to persecute the protestors, the whole country quickly descended into chaos. Compare that with the situation in Thailand where continued demonstrations have not escalated (yet) to civil war, and you can see that the glaring difference is that the government/military of Thailand has not turned its guns on its populace. Here is a timeline in which the current crisis appears at the end of the article (Here).

What is strikingly different in the Crimean situation than anything that has gone on either in the Arab spring or any of the Asian disputes is that a large neighbor with regional ties and a large ethnic ex-pat population stepped in and further escalated the situation. Russia surprised the world by massing its troops at the border and then seizing the Crimean peninsula and some of the eastern most portions of the Ukraine leading to it. It's excuse for doing so, other than the above mentioned large ex-pat population, is that it has a large military base on the peninsula and agreements with the former Ukrainian government that allows it to protect its interests in the area. In the modern era of diplomacy, the West was caught completely off guard by what is a pre-world war era style annexation of territory. More over, Russia was able to do this without alerting Western intelligence agencies to its intentions, rattling the already shaky foundation of modern intelligence work. Undoubtedly Russia used much of the information that Snowden gave them access to, in exchange for virtual asylum in Russia, to avoid detection from electronic surveillance. This has set off a scramble in the intelligence community to improve intelligence gathering capabilities in this region. NATO has gone so far as to warn other former soviet block countries with breakaway or restive populations of further land grabs by Russia.

The future of the Crimea is uncertain. Western countries have assessed various sanctions on Russia and Russian companies and today agreed to shut Russia out of the Group of 8 by only meeting now as the Group of 7. These actions make sense, in that no one is looking for a military confrontation, but they don't want a repeat of what happened in Georgia either, where Russia was able to take a large chunk of Georgian territory with little to no repercussions. So they are targeting the weak leg of the new Russia, its economy. The results of these sanctions have already been felt, with Russian securities markets losing value and the ruble losing a large chunk of its value versus Western currencies. Still, it is not clear whether this will be a significant enough harm to Putin and his allies to halt further aggressive action. Likely we will not find out until Russia makes its next move.

The open question then is whether Western effort will lead to a conciliatory Russia that halts its expansionist policies, or if it instead will embolden Russia to grab even more territory, or move against other ex-soviet block countries. Or worse, will it embolden China, which itself has been rattling the saber at its neighbors over control of a variety of geographic regions and the resource rich South China Sea? The worst outcome may well be if both Russia and China form an alliance and start seizing more territory in concert. That could well result in world war three.

The Failure of Stimulus Spending in a Global Economy

One of the big questions in economics since the great recession began has been whether stimulus spending has been an effective driver of growth for the United States. On one side of the debate you have Keynesian economists. They believe that without the intervention of the government into the economy during the great recession, and the extraordinary monetary easing since, that we would be in a much worse situation than we are now. They point to the continued failure to grow in European markets undergoing austerity budget cuts as proof of concept. Their argument is, when the broader market contracts its spending, it is the government's job to expand spending to keep people employed and return the country to fiscal solvency. On the other side of the argument, economic conservatives and Austrian economists say that government spending comes at the expense of the broader economy and that government economic interventions create economic miss-allocation which lead to future economic contractions (which they view as market corrections). They point to the continued failure of alternative fuels to become economically viable, despite the large amount of government support they receive, as proof that government intervention is a waste of money and a net loss to the economy.

Recently this debate has heated up as the Federal Reserve has begun tapering its quantitative easing program. Quantitative easing is the program by which the Federal Reserve is intervening in capital markets and buying assets to prop up prices and increase liquidity (i.e. the money supply). The belief is that this, coupled with keeping the federal interbank lending rate at near zero, will flood the broader economy with money which will lead to more hiring and more production. The debate has heated up as a result of what is actually occurring as the Fed is reducing its asset buying program. If you believe that quantitative easing supports the domestic economy, then you would imagine that tapering it, reducing these funds, would cause the domestic economy to slow down. What is actually happening though is that it is the developing world that has seen their economies decline as a result of the taper. Here is a good short summary of this by The Economist.

The reason that the developing world is being hit so hard should not be that big a surprise if you think about it. The companies that are best positioned to take advantage of Fed policies are financial companies. They borrow from the Fed, own large quantities of assets to sell it on the open market, they are constantly seeking to leverage their holdings for greater returns, and are always searching for greater yield. Recently, the economies with the highest growth rates and the highest returns on investment have been in the developing world. Since most of these investment companies invest internationally, it makes sense for them to look internationally to make the most money for their investors and stock holders. This is only a problem if you are the government extending them virtually free money in order to boost your domestic economy. The implication here is that in a global economy, traditional liquidity measures and even more radical quantitative easing, are not an effective way to stimulate the domestic economy. This also would go a long way towards explaining why hiring has not picked up, and the economy has grown at record low levels for a recovery, despite record levels of government support.

People Who Are Offended

I have noted with much disgust how frequently people get offended by just about anything. There seems to be an ultra politically correct movement, especially in academia, that tries to censor peoples' speech and writing by claiming that anything they disagree with is offensive. The root of this movement seems to be that colleges, once the bastion of the rich cultural elite, have opened up their doors to the general populace. This is undoubtedly a good thing, as an educated populace tends to be a more affluent and happy populace. But because college used to be a place for the rich to rub elbows during their formative years, colleges are uniquely sensitive to concerns of one group dominating and intimidating another. Because colleges want to have a diverse student population, they try to censor speech and behavior in the name of inclusiveness.

The problem here is that I live in a country (the USA) where freedom of speech is highly valued. So much so that we enshrined it in the first amendment to our constitution. More over, academic institutions are nominally dedicated to the craft of educating their students in a variety of subjects and preparing them to go out into the real world and succeed in whatever endeavor they choose to pursue. The real world is not academia, and with the exception of certain harassing behavior which our laws protect people from, it does not shelter people from views they don't like. Being offended is irrelevant unless the speech or action also offends the law. And yet our academic institutions continue to coddle this anti-social behavior within their student bodies. Inclusiveness is not irreconcilable with free speech, and academic institutions would do well to educate their students about this.

A good example of this is a recent kerfuffle at Wellesley College over a statue of a sleep walking man in his underwear. Link. Within hours of its installation there was a petition circulating to have it removed. The petition claimed that the statue had: "become a source of apprehension, fear, and triggering thoughts regarding sexual assault for many members of our campus community." The aim of this is obvious, to suppress the artistic speech embodied by the statue in the name of those who it offends. And while I agree that the statue is creepy looking, to start making allusions to sexual assault seems a little far fetched. More over, the complaints betray how thin skinned the community at Wellesley is. How are these people going to function in the real world if a statue makes them fear assault? Not well.

If colleges are going to remain bastions of learning and productive debate, students are going to have to be confronted with views they do not agree with, argued passionately by people who do. To silence the voices of dissent so that there is no real dialogue or debate is to do a disservice to the student population and to tacitly endorse censorship. It robs students of the chance to participate in a constructive debate, it robs them of the ability to exercise their critical thinking skills and develop coping mechanisms that they will need to function in a professional environment.

Censorship, The Ugliness of Ignorance

I'm surprised I have not addressed this before, but I am not a big fan of censorship. The reason I am not a big fan of censorship is that I am not a fan of ignorance; also, willful ignorance is a huge pet peeve of mine. Throughout history the value of knowledge and insight has been shown time and again. Whether it is knowledge gained in school, practical knowledge gained in life, or professional expertise gained through years of hard work, knowledge has enriched human life. So much so that it is too broad a category to go into in depth in a limited forum like a blog. Censorship, on the other hand, is keeping people ignorant of certain knowledge. It can be as trite and pointless as editing out curse words from movies so that they can be shown on TV, to as pernicious as banning or burning books to ensure societal conformity. In the end, it is an attempt by the powers that be to influence the populace by denying them access particular pieces of knowledge.

Censorship has a long history in public discourse and political theory. Going as far back as Plato's Republic, it has been argued that governments should take active steps to limit their citizens' knowledge of certain things in order to promote a more harmonious existence. In the Republic this was left to the ruling oligarchy, which was populated by philosophers, who Plato believed were best capable of determining what was best for the populace. In the modern era governments across the world, and China in particular, are using internet firewalls, the ability to take down web sites and block IP addresses to limit their population's access to knowledge. Practically speaking, what this does is allow ruling regimes to limit access to news and political discourse that would threaten the current regime. In the US we mostly limit censorship to banning certain "curse" words and sexual content from public broadcast on network television. However, in Europe this has taken the form of banning certain far right political parties in Greece, or providing people easy access to civil law suits for public statements "defaming, slandering or libeling" other people in England.

So what arguments can be made in favor of censorship? The easiest are arguments promoting censorship of things like child pornography and snuff films. Both child pornography and snuff films are created by victimizing someone in a criminal way in order to produce the offensive material. Because it is created by harming others, the argument goes, the government should censor and destroy all such materials it comes across to prevent future victimizations. And it is true that child rape and murder, regardless of whether either is filmed or not, are terrible crimes against other human beings. And it is absolutely right for government to criminalize child rape and murder, just as it is right for government to criminalize most acts that harm other people. But does it necessarily follow that we should then ban the derivative works (i.e. the portrayal of such acts)?

To answer this, let's look at a harder ethical quandary. Is it right for a government to censor political speech in order to protect the ruling regime? China certainly believes that it is, and it is very active in monitoring and censoring public speech on the net and in print. The argument for such censorship is that disrupting the government creates political instability. Political instability leads to protests and frequently violent confrontations between pro and anti government forces. As we saw during the Arab spring, while it is possible to have non-violent regime change, it is much more frequent for these confrontations to become violent. Such violence is invariably harmful to the populace as a whole. Thus, censoring disruptive elements is in everyone's best interest. What are the counter arguments to this? That censoring political speech allows the powers that be to stay in power and prevents political change. In the extreme, such as in North Korea, Soviet Russia or East Germany, this lead to societal decay, a breakdown of basic social structures and the suffering of the populace.

The problem I have with both the easy arguments and the hard arguments is that, in the end, the appeal is to social stability and the health of the general populace. In order to get to the point where the censored material poses a threat to the populace, you invariably are relying on actions that are already criminal without having to rely on censorship (i.e. violent acts against fellow members of society). Take the censorship of political speech to promote social stability argument. The action that actually harms society is the violent confrontation between protestors and the government. Similarly, with snuff films, the action that is harming the populace is the murder of one of its members. You can criminalize the action without limiting the knowledge or portrayal of it in any way. In other words, the offense is the action, not its portrayal.

So why is this distinction between  harmful criminal action and the censorship of its portrayal so important? Art and political discourse. When you censor the portrayal of things you object to, you prevent artistic and political discourse on the subject. It is this discourse through which we make progress as a society. In America, and in most democratic societies, political and artistic discourse serves to shape the public's opinion on important issues. We make progress as a society through such discussions. The USA would have had trouble emerging from its colonial past if the founding fathers were unable to get together and discuss politics. Moreover, the horrors of war in the ancient world would no longer be known if the societies of the time had prevented the portrayal of it in paintings and books. By censoring knowledge you are limiting this discourse and thus limiting the intellectual development of society.

To conclude, I don't like censorship because I believe it limits political and artistic discourse. And while the goal of protecting society from harm is laudable, I believe it is possible to accomplish this goal without harming positive discourse about it. This can be accomplished by criminalizing the harmful actions and rigorously enforcing those laws. You don't need to prevent the painter from painting Rape of the  Sabine Women to enforce the belief that rape (or in this case, abduction and rape) is a horrible criminal action that harms society. In fact, through the artistic portrayal, the horror of this moment in History is portrayed for all to see.

Thoughts on Christmas Eve

2013 is coming to an end and it is Christmas eve as I write this. I find myself pondering Christmases and New Years past and thinking about the many to come. While I did not remark on this yet in the blog, I passed the 1 year anniversary of this blog's existence a month or two ago. I started the blog as a way to discuss things that were on my mind and were not really appropriate for other forms of social media for reasons of length and complexity. 140 character limits and places to post pictures of pets and babies seemed to me to be uniquely poor places for political, philosophical and economic discussions. So now I have an anonymous way to put my opinions about things out into the void and see if they resonate with anybody (if you are curious, the gun control and the why teachers matters posts are the most popular by page views). And for those of you who have read anything I have written on this blog, thank you.

Christmas, as I get older, increasingly is a time for me to reflect on the holidays of my youth. It is hard for the current holiday season to compare to my memories of Christmases past. You always view such memories with rose tinted glasses to begin with and it is hard for holidays in an apartment to have the same luster as holidays in your childhood home. It is also hard to have the true spirit of giving when you have spent a year unemployed. And while yes, being unemployed has allowed me to indulge my creative urges by writing for this blog, it doesn't help the bank account. And a small bank account can only buy so many presents and still pay the bills. Still, despite all the time I have on my hands, I have been unable for reasons outside of my control to go home for Christmas. I can't help but feel my holidays are diminished as a result.

New Years is a time for people to celebrate the passing of the year and make resolutions for the coming year. However, long ago I resolved to not make any resolutions; and I have kept this promise, more or less, every year since then. This doesn't stop me from having goals, just that these goals are not New Years related. As such, I will not burden this space with my petty wants and desires. Besides, New Years is as much about partying with friends and family as it is about resolving to do things differently in the future. So instead I will simply say this, I hope you all have the chance this holiday season to go out and have fun with friends and family. Friends and family are what make life worth living. When people say money can't buy happiness, to me at least this is what they mean. I wish you all find happiness in the new year.

Merry Christmas, Happy Holidays and Happy New Year!