The launch of Sputnik in 1957 led to a major reform in US mathematics and science education. Motivated by that fear, and aided by massive immigration of well-educated people from Britain and elsewhere, we led the world in science and technology until the mid-1970's.
There has been a gradual and unremitting decline ever since. Many fixes have been proposed, and each has worked, in its own way.
Administrators and pundits said that the answer was more parental involvement. We had band and athletic boosters, the PTA, bake sales and the like. Middle-class parents did the homework for their children. In return for this work, they expected rewards, which fueled grade inflation.
Sociologists told us that teachers needed to be less authoritarian, and more nurturing. Students are now friendly with them, so much so that several hundred have been arrested in the past few years for sleeping and partying with them.
Psychologists assured us that the answer was to enhance self-esteem. In a recent study of mathematics achievement, the top 10% of Americans ranked at the 50% mark for South Koreans. However, the Americans rated their own performance as A/B, while the South Koreans rated themselves as C.
Teachers told us that increased pay was the answer. In many local districts, the pay and benefits for teachers exceeds that of college professors.
Education professors told us that the answer was to change teaching methods and curricula. Future teachers now take far more education credits than in the subjects that they will teach, and the teaching has changed so much and so often that we can't even compare student performance with a few years ago.
Politicians tell us that the answer is to reward 'good' teachers, and punish 'bad' ones. This had led to even more grade inflation, and encourages many to either cheat, or leave the profession entirely.
Saturday, March 14, 2009
Friday, March 13, 2009
Dysfunctional Nation?
Of the industrialized nations, the USA has some of the worst records when it comes to divorce, teen pregnancy, std infections, drug abuse, alcoholism, literacy, incarceration, violent crime, suicide, educational achievement, child mortality and life expectancy.
Our belief in free market capitalism led us to pour money into these problems, including prisons and the 'War on Drugs (TM)'. Per capita spending on education and healthcare is close to twice that of many other countries.
This investment has given us some of the highest paid teachers and doctors in the world, a bloated and inefficient managerial class, and legions of psychologists and lawyers to take care of the unhappiness and problems that result.
These problems are not new. Mark Twain wrote about the effects of over-nurturing parents in the 1870's, and Robert Heinlein discussed teen delinquency and bad mathematics education in the 1960's.
I used to visit my grandmother in Wiesbaden in the 1960's. She lived next to a lovely park. From four stories up and 1/2-mile away, we could tell which familes were US service personnel from the airbase. The German and African-American children stayed with their parents and behaved themselves. The other American children 'expressed themselves' by running into forbidden areas and making lots of noise.
That we have these problems in the poor urban areas is no surprise. That they occur as well in the suburbs is due, in my uneducated opinion, to an excess of wealth and free time, leading to a lack of competitive drive.
Our belief in free market capitalism led us to pour money into these problems, including prisons and the 'War on Drugs (TM)'. Per capita spending on education and healthcare is close to twice that of many other countries.
This investment has given us some of the highest paid teachers and doctors in the world, a bloated and inefficient managerial class, and legions of psychologists and lawyers to take care of the unhappiness and problems that result.
These problems are not new. Mark Twain wrote about the effects of over-nurturing parents in the 1870's, and Robert Heinlein discussed teen delinquency and bad mathematics education in the 1960's.
I used to visit my grandmother in Wiesbaden in the 1960's. She lived next to a lovely park. From four stories up and 1/2-mile away, we could tell which familes were US service personnel from the airbase. The German and African-American children stayed with their parents and behaved themselves. The other American children 'expressed themselves' by running into forbidden areas and making lots of noise.
That we have these problems in the poor urban areas is no surprise. That they occur as well in the suburbs is due, in my uneducated opinion, to an excess of wealth and free time, leading to a lack of competitive drive.
Wednesday, March 11, 2009
Consequences
Some rules for the parasitic management class:
Rule #1: Avoid decisions whose consequences can be traced back to you.
Rule #2: If you have to violate Rule #1, try to make decisions whose outcome cannot be classified as success or failure.
Rule #3: If you have to violate Rule #2, always make the choice which has failed somewhere else. If it succeeds for you, then you are a genius; if it fails, there is no blame.
This is why:
We encourage parents to be 'friends' to their children, then wonder why so many are self-centred lazy brats.
We put more and more responsibility for our children on teachers, but remove the authority to discipline them.
We put more emphasis on how people 'feel' about things than whether they contribute to society.
Companies lay off production workers to 'save money'.
We are measured by almost anything, except real productivity.
We are more concerned about 'effort' and 'hard work' than achievement.
Rule #1: Avoid decisions whose consequences can be traced back to you.
Rule #2: If you have to violate Rule #1, try to make decisions whose outcome cannot be classified as success or failure.
Rule #3: If you have to violate Rule #2, always make the choice which has failed somewhere else. If it succeeds for you, then you are a genius; if it fails, there is no blame.
This is why:
We encourage parents to be 'friends' to their children, then wonder why so many are self-centred lazy brats.
We put more and more responsibility for our children on teachers, but remove the authority to discipline them.
We put more emphasis on how people 'feel' about things than whether they contribute to society.
Companies lay off production workers to 'save money'.
We are measured by almost anything, except real productivity.
We are more concerned about 'effort' and 'hard work' than achievement.
Tuesday, March 10, 2009
Group-think and disaster
I've just been watching a Horizon programme, "How to Survive a Disaster". One part is about a 1960s experiment, where people were invited into a room and given paperwork to fill in, and then the experimenters started to force smoke under the door.
If alone, 75% of the guinea pigs left soon to report a possible fire; but if surrounded by actors who pretended nothing was wrong, only 10% raised the alarm, even though the smoke eventually got so bad that they could hardly see anything.
Rings bells for me.
By the way, I won't be surprised if the Dow rises above 9,000 points at some point, before the smoke gets too thick.
I see gold's under $900...
If alone, 75% of the guinea pigs left soon to report a possible fire; but if surrounded by actors who pretended nothing was wrong, only 10% raised the alarm, even though the smoke eventually got so bad that they could hardly see anything.
Rings bells for me.
By the way, I won't be surprised if the Dow rises above 9,000 points at some point, before the smoke gets too thick.
I see gold's under $900...
Monday, March 09, 2009
Could the City of London be facing long-term decline?
The UK has an unfortunate reputation for clasping vipers to its bosom, from Karl Marx to modern religious terrorists. But some might say the same goes for its financial sector - the lack of transparency here, of which I've complained more than once, allows problems to develop unchecked, as Brad Setser comments:
Had there been an international “early warning” system that was on the ball – and had the UK been willing to collect the data on flows through the UK in the face of inevitable complaints that such efforts would drive business abroad – it might well have picked up on some of these flows as a sign of brewing trouble in global financial markets.
At one of my old College's Gaudies (class reunion) a few years ago, a City financier complacently and cynically remarked that the UK was always going to have a strong financial community, since it has hundreds of years of experience in "shaving" its customers in subtle ways.
I don't think the Brits have a monopoly of greed, dishonesty and duplicity, and we see now the rotten fruits of their technical expertise. The UK National Defence Association may imagine we can concentrate on financial services and turn the rest of the country into a living museum; I say that just as we need to wean ourselves off coal and oil, so we must reduce our dependence on the old swindlers; no more fossil fuels, no more fossil fools.
Had there been an international “early warning” system that was on the ball – and had the UK been willing to collect the data on flows through the UK in the face of inevitable complaints that such efforts would drive business abroad – it might well have picked up on some of these flows as a sign of brewing trouble in global financial markets.
At one of my old College's Gaudies (class reunion) a few years ago, a City financier complacently and cynically remarked that the UK was always going to have a strong financial community, since it has hundreds of years of experience in "shaving" its customers in subtle ways.
I don't think the Brits have a monopoly of greed, dishonesty and duplicity, and we see now the rotten fruits of their technical expertise. The UK National Defence Association may imagine we can concentrate on financial services and turn the rest of the country into a living museum; I say that just as we need to wean ourselves off coal and oil, so we must reduce our dependence on the old swindlers; no more fossil fuels, no more fossil fools.
Sunday, March 08, 2009
Marc Faber: inflation, war, gold
It's not just about money. There will, thinks Faber, be graver consequences. Here.
Also, here, from which the following extract:
The best bet for investors may be to buy a farm and escape from the cities, as a prolonged recession could lead to war, as the Great Depression did, said the Swiss national, who now lives in Thailand.
“Buy a farm and let your girlfriend work on the farm,” he said, to the applause of investors. “If the global economy doesn’t recover, usually people go to war.”
For pictures of his elegant Chiang Mai home, possibly a clue to his personality, see here - and for local Thai comment on him, see here.
Also, here, from which the following extract:
The best bet for investors may be to buy a farm and escape from the cities, as a prolonged recession could lead to war, as the Great Depression did, said the Swiss national, who now lives in Thailand.
“Buy a farm and let your girlfriend work on the farm,” he said, to the applause of investors. “If the global economy doesn’t recover, usually people go to war.”
For pictures of his elegant Chiang Mai home, possibly a clue to his personality, see here - and for local Thai comment on him, see here.
Friday, March 06, 2009
Is now a good time to invest?
I've just been asked by a client whether he should switch from cash to equities. Here's my view, and it may explain why I haven't earned much from investments over the last few years:
It is not possible to predict the market with any accuracy, but I think I have done well in foretelling the current state of affairs as early as the late 1990s. The market has dropped to half its 1999 peak (again, as it did in 2003), but that is not to say we are now at the bottom. Some (and I am moderately persuaded to this view) think that there may be a "bear market rally" soon-ish - maybe a rise that recovers perhaps 50% of the losses so far - but it is perfectly possible that the underlying trend is still downwards, so there may then be a horrid lurch towards - what? Maybe, ultimately, 4,000 on the Dow and 2,000 on the FTSE.
We are in the middle of an exciting ride and I fear that entering the market at this stage may still be for the adventurous and nimble. Yes, had one invested in mid-2003 and got out, say, late 2007, it would have turned a nice profit; but much depends on the entry and exit points. So as ever, attitude to risk and corresponding watchfulness are key factors.
There is also the question of what asset class to choose. I think domestic and commercial property are still overvalued, relative to income; because of fears regarding other assets, and also because of central bank investment ("quantitative easing" etc) government bonds are very highly priced, which is why the yields are so low (and if interest rates rise, bond values could then drop sharply); equities are depressed, but as dividends decline in very testing economic conditions, they may ultimately be depressed still further. Commodities (e.g. gold, silver, oil) are the subject of some speculation, but owing to shortage of borrowed money to invest with, not quite so much institutional speculation as formerly; even so, gold (for instance) is a bit above its long-term inflation-adjusted average, as far as I can tell - though if inflation takes off, the price could indeed escalate.
And then there is the question of currencies. The pound has lost heavily against the dollar; but some say the dollar may catch us up again. The Euro may also not stay as strong as it is now - several countries within the Eurozone are suffering economic problems and are hampered by the common currency; I have even read speculation that the Euro system may fall apart within a decade, or some states may secede from it.
In short, I still urge caution, and if you do decide to get in, be prepared to move quickly if the market should turn. Meantime, there are relatively safe options such as National Savings Certificates, including the index-linked ones that will at least keep the value of your savings roughly in line with RPI...
It is not possible to predict the market with any accuracy, but I think I have done well in foretelling the current state of affairs as early as the late 1990s. The market has dropped to half its 1999 peak (again, as it did in 2003), but that is not to say we are now at the bottom. Some (and I am moderately persuaded to this view) think that there may be a "bear market rally" soon-ish - maybe a rise that recovers perhaps 50% of the losses so far - but it is perfectly possible that the underlying trend is still downwards, so there may then be a horrid lurch towards - what? Maybe, ultimately, 4,000 on the Dow and 2,000 on the FTSE.
We are in the middle of an exciting ride and I fear that entering the market at this stage may still be for the adventurous and nimble. Yes, had one invested in mid-2003 and got out, say, late 2007, it would have turned a nice profit; but much depends on the entry and exit points. So as ever, attitude to risk and corresponding watchfulness are key factors.
There is also the question of what asset class to choose. I think domestic and commercial property are still overvalued, relative to income; because of fears regarding other assets, and also because of central bank investment ("quantitative easing" etc) government bonds are very highly priced, which is why the yields are so low (and if interest rates rise, bond values could then drop sharply); equities are depressed, but as dividends decline in very testing economic conditions, they may ultimately be depressed still further. Commodities (e.g. gold, silver, oil) are the subject of some speculation, but owing to shortage of borrowed money to invest with, not quite so much institutional speculation as formerly; even so, gold (for instance) is a bit above its long-term inflation-adjusted average, as far as I can tell - though if inflation takes off, the price could indeed escalate.
And then there is the question of currencies. The pound has lost heavily against the dollar; but some say the dollar may catch us up again. The Euro may also not stay as strong as it is now - several countries within the Eurozone are suffering economic problems and are hampered by the common currency; I have even read speculation that the Euro system may fall apart within a decade, or some states may secede from it.
In short, I still urge caution, and if you do decide to get in, be prepared to move quickly if the market should turn. Meantime, there are relatively safe options such as National Savings Certificates, including the index-linked ones that will at least keep the value of your savings roughly in line with RPI...
How central market intervention increases inequality
This extract (highlight mine) from Robert P. Murphy's essay on the Mises Institute website explains some of the process whereby hard times help the rich get richer and the poor, poorer:
If the Fed doubles the money supply, in the long run, that will roughly double the prices of all goods and services. But if the Fed restricts the injection of new money into only the hands of a few privileged recipients, those people will be at a fantastic (albeit temporary) advantage relative to everyone else in the economy. They will get their hands on the billions in new dollars, while prices still reflect the old reality. The new money will then flow from sector to sector, pushing up prices as it ripples throughout the economy. But the last people in line receiving the new influx of twenty- and hundred-dollar bills will be much poorer than others, once prices settle down. Their paycheck was the last to rise, while they watched helplessly as more and more prices began doubling.
If the Fed doubles the money supply, in the long run, that will roughly double the prices of all goods and services. But if the Fed restricts the injection of new money into only the hands of a few privileged recipients, those people will be at a fantastic (albeit temporary) advantage relative to everyone else in the economy. They will get their hands on the billions in new dollars, while prices still reflect the old reality. The new money will then flow from sector to sector, pushing up prices as it ripples throughout the economy. But the last people in line receiving the new influx of twenty- and hundred-dollar bills will be much poorer than others, once prices settle down. Their paycheck was the last to rise, while they watched helplessly as more and more prices began doubling.
Thursday, March 05, 2009
Apocalypse now - Denninger
... those indicators are painting a picture of the Apocalypse that I simply can't believe, and they're showing it as an imminent event - like perhaps today imminent...
... says Denninger, but I still don't believe it. But maybe that's just me.
... says Denninger, but I still don't believe it. But maybe that's just me.
Wake Up!
Jim Mellon and Al Chalabi, authors of "Wake up!" , have emailed their latest interesting and useful newsletter. It concludes:
Our strongest recommendations are as follows:
• Prepare for rising inflation – continue to buy gold;
• Sell government bonds;
• Look for cheaply valued strong stocks – BAE and BP in the UK are two examples, and in the US we like Pfizer.
• Deploy cash wisely – our current favourites are, believe it or not, the British pound; the yen is weakening, but at 100 yen to the dollar it is a buy again.
• Avoid the US dollar and the Euro.
Like that bit about the pound - I was scratching around looking for something to save what's left of the savings.
Our strongest recommendations are as follows:
• Prepare for rising inflation – continue to buy gold;
• Sell government bonds;
• Look for cheaply valued strong stocks – BAE and BP in the UK are two examples, and in the US we like Pfizer.
• Deploy cash wisely – our current favourites are, believe it or not, the British pound; the yen is weakening, but at 100 yen to the dollar it is a buy again.
• Avoid the US dollar and the Euro.
Like that bit about the pound - I was scratching around looking for something to save what's left of the savings.
Dow 4,500 within 12 months - Cederholm
Fred Cederholm gives a Dow target close to the one I'm thinking, though I think we may have a reality-denying rally before then, so I don't necessarily agree with his timescale.
Wednesday, March 04, 2009
FDIC could fail - update
I've passed on the bad news about underfunding of the FDIC before - latterly here - and now it come to the fore again in a post from Karl Denninger.
UPDATE (7 March 2009): Jesse has a piece on it now, too. But "deposits would remain fully backed by the government,", says his source - not much comfort for the taxpayer, then.
UPDATE (7 March 2009): Jesse has a piece on it now, too. But "deposits would remain fully backed by the government,", says his source - not much comfort for the taxpayer, then.
Webcam: gold vault at the Federal Reserve
Live picture (updated every 30 sec)According to GATA, they ain't got it no more, nor they don't want it back, neither. (htp: Jesse)
What happens when everyone knows?
Tuesday, March 03, 2009
Do buy, Dubai
P.S. Did you think I was joking about Dubai as a world leading financial centre? Where the footballers lead...
It was said years ago that 90% of £20 notes in London bore traces of cocaine - because footballers have 90% of the notes. Sadly for some footballers and Old Etonians, possession of cocaine in the UAE is punishable by death. Nevertheless, lovely weather and no crowded, litter-strewn South East England commuter trains.
Could you stand Paradise? Or are you hooked on that museum of past industrial glories, the UK?
It was said years ago that 90% of £20 notes in London bore traces of cocaine - because footballers have 90% of the notes. Sadly for some footballers and Old Etonians, possession of cocaine in the UAE is punishable by death. Nevertheless, lovely weather and no crowded, litter-strewn South East England commuter trains.
Could you stand Paradise? Or are you hooked on that museum of past industrial glories, the UK?
If GE falls...
Karl Denninger notes that there is heavy betting that GE, the world's tenth largest company, will fail by summer.
Engineering Analysis
Positive feedback is a term used by scientists and engineers to describe a feedback loop process where the output of a system drives increased input to the system.
In human terms, one such example is drug addiction, where increased use leads to increased desire for the drug.
A more interesting example can be seen in the 'sudden acceleration' lawsuits against Audi some years ago. Once the cars were examined, it was determined that the drivers had been pushing on the accelerator pedal, rather than the brake. Because they were convinced that they were right, they pushed harder as they gained speed. In some cases, the drivers injured their own legs from the pressure, and bent the pedal.
The past 30 years have seen such a loop in the housing and financial sector. As house prices went up, they released fiat cash into the system, driving prices even higher. This, of course, led to the 'brilliant' idea of packaging mortgages. At some point, the profit margin became so huge that no 'real' industry could compete, which pulled even more investment capital into housing derivatives, and further crippled manufacturing.
Without a governor in place, by way of careful regulation, these crashes are inevitable. The capacity of the internet in moving money only sped things up a little.
In human terms, one such example is drug addiction, where increased use leads to increased desire for the drug.
A more interesting example can be seen in the 'sudden acceleration' lawsuits against Audi some years ago. Once the cars were examined, it was determined that the drivers had been pushing on the accelerator pedal, rather than the brake. Because they were convinced that they were right, they pushed harder as they gained speed. In some cases, the drivers injured their own legs from the pressure, and bent the pedal.
The past 30 years have seen such a loop in the housing and financial sector. As house prices went up, they released fiat cash into the system, driving prices even higher. This, of course, led to the 'brilliant' idea of packaging mortgages. At some point, the profit margin became so huge that no 'real' industry could compete, which pulled even more investment capital into housing derivatives, and further crippled manufacturing.
Without a governor in place, by way of careful regulation, these crashes are inevitable. The capacity of the internet in moving money only sped things up a little.
Signs of cash hoarding?
The Mogambo Guru relays a statistic: the stock of US notes and coins has increased by $77 billion in 12 months.Some of this may reflect a switch away from use of credit cards and accounts; but I wonder how much is disappearing into newly-bought floor safes and Heinz bean tin hideaways?
UK Government adviser loses its mind
“Only high-quality professional services, financial services and the City of London have any real value and they should be supported at all costs. The rest of the country can be turned over to tourism.”
Coming up next: new financial centre in Dubai forces closure of City of London.
This... or this?
Monday, March 02, 2009
Dow 6,000 this year, FTSE 3,000 - Nadeem Walayat
Sez he, here. I'm still guessing Dow (inflation-adjusted) 4,000 sometime in the next few years, and it seems Jim Kunstler agrees ("I myself called for Dow 4000 two years ago") In which case, maybe FTSE 2,000 at some point, too.
Sunday, March 01, 2009
Harriet Harman declares the end of the rule of law in the UK
Discussing the pension rights of ex-RBS boss Sir Fred Goodwin, Harriet Harman, Leader of the House of Commons, said today:
"The Prime Minister has said it is not acceptable and therefore it will not be accepted. It might be enforceable in a court of law this contract but it's not enforceable in the court of public opinion and that's where the Government steps in."
I propose a plebiscite to dispossess Harriet Harman of all her worldly goods, and exile her permanently from this country. A "yes" vote will have no legal force, but clearly that does not matter, provided it is supported by public opinion.
"The Prime Minister has said it is not acceptable and therefore it will not be accepted. It might be enforceable in a court of law this contract but it's not enforceable in the court of public opinion and that's where the Government steps in."
I propose a plebiscite to dispossess Harriet Harman of all her worldly goods, and exile her permanently from this country. A "yes" vote will have no legal force, but clearly that does not matter, provided it is supported by public opinion.
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