Aging populations are set to make a mess of the world's public finances in the decades ahead, and could cause government debt to hit speculative grades everywhere except Denmark, Austria and Canada, Standard & Poor's Corp. says.
The study looked at the impact of current trends in state pension and health care spending on creditworthiness of 32 industrialized nations. It found that, without changes in their fiscal stance or policies, most of the countries' ratings would sink to speculative grade by 2050."
The evidence falls into two categories. First, as the skeptics warned, when hordes of pundits are jostling for the limelight, many are tempted to claim that they know more than they do. Boom and doom pundits are the most reliable over-claimers.
Between 1985 and 2005, boomsters made 10-year forecasts that exaggerated the chances of big positive changes in both financial markets (e.g., a Dow Jones Industrial Average of 36,000) and world politics (e.g., tranquility in the Middle East and dynamic growth in sub-Saharan Africa). They assigned probabilities of 65% to rosy scenarios that materialized only 15% of the time.
In the same period, doomsters performed even more poorly, exaggerating the chances of negative changes in all the same places where boomsters accentuated the positive, plus several more (I still await the impending disintegration of Canada, Nigeria, India, Indonesia, South Africa, Belgium, and Sudan). They assigned probabilities of 70% to bleak scenarios that materialized only 12% of the time.
Second, again as the skeptics warned, over-claimers rarely pay penalties for being wrong. Indeed, the media shower lavish attention on over-claimers while neglecting their humbler colleagues.
We can see this process in sharp relief when, following the philosopher Sir Isaiah Berlin, we classify experts as “hedgehogs” or “foxes.” Hedgehogs are big-idea thinkers in love with grand theories: libertarianism, Marxism, environmentalism, etc. Their self-confidence can be infectious. They know how to stoke momentum in an argument by multiplying reasons why they are right and others are wrong.
That wins them media acclaim. But they don’t know when to slam the mental brakes by making concessions to other points of view. They take their theories too seriously. The result: hedgehogs make more mistakes, but they pile up more hits on Google.
Eclectic foxes are better at curbing their ideological enthusiasms. They are comfortable with protracted uncertainty about who is right even in bitter debates, conceding gaps in their knowledge and granting legitimacy to opposing views. They sprinkle their conversations with linguistic qualifiers that limit the reach of their arguments: ‘but,’ ‘however,’ ‘although.’
Because they avoid over-simplification, foxes make fewer mistakes. Foxes will often agree with hedgehogs up to a point, before complicating things: “Yes, my colleague is right that the Saudi monarchy is vulnerable, but remember that coups are rare and that the government commands many means of squelching opposition.”
May 20 sees the 200th anniversary of the birth of John Stuart Mill, the greatest exponent of 19th-century liberalism, whose philosophy still dominates jurisprudence in the English-speaking world. Mill was a many-faceted intellectual who wrote on all aspects of philosophy, on law and morals, on political economy, and on poetry and the arts. His home-schooling at the hands of his father, the economist and historian James Mill, was a model of rigor, causing him to read and write Greek aged 6, to master Latin aged 9, and to have acquired a thorough grounding in history and mathematics aged 10, when he began work on a history of Roman government. Mill later developed a taste for poetry, acquired a perfect knowledge of French, and, despite his agnostic upbringing, read deeply in the Bible, which he believed to be one of the two Great Books, the other being Homer.
... President Bush announced in his State of the Union address in January that he backed funding for research into producing ethanol from corn and other farm products, with the goal of making a viable fuel alternative to gasoline for automobiles. Since then, Congress has wrangled over how to implement the idea.
Critics, meanwhile, have blasted the viability of ethanol. A central argument is that corn-based ethanol, the most-common form today, is literally a waste of energy. Detractors say that it takes more fuel to make ethanol -- growing the corn, bringing it to a processing plant and converting it to fuel -- than would be saved by using it.
That criticism has received attention in articles in the Washington Post, the Louisville Courier-Journal and Cox News Service (all of which also included the pro-ethanol side). In April, Larry Kudlow said on his CNBC show, "So many experts believe it costs more energy to turn corn into ethanol-related gasoline than [is] actually produced."
Two prominent researchers are chiefly responsible for the energy-efficiency claim: Cornell University's David Pimentel and Tad Patzek of the University of California, Berkeley. In a co-written paper published last year in Natural Resources Research, Profs. Pimentel and Patzek wrote, "Ethanol production using corn grain required 29% more fossil energy than the ethanol fuel produced." By comparison, production of gasoline or diesel uses about 20% more fossil energy than the fuels produce. (For automobiles, ethanol is generally blended with gasoline in either 90-10 or 85-15 proportions, but the studies focused on the energy content of the ethanol itself.)
"Ethanol production using corn grain required 29% more fossil energy than the ethanol fuel produced."
Bylo Selhi wrote:"Ethanol production using corn grain required 29% more fossil energy than the ethanol fuel produced."
Ah, but the assumption is that one has to use corn grain in order to produce ethanol. What if you can produce ethanol from the remainder of the corn plant, i.e. what's left after you've used the grain to feed livestock? What if you can produce ethanol from other common sources of "garbage"? (But I digress...)
I consider [grain derived ethanol] to be a kind of fool’s gold that looks nice and shiny to the general public. Considering the magnitude of the subsidies as I showed in the previous essay, the industry is nowhere close to being able to compete on a level playing field. If the industry is to survive, you can count on multibillion dollar handouts – or mandates - as far as the eye can see.
This is the season for giving advice to graduates as they enter the workplace. Instead of listening to yet another recitation of the usual admonishments to "change the world," "carpe diem," or "wear sunscreen," those graduates — unless they are already trapped on the nonpaying internship hamster wheel — need to hear how to manage their paychecks.
College graduates may thank mom and dad, top left, for helping with tuition, but they still need advice on how to handle a paycheck. Small steps — packing your own lunch, for example — can make a big difference over the first 10 years of a working life.
Parents may have tried this. And many will undoubtedly send this article to their children.
But, dear graduate, before you wad this up and toss it next to the keg still sitting there from last week's party, consider this: ...
MANY of us would go to great lengths to avoid the dentist's drill. Sticking a needle with a flaming plasma tip into your mouth may not at first strike you as much of an improvement on conventional dentistry. However, the plasma needle, which is cold and painless to the touch, could be just the panacea we have been waiting for. The needle's creator, physicist Eva Stoffels-Adamowicz, who is based at the Eindhoven University of Technology in the Netherlands, says it could also be used to painlessly remove cancerous tissue...
Nitric oxide is also involved in cell messaging, so it can be used to trigger programmed cell death. Using higher-energy doses of plasma, in longer bursts, the team was able to target certain living cells and cauterise the tissue while leaving surrounding cells undamaged. "The plasma needle could be used to excise tumours or skin cancers," says Stoffels-Adamowicz. "It's surgery without cutting."...
Stoffels-Adamowicz's team are already working on a method to generate a plasma that can be sent down blood vessels via a catheter. They think that plasma therapy could one day be used to help clear blocked arteries, although it is likely to be used in dentistry much sooner.
The two economics professors — Mr. Laibson at Harvard and Mr. Gabaix at the Massachusetts Institute of Technology and Princeton — have looked at how companies hide fees and costs. They found that sophisticated consumers have somehow learned how to game the system by having enough naïve consumers around to subsidize them.
The smartest strategy, they say, is for the sophisticated consumer to choose the service with the most hidden charges and highest add-on prices, but then avoid paying those added costs. “The sophisticated consumer takes advantage of that,” Mr. Gabaix said. “The naïve pay all the fees.” ...
Companies should stop providing quarterly earnings guidance because it puts too much emphasis on short-term results and moves management away from concentrating on long-term performance, says a new report by two major U.S.-based business groups.
The report, titled "Breaking the Short-Term Cycle," was based on recommendations by a 20-member panel that included business leaders, analysts and fund managers.
The "obsession with short-term results by investors, asset management firms and corporate managers collectively leads to the unintended consequences of destroying long-term value, decreasing market efficiency, reducing investment returns, and impeding efforts to strengthen corporate governance," the report found.
It added that analysts, fund managers and shareholders should also stop demanding short-term results. "This is a two-way relationship. Investors should expect greater influence but must exhibit true ownership behaviour and generally commit to acting like owners (e.g. holding longer, trading less)," the report said. "Similarly, companies should expect longer capital commitments -- but only if they provide investors with high-quality communications and a fair voice in governance."
That daily latte habit may be draining your retirement funds. 'If you save the $5 every day you spend at Starbucks and let it compound slowly, you could have $500,000 by the time you retire,' explained Paul Farrell. Through his regular columns for MarketWatch and his nine books on personal finance and investment psychology, the Arroyo Grande resident is hoping to demystify investing with several simple strategies...
People also want instant gratification. They want to meet their needs today. They go to Starbucks and spend $5 a day on a coffee and a muffin, which adds up to $150 a month. That’s an IRA contribution. They’re members of the Starbucks retire-now club. They are enjoying their retirement now.
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