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The power of recall

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The other day, I heard the Stranglers’ Strange Little Girl for the first time in ages, prompting me to recall having an Indian takeaway in a friend’s Morris Oxford somewhere off the Clarendon Road on a sunny evening in 1982. I wonder: does this help explain why older people are more hostile to the Labour party than younger ones?

My response to that particular song was of course idiosyncratic. But it is nevertheless typical. All of us have Proustian madeleines – cues that prompt us to recall some memories. We all, I suspect, have songs which we associate with specific people and places. This is why “trigger warnings” are sometimes necessary: traumatic memories can indeed be triggered. As Daniel Levitin writes:

The brain is not like a warehouse; rather, memories are encoded in groups of neurons that, when set to proper values and configured in a particular way, will cause a memory to be retrieved and replayed in the theatre of our minds. The barrier to being able to recall everything, we might want to is not that it wasn’t ”stored” in memory, then; rather, the problem is finding the right cue to access the memory (This Is Your Brain on Music, p165)

In a new paper Jessica Wachter shows that this process colours our financial decision-making. Take for example the finding of Erin McGuire and Stefan Nagel and Ulrike Malmendier (pdf), that economic conditions in our formative years influence how much we invest in equities even decades later. From one point of view, this seems absurd: expected returns are the same for all of us. So, how can it happen? Simple. The questions “should I buy shares?” or “What is the economic outlook?” trigger particular memories. For some, these are memories of the bear market of the 70s. For slightly younger people they are memories of the 80s bull market. And these generations invest accordingly.

A similar thing, says Professor Wachter, explains why shares fell so far – in hindsight by too much – when Lehmans collapsed. This triggered memories of (reading about) the Great Depression and hence alarm.  (Luckily, though, it also reminded the Fed of the Great Depression, so it knew what not to do).

I suspect a similar process contributes to older people’s greater opposition to Labour. Remember that it is not inevitable that young people should be predominantly left-wing: in 1987, for example, more of them supported the Tories than Labour. So why are things different today?  

One reason, of course, is that older people own houses and younger ones don’t.

But it could be that different memories are involved. If you are in your mid-50s or older, talk of a left-wing Labour party cues memories of the Soviet Union and of the 1970s – and of the more salient aspects of the 70s such as strikes rather than less salient ones such as the fact that most workers got better real-terms pay rises than they’ve had recently.

Young people, however, have none of these memories. For them, talk of nationalizing the railways trigger not memories of British Rail sandwiches but of pleasant train journeys in Europe.

Of course, the 1970s were the 1970s whether you experienced them or not. But as David Hume said, actual experiences – impressions – are stronger than mere ideas.   

In one sense, all of this might be trivially obvious. In another, though, it’s not. Even though the truth should in theory be the same for all of us – in the way that future share price moves will be – we perceive it differently. This is not (just) because we are stupid or dishonest. It’s because of how memory works.  



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Economy

The Disease Cycle Turned Up – Next Peak 2022

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1918-1920 Influenza Pandemic

QUESTION: Hi Marty,
You had mentioned that it is possible that the Ebola virus becomes an issue in 2019, your model was certainly picking a big disease/war event. The Wuhan virus had not been identified at the time however given the recent acceleration of this breakout and the fact it was announced on your ECM turn date, I have a few questions please;
1. You have always been ahead of others in this space, can you please comment on how critical this may become?
2. I note that when you publish the ECM date chart, the chart from 2020 turns up, what does this line on the chart signify?
3. Does the fact that the ECM date lines up with your disease/war event amplify the outcome?
Thanks always,
David

ANSWER: It’s not that I am ahead of the curve because I possess some sort of clairvoyance. All viruses are cyclical. The flu shot is based upon what they expect will be the next strain on a cyclical pattern basis.  Scientists at each of the five main centers then gather and analyze the data together to identify new flu strains and to determine which strains of the virus are most likely to spread and cause illness in the upcoming flu season.

There is a 13-year cycle in Influenza outbreaks. The last pandemic with respect to the strain of the Influenza was 2009. The next one of those to reach a possible level of a pandemic will be in 2022. This is where the largest death toll appears to be most likely. Keep in mind that the last deadly pandemic began in 1918 but it lasted for two years into 2020. Clearly, the worst year ahead appears to be 2022.

It was the peak of the Economic Confidence Model 1981.35, which also marked the beginning of a major pandemic when the first cases of acquired immunodeficiency syndrome (AIDS) were reported in 1981. The infection with human immunodeficiency virus (HIV) grew to pandemic proportions, which resulted in an estimated 65 million infections and 25 million deaths. But this required sexual contact or a blood transfusion with infected blood. Coronaviruses, such as the common cold, the virus is spread via droplets when a person coughs or sneezes. It can also be spread when someone touches a contaminated surface such as a door handle. This is significantly different from the AIDS pandemic.

Most coronavirus infections are mild to moderate and don’t last long, and the symptoms are fatigue, dry cough, fever, and sore throat. Coronaviruses are a family of viruses that originate in animals before making the jump to humans. Seven, including the new virus, have been found in humans, with four causing only mild, common cold-like symptoms. The two which have been more dealy are the Middle East respiratory syndrome (Mers, 2012-present) and severe acute respiratory syndrome (Sars, 2002–2003). The death rate was about 2%.

There is currently no vaccine to protect against the novel coronavirus, although researchers in the US and China have already begun working on one, thanks to China’s prompt sharing of the virus’s genetic code. There are different genetic models to diseases such as this. Coronaviruses and flu viruses might appear to cause similar symptoms but they are genetically very different. The flu viruses which have a 13-year cycle incubates very rapidly so you tend to get symptoms two to three days after being infected. The coronaviruses, however, take much longer. Moreover, where the flu virus you become immune after contraction. Coronaviruses do not evolve in the same manner as the flu virus and thus our body doesn’t generate very good immunity. To complicate matters further, the coronaviruses virus, according to the Chinese officials, has already begun to mutate. This means the disease could evolve to enable it to infect many more people making vaccines even more difficult to discover.

The last deadly 1918 Spanish Influenza which killed between 50 and 100 million deaths, was an H1N1 virus which was the same virus that was also behind the 2009 swine flu outbreak. However, the 2009 outbreak killed only about 575,400 people perhaps because the survivors of the 1918-1920 pandemic became immune. The next important wave of Influenza was 1918-1929. As you can see, we collected data on everything that ever moved.

The interesting cyclical evidence in disease is the same I have discovered in the overall economy. There are six waves of intensity that always materialize. Hence, the sixth wave of influenza after the 1918-1920 event came in 1928-1929 which coincided also with the 51.6-year peak in the Economic Confidence Model – 1929.75. The epidemic of 1928-1929 was the most important since that of the more famous 1918-1920.

Diseases such as viruses are cyclical in nature. It too has a life-cycle, birth matures and dies. It is true that our model was forecasting more of a coronavirus that comes from animals rather than influenza which would be the next pandemic. Ebola virus disease is a serious, often fatal condition in humans and nonhuman primates. Ebola is one of several viral hemorrhagic fevers, caused by infection with a virus of the Filoviridae family, genus Ebolavirus. Still, this new mysterious coronavirus is not nearly as infectious as the measles virus, which can live for up to two hours in the air after an infected person coughs or sneezes. The Ebolavirus is much more deadly but it also much harder to transmit for it is largely through direct contact with an infected person’s blood or bodily fluids. Here, the question is since its transmission is more like a common cold that does not require direct contact, the question is how long can the virus survive on surfaces or in the air longer than just a few minutes. The super-bugs which are immune to antibiotics are a fungus.

My deep concern about Climate Change fraud is that this is really a covert means to further Marxist socialism with the solution being hailed are the seizure of public companies to force a reduction in CO2. I have stated many times that disease correlated to global cooling and that is FAR MORE DANGEROUS than global warming. The flu season is WINTER, not summer. The major events that devastated the population took place in 1555, 1586, 1596, 1623, 1723, and later in 1846. These are clusters of disease which takes place when the energy output of the Sun was at a minimum and the climate turned cold. The 1846 event was hot and dry. This is what we must be concerned about for we are headed into another solar minimum beginning with the turn in this ECM here January 18, 2020, turning toward global cooling which may be the lowest solar minimum in over 20o years. That means our model is also warning a decline in crops and a rise in disease. This will be also on track with the 11th intervale of a 16-year cycle due in 2022. The most devasting will be 2038. We do show that the death toll can reach 65 million- 100 million.

The World Health Organization said on Thursday that it remained “too early” to declare an international public health emergency. Our model is warning that a rise in disease should be unfolding with 2022 perhaps coming in as a very important year.



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Economy

Argentina’s “Emergency Law” Just Means More of the Same

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The so-called Economic Emergency Law announced by the new government in Argentina is simply another massive set of tariffs and burdens on the private sector to finance the bloated public expenditure in a country where confiscatory monetary and fiscal policy is the norm.

What is the major problem with the recent Economic Emergency Law? That it does not address the country’s massive monetary and fiscal imbalances. Worse, the law and in particular the decisions to raise retentions on the agricultural sector  aim to increase the confiscatory nature of Argentina’s fiscal policy.

With this emergency law, Argentina raises taxes—again, in the country with the highest tax rate in the region—and further burdens exporters by increasing the percentage of US dollar revenues that the government keeps.

The representatives of the producers in most regions have confirmed it: These are measures that lead producers and exporters to bankruptcy, since with the current levels of withholding for soybeans, corn, and wheat, profitability is already zero or negative in leased fields. In the case of oilseed, the gross margin will be negative at $105 per hectare. It’s a ruinous policy.

In reality, the so-called economic emergency plan functions as a huge set of tariffs against Argentine producers and the private sector.

The extractive and confiscatory vision for the economy, which has persisted through different Argentine governments for several decades, has gotten even worse.

The Argentine government begins with an error of analysis. They think that putting greater retentions on exporters will improve Argentina’s battered reserves, which is simply false, and comes from that extractive vision that assumes that adjustments can only be carried out by destroying the export economy and savings. The evidence that it does not work is clear, but the successive governments of Argentina believe that the problem is the strength of the US dollar and not their destruction of the purchasing power of the Argentine peso. However, the collapse in demand for pesos inside and outside the country is the direct cause of an insane monetary policy. Introducing higher taxes, withholdings, and pitfalls to economic development does not strengthen the demand for pesos or improve the economy. These are measures that lead to Venezuelan hyperinflation.

No country has strengthened the demand for its local currency by confiscating savings and salaries through massive increases in the money supply and confiscatory fiscal measures. It is a double expropriation of wealth.

The idea that the economy will be relaunched with a strong issuance of pesos should be discarded. In the last ten years Argentina’s monetary base has increased by 1,414.31 percent—that is, Argentina is the country that has increased issuance of local currency the most after Venezuela and Iran, causing decreasing demand for pesos and general deterioration of the economy, which has gone from stagflation to depression.

Increasing taxes and withholdings is the equivalent of demolishing one of the few competitive, exporting, and efficient sectors that remains in Argentina, and it is all because of the refusal to touch the disproportionate public spending.

Argentina will not strengthen its growth, productivity, and foreign reserves with a fiscal policy that is confiscatory and a monetary policy is extractive and inflationary. It will instead destroy the economy’s capacity to generate employment and attract investment.

It is very sad to see a country with the potential of Argentina fall back into the trap of thinking that monetary and fiscal imbalances are solved by raising taxes and printing more pesos. President Fernández recently stated that “we must end the habit of saving in dollars” while announcing a huge issuance of pesos “to strengthen growth.” It shows the refusal to understand that the citizens do not save in US dollars because they are evil or ignorant, but because they know that their few savings and real wages will be confiscated via monetary policy, diluting the country’s wealth in an ocean of decreasingly valued pesos useless to most local and global economic agents.

Argentine governments cannot continue to fool themselves into thinking that the problem is external. It is no accident that the country has the second-highest inflation in the region, which is also ten times higher than the average. And it is no coincidence that it has a much poorer economic growth than neighboring countries despite the challenges the latter suffer.

Argentina’s problem is not that taxes are low—it extracts the largest wedge in the region—nor of hawkish monetary policy—the increase in the annual monetary base is more than seven times that of the region’s average over the past ten years. It is quite the opposite. Argentina is only going to take off when it recognizes that its fiscal and monetary imbalances are not the fault of the citizens and their small businesses, but of a government that is still determined to believe that two plus two equals twenty-two.



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Economy

Bonus Quotation of the Day…

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… is from page 6 of the original edition of James M. Buchanan’s 1960 textbook, The Public Finances (a book that isn’t included in Buchanan’s Collected Works) (typo corrected):

[In a market economy] No individual coerces any other individual; a market transaction represents a wholly voluntary exchange from which both parties expect to receive benefits. The market economy is an organized method of securing voluntary cooperation among individuals. It is essentially a system of spontaneous order which arises out of the individual participation of numerous buyers and sellers. Resources are allocated to the many possible employments; goods and services are produced and distributed without a direct central plan every having been discussed, approved, formulated, or even contemplated. The first main advantage of this sort of economy is, therefore, that it “free” or “voluntary.”

The second main advantage is that the market economy incorporates a high degree of “efficiency.” This means quite simply that the individually inspired motivation of consumers, workers, property owners, and business enterprises combine to secure an over-all economic organization which is not grossly extravagant in its usage of scarce resources available for disposition. Decisions are decentralized private decisions and, therefore, mistakes are private individualized mistakes.

DBx: Note that Buchanan lists as the market’s first main advantage the fact that, within markets, individuals are free. No one can coerce anyone. If Jones wishes something from Smith, Jones must peacefully persuade Smith to give or to do that something – a reality that means that Jones, to get what he wishes from Smith, must give to Smith something that Smith wishes to have.

Efficiency in resource use is regarded by Buchanan as being only the second main advantage.

Note also that Buchanan’s description of market efficiency is not some hyper-condition. Instead, as Buchanan describes it, market efficiency prevails when the use of scarce resources “is not grossly extravagant.”

I wish that people such as Oren Cass, Michael Brendan Dougherty, and Daniel McCarthy – people intoxicated with the notion that government should be given far more power to direct the allocation of resources – would learn some economics. They don’t have get degrees in the subject or even to take upper-level undergraduate economics courses. Instead, let them read, with careful attention, some Buchanan, some Hayek, some Alchian and Allen, some Demsetz, some Sowell, some McCloskey, some Gwartney and Stroup, some Landsburg, some Heyne-Boettke-Prychitko, some Cowen and Tabarrok. Let them read some solid economics to discover the error of their ways.

The post Bonus Quotation of the Day… appeared first on Cafe Hayek.



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