A criminal act

Then again, Bernanke and other central bankers claim that their low interest rate policies have preserved the world from an economic depression. What’s your conclusion when you look back on the last decade since the financial crisis?
I’m of the view that the world-wide suppression of interest rates over the past ten years has been not only inadvisable but, on moral grounds, something very near to a crime.

That’s a tough judgement.
By that I mean that the suppression of interest rates has served to advantage one class of people: The savers have been disadvantaged whereas big banks have been very greatly advantaged, and the financial community has been advantaged. In short: the saver’s loss has been the speculators’ gain. So, the ordinary working person has been disadvantaged and that is apolitical. To speak metaphorically but, I still think truthfully, that kind of policy is bordering on criminal – and I stand by that. [Link]

An important extract from the interview that Jim Grant of the eponymous ‘Interest Rate Observer’ gave ‘Neue Zuercher Zeitung’ in Switzerland.

The French Ambassador to the US makes sense

The French Ambassador to the United States of America stepped down from his office on 19th April 2019 and he gave a blunt interview to ‘The Atlantic’. Well worth reading. (ht: Nandakumar). Sample these:

I don’t think that anything irreparable is happening in the U.S. I don’t know what would have happened in France if Marine Le Pen had been elected, because our institutions are much weaker.

Let’s look at the dogma of the previous period. For instance, free trade. It’s over. Trump is doing it in his own way. Brutal, a bit primitive, but in a sense he’s right. What he’s doing with China should have been done, maybe in a different way, but should have been done before. [Link]

… The case of Trump for me, it’s not so much Donald Trump, it’s not so much a person, but it’s a political phenomenon…..

…. For me, the identity crisis is the symptom, but it’s not the disease. In France, we optimistically believed that Macron’s election meant that we had found the recipe against populism. He was a new leader, with new ideas, elected on a centrist platform. Apparently we were wrong. ….

…. There is a misconception about Trump which is American and French: saying Trump is an accident, and when Trump leaves power, everything will go back to business as usual. That’s the dream of Washington, D.C. [Link]

Course on bullshit detection

A colleague of mine shared information about a new course offered by two professors at the University of Washington, titled, ‘Calling bullshit’.

The preamble is worth reading:

The world is awash in bullshit. Politicians are unconstrained by facts. Science is conducted by press release. Higher education rewards bullshit over analytic thought. Startup culture elevates bullshit to high art. Advertisers wink conspiratorially and invite us to join them in seeing through all the bullshit — and take advantage of our lowered guard to bombard us with bullshit of the second order. The majority of administrative activity, whether in private business or the public sphere, seems to be little more than a sophisticated exercise in the combinatorial reassembly of bullshit.

We’re sick of it. It’s time to do something, and as educators, one constructive thing we know how to do is to teach people. So, the aim of this course is to help students navigate the bullshit-rich modern environment by identifying bullshit, seeing through it, and combating it with effective analysis and argument.

What do we mean, exactly, by bullshit and calling bullshit? As a first approximation:

Bullshit involves language, statistical figures, data graphics, and other forms of presentation intended to persuade by impressing and overwhelming a reader or listener, with a blatant disregard for truth and logical coherence.

Calling bullshit is a performative utterance, a speech act in which one publicly repudiates something objectionable. The scope of targets is broader than bullshit alone. You can call bullshit on bullshit, but you can also call bullshit on lies, treachery, trickery, or injustice.

In this course we will teach you how to spot the former and effectively perform the latter.

While bullshit may reach its apogee in the political domain, this is not a course on political bullshit. Instead, we will focus on bullshit that comes clad in the trappings of scholarly discourse. Traditionally, such highbrow nonsense has come couched in big words and fancy rhetoric, but more and more we see it presented instead in the guise of big data and fancy algorithms — and these quantitative, statistical, and computational forms of bullshit are those that we will be addressing in the present course.

Of course an advertisement is trying to sell you something, but do you know whether the TED talk you watched last night is also bullshit — and if so, can you explain why? Can you see the problem with the latest New York Times or Washington Post article fawning over some startup’s big data analytics? Can you tell when a clinical trial reported in the New England Journal or JAMA is trustworthy, and when it is just a veiled press release for some big pharma company?

Our aim in this course is to teach you how to think critically about the data and models that constitute evidence in the social and natural sciences.

Carl T. Bergstrom and Jevin West
Seattle, WA. [Link]

The professors have done well to put up a FAQ (worth reading) and their entire syllabus along with reading materials for anyone to download and read. Commendable.

One good piece (if depressing) from the course material that I read is this.

The article in ‘The Guardian’ about the course makes two very good points:

(1) ultimate paradox of the information age: more and more knowledge is making us less and less reasonable. 

(2) Teachers have a more urgent and pressing duty than conveying and transmitting wisdom – it is to debunk non-sense (or, what is not wisdom)

I have two observations about and for the course:

(a) One observation is that ‘fake news’ is not the sole prerogative of social media. That is ‘bullshit’ too. It is a competitive tactic adopted by the old media, faced with competition from other sources that are now more boldly calling out their fake news that was going unchallenged.

The one classic example is that of the award-winning journalist in Germany’s reputed magazine, ‘Der Spiegel’ who faked news for a long time before beng detected. See here and here.

(b) The course, apart from helping wth ‘bull-shit detection, awareness and understanding’ must also go into where it (bullshit) is arising from and why.

That is,why more and more knowledge is making us less and less reasonable. If it is making us less and less reasonable, then simply it is not knowledge but merely hypotheses. What is causing it?

One of the (and not the only one) is the sense of certitude and absolutism that our knowledge is giving us. This has become a human failing and pervasively so. As humans conquer many hitherto unconquerable frontiers through technology, humans have become overconfident about what we know and what we can overcome. This has made us overconfident and absolutists making assertions without verification giving rise to bullshit. This is as true of modern central bankers, economists, commentators and journalists as it is true of those who spread bullshit through WhatsApp, Twitter, Facebook and much else.

In other words, the hypothesis here is that hubris is a principal source of bullshit.

Foundation level courses on the immensity of what we do not know vs. the miniscule proportion of what we know are necessary to avoid falling into the trap of generating bullshit in the pretense of generating and spreading knowledge. In other words, teaching children to say, ‘I don’t know’ is necessary to stop the generation of bullshit at source; then, the teaching of detection of bullshit will, one day, become superfluous.

McKinsey in Puerto Rico

My friend Rohit Rajendran had shared this long piece from ‘The New Yorker’ on the work of McKinsey in Puerto Rico, a state with restricted ties to the United States mainland.

While it is tempting to conclude that there are plenty of crosshairs and conflict of interest in McKinseys’ work, in this particular instance, the mess that brings McKinsey in, in the first place, was not created by McKinsey or its advice. One has to record that.

The article is full of innuendoes on McKinsey’s real and perceived conflicts of interest but it also gives considerable newsprint to the McKinsey pointman in Puerto Rico. That said, Mckinsey Investment Office and its consulting arm need to be far more than legally separate for the allegations of conflicts of interest to be dismissed.

The real requirements for any resolution of a problem as challenging as restructuring an economy are these: reciprocity, restraint and respect. Reciprocity – all sides share in the pain; restraint: it cannot be ‘business as usual’ and belt-tightening is inevitable, at least for a while; respect – for local knowledge, history, customs and culture (school closures, for example, must be handled sensitively and the University – local intellectual body  – has to be your partner).

Reciprocity, it appears, is missing:

When Puerto Rico made a desperate issue of $3.5 billion in junk bonds in 2014, warnings in the prospectus suggested a default was imminent. But hedge funds snapped up the bonds anyway, enticed by a loophole in U.S. law that seemed to prevent Puerto Rico from declaring bankruptcy. It looked as if the bondholders could seize tax revenues or assets belonging to the island and no one could stop them.

The group of creditors with the strongest legal claim — many of them hedge funds — were set to get around 93 percent of their money back, less a haircut than a slight trim. (Meanwhile, a weaker group of creditors, who are mainly Puerto Rican, were likely to lose about half of their investment.)

These don’t pass the smell test or fairness test even if they are legally in the clear. No wonder these financial types are aptly called vultures and they earn capitalism a bad name.

This is where the challenge for McKinsey’s bona fide comes in. On whose side, is it, eventually?

Then, of course, the question of its own fees is there:

The projected overall fees are more than five times what Detroit spent on its $20 billion bankruptcy, previously the largest local-government default in U.S. history, and higher even than the bill for Lehman Brothers, the $613 billion corporate liquidation that nearly destroyed the world economy.

All those fees are being footed by the taxpayers of Puerto Rico, which is far poorer than any U.S. state, with a median household income of less than $20,000 a year.

Reciprocity, respect and restraint?

The fine art of dentistry

“A team of researchers at ETH Zurich, a Swiss university, asked a volunteer patient with three tiny, shallow cavities to visit 180 randomly selected dentists in Zurich. The Swiss Dental Guidelines state that such minor cavities do not require fillings; rather, the dentist should monitor the decay and encourage the patient to brush regularly, which can reverse the damage. Despite this, 50 of the 180 dentists suggested unnecessary treatment. Their recommendations were incongruous: Collectively, the overzealous dentists singled out 13 different teeth for drilling; each advised one to six fillings.” [Link]

This is in Switzerland! nearly 30% of the sample have recommended unnecessary treatment!

An article worth reading, even if a bit worrisome. Good to be alert. With dentists, it looks like you cannot stop with a second opinion. You need a third and a fourth, no matter which part of the world you live in.

STCMA – 19th April 2019

Atman Trivedi on the India-China reset that was much touted in 2018. He calls for a rethink and he is right, in my view. [Link]

Yanis Varoufakis carefully walks on razor’s edge defending Julian Assange and protesting his possible extradition to the USA and succeeds in doing so. [Link]

Robert Blackwill writes in a new report dealing with Trump’s foreign policy that what matters most is the effectiveness of U.S. policy over time and its consistency with U.S. national interests, not the personal qualities of its leaders. [Link]

The question that crops up in one’s head after reading Anjuli Bhargava’s article on Jet Airways and India’s aviation policy decisions over the years is whether elections do matter or should matter. [Link] – subscription required.

Ashoka Modi raises very sensible questions on IMF’s optimism and ‘don’t ask-don’t tell’ attitude to risks. Cannot blame the IMF. Financial markets and the Fund feed off each others’ attitudes. [Link]

If China has the right to police ‘terrorism’ as it sees it in Xinjiang, does India not have the right to police terrorism on its soil?. Brahma Chellaney writes on the deafening silence in the Muslim world on China’s oppression in Xinjiang. [Link]