27th July 2004
- BUTTONWOOD -
A competent economist
on the www is the writer of the Buttonwood
Column in "The Economist". Our politicians, when they created
our pension scheme by automatic
deduction of 7% of wages to be accumulated in investment funds,
probably made the biggest mistake of our lives.
They have interfered
with an important
free market mechanism. No longer is the quantum & quality
(destination) of the commodity "savings rate" determined by the
calculation of investors. That quantum is now tied to the income
and employment of wage & salary employees, and the quality of
investment is in the hands of MBA's.
Buttonwood has drawn my attention to
the "Volatility Index" (VIX). Basically this is a number which is
calculated from the spread of risk trade. For instance a mining
house paid in $US might want to protect itself against a falling
$US. To do that it would purchase a forward currency "risk"
contract. When it was paid in $US for delivery of minerals, it
would have a guaranteed exchange rate. The cost of that guarantee
as a percentage of the value of the contract is (presumably) the VIX.
Buttonwood has pointed out that the value of this index is at an all
time low. He also mentions that many people are worried about
inflation. He goes on to say:
almost certainly in a very tiny minority on this, but it is not even
certain that inflation is a greater worry than deflation, for all that
this is dismissed by most as last year’s story.
Buttonwood also pointed out that the risk
spread might mean that there is a low risk of currency upsets, or more
why then is
volatility so low? Jim Bianco, who runs an eponymous research firm,
suggests an answer of beguiling simplicity. Many people—at hedge funds
and banks in particular—are selling options to earn money from the fees
for doing so.
Your diarist has the same
fears, although from a different paradigm.
THE ROAD AGAIN -
My sojourn in the USA finished on 15th July, from whence I travelled to
UK. I decide to see the midwest, Winnipeg, Dakotas & Las
From NY I drove up to Salem, NH, and traversed to Maine. Like
states, those guys up north have decided to penalize drivers by
virtually unavoidable turnpike (toll) roads. I then doubled back,
and diverted through Massachussets to Vermont, NY, across through Pa
and stopped for a few hours in Ohio on lake Ontario. Ohio and
Pittsburg are mining/industrial states. It has been estimated
that the US has sufficient coal energy reserves to power the world for
least two centuries. Ohio was very green, and (as an Australian)
I am very impressed whenever I see such an abundance of water.
From Ohio I touched into Michigan, then down to spend (another) few
in Chicago. Chicago is an easygoing town, and one of only two
cities that have a 24/7 Starbux T-Mobile hotspot. (Of course
many cities have 24/7 Kinko "offices", (e.g. Boston) however the
ambience is not conducive to recreational internet use.
Next across Illinois and then up through Minnesota where I
visited the alleged largest Mall in the world, named "the Mall of
America" which is so named because it is on America Avenue, not as a
cheap publicity stunt. (Although I would not rule that out). It
is centered around a children's amusement park, with roundabouts, an
extensive rollercoaster system, and scores of other rides, games of
& luck & etc. I made a dash across the state line from
Minneapolis-St.Pauls into Wisconsin, then retraced and continued on to
through North Dakota. The land up there is FLAT. It
also the wheat basket of the US. I understand that planting is
done before the winter snows. The crop germinates in the warmth
& moisture when the snow melts. Some regions obtain two
annually. Probably the very long days at this latitude (around
18-19 hours) enables this by allowing rapid maturation of the
wheat is not as "hard" as that from Australia. (Hardness is a measure
the protein content, apparently a desirable attribute in wheat.)
Winnipeg is one of Canada's larger cities, with a population in the
millions. I was most annoyed however that the Starbucks in
Winnipeg did not have T-Mobile hotspots. Instead I found a place
in the old french district that charged me CA$5 for an hour's use of
wifi. It was also a public holiday "Canada Day" and nothing much
was open. I also learned that my trip had been shortened by about
a week, and had to leave immediately.
I crossed back into ND, travelled down into South Dakota, and across
into Wyoming. These are not wealthy states, but the attitude of
the people is mostly quite laid back. The big events (at least in
summer) are the Rodeos. The number plates of this state bear a
During most of my travels in the US I had been aware of the pall of
atmospheric pollution. I have seen red sunrises whilst travelling
down through Louisiana, across New Mexico, in Tennessee &
Objects more than from two to ten miles distant were hidden by smog in
California, Texas, Iowa, the Dakotas, NY. In fact, in just about
every US city I visited, pollution was bad. I do not
think most Americans realize how bad the pollution is, because they do
not know what a clear atmosphere is supposed to be like. For
instance, from Barvennon the other side of the valley, around 40 Km (25
miles) away, can be clearly seen, with no haziness of the atmosphere
most of the time.
So it is with some pleasure that I discovered that I could see the
distant (40 miles?) mountain ranges to the East of the I-80 in
Wyoming. Of course my pleasure was somewhat marred by haziness,
but at least it was diminished in comparison to
I continued up to Montana, and stayed overnight in
a city that was at the edge of an extensive (50 miles) Indian
reservation. Next morning I travelled into Idaho,
through the Eastern edge of Yellowstone park, and into Salt Lake city,
Utah. The pollution in Utah was fierce.
This city is the home state of IBM, and the home state of the "Church
of Latter Day Saints" otherwise known as the Mormons. They seem
to believe that industriousness and industry are both good. My
road was south to Las Vegas, however I drove a detour East to see the
desert. From there I drove back to Salt Lake City and continued
down the I-25.
The "Great Salt Lake" is a terminating lake, like the Dead Sea.
It is around 4,500
feet (about 1400 meters) above sea level. The river that flows
into it is named the "Jordan". The land around the western side
of the lake, and continuing south is well watered & looked quite
fertile. Crops and livestock were abundant. It was not
until I reached the southern end of Utah I reached country that, in
Australia, we might call "poor".
When you are in Nevada near Las Vegas you are in near desert. I
suppose that some of the South Australian breeds of merino might scrape
a living off the vegetation - with only occasional hand feeding.
Las Vegas is only a fewscore miles from both where the I - 25 crosses
the Arizona border, and also from
the Boulder dam on the Colorado river. Water is piped to support
Las Vegas, a city in the desert about 15 Kilometers in diameter.
About the only business in Las Vegas seems to be
gambling and prostitution, both of which are legal.
In Las Vegas there are "Trader Joe" stores, the mark of the
presence of those who demand cheap food that is organic. In the
gambling strip at night, shills handed me the business cards of the
prostitutes. "Miranda comes to you naked, so you can see what you
buying" says one card, another says "Anna & Belle, get two for the
price of one." I notice that Anna & Belle come for around
is more than Miranda, who was $50. I went into a few
Casinos and watched the play. Blackjack, or 21 was played by the
same rules that we used in my college days. Baccarat and roulette
were also in play. When I looked at the players, I saw
ordinary Americans, not at their best. Las Vegas has a reputation
for glamour and legalized naughtiness, but when you get down to it, it
is tacky & seedy.
Then on back up through Utah and onto the I-40 which took me into
Colorado. Crossing Colorado I drove through a pass that is about
10,000 feet (3,000 meters) above sea level. That is a few
thousand feet higher than the highest point of Australia, Mt.
Kosciusko, around 7,000+ feet. According to an article I read in
the WSJ, Denver is supposedly the best city in the US for singles,
regrettably I did not have the time to verify that statement.
I detoured North then down through Kansas, Oklahoma and
into Fort Worth Texas. I spent a few days recovering there
at the home of my
friend Barbara, and then flew on to NY for my connection to London.