Dylan has his life saved

This kid and the friend who saved his life go to the school I often teach at.

Pseudoskepticism

Pseudoskepticism denotes thinking that appears to be skeptical but is not. The term is most commonly encountered in the form popularised by Marcello Truzzi, where he defined pseudoskeptics as those who take "the negative rather than an agnostic position but still call themselves 'skeptics'"

Understanding "Burden of Proof" here is important - in a legal situation, it is not necessary for the defendant to prove his innocence, but for the prosecutor to prove the defendant's guilt. Truzzi's words are important here:

In science, the burden of proof falls upon the claimant; and the more extraordinary a claim, the heavier is the burden of proof demanded. The true skeptic takes an agnostic position, one that says the claim is not proved rather than disproved. He asserts that the claimant has not borne the burden of proof and that science must continue to build its cognitive map of reality without incorporating the extraordinary claim as a new "fact." Since the true skeptic does not assert a claim, he has no burden to prove anything. He just goes on using the established theories of "conventional science" as usual. But if a critic asserts that there is evidence for disproof, that he has a negative hypothesis --saying, for instance, that a seeming psi result was actually due to an artifact--he is making a claim and therefore also has to bear a burden of proof.

Of course you know where I'm headed - climate skeptics.

Popular climate skepticism is actually a form of pseudoskepticism because it does not hold to an agnostic position. In other words, when climate scientists say "Human beings are causing global warming by emitting too much carbon dioxide", the best skeptical response to this is to say "Well that sounds interesting. But what proof do you have?".

A Pseudoskeptic, on the other hand, will say "Scientists who say that humans are causing global warming are wrong" - which means, of course, that they are no longer skeptics (and thus agnostic) but simply hold a diametrically opposing position. And this means that their position must also have the burden of proof to back it up.

Other assertions that popular climate skeptics will say include:

• There is no proof that the world is warming up dangerously.
• Increasing amounts of Carbon Dioxide in the atmosphere are due to natural processes and not due to human activity.
• Climate records over time are unreliable.

Which, of course, are not skeptical positions but opposing positions and require firm evidence to back up their assertions ie a burden of proof. This means that they are pseudoskeptics.

So if you're ever tempted to consider the climate-skeptic argument, ensure that you are skeptical of the skeptics.

Alt-A - the next Subprime

In terms of predictions, I usually focus upon medium-long term trends rather than short ones. Here's a prediction - the US housing market will undergo yet another collapse in about 12 months time.

It'd be lovely if I had the smarts to basically explain this, but the simple fact is that I'm merely reporting what Tanta at Calculated Risk has predicted - which means that if I get this prediction right it's merely because she got it right first.

I'm not exactly certain of the financial ideas here, but it seems as though the majority of "Alt-A" home loans - those which are superior to subprime but are still risky - are going to have their rates reset beginning in March 2009 and then climbing rapidly in Q4 2009.

In other words, there's a whole heap of people who will probably have their rates increased and who cannot afford it.

This assumes, of course, that the "credit crunch" extends another 12 months or more, which is highly likely given the current recessionary conditions. This means that the downturn is going to be a long one.

Visionary Leadership

Couldn't have said it better myself - 2

From the department of sensible analysis:

So the G.O.P. has found its issue for the 2008 election. For the next three months the party plans to keep chanting: “Drill here! Drill now! Drill here! Drill now! Four legs good, two legs bad!” O.K., I added that last part.

And the debate on energy policy has helped me find the words for something I’ve been thinking about for a while. Republicans, once hailed as the “party of ideas,” have become the party of stupid.

Now, I don’t mean that G.O.P. politicians are, on average, any dumber than their Democratic counterparts. And I certainly don’t mean to question the often frightening smarts of Republican political operatives.

What I mean, instead, is that know-nothingism — the insistence that there are simple, brute-force, instant-gratification answers to every problem, and that there’s something effeminate and weak about anyone who suggests otherwise — has become the core of Republican policy and political strategy. The party’s de facto slogan has become: “Real men don’t think things through.”

...

Is this political pitch too dumb to succeed? Don’t count on it.

Remember how the Iraq war was sold. The stuff about aluminum tubes and mushroom clouds was just window dressing. The main political argument was, “They attacked us, and we’re going to strike back” — and anyone who tried to point out that Saddam and Osama weren’t the same person was an effete snob who hated America, and probably looked French.

Let’s also not forget that for years President Bush was the center of a cult of personality that lionized him as a real-world Forrest Gump, a simple man who prevails through his gut instincts and moral superiority. “Mr. Bush is the triumph of the seemingly average American man,” declared Peggy Noonan, writing in The Wall Street Journal in 2004. “He’s not an intellectual. Intellectuals start all the trouble in the world.”

It wasn’t until Hurricane Katrina — when the heckuva job done by the man of whom Ms. Noonan said, “if there’s a fire on the block, he’ll run out and help” revealed the true costs of obliviousness — that the cult began to fade.

What’s more, the politics of stupidity didn’t just appeal to the poorly informed. Bear in mind that members of the political and media elites were more pro-war than the public at large in the fall of 2002, even though the flimsiness of the case for invading Iraq should have been even more obvious to those paying close attention to the issue than it was to the average voter.

Why were the elite so hawkish? Well, I heard a number of people express privately the argument that some influential commentators made publicly — that the war was a good idea, not because Iraq posed a real threat, but because beating up someone in the Middle East, never mind who, would show Muslims that we mean business. In other words, even alleged wise men bought into the idea of macho posturing as policy.

All this is in the past. But the state of the energy debate shows that Republicans, despite Mr. Bush’s plunge into record unpopularity and their defeat in 2006, still think that know-nothing politics works. And they may be right.

...

In any case, remember this the next time someone calls for an end to partisanship, for working together to solve the country’s problems. It’s not going to happen — not as long as one of America’s two great parties believes that when it comes to politics, stupidity is the best policy.

Paul Krugman's dead right on this one. Before Katrina, it was obvious to outsiders like myself that a personality cult had developed around president Bush - it was the only thing that could explain his huge popularity in the midst of making blindingly obvious mistakes. Since Katrina popped that bubble - which has led to a correspondingly low long term approval rate for Bush - it has become easier to examine his actions objectively.

The problem is that the hyper-partisans who helped set up this cult of personality, rather than repent of their actions, decide to direct their anger at the opposite side of politics. Take the right's furious denunciation of Obama in Germany as being comparable to Nazi rallies.

Nevertheless, Krugman's description of Republicans as "know nothings" does ring true, and that is cause for concern. In the world of ideas, Republicans and conservatives have lost any semblence of coherent and intelligent thought. Take the weekly ramblings of Charles Krauthammer at the Washington Post - surely someone who was part French, part Jewish, highly qualified as a psychiatrist and permanently paralyzed and confined to a wheelchair would make a fearful intellectual conservative. Sadly, this is no longer the case. Krauthammer has morphed into the worst sort of commentator - hack and spin merging together into angry, uninformed, unintellectual and poorly written screed. Rather than becoming a potential for conservative thought post-Bush, Krauthammer and other politically conservative commentators bravely stick to their guns and their talking points, offering nothing of substance to address the current tide of economic, political and social upheaval.

And I think this is where the left and the right differ. Right wing commentators seem to be more faithful to party politics and have relied upon a top-down approach whereby Karl Rove and other Svengalis disseminate talking points to their eager media followers (a process which has likely been less successful as Bush's popularity waned and probably revealed to commentators like Karuthammer the fact that they were used as pawns). The left, by contrast, seem to be more diverse, more based upon a grass-roots movement that is, especially in the case of Daily Kos, making steps to change American politics generally and the Democratic Party specifically. In other words, the right wing has been controlled by elements of the Republican Party, while the left wing is attempting to subvert and control elements of the Democratic Party. This process explains why right wing commentators are generally in lock-step with their message and quite partisan, while left wing commentators are diverse and are often angry or annoyed at how Democratic leaders have performed.

The fact is that we are currently straddling two eras in time whereby the waning power of conservative politics is being challenged by neo-leftist thought. The Republican Party - and other right wing parties around the world - will find it harder to maintain power as this new grassroots movement builds.

Of course, if we transplant ourselves back into the late 1970s we would have seen a similar movement - a grassroots movement of neo-conservatives challenging the established power of old leftists. The world has learned a lot from this period of conservative thought, namely what has worked and what has not worked. It remains to be seen how long the current neo-leftists will stay in power in the future and how long it will be before conservatives can effectively respond. Let's hope it won't be too long - a prolonged period of leftist dominance will probably leave the world in as bad a position as it is now under conservative rule.

Couldn't have said it better myself

From the department of copying the US in new and exciting ways:

As I mentioned a couple of posts back, the claim that mainstream science is totally wrong about global warming is an orthodoxy that is almost universal among commentators, bloggers and thinktanks on the political right in Australia, even though the great majority of ordinary Australians, including Coalition supporters, believe the science.

The great majority of Australians,, take the view that, while scientists aren’t always right, it’s much better to act on the basis of the best available science than to assume that the scientists are wrong. For this, they are attacked by rightwing commentators as religious fanatics or, at best deluded innocents.

One limited exception to this appeared to be the Centre for Independent Studies. A while back Andrew Norton got stuck into Clive Hamilton for listing CIS in the delusionist camp on the basis of some fairly tenuous links. As Norton observed, the CIS had never published much on the topic (though what it did publish was in line with delusionist orthodoxy) and had published nothing since 2003.

CIS has made up for it now, with this piece by Arthur Herman (also published, less surprisingly, in the Oz). It’s got everything - “global warming as a religion”, Al Gore conspiracy theories, Godwin’s Law violations on eugenics, the Spanish Inquisition and so on, backed up by some typically dodgy Internet factoids. As with much in this genre, it’s important to note the call for the replacement of science, as it currently exists, with “real science” in which people like Herman (self-described as an historian) will lay down the rules.

What’s striking here is the contrast between the willingness of just about everyone on the political right to sign up to a set of beliefs that are dictated entirely by political tribalism and their self-perception as brave heretics, spelt out in more than usually ludicrous fashion by Herman.

When politics trumps reality, reality eventually bites... hard. Any political commentator who chooses to deny reality will one day find that no one wants to read their political comments any more.

Here.

Imagination and Monetary policy

From the department of dream solutions:

The Federal Reserve's decision to hold the line on interest rates was the only move the central bank could make considering the state of the US economy, PIMCO chief Bill Gross said on CNBC.

Reacting to the Fed's move to hold its key interest rate at 2 percent, Gross called talk of rate hikes "comical."

"We're in a recession. When has the Fed ever raised rates in a recession?" he said. "Unemployment is headed toward 6 percent, mortgage rates on home buyers are at 7 percent, and these guys want to raise rates?"

Gross said the central bank has a responsibility now to provide liquidity.

"We're in an asset deflation of near-historic proportions. That calls for the use of the government's balance sheet and not for the Federal Reserve to raise interest rates," he said. "To the extent that the central banks now must prevent that deflation, interest rates don't go up, they go down."

To be honest with you, I have no idea how it is that Bill Gross is able to be so respected as a financial analyst after this comment. So let me make things clear to you Bill, in the hope that I might one day be seen as competent enough to be a financial analyst.

1. The last time the Fed raised interest rates during a recession was when Paul Volcker did his thing back in the early 1980s. When the dust settled and unemployment hit over 10%, Volcker had pretty much solved the stagflation crisis.
2. If deflation is such a massive problem, why is it not being felt in the consumer price index? Even the Fed says that Inflation is high.

I don't know Bill, but being ignorant of historical facts and turning a blind eye to the Consumer Price Index is no way to determine monetary policy. It's almost as though you're dreaming up facts and then using them to bolster your opinion.

US unemployment rate

Wow, the data is coming thick and fast. The US July unemployment rate will be released at 12.30PM UTC 1-August-2008. The place to go to is here.

Well, what is my prediction? I know you want to know. Let's just say that I would be surprised if it went up 50 basis points or more - from 5.5% to 6.0%. I think the chances are that it will go up to about 5.7% or 5.8%.

For this I factor in two things:

1. The Coincident Index (mentioned previously) which pretty much shows that Q2 2008 economic performance is bad.
2. Anecdotal evidence that a lot of companies are cutting back on hours worked for employees rather than firing people outright.
   

It's that last bit which is important and is probably the reason why some of my unemployment predictions have gotten muddled up in the past. In years gone by, the US labour market has been more flexible, which means that rather than people suddenly losing full time jobs, employers ask them to work less. This is a good practice as it retains trained staff during a downturn. The problem with it, of course, is that it creates an even larger pool of working poor people. Moreover, the drop in spending that will accompany underemployed people will be felt in a drop in overall consumption, which will, in turn, make it even more difficult for employers to keep their staff employed.

So, I predict a rise in unemployment to 5.7 or 5.8%. Anything more than that would, to me, be an awful indicator. Knowing the success rate of my short-term predictions, however, the rate will probably drop to 4.9% or something and confuse everyone (or, at least, confuse us doomsayers).

Update 12:34 UTC:
5.7%. Hey I did it! More soon.

Update 12:44 UTC:
Bloomberg reports that forecasts were 5.6%, so this is worse than what was expected. The average work week dropped from 33.7 hours pw to 33.6 hours, which is consistent with a bunch of employees being asked to work less as per my point above.

US GDP probably declined in Q2

US GDP figures are due to be released at 12.30 UTC 31-July-2008. I'm willing to go out on a limb and predict that the Q2 2008 (April-June) saw the economy contract.

The reasons for my opinion are:

1. The housing market has continued to decline markedly (see here).
   
2. A number of banks have failed (see here).
3. Mortgage rates are rising, even though the Federal Reserve has slashed interest rates (see here).
4. Economic activity in Q4 2007 and Q1 2008 were low - around 0.9% growth each - and were probably stimulated by Ben Bernanke's interest rate slashes (see here). A fiscal stimulus plan has only just been passed in congress. In between the monetary stimulus and fiscal stimulus is Q2 2008.
5. Unemployment in Q2 2008 has increased markedly from 5.0% in April to 5.5% in May and June (see here).
   
6. The Philadelphia Fed state coincident index - a measure of economic activity based on state economic output - has cliff dived (see here), thus giving very clear evidence of a national recession.

Actually, it is the coincident index which is probably the best measure - the others are merely anecdotal and are more like possible indicators. Previous attempts to predict the future on my behalf have been based mainly on the anecdotal ones and the coincident index shows quite clearly that economic activity in Q3 and Q4 2007 (the two quarters I wrongly predicted economic decline) were not declining in any massive way. Of course there was a biggish market slump and collapse of the dollar around August-September 2007 but that was not felt in GDP figures at the time.

The unemployment figures for Q2 2008 are also indicative. The rate bumped up 50 basis points in one month. That's a big jump and indicates some major economic problem.

Update 12:41 UTC:
GDP grew in Q2 by 1.9%. I may have some egg on my face for this prediction... however revised figures showed that the US economy contracted during Q4 2007. Moreover, had I been reading around market predictions I would have discovered that analysts predicted a 2.3% Q2 growth, which means that today's news is quite bearish. I'm reading the official BEA release at the moment, which can be downloaded directly from here (pdf 328kb).

Update 12:55 UTC:
One of the more spectacular revisions is in Q1 2007, which was originally published as 0.6% growth but is now 0.1%. Q2, however, has been pushed up from 3.8% to 4.8%. All in all, 2007 GDP figures show that the US economy grew by 2.0% that year, down from 2.2% in previous estimates. (BTW - lags in GDP estimates are common, and sometimes recessions don't become statistically correct until later. There's every chance that today's figures will be revised upwards or downwards 1 month from now when the next GDP release will occur).

Update 13:04 UTC:
Bloomberg is reporting that the Q4 2007 figures indicate that a recession is probably in progress.

Update 13:12 UTC:
I have a feeling that Q2 2008 GDP figures will be revised downwards in the next three months. Tanta at Calculated Risk has a post up about how weekly unemployment claims have hit a 5 year high. This may be a correct prediction after all. Back in January I said this: GDP data often gets revised and I think that in the months to come, we'll see that Q4 2007 actually saw an economic decline.