Economics: See How Stupid The Federal Reserve Is

(Drivebycuriosity) - It turns out that Federal Reserve Chairman Kevin Warsh and his comrades from the Fed Board are quite stupid. Yesterday they hiked their interest rate in order to fight the sticky inflation. Warsh complained: "This summer’s inflation readings do not tell me that underlying trends have meaningfully improved” (cnbc )

The sticky inflation is the result of the oil price rise in the recent 12 months caused by the Iran war. Will the rate hike create more oil? Nope. Will it stop the war? Nope. The Fed cannot turn the time back, neither do they have an influence on geopolitics and the market price of oil. These are force majeure.

The so-called “core” inflation (excluding food & energy)  dropped already to 2.4% y/y, a five-year low ( fisherinvestments). The difference to the measured inflation rate is caused by the past - the oil price gain of about 60% y-o-y.   

If the oil price stays on today´s level, then in the coming months the y-o-y price gain will go to zero - that is pure mathematics (calculus). In this case the measured inflation rate will move lower, approaching the core inflation. Only when the oil price keeps climbing - fueled by an ongoing Iran war - then the inflation will stay elevated - or even goes higher.

Apparently Warsh & Co. don`t understand simple mathematics. Yesterday`s interest rate hike gave a wrong signal, showing that the Fed is hawkish. They created another headwind for the economy, in addition to Iran war, expensive oil, trade war, AI anxiety, anti-data-center mood and a general pessimism.  

 

Science Fiction: Bios By Robert Charles Wilson

  (Drivebycuriosity) - Maybe in a far future humans will explore planets that are light years away. The science fiction novel "Bios" by Robert Charles Wilson narrates such an exploration ( amazon). Humans try to exploid an extra-planet and are confronted with a very different fauna & flora. Soon the plot turns into a nail-biting action thriller and then into horror (this is a spoiler free blog). 

The name tells it already, the plot is based on biochemistry, but also on evolution & quantum physics. Wilson has the gift to turn science into exciting stories. He describes and explains how intelligent life developed under conditions that are different from earth. Because of the far harsher environments cells, the bricks of organic life, are much better defended, more efficient, far more complex. They synthesize a staggering array of organic chemicals and are highly dangerous for humans, who´s immunity systems are not prepared for the alien environment. 

"Bios" is also spiced with some romantics and has even some explicit sex, very different from the usually  timid scifi genre that often caters young adults.  Reading "Bios" was not only a pleasure, it refreshed my knowledge and I learned a lot new things. 

"Bios" is on the same level like Tchaikovsky`s "Shroud" or Stanislaw Lem´s classic "Solaris".  A must read for any scifi connoisseur.

Books: The Unforsaken Hiero

 (Drivebycuriosity) - The 1970s were the time of the cold war and everyone was afraid of a possible devastating nuclear conflict between the West and the Soviet Union. A good climate for books about post-apocalyptic worlds.

Sterling E. Lanier`s fantasy novel "Hiero`s Journey", published in 1973, belongs to best post-apocalytic scenarios (my. review). The plot is set about 5,000 years after the disaster. The nuclear strikes had changed the genes of everything living - and created new and bizarre life forms. The plot follows a military priest who is fighting against powerful evil forces, with the help of exotic mutants and his own enhanced psychic capabilities (this is a spoiler-free blog). Much fun to read.  

Unfortunately the follow-up "The Unforsaken Hiero" disappoints ( amazon). Some of the fascinating companions of the first book are missing in the begin of the novel and the new challenges and life forms the protagonists meets instead are less interesting. Parts of "The Unforsaken Hiero" remind of Brother Grimm`s fairy tales, but not in a good way.

I still recommend Vol. 1 for fans of well written post-apocalyptic fantasies. 

Books: The Story Of China By Michael Wood

 

 (Drivebycuriosity) - Telling the history of China is a huge challenge. Michael Wood tries to narrate the "story" of the giantic country from the bronze age  through the present by going his own way ( amazon). He writes: "Our view of China opens from below, and from the fringes and the provinces; seen through the live of individuals,men and women, the dynasty founders and emperors,but also from writers and travelers, for instance a Mrs Wang and her children on a southern river Odyssey".

Wood`s anecdotes are interesting but tales about "Mrs. Wang and her children" and other anecdotes obstruct the view on the whole picture and the reader gets lost in countless sub-stories, that were not really important for the evolution of China.   

I prefer "China: A History" by John Keay (my review). His history is much more focused, more sober and much better to read and to understand. While I got lost in Wood´s "stories", I learned from Keay why China´s recent rise, the awakening "of the dragon", is just a comeback, a reawakening. 

 

Economics; Should The Fed Fight The Iran War?

 

 (Drivebycuriosity) - Should the Fed fight the Iran war? Ok, the question is ridiculous and absurd. But many pundits - and even some members of the FOC - demand that the Fed hikes her interest rate to fight the stubborn inflation. Their pleads are synonymous.

                       Force Majeure 

Let me explain that to you. The sticky inflation is the result of the oil price rise in the recent 12 months - almost up 40%. What can the Fed do against rising oil prices? Nothing. The high oil price is caused by the Iran war. And the war is the result of geopolitical stupidity and is force majeure for the Fed. 

Inflation means CONTINUOUS PRICE RISES. If the oil price stays on today´s level the inflation effect goes away. Only when the oil price keeps climbing - fueled by worsening of the war - then inflation will stay - or even goes higher.

Would the Fed try to fight the oil-price induced price hikes the authority would cause additional headwinds for economy - and may even cause a recession. 

 

Books: Through Two Doors At Once By Anil Ananthaswamy

 (Drivebycuriosity) - "Quantum mechanics is spooky", said Einstein, even though the genius belonged to the fathers of quantum physics. Indeed quantum mechanics, the behavior of infinitesimal small particles like electrons and photons (light), has a lot spooky phenomena. One of them is them is the result of the famous double-slit experiment. Sorry, no threesome. 

Since the 1920s physicists have been shooting a single photon through a barrier that has two slits. They noticed that - when the photon has passed the barrier - on the other side the photon created not just one impact but two or more. Can a photon exist on more than one place? 

Since the 1920s physicists have been discussing this phenomena and created more and more elaborated experiments and theories. Anil Ananthaswamy`s book "Through Two Doors At Once" sketches the basics of quantum physics and describes how physicists have been developing more and more complex experiments and theories over around 100 years  (amazon). 

Already in the 19th century started a controversy about the behavior of elementary particles, the basics of our world. Physicists stated that light is an electromagnetic wave, comparable to radio waves. But Einstein disagreed. He noticed that when a photon, a particle of light, hits an atom, the impact kicks an electron out of this atom, like a pebble causes a splash, when it hits water. According to Einstein this photoelectric effect proves that light consists of particles (photons) and not of waves.

 

                 Collapsing Wave-Function 

Unfortunately the double-slit experiments show multiple impacts on the other side of the barrier that fit to the wave theory. Einstein`s observation started a controversy about whether our universe is based on particles like photons and electrons or is based on waves. Some physicists believe that photons and electrons behave as waves when they are unobserved and turn only into particles after observation - the famous collapse of the wave-function. Schrödinger`s cat is either dead or alive as long it is hidden in a experimental box (unobserved), only when the box gets opened (observation) the state of the feline is decided. 

 Ananthaswamy presents over almost 300 pages the more and more esoteric theories that ambitious quantum physicists, many of them Nobel Prize winners, developed over the times and describes their more and more ridiculously sophisticated double-slit experiments, some of them cost meanwhile millions of dollars.

"Through Two Doors At Once" reminds of medieval philosophers who asked "can multiple angels occupy the exact same space simultaneously". Later authors mocked them with the infamous satire: How many angels can dance on the head of a pin? 

Books: Jules Verne`s: From The Earth To The Moon

 (Drivebycuriosity) - In the year 1969 the first human landed on the moon, in the year 1865 Jules Verne dreamed an early version of the journey to the earth`s satelitte: "From the Earth to the Moon". 

Verne´s moon shot happens in an alternate world, short after an undefined war, that destroyed the business of the canon producers. The President of the American gun club, that represents the American canon industry, has an idea how to compensate the missing business. Why not construct a giant canon and use it to shoot people on the moon?

Verne might have been inspired by 19th century circus shows where acrobats in the manege seemingly got shot through canons, even though the circuses used heavy rubber springs, not gunpowder, for propulsion.

The plot follows the long process from the decision to the final moon shot. The author described elaborately the engineering and the economics of the canon production and the social implications of the moonshot.  

Verne was not ignorant of the fact that humans cannot survive the immense heat & sudden push of a canon shot, so he imaged an elaborate cushioning system. "Undoubtedly the travelers would still have to encounter a violent recoil after the complete escapement of the water; but the first shock would be almost entirely destroyed by this powerful spring".

In contemporary science fiction space travelers sometimes have to survive deadly gravity caused by enormous acceleration. Scifi authors therefore imagine special beds that cushion the otherwise deadly intensified gravity.

"From The Earth To The Moon" is a funny tale, a farce, mixing fantasy with facts. Verne invented a new kind of novel, a "Roman de la Science" ("novel of science"), which allowed him to incorporate large amounts of the factual information he discovered while researching in the Bibliothèque ( wikipedia). He wrote of course for a 19th century audience, who had much less knowledge than people today. But Verne`s stories remind me a bit of a modern scifi subgenre, called cyber punk.

Even though the novel is a farce Verne acknowledges the physics of space flights: "As we recede from the earth the action of gravitation diminishes in the inverse ratio of the square of the distance; that is to say, at three times a given distance the action is nine times less". 

Anyway, "From The Earth To The Moon" is also an optimistic statement with a can-do attitude and belief into technology. Verne also praises of the efficiency of American engineering. "Nothing can astound an American. In America, all is easy, all is simple; and as for mechanical difficulties, they are overcome before they arise".

The novel has a surprising ending - but based on modern physics and cosmology. It is still fun to read. 

The novel is part of a giant omnibus reader: "Jules Verne: Complete Works (Wisehouse Classics)", that contains 47 novels! more than 10,000 pages! ( amazon).