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.