An example of illogical science

Social science can be tricky, and in many cases, an opinion was formed first, and then evidence was sought after to support that opinion.

Birth lottery?  http://www.futurity.org/birth-lottery-economics-970332/

It is totally expected for "scientists" to flock into the inequality bandwagon as it is so popular now (actually in any given time, relatively poor people out numbers "rich", and that is actually by definition, rich and poor are not quantifiable terms, they are relative vague terms).

The fundamental flaw in his logic was apparent in this idea of "American Dream" which Grusky was quoted as saying
“The American dream is about ensuring that all children, no matter how poor their parents may be, have an opportunity to be mobile by climbing the economic ladder and moving into a higher income group,”

The logic problem of this statement is "higher" is a comparative adjective, by definition, if you move one "higher", you will have to move another "lower".   So to realize Mr. Grusky's "American Dream" an equally statement must also be true: “The American dream is about ensuring that all children, no matter how successful their parents may be, have an opportunity to be mobile by dropping the economic ladder and moving into a lower income group,”

Now, is that anyone's dream?   Is my dream really achieving something in the cost of another person's fortune?  If I do, that's not a decent dream to have.  The problem of Mr. Grusky's study hence opinion described by Clifton B. Parker-Stanford is that his measure of "dream" is all relative to a limited group (your country men in his particular study).  In essence he put everyone in competitive mode, instead of an absolute measure of success -- i.e. the absolute change of quality of living, PPI, etc. 

This innate deficiency came from a combative inclination - that one's success has to come from another demise (or failure).   

Heritage is a very culture sensitive topic and the way Mr. Grusky described his passion of American Dream and broader - his sense of fairness shows how much he culture insensitivity is. 
Actually due to his limitation in imagining "American Dream", his analysis was already pre-determined.  


To improve the study, Two fundamental questions should be considered to amend the flaw of Mr. Grusky's analysis:
1) Do we allow parents to influence their children.  In other words, are children considered "objects that belongs to the government, and are centrally managed?"  (If we do live in a society where parents influence are eliminated, do we still call our society "free");
2) Does genetic inheritance exist and could it affect social success?  (Do we acknowledge that while Olympians come from all backgrounds, parents who are athlete tend to have a higher rate of children succeed in sports?)

For first question, the study clearly shows its tendency of "do something to eliminate parents influence on their children".  As long as we live in a free society (more or less), and as long as we allow nature Parent love, an argument that loving parent can have a positive influence on their children sounds scary to me.  The closest thing I could imagine was the concentration camps where children were wiped of their identity, and was only to be know by a number, they subject to no parents unique love, and are to be treated by a dictatorship who suppress the most fundamental human relationship.  The author may not know that in mainstream Asian culture, they do not worship a "supreme creator", instead worship their ancestors.  Family bound is the religion.  Apparently Mr. Grusky consider such family bound as an adverse that "need to do something about".

For the second question, sports is a very good area to explore, because the "quantified" achievement at individual level, the measurement of success is much more "absolute" (if you run 9.70 sec, it's and better than 9.71sec).  And it is common sense (just look around your school mates) parents who are more athletic have a better chance to have athletic children - not 100%, but a notable correlation.   If we establish a study "American Athletic achievement mobility - how many children, no mater how un-athletic their parents are should show chances of moving higher in their sports ranking".  Is this even desirable?
Now, we know our brains are probably hundreds of times more complex than our Muscle, and if their is a trace of inheritance in sports achievement, what makes us think their is no overall inheritance to affect children's broader capabilities and success?

There was a Chinese saying answered Mr. Grusky's "concern" of inequality thousands of years ago, it goes like "Chaos Era Creates Fierce and Ambitious" it basically says, "troubled time, usually associates with war" are the most effective way of destroying people's previous success and give ambitious people opportunity to forcefully redistribute power and wealth (often result in other people losing their hard earned success under previous rule).

In a society where commonly accepted rules are relatively stable, and people's ability and efforts are somewhat equally recognized cross generations, can (and should) people with certain ability and hardworking attitude succeed, and if we do not deny genetic inheritance, those who took their hardworking parents gene should be able to succeed also.

The most problematic foundational assumption in Mr. Grusky's analysis is: If you take his view to a broader scope, do you think those who were born in China or India, (or Japan in the 70s, and Hongkong, Taiwan, Korea in the 80s), should American gave its fortune to level the play field between American kids and let's say a Chinese kid?  Should they both be taken to a 3rd country and be treated same way?  The answer was very inconvenient though, as much as Chinese and Indean kids were much worse to begin with, they both surpassed American kids and achieved more success.

Not only they succeeded, but also their success was achieved without government enforced "level play ground".

Instead of "point out the son of American #999, did not surpass the daughter of American #25, we should ask, how could Chinese and Indian kids succeeded while they started far poorer than even the poorest American family.  That's actually the real issue: how can countries much poorer than American had their children achieve so much more than American children?

Typical example of "Selective Compassion"

Many "compassionate humanitarians" are not as compassionate for human being as they so claim.

More often than not, someone writes about "be compassionate for..." they are advocating for a group of people they relate too, often ignoring (if not at the cost of) other groups of human being.   In short, while fluent in using words that should be used by humanitarians, these writers by no means care about "all human being", and tarnish the human rights movements to its core.

This article by Salon is a typical example of this "strong biased selective compassion".

The Second World War II in Asia was a much less known war in the west where the main enemy was the German Nazi.  This fact gave opportunity to this author "CHRISTIAN APPY, TOMDISPATCH.COM" the convenience in selectively omit history.

While dropping nuclear bomb was nothing glory, it did reduce total number of civilian casualties significantly.  According to WWII civilian casualty China lost 15 to 20 million civilian alone (Japan invaded all over Asia, not just China), Japan on comparison, lost 2.5 to 3.2 million so it is about 6:1 ratio.  For any 1 Japanese civilian casualty, there were 6 Chinese died, plus other Asian civilizations).

So frame it as if US was the villain committed worst crime in human history as this author did, is in essence claiming Chinese (and other Asian) civilian life were meaningless, and were allowed to vanish without consequences, and Japanese civilian life on the other hand are human lives that is subject to human treatment uniquely.

If the Author come out straight froward as a Pro-Japan war activist, it is understandable.  By presenting himself as a "peace lover denouncing war crime", not only he undermined the meaning of anti-war peace movement, but also in the name of "humanitarian", he denied other Asian nations human life's dignity and right to live, while furiously fought for Japanese life.

Another great example of Political Correctness Artists work!  Using political correct wording to achieve what ever war criminals couldn't for decades.

The Japanese mass killers (in Nanking city-then capital of China alone they killed 300,000 people virtually the whole population of the city left then) was able to kill Chinese people, but never able to strip them of their dignity and human rights in front of the world.  Christian Appy, was able to eliminate any remote hope for Chinese people to be respected at least as much as Japanese by the political correct artists.

The Political inCorrect way of describing the tragedy should be Hiroshima - the most difficult decision American made in an attempt of reducing civilian casualty.  Knowing many Japanese civilian lives were affected to stop the Japanese war machine to keep killing other Asian, it is still a very debatable decision to make.

Throughout his post, he mentioned no word Asia nor Chinese, and argued the "fat boy" did not save significant number of American lives.... As if other than Japanese and American, lives of other nation are commodity and should not be taken into consideration of tough decisions.  How is such a logic humanitarian?

10 key quotes from the Supreme Court's gay marriage decision Read more: http://www.politico.com/story/2015/06/10-key-quotes-from-the-supreme-courts-gay-marriage-decision-119497.html#ixzz3eL1Ldq8S

You can find the original article here: 

10 key quotes from the Supreme Court's gay marriage decision
Read more: http://www.politico.com/story/2015/06/10-key-quotes-from-the-supreme-courts-gay-marriage-decision-119497.html#ixzz3eL1Ldq8S

"If you are among the many Americans...who favor expanding same-sex marriage, by all means celebrate today’s decision. Celebrate the achievement of a desired goal. .... But do not celebrate the Constitution. It had nothing to do with it.” – Roberts

I grew up in a country where 9 (sometimes 7) people would determine what can be believed by the rest 1 billion. Lots of their judgement were "good", but as you all know, many of their "final decision" were quite "troublesome" -- the problem is NOT they make good or bad decisions, the problem is the system -- allowing 9 people to decide what everyone else can or cannot believe... Even if they make the right call (I'm to this day still an atheist), the system is still WRONG.

While the gay rights movement see the latest ruling as a success (rightly so, it is a big win! congrats!), the problem rest with the majority judges reasoning... They chose the wrong path to reach the right destination. If they were ordinary individual, (or even legislatures), then all is good. But as judges, they handed down a victory to gay rights movement, but took away the dignity of minority groups and put our rights under their mercy (or their willingness to see our "dignity")

As a visible minority, I always feared my rights were rest in the "merciful" hands of "an authority". Not all minority groups have the power to shape Supreme Court Judges preferences, no one's right should rely on their ability to shift other people's mind. I'm deeply worried now about our ability to be fair to those underprivileged minority group (talk about Asian American in front of affirmative act, anyone?)

A good cause, fought in a wrong way can be really bad. Some may have every justification for Hiroshima and Nagasaki, it was a war against evil, but to this day, how many people can rightly claim that Human used Nuclear Weapon against human is the way we should take to solve world peace problem?

This case relied on empathy of some of the judges, although it's a win for the plaintiff, the majority judges's reasoning basically undermined minority groups "dignity" to the point our rights now is not a part of our humanity, but mercy (or empathy) of those judge's personal believes.

Read more: http://www.politico.com/…/10-key-quotes-from-the-supreme-co…

Your house or your investment

This has been a long time "no-brainer" argument and even books written for this idea -- your house is the best investment of your live.

BRETT ARENDS of Wall Street Journal dare to challenge the common wisdom (it's actually been preached by some people to the mass)

Your house as your investment

Some even went as far as suggesting, only, most American home owners can be millionaires. Well, mind you being a millionaire means you can afford a home, it's the cause of owning a home, not the result of home ownership (that's right, owning a home won't make ordinary people become millionaire).

However, why such ideas are so popular? I call them political correctness - they showed some "simple data" that demonstrates 20000 dollar 30 years ago became more than 10 fold.

However, this is deceiving, you know, if you bought government bond 30 years ago, you probably can get 8% interest rate, and you know what, 20000 dollar with 8% interest rate annually is 201253.14 dollar.

In the past 30 years, the average return on your money, probably is higher than 8% in average.

Not only the return is far from extraordinary, but also it was achieved mainly because of government's (and financial industry's) ignorance.

The housing price is not a one way train as some people implied. The housing price is affected by various factors and most of those factors have been supporting house price to move up. However, as most of those factors are actually drying up, the forces behind past 3 decades housing value appreciation is not there to push the housing price any higher in the long run.

So what caused the housing price to go up "like crazy" in the past 30 years?

1) mortgage (and then the low interest rate).

As we all know, nowadays very few people buy their house with 100% cash. Borrowed money is a key in affording a house. The widely available credit was propelling housing price up in two ways, a) the demand was driven up because lots of people can afford a house with loan than those who can buy up front; b) for those who could bought a house without (or with little) loan, they can afford a more expensive house with (bigger) loan.

So, the progress (or the missteps) of the mortgage industry has helped housing price most. One interesting things is when demand increases, the price goes up and it does not mean the quality of life will increase - people will compete in throwing money just to maintain a relatively OK life.

2) The government's "making houses more affordable move". This has been a long term theme in western world - government tried to make houses more affordable by providing tools to help people to afford a more expensive house. However, such move by the western governments is different than in the east - where (many are socialism) government simply build houses and give out to people they see in need (so that separates the subsidised market from the help-yourself market).

This "making housing more affordable" while helped a little number of people in the short term, actually did nothing but created bubble - why? Because it encouraged people who otherwise need help to find dueling, to participate in the housing market and when it happens, demand goes up again. And while more people being able to afford more, the market adjusts itself so the price actually goes higher, so that again people will live close (if not beyond) to their means.

And since most of the tools designed to "help" people to afford homes are credit related, when credit crisis hit, those people who bought home with maximum credit available to them became hardest hit - they either loose their homes, or had to go through the hardship by degrading their quality of life.

3) the myth of buying home is the best investment.

Really? a home is first and foremost a place for your family to live your life.

The added "investment" value - which indeed was explored by many people in the past 30 years - adds unwarranted demand. Those people with money to spare where the ones who benefited most during this period. While people reckless enough to borrow more than they should have benefited too. However, as we said, this investment value not only in no way is superior than average other investment vehicle, but also has been artificially bumped up due to various reasons (politician wanted vote, banks wanted your interest payment).

I'm not saying that they won't invent more ways to trick your money out of your pocket, but each new invention they come out with, there are less impact they can push the housing market higher as they wish - when income growth does not match housing price growth, at one point, people simply can't afford a house no matter how hard governments and banks try to "help" them. We are not far from that point.

Housing market has grown out of proportion in our economy (as many argued, it's not that housing market grew really fast, it that real economy grew too slowly). This unpropitious partly helped fuel the notion that house is the ultimate investment. The key is most of the driving force behind the housing market boom in the past 30 years have exhausted and proved to be bubble building. The chances that there will be new drivers as powerful as the past ones is slim.

The most powerful at work now is "moral hazard" the American (and other governments in the world) tried hard to shore up. By saving those people "in need" to keep their house, the market participants are thinking "what a hack, I can play the market, and if I fail, the government will bail me out". This "if I win, the profit is mine, if I lost, the lose is the government's" mentality is the only key driver that helping the housing market in the near future.

Other than this single hope, I see no reason why the housing market can beat the long term inflation in the next 30 years.

Happy buying your house(s).

2009 Q2 - The (re)bubbling of the world economy

Not everyone felt comfortable with the 2009 Q2 rally.

Since Mar 09, 2009, the stock market has rallied over 30% in about 2 month.

Not only in US, but in surrounding area (i.e. Canada), stock market and even housing market entered a strong bull run.

"Voila, here is the recovery!" some pundits say.

Not so quick, the others say.

I'm one of the later.

By no means, I'm a professor or scientist in economy (even though my major was economy in university). None of my titles gives me any more qualification than any of you, my dear reader. But if you care to read on, I'd like to share my thoughts - which I found interesting.

first, WHY?

Why there was a rally across the world? Is it really economy turned around? There are SOME statistics came out since March that showed a slowed deteriorate, however, nothing really indicates a turn of direction in economy activities.

The strongest argument for a reason for the rally was "investors usually predict recovery ahead of real turn of the economy". However, not only it doesn't mean this type of prediction is always right, but also this rally is far more volatile than previous "prediction rallies".

So, second question is "WHAT"?

Then what had happened?

International hot money, need to park their money.

Because in the past two decades, the wealth distribution is lean towards elites (if you think all the out sourcing money went to Chinese or India citizens evenly, you have really kind wishes)

The out sourcing of American manufacture and services, while distributed wealth out of US, created thousands of super rich foreigners, who controls huge portion of some countries wealth.

The imbalance is one of the key reason why the recession came - those belong to these elite groups(they may be American, or foreigner, they may be individual or institution), can hardly extract more value out of American enterprises and consumers - a structure issue causing economy to stop growing in the way it grew in the past two decades.

The stimulus announced by governments all over the world, has been nothing but re-bubbling measure. Since the economies have long been controlled by these elite groups, any short sighted attempt to shore up the economy is actually enabling the elite groups to spend more. Pathetically the governments figured to "enable" the elite groups to spend more, they need to be given more. So all the stimulus are focused on "let banks lend more" and "government spend more".

Unfortunately, because the fundamental issue was structure wise, ordinary people control smaller and smaller portion of the world wealth, hence the elite group feel it's harder and harder to extract value out of ordinary people, so no matter how much money governments give them, the elite groups won't invest in real economy much, because no matter how hard they try, there is simply not enough money in the hands of ordinary people for elite groups to earn.

Of course the elite groups won't put their free loans unused. So they park their money in virtual economy - stock market, housing market of some countries (like Canada), commodity (Oil, and gold) and currency (i.e. anything but USD and JPY).

These hot money caused real shake of the global markets. Oil has nearly doubled, stock rose more than 30%, Euro rose more than 10%.

third, then what?

Then there will be even worse recession. I don't know how long will the current rally last, I would say months instead of years, because those money are free loan, and if they were not put into real economy, they are not helping fundamental (think about a stock you own, by spending most of the money in buying that stock share, you are not helping that companies balance sheet, hence the next quarterly report won't be that good).

All this is creating a second stage bubble, causing the underline structure issue be hidden longer, and make damage to real economy deeper.

Yes you heard me right, seeing the world investment markets boom so quickly in the past three month, (which coincide with the injection of governments money into "economy"), I'd say this will actually make recovery slower, because the private sector who got the money, did not believe in real economy, and instead of participate in real economy, they chose to play in the investment markets.

Not only this means the money government injected did not help real economy, but also it re-creates the crazy investment mentality which was another key reason why the bubble was formed initially.

The governments help to the elite groups served nothing more than a moral hazard - people have already forgotten the burn and rushed back to investment market like crazy.

Reckless led us to here and reckless is back, along with renewed enormous amount of money given to them by the governments, do you think this will help us?

I don't.

Who is to be blamed for the global economy mess of '08?

Check this articale out:

http://www.bloggersbase.com/articles/world-affairs/business-and-finance/the-blame-game/

Very good analysis especially the key point "economics is about INCENTIVES". However, it left one party out of the discussion - the politicians (and governments, congress, senate, Fed, etc contorled by them). Who provided "incentives" for both banks and homeowners to grant/apply for excessive debt? The defense of the Fed at the end of article is a paradox. While "you cannot blame the homeowner for taking the loan and then say that Wall Street was a victim of low rates from the Fed." is true, "the Fed" should not be exempted from being examined as if it's not a possibility at all (The sole purpose of the Fed seems to be limited to contradict bank defenders - which is at minimum an understate of the Fed).  
I would suggest the author to go back to his/her own key idea "INCENTIVES" and look at who provided incentives to the boom and inevitably led to the bust. (Ordinary people like you an me usually are right - the bigger the entity the more like to be at fault in economy crisis - the Government along with the Fed should be held more responsible than banks, and banks should be held more responsible than individual home owners".  


The government by  
a) promote homeownership (provide incentives for people who could not afford a home to buy a home, or those could afford a cheaper home to buy a more expensive home)  
b) low interest rate (provide incentives for banks to lend as much as possible, and home owners to borrow as much as possible) 
single handed provided most fuels needed for this perfect financial storm.  


The truth is some people will live a better life by renting, not owning. And those who are pushed up but stayed at the edge, are actually most vulnerable to any fluctuation, and they are actually the ones hit hardest when bubble burst (look at the most people who lost their homes, they are the ones politicians claimed helped most).  


No politicians are straightforward, they "promote home ownership" to buy people's vote, but, they are not paying the bill, so they creatively invented this grand scheme - let the banks pay the bill. However the banks are not stupid (or totally controlled by the government), so incentives have to be created for banks to "voluntarily" do it - the Feddy and Freddy? The super low interest rate? These things all sounds like serving a purpose.


And at the end, when bubble burst, politicians jump out and say "you banks all suck, and let me clean up the mess. Vote for me" Unfortunately they got it again and again. And the game of blaming does not even mention these politicians, we know they got their way again this time.  


Considering the quality of analysis in this article is fairly high, yet it still omitted government, politician, and even defended the Fed, one would suspect the omission is somewhat intentional - which suggest at least in part, use the 2nd in command as scapegoat - as in many multi-player games -- the crowd wants "justice" and wish to see some of the big guys held responsible, and the biggest guy though, will never blame himself, so the 2nd biggest is pulled out and executed as scapegoat. (Have you seen many big enterprises fire high ranking executive but the chairman/CEO stay intact?).  


Not saying Banks are not responsible, actually I agree the banks are more responsible than homeowners, but just like arguing which homeowner is more responsible than the other is useless and misleading, this argument between banks and homeowners is misleading too. It did nothing but shielding the politicians behind the government from being held responsible of their own disgusting deeds.