EclectEcon

Afternoon Tea in Hong Kong

No, I haven't taken aftenoon tea in Hong Kong. I've never even been to Hong Kong.

But after reading some of my reviews of afternoon tea joints, my nephew sent me this:

I must admit that I’m a big fan of afternoon teas, and it was a big part of my life growing up having afternoon tea at my Grandma’s house. Anyhow, I’d never found a place that made the traditional scones, jam and cream that I’ve always been such a big fan of.

I was in Hong Kong a couple weeks ago, so I dragged my brother in law to the Peninsula Hotel in Hong Kong. After waiting for over an hour to get a seat, the service was decent (but not spectacular), and I looked at the standard tray that everybody was getting and decided we could live without the dried sponges that Chinese bakers frequently called cakes. I just got the scones. Unlimited tea refills. No refills on the scones. A very pleasant afternoon, but at an astronomical price.

The two of us paid roughly $80 Canadian. I’d still have to call it an iconic place to have afternoon tea, and it was very plush, but probably not worth the money. ...

I’ve also had afternoon tea at Victoria peak (in Hong Kong on my last visit), and it was a little better, but even more expensive. One of the best parts of afternoon tea in Hong Kong is the feeling of the colonial days. Places like the Peninsula Hotel are relics of a bygone era of colonialism, so they need to be more English than England. I love to be surrounded by the pretentiousness. Feel free to post, but I wanted to add the Peninsula Hotel to your list of great places to have afternoon tea (if not good value).

Let me just add that tea at the places in Mayfair generally runs about $70 Cdn per person, so those prices in Hong Kong do not seem out of line for this sort of thing.

For my previous reviews of afternoon teas, please see these links (ranked in order of preference):

These two were superb. Highly recommended:

• The Four Seasons, London, England
• The St. Regis Hotel, Houston, Texas


Those in this next group were okay. I would consider returning to them:

• Claridge's, London, England
• The Dorchester, London, England
• Brown's, London, England
• The Pump Room, Bath
• The Boathouse, Guelph, Canada


These next two were judged unacceptable:

• The Royal Crescent Hotel, Bath
• The Queen's Hotel, Portsmouth, England

Scatological Hymnology

After I posted a brief item about the hymn, "You Raise Me Up," Robert sent me a note about another hymn:

Isaac Watts (1674-1748) was the most prolific hymn-writer in English, with over 500 hymns. http://www.cyberhymnal.org/bio/w/a/t/watts_i.htm

Another of his hymns is Blest Is the Man Whose Bowels Move. http://www.musicanet.org/robokopp/english/blestman.htm

...

An Odd Calculation:I have gained 420 pounds

I have no idea what might have moved me to think about this, but the other day I realized that (ignoring hourly, daily, and weekly fluctuations) I have, over my lifetime, gained about 420 pounds. I have also lost about 240 pounds. You can do the math.

Books in the Mail

• A Random Walk Down Wall Street by Burt Malkiel. I read this book in its first edition back in the 1970s, and it is still very good. I'll be using it in my course this fall on the financial crisis, mainly to set out the nature of modern finance theory and the criticisms of it. It is perfect for people who don't have a very strong background in either math or economics. It has more investment "advice" than I would like for a textbook, but that is only a minor drawback. I hope to cover the main points of this book in about 4 weeks.
• Causes of the Crisis. A special issue of Critical Review (Vol 21, nos 2-3, 2009). This is a brilliantly accessible collection of current articles by well-known scholars, many of whom had been raising questions about the financial system long before the recession hit. It is the other material I will be using for my course on the financial crisis.
• Brick Lane by Monica Ali. A novel about a young Bangladeshi woman who was sent off to London, England in an arranged marriage, about her coming of age, about her exploration of a new identity. Informative about cultural interactions, maybe, but I didn't much like reading about the tribulations she faced. In many ways, it reminded me of the pathos of The Jungle by Upton Sinclair.
• Fool's Gold by Gillian Tett. A very informative narrative of the evolution of the shadow banking system and its role in the financial crisis. Despite the lack of clarity in some of the explanations, and despite calling the Bank of Canada the "Central Bank of Canada", the book was very good. I have made considerable reference to it in the past few weeks and will likely make great use of it in my upcoming course on this subject. I have already mentioned this book several times (most recently here). It is not a quick read, but it was worth the effort
• No Second Class Citizens by Sir Roger Douglas. Sir Roger and I have become Facebook friends, likely through my earlier e-friendship with Rodney Hide. Both are libertarian politicians in New Zealand. In this book, many of the current policy issues are addressed from a libertarian perspective. The link is to a no-charge pdf copy of the book.
• The Retail Revolution: How Wal*Mart Created a Brave New World of Business by Nelson Lichtenstein. I love Wal-Mart and everything it does to break down barriers. Poor people get cheaper goods and better jobs at Wal-Mart, and third-world producers get better jobs, too. I didn't much care for the not-so-subtle anti-Wal-Mart, pro-union tone of this book.
• Animal Spirits by Akerlof and Shiller. These guys are bright, and they have continued the work of challenging the rational-maximizer neo-classical paradigm in economics. The phrase "animal spirits" refers to a passage in Keynes' General Theory. Shiller, btw, was one of the early outspoken analysts who warned about the coming of the recent housing and financial crisis.
• Playbooks and Checkbooks by Stefan Szymanski. An extremely readable and accessible little book that has NO graphs and NO equations. I'm considering using it in the next Economics of Sports course I teach. I reviewed the proposal for this book several years ago.
• The Myth of the Rational Market by Justin Fox. Justin Fox didn't much like economics as a student, but he has some valuable insights in this book. It's another sensible exploration of the things we need to take into consideration rather than use the simple rational-maximizer model.
• The Birth of the Palestinian Refugee Problem Revisited by Benny Morris. Morris has shown what seems like integrity to me by revising his views about the Palestinian refugee problem as more information became available. In this book, he makes it very clear that the issue is more complicated than any one-paragraph bit of polemics might suggest.

. . .

. . .

A Useful Book on Health Care

Ms. Eclectic tells us that interventions by her sister (a nurse) and support from the rest of us played an important role in her (comparatively) speedy recovery from surgery and cancer more than two decades ago. We have been fortunate since then, but we have ordered this book, The Essential Hospital Handbook: How to Be an Effective Partner in a Loved One's Care, just in case. Here is a brief description from the CBC:

Conlon, a journalist and [the] author who, indeed, became an active participant in [his partner,] Jim's eventually successful treatment, has used the experience to help people who might find themselves in the same situation he did.

His book, The Essential Hospital Handbook: How to Be an Effective Partner in a Loved One's Care, is a straightforward approach to handling a health-care crisis, a time when many people's common sense battles fears for their loved one's life.

The book offers a comprehensive look at emergency rooms, surgery, recovery and the hospice as it takes readers on a tour of the hospital.

Such things as living wills, drugs, hospital equipment and even slang are examined to give a well-rounded picture of what people might encounter.

While directed at caregivers and families, the book is just as helpful for patients.

...

Stratford Tickets as low as $29 each

I love the performances at Stratford, Ontario. I would go to them more often if they weren't so expensive.

This season, due in large part to the economic downturn, attendance at the performances was so low that many of the performances scheduled for later in the season were canceled. However, additional gubmnt funding has been provided so that more of the performances could go ahead as scheduled.

But of course increased gubmnt funding per se doesn't mean customers will be any more likely to attend the plays. So now, recognizing that the marginal costs of having one more person in a less-than-capacity-filled theatre are near zero, Stratford is offering balcony tickets for $29 for many of its performances.

One problem with this strategy is that those who booked tickets well in advance will be distressed at having paid more. And now people will tend to hold off buying tickets in the future, waiting for the deals at the end of the season.

It's a classic short-run, price discrimination maximizing strategy that might not be so profitable for the longer run.

Addendum: it reminds me of the problem that many minor league sports teams face when they have a large number of ticket give-aways during the season. They then find that fans start waiting for the give-aways in the future, making the marketing of the tickets all that much more difficult.

Afternoon Tea at Brown's

Two years ago I had a reservation to take afternoon tea at Brown's in the Mayfair district of London, but I was unable to keep that reservation. And so when I read that Brown's was named the best place to take afternoon tea in 2009, I had to try again, and was fortunate to be able to visit them in early June.

I arrived a bit early and spent some time in the bar, checking my e-mail, answering questions from students, etc. After about half an hour, a server came to tell me my table was ready (I was on my own this time). Shortly after I was seated, two women were seated next to me. One of them proceeded to move her chair around so they could talk more easily, but in the process managed to crowd me a bit. Fortunately the waiter came and suggested they move to a different place. To be honest, when I saw where they have been moved, I sort of wished I had been the one who was moved.

Brown's carries only about 17 different tea varieties. That seems a bit meagre to me. Fortunately, one was a type of Lapsang Souchang tea, but it was pretty wimpy, compared with the real thing. Their pale imitation of the real thing is called, "Organic Bohea Lapsang." Organic, schmorganic, I honestly don't care. But this stuff just didn't measure up.

The setting was nice, but not as nice as the Four Seasons or Claridges, and nowhere near as nice as The Dorchester.

The food was standard and good. The sandwiches were very similar to those at The Dorchester: finger-length on white and brown bread with standard fillings. The scones and cream were also very nice. I don't even remember the desserts.

All in all, Brown's was okay, I guess, but it was nothing special. In my own scheme, I'd rank it below The Dorchester.

For my previous reviews of afternoon teas, please see these links (ranked in order of preference)

         These two were superb. I will likely try to return to them:

• The Four Seasons, London, England
• The St. Regis Hotel, Houston, Texas

- - - - - - - - - - - - - -
Those in this next group were good or acceptable. I wouldn't mind giving them another try:

• Claridge's, London, England
• The Dorchester, London, England
• Brown's, London, England (this review)
• The Pump Room, Bath (I didn't take afternoon tea here, but had a very pleasant cream tea)
• The Boathouse, Guelph, Canada

- - - - - - - - - - - - - -

Those below were deemed unacceptable. Avoid them:

• The Royal Crescent Hotel, Bath
• The Queen's Hotel, Portsmouth, England

On Liquidity and the Financial Crisis

Like many economists, I simply could not believe that the Fed would be unable to pump up liquidity enough to stave off a major recession like the one the US has been experiencing. Even after the Bear-Sterns forced sale to JP Morgan, I wrote to MA saying that I couldn't imagine the US would slip into a recession as serious as that experienced in the early 1980s (he had written to me, saying he was sure it would be worse). My message to him back then said,

My best guess is that the only way this will happen is if the monetary authorities REALLY foul up (or if there’s some other major political upheaval). I’d say there’s perhaps a 1/4 chance of 1980s type deep recession, but even that is unlikely.

I pretty obviously had something wrong. Either the Fed waited too long to increase liquidity, or they were simply unable to increase it enough fast enough, or both.

My reading of The Money Illusion by Scott Sumner suggests to me that he believes the Fed did too little too late, that it was their choice (albeit a mistaken one) to keep liquidity at a level far lower than he thinks they should have aimed for.

But I wonder if something else was going on. What if, as I have mentioned before (see here and here), much of the liquidity on the system came from the shadow banks, not from the Fed and standard monetary system? From some of the reports I have read, I gather that perhaps as much as 40% of the economy's total liquidity was provided via the shadow banking system. Shut that down very quickly  (or have it nearly collapse) and that leads to one heck of huge drain on the overall liquidity of the economy.

Suppose the Fed did not fully realize the extent of the liquidity being provided by the shadow banks during the 2002 - 2006 period. Suppose, then that (as a result) the Fed had little idea how much liquidity was being lost as the housing bubble burst.

If these suppositions are correct, then several interesting implications follow:

• The Fed has had much less control over the money supply during the past decade than it did back in the 50s, 60s, and 70s. Velocity is difficult to measure and determine, high-powered money means much less, etc. So much for the 1960s version of monetarism.
• If the Fed wishes to target inflation rates (or nominal GDP, following Scott Sumner), it must have a better understanding of and control of the shadow banking system.
• If there really was a near 40% collapse of liquidity a year ago, then fiscal stimuli won't be very effective. Only as liquidity is rebuilt within the monetary system will the economy begin to emerge from this recession.This rebuilding process cannot happen quickly, especially given the general lack of trust in shadow banks.
• By not understanding the size and nature of the shadow banking system, I (and the other inflation hawks) probably encouraged central banks to worry too much about the inflationary impact of pumping liquidity into the economy.

Having said all this, I am still concerned about inflation in the future, but now the source of my concern is a worry that the US will increasingly monetize its growing and massive debt.

USB Safely-Remove Programme:no charge for the next day or so

Jack sent me the link to this page, where you can download a little programme that is considerably clearer than the basic Windows programme for safely working with your USB drivers. No charge for the next day or so.

I've installed and worked with it just a bit. He's right: it does seem much clearer than the basic Windows utility.

The Eyeballing Game

I have often joked about using "The Palmer Eyeball Algorithm" to fit a line or curve through some data points. It looks as if I do an okay job of eyeballing things, but there are others who are much better.
My average scores on this test were generally below 4.0 but were never below 3.0 (low is good), placing my scores roughly in the upper quartile of the distribution of those who take it.

Note: Each time you take the test, you make three runs through the test items. It takes maybe 5 - 10 minutes.

P.S., I know I'd have scored higher with a larger screen and a mouse instead of my puny near-netbook Toshiba and glidepad.

P.P.S. The first time I took the test, I was riding on a train. Understandably, the scores were very high.

More Ignorance from 'merican Mediots*

Shortly after I moved to Canada, someone in the US asked me, "How big of a city IS Canada?"

But that person wasn't a mediot* like the person on CNN who does all those cutesy stories and who should have known better than this.

*Mediot: contraction of media and idiot.

Posner Responds to His Critics

He's a bit too Keynesian for me. I did not support the stimulus, fearing that its major impact won't occur for quite some time yet.

How Long Do Foods Keep?

Jack sent me this link recently. It has a lot of useful information. E.g., for nearly all frozen food, the best before date refers to quality --- the food is safe for a VERY long time so long as it remains frozen at zero degrees (F). But then how many of us really keep our freezers set that cold?

Don't Get a Financial AdvisorPart III

During the past month or so I have recommended that people who do not want to do a lot of detailed investigation into various investment opportunities just go to a local bank and put their money in mutual funds there with the following characteristics:

• low management expense ratio
• index fund
• no loads or trailer fees

and relax. See this and this. This advice is pretty similar to that of Burt Malkiel in his ongoing book, A Random Walk Down Wall Street.

In e-mail, Robert chimed in with

Was it Groucho Marx who defined a financial adviser as someone who takes your money and invests it 'til it’s all gone? Here’s a case in point!

In contrast, Ms. Eclectic sent me this link, which seems to have some pretty sound advice if you want to look into hiring a financial advisor anyway. For example,

If you are prepared to take the tougher route ask the advisor what their value added is expected to be. Remember that advisors are not analysts – they generally rely on their own research department.

You, as an investor, if you are prepared to do a little homework can easily build a diversified portfolio using low-cost mutual funds or exchange-traded funds. It’s not brain surgery. Politely ask the advisor what she will be contributing to this process and how she expects to add value over a simple index based buy and hold strategy.

Also in e-mail, Eva sent this critique of using financial advisors:

I would note the following:

• Whatever you pay in up front fees to a manager/advisor, this should be considered  a tax. (It is actually a cost of doing business, but you can't write if off for taxation purposes.) Only this management fee/tax has a feature that even income taxation doesn't have: you must pay it whether you earn money or lose money on the investment. In times of very low interest rates such as the present, the management fees often actually exceed the expected rate of return on the investment......and you still have to pay tax on your investments' earnings, if there are any.
• The current rate of exchange of the US dollar is unsustainable and is likely to decline significantly in coming years. Inevitably, it will drag the Canadian dollar down with it although the C$ is a much safer currency to hold for the time being. The implication of this is to diversify the currency mix of investments. I hate to say this, but of all the Western currencies, the EURO is looking the best for the time being......but it could implode if the EU breaks up or one or more of the less fiscally sound countries that use the Euro as their currency has a very serious fiscal crisis (possible for quite a few of them). This is not beyond the realm of possibility.
• I think I mentioned to you that the time to get out of the stock market was 2 to 4 years ago. (I did.) [EE: that was when I rebalanced out of equities quite a bit myself.] The time to get back into it may have passed already for the time being. Now is the time to get into tangible property....real estate, commodities, collectibles including gems and stuff like that. Prices are relatively low except for items like gold that has probably already attained most of its growth potential. Even gold could have a long way to go if the US dollar collapses because there isn't really another substitute currency available for world trading. Such investments assume that resources are being put aside for the long haul and are not immediately needed.
• In the end, everything depends on the amount and source of funds to be invested. If the source of funds is very high annual earnings then a good tax lawyer/accountant is a far better investment than an investment advisor who only tells you what to buy and sell. The accountant can help shelter income from taxation. 

...

How Well Can Economists Predict Recessions?

Back in early 2008, I posted the well-known quip that

Economists have successfully predicted nine of the last five recessions.

At the time, I defended economists in general, pointing out that we often can foresee a coming recession or uptick, but we are horrible at predicting exactly when it will occur. In part, I suspect, our reliance on rational expectations models causes us to think things will adjust more quickly than they really do out there in the real world.

Last week, though, Maclean's magazine printed a short note saying that economists don't even forecast recessions well at all and "tend to be too optimistic", just the opposite of the quip quoted above.

GRAPH OF THE WEEK: Economists really can’t predict recessions

As renowned British strategist James Montier recently wrote in a Société Générale report, when you look at their record, it’s clear “that the three blind mice have more credibility.” As a group, economists failed to predict the last few GDP tumbles, and in general, they tend to be too optimistic.

While it does look as if the bulk of the profession completely missed the recessions of 1991 and 2001, I do want to point out that economists correctly called the 1983 downturn and the 1993 peak, and their forecasts actually led the performance of the economy much of the time going into the current recession.

Some Holes in Canada's Immigration Policy

I would not have thought ten years ago that I would be expressing concern about immigration into Canada, but over time it has become fairly evident that there are some problems that need to be addressed. My friend, JA (a retired demographer) has set out some of them in some recent correspondence:

To me, our primary immigration policy, with its point system, seems reasonable enough, assuming the points are assigned in a rational way. The problems seem to be in to other areas:

1/ Abuse of the 'refugee' system

2/ Design and abuse of the 'family reunification' and sponsorship route.

The first is an absolute disgrace, and the government seems almost powerless to deal with it. The worst part seems to be the apparent inability to repatriate many who are, sometimes after years,  eventually denied by the board.

The sponsorship route results in the immigration of many who would never qualify under the points system, and who subsequently become a major drain on the system. The safety net is supposed to be the legal responsibility of the sponsor(s) to pay for all 'essentials' for a period of between 3 and 10 years, depending on the family status of person sponsored.The big exception is medical care, for which the sponsor is off the hook after 3 months. All brothers and sisters of the sponsor are eligible for sponsorship, provided the parents are also sponsored. If all family members are already here and off sponsorship status, the sponsor can sponsor anyone else. Such folks are not required to meet employability expectations.

As for the legal responsibility of the sponsors, it seems there are several ways to get out of it (attachment [EE: see below]). Some immigration lawyers no doubt sub specialize in just that. Social workers tell of many 'lost sponsor' South Asians in their case loads in many areas, all on welfare after the sponsor(s) reneged. As for the statistical burden involved, just try to find out!

I would propose that as in many areas of public life, our immigration policies are superficial, penned out to appeal to the big city electorate. Ignatieff can be counted on to pander to the immigration lobby, as he needs to lock up the Toronto vote. Harper would, I'm sure, like to do a major overhaul but in a minority situation, there is no chance.

Our options are limited, if we are dedicated to generous immigration targets. The pool is what it is. The real question is:  why is it is so important to stuff the country. Yes, I realize that pensions will suffer otherwise, but it's a choice I would make. Don't "Give us your poor, your tired, your huddled masses ...."

Here are the conditions that let sponsors off the hook:

Trono: Centre of the UniverseCoor's Light Billboard

There is a tendency for people who do not live in Toronto, Ontario, to believe that people in Toronto think they are at the centre of the universe. Understandably, based on this belief, they often mock Torontonians. The latest, which is really humourous, is this billboard for Coor's Light:

Of course the folks in Trono [also sometimes spelled Trahnah] don't see it as quite so funny. See this.

Making fun of Toronto is a unity issue that ties together everyone who doesn't live there, a strategy that has been used for years.

What has changed, said [Paul Cubbon], who teaches marketing at UBC's Sauder School of Business, is the speed at which localized ads can move outside their target area via cellphone cameras, YouTube videos and Twitter postings.

[h/t Jack and Scoop]

The Financial Crisis, as Explained to a Child

Brilliant

Just How Violent IS the United States?

Here is a table of murder rates per capita. Note that Russia ranks 5th, Mexico 6th, and the US 24th. I know the data can be questioned, but they are informative nonetheless.

Showing latest available data.

Rank   Countries  Amount  # 1   Colombia: 0.617847 per 1,000 people  # 2   South Africa: 0.496008 per 1,000 people  # 3   Jamaica: 0.324196 per 1,000 people  # 4   Venezuela: 0.316138 per 1,000 people  # 5   Russia: 0.201534 per 1,000 people  # 6   Mexico: 0.130213 per 1,000 people  # 7   Estonia: 0.107277 per 1,000 people  # 8   Latvia: 0.10393 per 1,000 people  # 9   Lithuania: 0.102863 per 1,000 people  # 10   Belarus: 0.0983495 per 1,000 people  # 11   Ukraine: 0.094006 per 1,000 people  # 12   Papua New Guinea: 0.0838593 per 1,000 people  # 13   Kyrgyzstan: 0.0802565 per 1,000 people  # 14   Thailand: 0.0800798 per 1,000 people  # 15   Moldova: 0.0781145 per 1,000 people  # 16   Zimbabwe: 0.0749938 per 1,000 people  # 17   Seychelles: 0.0739025 per 1,000 people  # 18   Zambia: 0.070769 per 1,000 people  # 19   Costa Rica: 0.061006 per 1,000 people  # 20   Poland: 0.0562789 per 1,000 people  # 21   Georgia: 0.0511011 per 1,000 people  # 22   Uruguay: 0.045082 per 1,000 people  # 23   Bulgaria: 0.0445638 per 1,000 people  # 24   United States: 0.042802 per 1,000 people  # 25   Armenia: 0.0425746 per 1,000 people  # 26   India: 0.0344083 per 1,000 people  # 27   Yemen: 0.0336276 per 1,000 people  # 28   Dominica: 0.0289733 per 1,000 people  # 29   Azerbaijan: 0.0285642 per 1,000 people  # 30   Finland: 0.0283362 per 1,000 people  # 31   Slovakia: 0.0263303 per 1,000 people  # 32   Romania: 0.0250784 per 1,000 people  # 33   Portugal: 0.0233769 per 1,000 people  # 34   Malaysia: 0.0230034 per 1,000 people  # 35   Macedonia, The Former Yugoslav Republic of: 0.0229829 per 1,000 people  # 36   Mauritius: 0.021121 per 1,000 people  # 37   Hungary: 0.0204857 per 1,000 people  # 38   Korea, South: 0.0196336 per 1,000 people  # 39   Slovenia: 0.0179015 per 1,000 people  # 40   France: 0.0173272 per 1,000 people  # 41   Czech Republic: 0.0169905 per 1,000 people  # 42   Iceland: 0.0168499 per 1,000 people  # 43   Australia: 0.0150324 per 1,000 people  # 44   Canada: 0.0149063 per 1,000 people  # 45   Chile: 0.014705 per 1,000 people  # 46   United Kingdom: 0.0140633 per 1,000 people  # 47   Italy: 0.0128393 per 1,000 people  # 48   Spain: 0.0122456 per 1,000 people  # 49   Germany: 0.0116461 per 1,000 people  # 50   Tunisia: 0.0112159 per 1,000 people  # 51   Netherlands: 0.0111538 per 1,000 people  # 52   New Zealand: 0.0111524 per 1,000 people  # 53   Denmark: 0.0106775 per 1,000 people  # 54   Norway: 0.0106684 per 1,000 people  # 55   Ireland: 0.00946215 per 1,000 people  # 56   Switzerland: 0.00921351 per 1,000 people  # 57   Indonesia: 0.00910842 per 1,000 people  # 58   Greece: 0.0075928 per 1,000 people  # 59   Hong Kong: 0.00550804 per 1,000 people  # 60   Japan: 0.00499933 per 1,000 people  # 61   Saudi Arabia: 0.00397456 per 1,000 people  # 62   Qatar: 0.00115868 per 1,000 people

$20 Oil by December??

Former US gubmnt advisor Philip Verleger says that falling demand and near capacity storage will force oil prices down, possibly as low as $20/bbl by December. It's hard to believe that forecast when oil prices are hovering around $70/bbl as I write this. Here is his argument:

A crude surplus of 100 million barrels will accumulate by the end of the year, straining global storage capacity and sending prices to a seven-year low, said Verleger, who correctly predicted in 2007 that prices were set to exceed $100. Supply is outpacing demand by about 1 million barrels a day, he said.

“The economic situation is not getting better,” Verleger.... “Global refinery runs are going to be much lower in the fall. If the recession continues and it’s a warm winter, it’s going to be devastating."

Of course not everyone agrees with Verleger. From the same source:

Oil will average $63.91 in the fourth quarter, according to the median of analyst forecasts compiled by Bloomberg. Crude for December delivery traded at $65.61 today [July 16th] in New York. Prices have rebounded on expectations of a demand recovery, led by China and other developing economies, and concern expansionary monetary policy would stoke inflation and weaken the dollar.

At the other end of the spectrum from Verleger, Goldman Sachs Group Inc. predicted in a report yesterday oil will rally to $85 a barrel by the end of the year, and recommended that clients buy futures contracts for delivery in December 2011.

Afternoon Tea at The Dorchester

I know I should have written this up back in May, right after I was there. I am sure I have omitted something -- some details if nothing else.

In April, remembering that The Dorchester Hotel in Mayfair had been rated as having the best tea in London in 2007, I got in touch with our friend Jennie. She was delighted to come to London to join me, and so I made reservations for the two of us.

The lobby of the Dorchester and the huge portion of it in the back of the reception area, called The Promenade, are all very elegant-looking. Jennie was already there when I arrived, and we were immediately greeted and seated. The tea area was nowhere near full (in part, I figure, because it was no longer rated number one in 2009; another reason might have been the downturn in the economy. Or maybe it was just an off-day?).

Service was prompt, yet unobtrusive. The servers wore tails and were quite formal in demeanor. At the same time, our server was personable while not being overwhelming.

As usual, I had Lapsang Souchong tea; and as expected, both Jennie and the server (when pressed) agreed that they don't like it at all. Jennie had the Dorchester special tea, whatever that was, and quite liked it.

The sandwiches were plain-looking but very good. They were just finger-length sandwiches on standard brown and white bread with the crusts removed. As I recall, we enjoyed them, and when the server came around to offer more, we were able to select which ones we wanted more of. We didn't have to take a whole plateful of sandwiches, some of which we weren't quite so taken with. That was a nice feature of the tea at The Dorchester, one that others might do well to emulate.

The server had to be signaled a few times when we were ready for more hot water or for a replacement of the tea. Once we caught his eye, he was on the spot, though. He might have been a bit more watchful, but at the same time I must say I was glad he didn't hover over us or keep returning just to natter at us.

The "scones" were among the most disappointing I have experienced at afternoon tea. The were small, a bit hard, and a bit dry. I quite enjoyed the jam and cream that accompanied them, but I simply couldn't believe a posh place like The Dorchester would serve such disappointing scones. They seemed as if they'd been stamped out in a factory in Leeds or something.

From that point on, I don't remember much. I know I enjoyed the strawberry tart for dessert, but I don't even remember the rest of the desserts.

After we finished our tea, we explored the washrooms. They were nice; there was an attendant in the men's but somehow I managed to elude him on my way out.

Overall, Jennie preferred The Dorchester to Claridges, where we had met for afternoon tea two years ago. She thought the ambiance was far superior at The Dorchester, and she seemed to prefer the food, too. I wasn't so sure. The hockey pucks scones really put me off. Perhaps I'm too unsophisticated to appreciate what they were doing with the scones, but I doubt it. They simply weren't very good. [Obviously, these people disagree with me.] So, with that in mind, I'd probably have voted for Claridges over The Dorchester, but it would have been close.

And still, my favourite place where I had afternoon tea was The Four Seasons.

Tea for two at places like this generally runs about 35-45 quid each or $180Cdn for two.

For my previous reviews of afternoon teas, please see these links (in order of preference)

• The Four Seasons, London, England
• The St. Regis Hotel, Houston, Texas
• Claridge's, London, England
• The Dorchester, London, England (this review)
• The Pump Room, Bath (I didn't take afternoon tea here, but had a very enjoyable cream tea)
• The Boathouse, Guelph, Canada

- - - - - - - - - - -

Those below were deemed unacceptable:


• The Royal Crescent Hotel, Bath
• The Queen's Hotel, Portsmouth, England

Cowardice, Sell-Out, or Both? Yale University Caves on Danish Cartoons

From Roger Kimball (h/t BenS),

In its August 13 report on the decision by Yale University Press to censor Jytte Klausen’s book The Cartoons that Shook the World by insisting that she publish the book without the Danish cartoons or other images of Mohammed, The New York Times informed its readers that

Yale University and Yale University Press consulted two dozen authorities, including diplomats and experts on Islam and counterterrorism, and the recommendation was unanimous: The book, “The Cartoons That Shook the World,” should not include the 12 Danish drawings that originally appeared in September 2005. What’s more, they suggested that the Yale press also refrain from publishing any other illustrations of the prophet that were to be included, . . .

It turns out, though, that the recommendation was not “unanimous.”...

1) The story in the Times implied that in its appeal to experts the University and/or the YUP was exercising normal caution. But in fact, Professor Klausen’s book had already been throughly vetted. Readers’ reports — including two from Muslim scholars — were unanimously enthusiastic. The only Muslim member of the House of Lords, Baroness Kishwer Falker, enthusiastically endorsed the book. The book had also been vetted by YUP’s legal counsel and passed muster. The YUP’s publications committee unanimously and enthusiastically recommended the book for publication. So why call in another “two dozen authorities” on the veritable eve of publication?

Another detail: 2) .... As I said in response to a comment from Jytte Klausen, “I strongly suspect . . . that the threats-of-violence trope was a pretext, or at most a subsidiary concern” for Yale. What was the real reason that Yale was anxious to bowdlerize Professor Klausen’s book? Even now, I know, energetic investigative reporters are looking into Yale’s financial relationships with some of the spots where Linda Lorimer, Vice President and Secretary of the University, told Professor Klausen she has often traveled recently: Saudi Arabia, for example. Quite soon, I suspect, we will know why the Yale administration insisted that the Yale University Press dim the lux and veritas when it came to Professor Klausen’s book.

It looks as if the appeasers at a typically left-wing elitist institution over-ruled their own, in-house, Yale University Press. Or maybe the university was afraid of offending potential major donors? Or maybe both?

Viagra and the Church

One of the songs performed recently by Thatotherchoir, of which I am a member, was "You Raise Me Up."
Mostly I try to avoid thinking about the words of the songs we sing, especially when we perform in churches, but this one made me suspect strong Freudian or maybe Penthouse overtones. Here is the portion that particularly caught my attention:

There is no life - no life without its hunger;
Each restless heart beats so imperfectly;
But when you come and I am filled with wonder,
Sometimes, I think I glimpse eternity.

You raise me up, so I can stand on mountains;
You raise me up, to walk on stormy seas;
I am strong, when I am on your shoulders;
You raise me up: To more than I can be.

Or in some ways the entire song sounds like double-entendre poetry written by an older person who thinks s/he has rediscovered youth in a younger partner. Complete lyrics here.

Counter-factuals about the Financial Crisis

Arnold Kling writes many excellent posts about macroeconomics and about the financial crisis. In this one, he proposes eight experiments that are worth considering as intellectual exercises but which are likely impossible to carry out:

1. An experiment where we change housing policy to get rid of the housing bubble. Does a bubble simply emerge somewhere else?

2. An experiment where monetary policy follows the Taylor Rule exactly. Does it make much difference?

3. An experiment where there are no bailouts. What happens to the financial sector, and what is the impact on the nonfinancial sector?

4. An experiment where government does not promote mortgage securitization. In particular, bank capital regulations are not written to allow banks to hold less capital for mortgage credit risk when the loans are bundled into securities and still held by the bank. How much of the fancy financial engineering that took place over the past decade was driven by regulatory capital arbitrage?

5. An experiment where exchange rates adjust to reduce capital inflows to the United States. Does that prevent a bubble from emerging?

6. An experiment where European banking is less concentrated. To what extent was the crisis exacerbated--and the bailouts motivated--by the fragility of banking systems in other countries?

7. An experiment in where Glass-Steagall restrictions are maintained, rather than gradually eroded starting in the 1970's. I don't think that this would have made much difference, but some people are obsessed with the issue.

8. An experiment in where we have a "systemic risk regulator." I don't think it would have made one ounce of difference, but the conventional wisdom in the regulatory community seems to be that if we just go back to where we were five years ago and add a systemic risk regulator, we'll be fine.

A Sure Sign of a Fiscal Crisis in Ontario

At the beginning of August, I received my notice and forms from the Province of Ontario for renewing the licence plate tags for my car [licence plate: T1 TA3]. That is three months early! My birthday is in October, meaning I don't have to renew the licence plate tags for nearly three months. In the past, I have received these forms sometime in September, but this year I received the materials a month earlier than that.

There can be only one explanation.

The Province of Ontario needs the money and hopes that some poor schmucks will actually pay up three months in advance, thus lending the province $75 interest-free for three months. It's not much, but if it works with even 10% of all car owners, it could save the provincial gubmnt a bunch of money.

Me? I refuse to lend them the money interest-free. So I'll put the material away somewhere in a safe place and hope I can find it and don't forget it in October.

Perseid Meteor Shower Last Night and Tonight

From CBC:

The Perseid meteor shower reaches its peak at about 2 p.m. ET on Wednesday, but for viewers in Canada the annual event is still expected to put on a show Wednesday night.

About 100 meteors per hour can be seen streaking across the sky during the shower's peak, NASA astronomers say.

The peak, however, is at about 2 p.m. ET on Wednesday, meaning people in Canada won't get to the see it at its zenith.

But the meteor shower did put on a show Tuesday night and early Wednesday morning and is expected to do the same Wednesday evening.

NASA astronomers recommend watching the shower between 9 p.m. and 11 p.m., when both the moon and the constellation Perseus are low on the horizon, though the number of meteors will be fewer than at the shower's apex.

So we'll have to tear ourselves away from the television set this evening and drive out into the country somewhere to watch this.

Why Did Easy Money Have Such a Big Impact on Housing but so little elsewhere?

Here is another question about housing and the financial crisis that has been bothering me for a couple of years.

Many people seem to blame the Fed for starting things with its easy money policies during the first half of the decade. John Taylor presents the case for this view quite compellingly in this article in Critical Review.

But if money was so easy/loose/cheap, whatever term you want to use, why didn't the CPI take off more than it did. I gather US prices rose by a bit more than the targeted 2% during that period, but not much. And yet the rate of inflation in the housing market was astronomical at the very same time.

I know that monetary policy tends to have its initial impact on housing markets often, but the differences between housing and the rest of the economy were very distortionary and look to me as if there must have been much more going on that would have had such a one-sector impact on housing.

Here is my guess (but I am open to suggestions). As I mentioned in my posting yesterday, the shadow banking system seems to have played a major role in pumping up the demand for mortgages (and hence increase the supply of lendable funds specifically to the housing market). And the way the derivatives evolved, it didn't matter what type of mortgages people provided so long as they could sell them to investment banks who could in turn fob them off onto shadow banks for repackaging as collateralized debt obligations. 

With the rapid growth in the demand by lenders for mortgages (increasing the supply of lendable funds for home buyers), outstripping the supply of conventional mortgages, credit standards were lowered ... and lowered some more. It was this set of circumstances that really drove up prices in the housing market. Easy money from the Fed could not have caused the bubble by itself. It was the flood of liquidity from the shadow banks that really drove up housing prices.

But of course it couldn't continue. People who bought a house using a subprime mortgage ran into problems when their adjustable or teaser rates were adjusted upward. Also, not everyone could be induced to keep trading up or into buying second or third homes for speculative purposes. And once the demand for housing slowed a bit, the players in the shadow banking system who were massively leveraged couldn't find people to lend them money in the short-term or overnight money markets.

From Wikipaedia,

In the case of investment banks, this reliance on short-term financing required them to return frequently to investors in the capital markets to refinance their operations. When the housing market began to deteriorate and the ability to obtain funds from investors through investments such as mortgage-backed securities declined, these investment banks were unable to fund themselves. Investor refusal or inability to provide funds via the short-term markets was a primary cause of the failure of Bear Stearns and Lehman Brothers during 2008.

When the shadow banks couldn't borrow short-term, and when the underlying mortgages they were holding began to default, and when they couldn't make payments on their CDOs, then they had to turn to the insurers of the the CDOs --- the monoline insurance firms and the investment-bank parents who had provided them with guarantees of liquidity.

If it weren't for the actions of these highly leveraged shadow banks, I have to wonder whether we'd have had such a big housing bubble even with easy money from the Fed; and without the highly leveraged credit from the shadow banks, I have to wonder whether a downturn in the housing market would have caused such serious financial problems for the economy.

The Housing Bubble and the Financial Crisis:Does Russ Roberts Have it Backwards?

In a posting last week, Russ Roberts (one of my favourite bloggers, btw) wrote that he is working on a lengthy essay that might become a book about the recent housing bubble and financial crisis. In that posting, he posed two questions, the first of which was:

Why did prices rise so dramatically between 1995 and 2003? [EE: I'm guessing he is referring to housing prices here.]

Without this price rise, the subprime market never takes off in 2004-2006. There would have been no NINJA loans, no loans for 103% of the value of the house, no second houses with zero down, no 80/20 loans and so on.

Recently I have been reading Fool's Gold by Gillian Tett. One of the themes implied by this book is that the subprime market would not have developed, and the housing bubble would not have occurred (or certainly not been nearly so extreme), if the shadow banking system had not evolved as a way for banks to circumvent the capital requirements that were in place for commercial banks. In one form, they bought tonnes of mortgages and resold the mortgages to off-shore special purpose or special investment vehicles.

These institutions, in turn, paid for these mortgages by borrowing short (while lending long). And when the bubble burst, they lost billions because they were over-leveraged and under-capitalized. Without these vehicles, the supply of lendable funds for mortgages would not have been nearly so great, the subprime mortgage market would not have taken off (and might even not have evolved), and the housing bubble would have been far less likely to have occurred.

 In other words, it is possible, even likely, that the causation is backwards from the way Russ Roberts expressed it. Or it might be a simultaneous relationship.

 I'll try to do a full review of the book in a later posting.

Toilet Paper: Too Important to Leave to the Market"The Commies always get a bum wrap"

There are serious concerns in Cuba that they will run out of toilet paper soon:

HAVANA - Cuba, in the grip of a serious economic crisis, is running short of toilet paper and may not get sufficient supplies until the end of the year, officials with state-run companies said on Friday.

Officials said they were lowering the prices of 24 basic goods to help Cubans get through the difficulties provoked in part by the global financial crisis and three destructive hurricanes that struck the island last year.

Cuba's financial reserves have been depleted by increased spending for imports and reduced export income, which has forced the communist-led government to take extraordinary measures to keep the economy afloat.

"The corporation has taken all the steps so that at the end of the year there will be an important importation of toilet paper," an official with state conglomerate Cimex said on state-run Radio Rebelde.

The shipment will enable the state-run company "to supply this demand that today is presenting problems," he said.

Cuba both imports toilet paper and produces its own, but does not currently have enough raw materials to make it, he said.

My reading of this news story [h/t Jack]:  the Cuban gubmnt has taken on the role of making many of life's staples easily affordable for the masses. But in doing so, it has run out of money and has opted to spend this money on other "essentials" rather than on toilet paper.When there are shortages, administratively lowering prices will only exacerbate the problem.

Jack says, "The commies always get a bum wrap."

BenS says about the bureaucrats who are clearly not out-performing the market, "Seems right. They ARE paper-pushers after all."

The distortions in the Cuban economy are horrendous. Shortages like this would only rarely arise and certainly would not last five months or so in a market economy, even when a celebrity, as a joke, announces there is a shortage of toilet paper:

1973 - Johnny Carson jokingly told his NBC Tonight Show audience that there was a TP shortage. People horded, draining supplies. Johnny then said, "just kidding," but the store shelves were out of TP, so people thought he was part of some shortage cover-up scam, and they horded some more.

I don't remember that incident, but maybe that's because I was living in Canada at the time. For more on the history of toilet paper, see this and of course the Wikipaedia entry.

Scotch Therapy!

Ms. Eclectic has long maintained that scotch therapy is the best way to deal with colds or the flu (see this, for example). And now we learn that Russian physicians are advising travelers to drink whiskey to deal with possible swine flu infections:

Russian soccer fans heading to Wales for next month's World Cup qualifier have been urged to take unique precautions to ward off swine flu: drink Welsh whisky

"Welsh whisky is on offer to Russian supporters as a disinfectant," Alexander Shprygin, head of the national team's fan club, said Monday. "This will relieve any symptoms."

We both concur with one of the comments on that story: is there some way to convince our drug plan to cover single-malt scotch if we get the flu?

More: But I guess it is possible to overdo it:

People who consume, on average, more than one alcoholic drink daily face a significantly higher risk of developing six types of cancer, according to sobering new Canadian research.

But as Ms. Eclectic also says, she had cancer before she started drinking much. So maybe the direction of causation is reversed? 8-)