PPP

Going to the candidates’ debate? It always reminds me of the Mrs. Robinson tune. Which in turn reminds of the movie, from an innocent era when cougars only roamed the mountains, not the metropolis.

Governor Martin O’Malley gave the best answer to the zillion dollar question: why didn’t Obama stick it to Romney on issues such as his 47% comment?

“He’s too much of a gentleman,” O’Malley lied. It’s really not possible to progress in politics as a gentleman debater. That’s not to say you need to be underhand and deceitful, though it often helps—folks have short memories.

Biden didn’t act ungentlemanly on Thursday, he just confirmed that folksy works, and that, as you commonly see in souvenir stores in California, old guys rule. With the benign smile of experience, the wise uncle listened patiently to the fatuous rants of an upstart nephew; too many numbers, too much detail, and too little people-speak came out of the technocrat youth. Occasionally the older man would gently correct him, sometimes a little more firmly, as if to say ‘No! This youthful fantasy, we really can’t allow.’

Ryan has better figures, and a grasp of detail. But the thin-lipped grimace, which he shares with Romney, together with his water intake, showed his extreme discomfort that evening. It’s incredibly difficult to pretend you’re listening to your opponent’s points with great interest, and then destroy him with a smile in the next sentence. Even Ryan’s chide about Biden’s faux pas history was poorly received. Some ten year old must have planned that one—when you remind a seventy year old (political) gentleman of previous bumbling, it’s like telling a story at Thanksgiving dinner about how your grandad forgot to zip his fly. People like people, not machines. And a folksy politician who bumbles is much more real than a numeric robot.

The IMF at work. Red shows the prediction last June for economic growth in 2013, blue shows those numbers predicted in April. Wow, that’s er… two months before. Someone screwed the pooch!

I had the privilege to hear Martin O’Malley speak the day after Hurricane Irene whipped through Maryland, when his agenda must have been as overcrowded as downtown Shanghai. He swept the floor. He talked about the environment, and particularly Chesapeake Bay, with more depth than many environmental professionals I know. It was obvious to me then that this man has every chance of becoming president. Just not right now.

O’Malley could run in 2016, if Obama wins the 2012 election. Or, he might run against Romney, but beating the incumbent is always tough. US presidents tend to do the full tour, unless they do something particularly stupid (think Nixon, but even then Ford served out the rest of the mandate).

If Obama wins, O’Malley’s challenge is to elect a follow-up Democrat administration—history suggests that after eight years, Americans like to change. The only exception in recent years was Reagan-Bush, twelve consecutive years of GOP. And the Maryland man will want two terms.

Only the other day Joe Kernen, the Kahuna at CNBC, was preparing to interview governor O’Malley, and commented on his presidential qualities. Partly just by looking at the picture. Look at this guy. Look at him! he just looks right. Curiously, anyone looking at the Kahuna himself will immediately think of a background steeped in the markets, which he has, but Kernen also has a master’s in molecular biology from MIT, and worked on cancer for a while, publishing in top journals such as Cell.

Tumor research may well be an asset in interpreting today’s economic growths. God knows what other weapons are left in the arsenal. When the IMF performs as shown above, it’s clear that no one has a clue what’s going on. What annoys me is that no one has the guts to say so.

Political, economic, and medical statistics are often quoted in relative terms: if you have high cholesterol, let’s say the lethal, or LDL variety, and you take the new drug Austeritazol, you reduce your probability of a heart attack by 50%. Ok, suppose someone without high cholesterol, age 40-50, has a 5% chance of a heart attack. Oh, you have high LDL? In that case your odds are at 15%. Go take that Austeritazol stuff, the probability goes down to 10%. That’s because if your odds are normally  5%, and with high LDL 15%, you only have a ten point margin to play with. Cut that by half, you take off five points,  so your odds become 10%.

So the drug actually slips five points off your odds—not fifty, as people might think. I was considering a cholesterol-lowering drug a couple of years back, and one of the listed side-effects was death. My option was to lose weight instead—challenging because I suffer from a medical condition known as bacchus syndrome. Percentages of percentages are always popular with the ungentlemanly classes.

If I were to join that unholy band of brothers, the IMF numbers become truly shocking. In the UK, Germany, and the Netherlands, these guys were out by 50-70%. In Spain, by 230%. Portugal? 370%. EU as a whole, 130%, in the US, about 15%. In China they were off by 40% and that’s like rolling an elephant down a bowling alley— sovereign nations will be flying around like ninepins.

PPP usually stands for purchasing power parity, a great favorite of economists. It’s econospeak, because no one else knows what it means. More recently, it can stand for public-private partnerships, which were ruinous in the UK in Tony Blair’s day, having started life as John Major’s private finance initiative, or PFI. They became a UK export, and a popular option in other countries. They were ruinous in Portugal too. Pretty unsurprising, because private companies generally protect their interests much more effectively than governments.

Today, celebrating the IMF’s numbers, that acronym has changed to piss-poor predictions.

One message is abundantly clear: the lunatics have taken over the asylum. Everywhere now the talk is of exports. To where? Portugal is exporting to Africa, oil-rich Angola being an important market. Southern Europe, the UK, and other EU nations cannot be strong importers, i.e. export markets for other countries, given the restrictions on their own internal consumption. The same applies to the US. Like everything else in economics, this is a zero sum game. Someone exports, someone else pays. If we all export and every country’s broke, who buys?

An eminent Belgian scientist I once knew had a poster up in his lab: theory is when you know everything, but nothing works. Practice is when everything works but you don’t know why. Here we combine both theory and practice: nothing works, and no one knows why.

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