DeLong Smackdown Watch

A correspondent writes, challenging my claims about the Stupidest People Alive. I confess that I was in error:

Brad DeLong, you are a fool.

Donald Luskin's claim to the "Stupidest Man Alive" crown cannot be shaken.

Consider this:

The Conspiracy to Keep You Poor and Stupid: Consider this passage [from the Post editorial]:

The U.S. current account deficit has grown to an astonishing 6.5 percent of gross domestic product... This means that the nation is consuming around $700 billion more than it earns each year and paying for the difference by mortgaging or selling assets.

...focus on the factuality of the claim... that a trade deficit necessarily entails debt creation. This is simply not the case. When an American... earn[s] money... spend[s] that money on foreign goods, and (3) the foreign maker of those goods doesn't spend that money on American goods, somehow debt is created. I don't see it. Where's the debt?... There's simply no debt involved, necessarily, anywhere in the transaction. Yet the notion of debt is always evoked... some kind of overhanging Sword of Damocles... inescapable doom.... Now consider this passage....

Every year Americans sell or mortgage a slice of their productive assets to foreigners, with the result that income from those assets must flow abroad in the future

...the catastrophists... trot out this idea that when foreigners buy our productive assets... we are sacrificing all future benefits from those assets... utter misunderstanding of how such assets are priced in an efficient market.... If you take money today in exchange for that share of stock, you have captured the present value of all its future benefits... an asset's price make you indifferent between holding the price in cash and holding the asset.... America becomes no poorer when an American accepts Chinese cash for a share of IBM.... Before, the American held stock. After, the American held cash equal to the present value of the stock's future earnings potential...

Let us summarize the transaction. Chinese investors buy shares of IBM from us Americans. They pay us in yuan. We Americans take those yuan and use them to buy a bunch of frozen shrimp and a bunch of running shoes from producers in China. We eat the shrimp. We go jogging and wear out the running shoes. Next year the profits the shareholders of IBM earn are credited to some guys in China rather than to some of us. Our national product is thus reduced by the amount of the dividends and retained earnings credited to the foreign owners.

We Americans are poorer in an income sense: the trade deficit-creating transactions have reduced next year's national product (and national product in every year thereafter). We Americans are poorer in a wealth sense as well: a greater share of IBM is owned by foreigners, and there is no compensating greater share of a foreign company owned by Americans.

Donald Luskin--somehow--fails to understand this.

I will not bother to observe that Luskin's quotes from the Post nowhere say anything close to "trade deficit necessarily entails debt creation."

Our correspondent is correct: the Post says that a trade deficit leads (on net) to Americans "mortgaging or selling assets" to foreigners. Mortgaging assets creates debt. Selling assets doesn't.

Comments

[CapitalistImperialistPig]

... And still champion!

[P O'Neill]

This is actually a useful insight into the Luskin psyche. It shows that his hostility to economic analysis is pathological: "somehow debt is created. I don't see it. Where's the debt?..." -- he's not just afraid of the analytical framework of a formal model, he's afraid of the analytical framework of an intro macro book that would simply write down balance sheets for Home and Foreign, and show how the transactions must result in debt. The result is that nothing he says is grounded in even in the simplest accounting identities, and draws simply on the needs to glorify George Bush and bash Paul Krugman (i.e. the same thing, in his mind).

[Julian Elson]

Awfully nice of those beneficent Chinese to shower their goods upon us without asking for anything at all in return.

This guy makes Paul Craig Roberts look like the reincarnation of Keynes.

[John Emerson]

During my earlier years, those I knew (including myself) who were suspicious of the economics profession were usually leftish. In the last ten years, however, I have heard suspicion expressed mostly by cornucopian free marketers, who resent it when economists say you can't have your cake and eat it too.

And frightening loonies they are indeed.

[jerry]

So there's a stupidest man alive as well as a fucking stupidest man on the planet.... And from this I conclude that Douglas Feith is undead.

[Davis X. Machina]

Luskin seems to share with his hero, Junta Boy, that if you reeeeeeely believe it, it becomes so.

I get that in freshman Latin ('But Mr. M, I reeeeeeely thought "tempus" was masculine!) but that's the upper age limit for this particular ploy, at least for normal people.

[Salvadore Lee]

All consumption reduces future national product compared to investment.

But in this case isn't Luskin on our side? The place in the transaction where national income is reduced is the decision by some American to consume instead of invest...

[Which is the result of (a) big budget deficits (the government's decision to spend more than its income) and (b) big asset purchases by foreign central banks, which push interest rates down, wealth up, and make households think they can afford to spend more than their income. It's a mistake to say that there is a "place" in the transaction where it happens. The whole is an equilibrium of the system.]

[knzn]

Luskin may indeed be an idiot, and it’s clear that he lacks the ability to express himself in a way that is acceptable to economists, but let me take a shot at interpreting his remarks in a way that is consistent with a normal IQ. First, deficit trade need not create “debt” because it can be financed with equity.

[Note that the *Washington Post* explicitly says this...]

(It depends on how you define “debt”, but certainly, by the definition of “debt” used in corporate finance, the trade deficit is not financed entirely with debt.) Second, the Chinese are offering us terms that make it attractive to sell our equity. True, we will be poorer in the future than we would otherwise be, but we’re getting such great frozen shrimp and running shoes today that a rational person would willingly give up that future wealth in exchange. (Bear in mind that the frozen shrimp and running shoes are a bird in the hand, whereas the Chinese are accepting the risk if IBM goes down the tubes.) This is not such a far-fetched idea, it seems to me, given the rate at which one may reasonably expect our technology to advance, and therefore our productivity to grow. In the future, despite having to send half of IBM’s dividends to China, we can still afford frozen shrimp and running shoes because IBM will be that twice as productive and will pay bigger dividends. In the future, in other words, we will be able to maintain our current standard of living while running a trade surplus. (I’m not saying that’s necessarily true, but I don’t think it’s untenable.) So if you assume a sufficiently concave felicity function, the tradeoff is rational, and there is no cause for alarm if we sell off our assets.

[But selling off our assets *does* make us poorer, yes? You can't rescue Luskin. You shouldn't try.]

Now that I write this, I begin to realize there’s probably no way to make the numbers work if you really imagine the trade deficit being financed mostly with equity. We can’t grow fast enough to keep the same standard of living if we’re bleeding at IBM’s rate of profit. However, it might be optimal to finance part of it with equity. And the case for running a large deficit is not such a stretch if it is financed with debt (2% real interest rate; 3% growth; if we expect those rates to continue – as one reasonably might, looking at forward rates and growth history – then we can run a successful Ponzi scheme).

[Ashish]

John,
You can't eat cake and have it too! But the end objective is to eat the cake and not just have it! So apparently, we become poorer when we eat cake. I guess then we should keep having the cake so that we continue to stay wealthy. Shouldn't it matter that being wealthy prevens us from enjoying the cake?

[knzn]

Brad (I assume the editorial comments on my previous post are yours): I guess your first point is right. I didn’t read the Post editorial, but apparently neither did Luskin.

However, your second point is tricky. Selling off assets makes us poorer in the future relative to what we would otherwise be...

[Exactly. That's what the Post asserts. That's what Luskin denies. Stop there.]

I will admit, the way Luskin expresses himself makes it hard to conduct a rational argument, so perhaps calling him an idiot is indeed the best course.

[Yup. Don't talk about what he might have said if he understood the issues. There's no point.]

[P.M.Lawrence]

The flaw in this reasoning is supposing that trade is bilateral, that US dollars reaching China are held as Chinese claims against the US economy and might (say) be used to let China acquire US resource bases like oil firms.

In fact the scenario is much more like what happened in the wake of New World silver inflation in the 16th and 17th centuries. Spain and Portugal became impoverished by a collapse of their local economies, end of chain countries like Poland and Turkey became impoverished by sending out goods in exchange for depreciating silver, and middleman countries like England and Holland benefitted in an enduring way.

Similarly, what China does with a lot of US dollars is, buy things like Australian iron ore to build its own infrastructure - investment, not consumption. While the US-China relationship seems to be approaching an unsustainable point, that is not in fact the case. The end countries have yet to reach their own unsustainable trade position (though that too is fast approaching, it has not yet been felt).

When the buck stops, it will stop in the end countries, not the USA. The Chinese have no worries for so long as they can find a bigger sucker - and the USA has no worries for so long as it can lean on end countries to keep recycling US currency from middleman economies, i.e. creating suckers. "There's another one born every minute" shows a fine intuitive understanding of the dynamic processes interfering with static equilibrium (as is, "oh, we just put another lamb in every so often", about the Lion Lying Down With The Lamb exhibit).

Think multilateral, and think through the dynamics of each stage.

[knzn]

"However, your second point is tricky. Selling off assets makes us poorer in the future relative to what we would otherwise be...

[Exactly. That's what the Post asserts. That's what Luskin denies. Stop there.]"

I just read Luskin's article, and I don't see where he denies it. He denies that it makes us poorer overall, and (as I noted in the part that you cut out of my previous post) he could be right depending on what discount rate you apply.

However, having read his article, I see he also fails to recognize that currency held abroad is a form of debt, so perhaps he is as stupid as you say.

[anne]

http://www.nytimes.com/2005/08/08/opinion/08krugman.html

That Hissing Sound
By PAUL KRUGMAN

This is the way the bubble ends: not with a pop, but with a hiss.

Housing prices move much more slowly than stock prices. There are no Black Mondays, when prices fall 23 percent in a day. In fact, prices often keep rising for a while even after a housing boom goes bust.

So the news that the U.S. housing bubble is over won't come in the form of plunging prices; it will come in the form of falling sales and rising inventory, as sellers try to get prices that buyers are no longer willing to pay. And the process may already have started.

Of course, some people still deny that there's a housing bubble. Let me explain how we know that they're wrong.

One piece of evidence is the sense of frenzy about real estate, which irresistibly brings to mind the stock frenzy of 1999. Even some of the players are the same. The authors of the 1999 best seller "Dow 36,000" are now among the most vocal proponents of the view that there is no housing bubble.

Then there are the numbers. Many bubble deniers point to average prices for the country as a whole, which look worrisome but not totally crazy. When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone.

In Flatland, which occupies the middle of the country, it's easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can't even get started.

But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions - hence "zoned" - makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles....

[Darren]

Luskin: "The Taipei seller could just as easily keep the money in his mattress, invest it in stocks, real estate, or whatever. There's simply no debt involved, necessarily, anywhere in the transaction."

Yes, he is a fool. 'money in the mattress' is an IOU worth $X of US goods sometime in the future. How is this not a debt? If you buy real estate, you are forever owed the future productive capability of that land, and so on (that's the only POINT of owning land - you can't eat it!) ALL items in the capital account are claims on future production in the united states in one way or another.

He is also a fool because he thinks that financing the CA deficit entirely with equities somehow has no effect on the future of the American economy.

The chinese have shrimp and running shoes. We have IBM, which generates future profits. They send us the shrimp and the running shoes, we send them cash (which currency doesn't matter.) They send the same cash right back to us and we send them IBM. We've traded IBM for shrimp and running shoes, the cash is irrelevant. Luskin concentrates on the second transaction (cash for IBM) and ignores the net effect of both transactions (we've *unambiguously* sacrificed future earnings for shrimp and running shoes today). Now, depending on our discount rate and the future prospects of IBM making a profit, maybe that's a good idea and maybe it isn't, but Luskin is pretending that nothing is going on vis-a-vis *the future* in all of this, which shows he does not understand introductory international macro accounting identities, and that Brad or Paul could wipe the floor with him in an open debate - I'd love to see that.

[Darren]

To add to my last comment (I wish we could edit).... Luskin makes a great fuss about efficient market theory, pointing out that it means that when you sell IBM, the price (presumably) reflects all future profits that IBM will already earn.... so selling IBM has not made you worse off.

Fine, but Luskin misses the point. The point is that the current account deficit is telling us a story: we are selling IBM (and its future profits) for cash in hand (which doesn't make us worse off), but we are spending that cash on consumer goods TODAY! We are borrowing from our own future production to finance extra consumption today. That's what the CA deficit means and that's all it can mean. To deny this - as Luskin appears to be doing - is absurd.

[Mr. Montesquieu]

Isn't there some tortuous argument to the effect that frozen shrimp and running shoes are really investments?

If there is, that would take the yellowcake.

[knzn]

Again, Brad and Darren, you have misinterpreted Luskin. He is not saying that “financing the CA deficit entirely with equities somehow has no effect on the future of the American economy.” (Nowhere does he make such a statement.) He is saying it has no effect on our discounted future plus current consumption (which is trivially true for some discount rate).

[But if that was what Luskin was saying, Luskin wouldn't have a beef with the Washington Post, would he? Your problem is that you are trying to deduce a rational underlying view of the world from Luskin's rants. It can't be done.]

We consume more now and less in the future, but the shrimp and shoes are worth the value of IBM. Wrong, probably, but not illogical.

[dennyr]

"When the buck stops, it will stop in the end countries, not the USA. The Chinese have no worries for so long as they can find a bigger sucker - and the USA has no worries for so long as it can lean on end countries to keep recycling US currency from middleman economies, i.e. creating suckers"

But what happens when global growth China decides it is ready to make the "Yuan" the world's reserve currency, i.e it will only except yuan for trade payments and will only buy oil in Yuan? Demand for Yuan will rise and the world will need less dollars leaving no country willing to hold ("suckers") dollars. Were would the US be without dollar hegemony?

[Darren]

Kuzn: "(Luskin) is not saying that "financing the CA deficit entirely with equities somehow has no effect on the future of the American economy." He is saying it has no effect on our discounted future plus current consumption (which is trivially true for some discount rate)."

Fair enough. I guess a real issue here is choice of discount rate: a CA deficit optimist like Luskin feels that a high discount rate should be used: don't worry about the future, consume today.

Someone concerned about the CA deficit would be worried about the borrowing from the future.

However, I think there might be more going on here than that... isn't the point of Nouriel/Roubini's "hard landing" scenario that the CA deficit will have real effects on *production* in the future? (through currency/monetary channels?) They might claim that it is NOT the case we are simply borrowing against future production (which remains unchanged even some of it is now owned by somebody else) for today's consumption... we are *affecting* tomorrow's production in real terms as well. (IOW, we are not simply moving along a budget line - this much borrowing *affects* production and *changes* the budget line, or in other, other words, the intertemporal budget constraint is not simply a straight line with slope = interest rate).

Comments anyone? Brad? Can you help me out here? :)

[Darren]

Sigh....

"Someone concerned about the CA deficit would be worried about the borrowing from the future"... add the following: "and would implicitly be using a lower discount rate."

[Darren]

dennyr: "But what happens when global growth China decides it is ready to make the "Yuan" the world's reserve currency, i.e it will only except yuan for trade payments and will only buy oil in Yuan?"

You have to find somebody willing to SELL you oil for yuan before you can do that.... ie you have to find somebody who wants to use the yuan to buy Chinese goods. If the person who sells you oil for yuan simply runs to the Chinese Central Bank and changes the yuan for dollars, your "oil purchases in yuan only" policy accomplishes nothing.

[matt]

So if IBM's price goes down in a year, the US deficit is reduced? I really thought it was impossible to do economics professionally if you don't undertand the difference between an opportunity cost and a real cost. Talk about utter stupidity! Luskin is right that at the time of the transaction cash equals the asset. If you want to start to aggregate the opportunity costs of every international commodity/asset trade go right ahead. Just because you can more easily calculate the utility of a share of IBM doesn't mean you can calculate the utility of a ton of shrimp or a 1000 units of Nike shoes.

What if the shrimp traded for is used in a growing business that goes national in one year. Then there is less debt because the shirmp is utilized better than the share of IBM.

What if the Nike shoes are used by a businessman to relieve stress through jogging. Might not his increased productivity lead to more wealth than the share of IBM.

Enjoy all of the calculations.

[RT]

When I followed the link over to Luskin, I found something even more amusing, that demonstrated both the lack of civility and sheer dumbness of both wingnuttia generally, and Luskin specifically. Check out this Luskin post:

http://poorandstupid.com/2005_08_07_chronArchive.asp#112347911556080880

"FIGHTING BACK Joe Sherlock nails the Daily Kos for ripping off his bandwidth. Check this out."

"Check this out" links to here: http://www.joesherlock.com/Kos.html

The short story is that some Kos diarist posted an image in that diary, back on July 11, that was hosted on JoeSherlock's website. That's bad netiquette, of course.

But when Sherlock found out about this, did he send Kos or the offending diarist an email saying "Hey, would you cut it out?" Nope, he played silly 'gotcha' games, by replacing the image with one that said, "The operator of this site is a cheapskate, a bandwidth thief, and a jerk." That's the image that's now appearing in the Kos diary in question.

There's two primary dumbnesses here - by a guy calling himself 'Sherlock', yet:

1) 'The operator of this site' is Markos Moulitsas, who, not being omniscient, isn't aware of what's being said by each one of the hundreds or thousands of diarists at DailyKos.com. So he's wrong from the get-go.

2) The diary is four weeks old - meaning that probably nobody's looked at it in weeks. The only people who will see Sherlock's little 'gotcha' are the wingnut idiots who follow his link.

Of course, one of them's Luskin, who thinks Kos has been 'nailed' here. Apparently he's no brighter than 'Sherlock.' What a surprise, huh?

(JFTR, I've emailed Kos and the diarist, just to let them know this BS is making its way around Right Blogistan.)

[scottynx]

Salvadore Lee says:
[All consumption reduces future national product compared to investment.]

Buying from China allows the U.S. to consume cheaply. If the U.S. had to consume without buying from China, wouldn't it cost even more? Thus, buying from China reduces future U.S. Gdp less then not buying from China. Buying products cheaply reduces future U.S. investment less then buying products expensively. Without trade with China, consumers would still consume, but just get a lot less bang for thier buck.

[Tony Shifflett]

This is why I can't read Luskin. As pointed out above, a majority of our fellow Americans simply don't seem to understand the fundamentals behind economics. I know I don't completely understand them, but I understand the need for savings and the maintenance of a very low debt strategy in my personal dealings.

Currently I save >30% of my income. Several years ago I was shocked to learn that our national savings rate had fallen so low. The other day in the bar I frequent I started talking to a guy with Luskin's mentality. He simply couldn't see why it's a wrong strategy, both personally and for our country, to run up massive debt.

His view was that debt really isn't that bad, and, if worse comes to worse, economics will take him/us OUT of debt via devaluation. He was a big Bush supporter, and felt the debt really wasn't anything to worry about.

Sometimes I wonder what's gonna happen to this country.

[anne]

http://www.nytimes.com/2005/08/08/international/africa/08niger.html

Hope for Hungry Children, Arriving in a Foil Packet
By MICHAEL WINES

MARADI, Niger - In the crowd of riotously dressed mothers clasping wailing, naked infants at a Doctors Without Borders feeding center just west of here, Taorey Asama, at 27 months, stands out for a heart-rending reason: she looks like a normal baby.

Many of the others have the skeletal frames and baggy skin of children with severe malnutrition. The good news is that a month ago, so did Taorey.

"When she came here, she was all small and curled up," said her mother, Henda, 30. "It's Plumpy'nut that's made her like this. She's immense!"

Never heard of Plumpy'nut? Come to Maradi, a bustling crossroads where the number of malnourished children exceeds even the flocks of motor scooters flitting down its dirt streets.

At this epicenter of Niger's latest hunger crisis, Plumpy'nut is saving lives, perhaps including Taorey's.

Plumpy'nut, which comes in a silvery foil package the size of two grasping baby-size hands, is 500 calories of fortified peanut butter, a beige paste about as thick as mashed potatoes and stuffed with milk, vitamins and minerals. But that is akin to calling a 1945 Mouton Rothschild fortified grape juice.

Since the packets came into the hands of relief organizations during the Darfur crisis in Sudan, they have been revolutionizing emergency care for severely malnourished children who are old enough to take solid food, by taking care out of crowded field hospitals and straight into mothers' homes.

The prescription given to mothers here is simple: give one baby two packets of Plumpy'nut each day. Watch him wolf them down. Wait for him to grow. Which he will, almost immediately: badly malnourished babies can gain one to two pounds a week eating Plumpy'nut.

"This product, it's beyond opinion - it's documented, it's scientific fact," Dr. Milton Tectonidis, a Paris-based nutrition specialist for Doctors Without Borders, said in an interview here. "We've seen it working. With this one product, we can treat three-quarters of children on an outpatient basis. Before, we had to hospitalize them all and give them fortified milk."

Traditional malnutrition therapy hospitalizes the tots, nursing them to health with steady infusions of vitamin-laced milk. Then they are sent home with powdered milk formula to complete their recovery. It works well, but milk is costly, must be mixed from water and is prone to spoiling.

And when mothers prepare the formula with the dirty water all too common in impoverished villages, babies get sick.

In comparison, Plumpy'nut - the name melds the words "plump" and "peanut" - costs less than the milk formula, has a two-year shelf life and need not be mixed with anything. Its sealed packaging and thick consistency make it a poor home for disease-causing germs that thrive in milk.

Perhaps most revolutionary, however, is that mothers, not doctors, can give it to their toddlers. That not only reduces costs, but also frees the doctors to treat the sickest children, who often suffer not just from malnutrition, but also from diseases like malaria or dysentery....

[anne]

I found this article on the sad sad sad problems of Niger quite stunning. Niger is proving dear Amartya Sen rather tragically incorrect about famine and participatory government.

[anne]

http://www.nytimes.com/2005/07/31/weekinreview/31polgreen.html?ex=1280462400&en=72863c1f11d2e9af&ei=5090&partner=rssuserland&emc=rss

July 31, 2005

A New Face of Hunger, Without the Old Excuses
By LYDIA POLGREEN

THE pictures are wrenching. A nomad holds an infant aloft, its gaunt head lolling dangerously, its matchstick limbs akimbo. A father asks God to forgive him for weeping publicly; he has just buried his son. A child in an emergency clinic awakens from a hunger-induced stupor only to moan and weep from the pain of his starvation-induced skin sores.

These images of victims of a food crisis in the vast, landlocked West African nation of Niger, captured by a BBC television correspondent and shown around the world, look like something the world has seen before - the famine in Ethiopia in the 1980's. That catastrophe prompted an extraordinary outpouring of generosity, along with a vow that the world would never again stand by as millions went hungry.

Yet here it is again, far smaller in scale, yet replete with images of stick-thin children with hunger-swollen bellies clinging to bony, flat-breasted mothers. Once again there is the question: what causes these calamities that invariably afflict the world's poorest corners?

The immediate cause is certainly known. Locust swarms and poor rains last year wiped out much of the nation's harvest and caused grain prices to triple. But when misfortunes strike other countries, they can help their people, with planning, with resources and by seeking aid from abroad. So what has gone so terribly wrong in Niger?

For decades famine was seen largely as a consequence of bad political leadership. Food scarcity in Ethiopia in the 1980's had natural causes, but its transformation into a deadly famine came to be understood as mostly man-made, the result of a Stalinist regime's collectivist ideology and its pursuit of victory over insurgents without regard to the well-being of its people. It seemed a neat illustration of the development the economist Amartya Sen's dictum: "No famine has ever taken place in the history of the world in a functioning democracy."

But that does not explain Niger's problem. Niger is a democracy. It has been one since 1999, when it made the transition to multiparty democracy and constitutional rule after a decade of turmoil. It has also made, in part at least, the painful transition from a centralized, state-run economy to a market-driven one, earning praise and ultimately relief from about half of its estimated $1.6 billion in foreign debt from the World Bank.

Yet Niger still earns a horrifically high score on the index of human misery compiled by the United Nations Development Program, which lists it as the second least developed nation in the world, just ahead of Sierra Leone.

More than 25 percent of its children die before their fifth birthdays. Those who survive go on to scrape a meager existence from a harsh, arid savanna that is just barely suitable for farming and cattle grazing, yet must feed 12 million people. Cyclical droughts and chronic hunger are a way of life. Life expectancy tops out at 46 years.

Nor is Niger alone in its troubles. Of the 25 countries at the bottom of the development list, all but two are in Africa. Niger's food crisis - it is not, despite news reports, a famine yet - is not even the worst on the continent. Similar problems, involving even larger numbers, exist in Zimbabwe, Ethiopia, Darfur and elsewhere....

[anne]

http://www.nytimes.com/2005/08/07/international/africa/06cnd-niger.html

Niger's Nomads Agonize as Livestock Die
By MICHAEL WINES

ZOURARE, Niger - With his black burnoose and piercing tan eyes set in angular, leathery features, Ali Yougouda is the very picture of a Tuareg, a stoic nomad who juggles two wives, 10 children and life on the Sahara's fringes without breaking a sweat.

Until he talks about his herd. In May, he was tending 68 head of cattle and sheep. Today he has 18 cows and bulls. He is devastated, bereft.

"The first two died of pneumonia," he said, crouching beneath a tree in this remote mud-hut village. "Then the rest started to die slowly, from hunger, because all they could find in their stomachs was sand. The last one died two weeks ago."

Mr. Yougouda, 40, epitomizes another side of Niger's hunger crisis: the devastation it has wrought on this nation's legendary nomads and herders. Mr. Yougouda's Tuareg tribe, known as the Kel Ouawar-Gadabeji, has suffered hunger and privation from the scattered rains that reduced last autumn's harvest and the food stocks that normally see them through the long dry season. But the hundreds of tribespeople in this village have so far survived.

Not so their livestock, which the herdsmen have pushed farther and farther afield in search of green pastures. Weak from the trek, their stomachs filled with grit from pulling the few tufts of grass from the sandy earth, thousands of the animals have simply lain down to die in recent months. The carcasses of long-curve-horned cattle dot the landscape on the sole path to the village, an hour's bone-cracking journey via four-by-four from the nearest dirt road. The losses not only threaten the centuries-old tradition of the Tuareg and other nomads like the Fulani, also known as the Peulh. It is a personal blow, even a humiliation, for a people who regard their animals almost as kin.

"We treat them like brothers and sisters," said Amadou Abou, the elder brother of the village chief here. "We're inseparable. It's a tragedy because we have lost what is most dear to us - an animal, a brother."

A handful of international charities, including Oxfam and CARE International, are rushing to the nomads' aid with food, money and more livestock. But the nomads, scattered across Niger's vast rural stretches, are not easy to find, much less to reach.

"The situation is extremely grave for the Tuareg, because they live from their cattle," said Illiassou Adamou, who heads CARE's office in Maradi, just south of one of the worst-hit areas. "When you lose a bovine, it takes five years to raise another to replace it. When you lose cattle this year, even if the situation is good next year, it's still a critical situation."

While rains are somewhat better, the past months' dry spell is still snuffing out the livelihoods of thousands of herders across Niger, especially around Dakoro, a regional center where 40,000 people live, and where rains have been spotty for two years straight....

[anne]

http://www.nytimes.com/2005/08/05/international/africa/05niger.html

Niger's Anguish Is Reflected in Its Dying Children
By MICHAEL WINES

ELKOKIYA, Niger - At sunset Wednesday, in an unmarked grave in a cemetery rimmed by millet fields, the men of this mud-walled village buried Baby Boy Saminou, the latest casualty of the hunger ravaging 3.6 million farmers and herders in this destitute nation.

At 16 months, he was little bigger than some newborns, with the matchstick limbs and skeletal ribs of the severely malnourished. He had died three hours earlier in the intensive care unit of a field hospital run by Doctors Without Borders, where 30 others like him still lie with their mothers on metal cots.

One in five is dying - the result, many say, of a belated response by the outside world to a disaster predicted in detail nine months ago.

Niger's latest hunger problem, like Baby Boy Saminou's tragedy, is more complex than it first appears. As aid begins to trickle into some of the nearly 4,000 villages across southern Niger that need help - the vanguard of a flood of food brought forth by television images of shrunken babies - the rich world's response to Niger's worst nutrition crisis since the 1985 famine is, in fact, proving too late for many.

Unseen on television, however, are the shrunken infants who die all but unnoticed even in so-called normal years. Of each 1,000 children born alive in this, the world's second-poorest nation, a staggering 262 fail to reach their fifth birthdays....

[liberal]

Jesus Christ, anne, would you _please_ get your own blog already?

[qwerty]

Brad:

Careful, they are going to come and take away you free trader badge.

[Darren]

I was going to say the same thing: Anne, we value your contributions, and these comments about Niger are interesting, but they have absolutely nothing to do with the topic of Brad's original post. They are verging dangerously close to spam IMHO.

[pgl]

Could Luskin have a point - even if was badly phrased. Over at Angrybear, I note that James Hamilton covered this issue very well. Short answer - Luskin has a point only if one ignores the real world data.

[Jennifer]

Liberal

Perhaps you might read and think and care and be polite, and not try to intimidate. I deeply value the posts.

[Jennifer]

The articles about Niger are more than just interesting, they are morally commanding. Complain away, anyhow. Dear Anne wonderfully posts as she will.

[Dubblblind]

That Brad sees fit not to remove Anne's posts is good enough for me. You go girl!

[Ari]

The articles on Niger are excellent but I find the "Plumpy'nut" story particularly exciting for the simplicity of the food. Wow. This I bring to our Rabbi this week. Thanks.

[Darren]

Jennifer: "Perhaps you might read and think and care and be polite, and not try to intimidate. I deeply value the posts."

But liberal's comment was spot on..... if anne's posts are valuable (and I think they are fine) perhaps she should start her own blog? You can go over to blogspot and have one running in five minutes.... instead of stomping all over a discussion of a completely different subject.

[anne]

Darren

I was too sharp, and I am sorry Liberal. A beauty of Brad's blog is the remarkable group of readers who contribute in various ways. This is a thoughtful community that is not readily duplicated. There are also often digressions in exciting discussion. I had before shut out the problem in Niger. The beginning article immediately drew my attention and I will pay attention to the problem from now on. Thank you for the response.

[anne]

Thanks folks :) Regardless of the thread per se, for we are dealing with stupidity, think about a technology that in a "Plumpy'nut" bar can create a revolution in nutrition for those desperately in need. A few years ago British doctors developed a simple rehydration packet for infants. Elegantly simple and low low cost, a revolution in infant health was brought about. Here we have what looks to be another such breakthrough in child nutrition.

[anne]

Think about a packet of rehydration salts and sugars that save millions, for it is millions, of infants. Now we a nutrition bar for children. From despair there is hope.

[liberal]

Jennifer wrote, "Perhaps you might read and think and care and be polite, and not try to intimidate."

I'm not being rude. Rather, it gets tiring when people post either (a) off-topic, (b) long excerpts from the media, or (c) both. People who have been around cyberspace long enough consider annoying.

Think of it as a kind of free rider problem: if everyone did what anne does, Brad's comments sections would be worthless.

Of course, anne isn't as bad as that "mike" person who had multiple excerpts per post.

[liberal]

typo: "...consider _it_ annoying..."

[W. Raymond Mills]

The transfer of the ownership of financial assets located in the U. S. to owners outside of the U. S. is the main financial or "economic" consequence of a trade deficit. It matters not whether these assets are "productive" (such as IBM) or merely cash because cash (by definition) can always be use to acquire any productive asset that is for sale.

By definition, the assets flowing in each direction are equal. But the empirical reality is that the goods that flow from China to the U. S. are mostly consumed immediately while the financial assets that flow to China are largely retained as financial assets (U. S. Treasury bonds). Consumption versus savings is the reason the financial assets owned in China are increasing and those owned in the U. S. are decreasing (as a consequence of the trade deficit).

The loss of financial assets is only part of the picture. Manufacturing goods dominate foreign trade. A trade deficit implies that the deficit country cannot compete in supplying manufacturered goods that sell on the international market. If you want to decrease the ability of a country to participate in manufacturing for the international market, ignore and tolerate a large and continuiously growing trade deficit.

The service sector will not and is not filling the gap, in the U. S., vacated by the manufacturing sector. The U. S. still has a trade surplus in services but it is small (relative to the goods deficit) and IT IS DECREASING EACH YEAR.

The future of the U. S. economy will be heavily determined by the ability of economists to develop a widespread consensus that DeLong is right on this issue.

True, this is an intellectual problem. But its solution has profound implications for the U. S. economy.

[Darren]

Matt: "So if IBM's price goes down in a year, the US deficit is reduced?"

Not quite sure who you're calling stupid here. This is a straightforward question of economic accounting identities, not opinion. (That being said, I must admit with a trace of embarrassment that I'm not quite sure what the right answer is...)

Current Account = Capital Account (KA) by definition. These consider market values, not opportunity costs. (I’m including the US 'financial account' in the Capital Account, other countries do not have such an accounting entity as far as I know).

In this period, China gets a $50 share of IBM (increases their holdings of US assets by $50). The US gets a $50 pair of running shoes. CA deficit = $50. US KA is $50. CA = KA.

In the next period, let's say the market value of IBM goes down to $30. If nothing else happens, US KA is -$20. There is either a corresponding credit (or debit? I can never remember which) in KA to bring it back to zero or a -20 entry on the current account side. CA = KA in every period.

As for the idea that a $50 pair of running shoes can or should be thought of as capital, in that they might add more to *future* national product than a $50 share of IBM (ie: ownership of factories which are *explicitly dedicated* to *making stuff*)... it is possible that a *particular* pair of running shoes might do more for future national product than a share in a particular company, but in general counting consumption goods as capital in an economic model is, ummmm, *not* standard macroeconomic practice.

[save_the_rustbelt]

For once, I agree with Liberal.

[Darren]

"True, this is an intellectual problem. But its solution has profound implications for the U. S. economy."

These things have a way of solving themselves eventually, one way or another.

[Randall]

Anne, you are a treasure. Do precisely what you wish for you are always one of the people I look to for comment. These guys like to intimidate other posters. Who cares? Love you, girl.

[Bruce Stram]

I'm afraid your IBM stock example falls short.

Actors in the US economy have made a decision between saving and holding assets and their level of consumption. I interpret your arguement to be that the US decisions have currently put us on an unsustainable consumption path. But you example isn't on point. The fact that someone sells a share of IBM stock probably means he thinks its over priced relative to other opportunities, not that he's made a decision to consume more and invest less. So he takes the Chinese money and revinvests it in a good high tech start up generating wealth, jobs, and income in the US.

[Then there's no current account deficit. The entire point is that the proceeds from the sale are *not* reinvested in the U.S.]

[W. Raymond Mills]

IBM argument above deals with possibilities, ignoring the realities. What has been happening in the U. S. in the last decade? The U. S. economy is growing more rapidly than competitor economies (by National Accounts), making our stock market a better place to invest money, resulting in the decline of the dollar (predicted because of the trade deficit) being interrupted because traders expect greater short-run profits from investing in the U. S. stock market.

So long as that reality persists, there will NOT be an automatic adjustment in currency value to correct our trade deficit.

A previous comment said "things always work out". Of course they do. But the way they work out and the conditions that exist in the United States at the conclusion is, in a large degree, undetermined as of this moment and could be influenced by action of the U. S. Congress. If economists could examine their "religious" adherence to "free trade ideology" and really see what their blinders are doing to the U. S., the Congress might be in a position to take constructive action. Don't blame others; look at your professional biases.