Sunday, May 1, 2016

Self adapting statistics and the queuing model, a simple example

Examine the grocery store, where the manager's goal is to balance customer flow and employee flow.  At the check out stand, one or two customers in line is optimum.  Then what iss his the optimum queue for clerks?  There will always be at least one clerk who is not busy and tends to front counter inventory.  The store manager is self adapting, managing an exit rate (clerk queue) with the entrance rate (customer queue).  Thew theory of everything tells us that when the queues are balanced, then one complete, typical sequence of transactions will occur before.  The store manager has encoded the typical transaction sequence the drives his business.  That sequence should be one complete set of unique school girls walking abreast on a Sunday afternoon.

There should be a decomposition theorem, building one complete sequence from others sub-sequences, ask a pro.  I look at it as the decoding/encoding graph, which is self adapting, an adaptive Huffman encoder.

Currency banking

The currency banker is willing to risk new currency in service of price discovery.  The currency banker wants a lower and uer bou d on this float.  It basically runs an adaptive Huffman encoder on member banks deposits / loans balance.  The precision is pricing is pre-announced, so if the precision is 3%, the currency banker promises to generate then decoding tree that  will generate a unique sequence of 32 deposit/loan balance for its member banker, and each member bank will be charged, or receive payment to move their banances into the quantized range.  

So, one or more member banks find a great investment opportunity, and they generate consistent deposit and loan transactions.  Their significance causes the adaptive decoding tree to alter shape, the tree must have 32 leaves. Each member bank wins or loses depending upon how close they are to the new typical sequence. The connection to queuing is the decoding network, it has to be an optimum queued network.

In this system, when more significant inside information is uncovered, less important information is discarded.  This is unlike block chain which supports infinite precision.  The marginal gains por loses are quantization noise.  The mathematicians get this.

Racism in Mexican government

Bloomberg: Corruption in Mexico is not just a legal and moral problem. It is an economic one. The annual cost amounts to 5 percent of gross domestic product, according to one report, which also found that almost half of business owners said officials have sought money in exchange for contracts or business opportunities. Worse, those who are caught have rarely been punished: Only 1.5 percent of corruption cases lodged in Mexico end in conviction. (In Singapore, in contrast, the share is 80 percent.) In fact, many Mexicans say they're more concerned about government corruption than even security and the economy.
Politicians are corrupt in Mexico, robbing Mexicans of their means to make a living.  Racism, Mexicans have no 'safe places'. 

Funcionarios del gobierno mexicano son corruptos y robar a los ciudadanos de México. ¿Dónde están las protestas Latinos?

We're going to need a lot of storks


Saturday, April 30, 2016

I take DeLong's challenge

BERKELEY – For countries where nominal interest rates are at or near zero, fiscal stimulus should be a no-brainer. As long as the interest rate at which a government borrows is less than the sum of inflation, labor-force growth, and labor-productivity growth, the amortization cost of extra liabilities will be negative. Meanwhile, the upside of extra spending could be significant. 

Using quick and dirty search methods we get, productivity growth from the IMF:

Coming in at zero.  Then population growth is .75% according to World Bank.   And inflation is basically zero.  But Congress borrows at the ten year rate, they got a huge rollover problem and have long termed all their debt.  The ten year rate is 1.83%.

Borrowing costs are too high, and we see that in the erratic volatility of interest payments by Congress,they suffer huge rate risk.

Discussion:

Rates:  When Congress borrows short term, and gets growth!, then the curve is upward rising and lifts.  But rollover of the past due occurs about 3 trillion per year, and its all 5-20 year debt.  The total effective rate becomes the weighted peak of the term distribution of debt, and that measures to the ten year rate.

Inflation:  We have deflation in consumer goods (68% of GDP), less housing and medical.  But housing inflation is driven by Asian rebalance and may not be all new construction after revisions. Medical inflation is driven by Obamacare.

Productivity: It ranges from 0 to 1.5% depending on your source.


Friday, April 29, 2016

Instabiity from over-aggregation

Jim Bianco 

"Not only do the five largest financial institutions in the US have a higher concentration of assets than they did before the financial crisis but it’s the largest concentration ever. So we’ve made the too-big-to-fail-problem worse because we have bigger, more systemically important financial institutions now than we did in 2007 – and nobody seems to know what to do about it... [EU banks] are acting irrationally. They’re not acting that way because they don’t believe it or they don’t understand it. So we’re still all trying to feel around in the dark as to what this means. And that means that the chance of an accident is very high."
HT Zero Hedge

We have one issuer of massive government debt, Treasury.  As that single entity dominants, in the market, a minimization of costs require the debt market to equally aggregate.   The Swamp itself is the fountain of monopoly.

Saturday, April 23, 2016

Obama enforcing the New World Order

UK Express: The US President warned the UK would be “at the back of the queue” for a trade deal with America if it quit Brussels.
But his threat provoked outrage and scorn from pro-Brexit campaigners, who dismissed it as yet another scaremongering ploy from the pro-EU lobby.
Mr Obama, who will no longer be in office when decisions on a trade deal are made, delivered a lecture to the British people on why he thinks it is in the UK’s, America’s and the world’s best interests for Britain to vote to stay in the EU on June 23.
When the original government plan ignored side effects then a higher level of aggregation is needed to suppress the effects. 

Tuesday, April 19, 2016

Minimum wage wave pushes all the wage brackets

Public sector unions intend to push up all the wage brackets based on the new minimum wage law. This is called self adaptive statistics.   The unions will push the wage brackets up before Jerry can cry monkey's uncle, and local municipal hiring will freeze.  Jerry Brown is stuck, California unemployment rate is rising fast and soon.
The Sacramento Bee story proves that the state’s public employee unions will use the increase in the minimum wage at the bottom-rungs of a pay scale to push for across the board wage increases for most public employees.  And they will likely get it, given how public compensation practices work for public agencies in California.
During the New York public celebration, New York state’s AFL-CIO President Mario Cilento said, “When we raise the floor in wages, we raise the ceiling.  Those of you making 16 or 17 or 18 dollars an hour, the net time your union goes to negotiate, they’re going to ask for 19 and 20 and 21 dollars and up!” according to the Sacramento Bee report. (New York also raised its minimum wage)
J.J. Jelincic, a CalPERS board member and former state labor union president and negotiator confirmed that this “will certainly be the strategy for government unions in California,” according to the Bee report.
“My experience is that when you raise the floor, it creates tremendous pressure for raises at least a few rungs up,” Jelincic told the Bee.
There are an estimated 12,000 state employee from custodians to office assistants who earn $15 to $20 per hour, states the report.
The state firefighters union says the “ripple effect of higher minimum wages should flow all the way up the ladder at Cal Fire,” according to union spokesperson Terry McHale.  Otherwise, the state risks “compaction,” which occurs when wages for jobs that carry less responsibility get too close or even overtake salaries for higher positions with more responsibility.

Monday, April 18, 2016

Can states sue the federal government?

Texas and some other states are suing the federal government because they are forced to provide services to undocumented immigrants.  The answer is yes, since the key term is undocumented, meaning illegal immigrant.  That is a requirement outside of the Congressional immigration law, Congress did not call them  legal immigrants. Hence the suit is valid, the state of Texas has its state's sovereignty threatened.
Sotomayor ignores the fact that Congress has labeled them illegal immigrants, she seeks to grant them rights for pure political  motives, outside any Constitutional authority.

WASHINGTON — An eight-member Supreme Court appeared skeptical on Monday that President Barack Obama’s decision to defer deportation for millions of undocumented immigrants could be subject to a multi-state legal challenge in a court of law.
At issue in the 90-minute hearing in United States v. Texas — perhaps the most deeply political and consequential case the justices will decide this year — are the president’s executive actions on immigration, which have been on hold for more than a year as a result of a conservative challenge from Texas and 25 other states.
If Texas and the other states are allowed to sue, “then every case of political disagreement where states disagree [with the federal government] would come before the court,” said Justice Stephen Breyer.
At the heart of the case are two constitutional questions: Whether the states have legal “standing” to sue over how the federal government administers immigration policy, and whether the policy itself complies with the mandate that the president “take care” that the laws be faithfully executed. On this latter point, centrist Justice Anthony Kennedy, who in 2012 largely sided with the federal government in another immigration case, seemed to share the concern of the conservatives states that sued to invalidate the president’s programs.
“It’s as if the president is setting the policy and the Congress is executing it,” Kennedy said. “That’s just upside-down.

Mish gets chart of the day

He watches transportation, when freight is down consumption is down.  The freight index changes over the year, in a somewhat predictable manner.  The red line in the chart is predicting a bad year for consumption.

Yawker v Texan

Business Insider: With polls showing him maintaining a gigantic lead in his home state, he appeared to be attempting to run up the score, suggesting that Cruz "hates New York."
Among other things, Trump called out Cruz for voting against relief for Hurricane Sandy after the 2012 disaster hit New York. He also lashed out at Ohio Gov. John Kasich for his alleged support of the North American Free Trade Agreement.
"No New Yorker can vote for Ted Cruz," Trump said. "And no New Yorker can vote for Kasich, who voted in favor of NAFTA ... which is a total disaster."