Thursday, November 10, 2011

Army, ADA, and AirSea Battle

Galrahn has been discussing AirSea Battle for quite awhile, specifically focusing on the absence of any Army contribution to the overall public discussion.  It is quite sad that the Army has not publicly engaged on the AirSea discussion.  Only this month has the AUSA come out with a rebuttal to the Navy and Air Force's public discussions.

One big reason Big Army is not contributing to this AirSea concept is because of internal Army politics. Specifically the decline of Air Defense Artillery. It is quite paradoxical that, while Ballistic Missile Defense has taken on greater strategic significance, Army itself is institutionally moving away from ADA in general.

ADA is composed of two components, HIMAD and SHORAD. For much of the 90s, the active officer corps was split 50/50: 10 Battalion of HIMAD and 10 Battalion of SHORAD. Right after OIF1, though, Big Army saw that there was no low-altitude threat at all, so it moved decisively to eliminate the SHORAD formation. I think right now there's only 10 Stinger/Avenger batteries providing a residual capability, which is a 75% cut.

You'd probably say it's long overdue, but the key is that the loss of 30%+ of total ADA corps means that many fewer O4s and O5s writing papers to Parameters and other professional journals. Sure, we have several ADA generals at the Pentagon, including the current G-8, but where do you think the generals' talking points come from? It's those O4s and O5s.

The BMD mission has slightly increased the HIMAD side of the house, but it did not make a dent against the SHORAD loss. The unit manning the GMD missile field is a Guard unit (Colorado/Alaska Guard), whose officers do not worry about professional journals. Ambitious officers transfer to other hot fields to make their stars.

ADA probably will never attain the reverence of the Soviet PVO branch, but its preoccupation with self-preservation means that Big Army has little brainpower thinking about AirSea. Horror upon horrors, but sometimes I wonder if we should have folded ADA into the USAF like the Europeans have...

Friday, July 8, 2011

More Real Estate Shadow Inventory

NPR had a story yesterday detailing the cost Fannie Mae is incurring, to keep up with the 150,000 homes it owns due to owner mortgage default.

Well, hell, you might say, why not just go ahead and sell them, so we don't have to pay for their upkeep?  Without getting into the financial wisdom of selling now or later, I will simply present this as evidence that the housing market is weighed down by all that shadow inventory.  Everyone is waiting for this inventory to come to the market.  With the shadow inventory staying in the shadows, the market cannot adequately price the houses on the market now.  So buyers are holding out for more certainty.  Fannie Mae's action is preventing the market from hitting bottom.

Wednesday, June 22, 2011

Obama And Banks Ran Out of Time

I just want to emphasize that the Obama Administration and the banking industry has run out of time, referencing my previous post where I said that they were hoping to wait out the recession.  They were hoping that, by delaying the foreclosure process, they could soft land the housing market and the economy, and rebound before the banking industry and consumers run out of money.  Well, as I said yesterday, the consumers have definitely run out of savings.  The Greek debt drama could soon drain the banks dry, too.  So yes, they have run out of time.  We are now entering the second dip of the classic depression.

Tuesday, June 21, 2011

Liberal Economists' Blind Spots

Derek Thompson of the Atlantic asked, "How did 2011 go so wrong?"  He could not understand why the year started out so well, with all of the economic indicators pointing toward a recovery, yet 6 months later we are stalling.

Well, he came pretty close to the answer himself:  Housing.  He himself said that investment (for the top 10% of Americans mostly) plus housing constitutes the savings for American households.  Therefore the housing collapse, which we are still sorting through, dampens the demand.  And then, at the very end, Thompson concluded, well, "The hardest thing for Washington to understand is that not every economic question can be solved in Washington."

What Thompson has conveniently forgotten is that we are still sorting through the housing wreckage because of the Bush/Obama administration's housing policy.  At the beginning of the crisis in 2008/9, the presidents concluded that a "soft landing" is our top goal.  Therefore, they slowed down the foreclosure process.  The banks themselves, fearful of exposing their own liabilities and thus going out of business, went along.  The TARP program allowed the administration to dictate foreclosure policy and pace for awhile.  The Making Home Affordable program of mortgage modification gave many people the false hope of staying in their homes, and thus exhausting their savings trying to save that sinking ship of their houses.  The search for foreclosure scapegoats ended up at the robo-signing title agents, which does not change the material facts behind the foreclosure cases, but simply delaying the process.

The federal government has succeeded in their economic policy of soft landing housing.  The economic cost of that priority is the current malaise we're going through.  We have yet to find the bottom of the housing market.  There is still a huge shadow inventory in the foreclosure pipeline.  The administration's TARP funding prevented the banks from running out of cash, yet the banks' safety net allowed the banks to hold onto their foreclosed inventory, hoping that the housing prices will come back up before they run out of cash, thus allowing them to still make a profit.  So consumers' savings are tied up in their houses.  Too many people have exhausted their savings trying to stay in their untenable houses.  The rest are waiting for the market to recover before realizing their real estate savings.  The real estate market is sucking the liquidity out of the market, preventing a consumer demand-driven economic recovery.

See, in a "normal" recession, housing market starts crashing.  People start losing jobs and have to stop paying mortgages.  They either arrange a short-sale or foreclosure.  The banks start accumulating properties instead of the revenue streams of mortgage payments.  Thus banks quickly runs into their own liquidity crises.  Even though the rational banker wants to hold onto the properties as long as possible, to recover the investment, the liquidity crises forces him to offload properties.  The glut of housing supply is quickly realized, allowing the real estate market to discover the bottom quickly.  At this time, the people with cash move in.  They buy the cheap houses with their savings, releasing the cash into the economy.  The discovery of the bottom allows business owners to start planning for the recovery.  The additional cash in the economy greases both demand and investment.  Voila, recovery.

An additional factor is that, as people lose their jobs and got foreclosed on, they move to greener pastures.  The liberated labor move to where jobs are, satisfying the labor needs and increasing the monetary velocity of these growth areas.  The result feeds back into the overall recovery and we get onto the peaks again.

Whereas, because of the delay in the foreclosure process, we have too many people holding on in the Rust Belt (And California), instead of moving to the Sun Belt where the jobs are.  This exacerbates the unemployment problem, and decreases the monetary velocity in the Sun Belt. [With less labor in the Sun Belt, employers have to bid up wages.  People with higher income have lower velocity.  Thus, lower monetary velocity for everybody, and slowing down recovery.]

So yes, the government can do plenty to improve the economy.  They can start by encouraging people to move to where the jobs are, and speed up the foreclosure process.

Oh, and we are starting to see the voices saying that a default on Treasuries is better than austerity measures.  If that happens, we are going to drag the world economy down with us.  The only thing standing in the way is the Republican House.  Let's hope that they hold the line.

Sunday, June 12, 2011

Charles Stross's Saturns Children and Thoughts on AI

Finished Charles Stross's Saturn's Children this weekend.  It was a great read.  The "sex scenes", which obliquely referenced sex but not directly, are a welcome break from the modern fiction these days.  Given that the heroine is a pleasure robot, the sexual references were exactly right, relevant and integral to the story, without detracting from it.  Compared to, say, Tom Clancy, this book is a textbook example of addressing this subject.  One suspects that the extraneous sex scenes in books these days are a plague inflicted by the book agents.

In any event, Saturn's Children paints a thoughtful picture of Artificial Intelligence inheriting the earth.  The classic tragedy of robots bound by the human property laws, in a world where humans are extinct, is haunting.  The constraints of economic reality on robots' actions is a great reminder that, despite the hopeful communism of Star Trek, et al, Resource Limitation is the universal condition no matter the scale of your civilization.

The notion of Artificial Intelligence having to pattern the human brain to achieve symbolic manipulation, is in line with current thinking on AI.  The spontaneous emergence of consciousness is the combination of the hardwired neural complexity and the profusion of environmental stimuli.  To recreate that neural complexity in software form is probably too expensive, compared to implementing that complexity in hardware form.  Moreover, the role of the environmental stimuli is crucial in guiding the development of the neural complexity.  Without the interaction with the environment, a brain is only latent, not realized.  There are some interesting research taking place on this particular AI hypothesis, and we will soon find out if the hypothesis hold any validity.

One note of caution, though, is that current researchers may be underestimating the amount of environmental stimuli required to realize intelligence.  Brains emerged to interact with the environment, not just to observe it.  Without interaction with the data stream, these new AI brains may starve just like the sensory-deprived orphans of post-communism Russia and Romania.  Or worse, the Hikikomori phenomenon in Japan.  One might think that the current projects are somewhat flawed because they are focusing on building the brain itself, rather than the educational apparatus required to realize the intelligence.

If the prototypes succeed, Dr. David Brin's future of AI working alongside man will be close at hand.  That future of augmented intelligence (where a brain can interact with a digital computer) definitely sounds exciting!

Wednesday, June 8, 2011

MGI Might Revive Bushmaster Pistol

Mack Gwinn Industries, the inventor of the Marck-15 Hydra weapon system with modular mag wells and quick change barrels for multiple calibers, and the licensee for the Valkyrie belt-feed system, [which itself was a revival of the Ciener light machine gun,] has publicly expressed interest in the Bushmaster pistol.  Mack Gwinn, Jr, founder of MGI, was the primary developer of the original Bushmaster pistol, which later went to the Bushmaster Firearms company, had a rifle variant, and merged with the Edenpine SAK-30 to become the Bushmaster M-17S bullpup rifle.  Whew, that was a handful. 

Duncan Long's AR-15 Sourcebook said that Bushmaster and Mack Gwinn developed the Bushmaster pistol on their own, and which later evolved into the M-17S rifle.  However, other sources such as Small Arms Review's article as well as Guns.Ru stated that the M-17S directly descended from the Armstech/Edenpine SAK-30.  The original Bushmaster pistol does not appear to have the tensioned barrel that M-17S has, so perhaps M-17S inherited the barrel from SAK-30, and the receiver/fire-control/bolt/bolt-carrier from Bushmaster Pistol.  All three used the gas system from the AR-18.

In any event, MGI said that they want to bring the Bushmaster Pistol back into production, which is great news! [You can find the announcement in their Facebook wall photo album.]  In an earlier ('07-'08?) private correspondence with their marketing rep, they had expressed interest in reviving the M-17S at a later date.  Perhaps the time has come for this bull-pup design.  I hope they bring back the M-17S and the pistol together, but either one would be great.  Given their Hydra mag-wells and quick-change barrels, perhaps MGI can add these features into the new gun.  Guess I need to start saving money now! :D

Thursday, March 31, 2011

Libya and Nation-State Paradigm

Well, the Obama administration sure did dodge a big fat bullet there w/ the Libya crisis.  Before the passage of the UN Security Council resolution, the Benghazi people did everybody a favor by declaring independence from the Qaddafi regime.  With a nominally state structure, we are now able to negotiate with Benghazi for aid and assistance.  The US didn't have to figure out how to deal with a non-state actor.

But the question remains un-resolved.  If Benghazi did not declare independence, could the US provide overt assistance such as a publicized shipment of ammunition?  Like I said earlier, the CIA could provide covert assistance when Obama signs a presidential finding, but not the Defense Department.  The weapon export regulatory regime (ITAR) requires a specific, drawn-out process to make this overt assistance happen.  With this drawn out process, Congress would get involved, slowing things down further.

Maybe this Libya adventure will provide the legislative impetus for Congress to start working this problem.

Monday, February 28, 2011

International Aid: Skip the Middle, Skimming, Man?

Slate had an article this past Friday on the international aid/development community: Is it better to give money directly to the poor people of the Third World, or give to their governments, who in turn distribute to the people.  This article coincides with the current discussion over Mubarak's and Qaddafi's personal fortunes skimmed from their countries.  Many government employees in the Third World are corrupt.  Development groups and advocates have long recognized the inefficiency of corruption.

There have been previous attempts to impose accountability on Third World bureaucracies.  American governmental aid generally comes with auditors, monitors, and reams of forms to fill out, in part to minimize foreign corruption.  The structural adjustment programs of IMF and World Bank were a response to the bloated and corrupt bureaucracies: With the ministries and state enterprises being a source of patronage and a job program for the ruling parties, it was no surprise that these countries would have to default.  To get new loans and aid, then, these countries must pare back their government, enact "austerity measures", to get back to an affordable level.

We can see that the Structural Adjustment was a proximate cause of the current troubles in Egypt: World Bank and IMF forced Egypt to limit government size and to divest state enterprises.  Therefore young men could not get a cushy government job like their parents.  Therefore they can't marry and they got angry.  QED revolution.  Although the fundamental question naturally arises: How did their parents get all those iron rice bowl government jobs?

In any event, Mubarak and his people had it coming to themselves.  Knowing that structural adjustment was coming, they could have prepared their people for a private-sector economy.  The redtape against starting a business in Egypt is legendary, sometimes exceeding the already bloated obstacles in India.  That could have been a starting point for Mubarak, coincident with the privatization.

In any event, the move to cut out the middle man/government in dispensing aid is an alluring proposition.  If you just give poor people money directly, they can spend it well.  We're in the post-Westphalian age, anyway.  But the authors went ahead and cited two native government programs, where the government, that skimming government, was monitoring the poor for compliance with program conditions.  So you end up having to depend on a bureaucracy, either government or private, for ensuring compliance [such as sending kids to school and receiving vaccinations.]

To go around the government corruption problem, aid organizations and donors will essentially have to create their own private bureaucracy to execute the program on the ground.  Then, if corruption is an intractable cultural problem, this private bureaucracy will become corrupt over time, less and less effective.  And that's assuming your conniving government was willing to stand aside and forgo its loot.  Cutting out the government works only when the government has ceased to exist.

In addition, Western donors and aid organizations run into the command economy problem: they just do not have enough information at their level to make effective spending decisions on a long term basis.

The real answer, as many conservatives concluded in the '80s, was to cut the dole.  Most of the Third World governmental dysfunction come from our misguided welfare program.  Western food subsidies drive African maize and yam farmers out of business.  Western aid creates a large bureaucracy more focused on life in the cities than the poor in the countryside.  College grads make more money being the drivers of aid workers than being an engineer.  Only by stopping the money can we hope to starve the distorted incentive structure we have created. 

Wednesday, February 9, 2011

Book Review: John Reed's Hyperinflation

I wrote this awhile ago.  I just started a new job, hence the lack of activities recently.  Anyway, here it is.

When I found out that John T Reed was writing a book on Hyperinflation and Deflation, I was really excited.  His book, Succeeding, was a true self-help book that focuses on working hard, saving money, and doing the right things.  He writes clearly, with a minimum of flowery language, and includes checklists and other tools to help readers implement his advice.  His preview articles on this subject promised unconventional advice on coping with currency fluctuations.

I pre-ordered 2 copies, and they arrived right after the release date.  The book starts off with a review of the current state, a history of hyperinflation and deflation, and then Reed's financial countermeasures.  The book is clear and well-written, with Reed's characteristically critical tone.  It is an engaging read.

If you have read Laurence Kotlikoff's The Coming Generational Storm: What You Need to Know about America's Economic Future, then you are familiar with the scale of the US financial liabilities. [IE, The US owes more in current and future obligations (Medicare/Social Security) than it will ever have the money to pay off.]  In fact, Reed cites Generational Storm as a major source in the book.  However, if anything, Kotlikoff understates the problem, if that was possible, as Reed made abundantly clear.  The only saving grace for the US is that the rest of the world is worse off than the US.  Conversely, the US's critical economic position means America will amplify the economic crisis and spread it to the rest of the world.  Regardless, the 'flations are coming soon, and all investors need to hedge the 'flations.

Reed's financial countermeasures are definitely unconventional.  He explained in great detail his reasonings, and cited multiple sources to back it up.  His chapter on precious metals goes against most writings on the subject [of both pro & con], but will help you avoid trouble with future legislation and law enforcement.  The current brouhaha over the 1099-Misc. $600 requirement (Obamacare) is just a portent of the negatives of a PM-only strategy.  Reed is not avoiding PMs altogether, but is serving as a corrective against the lazy-thinking behind a PM-only strategy.  In a 'flationary environment, governments inevitably restrict usage of precious metals instead of currency.  Therefore, the prudent investor has to rely on other countermeasures to adequately hedge against the 'flations.

Every prudent investor needs a copy of John Reed's Hyperinflation & Deflation.  His book is still timely and will help you survive the 'flations.
I wrote that 4 months ago (Sep'2010).  Since then, the economy has improved slightly, making 'flationary concerns less pressing to most of you.  However, the fundamentals has not changed.  The US Dollar is still unsound.  As Reed recently commented, the current debt ceiling debate in Congress is a good opportunity to fix our problems, but that Congress will sadly squander.  With the improving stock market, it is a good time for many investors to diversify their recovered portfolio into the other assets Reed recommends.  Now is the time.  Like the Chinese saying, "Short pain is better than long pain."

For all readers, Fernando Aguirre's The Modern Survival Manual: Surviving the Economic Collapse is a good complement to Reed's Hyperinflation.  Aguirre provides a good ground-level view of an economic collapse, and gives you a good understanding of the interplay of recession, hyperinflation, and deflation.  Aguirre offers other good tips on preparing for a 'flationary future.  His blogs are good to keep up with.

For readers interested in the academic background on the American debt obligations, Generational Storm, though dated (2005), still offers a good backgrounder.  It explains the math, too.  Kotlikoff's recent works could be good reading, too.