Carl from Chicago

Business executive interested in history, economics, taxation and energy policy.

The End of Colonialism as an Excuse

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One item that has gone relatively un-mentioned with the revolutions in Tunisia and Egypt is that the issue of “colonialism” has finally been thrown into the dustbin.

As any viewer of this blog knows, the left and the third world have traditionally blamed virtually all of their woes on the colonialist powers or the United States which came in the vacuum after the colonialist powers left (less often mentioned is the actions of the USSR, since it does not fit their narrative). Either we supported the wrong side, gave them inappropriate borders, or authorized coups that took out the men that would have changed history, but it was always our collective fault.

The Arab world today is predominantly younger, with a very high percentage of their population under 25 years old. The population that is under 40 is even larger; and you’d have to be 40 or over to even remember much of life under the Shah of Iran or even Sadat. The youth in these countries, the broadest segment of the population, knows nothing but the current fossilized dictators that have ruled uninterruptedly during the course of their entire life.

Thus the leaders can blame Israel and the US and the colonialists but it buys them nothing because the streets know that these countries haven’t been significant actors during their lifetimes. All they know is 1) a small elite band of the rich and powerful control the state 2) secret police and thugs control their lives should they step out of line or demonstrate 3) nothing much is changing, except that it is getting worse with higher prices for basics and low prospects for formal employment.

No one knows the future – the forces of the dictatorships could re-assert control, the radical Islamic factions could take power and then hold it violently, or some sort of freer society could emerge. But at last we aren’t hearing the same old noise that this is all the fault of events that occurred decades ago.

Maps and History

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I used to audit a community college. Some of the students on work study used to assist me with financial tasks and they were fun to work with. One day a girl seemed downcast and I asked her why. She said that she had a geography quiz and didn’t feel that she performed well. I asked her which questions she had difficulty with and one of them was “Which continent is Brazil located in?” I pulled out a piece of paper and drew a crude map of South America with Brazil along the coast and gave it to her.

Later she came back with an atlas and exclaimed “You were right!” The most interesting part of the story to me is that, in her mind, a lay-person like me (not a teacher) knowing which continent Brazil was in seemed like such odd and obscure knowledge that she assumed I was “guessing”.

I was recently in Room and Board, an excellent store, when I saw this interesting French map on the wall. What caught my eye was a small tag in the corner of the frame that said “c 1900” meaning “circa 1900”.

I knew instantly that this wasn’t true, since you can see from the map that the Austro-Hungarian empire had been split into its constituent parts and the post-WW1 land re-divisions had already occurred, such as the expansion of Italy. This is obviously a map dated post-1918 and pre-1945; this I could tell from the second I looked at it.

But the real issue is that this sort of knowledge of history applied to the lands of Europe is probably viewed as an obscurity by most people, including the hundreds or thousands of people that pass by this map every day at the store and look at it as an “art object” (it is a quite beautiful map, and if I had a place to display it and the price was right and I could yank off the “c 1900” tag I might think about buying it). I did not inquire but I am sure that if I asked the manager about this tag he would look at me like a crank and I can guarantee that my shopping partner would not have appreciated the likely subsequent argument.

The other part that is interesting to me is that many of the employees of Room and Board are highly educated and literate people, at least in my interactions with them. I am certain that many of them have liberal arts and design backgrounds. But this sort of arcane knowledge, the impact of military and political affairs on the boundaries of European states from 1900 – 1945 (and now into the 1990’s with the fall of the Soviet Union) would not be the type of work that would fit into their curriculum anyways. You could take an elective on virtually any historical topic to fulfill your meager requirement for history (if you had one at all) and I’d bet my last dollar that this sort of military / political history would be far less popular than myriad other potential classes.

Cross posted at LITGM

We Know Very Little

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Recently there was a revolution in Tunisia, which resulted in the ousting of the existing regime after a series of violent demonstrations led primarily by young people. The president who ruled the country for more than 20+ years abdicated, the first toppling of a ruler in an Arab country in decades.

While the news outlets (and bloggers) covered this event intensely as it occurred, and are now looking at neighboring states with long-lived autocrats as potential dominoes also ready to fall, the REAL issue is “who predicted this before it occurred?”

The answer is – nobody. No one was out there predicting a year ago that this government was going to fall. The factors that we are viewing as important today, such as the fact that the government had been in power for decades and was giving few opportunities to a vast population of younger people, were there for all to see previously, and hadn’t changed. Virtually nothing changed, except that a fruit-stand operator immolated himself when detained by the government.

In looking back at history many things seem “obvious” in retrospect, such as the German victories under Blitzkrieg early in WW2 or the BP offshore oil spill – but in fact they were NOT obvious at the time. This revolution is similar to those types of events which seem surprising but then immediately become part of the “common wisdom”.

When we have a world that is priced for stability with low inherent risks in valuations this type of event should put a shiver down an investor’s spine, because these sorts of events only bring with them a knock down in pricing and lead the way for more such events to follow. Not to say that this isn’t a good thing, since dictatorships aren’t good for the world in the medium or the long term, but in the short term they can “put a lid” on instability.

The prognosticators, whether paid (main stream media) or unpaid (like us) totally didn’t see this one coming, at least not now. Remember this and prepare for future surprises.

Municipal Bond Firm Calls Out Bloggers

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Municipal bonds are going through a rough patch right now. They are being attacked in the media, as featured in a “60 minutes” segment, and their values are falling in mutual funds that hold a portfolio of different issuers. I summed it up in this post but frankly you can just find it everywhere on the internet now.

Municipal Bond Fund Letter

A municipal bond specialist firm called FMS Bonds, Inc. attempted to defend the municipal bond market in the above full-page advertisement that they took out in the Wall Street Journal. This article calls out bloggers (like me) in the first sentence:

A steady drumbeat of opinions is prediction a muni market meltown. Bloggers, columnists and too many people with microphones have weighed in on what they proclaim is imminent danger in the municipal bond market. This fear mongering has spooked investors and disrupted the market.

Well first of all I am a tiny bit flattered; I didn’t think that BLOGGERS had the power to “disrupt” the municipal bond market. The total size of the US municipal bond market is approximately $3 trillion; does it make any sense at all that bloggers or even journalists should be able to impact this market?

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