May 9, 1941, British Capture Enigma Machine

Brad DeLong, quoting Wired:

May 9, 1941: German Sub Caught With the Goods: 1941: British destroyers capture a German submarine, U-110, south of Iceland. The British remove a naval version of the highly secret cipher machine known to the Allies as Enigma, and then they let the boat sink -- to keep the fact of their boarding secret. The Enigma machine, used by the Kriegsmarine to encode and decode messages passing between shore command and ships at sea, was taken to Bletchley Park in England, where cryptographers including computer pioneer Alan Turing succeeded in breaking the naval code. The Germans, assuming U-110 had foundered with her secrets intact, failed to realize that their code was broken. The subsequent information passing before British eyes helped the Allies enormously in the Battle of the Atlantic.

Several versions of the Enigma machine existed, but the working principle -- a rotor system activated using a keyboard -- was the same. The machine itself had been around since the early 1920s and was used by other nations, too, although it is most closely associated with Nazi Germany. The Enigma used by the German army was decrypted as early as 1932 by Polish cryptographers, who later passed their methodology along to the British and French. In light of subsequent events (the Germans drove a Franco-British expeditionary force out of Norway and then crushed the French in a six-week campaign in 1940), the military value of this early intelligence is debatable.

Trying to Get to the Definition of Inflation

Robert's Stochastic thoughts (via Mark Thoma):

Most people in the USA use "inflation" to refer to increased prices and assume that inflation does not cause increased nominal wages. They will not be surprised by the graph. That's what they imagine when they say inflation is a problem. Most US adults would not object of told "inflation reduces the amount of goods workers can buy with their salaries." They hate inflation (considering 10% inflation by far the biggest problem for the USA in the 70s) exactly because they assume that price increases don't cause wage increases even in the long run.

Evidently the idea is that lower inflation (and they ask economists how to achieve it) means higher real wages and the same employment. Then in a sick twist the older New Keynesians (Fischer, Taylor, Gordon) argue that central banks are tempted to cause surprise inflation, since lower real wages are clearly desirable.

Most people who fear the inflation monster under their beds don't fear a wage price spiral, they don't hope for a wage price spiral. They think higher inflation means lower real wages forever which are not compensated by any benefit such as higher employment ever.

The debate is schizoid because economists and not totally ignorant policy makers accept the public view that inflation is hugely costly (assuming complete nominal wage rigidity) and also assume that high inflation is persistent and hard to eliminate because they know how nominal wages really respond to inflation.

At the moment this is all irrelevant (as you note) since core inflation is low, wage inflation is low and a higher relative price of petroleum really does reduce US aggregate real income. But the current insanity is made more likely by the general inflation insanity. Basically policy makers know that high gasoline prices make people vote against incumbents and they demand that Bernanke save them from the effects of increased Chinese demand for petroleum.

There is a lot of truth there.  The 70's inflation was driven by Nixon dropping the gold standard, along with the oil embargo and decreasing oil production in the U.S. (Texas reaching peak production) driving down the dollar and driving up oil costs.  This combined with automatic cost-of-living wage increases tied to the consumer price index to kick in, starting a wage-price spiral.  Today we have the weaker dollar and the higher oil prices, but we don't have the wage increases.  What wage increases we do have go directly to helath insurance companies.  With high unemployment, workers don't have leverage to push for wage increases, and must make do by cutting back.  Employers have enough trouble passing on raw material costs, let alone labor cost increases.  Our main hope would be to reduce consumption of energy, and bring down that dead load cost on our economy, but that means getting off of our fat asses and walking, biking or using public transit, and since suburbal sprawl has made that tremendously difficult, I don't think we'll be seeing much voluntary decrease in energy usage.

Twist and Shout

Jimmie Wilson, Unlikely Hero of 1940 World Series



Jimmie Wilson, coach and 1940 World Series Hero


In a post script to last week's featured article recounting the death of Willard Hershberger, I wanted to highlight what little good came followed Hershberger's passing:

In his suite that night, McKechnie gathered his players together. He told them what Hershberger had said to him the night before—how his father had killed himself, how Hershberger had wanted to kill himself, too, and how he felt he had let down the team. McKechnie also said Hershberger had talked about other personal problems that the manager felt honor-bound not to reveal. McKechnie mentioned that Hershberger had several un-cashed paychecks in his pocket. Lombardi, Riggs and a few others were weeping. "I thought I had talked him completely out of it," McKechnie said. "I thought everything was put back together again. I couldn't keep a bodyguard on him."
The meeting lasted about half an hour. McKechnie made one plea. "The thing for us to do now is win the pennant and vote Hershie's mother a full share of the World Series money," he said. "And I know we'll win it." They did indeed win the Series, beating Detroit four games to three, and Maude Hershberger got a full share, $5,803.62.
Ironically, Hershberger's death led to the best of all 1940 World Series stories. In mid-September, Lombardi sprained his ankle, and without Hershberger, McKechnie turned to the only man in the organization he thought could handle the job—coach Jimmy Wilson, 40, a former catcher who had caught but two games in nearly three seasons. Wilson caught in six of the seven Series games, and Thompson can still see him hobbling in pain, his thigh muscles knotted up from so much squatting. Between innings, Wilson would teeter to the runway behind the dugout, drop his pants and sit down so that Rohde could massage a scalding salve into his thighs. "Oh, mercy, it was hot," Thompson says. "And his catching hand was so swollen from catching fastballs that he could barely get it in and out of the glove. He was great."
Wilson also hit .353—six singles in 17 trips. It was a rare farewell, a final performance by an old man who rose one more time to honor himself and the game.

The story of Jimmie (or Jimmy) Wilson has always amazed me.  How a 40 year-old could catch 6 out of 7 games in the World Series and hit .353, after catching in 2 games over 3 seasons, is stupefying.  He also appeared in 16 games during the regular season.  He'll always have a place in my personal Little-known Accomplishment Hall of Fame.

Ohio Amish Feel Impact of Meth

A scourge of rural Ohio has begun impacting the Wayne and Holmes County Amish community:

More than 150 Amish men and women filled a farm building this spring to learn about the chemical curse that is surrounding them. Methamphetamine, the drug peddled by outlaw bikers and street-corner dealers for decades, is on the rise in the land of the horse and buggy -- though no one caught with the drug in the area has been Amish.
The rural hills of Holmes and Wayne counties, about 90 minutes south of Cleveland, is a place where violent crime and major drug trafficking have seldom been a problem. Many associate the region with Ohio's largest Amish population, quilt shops and large family farms.
But beneath the idyllic setting is an underbelly of criminal cookers who have begun brewing the gritty, illicit stimulant into a growing drug of choice in a region that might be one of the last in the state to face the drug's scourge.

This is a more serious crime wave than Amish milk smugglers.  Luckily, none of the people caught with meth have been Amish, but the increased drug activity in the area has driven the Amish to meeting with police to understand the problem:

"The devil doesn't care where we live, whether in the city or in the country," said Ed Miller, an Amish general contractor from Apple Creek. "He seeks out the weakest. . . . There's a big concern about [methamphetamine.] We don't want that."
David Smith heads the Medway Drug Enforcement Agency, an anti-drug group that works mostly in Wayne, Holmes and Medina counties. In 2007, the agency dismantled one lab in the region. Last year, it cleaned up 17.

Meth producers have found rural areas to be good places to make the drug.  Meth, along with prescription drug abuse, is slowly growing to become nearly as damaging to rural communities as crack and heroin have been to inner cities.  Last month, the Summit County Sheriff warned highway cleanup volunteers to be careful about handling bottles used in backroad meth production.  This is an epidemic, which was highlighted in the book, Methland, which described the impact of methamphetamine around the community of Oelwein, Iowa.  It is sad how the drug destroys the lives of people so thoroughly.

Naked Capitalism Link of the Day

Today's link: Climate Shifts 'hit global wheat yields,' at the BBC.  This is a recap of the posts here and here.  From the BBC story:

The team carried out a large statistical analysis that tried to isolate the effects of temperature and precipitation on crops, independent of all other factors such as changes in technology and land management.

Wheat and corn are the staple crops that are most affected by changes in temperature

"We can see how much these variables affect crops... for example, for a crop like wheat, a degree (Celsius) of warming on a global average translates to about a 5% loss in production."
Professor Lobell said the study only referred to past relationships, as extrapolating the findings to predict future trends would require a number of assumptions to be made.
"In particular, you have to assume how non-linear the response will be and how different the crops of tomorrow will be from the crops of today," he said.

Population growth and energy consumption is straining agricultural resources, adding increasing global temperatures to the mix could very easily lead to catastrophe.

Other links of note include a story on the right-wing campaign to destroy the public schools, and a solar device to sterilize medical equipment.  A daily visit to Yves Smith's naked capitalism site is highly recommended.

More on the Endgame

John Mauldin, over at the Big Picture:

Let me jump out on a real limb. I was having dinner last Monday with Christian Menegatti, the #2 economist at friend Nouriel Roubini’s economic analysis shop. We were comparing notes (imagine that), and he said their opinion is that the US has until 2015 before the bond market really calls the deficit hand. Knowing that Nouriel is seen as the ultimate bear, it makes me nervous to put out my own even more bearish analysis.
I think the crucial point will be reached in late 2013. If the bond market sees a serious move to control the deficit, I think they let us “skate.” Then we Muddle Through. But if not, I think we begin to see some real push-back on rates then.
Why so early? Because bond investors are going to be watching the slow-motion train wreck that is happening in Europe and especially Japan. It is one thing for Greece to default (which they will in one form or another, with lots of rumors flying this morning), yet another for Japan to do so. Japan is big and makes a difference. Japan could start to go as early as the middle of 2013. As I have said, Japan is a bug in search of a windshield. Whenever this happens, 2013 or a year or so later, it is going to spook the bond market. The normal indulgence that a superpower and reserve-currency country would be accorded will become much more strained. It will seemingly happen overnight. Think Lehman Brothers on steroids.
I think the chances we will deal with this potential crisis are about 75%. Not doing so is such a horrific outcome that I think politicians will do the right thing. See, I am an optimist. (What was it Winston Churchill said? “You can always depend on the Americans to do the right thing, after they have exhausted all the other possibilities.”)

He is endorsing $3 in spending cuts for every $1 in tax increases.  I would think more along the lines of drastically overhauling the heath care sector with single payer, slashing defense spending and wrapping up the wars in Iraq and Afghanistan, (and Libya), then $2 in tax increases/tax reform for every $1 of spending decreases.  I think he is right that the deficit and debt are huge issues, but I think he is slanted too much in an anti-government direction.  Likewise, he is much more optimistic about Republican politicians being able to fix this mess.  So far, I have yet to see a decent likely candidate for the GOP nomination in 2012.  I sure don't want any of the guys who participated in the debate last week running the country.  He also doesn't mention issues we may face with resource scarcity or climate change.  We face a lot of hurdles in the near future, and we're going to have to put aside much of our enmtiy with our political opponents and make true shared sacrifice.  So far, I don't see much of that from Republicans.  I don't even see them acknowledging what I think are pretty obvious facts.  This is going to be a tough process.

David Hume's Birthday

Crooked Timber (h/t Mark Thoma) marks David Hume's 300th birthday on May 7 (April 26-Julian calendar):

David Hume was born 300 years ago today. His influence on philosophy is well recognized. His influence on the social sciences, rather less so. Dan Sperber proposes that readers of his blog celebrate this anniversary by selecting particularly relevant quotes. Sounds like a good idea – let me start the ball rolling by stealing a particularly appropriate one from Cosma Shalizi.

It is excellent reading.  Commenters added their own favorite quotes.  My favorite came from commenter Geo:

Hume, Of Commerce:
“A too great disproportion among the citizens weakens any state. Every person, if possible, ought to enjoy the fruits of his labor, in a full possesion of all the necessaries, and many of the conveniences, of life. No one can doubt that such an equality is most suitable to human nature and diminishes much less from the happiness of the rich than it adds to that of the poor. It also augments the power of the state, and makes any extraordinary taxes or impositions be paid with more cheerfulness. Where the riches are engrossed by a few, these must contribute very largely to the supplying of the public necessities. But when the riches are dispersed among multitudes, the burden feels light on every shoulder, and the taxes make a not very sensible difference on any one’s way of living.
“Add to this that, where the riches are in few hands, these must enjoy all the power, and will readily conspire to lay the whole burden on the poor and oppress them still farther, to the discouragement of all industry.”

We could stand to consider that again today.

Pacquiao Wins Easily Over Mosley

ESPN:

Manny Pacquiao caught Shane Mosley early, then chased him the rest of the night. Not much more he could do against an aging fighter who seemed only to want to survive. Pacquiao won a lopsided 12-round decision Saturday night, retaining his version of the welterweight title in a fight that was roundly booed over the late rounds because Mosley refused to trade punches.
Pacquiao won every round on two ringside scorecards in extending the remarkable run that has made him the most exciting fighter in the sport.

I went in to town to see if any of the sports bars was carrying the fight, but they weren't.  A bartender at one of the bars told me that it would cost them $1500 to buy the fight on pay-per-view.  I thought $54.95 was a lot for somebody to order at home, but $1500?  It seems like a shame to me that boxing has kind of priced itself out of the general sports market.  I haven't caught a championship fight in a long time, and I really like boxing.  Hopefully Floyd Mayweather and Pacquiao will be able to reach an agreement and have a title fight soon.

VE Day

66 years ago today, the war in Europe ended.