Thursday, January 29, 2015

Was Switzerland Right in Removing Its Currency Peg?

Switzerland was at it again with shocking the world, this time with removing itself from its fixed exchange rate. Prior to January 2015, the Swiss central bank pegged its franc to the euro at a rate of €1:1.2 CHF. Once the Swiss government resumed being a floating exchange-rate regime, the CHF appreciated to €1:1CHF. Not only did this move mess with various hedge funds, but the Swiss stock market dropped about sixteen percent the following day. What was the Swiss government thinking?

It might seem like the Swiss government's thinking has about many holes in it as Swiss cheese, but let's take a look at the basic of exchange rate regimes. In a floating rate regime, which is what Switzerland returned to this month, is when the value of the currency is allowed to fluctuate based on the foreign currencies market. Essentially, the supply and demand for a given currency relative to other currencies is what determines its worth in the foreign currencies market. A fixed exchange rate, on the other hand, is when a currency is fixed or pegged to the value of another currency, a basket of goods and/or currencies, or a good (e.g., gold). There are gradations of a fixed exchange-rate regime (e.g., managed floating), but any regime that is not floating means that the government attempts to control the exchange rate.

Governments who use fixed exchange-rate regimes typically are either trying to prevent major inflation or are trying to make sure its exports remain competitive in the international market because using a fixed exchange rate, like Switzerland did, keeps exports relatively low. A central bank doesn't want its currency greatly appreciating because it means that its goods would become more expensive relative to foreign goods, which is one of the primary allures of a fixed exchange rate. Also, Switzerland thought that its currency was overvalued, which was one of the impetuses behind the regime change.

One of the catches with a fixed exchange rate is that in order for it to work, the government has to successfully maintain the peg. This means buying and/or selling either domestic currency or foreign currencies to succeed. In the case of Switzerland, it meant that the Swiss central bank had to print a whole lot of francs and exchange them for euros so it can have a nice stash of foreign reserves. In theory, the central bank can print more and more money, but that just leads to devaluation and ridiculous levels of inflation in the long-run. Plus, floating exchange rates adjust the balance of trade. A world with floating exchange-rate regimes means a world in economic equilibrium. To implement a fixed exchange rate is a form of price control on of the most macro levels humanly possible. And we already know how I feel about price controls on a more micro level.

The Swiss economy will have some short-term pain, not because they relinquished the fixed exchange rate, but because Switzerland thought it was necessary in the first place. It will take some time for its currency and markets to adjust, but once they do, they will be in better shape not having their currency pegged to the euro, thereby having its monetary fate tied to the failures of the euro zone.

It is speculated that the Swiss government timed the regime change to preempt the European Union's call for quantitative easing. Could the Swiss have handled it better in terms of making the change more gradually? Yes. A sudden shift caused a short-term shock to the system. Although it could have be better managed, on the whole, Switzerland did not want to become a casualty in the Euro Zone's idiocy, and I can hardly blame the Swiss. Switzerland didn't need to peg its currency in the first place, because there are derivatives, securities, and other financial instruments that can better hedge against the risks of competing in the international market. However, since Switzerland committed this folly, it's now undoing a monetary wrong. Any exchange rate regime comes with its advantages and disadvantages (e.g., for a developing country, fixed exchange rates might help produce economic stability in the short-run), but feeling that you need to peg your currency to a bigger country's currency shows a sense of economic immaturity on your end (or possibly succumbing to ignorant, fear-mongering politics) because floating exchange rates allow for better economic growth. I'm glad Switzerland grew up and underwent a reform that will continue its overall reputation as an economically free nation.

Sunday, January 25, 2015

Reclaiming Mikvah as a Jewish Spiritual Practice

A couple of weeks ago, my synagogue performed the ribbon-cutting ceremony for its mikvah (מקוה), which is a bath used for purposes of ritual immersion. With the recent allegations against former Rabbi Barry Freundel of him videotaping naked, female converts entering into the mikvah, it brought attention to a painful reality for many in the Jewish community, particularly women: Instead of being a sacred space for purity, it was a place where one felt violated. Although the Freundel scandal has brought the issue to light, there has been something more ongoing than rabbinic abuse of power, and that is that many Jews have lost connection with what mikvah does mean or can mean in their lives.

A question that might be prudent to ask is when one is required to use mikvah. The most common usage of the mikvah is for women who just finished their period of niddah (see Leviticus 15:19, 15:24, 18:19, 20:18) due to their menstrual cycle, and want to resume marital relations. Immersion of kitchen utensils purchased by non-Jews (a process known as tevilat keilim) also require immersion in the mikveh. Conversion to Judaism for both genders is another common use of mikvah. There are also other mandatory uses, such as a bride before she gets married or a woman after childbirth. Other than that, any other use (e.g., a groom before the wedding, a man before Yom Kippur) are customary in nature.

Before going into greater meaning behind the ritual, I would like to point out the double standard between genders with regards to mikvah. Under Jewish law, a man who has ejaculated and has not yet completed an immersion in the mikvah is considered to in a state of ritual impurity called בעל קרי, which means amongst other things, he cannot study Torah until the immersion (Talmud, Berachot 22a; Leviticus 15:16). However, there was a point where these laws became inoperable for men, and men were no longer required to go to mikvah for reasons of ritual impurity. The biblical source for ritual impurity shows up in the same chapter for both genders, yet only men are provided a free pass. Maybe the rabbis realized that men ejaculating, even when involuntary, was a more frequent biological process than women menstruating. It sends the unfortunate message, even if unintentionally, that women are "gross" or "impure" while men are "good to go." If you go to the mikvah because you take the concept of ritual purity seriously, all the more power to you. However, not everyone is going to have that view. For non-Orthodox Jews or more religiously liberal Jews, I can at least understand why going to the mikvah based on the reason of "my body's ritual status is unacceptable" is unpalatable. The question is how can one go to the mikvah and not feel dirty or guilty about a natural process of the human body that G-d Himself created. How can we, regardless of gender, feel a relevant, spiritual connection to mikvah?

Think about the importance of water. Water is a source of life. Humans are over 70 percent water. Without water, we would not exist. The Tanach picks up on this symbolism. Water is used to transform (Leviticus 14:7). Water is a source of survival (Genesis 21:14-19). We see water's usage in the Creation narrative, the story of Noah and the flood (at which point, the planet is effectively one giant mikvah), the splitting of the Sea of Reeds in Exodus, Moses in the basket, the story of Jonah and the whale, the list goes on.

When we look at the uses of water in the Bible, they have a commonality: they commemorate a new beginning. Water is so transformative that we feel anew. Much like water, the concept of renewal is also a prevalent motif in Jewish thought. Every year, we start anew with the High Holy Days. Every month, we have Rosh Chodesh. Shabbat comes around every week. On a daily basis, there are practices such as Modeh Ani. Judaism provides constant and ample opportunity to restart our lives because we are redeemable and capable of improving upon ourselves.

Rabbi Samson Raphael Hirsch was correct in saying that the mikvah is symbolic of a new birth, which would help explain why immersing into mikvah with intent (קונה) is a requirement in Jewish law. Without it, it is as if one had not immersed at all. This is why I think that there should not be a lot of mandatory requirements for mikvah. The reason why I think there should be more personal discretion as to when one decides to go to mikvah is because we know ourselves best when it comes to determining when we have reached a transition point in life that necessitates a ritual to commemorate that transformation. Many of us would think that going to the mikvah daily or right before Shabbat is a custom that is too much. At least for me, I know if I went to the mikvah too frequently, it would lose its קונה. Perhaps going right before Yom Kippur only is more appropriate (see Pirkei DeRebbe Eliezer, Chapter 20; Mishnah Berurah 606:21). Or how about when you move to a new city and are starting a new life? That seems like a good time to use the mikvah. However you decide to use mikvah, may it commemorate the beginning of a new and better you.

Wednesday, January 21, 2015

Why Naysayers Should Pipe Down About Keystone XL

The Keystone Pipeline debate has been going on for about six years ago, and by the looks of it, Congress should allow for its construction soon enough. A lot of the debate behind it seems to be symbolic from both sides, which might explain why former Energy Secretary Chu said that the decisions behind Keystone are political. Republicans want to make it look like they're creating jobs and stimulating the economy. Democrats want to appear as the protectors of the environment.

In the grand scheme of things, I have to ask why building this is a big deal. The United States already has more than 190,000 miles of oil pipelines running through its infrastructure. Will another 1,179 miles do that much harm? If pipelines were so harmful that they cause an exceptionally high level of oil spills that spoil Mother Nature, don't you think we would have heard about pipeline safety issues by now? According to the Department of State's environmental impact statement, it "remains unlikely to significantly impact the rate of extraction in the oil lands, or the continued demand for heavy crude oil at refineries in the United States (p. ES-9)." Allowing for this pipeline would create 18.7 million metric tons of carbon per annum, which might sound like a lot, but if we used a climate model developed at NASA, we would see that building Keystone would only increase the planet's temperature by 0.00001ºC, or a hundred-thousandth of a degree. Even climate activists concede that Keystone would only be 0.2 percent of the world's "carbon budget."

We're talking 168 billion gallons of untapped oil, which is only third to Saudi Arabia and Venezuela. Do you think that Canada is going to sit on that metaphorical gold mine and do nothing? Good luck with that! If Keystone doesn't get passed, they're still going to extract it and find a different way to transport it, or even find a different purchaser for all that precious oil. Did the protesters think that it was more than a distinct possibility that alternative methods of transporting the oil would be more expensive, increase risk for oil spills, or increase carbon emissions even more? Pipelines are the safest way to transport oil, so if naysayers have a better way of transporting the oil, I'm all ears.

And let's talk about some of the benefits. There is no significant effect on federal spending. Oklahoma and Texas have already experienced a combined $5.7 billion boom to their economies for the construction of the southern leg of the pipeline, so it's reasonable to assume finishing the pipeline will have similar effects for the affected states. There's also that estimated $54 million in tax revenues. Even the Left-leaning CEPR admits there would be some job creation (granted, most of it would be temporary, but at least that speaks to how low-maintenced oil pipelines are, which is a good thing because it speaks to their overall safety). None of this gets into how increasing supply will make oil even cheaper.

Until renewable energy makes itself as price-effective with a capacity to meet our energy demands, we're "stuck" with oil, coal, and natural gas as our main providers of energy. Much like with fracking, there are residual risks to the construction of this pipeline. We have a safe way to bring affordable energy to many while boosting the economy. The fact that environmentalists' imaginations like to run wild on these matters should be no basis for dictating public policy.

Monday, January 12, 2015

Obama's Cockamamy Community College Concoction

No president has been perfect, but it is times like these where I think Obama takes the cake on some of the crazier policy ideas. What did he propose last week? To make community college a free service. Granted, the students have to maintain a 2.5 GPA, but if Obama's plan goes into action, the federal government will foot the bill for three-quarters of a community college education, whereas the remaining quarter will be funded by the respective state government. Considering that the recession has caused states to divest because of budgetary cuts, good luck with the latter portion.

But that set aside, why would Obama offer such a proposal? I can see the appeal of subsidizing community college. Community college is a cheaper alternative for a four-year degree. What's more is that not everyone should have the societal expectation of a four-year degree thrusted upon them. There are high-paying jobs out there that only require an Associate's Degree, and even more interestingly, most of the occupations with the highest amount of projected growth don't even require post-secondary education. Obama points out that by 2020, 30 percent of jobs will require some college or an Associate's degree. By funding college, not only would it provide young adults with the education they need, but it would save the 9 million students who would benefit from having to pay $3,800 in tuition per annum. Although $3,800 doesn't sound like much, when you aggregate those figures, it comes out to about $32.4B per annum. I could make the gripe about how the federal government alone is $18 trillion in debt, but that argument unto itself might not work because it's possible that the program can end up paying for itself.

I'm personally skeptical of that argument, and a lot of it has to do with how the federal government presently handles the four-year college education system. The federal government already subsidizes those going to a four-year college, and is I had explained back in 2013, such a policy increases the cost of going to college. This is all the more plausible since tuition is only a small portion of the overall costs for a two-year college program.

Let's say that talking about supply and demand is economic mumbo jumbo to you. It still doesn't address completion rates. Having access to a service is a required first step, but what good does it do when you cannot complete college? Looking at the Chronicle of Higher Education's completion statistics, it's comparatively difficult for someone aiming for a four-year degree to complete their coursework as it is for someone aiming for a two-year degree. Even with the four-year system being subsidized by the federal government, not only do we still have a 41 percent dropout rate, but a quarter of those who do manage to graduate have the same median salary as someone who only graduates high school. Throwing money and grant aid does not have the impact that proponents would like to think, which is why the way the current subsidy system is a textbook definition of over-investment. Federal subsidies towards the four-year college system have caused tuitions to skyrocket while saturating the labor market with people with Bachelor's degrees. It would be lamentable if the community college system ended up with a similar mess.

Another point is that this policy would not be a subsidy for the students; it would be one for the community colleges. As previously mentioned, tuition is only a small portion of overall costs for a two-year education, so much like we have experienced with four-year colleges, we would most likely see costs skyrocket. What's more is that since this is a subsidy for the colleges, there is a major incentive for grade inflation. While a 2.5 GPA average might not seem like much since it's below a B average, it will incentivize community colleges to keep students' grades above a certain level so they don't lose money. Grade inflation is an issue because it erodes the value of a college degree. A GPA is supposed to signal to a potential employer that a certain candidate is competent. What good is the GPA if it ends up distorted?

As Milton Friedman had to remind people enough times, there's no such thing as a free lunch. This "free lunch" would most probably be funded by increasing taxes, assuming you can get the states on board to commit to the remaining fourth of the subsidy. Subsidizing community college will simply boost demand in the same distorting, artificial manner that the federal government already has done with the four-year college system. Subsidizing another market in attempts to offset the other failed subsidy is unacceptable policy. We've seen what happens when the government gets its hands on education, whether it's with four-year colleges, Common Core, or universal preschool. Students should go to post-secondary educational institutions that best suit their skills and actually provides a skills-based education instead of providing what the government thinks is best for them. By discontinuing its subsidies, the government can create a freer marketplace in education, but I see that as improbable of an occurrence as Congress actually voting on this proposal.

10-6-2015 Addendum: The Manhattan Institute published a report on a series of community college reforms that transcend Obama's simplistic approach of "throw money at the problem."

Wednesday, January 7, 2015

Defending Freedom of Press in France and Everywhere From Extremists and Prudes

France has suffered a coup as it mourns those lost in the Charlie Hebdo terrorist attack that just took place. For those who don't know, Charlie Hebdo is a Left-leaning, anti-religious satirical newsletter that did an above average job of making fun of idiocy across the board. Apparently, some Muslims didn't find their satire so humorous because a group of them grabbed some Kalashnikovs, attacked the office of Charlie Hebdo, and ran away screaming الله اكبر (literally meaning "G-d is the greatest," but in this case, was used as an Islamic battlecry). Ten journalist and cartoonists, as well as a couple of police officers, were assassinated in the attack. It was the worst terrorist attack in France since the 1960s.

If you look at some of their cartoons, yes, I can see how they can be insulting or irreverent. I mean, look at this cartoon below of a Jew and a Nazi kissing, and it says "Judeo-Nazism: Love is stronger than hate."

Can you see how this would anger more than a few Jews, and how it can be perceived as anti-Semitism? I do. It infuriates me to no end that someone would be that insensitive. However, do you see Jews going out and assassinating the cartoonists simply because they find it insulting? Nope. There is only one religion whose practitioners will go out and kill someone because they can't take a joke: Islam. Why is it that there is not a single imam of clout that speaks out against such depravity? The better response to insulting cartoons is a non-violent one (e.g., boycotting) and to call a spade a spade, much like with the "Death of Klinghoffer" controversy a few months back.

I'm not going to be the least bit surprised if someone blames the attack on Islamophobia. To suggest that the satire brought about the attack is similar to blaming a woman for being raped because she was scantily clad. It's not the fault of Charlie Hebdo; it's the fault of the perpetrators who decided to murder in the name of Islam. It is attacks such as these that perpetuate stereotypes of Islam. If you want people to stop having negative views about Islam, Muslims in developed nations should use their freedom of speech to speak out against these depravities.

And it's not just Muslims who should use their free speech to speak against such immorality. We should double down and continue to use our freedoms of speech and press. We shouldn't be afraid to use our freedom of speech just because some religious extremists are offended. If we do become afraid, then anti-intellectual, ignorant ignoramuses who like to censor free thought win. In a free society, freedom of press needs to prevail, especially since it "contributes to good government, self empowerment, and eradicating poverty." Without it, we become slaves to fear and authoritarian prudes who lack a sense of humor they sorely need.

Aujourd'hui, nous sommes tous français.

Saturday, January 3, 2015

Parsha Vayechi: The Patriarch Jacob, the Tenth of Tevet, and New Year's Resolutions

Normally, I write up a d'var Torah for a given week before Shabbat begins, but given the convoluted nature of this particular set of thoughts, I needed time to think this one through. For those of you who do not know, this past Thursday was the fast of the Tenth of Tevet. Amongst other things, this fast recalls Nebuchadnezzar's siege on Jerusalem (II Kings 25), which was the beginning of the end of the destruction of the First Temple. According to the Talmud (Yoma 9b), the reason for the destruction of the First Temple was murder, idolatry, and sexual immorality. If we think about it for a moment, a society doesn't get depraved and sink to such lows overnight. Much like basically any other societal change, it happens gradually, and it's usually too late to do anything by the time the change is in full swing.

What we see in Parsha Vayechi (Genesis 47:29) is the patriarch Jacob being fully aware of that concept, particularly when he begs Joseph אל נא תקברני במצרים ("Don't bury me in Egypt"). Rashi points out via Midrash that Jacob was worried that the Egyptians would worship and deify Jacob. If we take this literally, as R. Chayim Angel illustrates, it's problematic because the Jewish people was so minute and non-influential that there was no way that the Egyptians were going to worship him. What Jacob was actually worried about was that his descendants would assimilate and worship him. Jacob was taking the Talmudic insight of "Who is wise? He who who sees the future outcome [i.e., foresight] (Tamid 32a)" very seriously here. Jacob did not want his descendants to forget their Jewish identities and what it meant to be Jewish. In this case, he felt that attachment to the land of Israel was essential for that. Not that I don't see the Zionist undertones in this Midrash, but I want to return back to the Tenth of Tevet for a moment. Wise people are able to foresee what's going to happen before it happens. When people become lax in their Jewish observance or identity, it's only a matter of time before Judaism and the Jewish people would fade into non-existence, or at least sink into the moral depravity we saw by the destruction of the First Temple.

In order to avoid making mistakes, we need to look both backwards in history and look forward. This motif is both apparent in the Tenth of Tevet and the idea behind New Year's resolutions for the secular New Year. If we are to learn from our past, we need to be able to take a hard look at previous mistakes that we have made. This is why Jews recite Selichot during the Tenth of Tevet: we need to be reminded that even our ancestors made mistakes. After all, we cannot move forward if we cannot find ways to avoid repeating mistakes. Conversely, if we only look backwards, we wallow in our past and don't make any progress. This is why Selichot are supposed to encourage us to look forward. It's the same thing when making New Year's resolutions. We need to find S.M.A.R.T. ways to improve upon ourselves if we ever want to make progress.

We need to have a certain mentality of going about progress because life can be downright arduous and bog us down. Jacob's life provides a good framework. Here was a man who tricked his brother, Esau, out of both his birthright and his father's blessing. He spent a sizable amount of his life running away not only from his brother, but from his past. He was even deceived by his father-in-law, Laban, with respects to his marriage to Rachel. He also had to deal with how his favoritism towards Joseph caused Joseph to be lost to him for many years. Jacob wrestled and struggled with life. It's why his namesake Israel (ישראל), literally meaning "one who struggles with G-d," is so relevant. It means that in spite of his struggles and travails, he stuck with his Judaism. Jacob's life shows one of the key ingredients not only to maintain a Jewish life, but also meaningful goal-setting in general. If you want to push through, you need the perseverance and tenacity that Jacob exhibited. Without these traits, people would give up all too easily on pursuing anything meaningful in life. So let's take a cue from Jacob: learn from your past, accept your present situation, and persevere like mad so we can all look forward to a better tomorrow.