Even the best central bankers are below average

One of the world's greatest central bankers, Sir Mervyn King of the Bank of England, is, in fact, an idiot, according to the Financial Times. This morning the FT had a special section on his reign in which they commented: Mervyn King was confident as he celebrated the 10th anniversary of Bank of England independence at the Royal Bank of Scotland five years ago. The economy was sound, the governor believed the risk to financial stability “appeared to be low” and lauded BoE independence as “the dramatic constitutional change” that convinced financial markets that Britain would run a stable economy. Life at the BoE was sweet. Five years on, Britain’s economic and financial stability has hit the rocks. Yet the BoE has emerged as the big winner of the crisis. Legislation to make it one of the most powerful central banks in the advanced world is passing through parliament. And its governor received not just a knighthood in 2011 but the highest form of that award, the Knight Grand Cross. How can so many of the BoE’s intellectually powerful figures have misdiagnosed Britain’s economy so badly? How can the country feel secure it will not happen again? And did Sir Mervyn’s personal style – dominating the BoE – contribute to the crisis? The study from the two economics professors that I previously sent you establishes that the distribution of human ability has fat tails, There are outliers at both ends of the spectrum. In fact, the ability of the most able is so high relative to the others that the great majority of people are below-average. This, according to the FT, applies to central banks as well as to athletes. Sir Mervyn is one of the world's best central bankers but he is still below overage. It one uses a reference population of not only living but of all central bankers who have ever lived, it is likely that all living central bankers are below average. Q.E.D. These are parlous times.

Most of us are below average, according to experts

http://www.npr.org/2012/05/03/151860154/put-away-the-bell-curve-most-of-us-arent-average?ft=1&f=151860154 The distribution of ability and performance is not normal. This is bad news for democracy. High performance individuals skew the results. Should they be suppressed? The article is worth reading.

Sort of sad mining joke

Junior gold stocks are depressed and the companies are having trouble raising equity capital. One CEO asked recently, "What is the difference between a large pizza and a mining geologist?" Answer: "The pizza can feed a family of four."

Junior Oil Co.: Hyperion Exp. Corp: TSX-V: HYX

We attended an interesting presentation by a Canadian oil exploration company that is active in the Cardium area of Alberta. Their strategy is to develop production by purchasing producing acreage and then applying horizontal drilling and fracturing to building up production. This very conservative strategy has been applied with success by the CEO Trevor Spagrud at previous companies. It is interesting that that, contrary to previous experience, stock market valuation for the company is not rising along with production. which makes new equity financing difficult. Today's market constitutes and anomaly, and perhaps an opportunity, assuming of course that market conditions will return to normal eventually. We shall see.

Gold mining company wave of consolidation?

The Financial Times suggests yes today, p. 18. http://digital.olivesoftware.com/OLIVE/ODE/FTUS/Default.aspx?href=FIT%2F2012%2F04%2F30&pageno=18&entity=Ar01803&view=entity

A Sunday Thought

Sometimes we learn surprising things about people long after their deaths. In 2009, The Times first published the following lines by TS Eliot:, who passed away in 1965. "Of all the beasts that God allows/ In England's green and pleasant land/ I most of all dislike the cows:/ Their ways I do not understand." How many of us, like Eliot, go through life without resolving such inner torments, and how better our lives would be if we did! It's worth thinking about.

The fracturing of shale formations holds the promise of almost free energy for the entire world. This may well (no pun intended) be the most important economic development of the next fifty years. Here are some implications: 1. Accelerating economic growth 2. Shrinking of the oil and gas industry (revenues shrink, like with mainframe industry thirty years ago) obsolescence of utility companies. (power generated at home level; more efficient) 3. No more coal 4. No alternative energy industry 5. Disruptive politics as industries and interests negatively affected engage in a bitter but futile resistance. 6. Middle East becomes unimportant and Canadians focus more on maple syrup production. In short, the future lies before us.