All In

Now that Nancy Pelosi has been buffaloed by Pencil Neck Schiff into opening an impeachment inquiry, the Democrats have pushed all their chips into the center of the table ... betting that they can either impeach and convict Trump ... or so damage him that he will lose in 2020. Pelosi has even indicated that it would  be worth losing the House of Representatives if this means Trump is no longer in the White House. Not a good idea ...

Now, in mathematics, there have been extensive studies on how to win such games ... centering around which strategy offers the best payoff. I won’t take you kind readers into the technical weeds here, but suffice it to say that, by far, the best decision rule is “minimax” meaning minimizing your potential maximum loss ... which is exactly the opposite of what the Dems are now doing.

Yes, it is possible that this all-in bet on the Trump impeachment might just fool the American people and Trump might be deposed. But, if this next sure-fire tactic, the Ukrainian Connection, fails like the Russian Collusion, the Stormy Daniels Payoff, the Government Shutdown, the Emoluments Violation, etc., etc., then the Democrats may well suffer what Pelosi most worries about.

If this Ukrainian balloon deflates ... as it most probably will ... then the Botox lady’s dire prediction may well be prescient ... and the Democrats will spend the next twenty years in the wilderness ... repenting their evil ways and wishing that they had some chips left.

Trade Wari?

China has recently threatened $50 billion in tariff retaliation against the equivalent planned tariffs by the United States against China ... thus raising the spectre of a trade war. Is this a serious threat? Let's first look at the numbers: in 2017 China exported $560 billion of goods and services to the U!S. and we, $185 billion to it ... for a total U.S. trade deficit of $375 billion, see: NY Times Article. Although China is the second largest economy in the world, it exports to the U.S. represent a far bigger proportion of its GNP than our exports to them.

Now there is in game theory the notion of the optimal gaming strategy being minamax ... minimize your maximum loss. Therefore, if China and the U.S. get into an all-out trade war, reducing both these trade numbers to zero, China would be far more damaged ... probably to the point of massive social disruption. Using game theory, which I am sure China understands, the United States does have the strategic high ground in this pissing contest.

OK, but China does own well over a trillion dollars in American government debt. Can't they use this as a cuddle against Trump's tariffs? But Trump knows this game quite well from his previous banking relations  -- when you owe the banks a huge amount of money, they don't own you ... you own the banks. If China were to start selling this U.S. debt, it would drive down the prices on that which it still holds ... and also, in the process, make the Federal Reserve Bank's job of paring its balance sheet easier.

Trump has stated that his objective is to reduce our trade deficit with China by $100 billion over the next year. Obviously, an all-out trade war would accomplish this ... but also would serious talks with China wherein Trump uses our above negotiating leverages effectively ... much more likely the latter than the former.

$330 Million

Tonight’s Mega Millions jackpot is estimated at $330 million (I suspect it will be bigger). The odds of winning on a single $1 ticket are 176 million to one. Thus, according to a game-theory construct, buying a ticket in this lottery is worthwhile since the expected return is almost $2 for a $1 bet (330/176). So today I bought $20 worth of tickets which makes my odds of winning 8.8 million to one (176/20) … still pretty long odds but a bit of an improvement. In fact, one might compare the odds of winning on the purchase of one ticket to the chance of you trying to contact an old friend (who you know lives in the U.S. but not where) by picking up the phone and punching in 10 random numbers after hitting “1.” If, when this phone call is answered, it is your old friend, then you have won the equivalent of the Mega Millions lottery.

It actually would make more sense to buy 176 million tickets since winning $330 million (more or less) would be almost assured. (However, I doubt if you could find a convenience store that would accommodate such a request.) Although not exactly the same analogy, Michael Graham on local talk radio makes the salient point that, if you had bought every Mega Millions ticket sold over the last 15 picks, you still wouldn’t have won since this is the number of consecutive no-winner drawings.  He adds that he never buys lottery tickets since the lottery is effectively a tax on the stupid.  I guess I have now moved with both feet into this category.