What Swine Flu Has Taught Me About My News Sources

How you think is shaped in large part by what you read - and what you read tends to reflect your interests and biases. This is inevitable, and even necessary when you consider how much information is available, but leads to a skewed understanding of what's happening in the world.

Case in point: according to the headlines of most of the major newspapers I read on a daily basis, the biggest threat swine flu is posing to the world is the damage it is going to cause to the economy. So we've got a potentially massive public health emergency, and I'm reading about how this will affect airlines stocks. Hmm.

It's time to re-evaluate my daily news-gathering routine...

Chile's Lesson for Emerging Markets

In a sharp contrast to some of its neighbours, Chile appears to be a model of economic responsibility. Borrowing lessons from Norway, the Chilean government has been stashing away the revenue generated by its abundant natural resources (especially copper) and is now using those stashes to help ride out the recession & commodity bust.

As the article explains, Finance Minister Velasco's policies to save up during the commodity boom were extremely unpopular. Now, as he uses his stored up cash to stimulate the economy and give handouts to impoverished families, he has become one of the most popular ministers in the country. This story is the mirror image of events in countries like Venezuela, which spent its commodity gains during the boom and is now left with little to cushion to economy in the downturn.

But this isn't just a story of "Chile: smart, Venezuela: stupid." Argentina's government tried to tax its commodity growth but was prevented due to popular opposition, so clearly there are political forces at work. I'm ignorant of most things Latin America, so let me ask you readers this: what is it about Chile's political structures/environment that provided the space for policymakers to implement responsible economic policies? And why is the opposite true for its neighbours?

16 Reasons We'll Miss The Recession

The list is here. Some of my favourites:

- Many high street stores selling goods that no one wanted to buy have
closed, prompting art galleries and other edifying enterprises to move in to the
vacant sites. Alas, all these shops peddling tawdry knick-knacks will be back
with us again.

- Dinner party talk of house price rises will return. People will no longer
be ashamed of being estate agents. Sons and daughters will again want to go into
investment banking rather than eco-farming.

- Service blossoms in a downturn. Waiters wait, usherettes usher, doormen
open doors. GDP growth = general grumpiness.

Monday Morning Round-Up

Recommended readings, to be enjoyed with coffee:

Gillian Tett - Financial markets: the case for radical intellectual overhaul

The Economist's backgrounder on South Africa's next president, Jacob Zuma

Esther Duflo outlines the basics of AIDS prevention: abstinence vs. risk reduction, with findings based on actual field work.

Cyprus - more divided.

Matt Taibbi asks the (*shudder*) teabaggers some questions

The promise of cheap genome sequencing

A clarification

In my theory-heavy post on the EMH earlier this week, it appears as though my example about Company X was misleading. As a blogger at Free Exchange pointed out:

...anyone who understands the efficient market hypothesis knows it is a long-run equilibrium condition, which means deviations from equilibrium (bubbles) can and do occur. Does it predict them, no? But it is not the scope of EMH to describe and predict short-run deviations.

So there you go - I was using a poor example. But the main argument of the post still holds.

Megan's McArgument

Megan McArdle has an interesting thought progression:

I've been thinking a lot lately about the political theory of an independent central bank....There's little doubt in my mind that if we had not had an independent central bank, unemployment would be many percentage points higher, GDP would have contracted much more strongly, and we wouldn't now be making optimistic noises about the thing bottoming out....

I think that the political process will hopelessly screw up the management of this crisis (something which libertarians are perfectly able to see when the government screwing things up is a left-wing populist one in Latin America). But maybe The People, God bless them, deserve to screw up their economy if they want. On principle, I am opposed to saving people from themselves. And anyway, maybe I'm wrong and the wisdom of crowds will prevail.

On the other hand, do they have a right to screw things up for everyone else? Should a populist 60% be allowed to plunge their neighbors deeper into crisis? In the case of America, to plunge the whole world deeper into crisis?

The uncomfortable conclusion I'm coming to is that yes, they should. Ben Bernanke should be hamstrung even though it's likely that this would make everyone worse off. And people who advocate for ending the independence of the central bank should be willing to accept all that this entails: inflationary monetary policy (the people love inflation!), bad and unpredictible banking policy, the collapse of the US economy. I just wish I didn't have to go along for the ride.

I confess that I am not a diehard libertarian and so this kind of thinking leaves me a little stunned. I don't believe that monetary policy should be any more influenced by popular opinion than heart surgery - it's an incredibly complicated task and belongs in the realm of experts. I am perfectly willing to admit that the experts can be wrong, but they are likely to be less consistently wrong than the population at large. Besides, there's a reason why we have checks and balances.

Let's revisit this sentence: "Ben Bernanke should be hamstrung even though it's likely that this would make everyone worse off." That's an awfully big leap of princple. I guess Megan thinks economic policy is like Voltaire's free speech: she disagrees with your policy prescriptions, but will defend your right to implement them to the death (of the economy). Call me an elitist, but I'm not convinced.

So maybe there are really good arguments for why the Fed has too much autonomy. But there's an awful lot of wiggle room between a fully independent central bank and a collection of monetary policies decided by direct democracy. And the number of times I've seen Ben (or Hank, or Tim) sitting in front of a collection of Congresspeople that are grilling him with questions suggests to me that he's not that politically isolated.

What think you?

UPDATE: In a rather creepy coincidence, Patrick at zzzeitgeist is thinking pretty much the exact same thing.

Poland to access IMF Flexible Credit Line

Poland looks set to become the second country, after Mexico, to access the IMF's Flexible Credit Line, a facility designed to offer stable countries access to contingency credit with few strings attached.

Polish Finance Minister Jacek Rostowski was careful to point out that the credit line would be treated as a "supplementary reserve" for the central bank, rather than "emergency funding."

What now for the Efficient Markets Hypothesis?

The ongoing financial kerfuffle is wreaking all sorts of havoc, but the damage has been particularly acute for the perceived legitimacy of the financial industries. The crisis has led to a torrent of criticism which accuses Big Finance of gambling with our savings, handing out bloated bonuses, and generally being a disease upon mankind. A lot of this is misdirected populist rage, but some of it is well-deserved. In fact, I think that this rage will prove useful if it leads to a greater awareness - and criticism - of the underlying logic of the tools used by Big Finance. Here's why:

Much of modern financial economics is based upon a set of assumptions that can be broadly labeled the efficient markets hypothesis (EMH). While not universal, the EMH forms the core of most financial modeling and is the foundation of a great deal of wealth creation in the last couple of decades - at least, it was. The three basic assumptions of the EMH are:

1. markets allocate resources most efficiently
2. liberalized markets will enhance the overall welfare of society, and
3. given the opportunity, market actors will converge on the "correct" economic outcome

As Tyler Cowen explains in an essay on economists and rationality, the EMH comes in a variety of flavours. Weaker versions of the theory claim that rational stock picking will not on average outperform the market because the market already incorporates all the relevant information about the value of companies into the stock price. In other words, it's very hard to beat the market averages, unless you're very lucky or Bernie Madoff (too soon?).

Stronger versions of the theory claim that market prices accurately reflect the fundamental values of corporations and thus cannot be improved upon. In other words, when a share in Company X is worth $50, that price is based upon all the available information about Company X. And if the price of a share in Company X is worth $0.50 the next day, that's because investors responded (rationally!) to new information, nothing more. Even though nobody actually believes that ALL investors are rational, it is assumed that capital markets are close enough to the ideal to allow rational investors to prevail.

The EMH is used in academia primarily for modeling discipline, but the theory also underpins many of the models and tools used by Big Finance. Unfortunately, it appears as though the beautiful simplicity offered by models of market rationality can lead to some pretty disastrous consequences. For example, Felix Salmon has a great piece on the formula that killed Wall Street. The article tells the story of how a mathematical model was developed which appeared to take the risk out of pricing risk. The formula explicitly assumed a strong version of the EMH and it spread like "a highly-infectious thought virus." All of the qualifications about the limits of model were buried under the stacks of money that this little formula was earning for financial executives. This is definitely worth reading.

But what's the problem with EMH, anyway? For one thing, it's tautological: how do you define the correct, most efficient economic outcome? If the answer is: "the outcome achieved by perfect markets," you're back where you started. The EMH appears to simultaneously assume a) a non-determined process driven by human choice, and b) that this spontaneous process is working towards some final end which is somehow "correct." Willem Buiter puts it more colourfully, as usual:

The efficient markets hypothesis assumes that there is a friendly auctioneer at the end of time - a God-like father figure - who makes sure that nothing untoward happens with long term price expectations or (in a complete markets model) with the present discounted value of terminal asset stocks or financial wealth.
What this shows, not for the first time, is that models of the economy that incorporate the EMH - and this includes the complete markets core of the New Classical and New Keynesian macroeconomics - are not models of decentralised market economies, but models of a centrally planned economy.

Put that in your efficient markets pipe and smoke it! Whether the fallout from the financial crisis will shift the balance towards more behavioural models of economics remains to be seen. At the very least, the crisis has forced a critical re-examination of the assumptions underlying modern finance; a re-assessment of what we thought we knew. That can only be a healthy thing.

(photo of the friendly auctioneer at the end of time from Wonder's photostream)

The best blog post on any subject so far this year

Or at least, that's what Robert Cottrell at The Browser thinks. This post struck home in a number of ways, but I especially liked the final paragraph.

Now if you'll excuse me, I have a long-overdue blog post to finish.

Quick hits and pink picks: Asia edition

-According to newly released figures, China's foreign reserves plunged a record $32.6bn in January, and a further $1.4bn in February. This is partly attributed to heavy selling of US T-bills and other foreign bonds, capital flight and falling export revenue. Before we get too worried about a loss of Chinese confidence in the dollar, or too excited about the unwinding of macroeconomic imbalances, these same reserves bounced back to the tune of $41.7bn in March.

-China has turned it's increasingly assertive foreign policy to South-East Asia this week with the announcement of a $10bn investment fund for Asean countries. It will also provide $15bn in credit over the next three to five years.

-Thailand's state of emergency is weighing heavily on the baht, while ratings agencies have warned of downgrades to the country's credit rating.

-The UN Security Council has agreed on a statement condemning North Korea's missile launch and calling for the tightening of existing sanctions.

That Was The Week That Was

Politique
-Japanese Prime Minister Taro Aso announced a new, Y15,400bn fiscal stimulus package.

-All criminal charges against Jacob Zuma are dropped, clearing the way for the ANC head's election to the presidency later this month.

-An East Asia summit is cancelled as Thailand stands on the brink of "revolution." Elsewhere, tens of thousands of protesters rallied in the Georgian capital of Tbilisi for Saakashvili's resignation.

-An earthquake killed at least 250 people in Italy, leaving near 20,000 others homeless.

Economia
-Wells Fargo stunned Wall Street with a profitable Q1 2009, contributing to the fifth straight weekly gains for US stocks.

-The FT ran an interesting article on Japanese bank Nomura's move towards more "western-style" contracts for employees.

-Underlining the collapse of trade in Asia, Singapore's GDP "probably" shrank for the fourth straight quarter, the deepest recession in the country's history.

The Rest
-In Europe, Barca looked unbeatable in their thrashing of Bayern Munich, a sublime Adebayor goal put Arsenal in the driver's seat and Chealsea stunned Liverpool at Anfield.

-A Reuters piece asks, "Is America's love affair with the 'exurbs' over?"

-Art prices fell 35% in Q1 2009.

Counter-cyclical trends: expensive kids edition

Shark attacks are down, traffic delays are down, but vasectomies are up! 

I've also heard reported on NPR that dentists are seeing an uptick in business related to stress: broken teeth, grinding of teeth, mouth guards, etc.

A Return to the Gold Standard? Sigh...

One of the interesting side-discussions of the current financial mess is whether the fallout from the crisis will lead to a new international currency order. There is worry that the massive spending deficits that the Americans have initiated will undermine confidence in the US dollar (USD). Enormous spending means the creation of more dollars; the creation of more dollars reduces the value of any given dollar; if the value of the dollar goes down, so does the value of anything priced in dollars.

Like any fiat currency, the value of the USD is based upon little more than a promise, by the government, that the currency is worth something. But since the USD is the de facto reserve currency of the global economy, and most commodities (like oil) are priced in dollars, much of global finance and trade is based upon a shared understanding that the currency of the largest, strongest and most open economy has value. It is a global confidence game, and everyone needs to play for it to work. To understand this is to understand why a deterioration of the confidence in the USD would have deep and wide-ranging consequences.

Which is what makes this set of proposals to ditch the dollar, put forward by reps from national governments, so interesting. The Chinese suggestion to switch to the IMF's special drawing right is especially loaded, but that's the subject of another post altogether. What I want to focus on is the recent talk about returning to the gold standard. Oooooh this makes me angry.

Let's take this article by Gillian Tett that lays out the basic idea of a return to the gold standard. She reminds us of the fragility of a fiat currency system that rests solely on government credibility, and quotes an essay from Alan Greenspan written in the 1960s:

Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets... [but] in the absence of the gold standard... there is no safe store of value," Greenspan wrote back then, pointing out that, without a gold standard in place, there is little to prevent governments indulging in wild credit creation. "Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.

Now Tett does suggest that a return to the gold standard is pretty unlikely, but I still find this kind of reporting irresponsible since it makes no effort to point out why we quit the gold standard in the first place.

Let's review the basic points here. Gold is valuable for no other reason than human beings like shiny metal things. If squirrels ran the global economy, they would probably have an acorn-standard because they like nuts - there is no fundamental difference.

Okay, you're right: the value of gold is also based on the finite amount of gold in the world - but that's precisely the problem. The creation of credit is the lifeblood of the global economy; if the amount of credit in the economy is limited to the amount of metal we can dig out of the ground, world trade would become very difficult indeed. Greenspan is wrong when he writes that, under a gold standard, the amount of credit is determined by the economy's tangible assets: it is in fact determined by a tangible asset. Singular.

Greenspan is technically right in arguing that, under a fiat system, there's nothing physically stopping governments from engaging in "wild credit creation." But there are additional considerations, including the fact that inflation creates enormous costs for the economy. Unless the government is insulated from the consequences (Zimbabwe), those costs are a barrier. For some countries, like Germany, historical experience with inflation has led to the creation of social and institutional mechanisms that act as a pretty strong disincentive for inflation. No gold required.

Moreover, "wild credit creation" is sometimes a necessary option. It is no coincidence that the earlier countries abandoned the gold standard in the 1930s, the sooner their recovery from the Great Depression began. If we had a gold standard right now, our central banks would not have the flexibility to adjust monetary policy to the crisis and engage in "non-traditional" activities.

We can argue about how the US government is choosing to spend money to kick-start the economy, and where that money is going. But there is almost no question that monetary expansion is an absolute necessity in a credit crisis. If our currency was tied to a fixed amount of gold reserves, we would have a complete disaster on our hands.

Plenty more reading: a survey of the rise and fall of the gold standard; Eichengreen & Temin on the gold standard mentalité, and Brad DeLong on Why Not the Gold Standard?

(photo from digitalmoneyworld's photostream)

Quote of the day: I'm still waiting for the punchline

Pakistani President Asif Ali Zardari has again publicly defended Pakistan's sovereignty and called on the US to provide his country with the means the strike militants itself. Via FP Passport,

"I cannot condone violations of our sovereignty even when they are done by allies and friends. We would much prefer that the US share its intelligence and give us the drones and missiles that will allow us to take care of this problem on our own."

Give you drones and missiles. Um, no.

Quick hits and pink picks: Zuma, energy espionage and Gates

-Is a legal victory for Jacob Zuma a loss for South Africa?

-Cyberspies (China, Russia) have reportedly infiltrated the US electrical grid, reflecting a growing consensus in the intelligence community that cybersecurity will be one of the flashpoints of the 21st century.

-From the serious to the absurd: North Korea has accused the South of poisoning its footballers with "adulterated foodstuff" ahead of South Korea's 1-0 World Cup qualifying victory last week. North Korea also maintains its "satellite" was successfully launched into orbit over the weekend, while back on earth everyone agrees a satellite-less missile now rests on the floor of the Pacific.

-According to Reuters, the US government will delay, if release at all, the results of its "stress tests" on the US banking sector. It reportedly wants to avoid negatively affecting first quarter earnings announcements.

-US Secretary of Defense Bob Gates makes good on his call to overhaul US defense spending, contracting and strategic priorities. He must now contend with the congressional/special interests outrage.

Adebayor defies gravity

We haven't had an Arsenal post in a while. My deepest apologies to all our Gooners out there. What better way to make up for lost time than with a Champions League goal for the ages.

Adebayor's second half stunner, fed by a sublime 40-yard pass from Fabregas, defied the laws of physics, salvaged a key away goal for an Arsenal side that was completely "out-Arsenaled" by the attacking Villareal, and positioned the Gunners to reach the Champions League semifinals for the first time since 2006.

Enjoy. (0:55 mark begins the replays, wait for it)

I Want YOU, Bankers

Early in March I wrote a post, only partly in jest, about employment opportunities for recently-fired free-range bankers. But now Bloomberg is reporting that, sure enough, the pink slip recipients of Wall Street and Greenwich are turning to the US federal government for jobs that will put their skills to use: finance professionals have swamped recruiting fairs for agencies such as the FDIC, SEC, and the FBI (for financial crime investigations, I suppose).

I would imagine that the more senior finance executives are also eyeing academia as an alternative source of employment - in fact, for many it would be a return to the type of work they were doing before being lured away to Wall St. by the massive salaries.

And in case there was any doubt that the government needed the human capital, check out a recent podcast of This American Life. In Act Two, they tell the story of what exactly happens when the FDIC deals with a bank failure (something that's happening at the rate of two per week these days): scores of federal agents swoop into the bank's HQ to seize all the money, computers and paperwork, inventory everything, then turn the good bits over to the bank's new owner. All in complete secrecy, and all over the course of a weekend. It's a fascinating listen.

UPDATE: here's a clip from 60 minutes that tells the same story, only with moving pictures! (13 min.) Thanks to George M. for the pointer.

Quote of the day: The horror of flying coach

Sir Allen Stanford, accused of running an $8 billion ponzi scheme and laundering money for a Mexican drug cartel, is having a hard time adjusting to life under federal investigation.

In a tearful interview with ABC News, Stanford said of flying commercial, coach to be exact, for the first time in two decades after authorities seized his private aircraft,

"They make you take your shoes off and everything, it's terrible."

Stanford followed this memorable line with a threat to punch his interviewer in the mouth.

That Was The Week That Was

Politique
-The G20 reached deals on IMF funding, tax havens and trade finance. Bretton Woods it was not, but a productive start?
-North Korea launches an intercontinental ballistic missile (er, satellite), world condemns and an emergency security council meeting is called for Sunday at the UN.
-NATO agrees on a troop surge to Afghanistan, Rasmussen for Secretary-General.

Economia
-Mexico became the first country to seek access to the IMF's new no-strings-attached lending facility.
-The ECB cuts rates again and Trichet signals the possibility of unconventional measures to come.
-The mark-to-market rule is amended in the US, financial stocks soar.

The Rest
-In the Prem, Liverpool go top, Fab and Adebayor solidify Arsenal's hold on 4 in their return to action, while Shearer's big return to Saint James' Park is business as usual for the Magpies.
-Honda's new robotic helmet reads your mind. Matrix or Terminator?
-An Antarctic ice bridge the size of Jamaica has snapped.

20,450th

Is where IPE Journal ranks on Wikio's list of the most widely referenced blogs on the internet. In other words: we're kind of a big deal.

But if you think that's sad, imagine how you'd feel if you ran one of the 41,798 blogs that ranked lower than we did.

Quote of the day: Obama in charge

Politico has published exclusive details of the meeting last week between US President Obama and major financial institution CEOs. Despite the cordial public face put on the meeting, the president reportedly made every possible effort to put these former masters of the universe in their place, including providing the CEOs with a single glass of water, no ice, no refills. How's that for perks!

As the bankers offered various justifications for bonus payments and executive compensation, the president reportedly responded, “Be careful how you make those statements, gentlemen. The public isn’t buying that.” He followed by letting them know exactly where they stood in the current crisis,

"My administration is only thing between you and the pitchforks."

And boom goes the dynamite.

Friday fun: Speak softly in the House of Windsor

The Queen finds Italian Prime Minister Silvio Berlusconi rather annoying.

Berlusconi is hilarious. By all accounts, the guy shows up late to the G20 (prior conference commitment in Rome), hangs around with little impact, slides his way into what is surely the most widely circulated photo of the conference and then annoys the Queen.

And this guy hosts the G8 in July. I can't wait.

The OECD gets things done, quickly

Less than 24 hours after the G20 agreed to "name and shame" tax havens through OECD oversight, the Paris-based organization publishes its list of offenders.

Tibet nearly sank the G20

Details are starting to trickle out of how close the French/Chinese fault line was to sinking the London summit. The Guardian is reporting that, remarkably, Tibet was the key issue linkage bringing the Chinese to the table on tax havens.

Read the article, its worth all the details, but I'll sum it up by saying it ultimately took a late night meeting between Sarkozy and Hu at the French president's hotel, and a last minute intervention by Obama, to smooth over the differences.

All sides are backing the account of Obama's last minute intervention; it seems the young US president is making good on his promise of a new era of US leadership.

George Soros on the IMF

George Soros makes a great point:

Institutions such as the International Monetary Fund face a novel task: to protect the periphery countries from a storm created in the developed world. Global institutions are used to dealing with governments; now they must deal with the collapse of the private sector. If they fail to do so, the periphery economies will suffer even more than those at the centre.

Soros then goes on to point out how differing perspectives about the financial crisis on both sides of the Atlantic threaten to derail any substantial progress in upgrading our international financial institutions. But he's only telling one-half of the story.

Yes it's true that the IMF needs more resources, but it also needs customers. The problem is both the stigma attached to countries that go to the IMF cap-in-hand and the strings attached to IMF loans. These are two of the mains reasons why the East Asian economies have built up very large currency reserves: applying for an IMF loan is punished by market actors that interpret such activity as a sign of weakness (not prudence), and is "punished" by the IMF in the form of disruptive policy reforms.

Recognizing this problem, the IMF has just launched a new Flexible Credit Line (FCL) that is specifically designed for "countries with very strong fundamentals, policies, and track records of policy implementation." It has considerably fewer strings attached and is aimed at being a precautionary tool, rather than a last resort. But the optics problem remains and countries are reluctant to apply.

Until yesterday, that is. Mexico is seeking $47 billion under the FCL to act as a buffer against the fallout from the financial crisis. In other words, Mexico has bravely volunteered itself to test how the market will react to the IMF providing pre-emptive financial assistance to a country that has their "strong fundamentals" stamp of approval. Has the financial crisis caused such an upheaval in the market mentality that this prudence will be rewarded? Or are serious investors unconvinced of Mexico's "fundamentals" and going to punish it just like old times?

All Sarko, All the Time

Any doubts that Sarko fancies himself leader of the free world? Apparently, he held his post-summit press conference at exactly the same moment as Gordon Brown, the host.

G20 communique tackles the easy questions

According to the FT, the final G20 communique makes the easy choices, and avoids almost all the tough ones (unless you ever really considered tax havens a sticking point). Gordon Brown is currently holding his closing press conference, putting a brave face on the meeting. Here are the preliminary details, keeping in mind that I have not read the communique yet:

-$750bn increased funding for the IMF ($500bn in new loans, $250bn creation of a new special drawing rights facility)
-$250bn in trade finance
-OECD to publish list of tax havens to "name and shame"
-Hedge funds will come under the direct supervision of national regulators

So, where do we stand? Well, the Europeans seem to be the big winners. The EU got its tax havens/hedge fund regulation, increased IMF funding and international trade support. We have no "grand bargain" on global financial regulation, but that was always as unlikely as a stimulus commitment. Sarko's showmanship seems to have worked; another successful summit for the great Summit Sarko.

I must say that the US/UK largely failed to obtain its priorities, especially a global commitment on fiscal stimulus. In his closing presser, Brown boasted of historic interest rate cuts and a global fiscal stimulus. But this was a classic summit tactic of framing actions already taken by national governments in the context of the summit consensus; when, in fact, no such consensus exists moving forward.

We will have much more to say about the G20 communique once we dive into the details. But initially, the agreement does seem pretty unremarkable, and the global fault lines appear as deep as they were heading in.

Blogs: the "second draft of history"

I began my "Quick hits and pinks picks: G20 edition" post below with a little friendly fire: newspapers are still the go-to, best source of coverage for events like the G20, regardless of what the blogosphere would have you believe. How convenient that I should read Tony Barber's Brussels Blog at FT.com shortly thereafter.

While breaking the news of a brilliant bit of political gamesmanship by UK Prime Minister Gordon Brown at the EU Summit of March 19-20, Barber eloquently expressed a similar sentiment. He calls newspapers the "first draft of history", while blogs have the special responsibility of providing the "second version", as he has done with his Brown story.

Barber managed to state clearly what I often struggle to properly express: that newspapers still matter. While clearly a medium in decline, its collective reputation, access and quality of reporting is still unmatched. Noone can consistently break the news like print media, and I include the websites of these publications in that category (the convergence of print/online staff, resources and editorial coverage has accelerated in recent years). You can find better analysis and insight in the blogosphere (like at, say...IPE Journal). But until the official press corps' in world capitals incorporate more non-traditional sources (perhaps President Obama calling on Sam Stein of The Huffington Post at his first press conference was a breakthrough), newspapers will continue to craft the "first-draft" history.

And I may be too nostalgic, but there is still something so familiar, romantic even, about holding my Financial Times in the morning. It appeals to your senses in a way digital media cannot. I come from a family of newspaper and radio men and women, and I still cling to these media, while embracing the progress of the digital age. I hope this delicate balance is sustainable, but I fear it is not.

Training for the 2010 Olympics

No, not Vancouver. Tompkins Square Park.

On Tuesday, the Unemployment Olympics were held in New York City. The "games" were organized by Nick Goddard, a 26 year-old unemployed computer programmer, and featured events like the "Fax Machine toss" and "Office Phone skee-ball."

While the organizer hopes this will be the first, and last, Unemployment Olympics, I have started training in earnest for 2010...just in case.

Willem Buiter is witty

The larger-than-life Willem Buiter (by the way, has any columnist/blogger been elevated higher by their coverage of the financial crisis than Buiter?) wins the award for "Best post title of the week" with his hilarious, and timely, "Please torch my car."

Attacking the "tax incentives for new cars" schemes being adopted in many countries, and more specifically the marketing-as-environmentalism justification for the schemes, he says,

"This artificial shortening of the economic life of a car seems nuts. It’s worse than getting paid to dig holes and fill them again. It’s like being paid to burn down your house to encourage the residential construction industry. In Iceland, where economic calamity has befallen a population that was until the autumn of 2008 among the richest in the world, people torch their SUVs for the insurance money. Iceland doesn’t produce any cars, let alone SUVs, so this does not do their GDP any good, but think of the global externalities! Perhaps the G20 could propose the world-wide legalisation and subsidisation of the willful destruction of consumer durables, residential property and infrastructure (schools, hospitals, prisons etc.) as a global stabilisation policy measure."

Quick hits and pink picks: G20 addition

Other, traditional media outlets will provide you with more comprehensive coverage of the G20 meeting in London. While a lot of bloggers would have you believe otherwise, newspapers still offer the best access, authority and overall coverage of events like the G20. I have no illusions to the contrary. So over the next few days, I'll instead aim to provide our readers with some of the more interesting, hilarious and overlooked anecdotes of this important meeting.

-It is fascinating to watch the public relations machines in overdrive ahead of the meeting: downplay the differences (US, UK), demand your red lines are met 'or else' (France, Germany), the other side just doesn't get it (Japan), mumble about the dollar to avoid taking a vocal stance on the most controversial issues (Russia, China), sit back and avoid the collateral damage (everyone else). Summits are always about image/message management, and unfortunately only rarely about radical or decisive action. As a colleague noted to me this week, 90% of a multilateral summit is completed before the principals even sit down at the table (sherpas do the heavy lifting in advance of the meeting itself). Each leader knows this, and thus positions him/herself accordingly ahead of the final communique, speaking directly to their domestic audience. The fact that such deep divisions are so publicly aired ahead of this particular summit suggests that there will be few major breakthroughs in London. Regardless of the post-summit rhetoric, increasing the regulation of hedge funds, while important, isn't going to solve any of our most immediate problems. Increasing IMF funding would occur with or without this meeting.

-The City of London was fighting back!! ahead of the protests, although I wonder how many are actually hanging around Bank and Moorgate after work this evening.

-Dan Drezner's April Fool's Day joke would be a lot funnier if it wasn't so, sadly, improbable.

-For two leaders with a chilly relationship, Merkel and Sarko have forged quite the formidable alliance at this summit. This front was built on tax havens in Europe and seems to be carrying through quite strongly to global financial regulation.

-Sarkozy, in fact, claimed today that China was the main obstacle to a deal on global regulation, blocking a provision on...wait for it...tax havens (which, by relation, is an issue directly connected to hedge fund regulation). Who would have guessed that tiny alpine kingdoms, English Channel rock formations and tropical islands would collectively sink a summit? And does it not seem a little too convenient for China to be cast as the problem when such deep divisions exist between the US/UK and France/Germany?

Random Links

Just in time for Easter: a history of eggs

The Ascent of Stan, or: why you will end up as lame as your parents.

An interesting parallel between the impact of oxygen and intelligence on our planet.

And as someone who regularly has objects flung in his direction as the result of a groan-worthy pun, I particularly enjoyed this artice.