Monday, 31 August 2009
-The NYT establishes a connection between the growth of independent media and increasingly open religious debate in Egypt.
-The Economix blog at the NYT asks whether congressional earmarks for public universities, surprisingly the largest recipients of so-called 'government waste', should be considered 'pork'.
-FP Passport offers an unconventional perspective on the al-Megrahi deal, and makes a convincing argument in favor of realpolitik. This short piece is blogging at its best: cutting through the noise to reveal the underlying complexity of international relations.
Tuesday, 25 August 2009
He argues that despite Bernanke's aggressive and creative response to the crisis, his weaknesses and ideological orthodoxy helped create this mess:
It is as if a doctor guilty of malpractice is being given credit for inventing a miracle cure.
He goes on to say that the jury is still out on whether the Fed's crisis response will work in restoring growth and stability. This is a sensible argument, but surely Bernanke deserves the chance to finish the job. A more appropraite criticism would be that Bernanke's 'philosophical conviction' is ill-suited to influence and implement financial sector reform. But even on this point Roach's argument falls short, as Bernanke has demonstrated an incredible intellectual flexibilty and ability to depart from the pre-crisis orthodoxy.
A second-term should not be seen as rewarding the failures of pre-crisis Bernanke. Instead, it should be welcomed as a vote of confidence in a man transformed by the crisis and using every measure in his monetary toolbox (and making some new tools up along the way) to end it.
Bernanke still has to gain the approval of a not-so-friendly Congress, but after the obligatory grandstanding that will undoubtedly come.
This is the right choice in my opinion; I've often expressed here my admiration for the Fed's response to the crisis. But Bernanke's second term will be anything but a victory lap following his central role in preventing another depression. The challenges he will face in unwinding the Fed's extraordinary response to the crisis, exercising some measure of systemic oversight, and defending monetary policy autonomy may be no less difficult than the challenges his first term brought.
Monday, 24 August 2009
- Arguments for why Europe is a great place to visit, but it's better to live in America. I would add that surburban America may be more comfortable, but it's also more boring (i.e., not as good for young adults without families) and suburban sprawl has big downsides. I do think that his secondary point - that it's better to get rich in America, but be rich in Europe - is easier to defend.
- How the financial crisis has altered the relationship between China and the US. Good source of information, annoying font.
- Arsenal is off to a good start, but haven't really been tested thus far. Watch out for Burnley, though....
Friday, 21 August 2009
Anyway, having undoubtedly alienated some readers, I'll get to the point. Researchers in Canada have leveraged mathematics to determine that if zombies did exist, civilation would end as we know it. From the BBC:
'If zombies actually existed, an attack by them would lead to the collapse of civilisation unless dealt with quickly and aggressively...They say only frequent counter-attacks with increasing force would eradicate the fictional creatures.'
You might be wondering why I highlight this waste of valuable research dollars (of the loonie variety); because the excercise actually informs the spread and containment of real threats like the H1N1 virus. As the article notes:
'In some respects, a zombie 'plague' resembles a lethal, rapidly spreading infection. The researchers say the exercise could help scientists model the spread of unfamiliar diseases through human populations.'
Now back to the absurd: commenting on the study conducted by Professor Robert Smith? and colleagues (no folks, that is not a typo, the guy's name is actually Smith?, question mark included, and thereby destined from birth to ponder the stranger things in life), Professor Neil Ferguson, an advisor to the UK government on the spread of swine flu:
'My understanding of zombie biology is that if you manage to decapitate a zombie then it's dead forever. So perhaps they are being a little over-pessimistic when they conclude that zombies might take over a city in three or four days.'
If you carry one thing into the weekend, it should be this: if ever confronted by zombies, go straight for the jugular.
Further, the FT has a whole online series analyzing the reconfiguration of migrant flows amidst the crisis, called 'Trading places: Migration in the crisis.' Check it out (or subscribe, i guess).
Finally, I've alluded to the fact that one of my pet-interests right now is the way in which the crisis is reorganizing economies of all scale. Migration is one such focal point that carries huge implications, from remittances to cuisine to development models.
Thursday, 20 August 2009
Incidentally, the same article shows that our (temporarily?) retired blogging friend Patrick was dead-on with item #4 on his list of predictions for goods that will benefit from the recession.
Spam, spam, spam....
Wednesday, 19 August 2009
Nowhere does the paper imply that this was inappropriate or overbearing. But the story speaks to a larger sentiment within the financial services industry against reregulation and government intervention in the day-to-day strategy and management of TARP recipients. This is a curious sentiment indeed, and demonstrates the short-term memory of some of the biggest recipients of taxpayer dollars.
As the firms largest shareholder and financial backstop, why wouldn't US regulators exert authority over the woefully mismanaged firm? We crossed the threshold of moral hazard/government intervention long ago; moves like this should be applauded as an important step towards restoring credibility and competence to Citi and maximizing the return to US taxpayers.
I subscribe to Kenneth Rogoff's view that wholesale reregulation is needed, and it is increasingly clear that the Obama administration has missed the boat on financial sector reform. The financial crisis has largely subsided, some of the largest bailout recipients have payed back the taxpayer, and profitability has generally returned to the sector. The industry is more self-confident and increasingly hostile to government intervention.
Further, the congressional agenda is now overwhelmed by the debate over health care reform, to be followed by energy/climate change reforms ahead of the Copenhagen summit. This ambitious and controversial agenda leaves little room for substantive financial sector reform in 2009. Small measures on derivatives are likely because those are the easy ones. Giving the Fed systemic powers? Much, much harder, and it is unlikely the Obama administration will have the political time or capital to push through reforms of this magnitude. If it bungles health care, which at this moment seems likely, the Obama presidency will shrink, the democratic party will fracture, and the administration's financial sector reform agenda will be downsized.
Reformers from South Korea to Slovakia have understood that you should 'never waste a good crisis.' Unfortunately, the Obama adminstration might have done just that.
Monday, 17 August 2009
Adding layers to an already convoluted system seems like a strange approach to addressing global financial stability. I get that their aim is to provide an overall direction to things, to guide the various international organizations towards a coherent objective. But that's not likely going to play out in practice. Every organization that this Gleco oversees would have to have a seat at the table, in addition to the reps from nation-states.
And even if this Gleco is chaired by the G20, in ten or fifteen years a series of Unforeseen Events will likely result in membership that no longer represents the true balance of power - precisely the same argument they level against the IMF.
The fact is, for this financial crisis at least, it was the policies and not the institutions which caused the problems. And its hard enough to get the key players to agree on what exactly were the problematic policies in the first place, never mind what to do about them. A Gleco will not fix this.
Take the FSB (no, not that FSB, the Financial Stability Board - the closest thing to an existing global economic council). With two dozen member states and another dozen reps from international bodies, I suspect that the participants of the FSB find that it's plenty difficult to reach agreement as is, thank you, and you can take your Gleco idea and stuff it away somewhere for later.
I think that's probably the way to go. Proposals of this sort make for interesting op-ed material, but in practical terms its more helpful to focus on improving our existing institutions. A Gleco is at best a colourful distraction.
Thursday, 13 August 2009
Malcolm Gladwell has this great history of ketchup and mustard which explores why the ketchup market is dominated by one brand (Heinz), but the mustard market isn't. It includes some really interesting stuff on how we understand and experience "taste."
(No puns this time!)
The differences I am discussing may be clarified by considering a field of economics which could but does not exist: ketchup economics. There are two groups of researchers concerned with ketchup economics. Some general econo-mists study the market for ketchup as part of the broader economic system. The other group is comprised of ketchup economists located in Department of Ketchup where they receive much higher salaries than do general economists. Each group has a research program.
General economists are concerned with the fundamental determinants of prices and quantities in the ketchup market. They attempt to examine various factors affecting the supply and demand for ketchup such as the cost of tomatoes, wages, the prices of ketchup substitutes and consumers incomes. They examine a number of different types of data in an effort to explain fluctuations in ketchup prices. The models that are estimated have some successes in explaining price fluctuations but there remain puzzles.
Ketchup economists reject out of hand much of this research on the ketchup market. They believe that the data used is based on almost meaningless accounting information and are quick to point out that concepts such as costs of production vary across firms and are not accurately measurable in any event. They believe that ketchup transactions prices are the only hard data worth studying. Nonetheless ketchup economists have an impressive research program, focusing on the scope for excess opportunities in the ketchup market. They have shown that two quart bottles of ketchup invariably sell for twice as much as one quart bottles of ketchup except for deviations traceable to transactions costs, and that one cannot get a bargain on ketchup by buying and combining ingredi-ents once one takes account of transactions costs. Nor are there gains to be had from storing ketchup, or mixing together different quality ketchups and selling the resulting product. Indeed, most ketchup economists regard the efficiency of the ketchup market as the best established fact in empirical economics.
The parallels should be clear. Financial economists like ketchupal economists work only with hard data and are concerned with the interrelationships between the prices of different financial assets. They ignore what seems to many to be the more important question of what determines the overall level of asset prices. It would surely come as a surprise to a layman to learn that virtually no mainstream research in the field of finance in the last decade has attempted to account for the stock market boom of the 1960s or the spectacular decline in real stock prices during the mid-1970s.
I know, I know - this is a bit dense and academic. But sentences like the bolded one above should ring some bells for readers familiar with this blog, or the wider debate. It is partly the narrowness of the ketchup economist approach that has led some to call for the field of economics to rebuild itself from its roots as a social science, as opposed to a mathematical one.
In Heinz-site it is clear that, eventually, real-world events were going to ketchup with the assumptions made by financial economists. It mustard been pretty embarassing for them when they finally did.
Wednesday, 12 August 2009
The NYT looks at the rising number of American graduates, equipped with limited language skills and little more than their ambition (sound familiar?), chasing the dream all the way to China.
Monday, 10 August 2009
-The 'democratization' of the human genome?
-Is the US really more dependent on China?
-Who loves nuclear energy?
-Is Berlusconi the world's biggest party crasher (you might remember his G20 performance)?
-Will Arsenal win the Prem?
Wednesday, 5 August 2009
The Argentine Football Association has delayed the start of its season because many of its clubs are so loaded with debt that they cannot pay the salaries of their players.
Elsewhere, it is widely being reported that America's Arena Football League, coming off a suspended 2008 season, will fold and declare bankruptcy.
The explosion of debt-financing in the Prem is well-documented and lamented (Platini I am looking in your direction), but the Prem's owners are hardly alone in financing their club purchases, new stadiums, and expensive transfer policies through debt. I am admittedly unfamiliar with the business of Argentine or Arena football, but it seems these are two further examples of the de-leveraging of sport.
A recently destabilizing, but positive in the long-term, trend has been the flood of ex-pats back into emerging economies. While it has caused short-term increases in unemployment, strained public finances, and cut remittances, it has brought money, skills, entrepenuership, and productivity.
Emerging markets' great gain is developed economies' great loss.
Tuesday, 4 August 2009
Monday, 3 August 2009
You can almost feel the left shuddering...
NOTE: I meant 'united' in a disciplinary sense, clearly his leadership would cause a fracture between left and centre in the party, but his masterful job of diffusing the move on Brown displayed his ability to command the loyalty of the bankbenchers)