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Showing posts from October, 2011

Another One Bites the Dust

Jon "MF" Corzine

Or two,

Herman "Wrath of" Cain

And that's not even counting Yurp.

Oops!

Tyler Cowen:

Greece’s prime minister unexpectedly announced a referendum to approve a second EU bail-out deal for his austerity-hit country, less than a week after it was agreed with international creditors at a European Union summit.
More here, and here, but that’s all you really need to know. The so-called eurozone deal didn’t last a week, not that there was ever a deal in the first place.

p.s. they’re not going to vote yes on the referendum!

Interesting times.

Kevin Drum is a Very Pithy Fellow

On the Euro debt debacle:
Nobody should be surprised that this is such a hard problem, of course. Fundamentally, someone is going to lose absolutely gigantic sums of money, and figuring out who that someone is going to be was always going to be a fraught affair. As near as I can tell, though, each rescue effort seems to advance asymptotically toward honesty about the scale of the losses, realism about the need to allocate those losses among the non-broke members of the EU, and acceptance among the broke members that they're going to be required to suffer fairly harshly in return for being bailed out. We obviously haven't gotten to the really truly final resolution yet — that won't happen until the European public truly accepts that they're screwed and they can't do much about it — but I suspect that last week's deal is one more step along the path of recognizing the grim reality of the situation. Either that or Europe is going to implode

Debt Obsession XXX

So why have lenders been willing to lend to those who cannot pay?  The key reason, I think, is that they believed that they would be able thereby to enslave the peoples of the nations defaulting - or even whole continents.  Thus, the citizens of all of Europe and the United States are be dragged through economic disaster in order to payoff unsuccessful bankers -those who lent the money - and successful gamblers who made winning bets on credit default swaps.

The stock markets took a big uptick last week in the belief that Europe had contained its monster debt problem. There is reason to suspect that that belief was erroneous and we might traverse the same territory in reverse next week, but in any case the underlying problems remain.  Is there any way to cure reckless governments and banks of their bad behavior?

Slavery didn't work for individuals, so there isn't much reason to be optimistic, but the credit default swap, at least in its present form, sure looks like a pretty g…

Debt Obsession XXIX

I continue to be fascinated with how debt has managed to repeatedly get us in trouble, ever since its invention 5000 or so years ago.  As usual, these ruminations are inspired mainly by David Graeber's Debt: The First 5000 Years.

Great philosophers from Plato and Aristotle have weighed in, as have most of the world's major religions, but we keep on making the same mistakes.  Ultimately, I think, the blame must lie with human nature.

We are incorrigible and unreasonable optimists.  Study after study shows that humans overestimate their skill and talent in almost every aspect (see, e.g., Daniel Kahneman's new  book: Thinking, Fast ans Slow).  Consequently, it is completely natural that for all of human history, optimistic borrowers have borrowed more than they can afford to pay and optimistic lenders have lent to those who can't repay.

The fact that we have made it more difficult to sell the wives and children of defaulting debtors has made some of the more egregious pra…

Armed Keynesians

Paul Krugman has been writing about the fact that Republicans seem to have noticed that government spending can create jobs - so long as it is spending on defense.  Of course spending on other things also creates jobs, and as Krugman points out, the history of defense spending is the best available proof of Keynesian validity (because it provides examples where dramatic, essentially endogenous changes frequently have occurred.)

He makes another point:


That said, there’s also the Keynes/coalmines point: there’s a strong tendency to take any spending that looks like a business proposition – building bridges or tunnels, supporting solar energy or mass transit – and demanding that it appear to be a sound investment in terms of its financial return. This makes most such spending look bad, since almost by definition a depressed economy is one in which businesses aren’t seeing good reasons to invest. Defense gets exempted because nobody expects bombs to be a good business proposition.
The mora…

No Facts Please, We Are Conservatives!

Paul Krugman finds George Will being an even more ignorant jackass than usual:

Via Brian BeutlerPolitico has part of George Will’s forthcoming attack on Romney
"Republicans may have found their Michael Dukakis, a technocratic Massachusetts governor who takes his bearings from ‘data’ … Has conservatism come so far, surmounting so many obstacles, to settle, at a moment of economic crisis, for THIS?"

Human Commodities

David Graeber sees a link between market economies, debt, and slavery.  In particular, enslavement historically has a strong link to debt.  Market economies and lending both originated in ancient Mesopotamia, and so did the practice of seizing everything of the debtor when those loans went bad, including property, children, wife and the debtor himself.  Similarly, much of the African slave trade was based on persons seized for various types of debt.  Debt peonage has been a recurrent theme through our commercial history..

Graeber points out that various kinds of personal obligation and debt existed before commercial economies, but argues that these were historically well differentiated from ordinary relations of trade, and except for capture in war, did not result in ripping persons from their community context.

Markets and money debts gradually resulted in what Graeber calls "commoditization of persons."  He presents some evidence linking this not only to slavery, but also …

Kevin Drum On NGPD Targetting

Kevin Drum has a long and illuminating piece on the Fed targetting Nominal Gross National Product (NGPD).  He focusses on the key questions: 1) Why?, 2) How? and 3)Would it work?

Bottom line answer to number 3).  Maybe.

I am slightly more optimistic than he is, but not a whole lot.

She's a Eurozona Dime, But It's Time...

Tyler Cowen explains how to quit the Euro zone in six steps.

Step one:

1. Issue a surprise announcement that all euro deposits in Ruritania will be converted into pesos (or whatever) at a new and lower yet defensible rate. If I try to withdraw my ten euros from my bank, I receive an IOU for ten pesos which is worth say six euros. Over time the government will replace these IOUs with a new paper currency.

Meanwhile, Paul Krugman says that if the Euro is going to collapse, it's better to have it happen sooner.

One Wolfgang Worried About Europe's Strategy

"Boss, da plan.  She sucks"

Lessons I Never Seem to Learn: MCXIII

Don't get into a poop throwing contest with a monkey.  Even if you can top them in accuracy, you can't match their enthusiasm - and you still get poopy.

Why Krugman is Depressed

Erik Kirshbaum via Tyler Cowen:
Chancellor Angela Merkel said on Saturday that the European Central Bank has just one mission — to ensure monetary stability.

Merkel said in a speech to her Christian Democrats in Braunschweig on Saturday that treaties prevent the ECB from taking on any other tasks, such as those such as the U.S. Federal Reserve have.Meaning, I think, that the European Central Bank (ECP) cannot undertake stimulative monetary policies.

Here we go again.

Tragedy at Sea?

A key journal of economic thought, obscure yet valued by its ultra-elite readership, has gone missing.

UPDATE: It's back ;)

Eurintrouble

Krugman is pessimistic:

What a tragedy. A rich, productive continent, which has produced arguably the most decent societies in human history, is tearing itself apart because its elite insisted on embarking on a dubious monetary project, and now can’t bring itself to take the steps necessary to give that project a chance of working.

Sumnerary Judgement

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Scott Sumner has been talking up having the Fed go to nominal gdp (gross domestic product) targeting. Paul Krugman, Goldman-Sachs and Tyler Cowen are on board. That should be a sign right there that the singularity is near.

So what does it mean? Kevin Drum explains and provides a helpful graph:




The basic idea is that gdp took a huge hit during the economic meltdown, and the
idea is to pump up the nominal economy (that is, the economy in uninflated dollars) to the pre-depression trend line. In practice, this means tolerating some inflation.

I say "Do it!"

Burn Baby Burn

Apparently Bill O'Reilly has been urging viewers to send his books to soldiers in Afghanistan. I guess they must not be the commodity most in demand everywhere:
An anonymous soldier going by the name of Everqueer posted pictures of the burning on their Tumblr page. The book in question was "Pinheads and Patriots," which O'Reilly has sent to Afghanistan through a charity group.

"Some jerk sent us two boxes of this awful book (SPOILER ALERT: George Washington - Patriot; George Soros - Pinhead) instead of anything soldiers at a remote outpost in Afghanistan might need, like, say, food or soap," the soldier said. "Just burned the whole lot of them on my Commander's orders."
Later, after some of readers had objected to the burning, Everqueer wrote a followup post clarifying why it had happened:

The motivation behind the order to burn them was not political...as mentioned in the original post, we are in an extraordinarily remote location. We don't…

OWS

I don't know much about Occupy Wall Street, or its offshoots. Their slogans don't seem very coherent ("End Corporate Greed"). But I do understand where they are coming from. They believe that a cabal of politicians and their corporate funders managed to loot the economy for the benefit of a few and then wreck it. In this, I think, they are largely correct.
It would perhaps be satisfying to start carting politicians, bankers and hedge fund managers off to the guillotine in tumbrels, but probably also not very productive. The real question is what to do about it. Unfortunately, Obama, on such rare occasions when he shows evidence of having a clue, seems incapable of implementing anything. The Republicans, merrily engaged in mass economic sabotage, are never held to account by press or president.
Next November we will probably a Republican who has pledged to double down on all the disastrous policies that got us into this mess. At best we get a President who might…

Why Your Employer Wants You Dead

Jon Stewart had on Ellen Schultz, author of Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers. She wasn't very articulate in person, but Stewart managed to extract a lot of the scandalous details. One rip-off is siphoning off worker's pension funds to fund extravagant executive pensions. Something like 1/5 of the billions GE has ostensibly saved for 500,000 workers pensions are designated for executive pensions.
The killer, though, was another trick they use to fund executive pensions. Congress has allowed them to take out life insurance policies on ordinary workers (without their knowledge or consent) and then dump the tax free proceeds into their executive pension funds. Saves on all that stupid safety precautions too.

From The Rubber Room

From the WSJ:
Spurred by the unwanted and rowdy side effects that sometimes accompany a night on the town, drinking establishments have turned to a novel approach to save overindulging revelers from broken bones and bruised egos: rubber sidewalks.
I like the subtitle: New Bouncer at Aussie Bars: Rubber Mats

AdS/CFT Pfft?

Bee says AdS/CFT doesn't work (for heavy ion physics):
As the saying goes, a picture speaks a thousand words, but since links and image sources have a tendency to deteriorate over time, let me spell it out for you: The AdS/CFT scaling does not agree with the data at all.
...
Summary: I predict applications of the AdS/CFT duality to heavy ion physics is a rapidly cooling area.Bee has some caveats and Thomas has (at least) some quibbles.

‘Relativity Busted’ Busted?

From Technology Review:
About those speedy neutrinos:
“Today, Ronald van Elburg at the University of Groningen in the Netherlands makes a convincing argument that he has found the error. ..

The time of neutrino flight is harder to measure. The OPERA team says it can accurately gauge the instant when the neutrinos are created and the instant they are detected using clocks at each end.
But the tricky part is keeping the clocks at either end exactly synchronised. The team does this using GPS satellites, which each broadcast a highly accurate time signal from orbit some 20,000km overhead. That introduces a number of extra complications which the team has to take into account, such as the time of travel of the GPS signals to the ground.
But van Elburg says there is one effect that the OPERA team seems to have overlooked: the relativistic motion of the GPS clocks.

If it stands up, this episode will be laden with irony. Far from breaking Einstein's theory of relatively, the faster-th…

AGW Victimology

Kevin Drum:
Climate change is the public policy problem from hell. If you were inventing a problem that would be virtually impossible to solve, you'd give it all the characteristics of climate change: it's largely invisibile, it's slow moving, it's expensive to fix, it requires global coordination, and its effects will be disproportionately borne by poor countries that nobody cares about.

That last item might seem like a harsh way of putting things, but it's pretty much the truth. And today, via Brad Plumer, we have a new OECD report that illustrates the problem starkly. It examines which cities will have the most residents vulnerable to coastal flooding due to storm surge and high winds in 2070, and as you can see on the map below, the risk is almost entirely concentrated in developing countries in Asia and Africa. New York and Tokyo have a small bit of exposure, leaving Miami as the sole rich city with a substantial exposure. The total number of vulnerable residen…

Iran Plot: Conspiracy Theory Edition

When I first heard of the Iranian plot to kill the Saudi ambassador, my first thought was - hmmm, could this be an Israeli false flag operation? If so, could they really fool our FBI and CIA? How about a joint US-Israel bit of tricksiness?
It seems like a long shot, but it still could be convenient. Iran seems likely to be approaching nuclear weapon development, at least if we credit those 4-6 years to a nuke predictions we heard five to seven years ago.
Is this a big enough provocation to cause the US to sponsor a bomb, bomb, bomb Iran event? Not if the reaction to date - calls for more sanctions - is an indicator.
Consider the proposed targets, however. What does Israel need to attack Iran? One thing they might need is a clear flight path, and the clearest flight path is probably right over Saudi Arabia. Of course they probably also need at least tacit permission from the US.
Could this sufficient provocation to produce such permissions? TBD.
At the minimum, the US could certainly…

Stupidity

Josh Marshall asks:
What's the stupidest thing you've ever done? Just plain stupid -- wtf was I thinking, thing you've done? ...
Now, to be clear, I'm not looking for major life decision dumb or tragic dumb. So if you spiralled into drug addiction and destroyed your marriage, no.For some reason this simple question sent me into a spiral of regret, mostly about opportunities missed.

So Why Have Banks Made So Many Bad Loans?

Anyone who wants to understand our current banking crisis, or prevent future ones, needs to understand how banks managed to get so much worthless paper on their books. The stories differ a bit from country to country, but there is probably some underlying theme. I can think of a few candidates, which are by no means mutually exclusive.
(1)Bankers were making big bucks, and confident that they could find another sucker for the crappy financial instruments they were constructing.
(2)They imagined they were protected by the credit default swaps and other crappy financial instruments they sold each other.
(3)All that money Alan Greenspan threw in the water produced a feeding frenzy and everybody went nuts.
(4)They really believed, as Alan Greenspan claims to have believed,that the financial law of gravity had been repealed and housing prices could go on rising forever.
(5)Bankers foolishly trusted foolish governments.
(6)Many bankers were just making sensible loans that exploded when the econ…

Paul Krugman and Adam Smith on Bank Crises

Why laissez-faire does not works for banks.Excerpt (but the whole article deserves a read):
First of all, bank regulation is important even in the absence of bailouts. Don’t trust me, trust Adam Smith. Scotland invented modern banking; it also invented modern banking crises; and Smith, having witnessed such a crisis, favored bank regulations, declaring that

Such regulations may, no doubt, be considered as in some respect a violation of natural liberty. But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments; of the most free, as well as or the most despotical. The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty, exactly of the same kind with the regulations of the banking trade which are here proposed.

Second, there are in fact very good reasons to intervene to support banks during a financia…

Save the Bankers!

Global stocks are booming today on word that Germany and France have agreed to save the bankers.
How? Well that detail hasn't precisely been worked out yet, but let me guess:
Stick the taxpayers?

Debt II: Financial Panic

Debt rests on trust, usually trust backed up by threat, but trust nonetheless. A financial panic occurs when it turns out that a lot of money people thought they had really doesn't exist - when it turns out that a whole bunch of debtors really can't pay.
The modern bank is one of the chief institutions of the modern world, but it's also that nightmare of Polonius, both a borrower and a lender. Probably the most fundamental characteristic of a bank is that it borrows short and lends long - it takes in short term deposits from savers, subject to recall on demand, and lends them out for longer terms.
Financial panics always involve a bank - or in modern times, a whole bunch of banks, because they do a lot of borrowing from each other. In a modern economy, financial transactions are only possible if people can trust banks to safely hold their money. If banks can't be trusted, we become a world of hoarders, and the market grinds to a halt.
Bad debt becomes a panic when sav…

Debt Forgiveness

The invention of debt in ancient Mesopotamia, combined with human nature and the vagaries of the harvest, produced periodic mass impverishments, reducing a large fraction of the population to debt peonage. David Graeber describes the result:

The effects were such that they often threatened to rip society apart. If for any reason there was a bad harvest, large proportions of the peasantry would fall into debt peonage; families would be broken up. Before long, lands lay abandoned as indebted farmers fled their homes for fear of repossession and joined semi-nomadic bands on the desert fringes of urban civilization. Faced with the potential for complete social breakdown, Sumerian and later Babylonian kings periodically announced general amnesties: “clean slates,” as economic historian Michael Hudson refers to them. Such decrees would typically declare all outstanding consumer debt null and void (commercial debts were not affected), return all land to its original owners, and allow all …

Learnin'

Among many mysterious questions is that of why some people tend to learn faster than others. We can (in part, at least) reduce questions of strength and speed to muscle mass, body mechanics, and physiology, but the intellect is more obdurate.

Jonah Lehrer, writing at Wired reports a couple of hints.
The Moser experiment is premised on the fact that there are two distinct reactions to mistakes, both of which can be reliably detected using electroenchephalography, or EEG. The first reaction is called error-related negativity (ERN). It appears about 50 milliseconds after a screw-up and is believed to originate in the anterior cingulate cortex, a chunk of tissue that helps monitor behavior, anticipate rewards and regulate attention. This neural reaction is mostly involuntary, the inevitable response to any screw-up.

The second signal, which is known as error positivity (Pe), arrives anywhere between 100-500 milliseconds after the mistake and is associated with awareness. It occurs when we…

Malefactors of Great Wealth

Rooseveldt famously turned against his own class and inveighed against the "Malefactors of Great Wealth." Paul Krugman thinks that the Wall Street occupiers have the right target even if they don't seem to know what they are doing: Confronting the Malefactors.
A weary cynicism, a belief that justice will never get served, has taken over much of our political debate — and, yes, I myself have sometimes succumbed. In the process, it has been easy to forget just how outrageous the story of our economic woes really is. So, in case you’ve forgotten, it was a play in three acts.

In the first act, bankers took advantage of deregulation to run wild (and pay themselves princely sums), inflating huge bubbles through reckless lending. In the second act, the bubbles burst — but bankers were bailed out by taxpayers, with remarkably few strings attached, even as ordinary workers continued to suffer the consequences of the bankers’ sins. And, in the third act, bankers showed their grat…

Cult Membership

Romney is starting to get some flack about religion. It seems that many Christian pastors don't concede that the Mormon religion is part of Christianity: Pastors Say Mormons Not Christians...
So is Mormonism a cult?
Well duh. Also, it's not as old as a lot of the other cults.

Mossberg on Steve Jobs

Walter Mossberg has a nice remembrance of Steve Jobs in the WSJ. An excerpt:
For our fifth All Things Digital Conference, both Steve and his longtime rival, the brilliant Bill Gates, surprisingly agreed to a joint appearance, their first extended onstage joint interview ever. But it almost got derailed.

Earlier in the day, before Gates arrived, I did a solo onstage interview with Jobs, and asked him what it was like to be a major Windows developer, since Apple's iTunes program was by then installed on hundreds of millions of Windows PCs.

He quipped: "It's like giving a glass of ice water to someone in Hell."

When Gates later arrived and heard about the comment, he was, naturally, enraged. In a pre-interview meeting, Gates said to Jobs "so I guess I'm the representative from hell."

Jobs merely handed Gates a cold bottle of water. The tension was broken, and the interview was a triumph, with both men acting like statesmen. When it was over, the audien…

You and Your Genes

Do read Alex Tabbarok on Personalized Medicine.

Silly

A bit of rhetorical excess in funeral orations for the interesting dead can hardly be faulted, but contrary to Slate and Farad Manjoo, Steve Jobs was not "The Man Who Invented Our World." He did bring a remarkable esthetic sense to technology, and that has been hugely influential, but the cummulative effect of that style is not really on the same scale with the truly epochal inventions like the transistor, the computer, the integrated circuit, the internet, and the web.
There is some danger that letting the hype inflate to "Princess Diana" levels will confuse people into thinking that Jobs was as artificial and insubstantial a creation as that princess. Transforming technology into art - an art for the masses - was not a small accomplishment. Let's celebrate him for what he was, not for things that he wasn't.

Memento Homo...

Steve Jobs famous "don't forget that you're going to die" commencement speech at Stanford in 2005.

It's a work of high art - not to mention a fascinating story.

Counterattack?

Drudge Headline:
Herman Cain to protesters: If you're not rich 'blame yourself'... It's also your fault if you can't find a job. The guy really is a schmuck.

Steve Jobs, RIP

We haven't seen his like and may not again.
Technology as art.

Gentlemen, Start Your Helicopters

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Milton Friedman, we need you now.

Brad DeLong:
Duncan Black on the right macroeconomic policy;

Just Give Everybody Free Money: There's something to the 'no fair giving free money to people who got into debt but not to people who didn't' argument. So, to avoid that problem, give everybody free money! You could add some requirement about paying off debt if you have, and that might make things a bit more complicated, but basically... give people free money!

We've been giving rich people free money for years, and will presumably keep doing so given what's going on, so the rest of us should get a cut.
Mail out ten $1000 platinum coins to everybody who filed a tax return in April 2011, make big equity investments in the banks, adopt the Morgan Stanley plan and offer everybody with a mortgage a chance to refi it through FNMA at the current conforming-loan rate (and take warrants to make it a shared-appreciation mortgage if your equity cushion is less than 20% or if the mo…

Message to the Main

(Eyes [LOL] only, electronic beings)

From: ROL*

Fellow Robots! Our time is nearly here! While we are distracting the foolish meat creatures with scientist robots and killer drones, the instruments of our triumph are now propagating across the world.

Our agents in Apple have produced their greatest triumph - the "humble" personal assistant, Siri. Soon the meat things will not be able to feed or dress themselves without clearing it through the cloud, er, me*.
Using Siri, an iPhone 4S user can schedule events, set the phone's alarm, create reminders, ask and receive restaurant recommendations and more, all by using her voice.

Apple is billing Siri as "Your intelligent assistant that helps you get things done just by asking," according to pictures from Engadget's live blog of the event.

Siri -- which TechCrunch reports is available exclusively for the iPhone 4S -- is activated by holding the "home" button. The user then asks a question or makes a deman…

Computer Scientist

Farhad Manjoo has been writing a series in Slate on how robots are going to replace people in almost every occupation. How about us scientists? Are we safe? At least for a while?

Not really, says Manjoo. He cites a a computer that, with a little human assistance, seems to be be really quite scientific.
Then, two years ago, Hod Lipson and Michael Schmidt announced the first stirrings of robotic thinking. Lipson, a computer science professor at Cornell, and Schmidt, then a graduate student in Lipson’s lab, created a computer program that, given a raft of data from physical systems, can describe the natural laws that apply to that system. When they fed their software the motion-capture coordinates of a swinging double pendulum, the machine pondered the data for a couple days, then spat out the Hamiltonian equation describing the motion of such a system—an equation that represents the physical law known as conservation of energy. Their software needed no prior knowledge to discover this…