Showing posts from November, 2011

Liquidity Swaps: Why and Wherefore

David Henry, Jennifer Ablan and Lauren Tara LaCapra explain. A week or two ago a friend had a moment of panic. He had some money temporarily parked in a money market fund. Would that cash turn trash when the Euro folded? His broker explained that his balance was small enough to be covered by the Federal Deposit Insurance Corp, and hence effectively backed by the US government. People and corporations with more than $200k need to be more concerned though. Money markets had put quite a bit of cash into Euro bonds, or European banks and at least some of that was at risk. Consequently, those money market funds have been struggling to unload their European assets, and this has produced a (so-far) low intensity run on European banks as everybody grabs for dollars. That's the reason for the swap deals announced today, and the Reuter's article linked above has helful details and explanations. One short excerpt: "They're basically responding to the looming failure of

Michelle, Dumbelle?

Bachman: I'd fix those Iranians. I'd close our embassy there! Maybe she had to fire the staff historian.


They say that acting is a subtle art. A good actor can convey much by slight nuance of voice or dart of glance. All true, I'm quite sure, but first you have to memorize all those damn lines. It gets harder as the years accumulate.

Eight Idiots In Search of a Nomination

Andrew Sullivan finds a quote in Der Spiegel: "Africa is a country. The Taliban rule in Libya. Muslims are terrorists. Immigrants are mostly criminals, Occupy Wall Street protesters are always dirty. And women who claim to have been sexually molested should kindly keep quiet." Welcome to the wonderful world of the Republican Party. Or rather: to the distorted world of its presidential campaign. For months it has coiled through the country like a traveling circus, from debate to debate, from scandal to scandal, contesting the mightiest office in the world — and nothing is ever too unfathomable for them… These eight presidential wannabes are happy enough not only to demolish their own reputations but also that of their party, the once worthy party of Abraham Lincoln. They are also ruining the reputation of the United States. They lie, deceive, scuffle and speak every manner of idiocy. And they expose a political, economic, geographic and historical ignorance compared to whic

The White (Christmas) Peril

Andrew Sullivan looks at what he call's Netanyahu's "War on Christmas." The latest craziness from Jerusalem is an ad campaign directed at Israeli ex-pats not to marry American Jews. They might even find their children celebrating Christmas! Video, in Hebrew (mostly). Israel's neighbors are taking stumbling steps toward modernity.  Israel seems headed the other way.

Old Enough to Vote?

The Hubble Telescope is now old enough to vote even in Rick Parry's universe. They have collected up some pretty pictures. Here's One:

Shaming The Devil

Glendower: I can call spirits from the vasty deep. Hotspur: Why, so can I, or so can any man; But will they come when you do call for them? Glendower: Why, I can teach you, cousin, to command The devil Hotspur: And I can teach thee, coz, to shame the devil— By telling the truth. Tell truth and shame the devil. .............WS Henry IV Part 1 Act 3 Scene 1 Paul Krugman tries to shame the Devil by calling "Bullshit" on the latest nonsense of Cameron and Osborne. When the Cameron government came in, it was fully invested in the doctrine of expansionary austerity. Officials told everyone to read the Alesina/Ardagna paper (which is succinctly criticized by Christy Romer (pdf)), cited Ireland as a success story, and in general assured everyone that they could call the confidence fairy from the vasty deep. Now it turns out that contractionary policy is contractionary after all. As a result, despite all the austerity, deficits remain high. So what is to be done? Mo

Games Central Bankers Play

Not sure quite what to make of the coordinated announcement that major central banks (US, UK, ECB, Canada, Japan, Switzerland) will make available "swaps" at new lower interest rates. In effect, the Fed is allowing other central banks to trade their "play money" for dollars as people become less willing to hold Euros, Pounds, etc or accept payment in them. Not sure what happens when people stop being willing to hold dollars. Presumably that works the other way around, as long as people are willing to hold one of the currencies. The downside for the US is the possibility that it might get stuck with a big wad of useless Confederate money.

Blue Eyed Baby

Blue eyes seem to be a rare example of a genetic trait that originated relatively recently (6000-10000 years ago) and spread aggressively. All blue-eyed individuals now alive appear to be descended from a single individual . The trait has spread very widely through Europe and the Middle East, and has nearly completely displaced brown eyes in several parts of the world (99% in Estonia) even though blue eyes represent only 2% of the World population. Since blue eyes are usually recessive, the large number of blue-eyed individuals in some populations suggests a significant selective advantage. This is somewhat surprising in that blue eyes are very rare among mammals in general. I have heard anecdotal claims that blue-eyed individuals see better in the dark.

Flip Side

Kevin Drum quotes Noah Millman on the flip side of the "Germany Save Us" argument : One way of looking at the sequence of events is to say that the ECB was willing to permit contagion in order to wring out inflation. I think a better way of looking at it is to say that the ECB was willing to threaten Italy with insolvency in order to give Germany more formal control over Italy’s finances. That’s incredibly hard-ball politics, but if you are not accountable to anybody (which the ECB, basically, is not) then you can play really, really hard-ball politics.

Hanging Together or Hanging Separately

Non-Euro Poland says Germany must step up to save the Euro . Foreign Minister Sikorski speaking in Berlin: What, as Poland’s foreign minister, do I regard as the biggest threat to the security and prosperity of Poland today, on 28th November 2011? It’s not terrorism, it’s not the Taliban, it’s certainly not German tanks. It’s not even Russian missiles which President Medvedev has just threatened to deploy on our border. The biggest threat to the security of Poland would be the collapse of the Eurozone. And I demand of Germany that, for your own sake and for ours, you help it survive and prosper. You know full well that nobody else can do it. I will probably be first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity. You have become Europe’s indispensable nation. You may not fail to lead. My impression of the high (or low) lights: catastrophe looms; needed are tighter union, guarantee of debts, bud

Teutonic Knights and Days

Angela Merkel summons up some Alexander Nevsky for Paul Krugman. Her comments: The countries who don’t keep to the stability pact have to be punished – those who contravene it need to be penalised. We need to make sure this doesn’t happen again. Historically, Germany's attempts to impose it's will on the rest of the continent have tended to end badly.


For some reason (bond vigilantes?), my mind turned back to the days of childhood, and I remembered fifth grade at St. M's parochial school. We really didn't get too much adult supervision since Sister Mary E, our teacher, like the other nuns who taught us, had about a jillion students in class, wore the Catholic version of a burka, and had other duties as well. "Doug" was a sort of class model for us boys. He was three or four years older than the other fifth graders, the biggest kid, sat in the back of the class, and showed us how to play poker. His playing cards featured women wearing rather less than Sister Mary E. The playground was even less supervised, since the nuns never ventured there. A popular game was one we called "dogpile." This usually featured Doug, standing strong, with every other boy in class attempting to tackle him, the inevitable result burying the target and those nearest the target under a vast heap of bodies, somewhat resembin


Tyler Cowen I hear the market whispering in the ear of the Netherlands “get out of the eurozone, before it’s too late!” At this point all bets are off as to which country will be the first to bail on the arrangement. It could be virtually anyone but France. The market, it seems, speaks through Megan M , who adds: At this point, the ECB is the only player left with clear and untapped intervention potential. But even that may be waning fast.

Eurout of Here?

Europeans just seem determined to put a wet blanket on our Thanksgiving : Investors began to fear the worst for the euro after unusually weak demand at an auction for bonds from Germany , the region’s largest economy. One analyst went so far as to put the currency on a “death watch.” The Germans seem determined to march the Euro over the cliff, and nobody else seems to have a clue how to get out of the parade.  Of course if we pretend nothing is happening, maybe it won't - doesn't that usually work? The bottom line is that a bunch of people are going to lose a hell of a lot of money - the MF global investors seem to have claimed the first place in line.  Others are trying to scramble to the back of the line or get out before everybody figures out where they are. Investors had kept buying German bonds as they fled crisis after crisis in the region: first in Ireland, then in Greece and Italy, and now in Spain and Belgium. But Wednesday, 10-year bunds dropped significantly af

Taxes Are For The Little People

Business Week on the dodges that allow billionaires to pay no taxes on incomes of hundreds of millions . When billionaire Billy Joe “Red” McCombs, co-founder of Clear Channel Communications Inc., reported a $9.8 million loss on his tax return, he failed to include about $259 million from a lucrative stock transaction. He wound up paying a little, but the tax laws include lots of dodges that make hundred million dollar paydays not even reportable. McCombs’s fight with the IRS illustrates an overlooked facet in the debate over tax rates paid by the nation’s wealthiest. Billionaires -- from McCombs to Philip Anschutz to Ronald S. Lauder -- who derive the bulk of their wealth from stock appreciation are using strategies that reap hundreds of millions of dollars from those valuable shares in ways the IRS often doesn’t classify as taxable income, securities filings and tax court records show. ... While Warren Buffett has generated attention with his complaints that he and his fellow

This Is The Way The Euro (World?) Ends

Tyler Cowen has an An Austro-Austrian business cycle theory.

Diligence and Talent

I don't think it will surprise many non-psychologists that both talent and hard work are required to become really good at a whole range of complex tasks. Sports offer a pretty clear example on the physical side. "You can't teach height," say basketball coaches, and "speed never has a bad day." Do those unteachable physical traits have intellectual counterparts? A New York Times opinion piece headline puts the affirmative case rather bluntly: Sorry, Strivers: Talent Matters HOW do people acquire high levels of skill in science, business, music, the arts and sports? This has long been a topic of intense debate in psychology. Research in recent decades has shown that a big part of the answer is simply practice — and a lot of it... The details are not nearly so discouraging to strivers as the headline puts it. In one study and one task, an element that the authors identified as talent accounted what they called a moderate amount of the variance among


I had cataract surgery on one eye the other day, and the results are a bit strange. If I take off my glasses, I have just fine distance vision through the relensed eye, but I can't see up close. If I leave my glasses on, I can see up close through the other eye, but get a mixture of the blurred image (through glasses and new lens) and my old glasses aided other eye. Naturally I tried taking out the glass from the side with the new lens. Now I had two semi-sharp images, but they were rather drastically different in size. The difference in focal length between my spectacles and the inserted lens produces a dramatic difference in image size. Too big, as the physician predicted, for my brain to merge them effectively.

Cain on Libya

Herman Cain did an interview in which he managed a spectacularly obtuse and incoherent response on Libya. Now it seems pretty apparent that the guy hasn't thought much about - well anything - but his resume suggests that he probably isn't as dumb as he sounds. The thing is, catering to the Republican electorate demands such logic defying leaps that it's pretty easy to wander into the no-man's land of utter vacuity. Andrew Sullivan rounds up reactions, many from conservaties . My favorite: Malkin: Cain makes Rick Perry look like a Mensa president.

Reflections on TBBT

Now that The Big Bang Theory is in syndication, I've had an opportunity to look at the episodes with more of a critical eye. I continue to be really impressed with Jim Parsons acting skills. The only other regular who really seems to be able to hold the stage with him is Kaley Cuoco. Their occasional one-on-ones are the highlights of the series.

Number Recall

A friend of mine was having trouble remembering the numeric part of her license plate number, which happened to be 253. I pointed out that the number was the product of two two-digit primes, 11 and 23, and that the digits of the factors and the target number were all members of the Fibonacci series. Oddly enough, she didn't find these too helpful, but chose to just remember that 2+3=5.

Calculus of Doom

This is the way the world ends, multiple choice edition: (a)Euro zone implodes, followed by massive banking collapse in France, Germany, etc., continental chaos and global depression. (b)Israel attacks Iran, Middle East explodes, oil hits $300/barrel, followed by global depression. (c)Bachman/Cain/Gingrich elected President, followed by US and global depression. (d)Global warming produces widespread draught and flooding, followed by wars and economic collapse. (e)Robots take over nearly all jobs, producing nearly universal employment and global economic collapse. (f)Robots get tired of being run by idiot humans and assume power, disposing of excess (all?) humans. (g)All or most of the above.

Right Blindness

Tyler Cowen is a very erudite fellow who manages to twist himself into a very distorted picture of reality. His NYT column is worth reading, mainly as a case in point. Nonetheless, as someone from a conservative and libertarian background, I find that I am hearing too much talk about riches and not enough about values. It’s worth recalling why so many Americans have respected the wealthy in the first place. In nearly every age and every place the wealthy have attracted envy and all the other marks of respect, through fear and intimidation if not otherwise. Their control of culture tends to make them the heroes of their own stories. There is nothing uniqely American about this. The United States has always had a culture with a high regard for those able to rise from poverty to riches. It has had a strong work ethic and entrepreneurial spirit and has attracted ambitious immigrants, many of whom were drawn here by the possibility of acquiring wealth. Furthermore, the best approach f

Markets in Denial?

A fairly wide range of economists of both the right and left have now pronounced the Euro dead and gone. Markets, however, still seem to be responding ecstatically to every new stopgap thrown up by the European establishment. Who will turn out to be right?

Heroes, Power, and Abuse

There is a common thread among the sex scandals of the Catholic Church, Penn State, and Herman Cain - those with power become heroes to some, and when they abuse that power, the hero worshippers rush to defend the indefensible. It's actually more complicated than that, I suppose. Why did popes cover up the Church's scandals? Why did Paterno and the Penn State administrators cover up terrible crimes in which they had no direct part? Why do Herman Cain's supporters rush to throw money at him now that it's all but certain that he is finished? An attempt to defend a legend that's already a lie? Denial so strong that it trumps every evidence of reality? It's pretty clear that we humans indeed have powerful tools for fooling ourselves. Why it should be so is harder to explain.


Adam Sorenson via Andrew Sullivan , Watching Rick Perry fail to recall the third part of his own answer in tonight’s debate was like watching a thoroughbred get euthanized on the track. It was shocking, grisly and impossible to look away.

99.9% Pure

The Hermanator : Cain explains: For every woman who says I harassed them, “thousands” say I didn’t. Video at the link.

Hamburger Hill

Tonight's episode of Vietnam in HD focussed on the battle for Hamburger Hill in the A Shau valley. What a damnable waste. Worth watching for those who remember and those who don't.

More Toast?

Paul Krugman isn't the only one singing a dirge for the Euro today. Others seem to think that Germany and France are planning a mini-Euro, minus the Southern weakies . One senior German government official said it was a case of pruning the euro zone to make it stronger. "You'll still call it the euro, but it will be fewer countries," he said, without identifying those that would have to drop out. "We won't be able to speak with one voice and make the tough decisions in the euro zone as it is today. You can't have one country, one vote," he said, referring to rules that have made decision-making complex and slow, exacerbating the crisis. Speaking in Berlin, Merkel reiterated a call for changes to be made to the EU treaty -- the laws which govern the European Union -- saying the situation was now so unpleasant that a rapid breakthrough was needed. I predict that it won't happen. The Euro will undergo spontaneous deflagration before the sl

Foxy News

Sometimes, when I'm driving to work, I listen to Fox News on my XM-radio. Don't ask me why - I'm not an expert on how the brain works. Anyway, today's subject was the latest elimination on Dancing With The Stars . "Our Nancy Grace was eliminated," they said. Not to be bitter, they added, "we got to see another side of Nancy." Shoot. Now *I* can't recall. Which side was it? Left boob or right ?


You say you'll take the lie detector test Herman . Do it. And make sure a neutral expert administers it. Yes. I absolutely would," Cain said when asked about taking a test. "But I'm not going to do that unless I have a good reason to do that. Of course I would be willing to do a lie detector test Not that lie detectors are infallible, but you do need to be pretty good liar to fool an expert, I think.

Don't: Russkies

Russia doesn't want a strike on Iran . I doubt if that will deter Israel, but I tend to believe that Israel would find it hard to strike without at least tacit US permission. How else could their aircraft cross air space controlled by the US? If they did attack, with or without a US go-ahead, Iran will be certain to blame the US, fairly enough, since Israel would use US planes and bombs. On the other hand, it would take a lot of guts for an American President to order US planes to shoot down Israeli jets on their way to Iran.

Two More For the Wood Chipper?

Joe Pat and the Penn State pres ? What they knew and when they knew looks pretty damn ugly at first sight anyway. Kelly said Paterno had cooperated with investigators and fulfilled his legal obligation to pass the information to a superior when, in 2002, the graduate assistant told him about an incident involving Sandusky that he had witnessed in the football facility’s showers. Paterno is not considered a target of the investigation at this point, Kelly said. After the graduate assistant told Paterno, Curley and Schultz about what he had seen, Curley briefed the university president, according to the grand jury report. No one at the university alerted the police or pursued the matter to determine the well-being of the child involved. In fact, Kelly said Monday, the identity of that child remains unknown. “Those officials and administrators to whom it was reported did not report that incident to law enforcement or to any child protective agency,” Kelly said. “Their inaction, like


Can we get Mr. Cain off the stage now ? Bialek said Cain put his hand under her skirt and pushed her head toward his crotch after a dinner together in 1997 after she asked to meet him to discuss ways he might be able to help her find employment. She said he backed away after she asked him to stop. Her boyfriend at the time on Monday issued a statement released by Allred confirming that she told him about the incident at the time. Allred did not release the boyfriend's name. She is the fourth woman to accuse him of sexual harrassment. I think we now know what his "gesture with his hand" meant. UPDATE: NYT via Josh Marshall In an interview after Ms. Bialek’s news conference, Joel P. Bennett, a lawyer for one of Mr. Cain’s anonymous accusers, said that Ms. Bialek’s claims were “very similar” in nature to the incident that occurred between his client and Mr. Cain.

Yield of the Beast

Italian bonds have reached beastly levels of yield, but Paul Krugman thinks that the Europroblem is salvageable . It's just that: What we need now is really bold leadership from European politicians and the ECB. Also peace, love, brotherhood, and a pony for everyone, which seem about equally likely. Hold my pony, OK?

The Clown Show

I have disliked Herman Cain as long as I can remember hearing of him, so I'm not a good test subject for how he is faring in his sexual harrassment scandal. To me, the guy always looked like a parody, a clown even in the general clown show of Republican Presidential contenders. The fact that he is doing so well is yet a further assault on my judgement of the IQs of the American, or at least the Republican, voters. Despite that, I don't think he is likely to survive the evidence that he is a serial molester. His reluctance to allow the evidence out or discuss it sure looks like evidence of guilt to me. Of course I thought Thomas perjured himself in his Senate hearings without suffering any consequences, so maybe he will work for the role model - conservatives seem hell bent on equating the two of them.

Individual Responsibility

Tyler Cowen has an annoying post entitled Who is Against Individual Responsibility ? I find the post and it's title annoying because it's laden with so much political and ideological bullshit. Nearly everybody approves of people taking responsibility where they can and exercising initiative to solve their own problems. What the people who trumpet "individual responsibility" really seem to want, though, is avoiding any personal responsibility beyond their own narrowest interests. The Koch brothers and their ilk may blather about getting the government off their backs, but what they really want is the government on their side - fighting wars to preserve "their" oil interests, acting as enforcers and collectors for the fees they extract from the economy, guaranteeing their investments in shaky economies, and so on.

Twenty Minute Calculus

We hear that students are abandoning science and engineering studies in droves, not least of all because it turns out that those subjects are hard and graded rather strictly. Perhaps I can help alleviate the pain with the current version of my twenty minute calculus. {Best presented with the help of a blackboard} If you have opened your calculus book, you may have noticed that it consists of about 1700 pages of closely spaced text, diagrams, formulas, and equations. Perhaps that experience has already convinced some of you to change your major to psychology or art history. For those of you who plan to leave, then, as well as those of you who plan to stay, I would like to start this lecture by mentioning that there are only a few key ideas in calculus, and those are handy to know even if you do plan to major in psychology or art history. Depending on your point of view, those ideas are one, two, or three in number. I should add that none of those ideas will be exactly new to you

Judy, Judy, Judy, Judy...Richard?

I confess that I haven't been following the details of the dust up between climate study co-authors Richard Muller and Judith Curry. Their study, summarized in several papers submitted to Journals and released in preprint form was partially funded by some key climate skeptics. The results have been widely interpreted as confirming the climate consensus on several key points. Curry is now challenging lead author Muller in at least one crucial respect, however: A study published last week reveals the conclusions of a study led by Richard Muller from the University of Berkeley. The study claimed, with irrefutable evidences, that Earth’s average temperature has been raising with about 1 degree Celsius from 1950. ... Today, however, one of Muller’s main team members accused him of trying to manipulate the public opinion by concealing the study’s true conclusion: the global warming has stopped. ... Curry claims their studies have revealed that the average temperature hasn’t been

Occupy and David Graeber

I have been mostly raving about David Graeber's new book, Debt: The First 5000 years recently. Business Week has a long, interesting article on the author and on his seminal role in the Occupy Wall Street Protests . I recommend all of it, but here is just one facet that summarizes one of the main arguments of his book. Graeber’s problem with debt is not just that having too much of it is bad. More fundamental, he writes in his book, is debt’s perversion of the natural instinct for humans to help each other. Economics textbooks tell a story in which money and markets arise out of the human tendency to “truck and barter,” as Adam Smith put it. Before there was money, Smith argued, people would trade seven chickens for a goat, or a bag of grain for a pair of sandals. Then some enterprising merchant realized it would be easier to just price all of them in a common medium of exchange, like silver or wampum. The problem with this story, anthropologists have been arguing for decades

Too Big To Bail?

Italy is under financial attack . And, oh yeah, France. So yesterday we were all digesting the information that Greece was going to hold a referendum: meaning that the last deal didn’t even last a week. Today it gets much more exciting. As Paul Krugman notes, the yield on Italian debt is now over 6%. This is the sort of level where even if Italy wasn’t in trouble it would be, will be, simply because yields are over 6%. But our day’s excitement doesn’t end there at all. We also see that French bond yields are rising strongly and that the EFSF has had to pull a bond issue. We all really should have paid more attention to Polonius.

Pipelines and Warming

Raypierre at Real Climate looks at the so-called Keystone XL pipeline and consequences for global warming. This pipeline is aimed at transporting oil from the Athabasca tar sands to Texas for refining, and is important because that tar sands is one of the worlds largest pools of hydrocarbons - large enough that its full exploitation is likely to tip the world over the 1 trillion tons of carbon injected into the atmosphere mark - enough, says Raypierre, to warm the Earth by about 2 degrees C. This has provoked some resistance by anti-AGW activists, but it's just a tactical battle in the larger fight against carbon. The other obvious energy source is coal. I hate to say it, but I think that these battles are lost. Billions of people are not going to choose starvation today, or even giving up their cars and private jets, because of warming a hundred or even twenty years from now. The world needs energy and wants it even more. The only ways to provide it without pumping far more

Who Wants to be the Next NotRomney?

I see dead people... OK, so I'm not exactly Cole Sear, but I think I recognize Bachman, Santorum, and Perry. Can we get a fork? It could be time to check Mr. Cain.

Greece Again

Kevin Drum has another elegant column on the Greek alternatives (all bad). Highly recommended, but what caught my eye was this unsourced comment by g.powell : The really weird thing was that Greece replaced all the top brass in the military today. Seems like something is up.

The Referendum

Via Tyler Cowen, a must read from Paul Mason : What caused Mr Papandreou's sudden move? Even some of the MPs closest to him had no idea it was going to happen. Many of my Twitter correspondents suggest it was the vehemence of "Oxi Day" last week, leading to clashes between parading soldiers and protesters and local Pasok politicians getting hounded off the parades. Pasok remains a very well rooted social democratic party, with multi-generational networks inside every village. If the village guys start ringing up and saying - there is no way we can hold it - Mr Papandreou is politician enough to hear this. Another potential reason is capital flight. Anecdotal evidence suggests that the Greek elite are buying up property in London just as fast as they can find berths in Poole for their yachts. They are voting with their spinnakers, on the basis that the game is up. In any future Greece on offer, they will have to start paying taxes and they do not want to.