links for 2008-02-13

• Project Lifeline - Econbrowser
• Hackonomics - The Big Picture
• Lifeline for Whom? - New York Times
• Why Putin’s rule threatens both Russia and the west - Martin Wolf
• About Those Bush Tax Cuts for the Rich . . . - New York Times Blog
• Winning the Edwards Vote - Thomas Palley
• Shame On Elaine Chao - The Nation
• Looking for Sure Political Bets at Online Prediction Market - New York Times
• Senator Clinton Calls for a $9.50 Minimum Wage for Full-time Workers - pgl
• How to lower income inequality - Free exchange
• Obama vs. McCain, and The Four Stories of American Life - Robert Reich

Comments

[anne]

http://krugman.blogs.nytimes.com/2008/02/13/the-credit-crunch-hits-students/

February 13, 2008

The Credit Crunch Hits Students
By Paul Krugman

This * is awful:

"The credit crunch that has so far caused more than $100 billion of losses for big Wall Street investment firms now extends to students in Michigan, and it could soon hit many other borrowers, ranging from California museums to the prestigious Deerfield Academy prep school in Massachusetts.

"Yesterday, the Michigan Higher Education Student Loan Authority, a state agency, said on its Web site that 'due to the current and unprecedented capital-markets disruption' it will stop making loans under the state’s Michigan Alternative Student Loan, or MI-Loan, program. More than 100 Michigan colleges and universities participate in the program.

"In the past few days, problems have mounted for many borrowers as an obscure — but important — corner of the credit market called auction-rate securities has gone into a deep freeze."

* http://online.wsj.com/article/SB120287550746064755.html?mod=hpp_us_whats_news

[anne]

Notice the progression:

http://krugman.blogs.nytimes.com/2008/02/11/just-remember-the-financial-problems-are-contained/

February 11, 2008

Just Remember, the Financial Problems Are Contained
By Paul Krugman

To Planet Earth, that is — though I wouldn't be surprised if all this eventually affects the International Space Station, too.

The Wall Street Journal has a new "cliff-diving" chart, this time for a whole other type of asset we didn't know we had to worry about:

Leveraged loans pricing [Chart]

And Business Week * tells us that there's a new squeeze on credit cards.

I guess I should mention a point that's come up in some discussions: hasn't the quantity of bank loans gone up? And doesn't this conflict with the notion that there's a credit crunch?

Well, here's what I'm told by people who know these markets better than I do: the increase in bank lending is basically a statistical illusion — in fact, it's in large part a consequence of the credit crunch.

One example of how this might be happening is the now-famous "liquidity put".

Suppose that a bank has created a SIV (special investment vehicle) with an agreement to provide a credit line to pay off investors if they want out and new investors can't be found. That obligation doesn't show on the bank's balance sheet — but when investors cut and run, and the line of credit is called on, the bank is obliged to pony up — and hey presto, it looks as if bank credit has expanded.

A subtler example would involve a firm that has good credit, but finds that security markets have dried up — so it goes back to old-fashioned borrowing from banks, instead. Again, it looks like a credit expansion, but it's really a sign of tight credit.
Bottom line: yes, there is a credit crunch, and it's not contained.

* http://www.businessweek.com/magazine/content/08_07/b4071034382063.htm

[anne]

There was discussion of Warren Buffett being willing to enter the municipal bond insurance market, for a price, a high price to increase liquidity. We need to ask how and why Buffett has the necessary liquidity, how Berkshire Hathaway managed to avoid buying suspect debt in supporting its massive financial-insurance operations.

[anne]

Fabulous....

http://judson.blogs.nytimes.com/2008/02/12/a-tyrannical-romance/index.html

February 12, 2008

A Tyrannical Romance
By Olivia Judson

If Charles Darwin were alive today, he’d be turning 199: like Abraham Lincoln, he was born on Feb. 12 1809.

I considered observing their joint birthday with a discussion of slave making in ants, but rejected that idea in favor of another. For later this week is another Big Day: the feast of St. Valentine. With apologies to Lincoln, I’ve decided to hold a Darwin-Valentine celebration by revealing one of my more tyrannical romantic fantasies.

I should say, by way of preamble, that Darwin contributed far more to biology than the “Origin of Species,” in which he laid out how evolution by natural selection works, and the evidence for it at the time. He also wrote (and this list is not complete): a treatise on the formation of coral reefs, which is still held to be correct; a landmark work on carnivorous plants; a definitive treatise on barnacles, extinct and extant; a study of how earthworms plow and aerate soil; and a fascinating speculation on the evolution of emotion in humans and other animals.

And that’s not all. One of his other major works, “The Descent of Man, and Selection in Relation to Sex,” includes a huge compilation of the sexual decorations and displays of animals, from the jaws of stag-beetles to the tail of the Argus pheasant, which far exceeds that of the peacock in absurd magnificence. From his study of all this, Darwin began to elucidate systematic patterns and principles of the evolution of courtship and sexual behavior. In particular, he developed the concept of sexual selection, which is the idea that cumbersome ornaments like big tails can evolve, even if they make the bearer less likely to survive, if the opposite sex (usually the female) finds them attractive.

In doing so, he founded one of the most important and successful branches of evolutionary research. We now have a robust understanding of how sexual pressures — the pressures to find, impress, and seduce a mate — influence the evolution of males and females. So much so that if you tell me a fact, such as the average size difference between males and females in a species, or the proportion of a male’s body taken up by his testes, I can tell you what the mating system is likely to be. For example, where males are much bigger than females, fighting between males has been important — which often means that the biggest males maintain a harem. If testes are relatively large, females probably have sex with several males in the course of a single breeding episode.

These forces are so reliable that, if only we could determine the sex of dinosaur fossils, we could begin to infer their mating habits. But alas. Unless the animal died while heavy with eggs, as one oviraptor obligingly did, determining the sex of a dinosaur is close to impossible. At one point, it was thought that the shape of a particular bone at the base of the tail might indicate sex; but a recent analysis has shown it does not. Now the best guesses come from subtle differences in structure of the bone in the hind legs. For the time being, then, fossils are stonily silent about the dinosaurs’ private lives, their methods of wooing, the exuberance of their song-and-dance routines.

Which brings me to my tyrannical fantasy. I want to take a journey 68 million years back in time to see a Tyrannosaurus rex couple mating. What was it like? Did they trumpet and bellow and stamp their feet? Did they thrash their enormous tails? Did he bite her neck in rapture and exude a musky scent? Somehow, I imagine that when two T. rex got it on, the earth shook for miles around....

[anne]

http://ebooks.adelaide.edu.au/d/darwin/charles/d22d/chap13.html

1871

The Descent of Man
By Charles Darwin

SECONDARY SEXUAL CHARACTERS OF BIRDS.

SECONDARY sexual characters are more diversified and conspicuous in birds, though not perhaps entailing more important changes of structure, than in any other class of animals. I shall, therefore, treat the subject at considerable length. Male birds sometimes, though rarely, possess special weapons for fighting with each other. They charm the female by vocal or instrumental music of the most varied kinds. They are ornamented by all sorts of combs, wattles, protuberances, horns, air-distended sacks, top-knots, naked shafts, plumes and lengthened feathers gracefully springing from all parts of the body. The beak and naked skin about the head, and the feathers, are often gorgeously coloured. The males sometimes pay their court by dancing, or by fantastic antics performed either on the ground or in the air. In one instance, at least, the male emits a musky odour, which we may suppose serves to charm or excite the female; for that excellent observer, Mr. Ramsay, says of the Australian musk-duck (Biziura lobata) that “the smell which the male emits during the summer months is confined to that sex, and in some individuals is retained throughout the year; I have never, even in the breeding-season, shot a female which had any smell of musk.” So powerful is this odour during the pairing-season, that it can be detected long before the bird can be seen. On the whole, birds appear to be the most aesthetic of all animals, excepting of course man, and they have nearly the same taste for the beautiful as we have. This is shown by our enjoyment of the singing of birds, and by our women, both civilised and savage, decking their heads with borrowed plumes, and using gems which are hardly more brilliantly coloured than the naked skin and wattles of certain birds. In man, however, when cultivated, the sense of beauty is manifestly a far more complex feeling, and is associated with various intellectual ideas.

Before treating of the sexual characters with which we are here more particularly concerned, I may just allude to certain differences between the sexes which apparently depend on differences in their habits of life; for such cases, though common in the lower, are rare in the higher classes. Two humming-birds belonging to the genus Eustephanus, which inhabit the island of Juan Fernandez, were long thought to be specifically distinct, but are now known, as Mr. Gould informs me, to be the male and female of the same species, and they differ slightly in the form of the beak. In another genus of humming-birds (Grypus), the beak of the male is serrated along the margin and hooked at the extremity, thus differing much from that of the female. In the Neomorpha of New Zealand, there is, as we have seen, a still wider difference in the form of the beak in relation to the manner of feeding of the two sexes. Something of the same kind has been observed with the goldfinch (Carduelis elegans), for I am assured by Mr. J. Jenner Weir that the bird-catchers can distinguish the males by their slightly longer beaks. The flocks of males are often found feeding on the seeds of the teazle (Dipsacus), which they can reach with their elongated beaks, whilst the females more commonly feed on the seeds of the betony or Scrophularia. With a slight difference of this kind as a foundation, we can see how the beaks of the two sexes might be made to differ greatly through natural selection. In some of the above cases, however, it is possible that the beaks of the males may have been first modified in relation to their contests with other males; and that this afterwards led to slightly changed habits of life.

Law of Battle.—Almost all male birds are extremely pugnacious, using their beaks, wings, and legs for fighting together. We see this every spring with our robins and sparrows. The smallest of all birds, namely the humming-bird, is one of the most quarrelsome....

[anne]

http://krugman.blogs.nytimes.com/2008/02/13/do-bad-wars-hurt-economic-confidence/

February 13, 2008

Do Bad Wars Hurt Economic Confidence?
By Paul Krugman

One favorite claim of Bush supporters, trying to explain why people are so negative on what they insist is a terrific economy, is that people are upset about Iraq and project their bad feelings onto the economy, too. That — along with the evergreen claim that the liberal media refuse to report how great things are — is what seems to be going on in this * example of whining.

But I don't believe it. Why? Because there's a useful control from American history. In the late 1960s America had a terrific, full-employment economy; it also had a deeply unpopular war, a crime wave, an explosion in the welfare rolls, and a general sense that the country was on the wrong track.

Was this bad feeling about politics and society reflected in low consumer confidence? No.

Bad war, good economy [Chart]

In the past, then, people were able to tell the difference between a bad war and a bad economy. And they know that right now we've got both.

* http://thinkprogress.org/2008/02/12/rove-economy/

[anne]

http://krugman.blogs.nytimes.com/2008/02/13/bubble-bubble/

February 13, 2008

Bubble? Bubble!
By Paul Krugman

A strange post * by Alex Tabarrok, who seems to think that because housing prices haven’t yet given up much of their gains, there wasn’t a bubble.

Um, two things.

First, housing prices are sticky — it’s not like the stock market, where things fall quickly. In past bubbles, home prices have declined gradually, over years, as sellers painfully gave up exaggerated notions about what they could get. Here’s a picture from Calculated Risk that shows the Los Angeles bubble from the 80s and its deflation. It took about 6 years for that bubble to fully deflate.

Bubble deflation [Picture]

Second, there are housing futures prices — and they say that people expect large price falls over the next few years, largely because there are huge unsold inventories.

So it’s very strange to assert now, of all times, that there was no bubble.

* http://www.marginalrevolution.com/marginalrevolution/2008/02/was-there-a-hou.html

[oops]

european election monitors announced they will not be allowed to do an adequate job of monitoring upcoming russian elections they are leaving.