links for 2008-08-19

• The Fed can learn from history’s blunders - FT
• Bank capital and write-downs: Zeno’s paradox and the subprime crisis - Vox EU
• Sizing Up the Universe as It Expands in Search of a Dark Force - NYTimes.com
• Peddling Anti-Obamaism - Economists for Obama
• For a New Economics - The Nation
• Global recession will drive down energy prices 30% - Roubini - Project Syndicate
• No Limit to Greenspan's Once-In-A-Century Events - Caroline Baum
• China’s demographic imbalance: Too many boys - Vox EU
• Price-fixing: it's baaaack (and perfectly legal, too) - Kathy G
• On Cornucopian Views of Oil Supplies - Tom Bozzo
• Obama Vows to Shake Off Republican Attacks - Washington Wire

Comments

[wjd123]

In "Profit-maximization as the sole goal of a corporation" Martin Wolf makes a 10 point comparison between the Anglo-American view of a company with the rest of the world's view.

Fourth, the idea that a company is an entity that can be freely bought and sold is culturally specific. It is the view, above all, of Anglo-Americans. It is not shared in most of the rest of the world. The reason for this divergence is that, for many cultures, a company is viewed as being an enduring social entity. I once read that, for many Japanese, one can no more sell a company over the heads of its workers than one can sell one’s grandmother. In this view, goods and services can be bought and sold. Companies, like countries (or, as we all now agree, people), must not be.

http://creativecapitalism.typepad.com/creative_capitalism/2008/08/profit-maximiza.html#more

[Lower Price Generally Leads to More Demand]

Caroline Baum...'`Prices should have fallen'' as companies are able to produce more with less, said Paul Kasriel, chief economist at the Northern Trust Corp. in Chicago. ``He fought it tooth and nail. The money had to go somewhere. It went into Nasdaq stocks.''

Yes, let prices fall when technology/productivity increases supply. Lower price leads to more demand on supply/demand curves (except for products with relatively inelastic demand like food). Don't redistribute the entire productivity gain to speculative borrowers by distributing new money through them.

[anne]

http://angryarab.blogspot.com/2008/08/what-is-big-deal-about-resignation-of.html

August 19, 2008

What is the big deal about the resignation of Musharraf? I mean, a pro-U.S., "democratically-elected" dictator will be replaced by a pro-U.S., "democratically-elected" dictator.

-- As'ad Abukhalil

[kthomas]

Caroline Baum is THE best. The woman has class when she beats this liar to the ground. Brava, amiga, brava!

[Steven]

Someone just pointed me to the following article about the 2nd quarter GDP, and I'm wondering if anyone here can say if this is believable or not.

http://www.gold-eagle.com/editorials_08/willie081408.html

[anne]

http://www.democracynow.org/2008/8/18/headlines#7

August 18, 2008

Fernando Lugo Inaugurated as Paraguay's New President
By Amy Goodman

In Latin America, a former priest known as the "Bishop of the Poor" has been sworn in as Paraguay's new president. Fernando Lugo was inaugurated on Friday, ending over sixty years of power by the conservative Colorado Party. Lugo pledged to give land to the landless and fight corruption.

Fernando Lugo: "Today we start a new chapter of Paraguayan history, whose authorities will be relentless against the thieves in their communities."

Venezuelan President Hugo Chavez and other Latin American leaders have expressed support for Paraguay's new president.

Hugo Chavez: "All the oil Paraguay needs in this century, Venezuela has, and Venezuela guarantees to supply Paraguay right to the last drop…for the development of Paraguay's people, industry and agriculture."

[Winslow R.]

"Banks’ losses and capital: The new version of the paradox of Achilles and the tortoise"

The article and many others like it disturb me.

The relationship between 'liquidity' and 'bank capital' needs to be explored.

Perhaps my framework has a huge hole (and I'd appreciate anyone showing me the errors of my ways), but as long as there is liquidity and a mechanism (say an unregulated bank controlled hedge fund) to turn that liquidity into bank capital, there will be no bank failures.

EXAMPLE
Bank borrows 10 billion at interbank rate of 2% and loans it to an unregulated hedge fund at 5%. The hedge funds buys 10 billion of bank capital at 7% (currently what BofA pays). Miraculous! With 10 billion in new capital, BofA can now make 100 billion in new loans. Only if the fed funds rate is inverted (like Aug 2007) or the hedge fund is regulated, does the system come tumbling down. Add another bank (or even two) to the mix and the game continues.

Indymac and Countrywide lacked these mechanisms and were subject to failure or to the whims of a bank that possessed the mechanism. Were they just stupid?

Turning liquidity into bank capital is as easy as spinning straw into gold as long as a bank has access to the mechanism of an unregulated hedge fund.

[anne]

Should the question be legitimate, when a website and post are at a glance designed for the illiterate, the post and site are not even worth the reading.

[anne]

Interestingly enough Hugo Chavez continues to gain philosophical and diplomatic supporters through Latin America, so that Argentina, Paraguay, Bolivia, Ecuador, Venezuela and Brazil are increasingly allied, with respect growing beyond. Choosing to denounce Chavez, for no possible diplomatic reason, then choosing to repeat the denouncing to show there was no mistake, shows terrible judgment by Barack Obama and advisers. As though the point of Obama is to dictate Latin American politics for our interests as in the past we took as our right.

[hari]

The Nation - *For A New Economics*

Economists For Obama - *Peddling Anti-Obama*

If you take this two together you get closer to my critique
of BOs nuances and lack of clarity in formulating economic policy - going forward at a time of depressed fundamentals.

The anti-Paul Krugman piece deserves some comment because it also illustrates the intellectual bankrupty of the economic elite. They simply can't see beyond their noses - for wahtever reason - personal attacks and innuendos are the stuff they are left with. What a shame for the elite with some intuition to offer solace for those looking for policy alternatives.

[anne]

Thanks to Hari:

http://econ4obama.blogspot.com/2008/08/peddling-anti-obamaism.html

August 18, 2008

Peddling Anti-Obamaism

We've largely ignored Paul Krugman's not so subtle and gratuitous anti-Obama jabs that seem to make their way into nearly every column. Speaking for myself, I've cut Krugman a lot of slack largely because he was one of the few voices of reason in the early Bush years. I've also chalked up some of his bizarre and counterproductive commentary to his admission that his current cynical take on Obama stems from some prior disappointment with the politics of idealism in 1968....

-- Lexrst

[anne]

Though it never occurs to me anymore to read Economists for Obama, this shows just how mean-spirited and false they have been and are. Krugman makes a point of criticizing policy and positions, all criticisms carefully documented. Here we have the reason for what is taken as bizarre and counterproductive commentary as a supposed disappointment of 1998, sort of like a lost puppy. "Here, Little Fritz, come to Daddy."

Me, I'm still waiting even for a decent approach to health care reform by Obama, let alone an approach to community rebuilding needs, grown ever more serious as housing difficulties have spread. Not to worry though, I have my tire gauge at the ready, to save us all from dread Venezuelan gasoline.

[anne]

There is always that vindictive attack for the slightest disagreement with policy proposals that are continually self-defeating of actually defined enough to be coherent. Attack on the basis that any and all criticism is already attack, so there is never an answer to the slightest criticism though positions are readily changed the moment polling inadvertently shows they need changing.

Also, when broadly called to account blame the "cynicism" of foolish people who can be belittled when spoken about.

[anne]

http://www.voxeu.org/index.php?q=node/1553

"A long-term study of Vietnam veterans in 1998, cited in a recent New Republic article, provides some clue as to why. The subjects' testosterone levels, which are linked to aggression and violence, dropped when they married and increased when they divorced. Men who remain single maintain high levels of testosterone, which may make them particularly aggressive."

This is what passes for research at MIT, evidently. Probably accounts for all those Chinese gold medals, but what about the Jamaicans?

[anne]

http://www.voxeu.org/index.php?q=node/1553

"Men who remain single maintain high levels of testosterone, which may make them particularly aggressive."

And, you wonder why I carry my official Red Sox bat everywhere I go. What we ought to do is sort of stamp them of the forehead, single guys I mean. Warning, especially when divorced.

[kthomas]

"And, you wonder why I carry my official Red Sox bat everywhere I go. What we ought to do is sort of stamp them of the forehead, single guys I mean. Warning, especially when divorced."

Now now...calm down.

[anne]

http://www.nytimes.com/2008/08/20/world/europe/20georgia.html?hp=&pagewanted=print

August 20, 2008

Russians Detain Georgian Soldiers at Port
By MICHAEL SCHWIRTZ and C.J. CHIVERS

The detention of 21 soldiers in the Black Sea port of Poti was further evidence of continued Russian military activity in Georgia.

[But, we wonder, why were the 21 soldiers detained?]

A senior Russian military official, Col. Gen. Anatoly Nogovitsyn, said the Georgian soldiers were disarmed at a checkpoint on Monday, when they were carrying automatic rifles, submachine guns and grenade launchers, the Interfax news agency reported.

[brian holt]

regarding republican attacks, here's a site might be worth a look:

http://www.vietnamveteransagainstjohnmccain.com/

Ah, the joy of civility. Thankfully it's not found in national politics.

[anne]

http://www.nytimes.com/2008/08/20/world/europe/20georgia.html?hp=&pagewanted=print

The Georgian soldiers were taken by the Russians to a military base at Senaki, along with five armored American Humvees that were due to be shipped back to the United States.

Shota Utiashvili, a spokesman for Georgia’s Interior Ministry, said the American Humvees were used in joint American-Georgian military exercises this summer....

Good grief, them there Russians are even stealing our Humvees (due to be shipped back to the United States, soon, very soon).

[piglet]

The Magic Pudding
http://www.monbiot.com/archives/2008/08/19/the-magic-pudding/

Posted August 19, 2008

Why is the US government still pouring billions into missile defence?

By George Monbiot. Published in the Guardian 18th August 2008

... So why commit endless billions to a programme that is bound to fail? I’ll give you a clue: the answer is in the question. The programme persists because it doesn’t work.

US politics, because of the failure by both Republicans and Democrats to deal with the problems of campaign finance, is rotten from head to toe. But under Bush the corruption has acquired Nigerian qualities. Federal government is a vast corporate welfare programme, rewarding the industries which give millions in political donations with contracts worth billions. Missile defence is the biggest pork barrel of all, the magic pudding which won’t run out however much you eat. The funds channelled to defence, aerospace and other manufacturing and service companies will never run dry because the system will never work.

To keep the pudding flowing, the administration must exaggerate the threats from nations which have no means of nuking it and ignore the likely responses of those which do. Russia is not without its own corrupting influences. You could see the grim delight of the Russian generals and defence officials last week, who have found in this new deployment an excuse to enhance their power and demand bigger budgets. Poor old Poland, like the Czech Republic and the UK, gets strong-armed into becoming America’s groundbait.

If we seek to understand US foreign policy in terms of a rational engagement with international problems, or even as an effective means of projecting power, we are looking in the wrong place. The government’s interests have always been provincial. It seeks to appease lobbyists, shift public opinion at key stages of the political cycle, accommodate crazy Christian fantasies and pander to television companies run by eccentric billionaires. The US does not really have a foreign policy. It has a series of domestic policies which it projects beyond its borders. That they threaten the world with 57 varieties of destruction is of no concern to the current administration. The only question of interest is who gets paid and what the political kickbacks will be.

[Patricia Shannon]

Anne, you must have overlooked the link to the article about China's demographic imbalance. I expected to see you comment that it's no problem, since their are no differences between men and women.

[Patricia Shannon]

My mistake, Anne, I read the rest of the article, and saw that your hysteria about the effects of varying levels of testosterone were a response to the China demographic article.
Do you really believe what you write, or are you trying to give us a laugh during this time of many causes for worry? You sound like an only child, w/o children, who teaches in a women's college.