"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister
"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."
- Daenerys Targaryen
"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"
- Tyrion Lannister
"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."
- Jorah Mormont
"These bad people are what I'm good at. Out talking them. Out thinking them."
- Tyrion Lannister
"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."
- Michael Barone
"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker
Saturday, January 29, 2011
Now, what about food prices?
Not much evidence of hoarding, as far as I can tell. So this is straightforward supply and demand. Demand may be up to some extent because of that emerging-market boom. But if you look at the FAO reports it becomes clear that the key thing for cereals prices is that production is down in advanced countries, largely owing to terrible weather. And yes, it’s likely that climate change has played a role.
Oh, and what about Ben Bernanke? Well, to the extent that emerging markets are insisting on a fixed exchange rate against the dollar in the face of obvious overvaluation, that contributes to the boom and hence to demand. But I don’t think it’s reasonable to demand that the Fed stop fighting US unemployment in order to keep Chinese currency manipulation from leading to cotton hoarding by Chinese farmers.
So the story on commodity prices is somewhat different from the story during the last spike. As always, though, it’s crucial to keep your eye on the bale -- that is, whatever your logic, it must translate into actions that affect the physical supply and demand for raw materials.
Friday, January 28, 2011
As I watch the rioting in Cairo on CNN I think about the so-called "liberal left."
I've been following foreign affairs since the Cold War ended and have been disappointed with the so-called "liberal-left" on the subject. I agree on Vietnam, but most were uninspiring about Bosnia or Rwanda. They were good on South Africa but not much else. During the Naughties they mocked color revolutions. On Egypt they are silent.
David Weigel writes:
There's a lot of focus right now on what members of the administration have said publicly about the situation in Egypt; if you're a conservative, Joe Biden saying that Hosni Mubarak is no dictator, or Robert Gibbs meekly saying the country should turn the Internet back on, tell you everything you need to know about the weakness of the Obama administration.
It's rather worse than that. The Obama administration is flat-footed here, sure, but it's only acting out the role we've been playing with Egypt for decades. It continued sending $800 million in direct economic aid and $1.3 billion in military aid -- that's the military on your TV now, trying to break up riots. Mubarak has been an incredibly resilient and effective strongman who has kept us from worrying about a fundamentalist takeover of the country. It's worth reading the WikiLeaked cable our ambassador wrote in 2009:
He is a tried and true realist, innately cautious and conservative, and has little time for idealistic goals. Mubarak viewed President Bush (43) as naive, controlled by subordinates, and totally unprepared for dealing with post-Saddam Iraq, especially the rise of Iran,s regional influence.
On several occasions Mubarak has lamented the U.S. invasion of Iraq and the downfall of Saddam. He routinely notes that Egypt did not like Saddam and does not mourn him, but at least he held the country together and countered Iran. Mubarak continues to state that in his view Iraq needs a "tough, strong military officer who is fair" as leader. This telling observation, we believe, describes Mubarak's own view of himself as someone who is tough but fair, who ensures the basic needs of his people.The Obama administration's response to this has not been uniquely distaff. It's been traditional. It's worth reading Shadi Hamid on this.
President Obama has also weighed in, but more by what he chose not to say. On Jan. 18, he phoned his Egyptian counterpart, President Hosni Mubarak. They discussed a number of issues, including Iran and the Arab-Israeli conflict. They did not, however, discuss the need for political reform in Egypt.
The United States has backed its rhetoric, or lack of it, with action. On Jan. 12, more than three weeks into the Tunisia uprising -- and after protests had spread across the region -- the State Department granted $100 million in new funding to the Jordanian government to boost employment and strengthen the health and education sectors. Presumably, this will help the Kingdom diffuse popular anger over worsening economic conditions.
These actions have a clear intent -- to protect the stability of a state perceived as strategically vital to US interests.
Behind closed doors, Ben S. Bernanke, the Federal Reserve chairman, called it "the worst financial crisis in global history, including the Great Depression."
He said that 12 of the country’s 13 most important financial institutions, including Goldman Sachs, had been on the verge of collapse "within a week or two." (The apparent exception: JPMorgan Chase.)
Wednesday, January 26, 2011
While the panel, the Financial Crisis Inquiry Commission, accuses several financial institutions of greed, ineptitude or both, some of its gravest conclusions concern government failings, with embarrassing implications for both parties. But the panel was itself divided along partisan lines, which could blunt the impact of its findings.
The report does knock down -- at least partly -- several early theories for the financial crisis. It says the low interest rates brought about by the Fed after the 2001 recession; Fannie Mae and Freddie Mac, the mortgage finance giants; and the "aggressive homeownership goals" set by the government as part of a "philosophy of opportunity" were not major culprits.Britain's economy stalls under austerity measures
Tuesday, January 25, 2011
It’s kind of shocking if you think about it. Here we have a huge, hard-won intellectual achievement, one that accounts very well for the world we actually see, and yet it’s being thrown away because it doesn’t go along with ideological preconceptions. Once that sort of thing starts, where does it stop? The next thing you know, the theory of evolution will get the same treatment. Oh, wait.
Seriously, though, this is truly sad -- and dangerous. Demand-side understanding, in my view, played a big role in helping us avoid a full replay of the Great Depression; if enough people had shared that understanding, we might have avoided even the minor-league Depression we’re going through. But willful ignorance is on the march -- and the odds are that we’ll handle the next crisis very badly.I doubt there will be bailouts next time, a scary thought. Anyway, Krugman's post reminded me of "Agora."
Monday, January 24, 2011
In the Clinton years, Robert Rubin had a policy of pushing up the value of the dollar. He put muscle behind this effort through the U.S. control of the IMF at the time of the East Asian financial crisis. The conditions that the IMF imposed were so onerous that developing countries decided that they needed to accumulate massive amounts of reserves in order to avoid being put in a similar situation. This meant accumulating large amounts of dollars. They did this by keeping down the value of their currencies against the dollar (i.e. raising the value of the dollar).
It is very misleading to assert that the value of the dollar is outside of the government's control. President Obama, like his predecessors, has allowed the dollar to remain over-valued. An over-valued dollar effectively subsidizes imports and imposes a tariff on exports. There is nothing that President Obama's new competitiveness panel can realistically hope to do that would come close to offsetting the competitive disadvantage created by an over-valued dollar.Global savings glut Wikipedia entry
Decent column by Robert J. Samuelson (yes him) but it fails to mention the East Asian financial crisis.
"The Global Saving Glut and the U.S. Current Account Deficit" given March 10, 2005 by Bernanke
"Revenge of the Glut" by Krugman
Sunday, January 23, 2011
More than the first "True Grit," the new one emphasizes Mattie’s precocious, almost obsessive preoccupation with the law. She is forever citing law-book principles, invoking lawyers and affidavits, and threatening to go to court. "You must pay for everything in this world one way or another," says Mattie. "There is nothing free except the grace of God."
That kind of legal and moral cost-accounting seems as distant as a tintype now. The new "True Grit" lands in an America that’s still not recovered from a crash where many of the reckless perpetrators of economic mayhem deflected any accountability and merely moved on to the next bubble, gamble or ethically dubious backroom deal. When Americans think of the law these days, they often think of a system that can easily be gamed by the rich and the powerful, starting with those who pillaged Lehman Brothers, A.I.G. and Citigroup and left taxpayers, shareholders and pensioners in the dust. A virtuous soul like Mattie would be crushed in a contemporary gold rush even if (or especially if) she fought back with the kind of civil action so prized by the 19th-century Mattie.
Talk about Two Americas. Look at "The Social Network" again after seeing "True Grit,"and you’ll see two different civilizations, as far removed from each other in ethos as Silicon Valley and Monument Valley. While "Social Network" fictionalizes Mark Zuckerberg, it mines the truth of an era -- from the ability of the powerful and privileged to manipulate the system to the collapse of loyalty as a prized American virtue at the top of that economic pyramid.
In contrast to Mattie’s dictum, no one has to pay for any transgression in the world it depicts. Zuckerberg’s antagonists, Harvard classmates who accuse him of intellectual theft, and his allies, exemplified by a predatory venture capitalist, sometimes seem more entitled and ruthless than he is.