Bearded old men running scared will lose, though it may take a while 

Willem Buiter

Whenever the cumulative effect of the daily observation, looking out of my window or into the mirror, of human inequity and wretchedness brings me to the point that I am convinced the human race is an evolutionary dead end, something incredible happens to restore my faith that a hunger for freedom and an unquenchable thirst for justice and fairness are part of our genetic code.  Crowds often become mobs and mobs are mostly ugly and destructive.  The sight of large numbers of unarmed people, most of them young, facing heavily armed police, regular army, militia or other armed thugs is awe-inspiring.

Hungary 1956

My first political memory dates to 1956.  As a seven year old, I was glued to the radio, listening with my parents and older sister to radio Budapest broadcasting appeals for help in every language under the sun "... help ons,    help ons...".  Then suddenly a loud noise, as of doors being broken down, and then silence.  The tanks won that day.  Imre Nagy was murdered by the Soviet Regime.  But the spirit of 1956 lived on and burst through in 1968.

Czechoslovakia 1968

....

Watching the full sadness of what is going on in the streets of Iran, I cannot but be an optimist.

 

Apparently I am the same age as Buiter so this is a chronicle of events I too have witnessed from afar.  I found it really quite moving.  Who knew a FT economist could be so inspiring.

Please read the whole thing.

Whoever in the State Department that is advising Hillary and Nancy on how to cover their heads on visits to Muslim countries should be fired. It is not like we do not have hats in our own style that would be not only more flattering but more appropriate. Both Queen Elizabeth and Queen Margrethe have visited Saudi Arabia wearing their usual hat styles even though their roles as heads of state are ceremonial. Nancy and Hillary have more real official power. Their dress, including head coverings, should reflect their own culture -- the one in which they were able to rise to power not one that restrict womens' rights as well as dress. /Vent

Excerpted from report by Gillian Tett of The Financial Times:

As the financial crisis virus has swept around the globe in recent months, Kazakhstan's banking sector has been engulfed in turmoil. This is not just creating a headache for the Kazakh government and Western creditors, but also highlighting issues about the credit derivatives market that extend well beyond those far-flung steppes.

Take the case of Morgan Stanley's dealings with BTA, Kazakhstan's largest bank. A few years ago, BTA - like many of its Eastern brethren - was an up-and-coming darling of the capital markets world, with investment bankers furiously competing to float its bonds, provide loans, and much else.

But earlier this year, when funding dried up for Kazakh banks, BTA fell under the control of the government. Initially BTA wanted to keep servicing its loans, and its creditors, such as Morgan Stanley, appeared happy to play along.

But last week Morgan Stanley and another bank suddenly demanded repayment. BTA was unable to comply, and thus tipped into partial default. That sparked fury among some other creditors, and shocked some Kazakhs, who wondered why Morgan Stanley would have taken an action that seemed likely to create losses.

One clue to the US bank's motives, though, can be seen on the official website of the International Swaps and Derivatives Association. One page reveals that just after calling in the loan, Morgan Stanley also asked ISDA to start formal proceedings to settle credit default swaps contracts written on BTA.

For it transpires that while the US bank has a loan to BTA it also has a big CDS position on BTA, that pays out if - and only if - the Kazakh bank goes into default. Indeed, some of Morgan Stanley's rivals suspect that notwithstanding its loan, Morgan Stanley is actually net short the Kazakh bank.

As a result speculation is rife that Morgan might have deliberately provoked the default of BTA to profit on its CDS, since a default makes the US bank a net winner, not a loser as logic might suggest.

Morgan Stanley, for its part, refuses to comment on this speculation (although its officials note that the bank does not generally take active "short" positions in its clients.) And I personally have no way of knowing whether Morgan is short or long, since Morgan refuses to disclose details of its CDS holding.

What is crystal clear is that somebody has been placing big bets on whether or not the banking equivalent of Borat will blow up.

 

There is more so please read the whole report.  Also, Willem Buiter comments on some wider implications  of the "nasty case of moral hazard" created when CDSs can be written without any insurable interest and provides a bit of information on the attempts of foreign  creditors to get the Kazakh  government to guarantee their unsecured loans with oil and gas revenues.

Open questions are who is on the hook for those CDS that Morgan wants settled and whether or not BAT is free of the defaulted debt or just has a new creditor -- maybe US through AIG.  What are the foreign policy implications of that?

 

 

Bloomberg is not happy.  They've added up the numbers, really big numbers, and want to know what the US is getting in return.  The Treasury and the Fed have not been forthcoming, Bernanke thinks it would be 'counterproductive' so Bloomberg has filed a Freedom of Information suit against the Fed to find out who is borrowing and what collateral they are offering. 

Nov. 24 (Bloomberg) -- The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.

[...]

Bloomberg has requested details of Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit against the central bank Nov. 7 seeking to force disclosure of borrower banks and their collateral.

Collateral is an asset pledged to a lender in the event a loan payment isn't made.

"Some have asked us to reveal the names of the banks that are borrowing, how much they are borrowing, what collateral they are posting," Bernanke said Nov. 18 to the House Financial Services Committee. "We think that's counterproductive."

The Fed should account for the collateral it takes in exchange for loans to banks, said Paul Kasriel, chief economist at Chicago-based Northern Trust Co. and a former research economist at the Federal Reserve Bank of Chicago.

"There is a lack of transparency here and, given that the Fed is taking on a huge amount of credit risk now, it would seem to me as a taxpayer there should be more transparency," Kasriel said.

Interesting times when even the business press cannot figure out what is going on in the financial industry.  The situation is not going to improve until confidence is restored and that is not going to happen while there is so much uncertainty.  HIding unpleasant facts only increases it.  Instead of the feared run on a few banks and brokers we now worry about all of them.  Heck of a job, Hank.

Read more »

My favorite so far:  The Huntsville Times

What about you?  What's your favorite so far?

There have been some very interesting book club recommendations and discussions that have been hosted here at TPMCafe.  Unfortunately I have not been able to follow all of them in real time and find it extremely difficult, really practically impossible, to go back post-by-post through the archives to find where one discussion begins and another ends. 

None of the archived posts include the book title or subject of discussion in any header so one is forced to read into the posts a good deal in reverse order just to figure out where the conversation began. 

It is even worse trying to sort out an old discussion found through a search.  For example, this morning I looked for an old discussion on heterodox economics, a very lively discussion among many, many well-known economics bloggers.  The hits were not even in date/time order.  They did not include book, author, subject or even the poster's name.  An expanded search that included the name of a specific poster produced a longer list of posts that were less specific to the discussion I was seeking.  What a pain.

An indexed archive would be beneficial for authors as well as late readers..  Authors would benefit because their books would continue to be promoted beyond their alloted week and late readers of the discussion could follow the conversation more easily in sequence and may end up buying an interesting book. 

It should not be that hard to create an indexed archive, just initially time consuming.   For an example, see how Cato Unbound links and tracks their current and archived discussions on their right sidebar.  And for something really useful, see how Cato creates a separate web page of links for each archived discussion.

Whether this is something that TPM thinks would be worthwhile will depend not just on the merit of the idea itself but on its usefulness to its general audience.  What do you all think? 

The Palin monologue was a pretty good routine. . . lots of snarky one liners competently delivered to a friendly crowd.  Did McCain borrow The Tonight Show writers?  Gov Palin has a promising future -- in standup comedy (da-da-drum).

But wait, now that I think about it Republican VPs and late show hosts have a common job requirement -- a willingness and abiility to  kiss up  and kick down.   Maybe NBC should think about replacing Leno with Palin instead of O'Brien.

Yesterday Georgia's Young Republicans passed a formal resolution denouncing leading right-wing talking heads for spreading disunity in the ranks.  Maybe some sanity is returning to the country.  One can only hop.

Therefore, be it resolved, this 5th Day of February, 2008, that the Georgia Federation of Young Republican Clubs strongly condemns and denounces the actions and speech over the past several weeks by Rush Limbaugh, Sean Hannity, Ann Coulter, Laura Ingraham, and others for breeding contempt, disunity and hatred among the Republican Party in order to bolster their own careers; and

Therefore, be it FURTHER resolved, that the Georgia Federation of Young Republican Clubs praises talk show hosts like Neal Boortz, who, despite making their preference known, have chosen not to make it their mission to tear down other GOP candidates.

An open thread to which I invite you to share what you are reading, thinking, viewing but don't feel like writing a dissertation about.

 

 

WTF?  is an uncharacteristically shrill post by Josh over at TPM.

WTF, indeed.

If Huckabee communicating in the traditional idioms and current themes from his culture is crypto-evangelical code, is Yiddish cryto-Judaic code?  Meshuge.

And enough already with the deliberately derogatory dog-whistle analogy.  How would you feel if the expression "next year in Jerusalem" was described as a dog whistle for Zionists?  It was, wasn't it, even if it is so much more as well.

So you don't like Huckabee.  Neither do I.  I just think it would be more useful to find oppositional arguments in the idioms of his own culture rather than generally insulting it.  Jesus' anti-Pharasaic teachings come to mind, i.e. public versus private piety.

 

There is a growing consensus that our healthcare system is broken.  That is wrong.  There is no system.  System implies some sort of order.  What we have is healthcare chaos.  Mandates will expand the chaos and do nothing to improve healthcare.  But then they aren’t supposed to, are they.  Mandates are about financing - not care.

Yes, I know, single-payer is about financing as well but at least it could begin to bring order out of the current chaos.  Mandates will not, even with community rating.  By the way, how will those be calculated?  Will premiums be lower or higher in an upscale community where people are healthier but also may be more litigious and are definitely able to afford higher premiums?  What factors will actuaries use to rate communities?

Mandates will be a boon to insurers (including AARP) and Wall Street (SIVs?) and Main Street (Chamber of Commerce).  They will also benefit the 1/6 of us not currently insured and maybe some who are savvy investors. But what about the rest of us?  Healthcare providers will be even more overburdened.  Employers as well as healthcare consumers will face even more complexity and chaos.  Employment and healthcare will still be linked.

If mandates are so bad, why are the leading Democratic candidates and progressive pundits Ezra Klein and Paul Krugman advocating for them?  For the simple reason that they are considered “doable” politically.  Some advocates also seem think mandates are a first step on the way to single-payer.  I can imagine the insurance industry lobby rolling on the floor laughing.   Mandates as a way to single-payer are like the proverbial knife in a gun fight – worse than useless.

One of the biggest obstacles to a single-payer system is the trillion or so dollars it could pull out of the financial markets and give to Congress to putz around with “earmark”.  The transfer of that much money out of the control of the people who now have it is bound to produce the most effective resistance.  It is why Rube Goldberg solutions like mandates are considered “doable”.  The money stays where it is and as a bonus generates a windfall to the insurance industry like the one they and Big Pharma got with the Medicare drug plan.

Why are we beginning negotiations by offering to accept the least we can get?  There has to be a better way to buy off the insurance and investment industries.

Why not just pay insurers to manage the investment of single-payer premiums?   They already have their own investment divisions.  How much each insurance company manages could be divvied up based on their market share of supplemental health insurance sold.  They get to stay in business and have an incentive to keep premiums competitively reasonable.  DJIA doesn’t drop a few thousand points.  Congress has to segregate the funds.

From the insurers perspective this would not be as profitable as mandates.  Maybe it is even less profitable than what they have now; however, they are very near to pricing themselves out of business so why wouldn’t they consider the offer. 

Like canaries in a coalmine, the poor and near poor suffer the worst effects of an ailing economy. From Associated Press last night:

Living paycheck to paycheck gets harder - Yahoo! News

“Across the nation, Americans are increasingly unable to stretch their dollars to the next payday as they juggle higher rent, food and energy bills. It's starting to affect middle-income working families as well as the poor, and has reached the point of affecting day-to-day calculations of merchants like Wal-Mart Stores Inc., 7-Eleven Inc. and Family Dollar Stores Inc.

“Food pantries, which distribute foodstuffs to the needy, are reporting severe shortages and reduced government funding at the very time that they are seeing a surge of new people seeking their help.”

[…]

“Retailers started noticing the strain in late spring and early summer as they were monitoring the spending around the paycheck cycle.

Wal-Mart and Family Dollar key on the first week of the month, when government checks like Social Security and public assistance generally hit consumers' mailboxes.

7-Eleven, whose customers are more diverse, looks at paycheck cycles in specific markets dominated by a major employer, such as General Motors in Detroit, to discern trends in shopping. “

How bad is it? Here are a few factoids from the article.

“Wal-Mart, the world's largest retailer, said the imbalance in spending before and after payday in July was the biggest it has ever seen, though the drop-off wasn't as steep in August.”

“From Family Dollar to Wal-Mart, merchants have adjusted their product mix and pricing….”

“The BedStuy Campaign against Hunger, a church-affiliated food pantry in Brooklyn scrambled to feed 5,000 new families over the past 12 months, up almost 70 percent from 3,000 the year before” and “has seen more clients in higher-paying jobs — the $35,000 range — line up for food.”

“The Regional Food Bank of Northeastern New York, which covers 23 counties in New York State, cited a 30 percent rise in visitors in the first nine months of this year, compared with 2006.

“Maureen Schnellmann, senior director of food and nutrition programs at the American Red Cross Food Pantry in Boston, reported a 30 percent increase from January through August over last year. “

“Food costs have increased 4.5 percent over the past 12 months, partly because of higher fuel costs. Egg prices were 44 percent higher, while milk was up 21.3 percent over the past 12 months to nearly $4 a gallon, according to the Bureau of Labor Statistics.”

I wish there were a way for the free-marketeers and Chicago School economists to find out how disastrous their policies are without the least among us being the first to suffer.

Expressed concerns over the future of Social Security by young people(1) and conservative concerns of being overwhelmed by immigrants, legal or otherwise(2) had me pondering what the future will be like for my grandchildren so I went looking for demographics.

The disappearance of one particular demographic wormed its way into my head and distracted me from my original concern.  I became alarmed.  I searched but could not find anyone commenting on its grave implications.  Middle children, once a majority of the population, are disappearing.  The national fertility rate has been between 2 and 2.1 children for the past quarter century.(3)

What will a world of just first-borns, babies and only-childs be like.  The horror.(4)

 

---------

1.  Matt Bai's recent conversation here.

2.  American Conservative Magazine

3.  Hoover Institute - "Since the 1970s the rate has been under two children for the majority non-Hispanic white population. The national fertility total currently barely reaches its replacement level; fluctuated between 2.0 and 2.1 children per woman over the past quarter century; by 2000 non-Hispanic white women were averaging just 1.8 children. Among all groups it was only the Hispanic women—who are at a total fertility rate of 2.5 children—who are above the replacement level. Even among Hispanic women, it is primarily Mexican-American women, the largest single group, which maintained very high fertility rates. Cuban-American women were close to the non-Hispanic whites, and the Puerto Rican women were closer to the fertility patterns of non-Hispanic black women."

4. Tongue firmly in cheek but yes, I am a middle-child and it does bother me a little that our perspective may disappear for at least the near future.

The revelations of extreme animal cruelty in the recent Michael Vick case have provoked quite a discussion among some young, economic libertarians.  They are trying to square their perceptions of inherent rights for humans versus any that might be due to other animals.  Apparently, it is enough of a conundrum to cause my favorite young, libertarian blogger to retreat from the blogosphere to check his premises.  Since checking one’s premises periodically is an excellent practice, I have a tiny hope that something good may actually result from the despicable Vick story.  That will, of course, depend on what, if any, new perspectives emerge.  

Matt Yglesias joined the conversation and really nailed the essential issue.  It is not really a question of animal rights or even cruelty to animals but cruelty.  Whether pulling the wings off flies, putting firecrackers in a frog, hanging and killing dogs with a nail gun or waterboarding other human beings, cruelty is not a trait we admire or respect – at least in most of our culture.  We are uncomfortable with people who reveal a cruel aspect to their personality -- with good reason.   Matt points out that this is unlikely to be an acceptable argument for most libertarians.  He is probably right, at least about economic libertarians.  After all, there is a certain degree of cruelty in the extreme laissez-faire ideology. 

Still, I am an optimist.  I believe many young libertarians will outgrow the crueler aspects of the ideology as life forces them periodically to think in new categories.   This discussion definitely seems to be one of those times.  I hope they make the best of it.

I enjoyed Joseph Heller's novel so much when I first read it that I read it again.  Maybe I should try to find my book so I can reread it because I'm beginning to feel like we are living it. 

Doesn't the whole CPA under Bremer seem like a Milo Minderbinder operation?  Now at least one agency, the NHTSA, the federal agecny in charge of auto safety, is apparently being run by Major Major Major Major.   As summarized by Kevin Drum, the agency's new press policy:

(1) Agency experts are no longer allowed to talk to reporters on the record. (2) The communications office (!) is not allowed to talk to reporters on the record. (3) The agency's administrator is not available to talk on the record about the policy barring staffers from talking on the record. (4) Her chief of staff explained to a reporter that "we were finding a lot of stuff did not need to be on the record," but then insisted that this statement itself was off the record.

Yes, I definitely have to reread Catch-22 to remind myself which other characters may be lurking around.