narcissism run amok

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Life gets stranger everyday!

Sino-American tensions .... continued

Commentators are all over the place ever since Tim Geithner referred to China's currency manipulation. Charles Wallace has an interesting point, which I have not seen elsewhere:

An anomaly of Geithner's remarks to the Senate finance committee last week was his comments on the dollar. After accusing China of manipulating its currency, he declared that "a strong dollar is in America's best interests" (the same thing that Paulson used to say repeatedly). The Chinese must be scratching their heads over that comment: Do the Americans want a strong dollar or a strong yuan? As the new overseer of U.S. currency policy, Timothy Geithner is not making much sense.

Bridges to nowhere?

Eliot Spitzer, who could have been a presidential contender if only ...., makes a good case for why building and reparing roads is not the way to crawl out of this nasty recession.  He writes:

the right infrastructure could provide the basis for a redirected economy. Long term, the most important investments are not on the easy list of "off the shelf" projects. Yes, good roads and bridges are important. But investing in the necessary public goods to support a post-hydrocarbon, information-based economy is a much better choice than using the stimulus to patch up the old economy.

ps: speaking of Spitzer's sexcapades, read this horrible tragedy involving a man, his penis, and his jealous wife.  He is dead, their house has been burned down--it all started from the wife setting fire to the husband's penis when he was asleep.  If only we men learnt how to keep it inside our pants!  Spitzer ought to thank his wife for sparing his life! 

Reviewing 2008

Ethanol producer files for bankruptcy

If Iowa were not the first state in the presidential primary process, then there is a very strong possibility that corn-based ethanol would be a non-story here in the US. If this Wikipedia entry is correct, then we have the Democrats to thank for making Iowa so doggone important at the expense of pretty much every other state in the union!

Iowa is the largest grower of corn; the Iowa Corn Promotion Board points out that "Iowa has produced the largest corn crop of any state for each of the past 14 years. In an average year, Iowa produces more corn than most whole countries." Funny how there is no mention of government subsidies among the reasons for one of the FAQ: Why is corn Iowa's leading crop?

So, it is a no-brainer that the largest corn producing state, which is also the first in the presidential primary process, will then have politicians lining up one after another to sing the virtues of corn-based ethanol. Even a couple of years ago, Slate, one of my favorite go-to-sites, had a fantastic piece on the godawful ethanol subsidies. Slate is no right-wing nut case site, and in fact its people consistently are pro-Democratic presidential candidates. (This year, almost everybody there, but two, is pro-Obama.) BTW, right-wing nutcases also hate the subsidies, and Cato is one such example.

Well, one of the ethanol producers is bankrupt, despite all the subsidies! The NY Times reports that:

The VeraSun Energy Corporation, which accounts for roughly 7 percent of ethanol production capacity in the United States, announced that it had filed for Chapter 11 bankruptcy protection late Friday.

Want more on how corn and ethanol feature(d) in this 2008 elections? Click here for details.

More Starbucks = more financial crisis. Really?

I am no fan of Starbucks. The last time I went on my own to buy a cup of coffee--whatever they call them sizes--was .... I don't remember when! I blogged earlier about the many, many takes on Starbucks. Frankly, I don't care a damn about Starbucks--it is like the adult stores by the freeways. Hey, I don't care for them, and if there are those who want to get stuff there, well, more power to them as long as nobody hassles me.

But, I do like intelligent and innovative takes on Starbucks. Which is why I liked this piece where the idea is simple: "The higher the concentration of expensive, nautically themed, faux-Italian-branded Frappuccino joints in a country's financial capital, the more likely the country is to have suffered catastrophic financial losses."
Pretty simple the idea, eh! I wish I had taken the trouble to correlate the location of Starbucks outlets with the real estate data and banks .... Some of these commentators are smart--unlike the motor mouths on talk radio and TV who spin the same ideological crap over and over and over .... Anyway, the theory is:

Having a significant Starbucks presence is a pretty significant indicator of the degree of connectedness to the form of highly caffeinated, free-spending capitalism that got us into this mess. It's also a sign of a culture's willingness to abandon traditional norms and ways of doing business (virtually all the countries in which Starbucks has established beachheads have their own venerable coffee-house traditions) in favor of fast-moving American ones. The fact that the company or its local licensee felt there was room for dozens of outlets where consumers would pony up lots of euros, liras, and rials for expensive drinks is also a pretty good indicator that excessive financial
optimism had entered the bloodstream.

Oil and other commodities becoming cheaper .... is bad?

More on whether falling oil prices are good or bad .... And grains and metals and a whole bunch of commodities are also experiencing significant price decreases ..... I suppose critical thinking means that we never take anything for what it seems like on the outside .... Ray Fisman explains:

How are commodities prices connected to civil strife? Poor farmers impoverished by lower crop prices may be eager recruits for rebel groups who can promise a better livelihood from stolen loot than what the soil can provide (not to mention protection from pillaging, since unaligned farmers may be easy prey for either rebels or government troops). A cheaper cup of joe may thus translate into conflict in the coffee-growing world. ....
Then again, lower prices may also mean less conflict. One of the great ironies of modern economic history is that natural resources can be less an economic blessing than a curse (the so-called natural resource curse). One reason for this apparent paradox is that resource-abundant countries suffer through frequent civil conflicts as competing factions struggle for control over oil wells, diamond mines, and other sources of natural wealth (and use the resulting revenues to fuel further conflict). If
resource prices fall, then there's less wealth to bicker over, less reason to fight, and less cash on hand to purchase further armaments.
Given these two opposing forces, when should we expect price drops to trigger more violence, and when should we expect less? [ Oeindrila Dube and Juan Vargas] argue that the critical difference is the "labor intensity" of extracting a resource—that is, the value of workers relative to the cost of buildings and machines. For example, a farmer tending his land may need little more than a strong back and a shovel, but an oil rig may cost billions and a pipeline billions more. Subsistence farming is labor-intensive; oil drilling is capital-intensive.

Ideologues neither die nor fade away

General Douglas McArthur famously uttered that "old soldiers never die, they just fade away." That may be true of old soldiers. But, old ideas do not seem to die nor do they fade away. They just hang around and cause additional misery for all of us. When the USSR was going strong, the defenders in the free world argued that the USSR was not representing the true ideals of socialism and communism. And now, we hear from the far right about how all this is not the fault of a free market--because, after all, what we have now is not a free market to begin with!

Of course, we do not have a free market--not when government accounts for almost a fifth of the economy. And not when we have significant government involvement in economic decision making.

But, come on, can't we at least accept that the market is imperfect? Oh yeah, even if some of them will say that in the softest of whispers, they immediately come back with a much louder, the most imperfect market will be more perfect than the most perfect government. Which, again, is ideological speak.

Jacob Weisberg writes that this financial crisis is the end of libertarianism. I say he is way too optimistic. But, he has some good points:

the libertarian apologetics fall wildly short of providing any convincing explanation for what went wrong. The argument as a whole is reminiscent of wearying dorm-room debates that took place circa 1989 about whether the fall of the Soviet bloc demonstrated the failure of communism. Academic Marxists were never going to be convinced that anything that happened in the real world could invalidate their belief system. Utopians of the right, libertarians are just as convinced that their ideas have yet to be tried, and that they would work beautifully if we could only just have a do-over of human history. Like all true ideologues, they find a way to interpret mounting evidence of error as proof that they were right all along. .....

Like other ideologues, libertarians react to the world's failing to conform to their model by asking where the world went wrong. Their heroic view of capitalism makes it difficult for them to accept that markets can be irrational, misunderstand risk, and misallocate resources or that financial systems without vigorous government oversight and the capacity for pragmatic intervention constitute a recipe for disaster.

Abortion, presidential candidates, and Goldwater

I am immensely glad that Michael Kinsley and Bill Gates launched Slate.com--because, at very few other outlets can I ever run across something as interesting as this

America is now socialist? Mercantilist? Corporatist?

A better name for our new system might be life jacket capitalism. The role of the watchdogs isn't just to enforce seat-belt and helmet laws for the financial sector. Market misjudgments have produced systemic risk with growing intensity and alarming frequency, requiring rescues in 1988 (the savings-and-loan crisis), 1994 (the Mexican collapse), 1997 (the Asian meltdown), 1998 (the Long Term Capital Management debacle), and 2008 (the subprime catastrophe). In an age of globalization, threats to the financial system can arise unexpectedly from almost any place. What's scary about such an arrangement is how much power it vests in our economic guardians and how vigilant, wise, and adroit those guardians need to be. One dud call like letting Lehman go and the whole world can blow up. .....
private enterprise on its own won't address global ills such as climate change, economic inequality, or systemic financial risk. Put a different way, when capitalism stops working, it's time to start looking for a good adjective. Jacob Weisberg in Slate

"The Martingale" on Wall Street

Here's how to make money flipping a coin. Bet 100 bucks on heads. If you win, you walk away $100 richer. If you lose, no problem; on the next flip, bet $200 on heads, and if you win this time, take your $100 profit and quit. If you lose, you're down $300 on the day; so you double down again and bet $400. The coin can't come up tails forever! Eventually, you've got to win your $100 back.
This doubling game, sometimes called "the martingale," offers something for nothing—certain profits, with no risk. You can see why it's so appealing to gamblers. ....
The carefully synthesized financial instruments now seeping toxically from the hulls of Lehman Bros. and Washington Mutual are vastly more complicated than the martingale. But they suffer the same fundamental flaw: They claim to create returns out of nothing, with no attendant risk.

That was a pretty good piece by Jordan Ellenberg. And, again, I was reminded of Ralph Nader's warnings about derivatives and the various games that these "financial experts" were playing with borrowed money.

Bailout fails: 228 to 205

A hallmark of the crisis has been the stark contrast between the "real economy" of production and jobs and the tumultuous financial markets of stocks, bonds, banks, money funds and the like. Even with the 60 percent drop in housing construction since early 2006, the real economy has so far suffered only modest setbacks. Yes, there are 605,000 fewer payroll jobs than there were in December; still, 137.5 million jobs remain. Meanwhile, financial markets verge on hysteria. The question is whether this hysteria will drive the real economy into a deep recession or worse -- and what we can do to prevent that.

That was Robert Samuelson in Newsweek. I wonder what his reactions will be in his next column, which will surely be on the House voting down the bailout bill

Our local congressman, Peter DeFazio, opposed the bill all the way, and also explained his reasons in a commentary in the Register Guard. I applaud him for explaining his position so clearly to his constituents. Interestingly enough, only one Democrat from Oregon voted for the bill, and she is not up for re-election. The lone Republican voted for the bill. Details here.

Daniel Gross is livid that the House voted it down. He writes:

For in the meantime, the chaos they've created by coming to the table and then throwing a fit works to their disadvantage. Each time a deal is close to done and then gets scuppered, the market (and its many participants) freaks out. Huge quantities of wealth are destroyed. The markets fell about 8 percent after today's stunt, likely wiping out close to $1 trillion in wealth.

Our "cartoon" economy

Lies, damned lies, and 'eat locally'?

It's hard to open a magazine without finding an article about a photogenic farmer making handcrafted cheese or a happy family that has reduced its carbon footprint by planting a victory garden. ....
There are consequences, too, for oversimplifying. If we all think in food miles, the answer is obvious: Buy local. But new studies show that in some cases it can actually be more environmentally responsible to produce food far from home.

That is an excerpt from Jane Black's essay on how the press got the idea that food travels 1,500 miles from farm to plate. Worth reading the entire essay.

Students in my summer online class will be all too familiar with this topic because that is the task I gave them for the final 2000-word paper, and I have copied/pasted it here:

The Oxford University Press declared that the new word of the year for 2007 was "locavore", which perhaps you are already familiar with. A true commitment to being a locavore has implications for international trade and transportation.
In order to help you explore the issues, I had put together a few articles--on food miles--as readings for Week#6, which I am sure all of you have already read a gazillion times!

Your task:
* Carefully, and critically, read the five articles on food-miles.
* Think about related issues from Levinson and the mini-questions/responses.
* Articulate a thesis statement that relates to international trade and transportation. Provide this as the "abstract" in about 50-100 words.
* Develop your abstract with logical arguments, with supporting evidence from any number of materials used in this course. Make sure that you do not write a paper exploring a theme that is not quite central to this course. E.g., do not end up writing a paper on the farmers' market in Corvallis.
* You need to carve out your own thesis idea that relates to "locavore" and international trade and transportation.

Drinking coffee is an environmental sin?

My office recently switched from Styrofoam coffee cups to a "bring your own mug"
policy. Sounds like the right idea, but with all the water and paper towels we
now waste on washing mugs, I'm not sure this is a huge net gain for the
environment. What is the "greenest" way to drink coffee around the office?

That question in Slate, and the detailed response from Jacob Leibenluft show how complicated the relationship is between economic activities and impacts on the environment. Being "green" is not as easy as one might think. There are tradeoffs to be made every step along the way.

Of course, one big tradeoff in being "green" is about payraise itself. Why? Hey, a payraise that is above and beyond the inflation rate is nothing but asking for extra money to pay for additional consumption. And, consumption is the trigger for all kinds of environmental impacts--different impacts for different kinds of consumption, of course. Which is why ethicists try to figure out how much we should appreciate soccer moms for their rushing around in their vehicles in order to make lives better for their families, when pretty much everything related to that can be simultaneously identified as contributors for climate change!

If only answers to big questions were simple and beautiful equations like E=MC² :-)

I love coffee. There are few things that can beat the wonderful feeling when I drink that freshly brewed coffee. Particularly after a good meal. More so with warm brownies topped by vanilla ice cream. Hmmmm ....

Pakistan "fires" at US troops. OMG!!!

Pakistani troops have fired shots into the air to stop US troops crossing into the South Waziristan region of Pakistan, local officials say.
Reports say nine US helicopters landed on the Afghan side of the border and US troops then tried to cross the border. ...
They say seven US helicopter gunships and two troop-carrying Chinook helicopters landed in the Afghan province of Paktika near the Zohba mountain range.
US troops from the Chinooks then tried to cross the border. As they did so, Pakistani paramilitary soldiers at a checkpoint opened fire into the air and the US troops decided not to continue forward, local Pakistani officials say.
Reports say the firing lasted for several hours. Local people evacuated their homes and tribesmen took up defensive positions in the mountains.

That was from the BBC. Holy &*%$!

Chris Hitchens reminds readers about the origin of the country's name, which itself is a reminder of all the related geopolitical problems:

The very name Pakistan inscribes the nature of the problem. It is not a real country or nation but an acronym devised in the 1930s by a Muslim propagandist for partition named Chaudhary Rahmat Ali. It stands for Punjab, Afghania, Kashmir,
and Indus-Sind. The stan suffix merely means "land." In the Urdu language, the resulting acronym means "land of the pure." It can be easily seen that this very name expresses expansionist tendencies and also conceals discriminatory ones. Kashmir, for example, is part of India. The Afghans are Muslim but not part of Pakistan. Most of Punjab is also in India. Interestingly, too, there is no B in this cobbled-together name, despite the fact that the country originally included the eastern part of Bengal (now Bangladesh, after fighting a war of independence against genocidal Pakistani repression) and still includes Baluchistan, a restive and neglected province that has been fighting a low-level secessionist struggle for decades. The P comes first only because Pakistan is essentially the property of the Punjabi military caste (which hated Benazir Bhutto, for example, because she came from Sind). As I once wrote, the country's name "might as easily be rendered as 'Akpistan' or Kapistan,' depending on whether the battle to take over Afghanistan or Kashmir is to the fore."

Fannie, Freddie, and the taxpayer

How old is enough? 99 years?

In previous posts, I wondered about old age: will medical advancement make death optional, and whether politics is becoming the tyranny of the old. And then the impact of pensions and benefits pretty much bankrupting GM, and perhaps public agencies real soon. Additional links on this "old" topic:

• Should old faculty retire when they are eligible for retirement so that the younger ones waiting for a (tenure-track) job can get one?
• At what age--80+,90+, 100+--do advanced medical treatments for the old become wasteful expenditures?

The typical argument in India, when I was young, was that the older folks were respected and well-treated in India, and that the US and the west condemned them to old-age homes. That was then. Now, old-age homes are a rapidly growing market in India. I know of at least three in such developments; one is in his late 80s. It is a simple matter of demographics--life expectancies have shot up in three decades.

Here in the US, the elderly are a powerful bloc--both economically and politically. Slate has been looking at different aspects in its geezer special. Slate has also listed the most powerful 80 who are over 80, and are highly active. Who are the top-ten in this group? Here is that list:

1. John Paul Stevens, 88. Associate Supreme Court justice since 1975. Justice Stevens is currently the court's oldest and longest-serving member and wrote the most-cited opinion in American law, Chevron v. Natural Resources Defense Council.
2. Kirk Kerkorian, 91. President and CEO of investment company Tracinda Corp.; majority owner of Las Vegas-based MGM Mirage. As of March, the Armenian-American Kerkorian was the 41st-richest person in the world.
3. T. Boone Pickens, 80. Chairman and founder of the hedge fund BP Capital Management. Pickens' fortune stands at $4 billion and growing. A famous Texan wildcatter, Pickens is now turning his attention to alternative energy.
4. Si Newhouse, Jr., 80. Chairman and CEO of his family's privately held Advance Publications, which owns Condé Nast—home of fancy titles like The New Yorker and Vogue. According to a recent New York Times profile, micromanager Newhouse personally hand-counts ad pages in both his magazines and in their competitors
5. Sumner Redstone, 85. Chairman and CEO of National Amusements Inc., which has controlling interests in Viacom, the CBS Corp., MTV, and Paramount. Redstone's net worth is currently estimated at $6.8 billion.
6. Robert Byrd, 90. Senior senator from West Virginia and a vociferous critic of President Bush and the Iraq war. As president pro tempore of the Senate, Byrd, a Democrat, is third in the line of presidential succession
7. Henry Kissinger, 85. Secretary of state under President Nixon; guardian of realpolitik theory, practitioner of détente. Kissinger won the Nobel Peace Prize in 1973 for his role in arranging a cease-fire between the United States and North Vietnam
8. David Rockefeller Sr., 93. Grandson of John D. Rockefeller; patriarch of the famous clan since 2004. In his own right, he is the former chairman, president, and CEO of Chase Manhattan Bank. Rockefeller's lifetime charitable donations are approaching $1 billion
9. Edward Albee, 80. Hailed as America's greatest living playwright. Albee's most famous plays include Zoo Story, Who's Afraid of Virginia Woolf?, Seascape, and Three Tall Women. When asked how it felt to have won three Pulitzers, the famously cantankerous Albee replied, "Hmmph! It's not very many."
10. Liz Smith, 85. New York gossip columnist, at various publications, for 32 years. Her 2000 memoir, Natural Blonde, was a best-seller

BTW, I am far from being in this 80+ club :-)

Saving the People's Bank of China

I referred to Krugman's and Mankiw's comments on the Fannie/Freddie takeover. Well, Daniel Gross provides an entirely different perspective on this: that the takeover was urgent because

the potential victims were central banks and foreign institutions that have
bought their debt by the boatload. It's no accident that the takeover was
announced in the middle of the day on Sunday. (Barry Ritholtz chronicles a slew of
other recent Sunday credit-related announcements.) It was timed to get out
before the Asian markets opened for trading on Monday.

He then ends with:

The bailout of Fannie Mae and Freddie Mac will be sold and marketed as an effort
to shore up the U.S. housing market. Maybe so. But it is mostly meant to shore
up our damaged international financial standing, preserving leadership and
making sure the U.S. Treasury Secretary doesn't get tarred and feathered at the
next G-8 meeting.

Really? And not to protect the interests of the American consumers and taxpayers? it is e e cummings all over again :-(