Saturday, April 05, 2008

Hot Links!!

1. Vote for the NBAs LVP (least valuable player) here. Telling excerpt: Kidd has the opportunity to do something this season that no other great point guard has ever done: Cause two different teams to miss the playoffs.

2. So that's why me and Mrs. Angus are so happy; no kids!! Will Wilkinson has the scoop. A morsel: None of this is to say that people with kids are unhappy people. There are many things in a parent’s life that bring great joy. For example, spending time away from kids.

3. Stay in school kids. Mark Perry breaks down unemployment by educational achievement. Money quote: almost all of the .50% increase in the overall unemployment rate over the last 9 months from 4.6% in June 2007 to 5.1% in March 2008 was mostly from increases in unemployment for workers with less than a high school degree.

Basketball Zelig

Check out this photo of basketball royalty. No, not King James, but rather the other dude, William Wesley. The NY Times has a bizarre and fascinating story on this modern day Zelig.

He's friends with LeBron, MJ, Rick Mahorn, John Calipari, Coach K, and Denny Crum, even Derek Rose.

And it's not just basketball either. He's pals with Jimmy Johnson, Jay-Z, and Beyonce.

Here is a testimony to his Zeligness:

In one of the numerous “Where’s Waldo?” moments for Wesley, Mahorn said he saw Wesley on television on the sideline after a Cowboys Super Bowl victory. He was photographed breaking up the brawl between the
Pistons and the Pacers in 2004. And he was on the floor in Houston last week, crying tears of joy when Memphis clinched its Final Four berth.

As another friend, Michael Irvin puts it:

“What Paris Hilton has done in Hollywood, Wes has done in the sports world,” said Michael Irvin, the former star receiver in the N.F.L. who now does a radio show for ESPN. “Whoever is winning a championship, Wes is there associated with them. He’s never played a down or shot a basket, but he’s a superstar anyway.”

Friday, April 04, 2008

A whole new meaning to the phrase: Sleep it off

From our French friends comes the news that,

"An extra hour between the sheets at night might be the key to shedding excess weight and fighting obesity, according to recent research"

Yeah, that's my kind of research! Maybe Eliot Spitzer was just trying to lose weight?

Sadly, that's not actually what they are talking about:

"More sleep could be the ideal way of stabilising weight or slimming," said neuro-scientist Karine Spiegel, of France's INSERM, a public organisation dedicated to biological, medical and public health research.

It's all about the hormones, people

Two key hormones produced at night which help regulate appetite were at play, she said.

Grehlin makes people hungry, slows metabolism and decreases the body's ability to burn body fat, and leptin, a protein hormone produced by fatty tissue, regulates fat storage.

"We have shown that less sleep (two four-hour nights) caused an 18 percent loss of appetite-cutting leptin and a 28 percent increase of appetite-causing grehlin," she said.

Such hormonal changes made people hungry for foods heavy in fats and sugars such as chips, biscuits, cakes and peanuts, she added.


INSERM?? Grehlin?

Hugo strikes again.


Yesterday, an apparently well-hydrated Hugo Chavez announced that Venezuela will be nationalizing the cement industry. The affected foreign companies are Mexican (Cemex), French, and Swiss.

He is making good on his vow made last year:

Prior to Thursday's announcement, Chavez had repeatedly expressed frustration with the high cost of construction materials and threatened to seize control of companies that fail to provide low-cost cement for the domestic market.

Last year, he said many of Venezuela's cement factories prefer to sell their product abroad at higher prices and warned: "If the cement factories do not (sell in Venezuela), we will occupy them."

Can cement companies price discriminate? Or is the price of cement held below the market price in Venezuela? Have any of you ever heard of a country nationalizing cement before, or is this another historic first for the Bolivarian Revolution?

Needed: An Ex-Dictator rest home

It looks like Mugabe has decided to fight. He's raiding opposition offices, arresting foreign journalists, and parading independence fighters through the streets. He is rumored to be planning a 90 day delay in the runoff election (it's supposed to be 21 days after the first vote). Incredibly, the electoral commission still has not released ANY presidential vote results. None!

One thing that may have weighed on Bobby M. is that ex-dictators don't tend to get cushy digs and aren't always safe from future prosecution. Thus they may tend to hang on til the bitter end.

Here are a few ex-dictators and their exile locations and durations. Please help me add to this list with other cases I've missed. Are there ones who have gotten a "good" (for them) deal?

Baby Doc-Haiti-France still alive 1986-present

Alfredo Stroessner-Paraguay-Brazil 1989-2006

Idi Amin -Uganda- Saudi Arabia 1981-2003

Mengistu-Ethiopia-Zimbabwe-1992-present

Charles Taylor-Liberia-Nigeria-2003-2006- now on trial in Sierra Leone

Hissène Habré-Chad-Senegal-1991-present.

Juan Peron-Argentina-Spain-1955-73-returned with new wife to be president again.

Thursday, April 03, 2008

Snoop Dogg Attracted to Mormonism

FIrst a serious entry on the LDS. Now, less so.

Snoop Dogg...well, ATSRTWT.

(Nod to the Mayor, who is a BIG Snoop fan)

They Aren't Going to Get Jobs, Anyway, RIght?

Students do backflips, baksheesh, to get adWISE-ers.

BERLIN - A judge has sentenced a German law professor to three years in prison for accepting kickbacks from doctoral students.

The Hannover university professor, whose identity was not revealed, confessed to accepting euro 156,000 (US$240,000) to serve as a faculty adviser to 68 doctorate students between 1998 and 2005.

Court documents say an agency brokered kickback deals for him to serve as the students' adviser. Advisers can be difficult to find in German universities.

Judge Peter Peschka called it "a very severe case of corruption" on Wednesday.

The professor said he needed the money to renovate his Hamburg mansion.


Some observations:

1. Coase would say it doesn't matter, right?
2. Saying that the German academic system is corrupt is like
saying that trees are made out of wood. They aren't separate features. The whole "chair" thing is a state-run monopoly for the benefit of the mentally infirm. German students are good, some of them VERY good, but the system is horrible.
3. It's pronounced "adWISE-ers", as in "AdWISE-ers can be difficult to find in German universities."

(Nod to Anonyman, who never paid ME a darned thing)

Mommy, What is that woman doing?

TV tech suspended for broadcasting porn.

Reminds me of two other stories.

1. The finest WoW music video in history

2. This guy, who also neglected to check his video feed

Advice: Look up the word "volunteer"

What is it when the government requires payment of an in-kind tax, collected in the form of mandatory service hours?

In the state of Ohio, it's called "volunteering."

When I look up "voluntary," though, I find something like "of your own free will or design; not forced or compelled." Hmmmmmm......

A survey, from a tv station web site:

If House Bill 519 passes, would you volunteer at your child's school or pay the fine?
Choice____________Votes___________Percentage of 1632 Votes
Volunteer ________926_____________ 57%
Pay Fine _________706 _____________43%

They should have offered another choice: "Move to another state, where there are actually some jobs that pay higher than the implied wage of $100 / 13 hours = $7.70/hour"

I volunteer a lot at my kids' school. But requiring voluntary donations is nonsense. I predict that teachers will NOT enjoy policing petulant parents. I mean, can you imagine the teachers at 2T's school, trying to tell Angus how to "volunteer"?

(Update: Speedmaster posted on this first, and better)

Clubs, Groups, and Organization

Club Mormon: Free-Riders, Monitoring, and Exclusion in the LDS Church

Michael McBride
Rationality and Society, November 2007, Pages 395-424

Abstract:
The Mormon Church is best understood as a club, in the economics sense of
the term. It succeeds, in part, because it identifies and selectively
rewards high contributors, thereby limiting free-riding and producing large
religious benefits for its members. First, it offers a menu of club goods of
varying excludability, with the most valued goods excluded from
less-committed members. Second, to enforce this menu, it actively monitors
its members using a sophisticated administrative structure. The menu design
reflects to an extent the costs of excludability of various religious goods,
and the menu-monitoring approach implicitly allows some free-riding to
dynamically foster commitment. Because the menu-monitoring approach is best
understood as complementing other methods in achieving the Mormon Church's
religious goals, these findings yield insights into the activities of other
religious groups.

----------------------------

Conservatism, Institutionalism, and the Social Control of Intergroup
Conflict


Ryan King
American Journal of Sociology, March 2008, Pages 1351–1393

Abstract:
This research investigates the state social control of intergroup conflict by assessing the sociopolitical determinants of hate crime prosecutions. Consistent with insights from the political sociology of punishment, group-threat accounts of intergroup relations and the state, and neoinstitutional theory, the findings suggest that hate crime prosecutions are fewer where political conservatism, Christian fundamentalism, and black population size are higher, although this last effect is nonlinear. Linkages between district attorneys' offices and communities, on the other hand, increase hate crime prosecutions and the likelihood of offices' creating hate crime policies. Yet these policies are sometimes decoupled from actual enforcement, and such decoupling is more likely in politically conservative districts. The results indicate that common correlates of criminal punishment have very different effects on types of state social control that are protective of minority groups, and also suggest conditions under which policy and practice become decoupled in organizational settings.

This is a drill...This is ONLY a drill

APRIL FOOL'S MESSAGE FROM THE WINE AUTHORITY: BSAFD's ARE SCARCE!

BSAFD:


Sorry for the unusual email early in the week. We had to get the word out about new alcohol legislation that went into affect this morning at 12:01 AM.

March 31st was a historic day for the Wine Industry in North Carolina. In case you haven't heard, yesterday was the last day to sell higher alcohol wines. As of today no wine can legally be sold by wine retailers or restaurants over 10.78% abv. As strange as that seems, the neo-prohibitionists, especially the group PEAT, People for Ethyl Alcohol Tolerance, have made their voice heard and won their forty-six year on-going battle to have the alcohol volume lowered in wine. This new law goes into effect nationally December 1st, but the Sate of North Carolina volunteered to be the first test state eight months early.

What does this mean for us at the store? We'll a whole bunch of work at first, as well as a huge capital expense. To comply with the new law all retailers have to prove to an ALE agent that the bottles on display have been tested for alcohol level. Currently, the only way to do this c is to buy a machine called the Bufort/Stern Alcohol Flowvert Determiner, B.S.A.F.D. for short. As you might imagine these machines aren't easy to come by used on Ebay or Craig's List at the moment! A new machine runs about 15,000 Euros from Slovenia, or about $30,000! We wish there was an easier way, but this is the only device that can measure a liquid's alcohol level through glass, plastic, cardboard and aluminum without touching the liquid thus avoiding contamination. The only way a small business can afford such a contraption is to pass this cost on to the consumer. We are going to charge a Bufort/Stern tax of twenty-five cents per bottle until the machine is paid for. Sorry.

To comply, we had to pull the corks or open the screw tops on every bottle of wine in the store last night, use a turkey baster to suck out a few ounces, add distilled and purified water, measure the alcohol level with the BSAFD and then print a tag to show that bottle complies with the new standard. Similar to a mattress tag, this alcohol proving tag has to be affixed on the front label prominently, just like the ABC tags you see on liquor bottles on bar shelves at restaurants here in NC. Only this tag is about the size of an index card so it blocks the label entirely. You have to lift up the tag to see the name of the wine. Please pardon the appearance of our bottles on the shelves with their foils cut, giant ALE tags and the corks mostly pressed back into the bottles. We did the best we could to make the bottles look un-opened.
Furthermore, until this practice starts directly at the wineries we no longer recommend aging any wine for more than a week or two. Opening the bottles ahead of time and lowering the alcohol level certainly shortens its life!

Let's hope this new law is repealed quickly so we don't have to go through a short eternity of neo-prohibition.


(Nod to KL: You can breathe again)

I am not alone!

Hi, my name is Angus and I'm a grade-avoider. I give exams right before spring break so that I can have "all week to get them done" but generally I'm up late on Monday of the next week feverishly grading to get them done by when I've promised them back to the class. While other people look at the new academic calendars for vacation days, I look for the line saying, "final grades due by:" If anything will make me stop professoring, it will be grading.

Mrs. Angus on the other hand is a grading machine. She'll give exams in both her classes and have the first set graded by the time the second class finishes taking their test.

Well I learned this week that I am a member of a big club according to Insider Higher Ed. Late grades are apparently a chronic problem and some schools are taking extreme measures to deal with them. The article is worth a read and so are all the comments. The comments will give you non-academics a feeling for why faculty meetings generally take so long and accomplish so little.

If you think the proposed remedies for late grades seem extreme, at the school where Mrs. Angus and I taught in Mexico, professors were required to go to an office before each of their classes and sign a form certifying that they were actually holding their class that day! I am not making this up. It irritated me to no end, so I wouldn't do it and the bureaucrats decided they weren't going to pay me, so I told them that would cause me to stop teaching the course. This real life "Mexican standoff" was resolved by me agreeing to sign about 20 backdated certification forms.

I really enjoy teaching but I despise grading.

Wednesday, April 02, 2008

If Michael Mann made skating videos.....

They might look like this. Music by M83.

College Kids Easily Bored: Munger Campaigns at Pembroke

I drove down to UNC-Pembroke, and participated in the GOOB debate.

From the description, the crowd was not overwhelmed with the proceedings.

Nice picture, though.

Why not a golden parachute for the Mugabes of the world?

As the Zimbabwean electoral soap opera continues to unfurl, I am led more and more to wonder why "we" (Western governments and IFIs) don't simply buy out corrupt dictators? The World Bank has loaned a lot of money to Zimbabwe, all of it seemingly wasted judging by current conditions there. From the Bank's Zimbabwe page:

Between 1980, when Zimbabwe joined the Bretton Woods Institutions, and 2000 when the country fell behind in its payments on World Bank loans, the Bank funded a total of 33 projects worth US$1.6 billion. Bank support concentrated on infrastructure, agriculture, health support, and community and local government programs, financed from both International Development Association (IDA) Credits (42%) available to low-income countries, and International Bank for Reconstruction and Development (IBRD) loans (58%) available to middle-income countries. Zimbabwe’s arrears to the World Bank were estimated at US$521 million as of September 13, 2007. The arrears to the IMF stood at US$134 million at end-July 2007 and to the AfdB at US$359 million as of end-April 2007.

So why not "buy the rascals out"? Go to Mugabe in 2002 and offer him $500 million cash to go live in Canada. Is it that his expected profits from being in power are too large for us to afford the buyout? Is it because of moral hazard? Is it because of the moral outrage such a scheme would create?

Or is it because if the institutions of the country don't change, the new president will simply become the next Mugabe?

May you live in interesting times

Zimbabweans certainly are! After 28 years of Mugabeism, they seem tantalizingly close to getting a new president. However, the electoral commission still will not release any information about the presidential vote now 3 days after they were supposed to do so. The NY Times is running a story quoting a Zimbabwean newspaper saying that neither Mugabe nor his rival Tsvangirai have gotten 50% of the vote, meaning that there will be a runoff. Meanwhile the AP is quoting a spokesman for Tsvangirai's party as saying they have won a (bare) majority of 50.3%. These numbers are a far cry from what the opposition M.D.C. party was touting immediately after the election, i.e. that they had won a landslide with around 60% of the vote.

From my perspective, its very hard to imaging how in a country with 80% unemployment and virulent hyperinflation, the incumbent president could get anywhere close to 48-49% of the vote, but the opposition is not claiming any vote rigging in their claim of getting 50.3%.

The main theories behind the delays are (1) Mugabe is buying time to steal the vote. This theory now seems out of favor. Apparently the simple tactic of posting the results quickly at each polling station has made changing the results too costly. (2) Mugabe is buying time to negotiate a golden parachute. This seems plausible. (3) Mugabe considers having to endure a runoff "humiliating" and beneath him, but his advisers are pushing him to suck it up and accept the runoff. That sounds like something a crazy person would think, so I guess it is a plausible theory here too.

Tuesday, April 01, 2008

A-hole of the decade?

Tripp Isenhour is off the hook. KPC has found the a-hole of this year and the last several years as well in the form of Richard Davidson, a psychologist and medical researcher at the University of Wisconsin. Davidson is big on "compassion" and is pals with the Dalai Lama. He's been featured in Oprah's magazine and been named by Time magazine as one of the 100 most influential people in the world. Wikipedia sez that,

Dr. Davidson hopes to help get out the message that based on what we know about the plasticity of the brain, we can think of things like happiness and compassion as skills that are no different from learning to play a musical instrument or learning golf or tennis. Like any skill, it requires practice and time but because we know that the brain is built to change in response to experience, it is possible to train a mind to be happy.

Davidson has long maintained his own daily meditation practice, and continues to communicate regularly with the Dalai Lama.

A longtime friend of the Dalai Lama, some of his work involves research on the brain as it relates to meditation. Davidson is one of the most important scientists in the Dalai Lama's quest to validate Buddhism with science.


Well I am not a Buddhist, but I'd say Doc Davidson needs to teach himself a bit of compassion and that the Lama, Oprah and Time need to do some serious retracting.

Here are some tidbits from a paper published in 2007 by Davidson and others:

“Role of the primate orbitofrontal cortex in mediating anxious temperament.” (Kalin N. H., Shelton S. E., & Davidson R. J. Biological Psychiatry):


Experimental Subjects Twelve experimentally naïve adolescent colony-born rhesus monkeys (Macaca mulatta) were the subjects. Animal housing and experimental procedures were in accordance with institutional guidelines. The animals were housed as pairs; each experimental animal lived with a control animal. At the beginning of the study, subjects were, on average, 34.4 months of age. Six randomly selected males underwent surgery at an average age of 35.6 months. Six nonoperated male control animals were used for comparison, since we previously demonstrated that the nonspecific effects of the surgery do not significantly affect the behavioral and physiological measures of interest.

Surgical Procedure Prior to surgery, atropine sulfate was given to depress salivary secretion, and dexamethasone was given to reduce potential brain swelling. Animals were pre anesthetized with ketamine hydrochloride, fitted with an endotracheal tube, and maintained on isoflurane anesthesia. An experienced surgeon made an opening in the frontal bone posterior to the brow ridge to expose the frontal cortex. Both hemispheres were lesioned in a single procedure by lifting the brain to expose its ventral surface. Using microscopic guidance, electro-cautery and suction were applied to the targeted brain area.

Oh my goodness people. He's a straight up animal torturer! And, lest you give me the "if it saves one human life" speech, let me tell you the experiment and the results. Davidson proceeds to show a snake to each of the monkeys and see whether or not the ones where he induced brain damage are less afraid. Really. I am not making this up. And the big scientific payoff for this horrific exercise?

The monkeys with the induced brain damage exhibited a less "fearful" response to snakes. Wow. I take it back. He's right at the doorstep of curing anxiety in humans!! Induce brain damage.

People, aren't monkeys SUPPOSED to be afraid of snakes? Is a monkey being afraid of a snake in any way similar to anxieties that people seek to overcome or get rid of? Isn't sticking snakes in front of a captive monkey cruel and heartless even when they haven't been surgically tortured?
Don't you think these brain damaged monkeys quite likely display less of a response to EVERYTHING and not just what the good Doctor stuck in front of them.

Shame on you sir and on the University of Wisconsin for condoning this crap. Shame on the Dalai Lama for lending his name to this creep.

Global Roundup

1. Ominous silence in Zimbabwe. The opposition still insists that it has won a clear majority, but no presidential vote tallies have been released by the electoral commission fueling speculation that Bobby M is going to claim victory.

2. Farmers are back to the blockades in Argentina. After initial negotiations with the government broke down, tax protesting farmers resumed their roadblocks and protests, though they are now delivering milk as some other products internally. The FT reports that the cost of the protests is approaching a billion dollars.

3. Chavez proposes to exhume Bolivar's body to test for poison and his poll numbers skyrocket!! Really!!

4. Cubans can now live the good life in Cuba. Sure, electronics, cell phones, even staying in hotels! Not sure where they are supposed to get the scratch to pay for all this bling, but hey!

Monday, March 31, 2008

It's not NICE....to thermal probe Mother Nature

They sink a probe into Mother Earth, and the town sinks.

A spokesman for Staufen council said: "The community was so proud of the environmentally-friendly geothermal energy project that it would be a painful irony if that was the cause for this incredible occurrence."

It's only an irony if you think that "green energy" is always cheaper, regardless of the cost. Otherwise, it is an "idiocy."

Look, we don't know much about what causes changes in the environment, or about how "alternative" energy sources work. That's why they are alternative.

Thinking that it's all easy, and the only reason we aren't all "green" is that greedy people are blocking the progress is...well, those people deserve a big old probe of their own. A red hot one.

Nod to Anonyman...

(Title credit, btw:
)

Great Questions in Poli Sci

Real stories from the front (and not from Duke, by the way):

American politics class. Students studying for exam. Two nights before the exam, prof receives following email:

"We were studying for the test, and came up with this question for you. Do we have to know the order in which the Federalist papers were written? And, if so, how can we find that out?"

My advice: If you get an email like this, go for a walk. Don't answer it right away.

Still no official results in the Zimbabwe Election

People, a presidential election occurred Saturday in Bobby Mugabe's Zimbabwe. The results were supposed to be reported this morning, but so far no complete results have been forthcoming. The main opposition party, the M.D.C. is claiming they've won a majority (there are three candidates, Mugabe, Tsvangirai of the M.D.C. and Simba Makoni). As of last night the NY Times was quoting an anonymous "independent observer" saying the tallies were Tsvangirai 58%, Mugabe 37%, and Makoni 5%.

However, the delay in announcing full results and the staging of the partial results are causing concern. The results announced so far show Mugabe's party and the M.D.C tied in the number of seats won for Parliment, and the fear is that Mugabe trying to steal the election and get a result announced of him winning 52% of the vote and his party holding a 1 seat majority in Congress.

Hmmm, I wonder what Ray Fair's economic model of the incumbent's share of the vote would predict when you plug in an unemployment rate of 80% and an inflation rate of 100,000%?

Sunday, March 30, 2008

No country for old milkmen

Did you know that in 1947 the Indian state of Maharashtra "nationalized" its milk industry? It's true! This lasted until 2001. Can you guess what happened then?

Private carriers with higher quality milk swiftly won customers by delivering milk to doorsteps. The government milkmen have always been restricted to delivering mostly to curbside milk stalls so they could cover a greater area.

Customers swiftly deserted. Many switched to heat-treated milk in sealed packages that resist spoiling. Some ditched the government's former best sellers of sweet Pineapple milk and spicy Masala milk for Coca-Cola and Sprite as Indian tastes westernized. Others never found the milk stands appealing -- they can be dingy and the milk sometimes bad.

Sandra Melwani, a 42-year-old food writer who lives near the Worli Dairy, grew up on government milk but now buys sealed packs of Nestle skim milk from the new neighborhood grocery store. "Even as a kid I used to cringe when I looked at the government booths," she says.

Amazingly though, the WSJ asks us to feel sorry for, not the millions of Indian consumers to had to put up with crappy milk in nasty shops for 55 years, but rather for the government milkmen who are still being paid, but have no work to do because the "firm" has no business.

Once respected civil servants, Mr. Walkar and his 300-odd fellow drivers have been left in a strange limbo. Milk sales at their dairy have plummeted as the state government lost its monopoly on milk and consumer tastes changed. But because Indian work rules strictly protect government workers from layoffs, the delivery men show up for work each morning for eight-hour shifts, as they always did, then proceed to do nothing all day. They rarely, if ever, leave the plant.

All around the milkmen are reminders of their lost prestige. The Worli Dairy's entrance is adorned with a huge mosaic of milk bottling machines, a chandelier of milk bottles and plaques marking visits from top politicians.

In the good old days, the dairy threw big events with dancing, live bands, food, photographers and boxes full of sweets to take home. Now, there are only small gatherings to observe religious holidays and to congratulate another retiree. After a hiring freeze of two decades, the average age of employees is close to 50. The ceiling of the rest area where the drivers spend their days is covered with strings of frayed flags put up for a party long ago.

Hey Eric Bellman! Are you freakin' kidding me? The consumers of India got the shaft for 55 years and still are paying the wages of these guys. Not just them either, in Maharashtra alone there are over 25,000 such workers (employed and paid by state owned firms that now do little to no business now that Indian consumers have been given a choice). And your take is that the tragedy is how these guys have lost their "prestige" and have no future? Holy Crap, dude.

Alan Meltzer gets it right

...and of course by getting it right I mean "agrees with me". I've been posting (see here and here) that while I applaud the recent "lender of last resort" actions by the Fed, that driving short term real rates negative is bad monetary policy.

Here is Alan Meltzer this past week:

Monetary policy is too lax at present. The Fed has done too much to prevent a possible recession and too little to prevent another round of inflation. Its mistake comes from responding to pressure from Congress and the financial markets. The Fed has sacrificed its independence by yielding to that pressure. As a result, real short-term interest rates are negative. Borrowers are being paid to borrow. Negative real rates were a cause of the current problem; they are not a cure. The Fed must raise interest rates in order to prevent inflation.

On the other hand, the Fed’s credit policy has been good. It has been alert to problems in the payment and settlement system. Banks and financial institutions are uncertain about the solvency of other institutions, so they prefer to hold cash rather than to lend it. The traditional way to solve problems of this kind is to provide as much cash as the market wants. And indeed, the Fed has invented new ways of pumping reserves and liquid assets (Treasury bills) into the market. This has helped to prevent a genuine market crisis—at least so far. The Fed did not “bail out” Bear Stearns. It arranged a sale that wiped out the equity and replaced the management without closing the firm.

The Fed’s only mistake was to guarantee $30 billion of Bear’s portfolio. This action transferred potential losses from the market to the taxpayers. I do not believe the present system can remain if the bankers make the profits and the taxpayers share the losses.

Mungowitz: can I get a Amen?