Crisis Links

Here are three articles that haven't gotten a lot of play that I think are well worth reading.

This is the most scholarly, it's by Ed Leamer (hat tip to Mark Perry).


This is a great rant.


This one explains that we need a financial Isiah Thomas to overpay for bad assets (note that it contains some non-family friendly pictures but is *awesome*).

Great moments in human stupidity

Every now and again a quote so awesome enters the world that, whether real or apocryphal, it goes down in history. For example:


"Everything that can be invented has been invented" --

Charles Duell in 1899 explaining why he should be out of a job as Patent Commissioner


"Governments don't go Bankrupt" --

Citicorp chair Walter Wriston showing the brainpower that led to the 1982 Latin American debt crisis


And now, direct from the current financial meltdown KPC is proud to present J.J. Cassano, the man who brought down AIG (circa summer of 2007):

“It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of those transactions.”


A few hundred billion maybe, but one? No way!

Attention Halloween shoppers

Get 'em before they're gone

Pelosi predicted the defeat of Paulson

Really, and it's on the interwebs. Check it out. Right about at the 1:55 mark she starts winding up and then says the days of bailouts are over!! I am not making this up.

Down Goes Paulson!

Wow. The House defeated the bailout 205 yea, 228 nay. I got my wish, except that it wasn't really the Dems so much that defeated the bill, but rather incumbents up for re-election who were listening to their constitutents:

"We're all worried about losing our jobs," Rep. Paul Ryan, R-Wis., declared in an impassioned speech in support of the bill before the vote. "Most of us say, 'I want this thing to pass, but I want you to vote for it — not me.' "

Now I just have to hope getting my wish doesn't bite me in the butt too badly.

Wha' happened to Wachovia?

Well obviously they got bought by Citigroup with a little help from that great hedge fund, the American Taxpayer. But why the collapse? Well in 2006 Wachovia bought Golden West Financial Corporation who's specialty was mortgages where you didn't have to make all the payments. I am not making this up. From the above linked story:

"Wachovia has been among the banks hardest hit by the ongoing crisis in the mortgage market. It paid roughly $25 billion for Golden West at the height of the nation's housing boom. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of Pick-A-Payment loans, Golden West's specialty, which let borrowers skip some payments."

Lordy pie. Now me and Mrs. Angus own us some AIG, some Wachovia, and Lord knows what else without even lifting a finger. I sure hope some of Wachovia's senior management is kept on the job. They are aces.

Is this a great country or what?

World's greatest sausage factory strikes again

It looks like the bailout is going through this time after Congress has ground up the Paulson plan and added their own secret herbs and spices. ummmmmmmmm, tasty. Here's some details from the AP wire story:

"A breakthrough came when Democrats agreed to incorporate a GOP demand — letting the government insure some bad home loans rather than buy them — designed to limit the amount of federal money used in the rescue.

Executives whose companies benefit from the rescue could not get "golden parachutes" and would see their pay packages limited.

The government would receive stock warrants in return for the bailout relief, giving taxpayers a chance to share in financial companies' future profits.

To help struggling homeowners, the plan requires the government to try renegotiating the bad mortgages it acquires with the aim of lowering borrowers' monthly payments so they can keep their homes.

"Nobody got everything they wanted," said Democratic Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee. He predicted it would pass, though not by a large majority."

Cavaliers step in a big pile of Dooky

Wow. OU will be #1 and the Big 12 will probably have 3 teams in the top 5 in the next polls and Michigan beat a top 10 opponent but the big, big story in college football is that the Duke Blue Devils beat UVA snapping a 25 game conference losing streak and running their record to 3-1.

Congratulations Mungo!

a cartoon that is not funny

I think this is an actual videotaped record of the mortgage process, filmed in low def.

What this country needs is...

A good 5 cent cigar?

A good 5 watt amplifier?

More presidential debates?

No, no no! More cute puppies!

Should an equity position be an important part of the bailout?

Greg Mankiw quotes an anonymous "smart friend" to give a witheringly condescending dismissal of the popular idea that the taxpayers should get equity stakes in the firms they are helping to bail out. Here's an excerpt from Greg's "lil friend":

2. "Taxpayers will be better off if Treasury gets warrants."

"This is essentially the assertion made in David Leonhart's column in the NY Times on Wednesday. And it again illustrates that we would all be better off if high schools taught the Modigliani-Miller theorem. MM implies that the price of the asset (again,assuming the auction gets it right) will adjust to offset the value of any warrants Treasury receives."

not surprisingly Mr. Leonhardt took exception to the idea that he needs remedial training (probably didn't like the misspelling of his name much either):

Jonah Gelbach also takes issue here.

Modigliani-Miller (MM) is explained here.

My own view is the MM is a mighty thin reed on which to base an argument in this current situation (or perhaps even in any real world situation). I am not an expert on the capital structure literature, but the empirical evidence testing whether capital structure is irrelevant is far from being conclusive in MM's favor (check the introduction to this paper for example).

I actually think we'd all be at least slightly worse off if the MM theorem was taught in high school.

Here is a picture of my lil friend.

"Free Market Economists" Rage Against the Machine

Bob Higgs, Bryan Caplan, and others, and...well, me, on the bailout, over at Reason On Line

D'OH!

At the debate, I claimed that each voter was wasting his / her vote, unless:

1. Your vote determines the outcome
or
2. You vote your heart, your dreams, for the sake of sending a message.

Vote the LoTE (lesser of two evils) makes no sense.

Then, I tried to answer the usual, "But what if EVERYONE thought that way?"

My claim was this: unless you are a Jedi, and can control OTHER people's weaker minds, then you only get one vote.

Jollyman, and N&O maven RTB was reminded of the following picture, which amused me greatly:

Video of Debate

Enjoy....When the link below comes up, there are TWO images. Click on the one on the RIGHT.

And thanks to WUNC-TV

Say it with cake!

Cake is awesome, and thanks to my latest favorite blog, Cake Wrecks, I've learned that there is no message that you can't send with cake.

Has your child passed a developmental milestone?



Or has a loved one completed a big project?



Maybe someone has done you a big favor?




Or maybe they just made the world a better place for all of us?

Mixing to the IPOD claims anothor victim

Holy Crap people, I have blogged before about how optimizing recordings for IPOD playback is making for bad sounding music, but now even Metallica fans have noticed. In today's WSJ the general trend of loud brittle recordings with little dynamic range is discussed along with the specifics of Metallica's new album and the fan mini revolt that has ensued.

Here is a sad snippet from the article:

Music released today typically has a dynamic range only a fourth to an eighth as wide as that of the 1990s. That means if you play a newly released CD right after one that's 15 years old, leaving the volume knob untouched, the new one is likely to sound four to eight times as loud.

Sound engineers say artists who insist on loudness paradoxically give people less to hear, because they end up wiping away nuances and details. Everything from a gently strummed guitar to a pounding snare drum is equally loud, leading to what some call "ear fatigue." If the listener turns down the volume knob, the music loses even more of its punch.

But many musicians, producers and record-company executives "think that having a louder record is going to translate into greater sales," says Chris Athens, Mr. Jensen's business partner and a fellow engineer. "Nobody really wants to have a record that's not as loud as everybody else's" in an iTunes playlist, he adds.

In other words: All your bass are belong to us!

N&O Article on Debate

Blush. I went after Bev a little, I'm afraid.

N&O piece.

The Bishop Angles for the Environment

The Bishop's op ed in the SLC Tribune.

Excerpt:

The great conservationist Aldo Leopold explained it this way: "Conservation will ultimately boil down to rewarding the private landowner who conserves the public interest."
I visited the kind of landowner Leopold extolled. He owns 1,800 acres of rural Utah land that includes 1.8 miles of stream. When he purchased the property seven years ago, the banks of the creek had been grazed down to the point where there were no river birches, willows or cottonwoods. Stream banks were eroded and there was little stream complexity, a necessary ingredient for a fruitful fishery.
This landowner spent thousands of dollars and hours restoring the creek to create a productive trout fishery. He fenced the cows away from the stream. He sought expert advice on how to help the stream heal itself. He made stream barbs of rocks that stick out from the banks to create eddies, protect banks from erosion, and change water depth and velocity.
Today river birches, willows, cottonwoods and tall grasses are growing along the banks, a gravel bed suitable for spawning has emerged, and the fish love it.
The landowner's son planned to buy the adjoining property and over time, double the amount of restored creek. Now, all plans are off. If he and his father cannot protect the habitat they create and the fish that thrive there, they are not going to spend anything at all.
Instead of doing back flips over the court's decision, anglers should be asking the Legislature to change the state code on which the decision was based so that landowners will once again have an incentive to restore and enhance streams on their properties.
Otherwise, who is going to fence cows away from the water? Who is going to pay for stream barbs and planting willows? Governments may help on portions of major waterways like the Provo River, but what about all the little creeks that could be as productive as the one I saw?
Many anglers understand the value and potential of private conservation and want to encourage it. The stream-access court decision does the opposite. Productive streams crossing private property will be quickly fished out, as has already happened a few miles below the property I described.

Something to take your mind of the Crisis

Why can't Hank roller skate??

Op Ed in Durham Herald

A policy piece / op ed I wrote for the Durham Herald Sun yesterday. Hasn't shown up on-line yet....

Here it is, in text, tho:

The Drought is Over; Long Live the Drought

Michael Munger

The drought is over; let's move on to some other policy problem.

No feeling could be more natural. We're all sick of dry lawns, and dry lectures about wasting water. Now, there are puddles everywhere. Hey, tree-hugger: splash THIS!

But no feeling could be more wrong. There are two droughts in North Carolina: a shortage of water, and the lack of any coherent vision of how we can solve the problem of water allocation. Rain has solved the first, temporarily. We can't expect the vision to come from the clouds, though. It has to come from us.

We live in a climate where droughts happen, but only rarely, because most years we get more than forty-five inches of rain. Water "management" has always meant handling runoff, and even that is managed locally. In cities, water is captured in storm drains; in rural watersheds, runoff drains into creeks and rivers. Until now, the focus has been on erosion, contamination by farm chemicals, and flooding of riverbanks. Even for our reservoirs, the key question has been about release rates, not sufficiency.

No more. The "only runoff, only local" approach has ended, probably forever. The drought of the past two years may have eased, but the next one is only a matter of time. There are two reasons: population growth and increased variance in weather patterns.

The population of North Carolina's cities has doubled since 1980. By 2030, our state may well have a population of 12.5 million or more, if current trends continue. And the variability in rainfall totals over the last two decades is the highest we have ever measured. These climate changes may or may not have been humanly caused; it hardly matters. My point is that we must somehow connect the steady population increase with the wild gyrations of drought and deluge.

What does this mean, in practical terms? Three things, none of them easy or cheap. But if we wait, the problems will grow worse, and the solutions will cost even more. The answer is reservoirs, metering/pricing, and regional integration.

The reservoir systems for many of our cities (but particularly for Durham and Raleigh) were never adequate and have recently fallen far short of our needs. But expansion of reservoirs means buying lots of land, and building new dams for containment. The costs would be immediate, and enormous; the benefits decades away and hard to measure. Only a really clear-eyed leader is going to be able to persuade our legislature to defer short-term electoral goals for the good of the state. At this point, no one is even trying.

Mention metering and pricing, and everyone's eyes glaze over. But property rights are at the heart of the problem. The current system is based on riparian rights, and antiquated meters that do not allow taxpayers even to learn, much less change, their consumption choices. The problem with the way we define rights is that they are nearly always "use or lose." If a riparian owner lets water flow downstream, he gives up all rights to that water, without compensation. A decision by a homeowner to forego watering his lawn may be complimented by neighbors, but the impact on the water bill is negligible. In fact, given the way that many utilities meter and bill, the homeowner may not even be able to tell the difference.

The solution is, once again, much more easily described than implemented. We need to create a system of tradable rights, capturing water's true costs. We need to replace hundreds of thousands of antique meters, with immediate feedback on efforts to conserve. And we need to adopt a tiered pricing structure, with sharply increasing costs for heavy users. The current practice of keeping prices low but shaming violators, and closing down small businesses such as car washes or landscapers, makes no sense. Charging more means that most people will conserve, while preserving the possibility of continued use for high-value users who have no alternative.

Finally, we will need top-down facilitation of bottom-up cooperation across regions of the state. What I mean is that North Carolina, as every schoolchild knows, has three distinct regions: coastal plain, piedmont, and mountains. It is possible that drought will afflict all three, but conditions are different enough that solutions need to be adaptable. Further, redundancy in water supply systems, including pipelines, means that excess reservoir capacity anywhere can ensure water adequacy everywhere.

I'm skeptical of the idea of a state-wide plan, created by state agencies. Local variations in supply, need, and conditions are just too pervasive. But the state is the logical place to start. The 2001 Water Supply Plan, created by the Department of Energy and Natural Resources, is a good start. But it is only a start. Our population has increased by more than 10% since 2000, and the now-dead drought got everyone's attention. Let's not look back from a dry future, ten years from now, and think about what we might have done.

Each, All, and the Bailout

A little squib of an op ed in the Charlotte Observer this a.m., for your reading pleasure.

The text:

From Mike Munger, a Duke University professor of economics and political science, and the Libertarian candidate for governor.

“The state is the great fiction by which each of us seeks to live at the expense of all of us.” The 19th French economist Frederic Bastiat recognized something that seems to be eluding our wise men in Washington, and Wall Street.

If Bastiat were alive, I can guess his reaction to the bailout: First, we don't know what we are doing, and we are as likely to do harm as help. The desperate hurry comes from electoral politics, and not from any real economic necessity.

Second, we aren't creating value. Government can't create value in financial markets. All we are doing is shifting costs from one group (Wall Street bankers, and mortgage sellers who took enormous and unsupportable risks) and transferring them to another group (taxpayers, who don't know any better).

When you hear someone say “The government bailout of Wall Street,” make a mental substitution: “The taxpayer-funded bailout of Wall Street.” And then remember that we have a federal debt bigger than Jupiter.

Deficits are future taxes. The bailout is simply a way of allowing irresponsible lenders to escape unharmed. If you have a mortgage, and can't pay, then you are responsible. If AIG has debts and can't pay, our leaders want to soak taxpayers for the bill.

The point is that you can't take money away from taxpayers who earned it, give it to the financiers who squandered it, and call that a good policy. There is no danger of another Depression, which was caused by a deflationary monetary policy. We are facing a temporary credit crunch, and it will sort itself out if we leave it alone. Things aren't so bad that a panicked bunch of politicians can't make it much, much worse.

Each can't live at the expense of all. Not even if you are a rich banker.

And....it made "THE CORNER"

All hail skeptical economists!

Anil Kashyap & Jeremy Stein have some thoughts and reservations about Hank 'n Ben's plan.

After outlining a couple of relatively benign options for the bailout (buying bargains and restructuring and repackaging some types of debt) , they get down to the nitty gritty of whether, and if so in what form, there will be direct subsidies to the financial sector:

"These first two tasks are probably the easiest for skeptics of government intervention to embrace — or at least tolerate. Unfortunately, they may not be enough. The financial sector is now seriously undercapitalized — struggling institutions simply don’t have enough equity to absorb potential losses — and normal lending within the financial system will not resume until this changes.

Consider Merrill Lynch. It found itself in dire straits because it was having difficulty borrowing to finance its holdings of mortgages and other investments. With options running out, it agreed to merge with Bank of America. Upon the announcement of the merger, the borrowing money problem disappeared, even though Merrill was going to use the borrowed money in exactly the same way as before. What was new was that Bank of America had put its substantial capital base on the line.

Accordingly, a third job for the new agency might be to directly subsidize financial firms to increase their capital. One way to accomplish this would be the agency’s purposefully overpaying — relative to underlying fundamental values — for the mortgages it acquires. Mr. Paulson initially said he wanted to buy mortgages only from American companies; although he apparently changed his mind about foreign banks over the weekend, his original thinking seemed to suggest that he envisions some sort of a subsidy program.

While injecting more money into the financial sector is clearly necessary, doing it this way raises several concerns. For one thing, overpaying for the mortgages would help the banks’ current debt and stock holders. This kind of gift to existing investors (with no upside for the taxpayers providing the money) sets a terrible precedent, surpassing the Bear Stearns and American International Group bailouts, where at least shareholders saw their stakes largely wiped out.

In addition, there would be considerable scope for corruption in distributing the subsidies. Which types of mortgages would get the sweetest deals? What if some banks own disproportionately more of these high-subsidy mortgages? Designing a coherent mission and organizational structure for the agency to minimize these problems will be challenging, to say the least.

If the agency is to get into the direct subsidy business, which may be inevitable, we prefer that it also take on the role of a bankruptcy judge. The government should refuse to buy any toxic mortgage assets from a bank unless it first reaches an agreement with its long-term debt holders to erase some of the debt it owes, perhaps in exchange for stock.

Beyond the principle involved, eliminating some of the existing debt in this way would help to strengthen the bank’s balance sheet. If, in addition, the government received some preferred shares of the bailed-out bank as part of the process (as it did in the A.I.G. rescue), taxpayers might eventually share in some of the gains. Together, these steps would at least partly limit the gift element of the program.

For now, all we can do is make educated guesses at what Mr. Paulson has in mind. But Congress, which has to sign that check for him, should demand some clear answers."

Keep pedaling that bike!

Hank 'n Ben are now out trumpeting the dire consequences that will follow if Congress does not speedily enact their master plan. This very much reminds me of how trade negotiations often go. The in crowd puts the package together in the green room and then pressures the outsiders to go along using increasingly apocalyptic language when resistance is encountered. I only hope that some block of legislators will stand up and play the role of India here and scupper this deal.

Update: The rhetoric has escalated even further. Check this dandy, where a "former federal reserve official" opines about what will happen without the plan:

“The alternative is complete financial Armageddon and a great depression”.

Holy Crap. So either you're with Hank 'n Ben or you are in favor of another depression?

Yikes, put me down for none of the above.

Land of Oz

Some incidents in my trip to Oz earlier this month.

1. The trip over was supposed to be 38 hours. RDU - JFK - LAX - Sydney - Perth - Fremantle. It was, in fact, 46 hours. We ran out of fuel. 250k/hr headwinds, extremely rough. Had to land in Auckland, NZ. Waited on the tarmac three hours for fuel. Couldn't leave plane, because of customs non-permission. Missed connection in Sydney, had to wait until evening. I was somewhat tired, b/c I can't sleep on planes.

2. Got up, went down to the beach, looking for coffee. There was (I'm ashamed to admit) a McDonald's, right on the beach overlooking the old "Long Jetty." I ordered a coffee. Now, I could see the pot of coffee sitting there, and "coffee" was listed on the menu. The cashier kid seemed confused. Said, "Coffee? You mean, filtered coffee? Black coffee? What are you asking for?"

Me: "Um....coffee...yes....black coffee."

Kid: "Okay." Pour coffee into cup, then fills the cup last 1/4 with milk.

Me: "Um....the milk is fine....but didn't I say 'Black'?"

Kid: "Oh, black coffee comes with milk. That's how we make it."

3. My keynote speech. Great fun. My thesis was this: Mandatory recycling violates the separation of church and state, since it has no economic justification, and in fact wastes resources. In an economic activity, saving cost is the goal. But in a religious activity, increasing cost is the goal, as a sign of devotion. Since the crowd was largely people employed in the recycling industry, this message was not universally received with joy.


4. A bit of lunch, out in the display area, with Bernie and Becky. Put a couple of drinks in these folks, and they were fair dinkum mates to anyone. I really enjoyed my time with these two. Great people.

Oil Kerfuffle

I could just spit.

Here is the article in today's Duke Chronicle. Key quote:

"It's an election year, which means that it is silly season for politicians," Michael Munger, the Libertarian candidate in the North Carolina Gubernatorial race and chair of the department of political science at Duke University, said in a press release. "The supporters of new drilling are promising miracles, and the opponents are predicting disaster.... They are both exaggerating for their own political purposes."

Munger's plan takes a hands-off approach, asserting that "the increased price of oil and gas will solve this problem for us, if we let it" by driving down demand and opening up new supplies. His plan does not address environmental concerns.


My response, just sent in as an LTE. We'll see if it gets published.

Dear Editor:

I appreciate your front page piece on the issue of "off shore" drilling.

But your claim that my "plan does not address environmental concerns" is a bit inaccurate.

Look, the reason we waste so much, and pollute so much, is that the price of oil is artificially low. It is subsidized by tax breaks to oil companies, and huge payments for unjustified foreign wars. If we had to pay the full cost of oil, two things would happen.

1. We would use less, a "demand side" response to high prices. (Environmental concern #1: Reduces pollution!)

2. We would focus on alternative, and likely less-polluting, energy sources. (Environmental concern #2: Make green energy profitable, and it would flourish.)

Both of my opponents want to use tax money to bring the price down. I say, charge the REAL price of gas, and let those prices produce the positive environmental effects. That's my plan. It is my opponents who refuse to address "environmental concerns."

Mike Munger
Libertarian Candidate for Governor

I like lattes so much almost bought a beret!

But then I found out they serve fancy coffee at McDonalds (hat tip to Dan Drezner)?

Hoping for reverse gridlock: special bailout edition

I cannot believe that I sit here today hoping for a Democratic Congress to somehow stop a Republican administration from effectively fully nationalizing our financial services industry.

Holy Crap, if we are going to nationalize something, lets at least be as smart as Chavez and Morales and pick stuff that is profitable! Lets nationalize Google and Microsoft!

For what it's worth, I think this plan is a hasty, ill-considered overreaction to recent events. If it's a cure, then the cure is worse than the disease. Once a bailout like this happens it will be (1) very hard to say no to anyone down the line and (2) very hard to deny politicians a much increased voice in the everyday activities of firms if taxpayers are going to be the ultimate owners when things go bad.

Here are words of wisdom from Luigi Zingales. Greg Mankiw provides this link that is well worth reading. Here is a bunch of people more famous than me chattering on the topic.

This is a very bad business.

I've been working on the railroad...

but I wouldn't be if I worked for the Long Island Railroad, where you can retire with a pension at age 50, and then file a disability claim for the job you just quit, secure in the knowledge that your claim will then be considered by the Railroad Retirement Board which "almost never says no to a disability claim". They even get free golf somehow! Perhaps not surprisingly given this strange convolution of perverse incentives, last year 94% of LIRR employees that retired after age 50 received disability benefits (again, on TOP of their retirement benefits).

As the NY Times puts it "The L.I.R.R.’s disability rate suggests it is one of the nation’s most dangerous places to work. Yet in four of the last five years, the railroad has won national awards for improving worker safety."

HA!

This truly is a great country

Tiger Who?

With elder statesmen Eldrick out of the way and only elderly boat anchor Phil Mickelson left to drag us down, the US managed to finally win a Ryder Cup. Ladies and gentlemen, I give you Hunter Mahan (3.5 points), Boo Weekley (2.5 points and no I am not making that name up), J.B Holmes (could it possibly be Johnny? 2.5), and OU's very own Anthony Kim (2.5 points) who absolutely disrespected and vivesected Sergio in singles today.

Well played sirs, kudos. And kudos to Zinger for his picking Mahan and Holmes to be on the team.

A message to Sarah Palin from all the woodland creatures

Redemption: yer doin' it wrong

Yahoo sports, September 17th: Miles searching for redemption with Celtics

Yahoo sports, September 19th: Celtics F Miles suspended 10 games

Ah yes, redemption takes a detour via violation of the league's anti drug rules.

Crazy things I tell myself

I actually worked up the nerve to say this at dinner last night with colleagues and this week's seminar speaker, Matt Harding:

"Y'know, I think there's a better chance that Greenspan will go down in history as the worst Fed chair than that Bush will go down in history as the worst president."

Really, I do.

Here is a fun Greenie slam that includes this great quote from April 2005:

“Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending.”

HA!

Good news for Johnny Mac

NBA star Josh Howard enthusiastically endorses McCain for president:

Tyrone don't play

For those of you who thought Tyler's alter ego Tyrone was just an imaginary friend, KPC has found video of Tyrone and he packs quite a punch.

Your Brazil roundup

Last month, Argentina beat Brazil in the Olympic soccer tournament and went on to win the gold medal which may have helped prompt Brazilian president Lula da Silva to say last week that the Argentine players had an awesome fighting spirit and that Argentina's Lionel Messi is the best player in the world.

Not surprisingly the Brazilian players didn't take too kindly to their Prez lauding their arch-rivals.

Here's goalie Julio Cesar (no I am not making that up): "He should go and live in Argentina, become an Argentine citizen, resign as president, and maybe Brazil will improve in some way or another," Cesar said. "The president doesn't think twice before speaking (taken from this article). "

Maybe Lula thought his remarks would fire up the Brazilian squad, but they didn't as Brazil recently tied lowly Bolivia 0-0, which then prompted Lula to opine that Brazil no longer has the best football in the world.


Meanwhile, Brazilian politicians are changing their names to Barack Obama in order to help win election (again, not making this up):


Finally, Lula gave soccer a break and has decided to give "logistical support" to Bolivian president Evo Morales' attempt to try and (re?) gain control of Bolivia's Pando province

Michael Kinsley: Almost as dumb as Donald Luskin?

Brad Delong and I agree on at least one thing: Donald Luskin is mighty dumb (see Brad here and me here). Now Slate's Mike Kinsley has ventured very near to Luskin territory in this piece.

He gives figures for inflation, unemployment and real per capita income growth from 1959 - 2007 which show better average performance under Democratic presidents than Republican presidents and uses this information to conclude that Democrats are better for the economy than Republicans.

Now people, you know I like gridlock, but I am not a Republican, and I believe that it is quite possible that Democrats are better for the economy than Republicans, but comparing sample averages does not provide any relevant information about who is better.

One reason is the potential of reverse causation. Suppose for example, that when the economy is going bad, voters turn to the Republican party to "fix" the problem, and when the economy is booming voters turn to Democrats to advance a non-economic agenda. If this is true then it's the economy is causing the party of the president, and it's not the party of the president causing the economy.

A second reason is the lack of a counterfactual. What we really need to know is if all circumstances were exactly the same except for the party of the president, would the outcomes differ, and if so, in what way. One way to impose the counterfactual would be to use a multiple regression and control for all the other relevant external factors that affect economic performance.

A third reason is that much responsibility for economic policymaking in the US resides with the Federal Reserve, which is supposedly independent from partisan politics, and even if they are not, presidents do not automatically get to pick a new FOMC when they take office.

Please don't read this as an apology for the Republicans. Read it as a plea for numeracy among our chattering class.

I need to fire my broker

Man oh man. Housing is in the toilet, uncertainty and risk are everywhere, and my broker keeps buying and buying housing related firms and financially troubled firms for my portfolio. It's too late for me, I think I am doomed. I sure hope none of you guys have put your money into the brokerage house of Bernanke, Paulson & Co.!!

Plus I must be some kind of moron because I appear to have signed a deal where they can made purchases on my account without my approval, I can't take my money out, and they can buy stuff now and finance it with claims on my future earnings!

Ouch!

Mungowitz, as your friend, I advise you to stay in Australia. Get your papers and then send for your family. I am looking for a way to get me, Mrs. Angus and Mr. Pluto across the border (Welcome to Tijuana, con el coyote no hay aduana!).

KPC Job Fair!

There are at least two kinds of jobs. One kind is where the wage is posted and known and if you are offered the job, it's take it or leave it at the posted wage. Another kind is where the wage is not explicitly posted and the prospective employee may be able to bargain with the employer over the wage. There are at least two kinds of workers. One kind is unemployed and looking for work. Another kind already has a job but is looking for something better.

Well, curiosity got the better of Bob Hall and Allen Krueger (H&K, ungated paper is here) so they went out and surveyed (probably the NSF paid a firm to have the survey done) around 1400 job acceptors to see what were the relative frequencies of the different types described above in the US labor force.

H&K found in both cases the split is fairly even. Between 22% and 54% (depending on the stringency of the definition of "knowing") knew in advance what the wage would be and that it was take it or leave it. Also, around 40% of the job acceptors reported that they could have stayed in their current jobs when they took a new one. They also find that taking a posted wage job is strongly negatively correlated with education.

With a brand new PhD in hand I thought my initial job at George Mason would be a bargaining type situation. HA. Here are a list of the things I asked for and was denied: more money, a course off, summer money, a computer (this was back in 1984), moving expenses. Once I got there, Jim Bennett found money for me to get a computer, and a couple years later Bob Tollison arrived at the Public Choice Center and hooked me up with generous summer money, but at the time I was stunned. After all I'm Scottish. We are the second greatest bargainers in the world (I have to give the honor of #1 to Moroccans)! I must have improved or made myself a more valuable commodity because ensuing jobs did involve bargaining and counter-offers.

However, one big difference was that in the GMU case I was unemployed when "bargaining" with them and in later cases I could have stayed at the job I eventually left.

Sticky Prices vs. Sticky Information: A False Dichotomy?

A new NBER working paper by Coibon and Gorodnichenko (C&G, ungated version here) suggests that the two approaches may be complements rather than subsitutes. The paper assumes that firms can follow one of 4 pricing schemes, a basic sticky price (Calvo) set up, a sticky information (Mankiw & Reis) regime, a full information flexible price regime and a rule of thumb regime. C&G then estimate the fraction of firms in these four regimes in the context of a more or less straightforward New Keynesian DSGE model.

C&G find that a combo of sticky price and sticky information firms in roughly equal proportions is best for matching the population moments they use to estimate their model. Rule of thumb and full information firms are estimated to be a small and not very important fraction of total firms.

This is a very cool paper. But that's not all on this front.

In a paper forthcoming in the Review of Economic Studies (ungated version here) Dupor, Kitamura, and Tsuruga consider a model where all firms face both a sticky price and sticky information scenario. They compare this dual stickiness model to both a pure sticky price and a pure sticky information model and find that data prefer the dual model. They also argue that the dual model fits the data better than a hybrid model that contains some sticky price and some rule of thumb firms.

It's like Reese's Cups people, you don't have to choose between peanut butter and chocolate!

David Foster Wallace dies

Incredibly sad news that one of Mrs. Angus and I's favorite writers has taken his own life at age 46.
"Infinite Jest" would be on my list of the top 5 novels of the 1990s and his essays, especially "A Supposedly Fun Thing I'll Never Do Again" about the cruise ship experience and "Up, Simba" about the John McCain campaign of 2000 are superb. This is a tragic turn of events.

Teaching to the test

Bad economics makes good editorials

Like in today's WSJ where we are told "Divided Government is Best for the Market" and treated to a lovely exercise in torturing the data. It turns out that, since 1948, the stock market has done better under Democratic presidents (15.6%) than Republican ones (11.1%). Now this number really means nothing. First, we'd like to know real, inflation adjusted returns, not nominal returns. Second, and most important, we need to control for other relevant factors. Despite the best efforts of the MSM, we do not live in a unicausal world; politics is not the unique cause of all outcomes.

However, the editorial writer has a unique approach to attacking the problem:

"But it's not so simple... First, not all Democrats act like Democrats, and not all Republicans act like Republicans. John F. Kennedy, for example, was an enthusiastic supply-side tax cutter, and George H.W. Bush raised taxes. Bill Clinton promoted free trade, and Richard Nixon imposed wage and price controls.

If you assign those four presidents to the opposite party based on that -- make the two Democrats into Republicans and the two Republicans into Democrats -- the numbers completely reverse. Now stocks average 14.7% under Republicans and only 10.5% under Democrats.

In fact, it turns out that if you do just one single switch -- if you make Richard Nixon into a Democrat -- it's enough to reverse the numbers."

Awesome!! When all else fails, massage the data!

People, no matter how you slice them, these numbers can't at all be taken as evidence about what market performance would be in the future under different Presidents or about how the market would have faired if George McGovern would have beaten Nixon because they don't take into account any of the other massively important factors that affect market performance. Give a couple of examples, would there have been no oil shocks in the 70s if Nixon were not President? Would the tech boom not have happened if Clinton were not president?

Of course our beloved editorial writer is a sophisticated guy and does bring in another factor later in the article: Congress!!!

"If the electorate were really smart, it would elect a Democratic president and a Republican Congress. Under that deal, stocks have averaged a 20.2% total return"

Again, awesome. That combo in this sample is the last 6 years of Clinton. So the tech boom happened because of a Democratic prez and a Republican congress. Elect that combo again and presto, another boom. It's just that simple eh?

Why oh why oh why oh why does the WSJ publish trash like this? And why oh why oh why would anyone put a single penny into the hands of Trend Macrolytics LLC?

News Flash: Sarah Palin is not a woman!

At least according to Heather Malik:

Palin was not a sure choice, not even for the stolidly Republican ladies branch of Citizens for a Tackier America. No, she isn't even female really. She's a type, and she comes in male form too.

and Wendy Doniger agrees:

Her greatest hypocrisy is in her pretense that she is a woman. The Republican party's cynical calculation that because she has a womb and makes lots and lots of babies (and drives them to school! wow!) she speaks for the women of America, and will capture their hearts and their votes, has driven thousands of real women to take to their computers in outrage. She does not speak for women; she has no sympathy for the problems of other women, particularly working class women.

Holy Crap people, is this a great country or what? McCain surges ahead in the polls based on his choice of a trans-gendered running mate?

It is just so awesome and fun for me to watch how our liberal chattering class has gone completely insane over Sarah Palin.

Hat tip to Betsy Newmark!

Foreign Aid: Fail

Here are Easterly and Pfutze in a recent (Spring 2008) article in the Journal of Economic Perspectives:

"Our findings on aid best practice tend to confirm a number of long-standing
complaints about foreign aid, notwithstanding the aid agencies’ perpetual claims
that they are fixing past problems. The aid effort is remarkably splintered into many
small efforts across all dimensions—number of donors giving aid, number of
countries receiving aid from each donor, and number of sectors in which each
donor operates. A lot of aid still goes to corrupt and autocratic countries and to
countries other than those with the lowest incomes. Aid tying, the use of food
aid-in-kind, and the heavy use of technical assistance persist in many aid agencies,
despite decades of complaints about these channels being ineffective. In addition,
some agencies have remarkably high overhead costs. The broad pattern that
emerges from our evidence is that development banks tend to be closest to best
practices for aid, the UN agencies perform worst along each dimension, and the
bilaterals are spread out all along in between. Explaining why each of these patterns
persists over time raises an interesting agenda for research in political economy.
The aid business now spends $100 billion dollars a year of money each year,
seeking to help the world’s poorest people. It is a sad reflection on the aid
establishment that knowing where the money goes is still so difficult and that the
picture available from partial knowledge remains so disturbing."

The UN World Food Program (which tied for last in the Easterly-Pfutze rankings) has responded and E-P have responded to them. While both are interesting and worth reading, I would be remiss in my duties if I didn't point out two of the most entertaining statements in the UN's response letter:

1. "WFP does not decide where to provide assistance"

Really? They just open the doors and see who shows up to cart off the food?? Or they spin a roulette wheel with country names on it?

2. "The world consumes more than it produces"

Yikes! I know that it's been reported that some North Koreans eat grass and leaves, but I don't think the statement can be true, can it? Are we eating the production of future generations?

Is fewer people really a good thing?

This morning, Lebron James' attempt to justify his lifestyle got me to thinking about people. We often hear that the world has too many people, but to many highly trained economists (he he he), population growth is the key to economic growth.

First generation endogenous growth models (eg. Romer JPE 1990) had the implication that long run growth in income per capita was proportional to the number of researchers in the ideas sector. In this case long run growth was possible with a fixed population and policies that increased the number of researchers had growth effects.

However, Charles Jones (QJE 1995) showed that, over the last 40 years, the number of researchers had grown dramatically while growth rates were largely unchanged, so economists modified the Romer model to reduce the productivity of workers in the ideas sector. In this endogenous growth without scale effects (or semi-endogenous growth) model, long run growth in income per capita is proportional to population growth.

From this point of view, Sarah Palin has it right and Tyler (and me and Mrs. Angus) have it exactly wrong! It would be better to take pro-environment steps that did not work to reduce population growth.

Parents: don't let your kids go to business school!!

Another "Reason" not to vote Libertarian

From Reason magazine online that is, a story showing the LP's VP choice to be a complete ass.

An excerpt (note that Wayne Allyn Root is the LP VP candidate):

Matt Welch: So tell us what we should know about Barack Obama that we don't?

Wayne Allyn Root: I think the most dangerous thing you should know about Barack Obama is that I don't know a single person at Columbia that knows him, and they all know me. I don't have a classmate who ever knew Barack Obama at Columbia. Ever!

Welch: Yeah, but you were like selling, you know, Amway in college or something, weren't you?

Root: Is that what you think of me! And the best damned Amway salesman ever!

Welch: No, I'm sure that you were an outgoing young man, I'm just guessing.

Root: I am! That's my point. Where was Obama? He wasn't an outgoing young man, no one ever heard of him.

Tim Cavanaugh: Maybe he was a late bloomer.

Root: Maybe. Or maybe he was involved in some sort of black radical politics.

Welch: Ooooooooooh.

Root: Maybe he was too busy smoking pot in his dorm room to ever show up for class. I don't know what he was doing!

Welch: Wait, you weren't smoking pot in your dorm room?

Root: No, I wasn't. I wasn't. But I don't hold that against anybody, but I wasn't.... Nobody recalls him. I'm not exaggerating, I'm not kidding.

Welch: Were you the exact same class?

Root: Class of '83 political science, pre-law Columbia University. You don't get more exact than that. Never met him in my life, don't know anyone who ever met him. At the class reunion, our 20th reunion five years ago, 20th reunion, who was asked to be the speaker of the class? Me. No one ever heard of Barack! Who was he, and five years ago, nobody even knew who he was.

Holy Crap people, read the whole thing because it gets weirder and uglier from here. It's a shame, especially in this election where the major party choices are big government or big government that the LP is running such a weak ticket.

Ya know, I was just thinking "Hey, we need more government" and looky!!

Holy Crap people, the only thing dumber than this article are the fawning responses here and here.

I think the whole left wing blogosphere has totally lost it. Palin has crushed them! I'm serious.

Check out this prime example.

Competing Free Advice for Libertarians!

First from notorious Canadian Alex T at Marginal Revolution: Why Libertarians Should Vote for Obama. An excerpt:

First, war. War is the antithesis of the libertarian philosophy of consent, voluntarism and trade. With every war in American history Leviathan has grown larger and our liberties have withered. War is the health of the state. And now, fulfilling the dreams of Big Brother, we are in a perpetual war.

A country cannot long combine unlimited government abroad and limited government at home. The Republican party has become the party of war and thus the party of unlimited government.

With war has come FEAR, magnified many times over by the governing party. Fear is pulling Americans into the arms of the state. If only we were better at resisting. Alas, we Americans say that we love liberty but we are fair-weather lovers. Liberty will flourish only with peace.

Have libertarians gained on other margins in the past eight years? Not at all. Under the Republicans we have been sailing due South-West on the Nolan Chart – fewer civil liberties and more government, including the largest new government program in a generation, the Medicare prescription drug plan, and the biggest nationalization since the Great Depression. Tax cuts, the summum bonum of Republican economic policy, are a sham. The only way to cut taxes is to cut spending and that has not happened.

However, here is the wonderful Vin Suprynowicz with a slightly different point of view:

I'm considering voting for a major party's presidential ticket this year, for the first time in decades. As a matter of fact, it would mark the first time I've voted the top of the ticket for this particular party in my life.

I've met the presidential nominee. He's got character. He's also a likeable guy -- most politicians share that asset -- though he's clearly a creature of the Senate, where respect for freedom and limited government are laughed at, deemed a handicap in "making the deal."

Over the past year, though, he's run a come-from-behind Cinderella campaign that could become the stuff of legend. And then last week, he did something that made our enemies afraid.

That made me take notice.

Mind you, there's a good moral case to be made for not voting. By participating in the election, you tacitly acknowledge the winner has the right to do all the awful, unconstitutional, morally wrong things they now do in our names.

I still vote largely because the "Libertarian" button is available. This year, though, the Libertarian Party has nominated Fearless Drug Warrior Bob Barr, a man who has opposed medical marijuana initiatives, opposed needle exchanges, a man who zealously locked up for years those seeking to peacefully medicate themselves or help others to do so, shoving them into small cages.

The only two things these posts seem to agree on is that Libertarians should not vote for Barr (Alex implicitly and Vin quite explicitly)!! Now where have I heard that before?

How not to make an argument

The inimitable Mary Anastasia O'Grady (Latin American (LA) columnist for the WSJ) shows us exactly how as she argues for McCain over Obama by positing that the Smoot Hawley Tariff of 1930 caused the spread of import substitution policies in Latin American in the 1950s. Really, I am not making this up. See for yourselves:

Of the two U.S. presidential candidates, one promises to expand international trading opportunities for American producers and consumers. The other pledges to raise the barriers that Americans already face in global commerce.

For Latin America, this is the single most important policy issue in the campaign. If Republican candidate John McCain wins, he says he will lead the Western Hemisphere toward freer trade. Conversely, Democratic candidate Barack Obama has promised that he will craft a U.S. trade policy of greater protectionism against our Latin neighbors. The former agenda will advance regional economic integration, the latter will further Latin American isolation.

Anyone who has read 20th-century history knows the seriousness of this policy divide. The last time Washington adopted a protectionist stance toward our southern neighbors was in 1930, when Congress passed the Smoot-Hawley tariffs. It took more than 50 years to even begin to climb out of that hole.

This is so weird. Clearly it didn't take the US 50 years to begin to recover from the depression. Nor did it take Latin America that long. Most big Latin American countries were doing great, growing rapidly and showing some catch-up to the USA in the late 1960s and the 1970s until the 1980s debt crisis smashed them up pretty good.

Many economists blame Smoot-Hawley for the depths of the U.S. depression. But Latin Americans have suffered even more over a longer period. Their leaders chose to retaliate at the time with their own protectionist tariffs, but the damage didn't end there.

And, I think it is fair to say that many economists DON'T!! Also, on average over the region, the depression hit LA much more lightly than it hit the US, which is not what you'd gather from the above sentences.

In his 1995 book "Crisis and Reform in Latin America," UCLA professor Sebastian Edwards writes that though there was a brief period of liberalization in Argentina, Brazil and Chile in the late 1930s, it didn't last long. Adverse conditions brought about by World War II prompted the region's policy makers to restore tariffs, in the hope that protectionism would stimulate economic development.

"By the late 1940s and early 1950s," writes Mr. Edwards, "protectionist policies based on import substitution were well entrenched and constituted, by far, the dominant perspective." The U.N.'s Economic Commission on Latin American and the Caribbean, he adds, provided the "intellectual underpinning for the protectionist position."

Awesome, so O'Grady does decide to cite one source for her "thesis" and the source completely contradicts her. As I read Edwards, Smoot Hawley had nothing to do with high tariffs in LA and Import Substitution, which was a fashionable position among development economists of the 1950s, gave intellectual cover to protectionist governments around LA.

Why oh why oh why can't we have a better LA press corp?

Having had my fill of mockery, let's consider whether a McCain administration would promote trade with LA more than an Obama one. They might want to, but it would be almost impossible given the expected Democratic majorities in both Houses of Congress. Ironically, the best chance of getting deals done (even though those deals might be weird and crappy) would be with the Obama people negotiating a deal that the Pelosis of the world could live with (again, I shudder to think what such a deal would look like).

Take it to the bridge, throw it overboard / See if it can swim back up to the shore

Mrs. Angus & I saw Squeeze's reunion tour stop at the House of Blues in Dallas Saturday night.

I am of two minds about what transpired.

On the one hand, they have a ton of good songs and played them for over 90 minutes with enthusiasm and a minimum of chatter. It was great to see them and hear their catalog.

On the other hand, they seemed more prepared to play Texas stadium than a small hall. The bass and drums were mixed way way up, and overall the band's sound had a hard brittle edge. This is not the fault of HOB, we saw the Breeders there and while it was way loud, the sound was clean and clear and textured. It's not the fault of my ears either; I've seen Sonic Youth and My Bloody Valentine and can appreciate brutal distortion as it's own art form.

The other somewhat disturbing element of the show is that the original members seemed to have instructed their current keyboardist to impersonate Jools Holland (at least his clothing style and physical mannerisms). That was very jarring indeed.

I think those boys need some tube amps!

And that's a mighty long airplane ride....

I'm heading for Perth, Australia. After that, I hope to post more. I certainly can't post much LESS. Thanks to Angus, for, as always, carrying me.

I leave RDU today, SUNDAY, at 1:30 pm. I arrive (travelling through JFK, LAX, and Sydney) in Perth at (gulp) 1 pm on TUESDAY.

On the other hand, I am going to stay here, in Fremantle (just south of Perth). Nice.

Oh, but on the third hand....I'm going to be at this conference, sharing my views on recycling. I believe that I am the tethered goat.

Back Saturday night, September 20. Back to the world of the living after the election on Nov. 4.

N&O

Nice article and other material in Raleigh N&O today.

For more.....

Mungowitz for Governator!

Change we can believe in!

APSA debates abolishing American Politics (and not a moment too soon):

"Spurred by discussion of how the discipline should respond to globalization, the APSA has been talking about whether the way the discipline organizes itself — with a prime position for American politics — makes sense any more.The precise number of subfields within political science is itself the subject of debate. Most people would include American politics, comparative politics, political theory and international relations. Some would add methodologies or area studies or various other topics, but American politics always makes the list. Should it? What would new organizations for the field look like? While the discussion of this issue Thursday at a panel of the political science association’s annual meeting didn’t find a consensus, there was agreement that the current structure has real flaws.

Scholars who called for the abolition of American politics as a subfield were not arguing that scholars shouldn’t study American politics, which may have been reassuring to audience members, most of whom identified by a show of hands as Americanists. But they said that using the United States as an organizational structure, in isolation from the rest of the world, is producing flawed ideas.

Mary Hawkesworth, a political scientist at Rutgers University, said that when the United States is studied in isolation, “certain things get masked.” The “notion of American exceptionalism,” she said, produces “a social amnesia.” For example, she said that that the violence and corruption of the American revolutionaries receives little emphasis, so when students are exposed to the violence of other revolutions, they see no connection to the American revolution and have little tolerance for those other revolutions. Similarly, she said that slavery is taught only as “an aberration in the United States rather than as part of a racist feudalism” imported from Europe.

American politics scholars, she said, largely embrace a view of their work as “non-ideological and moderate,” limiting the critique they may offer of American society. And the current organization of political science, she said, isn’t producing the kinds of understanding that the public needs. Where was political science in predicting the reunification of Germany or the rebound of Russia? she asked. A more global perspective might make the discipline more aware and useful, she said."

So Mary wants to do away with American politics because its practitioners don't emphasize enough how much America sucks? Is this a great country or what?

Whither De-coupling?

One the one hand the global economy seems more integrated than ever, but on the other, it is claimed that the BRICs are growing right through rich country cycles, so what is up with the de-coupling hypothesis?

A new paper by Kose Otruk & Prasad addresses this question empirically using a large dataset of over 100 countries from 1960-2005. They divide the countries into Industrial, Emerging, & Other and use Bayesian methods (Gibbs sampling with data augmentation) to estimate a dynamic factor model of what shocks drive cycles in these countries. When comparing the 1960-84 period with 1985-2005, they find that the global factor has declined in importance in all three groups, while the group factor has become more important in the Industrial and Emerging groups.

So globally, decoupling but within two of the three regions, increased syncronization while in the dreaded "Other" group (developing but not emerging!) idiosyncratic factors have become more important.

Very nice paper, but it seems to me that Tolstoy should get a shout out in the acknowledgements! After all, he said it first.

A Scott a Swiss and a Spaniard walk into a bar....

....actually it's into the semi-finals of the US Open as Andy (the best looking man in all Scottish history) Murray, Roger (this is my 18th straight grand slam semifinal) Federer, and Rafa (soy el maximo) Nadal wait to see whether it will be Serbo-punk Novak Djokovic or Andy Roddick joining them there.

The Open has been fantastic so far this year. New faces, tough matches, and last night Venus and Serena put on a ferocious display. I think Rafa vs. Murray will be a competitive and entertaining match and of course I am rooting for Roddick tonight.

Be afraid. Be very afraid.

How 'bout we let Chairman Clay break it down for ya in his own words?

“We think the logo is classic in its style. We think it's powerful in its design. We think it evokes energy. We think the word Thunder is displayed with simplicity and dignity. And the colors represent much about Oklahoma.

“Our primary color blue is the color of our state flag. This is very much an Oklahoma organization. The sunset is red and orange. Not too red. Not too orange. And the beautiful sun is reflected by yellow.”

very very afraid.

I don't get it

Suppose I was running for office and had a kid. Suppose I supported de-criminalization / legalization of drugs. Suppose during the campaign the kid dies of an overdose.

Three things would be true.

1. My support for the policy didn't kill my kid. Lots of people die of overdoses while we continue to wage "war" on drugs.

2. My kid dying doesn't make my policy position wrong. It might be wrong (I don't think it is), but my kid dying has nothing to do with the cost-benefit analysis or the morality of the position.

3. My kid dying + my policy position doesn't automatically make me a hypocrite.

Right?

Right?

Right?

So I have to ask, WTF is going on in this country???

Andy Roddick joins the Angus Anti-Djokovic Club

Andy, congrats on making the quarters at the US Open and welcome to my club.

Here is a chunk of Andy's postmatch interview after beating Fernando Gonzalez:

Q. With the way he plays and his style, does it almost mandate that it's going to be a grind? Because it's not easy to knock Djokovic out of points early, even if you're playing well.

ANDY RODDICK: Oh, sure. You're going to have to go to work. He goes to work pretty much every point, and, my service game, he's going to put returns in, he puts guys in pressure. It seems like a lot of times there'd be breaks back and forth with him. You know going in that you're going to have to go to work.

Q. When asked about his injuries today, mentioning the right ankle as opposed to the left ankle, the other day ‑‑

ANDY RODDICK: Isn't it both of them? And a back and a hip?

Q. And when he said there are too many to count.

ANDY RODDICK: And a cramp.

Q. Do you get the sense right now that he is...

ANDY RODDICK: Bird flu.

Q. Lot of things. Beijing hangover.

ANDY RODDICK: Yeah.

Q. He's got pretty long list of illness.

ANDY RODDICK: Anthrax. SARS. Common cough and cold.

Q. Got a lot of things going on with him.

ANDY RODDICK: Sure.

Q. Do you think he's bluffing?

ANDY RODDICK: No, I mean, I'm sure ‑‑

Q. The way you're saying it, almost means you feel like...

ANDY RODDICK: No, if it's there, it's there. There's just a lot. You know, he's either quick to call a trainer or he's the most courageous guy of all time. I think it's up for you guys to decide.

Sweet!! Andy you can be secretary-treasurer for sure.

If the numbers don't go your way, make up some new ones

Ah the IMF. You remember them, right, policy reforms, Washington consensus, adjustment lending? You know, all that stuff that didn't work? Well not so fast says a new IMF working paper entitled "The Myth of Post Reform Income Stagnation: Evidence from Brazil and Mexico".

Here's the abstract:

Economic policies are often judged by a handful of statistics, some of which may be biased during periods of change. We estimate the income growth implied by the evolution of food demand and durable good ownership in post-reform Brazil and Mexico, and find that changes in consumption patterns are inconsistent with official estimates of near stagnant incomes. That is attributed to biases in the price deflator. The estimated unmeasured income gains are higher for poorer households, implying marked reductions in “real” inequality. These findings challenge the conventional wisdom that post-reform income growth was low and did not benefit the poor.


Ha!! and again I say, Ha!!

"What do you mean our policies don't work? What about the 'estimated unmeasured income gains'? Dude, we RULE! Poor people love us."

Aaargh. Olivier, you got a lot of work to do!

Wow! Argentina pays up.

In what I think can be fairly described as a surprise move, the Fernandez government announced that it will use foreign reserves held by the Central Bank (of which Argentina has around $47 billion) to pay off its $6.7 billion debt to the Paris Club countries, which has been in default since 2002.

"I have signed a decree today instructing the economy minister to use available central bank reserves to pay off the Paris Club debt," Fernandez said in a live televised speech, met with a standing ovation from industrial-sector executives.

This is the same method that Fernandez's husband, the ex-president Kirchner used to pay off Argentina's debt to the IMF a couple years ago.

Argentina is in the strange position of still belonging to the IMF but refusing to undergo the annual IMF reviews that generally are done for all members whether they are in a loan program or not.

Monetary Policy and Schrödinger's Cat

Barry Eichengreen warns us that there is more to evaluating and conducting policy than picking the correct historical analogy:

"One of the chief ways financial market participants make sense of events is by drawing parallels with the past. The subprime crisis, when it first erupted, was widely perceived as the most dangerous financial crisis since the 1930s. The implication was that it was critical to avoid the policy mistakes that transformed that earlier crisis into a macroeconomic disaster. Specifically, it was important to avoid an excessively tight monetary policy.

Now, with inflation surging, the popular parallel is not the deflationary 1930s but the stagflationary 1970s. Again the implication is that it is important for policymakers to avoid past mistakes. This time, however, past mistakes means a monetary policy that allows inflation expectations to become unanchored.

In fact both analogies are misleading, precisely because market participants and policy makers are aware of this history. Their awareness means that financial history never repeats itself in the same way. Biochemists can replicate their experiments because molecules do not learn. Central bankers lack this luxury."

I like this piece because Barry agrees with me that the Fed did a very good thing (acted as a generous lender of last resort) along with a possibly bad thing (cut rates sharply):

"The Fed’s mistake was cutting interest rates so dramatically when it expanded its credit facilities. Better would have been to lend freely at a penalty rate, a la Bagehot. Higher interest rates which made its emergency credit more costly would have meant better targeted lending and less inflation."

Yes!!

All Hail Marty Fish

The 26 year old Fish, who I've always thought of as tennis' equivalent of "the dude" from the Big Lebowski (the Fish abides!) is in his first ever grand slam quarter final after beating James Blake and Gael Monfils. He now faces Rafael Nadal, but at least it is on a hardcourt where Nadal is not quite so invincible (thought Rafa won the US open series this summer and the Olympic singles gold medal on hard courts).

Fish apparently has really changed his attitude though. In his post match interview after beating Monfils he said:

"Yeah. I mean, this is the biggest tournament of the year, no doubt. It obviously can be argued from a bunch of players at Wimbledon, and this is ‑‑ these are the two biggest ones, are the two favorites that they would like to win most. I think it's no secret, you know, and I said out there on the court, I mean, I desperately wanted to play well and desperately wanted to do well, and this is certainly sweet for sure."

Wow, I can't see Jeff Bridges coming out and admitting something like that. Go Fish!

The resurgent LP

No not the Libertarian Party (sorry Mungowitz), but rather the Licorice Pizza. You know, the 12" long playing vinyl record. It's true! It's in the NY Times. We actually have two turntables at Chez Angus (much to the consternation of Mrs. Angus). Music just sounds more musical on LP over CD, and as the article documents, there is a lot of music coming out on vinyl from new releases by alternative bands to major labels re-releasing chunks of their catalogs on vinyl.

Here's what a couple of 21 year old college boys say in the article about LP listening:

“The process of taking the record off the shelf, pulling it out of the sleeve, putting the needle on the record, makes for a much more intense and personal connection with the music because it’s more effort,” said R. J. Crowder-Schaefer

“I have a ton of music on iTunes,” Mr. (Scott) Karoly said, “but with that music I get A.D.D. really quick. With my LPs, it’s like reading a book as opposed to clicking through articles on Yahoo. When you put on a record,” he added, “it’s an event.”

If you'd like to get on this bandwagon, here is a sweet looking TT to consider (note that you'll still need to buy and install a tonearm: