- "The Irish Banking Crisis: A Parable"
- "Administrative Measures are Not Effective in Controlling Inflation"
- "And There, Lurking Among Dozens of Well-Intentioned Opinions, is a Troll"
- Expected TARP Cost: $25 Billion
- links for 2010-11-29
- "A Transparently Cynical Policy Gesture"
- "Milton Friedman Would Have Supported QE2"
Posted: 30 Nov 2010 02:40 AM PST
The Irish Banking Crisis: A Parable, by Umair Haque: Once upon a time, there was a country where bankers..., fed up with regulation, dissatisfaction, and downright hostility,... went on strike, not once, but three times.
Here's what orthodox economics would have predicted for a country without banks: A collapse in the money supply, a credit crunch, a trade implosion, mass unemployment, an atomized GDP, and the gears of industry and commerce grinding to a crashing halt. Imagine all the veins in your body suddenly shrinking and collapsing ... and you might begin to see how economists conceive of banking shutdowns.
This is no fairy tale, so we don't have to imagine what happened next. And what did come next was something really, really interesting — and just a little bit awesome..., the economy continued to grow. Though the money supply did contract sharply, neither trade, commerce, nor industry came to a grinding halt.
How? People created their own currencies, to substitute for the collapsing money supply. ... The country in question was Ireland — today, in deep crisis because of profligate banks.
So why were the Irish of yesteryear able to trade notes with one another, in lieu of credit issued by banks? Well, Ireland ... was ... characterized by intense, frequent, conversational personal contact: tight, dense, solid local knowledge circulating at high velocity within and across communities. Result? Borrowers and lenders could build solid microfoundations of trust. In other words, when you've been chatting with Bill every night at the local pub for twenty years, you probably know whether his note is a good bet or not.... Furthermore, if you're the publican, and you've been chatting with me and with Bill, then you're even better positioned to become a de facto arbitrator of notes — a bank. And that's exactly the role that pubs began to play. ...
Now, here's what I'm not suggesting: that you or I extrapolate directly and naively from history. ... I'd suggest it's more like a parable — a tale that highlights deeper principles at play.
It's not that Ireland can exit its troubles merely by vaporizing the banks, and letting pubs trade notes. Ireland 1970 is a far cry from the Celtic tiger of the 2000s. ...
[When mega-banks] blow up..., people and societies are left holding the bag. ... The parable of the disappearing bankers gives the tiniest glimpse of a better way: a path to a smarter kind of growth, built on a different set of institutions — those that operate at micro-scale, instead of mega-scale, built on human relationships, instead of anonymous transactions, self-organizing, instead of "administered," and that have the humanistic and the meaningful, instead of soul-crushingly trivial, hardwired into their very DNA.
Maybe, just maybe, banks need people a lot more than people need banks. Perhaps that's true for the whole imperious, plodding gamut of yesterday's zombie institutions, from corporations, to newspapers, to governments. Perhaps people and societies are a tiny bit more adaptive, resilient, intelligent, and creative than yesterday's institutions assume. And perhaps failing to recognize that is what's really at the root of this great crisis.
Posted: 30 Nov 2010 02:40 AM PST
The old raise the price by shrinking portion size trick:
During the sixty years of the People's Republic, we have learned that administrative measures are not effective in controlling inflation. For instance, the government often forbids university canteens from raising food prices, so prices do not change. Instead the portions get smaller. Unfortunately the government is doing the same again.
Posted: 30 Nov 2010 02:39 AM PST
Comments on this, anonymous or otherwise?:
Where Anonymity Breeds Contempt, by Julie Zhou, Commentary, NY Times: There you are, peacefully reading an article or watching a video on the Internet. You finish, find it thought-provoking, and scroll down to the comments section to see what other people thought. And there, lurking among dozens of well-intentioned opinions, is a troll. ...
Trolling, defined as the act of posting inflammatory, derogatory or provocative messages in public forums, is a problem as old as the Internet itself, although its roots go much farther back. Even in the fourth century B.C., Plato touched upon the subject of anonymity and morality in his parable of the ring of Gyges.
That mythical ring gave its owner the power of invisibility, and Plato observed that even a habitually just man who possessed such a ring would become a thief, knowing that he couldn't be caught. Morality, Plato argues, comes from full disclosure; without accountability for our actions we would all behave unjustly.
This certainly seems to be true for the anonymous trolls today. ...
Some may argue that denying Internet users the ability to post anonymously is a breach of their privacy and freedom of expression. But until the age of the Internet, anonymity was a rare thing. When someone spoke in public, his audience would naturally be able to see who was talking. ...
Content providers, stop allowing anonymous comments. ... In slowly lifting the veil of anonymity, perhaps we can see the troll not as the frightening monster of lore, but as what we all really are: human.
Posted: 30 Nov 2010 02:38 AM PST
The estimated cost of TARP falls again:
TARP expected to cost U.S. only $25 billion, CBO says, by Lori Montgomery, Washington Post: The Troubled Asset Relief Program, which was widely reviled as a $700 billion bailout for Wall Street titans, is now expected to cost the federal government a mere $25 billion...
A new report released Monday by the nonpartisan Congressional Budget Office found that the cost of the program, known as TARP, has plummeted... "Clearly, it was not apparent when the TARP was created two years ago that the cost would turn out to be this low," the CBO report says. ...
The TARP was conceived in the final days of the Bush administration and pushed through a reluctant Congress in less than three weeks. It is widely thought to have helped stabilize a financial sector on the verge of collapse, though it remains hugely unpopular with the public. ...
All told, $389 billion has been distributed through the TARP, which expired in October. The CBO estimates that an additional $44 billion is still waiting to go out the door, primarily to troubled insurance giant American International Group and federal mortgage programs. That would bring total TARP outlays to $433 billion, of which about half - $216 billion - has been repaid. The rest of the TARP investments, meanwhile, have become markedly less risky, according to the CBO, and in many cases even profitable. ...
While the cost of the TARP is coming in far below expectations, it is just one of several massive government programs aimed at propping up the financial industry. The Federal Reserve and the FDIC have together guaranteed billions of dollars in bank debt.
Posted: 29 Nov 2010 10:02 PM PST
Posted: 29 Nov 2010 12:47 PM PST
I was trying to think of a succinct way to respond to Obama's plans to freeze federal pay. This expresses my sentiment fairly well:
Freeze Frame: Yep, that's exactly what we needed: a transparently cynical policy gesture, trivial in scale but misguided in direction, and in effect conceding that your bitter political opponents have the right idea.
Update: I also like pgl's characterization of the policy:
Posted: 29 Nov 2010 09:12 AM PST
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