Tuesday | 19 March 2013


Pawelmorski | Some Of It Was True

“You can’t put shit back in the donkey” – Tony Soprano

A New Jersey mobster couldn’t manage it, but the Eurogroup and the Cypriots are trying to. The attempts consist of trying to keep the good bits of Saturday’s deal whilst doing a u-turn on things like squeezing people who have very little money in order to spare dodgy external money, and trying to put lipstick on the pig that is demolishing trust in the deposit insurance mechanism. The vote is today, the banks reopen Friday. neither of these is a done deal. There are three key risks attached to the plan right now: 1) immediate bank-run contagion; 2) the Cypriots vote “no” to the deal and end up leaving the Euro. 3) the deal passes, but depositors judge that 10% is just the appetiser and scarper.

Russia? ‘The Russians Not Save You, Jimmy’ as Lester Freamon didn’t say. Russian financing – if it appears – will be guided by a sense of self-interest that makes the Troika look like Mother Teresa.

Martin Wolf | The Financial Times

The Bankers’ New Clothes: What’s Wrong with Banking and What to Do About It, by Anat Admati and Martin Hellwig, Princeton, RRP£19.95, RRP$29.95

Attentive readers will learn that financial fragility is a feature of the system, not a bug. Banking is more dangerous than they dare imagine. The public have, willy nilly, become risk-bearers of last resort. Protected by this generosity, bankers gain vastly on the upside while shifting the downside on to others. At worst, they can devour a state’s fiscal capacity.

A related item of imaginary clothing is the argument that banks simply cannot raise equity and will have to shrink their balance sheets, instead. The riposte is simple: if the bank is profitable, it must simply be told to retain earnings until higher ratios are reached; if it is unprofitable, it needs to be wound up smartly, in any case. Pollution is regulated. Economic pollution should also be regulated. Banks that are financially fragile and unprofitable are important sources of just such economic pollution.


Tyler Cowen | The New York Times

At least since the 19th century, the interest of economists in personal liberty can be easily documented. In 1829, all 15 economists who held seats in the British Parliament voted to allow Roman Catholics as members. In 1858, the 13 economists in Parliament voted unanimously to extend full civil rights to Jews. (While both measures were approved, they were controversial among many non-economist members.)

So where will a cosmopolitan perspective take us today?

One enormous issue is international migration. A distressingly large portion of the debate in many countries analyzes the effects of higher immigration on domestic citizens alone and seeks to restrict immigration to protect a national culture or existing economic interests. The obvious but too-often-underemphasized reality is that immigration is a significant gain for most people who move to a new country.

Michael Clemens, a senior fellow at the Center for Global Development in Washington, quantified these gains in a 2011 paper, “Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?” He found that unrestricted immigration could create tens of trillions of dollars in economic value, as captured by the migrants themselves in the form of higher wages in their new countries and by those who hire the migrants or consume the products of their labor. For a profession concerned with precision, it is remarkable how infrequently we economists talk about those rather large numbers.


Paul Krugman | The New York Times

So we could definitely do worse than the Senate Democratic plan, and we probably will. It is, however, an extremely cautious proposal, one that doesn’t follow through on its own analysis. After all, if sharp spending cuts are a bad thing in a depressed economy — which they are — then the plan really should be calling for substantial though temporary spending increases. It doesn’t.

But there’s a plan that does: the proposal from the Congressional Progressive Caucus, titled “Back to Work,” which calls for substantial new spending now, temporarily widening the deficit, offset by major deficit reduction later in the next decade, largely though not entirely through higher taxes on the wealthy, corporations and pollution.

I’ve seen some people describe the caucus proposal as a “Ryan plan of the left,” but that’s unfair. There are no Ryan-style magic asterisks, trillion-dollar savings that are assumed to come from unspecified sources; this is an honest proposal. And “Back to Work” rests on solid macroeconomic analysis, not the fantasy “expansionary austerity” economics — the claim that slashing spending in a depressed economy somehow promotes job growth rather than deepening the depression — that Mr. Ryan continues to espouse despite the doctrine’s total failure in Europe.

politics / history

Rick Perlstein | The Nation

Take it all the way back to 1924—when both parties had both left- and right-wing factions (before that year, the great progressive reformer Robert “Fighting Bob” Lafollette of Wisconsin was a Republican), when there was no reason to believe the Democrats would be the ones to become the nation’s established left-of-center party, and when at the presidential nominating convention the civil war came down to 103 ballots (and gubernatorial fistfights on the convention floor) over issues like Prohibition and whether the party should be for the Ku Klux Klan or against it.

Thirty-six-year-old Gary Hart was more or less the ideologist of the bunch. His memoir of the McGovern presidential campaign, which he had managed two years earlier, called liberalism “near bankruptcy.”Time called him a “liberal.” “Traditional ‘liberal’ and ‘conservative’ slogans,” he wrote back in an angry letter to the editor, “are simply not adequate to cope.” He said the best way out of the energy crisis was “to work together. There will be a lot more cooperative ventures between the environmentalists and the energy developers.” His stock speech, “The End of the New Deal,” argued that his party was hamstrung by the very ideology that was supposed to be its glory—that “if there is a problem, create an agency and throw money at the problem.”

the interweb

Adam Gurri | The Umlaut

The phenomenon of going viral makes a joke of the daily me and The Filter Bubble theories of Internet echo chambers. The bubble is all too easily penetrated, and the daily me bears far too great a resemblance to the daily everybody else.

Consider the social life of one individual as a set of concentric circles. Every so often, it seems like everyone in a particular circle is talking about the same thing. It happens most frequently with the innermost circle, which the individual is most engaged with. Sometimes a topic spreads to the next level, and occasionally it reaches the most remote circles. More often, content originating from the outer layers invades our inner circles.


Ezra Klein | Wonkblog | The Washington Post

Two of the five most profitable industries in the United States — the pharmaceuticals industry and the medical device industry — sell health care. With margins of almost 20 percent, they beat out even the financial sector for sheer profitability.

The players sitting across the table from them — the health insurers — are not so profitable. In 2009, their profit margins were a mere 2.2 percent. That’s a signal that the sellers have the upper hand over the buyers.

This is a good deal for residents of other countries, as our high spending makes medical innovations more profitable. “We end up with the benefits of your investment,” Sackville says. “You’re subsidizing the rest of the world by doing the front-end research.”

But many researchers are skeptical that this is an effective way to fund medical innovation. “We pay twice as much for brand-name drugs as most other industrialized countries,” Anderson says. “But the drug companies spend only 12 percent of their revenues on innovation. So yes, some of that money goes to innovation, but only 12 percent of it.”

energy / environment

Melissa Lott | Plugged In | Scientific American

Methane hydrate deposits could hold up to 15 times the amount of gas as the world’s shale deposits. At the same time, they represent more carbon than all of the world’s fossil fuels combined. So, it’s no wonder that the response to recent announcements by the Japanese has been a bit mixed.

Methane hydrates (a.k.a. methane clathrates or fire ice) are solid compounds where methane is literally trapped in water. The substance looks like ice and can be found deep on the ocean floor, locked under layers of sediments.

Last Tuesday, Japan announced that researchers have successfully produced natural gas from offshore methane hydrates in the the Eastern Nankai Trough.

Depending on how cost-effective production of gas hydrates proves, this vast new fossil energy resource could lower energy prices worldwide. “These lower prices almost certainly will lead to an increase in fossil-fuel consumption on an energy basis,” says Knittel. “That’s the bad news, from a climate perspective.”


David Frum | CNN

First: The president can direct the surgeon general to compile a scientific study of the health effect of individual gun ownership.

“An assault weapon in the hands of a young woman defending her babies in her home becomes a defense weapon, and the peace of mind that a woman has as she’s facing three, four, five violent attackers, intruders in her home, with her children screaming in the background, the peace of mind that she has knowing that she has a scary-looking gun gives her more courage when she’s fighting hardened, violent criminals.”

Thrilling. Also wholly imaginary. Such Rambo-like defenses of home and hearth do not happen in real life, unless the home also happens to contain a meth lab. (The oft-cited statistic that gun owners draw in self-defense 2.5 million times a year is a classic of bad social science.)

Incidents like these, however, do happen — and tragically often:

“A fourteen year-old girl jumped out of the closet and shouted ‘Boo’ when her parents came home in the middle of the night. Taking her for an intruder, her father shot and killed her. Her last words were ‘I love you, Daddy.’ ”

Fifty years ago, Americans contended with similar public ignorance — and similar industry misinformation — about the hazards of cigarette smoking. The argument was settled by the famous surgeon general’s report of 1964.

Congress in the mid-1990s forbade the federal government to fund its own research into the health risks presented by guns. By now, however, enough research has been done by privately funded scholars that the surgeon general could write a report based on existing material.

The surgeon general can lead that attitude change with more authority than any other public official.

The second step that might be taken — again without the need for any congressional vote — is for the Senate to convene hearings into the practices of the gun industry analogous to those it convened into the tobacco industry in the 1990s.


Christopher Jobson | Colossal



Jon Pareles | Rolling Stone

How can a serious bluesman thrive in the age of Auto-Tune? That’s the question Gary Clark Jr. grapples with on his major label debut. Since his teens, Clark has been the young titan of Texas blues, coming out of Austin in the early 2000s with a smoothly long-suffering voice and one hell of a mean guitar tone, playing solos that claw and scream their stories with ornery splendor. He’s a full-fledged guitar hero of the classic school.

Clark is clearly aware that young listeners have heard the Black Keys, Prince and the Roots. Although most songs have a live, hand-played flavor, a few of them – including the title track – tilt toward the static, looplike grooves of hip-hop.



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