Showing posts from October, 2008

Ben and Ryan translate rap

For your indulgence : I am in fact orating with little or no prior preparation, an act commonly referred to as freestyling. Once again, and I think this bears repeating, I would like to restate my claim that I am in fact much stronger and have endured a larger number of hardships than you; hardships which have left me with an aggressive behavior and an imposing demeanor which, I believe, frightens you. Thanks to Freakonomics .

Ideological reporting in Slovenia

There's an old joke that, in one of its incarnations, goes like this. During the Cold War, the Soviets and the Americans decided to arrange a good-will running competition between the two presidents. The day of the competition arrived, and Reagan, being in better shape, outran Gorbachev. The next day, American newspapers proudly reported: "Reagan first, Gorbachev last!" On the other hand, the Soviet newspapers reported: "In yesterday's presidents' running competition, Gorbachev finished an excellent second, while Reagan was second-to-last." Slovenia used to be part of Yugoslavia - not as bad as the Soviet Union, but still a decidedly socialist state. In its heyday, socialist Yugoslavia featured such boons as a single type of jeans (why would you need more than one type of jeans?); a single type of toothpaste; stores that were predominantly empty; essential goods that were sometimes available, and sometimes were not; for aspiring drivers, waiting lists

Harlem voters make an educated choice

Now, I think McCain is a sleazebag - which is not to say that Obama is a good choice - but this is great . Transcript: Stern: ... and, most people said - Barack Obama. So what he said is, do you support Obama's views, but he attributed all of McCain's views to Obama. And it didn't sway anyone. Quivers: But it didn't cause people to even flinch - Stern: No. This is crazy. Listen to this. Interviewer: Some people speculate that blacks are voting for Obama strictly because he's black and not because of his policies. So we took McCain's policies and pretended they were Obama's. This is what they had to say. Interviewer: For the election, Obama or McCain? Person A: I like Obama. Interviewer: Now, what don't you like about McCain? Person A: McCain seems to not really know what he's doing right now. Interviewer: Are you more for Obama's policy because he's pro-life, or because he thinks our troops should stay in Iraq and finish this war?

Subprime mortgage vs. loan sharks

At the end of an otherwise fine article comparing loan sharking to subprime lending, Mark Gimein makes a doo-doo. The core of Mark's article explains how loan sharking is not as profitable as you might think. Advance America charges $17.50 as its fee on a two-week $100 advance. If that were an annual interest rate, it would be 450+%. However, a huge proportion of borrowers default on their loans: the defaults work out to $49 per customer, while the average loan is $366. Advance America loses most of its fees to those who fail to repay their advances. Then, Mark Gimein waltzes off into fantasy world and makes the following conclusion: We've yet to see what lesson lenders draw from the subprime debacle. One possibility is that they will conclude that they need to stay away from any but the safest borrowers at all costs-that seems to be the direction they're heading in. And it's likely to be bad news for the economy. That'll mean less credit for those at the bottom

Detroit houses for sale: prices from $9,000

Yup. The median property in Detroit sells for $9,250 . Here's just one listing (they're easy to find) for a 3-bedroom house, 1 bathroom, built 1941. Price: $14,900. Dang. We spend more each year on groceries. Apparently, this is what happens in places where supply exceeds demand. Why does no one want to live in Detroit? Do a search on its demographics...

South Africa sees the light on HIV

After years of HIV denial, in various assorted forms: prime minister Thabo Mbeki and his hosting of alternative AIDS conferences; governing party chief Jacob Zuma and his condomless rape of a woman he knew had AIDS, which small fact he didn't consider a problem because he showered afterwards; health minister Tshabalala-Msimang and her advocacy that AIDS patients should simply get better by eating onions and beetrot; after all that, South Africa now surprises the world with a new health minister who takes HIV seriously and calls for efforts against it. Congratulations, South Africa. Way to go. This all took place after Thabo Mbeki resigned: Malegapuru Makgoba, vice-chancellor and principal of the University of KwaZulu-Natal, said that for the first time in years, South African academics were free to "state that HIV causes Aids without getting threats". "It is a liberating experience," he said at the conference. "You don't know how long we suffered i

Too big to exist #2

Here you go , exactly what I've been saying : “Prior to Lehman, there was an almost unshakable faith that the senior creditors and counterparties of large, systemically important financial institutions would not face the risk of outright default,” notes Neil McLeish, analyst at Morgan Stanley. “This confidence was built up ever since the failure of Continental Illinois (at the time the seventh largest US bank) in 1984, a failure in which bondholders were [fully paid out].” [...] This would seem to put the complaints about Fannie Mae and Freddie Mac, and their implicit government guarantees, in proper context. Everyone, or at least the big guys, was behaving as if there was no chance that the government would allow them to fail. The rules will have to be torn up and rewritten after this is all over and done with. As things stand, there are plenty of too-big-to-fail institutions remaining. They must either be reduced in size to the extent that the government's promise to let

James Bond at work

Two interesting tricks that the British used successfully against the IRA: Having lost many troops and civilians to bombings, the Brits decided they needed to determine who was making the bombs and where they were being manufactured. One bright fellow recommended they operate a laundry and when asked "what the hell he was talking about," he explained the plan and it was incorporated -- to much success. The plan was simple: Build a laundry and staff it with locals and a few of their own. The laundry would then send out "color coded" special discount tickets, to the effect of "get two loads for the price of one," etc. The color coding was matched to specific streets and thus when someone brought in their laundry, it was easy to determine the general location from which a city map was coded. While the laundry was indeed being washed, pressed and dry cleaned, it had one additional cycle -- every garment, sheet, glove, pair of pants, was first sent through

Feldstein's loan proposal: Similarities to my call for a decentralized money supply

Steven Levitt summarizes on Freakonomics the following proposal by Martin Feldstein: Writing in The Wall Street Journal, highly respected economist Martin Feldstein proposes that the government provide low-interest loans to consumers in return for mortgage debt. These government loans would not be secured by the borrower’s home. The loan would need to be paid back even if the home goes into foreclosure and would not be eligible for relief in bankruptcy. The narrower focus of Martin's idea notwithstanding, notice the similarities to the decentralized money supply I recently proposed. I wrote recently how a true solution to the smaller and bigger banking crises we experience every decade requires us to turn the economy on its head. We need to keep the good parts of the economy which drive our progress: most importantly, capitalism and a limited role of the state. However, we need to replace the parts that are dysfunctional: banks and the monetary supply, which facilitate bubbl

Another year, more St. Kitts power outages

Last year, I noted that there was no power for 2 consecutive days during our first month of living on St. Kitts. The ostensible reason given was that the government-run electricity company was installing a new power generator to prevent load shedding (i.e. outages) in the future. Similar prolonged outages repeated a few times in subsequent months, but after that the situation stabilized. We have had fairly decent power supply over the course of 2008. That was until October. On October 1st, we noticed one or more outages, which preceded a fire in the power plant on the morning of October 2nd. This fire brought 50% of the generating capacity offline, and we noticed this as frequent and repeated outages on October 2nd and 3rd. As of today, October 4th, electricity is being shut off at different parts of the island at largely unpredictable times and for largely unpredictable durations. Our area was without power for ten hours, from 08:30 to 18:30 today. It all looks like this is going

A decentralized money supply: Solving the scarcity of money

A major problem with all currencies we've had so far is that varying amounts of currency are available in different parts of an economy. This leads to sharp depressions in the prices of products and services in parts of the economy which are transactionally far from the sources of money, and sharp price increases in other parts of the economy which are close to the sources of money. There is no greater fundamental cause for this than simply that there's more money near the source, than there is farther away from it. These leads to injustice as parts of the economy that are transactionally far from the money sources struggle along with the paltry amount of currency that they can get, while people who are closer to the money sources can effectively exploit the rest of the economy, since they live in an environment where money is abundant. The cure for this is to decentralize the supply of currency, and the most effective way to decentralize is to let every person be their own ba

Cochrane on Why the bailout would be a disaster

This, I think, is a thoughtful rebuke of the Treasury-proposed bailout . This is the first time that I've read an economist weigh in on the topic, and my thoughts were, yes, that makes sense. On Freakonomics .

The harm of banks: Economic booms and busts

I have argued recently that banks cause economic harm for a few reasons. One of those reasons is that the banks' varying lending moods cause expansion and contraction of the effective money supply. This leads to economic booms driven by malinvestment, as people compete to spend easy credit, followed by economic busts driven by a widespread realization of investment mistakes. A counter-argument that I've seen more than once is such as made by this correspondent: I disagree with the underlying premise that volatility is a bad thing and that the goal of "architecting" a financial system is to smooth-out the ups and downs. I have no problem with volatility. There's no law of nature or moral principle that states that the optimal state of the world is an even keel with minimal volatility. The purpose of my proposal to phase out fractional reserve banking altogether is not to do away with volatility for the sake of itself. Rather, it is to remove the systemic harms an