blog of Brad Setser:
"October 28th, 2008 at 10:44 pm
Twofish Says:
Where’s the money now?
It was never there.
October 29th, 2008 at 12:05 am
bsetser Says:
2fish — i lack your training in detecting anti-matter, but i would second your thought that “it was never there” … of course, lots of the street got paid as if what wasn’t there was, but that is a different story."
Wednesday, October 29, 2008
Some effects of the financial crisis on me
My pension is down and expected to go down further. Luckily, Jhansi has a small home run electronics business which mostly caters schools. During labor governments, funds to public schools increse here and the business seems to be doing ok. The funding will be reduced next year due to the crisis. There are other benefits that I have not been using; one can get some money from the government for babysitting for grandchildren. It seems that we will be ok for a while. I have been contributing a bit to charities here and in India. The instinct is to get rid of the money while I still have it since the poorer may be suffering more. Growing vegetables is an option but there are water restrictions. May have to spend more money to save rain water.
P.S. May be Obama will win and things will improve. But one had such hopes before with Nehru, Indira Gandhi, Rajiv Gandhi and others. there were changes but not as much improvement as one hoped.
P.P.S. Felix Salmon has a post The Financial Crisis Hits the World's Hungry.
P.S. May be Obama will win and things will improve. But one had such hopes before with Nehru, Indira Gandhi, Rajiv Gandhi and others. there were changes but not as much improvement as one hoped.
P.P.S. Felix Salmon has a post The Financial Crisis Hits the World's Hungry.
From the comments
Derek Wall in the comments to an earlier post on 'Curbing Growth' links to this very readable post of his Growth is madness!. The post also has a link to a longer article of his broaching on possible solutions.
Tuesday, October 28, 2008
Normalization of US-Cuba relations
at least in science can benefit both countries say scientists in Science Magazine:
"Restrictions on U.S.-Cuba scientific cooperation deprive both research communities of opportunities that could benefit our societies, as well as others in the hemisphere, particularly in the Caribbean. Cuba is scientifically proficient in disaster management and mitigation, vaccine production, and epidemiology. Cuban scientists could benefit from access to research facilities that are beyond the capabilities of any developing country, and the U.S. scientific community could benefit from high-quality science being done in Cuba. For example, Cuba typically sits in the path of hurricanes bound for the U.S. mainland that create great destruction, as was the case with Hurricane Katrina and again last month with Hurricane Ike. Cuban scientists and engineers have learned how to protect threatened populations and minimize damage. Despite the category 3 rating of Hurricane Ike when it struck Cuba, there was less loss of life after a 3-day pounding than that which occurred when it later struck Texas as a category 2 hurricane. Sharing knowledge in this area would benefit everybody."
"Restrictions on U.S.-Cuba scientific cooperation deprive both research communities of opportunities that could benefit our societies, as well as others in the hemisphere, particularly in the Caribbean. Cuba is scientifically proficient in disaster management and mitigation, vaccine production, and epidemiology. Cuban scientists could benefit from access to research facilities that are beyond the capabilities of any developing country, and the U.S. scientific community could benefit from high-quality science being done in Cuba. For example, Cuba typically sits in the path of hurricanes bound for the U.S. mainland that create great destruction, as was the case with Hurricane Katrina and again last month with Hurricane Ike. Cuban scientists and engineers have learned how to protect threatened populations and minimize damage. Despite the category 3 rating of Hurricane Ike when it struck Cuba, there was less loss of life after a 3-day pounding than that which occurred when it later struck Texas as a category 2 hurricane. Sharing knowledge in this area would benefit everybody."
Monday, October 27, 2008
Why Oh Why Can't We Have Better Economics Blogs?
Echoes of Dean Baker's post from
David Warsh's What Just Happened:
"But you would never have a clue that any of this had happened from three of the most widely-read economists’ blogs, the Freakonomics site, J. Bradford Delong’s Semi-Daily Journal, or N. Gregory Mankiw’s blog. Why? Because they are economists, and not committed to “without fear or favor” news, though they deliver plenty of interesting tidbits over the course of a week. Besides, Shleifer is on the board of directors of the Becker Center on Price, where Freakonomics’ Steven Levitt teaches. DeLong, who worked under Summers at the Treasury Department, has been Shleifer’s friend since the two were college roommates. Mankiw regularly touts his colleague for a Nobel Prize.
But neither would you have known much about it from coverage in The New York Times, at least not until the bitter end; or from the Washington Post (except for a column by David Ignatius in 1999); and just barely from the Financial Times, where Summers now a star columnist; or, for that matter, would you have learned of it from Paul Krugman’s twice-weekly columns in the Times. Why the lack of interest in what was, after all, a pretty interesting story? Perhaps because newspapers are run at least partly for the benefit of their sources; editors are reluctant to bite the hand that feeds. (In contrast, The Wall Street Journal, which broke story, did an excellent job.)"
David Warsh's What Just Happened:
"But you would never have a clue that any of this had happened from three of the most widely-read economists’ blogs, the Freakonomics site, J. Bradford Delong’s Semi-Daily Journal, or N. Gregory Mankiw’s blog. Why? Because they are economists, and not committed to “without fear or favor” news, though they deliver plenty of interesting tidbits over the course of a week. Besides, Shleifer is on the board of directors of the Becker Center on Price, where Freakonomics’ Steven Levitt teaches. DeLong, who worked under Summers at the Treasury Department, has been Shleifer’s friend since the two were college roommates. Mankiw regularly touts his colleague for a Nobel Prize.
But neither would you have known much about it from coverage in The New York Times, at least not until the bitter end; or from the Washington Post (except for a column by David Ignatius in 1999); and just barely from the Financial Times, where Summers now a star columnist; or, for that matter, would you have learned of it from Paul Krugman’s twice-weekly columns in the Times. Why the lack of interest in what was, after all, a pretty interesting story? Perhaps because newspapers are run at least partly for the benefit of their sources; editors are reluctant to bite the hand that feeds. (In contrast, The Wall Street Journal, which broke story, did an excellent job.)"
FT endorses Obama
Obama is the better choice:
"The challenges facing the next president will be extraordinary. We hesitate to wish it on anyone, but we hope that Mr Obama gets the job."
"The challenges facing the next president will be extraordinary. We hesitate to wish it on anyone, but we hope that Mr Obama gets the job."
Curbing growth
at least in 'developed' countries. From Special report: Nothing to fear from curbing growth (via EconoSpeak):
"The absurdity of our situation is illustrated by the way our economy profits from selling back to us the pleasures that we have lost through overwork: the leisure and tourist companies that sell us "quality time"; the catering services that provide "home cooking"; the dating and care agencies that see to personal relations; the gyms where people pay to walk on treadmills because the car culture has made it unsafe or unpleasant to walk outside. As the economy continues to expand, consumer culture becomes ever more reliant on our willingness to accept this."
This article from New Scientist has links to several articles on sustainable growth one of which is Why politicians dare not limit economic growth:
"If we do not go out shopping, then factories stop producing, and if factories stop producing then people get laid off. If people get laid off, then they do not have any money. And if they don't have any money they cannot go shopping. A falling economy has no money in the public purse and no way to service public debt. It struggles to maintain competitiveness and it puts people's jobs at risk. A government that fails to respond appropriately will soon find itself out of office.
This is the logic of free-market capitalism: the economy must grow continuously or face an unpalatable collapse. With the environmental situation reaching crisis point, however, it is time to stop pretending that mindlessly chasing economic growth is compatible with sustainability. We need something more robust than a comfort blanket to protect us from the damage we are wreaking on the planet. Figuring out an alternative to this doomed model is now a priority before a global recession, an unstable climate, or a combination of the two forces itself upon us."
All this may be afterGathering Storm which is drawing a lot of comments in Naked Capitalism.
See also Is a Currency Crisis Next? in Economist's View.
"The absurdity of our situation is illustrated by the way our economy profits from selling back to us the pleasures that we have lost through overwork: the leisure and tourist companies that sell us "quality time"; the catering services that provide "home cooking"; the dating and care agencies that see to personal relations; the gyms where people pay to walk on treadmills because the car culture has made it unsafe or unpleasant to walk outside. As the economy continues to expand, consumer culture becomes ever more reliant on our willingness to accept this."
This article from New Scientist has links to several articles on sustainable growth one of which is Why politicians dare not limit economic growth:
"If we do not go out shopping, then factories stop producing, and if factories stop producing then people get laid off. If people get laid off, then they do not have any money. And if they don't have any money they cannot go shopping. A falling economy has no money in the public purse and no way to service public debt. It struggles to maintain competitiveness and it puts people's jobs at risk. A government that fails to respond appropriately will soon find itself out of office.
This is the logic of free-market capitalism: the economy must grow continuously or face an unpalatable collapse. With the environmental situation reaching crisis point, however, it is time to stop pretending that mindlessly chasing economic growth is compatible with sustainability. We need something more robust than a comfort blanket to protect us from the damage we are wreaking on the planet. Figuring out an alternative to this doomed model is now a priority before a global recession, an unstable climate, or a combination of the two forces itself upon us."
All this may be afterGathering Storm which is drawing a lot of comments in Naked Capitalism.
See also Is a Currency Crisis Next? in Economist's View.
Saturday, October 25, 2008
Comments from two who predicted the crisis
Roubini says:
"... if - as likely - the capitulation panic continues today and in the next few days authorities may be forced - as I argued yesterday - to close down financial markets for a week or more in the next few days. We have reached the scary point where the dysfunctional behavior of financial markets has destructive effects on the financial system and - much worse - on the real economies. So it is time to think about more radical policy actions and government interventions of the type I discussed in my London talk yesterday."
Dean Baker says:
"In fact, the problem is not that "we" cannot see events that far in advance. The problem is that the Federal Reserve Board and the economics profession as a whole functions more like a fraternity than a real forum for debate and truth seeking. Those whose views are taken seriously mimic the views of those with status and power within the profession, they do not think independently.
The failure of the economics profession to recognize the bubble and the harm that it would cause was due to the sociology of the profession. For any competent economist, the bubble was easy to see and the damage that its collapse would cause was entirely predictable."
"... if - as likely - the capitulation panic continues today and in the next few days authorities may be forced - as I argued yesterday - to close down financial markets for a week or more in the next few days. We have reached the scary point where the dysfunctional behavior of financial markets has destructive effects on the financial system and - much worse - on the real economies. So it is time to think about more radical policy actions and government interventions of the type I discussed in my London talk yesterday."
Dean Baker says:
"In fact, the problem is not that "we" cannot see events that far in advance. The problem is that the Federal Reserve Board and the economics profession as a whole functions more like a fraternity than a real forum for debate and truth seeking. Those whose views are taken seriously mimic the views of those with status and power within the profession, they do not think independently.
The failure of the economics profession to recognize the bubble and the harm that it would cause was due to the sociology of the profession. For any competent economist, the bubble was easy to see and the damage that its collapse would cause was entirely predictable."
Friday, October 24, 2008
A thoughtful article about blogging
by Andrew Sullivan Why I Blog (via Chris Blattman). One aspect of blogging:
"A good blog is your own private Wikipedia."
A recent entry in Andrew Sullivan's Blog:
Why He's Winning.
"A good blog is your own private Wikipedia."
A recent entry in Andrew Sullivan's Blog:
Why He's Winning.
Thursday, October 23, 2008
SciDev.net summary of three articles on looming food crisis
Answers to the food crisis:
"Joachim von Braun, director-general of IFPRI, discusses high priority policy responses including: expanding emergency responses and humanitarian aid; freezing biofuel production; eradicating export bans and investing in rural infrastructure and agricultural research. These changes must be incorporated on a global scale, von Braun says, possibly led by the UN and major groups of developing country players.
Josette Sheeran, executive director of the World Food Programme (WFP), discusses WFP activities, including their food-for-assets programme used to train local populations, school feeding for around 20 million children and disaster-preparedness activities including canal-building and river bed restoration. Sheeran calls for more agricultural research and higher investment across the value chain.
Namanga Ngongi, president of the Alliance for a Green Revolution in Africa, discusses the policy implications of high food prices for Africa. Policies are needed, he says, to create sustainable food production driven by advances in productivity rather than by expansion of cultivated area.
He calls for focused plant-breeding efforts on staple food crops that include training for plant breeders. He highlights the need for better fertiliser procurement practices and increased African fertiliser production, and calls for an improvement in both financial services and infrastructure."
Link to the articles.
"Joachim von Braun, director-general of IFPRI, discusses high priority policy responses including: expanding emergency responses and humanitarian aid; freezing biofuel production; eradicating export bans and investing in rural infrastructure and agricultural research. These changes must be incorporated on a global scale, von Braun says, possibly led by the UN and major groups of developing country players.
Josette Sheeran, executive director of the World Food Programme (WFP), discusses WFP activities, including their food-for-assets programme used to train local populations, school feeding for around 20 million children and disaster-preparedness activities including canal-building and river bed restoration. Sheeran calls for more agricultural research and higher investment across the value chain.
Namanga Ngongi, president of the Alliance for a Green Revolution in Africa, discusses the policy implications of high food prices for Africa. Policies are needed, he says, to create sustainable food production driven by advances in productivity rather than by expansion of cultivated area.
He calls for focused plant-breeding efforts on staple food crops that include training for plant breeders. He highlights the need for better fertiliser procurement practices and increased African fertiliser production, and calls for an improvement in both financial services and infrastructure."
Link to the articles.
Some links to questions I had
except that I do not understand the answers well.
'Keep things in cash' says Roubini in Roubini on CNBC .
It is more Minsky than Marx says a Marxist in Marx: less relevant.
Brad Setser in The end of Bretton Woods 2?:
"...Bretton Woods 2, as it evolved, hinged both on the willingness of foreign central banks to take the currency risk associated with lending to the US at low rates in dollars despite the United States large current account deficit AND the willingness of private financial intermediaries to take the credit risk associated with lending at low rates to highly-indebted US households.
The second leg of the chain collapsed before the first. And it collapse looks set to deliver a nasty shock to everyone – including the countries that supply the US with vendor financing."
And Yves Smith develops that theme in Bretton Woods 2, R.I.P.
Dani Rodrik goes back to Tobin Some old wisdom from Jim Tobin:
"The proposal is an internationally uniform tax on all spot conversions of one currency into another, proportional to the size of the transaction." and asks "How about generalizing this idea to all securities transactions, domestic as well as international? If leverage--short-term debt--is a big part of the problem, isn't taxing it an important part of the solution?"
And finally New York Times has a special section Credit Crisis — The Essentials.
P.S. In the comments section of Chris Dillow's post "Marx:Less Relevant", Noah disagrees taking his cue from this quote of Marx:
"The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit."
'Keep things in cash' says Roubini in Roubini on CNBC .
It is more Minsky than Marx says a Marxist in Marx: less relevant.
Brad Setser in The end of Bretton Woods 2?:
"...Bretton Woods 2, as it evolved, hinged both on the willingness of foreign central banks to take the currency risk associated with lending to the US at low rates in dollars despite the United States large current account deficit AND the willingness of private financial intermediaries to take the credit risk associated with lending at low rates to highly-indebted US households.
The second leg of the chain collapsed before the first. And it collapse looks set to deliver a nasty shock to everyone – including the countries that supply the US with vendor financing."
And Yves Smith develops that theme in Bretton Woods 2, R.I.P.
Dani Rodrik goes back to Tobin Some old wisdom from Jim Tobin:
"The proposal is an internationally uniform tax on all spot conversions of one currency into another, proportional to the size of the transaction." and asks "How about generalizing this idea to all securities transactions, domestic as well as international? If leverage--short-term debt--is a big part of the problem, isn't taxing it an important part of the solution?"
And finally New York Times has a special section Credit Crisis — The Essentials.
P.S. In the comments section of Chris Dillow's post "Marx:Less Relevant", Noah disagrees taking his cue from this quote of Marx:
"The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit."
Recent letter from a cousin
"Recently we entertained Dr. Narisetti Innaiah, a writer and humanist from Andhra, at our house. We met him a few years ago in Washington D.C.
During our conversation he mentioned that he knew uncle VeeraRaghavayya (your father) well and inquired if any one has copies of his speeches and writings. If you have any, he would like copies of them."
It seems that I have some backgound. Unfortunately I do not have any of the copies.
P.S. Wikipedia entry on Narisetti Innaiah.
He blogs at
Narla V.R. in English, and
నా ప్రపంచం in Telugu.
During our conversation he mentioned that he knew uncle VeeraRaghavayya (your father) well and inquired if any one has copies of his speeches and writings. If you have any, he would like copies of them."
It seems that I have some backgound. Unfortunately I do not have any of the copies.
P.S. Wikipedia entry on Narisetti Innaiah.
He blogs at
Narla V.R. in English, and
నా ప్రపంచం in Telugu.
Monday, October 20, 2008
What if he is a muslim?
says Colin Powell:
"Mr. Powell mentioned Mr. Khan’s death to underscore why he was deeply troubled by Republican personal attacks on Mr. Obama, especially false intimations that he was Muslim.
Mr. Obama is a lifelong Christian, not a Muslim, he said. But, he added, “The really right answer is, what if he is?”
“Is there something wrong with being Muslim in this country? No, that’s not America,” he said."
And from The Huffington Post:
"Powell also spoke passionately against the insinuations by some Republicans that Obama is a Muslim.
"Well, the correct answer is, he is not a Muslim, he's a Christian. He's always been a Christian," he said. "But the really right answer is, what if he is? Is there something wrong with being a Muslim in this country? The answer's no, that's not America. Is there something wrong with some seven-year-old Muslim-American kid believing that he or she could be president? Yet, I have heard senior members of my own party drop the suggestion, 'He's a Muslim and he might be associated terrorists.' This is not the way we should be doing it in America.""
"Mr. Powell mentioned Mr. Khan’s death to underscore why he was deeply troubled by Republican personal attacks on Mr. Obama, especially false intimations that he was Muslim.
Mr. Obama is a lifelong Christian, not a Muslim, he said. But, he added, “The really right answer is, what if he is?”
“Is there something wrong with being Muslim in this country? No, that’s not America,” he said."
And from The Huffington Post:
"Powell also spoke passionately against the insinuations by some Republicans that Obama is a Muslim.
"Well, the correct answer is, he is not a Muslim, he's a Christian. He's always been a Christian," he said. "But the really right answer is, what if he is? Is there something wrong with being a Muslim in this country? The answer's no, that's not America. Is there something wrong with some seven-year-old Muslim-American kid believing that he or she could be president? Yet, I have heard senior members of my own party drop the suggestion, 'He's a Muslim and he might be associated terrorists.' This is not the way we should be doing it in America.""
Saturday, October 18, 2008
Home miscellany
I used to blow the dust away from the sides of my house thanks to a blower given by one of daughters as a birthday present. Today I found that I was out of potting mix and decided to collect as a substitute the dirt and leaves from one side of the house. It filled about seven medium size pots. I started wondering about the depletion of topsoil if this much cams from a small portion of an enclosed garden. There seem to be many warnings about the dangers of the depletion starting of with
with this one from Wikipedia.
Meanwhile my son bought a flat and moved out. He always seemed phlegmatic but my wife said that he was excited when he entered his own flat. He is the first one in our family without a degree so far. In class 7, he found that the mathes teacher was making mistakes and when he pointed them out, they were given lots of home work. Since I myself fought with my father to study what I wanted, I did not try to guide him. Very early he decided that degrees were not needed to make money and started making money on ebay and poker. He gives money when I ask for charities.I hope that he will find some thing more interesting than making money. One more child to go and grand children started arriving and there does not seem to be any respite from cleaning and cooking.
with this one from Wikipedia.
Meanwhile my son bought a flat and moved out. He always seemed phlegmatic but my wife said that he was excited when he entered his own flat. He is the first one in our family without a degree so far. In class 7, he found that the mathes teacher was making mistakes and when he pointed them out, they were given lots of home work. Since I myself fought with my father to study what I wanted, I did not try to guide him. Very early he decided that degrees were not needed to make money and started making money on ebay and poker. He gives money when I ask for charities.I hope that he will find some thing more interesting than making money. One more child to go and grand children started arriving and there does not seem to be any respite from cleaning and cooking.
Friday, October 17, 2008
Razib says
in comment 34 of Communal Violence in Orissa: Trying to Get a Balanced PictureNews:
"the proper response to evangelical obnoxiousness coupled with material inducements is to offer mainstream hindu outreach with material inducements."
Sounds sensible to me. He also says in comment 71 "btw, you do know that muslims in indonesia can convert to christianity and hinduism, right? hundreds of thousands of javanese muslims converted to hinduism afte 1965." A quick google check confirms that conversion to Hinduism have been taking place in Indonesia.
Razib Khan blogs at Gene Expression and Gene Expression Classic on Evolution and Genetics. I occasionally read the posts like his recent rebuttal of Steve Jones view that evolution has stopped in humans. If he has any views on fast evolution views of John Hawkes of which there is a recent exposition in the Seed Magazine article How we evolve,I missed them. He seems to be one of the most erudite bloggers to come out of the subcontinent.
"the proper response to evangelical obnoxiousness coupled with material inducements is to offer mainstream hindu outreach with material inducements."
Sounds sensible to me. He also says in comment 71 "btw, you do know that muslims in indonesia can convert to christianity and hinduism, right? hundreds of thousands of javanese muslims converted to hinduism afte 1965." A quick google check confirms that conversion to Hinduism have been taking place in Indonesia.
Razib Khan blogs at Gene Expression and Gene Expression Classic on Evolution and Genetics. I occasionally read the posts like his recent rebuttal of Steve Jones view that evolution has stopped in humans. If he has any views on fast evolution views of John Hawkes of which there is a recent exposition in the Seed Magazine article How we evolve,I missed them. He seems to be one of the most erudite bloggers to come out of the subcontinent.
Memo to self
Papers to read (non-technical parts):
1) George A. Akerlof and Paul M.Romer: Looting:The Economy of Bankruptcy for Profit, Brooking Papers on Economic Activity, 1993
2)T.F. Hellmann, K.C. Murdoch,and J.E.Stiglitz: Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?, The American Economic Review, 2000
3) M.Bordo and others: Is Crisis Problem Growing?. Economic Policy 2001
4)M. Gianeetti: Bank-Firm Relationships and Contagious Banking Crises, Journal of Money, Credit and Banking, 2003
1) George A. Akerlof and Paul M.Romer: Looting:The Economy of Bankruptcy for Profit, Brooking Papers on Economic Activity, 1993
2)T.F. Hellmann, K.C. Murdoch,and J.E.Stiglitz: Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?, The American Economic Review, 2000
3) M.Bordo and others: Is Crisis Problem Growing?. Economic Policy 2001
4)M. Gianeetti: Bank-Firm Relationships and Contagious Banking Crises, Journal of Money, Credit and Banking, 2003
Thursday, October 16, 2008
Charles Dickens of the call-centre generation
says The Economist about Aravind Adiga after just one book 'The White Tiger'.
Interview with the author as well as links to excerpts from the book here.
His website. Excerpts from an interview
with Stuart Jeffries of The Guardian:
"Well, this is the reality for a lot of Indian people and it's important that it gets written about, rather than just hearing about the 5% of people in my country who are doing well. In somewhere like Bihar there will be no doctors in the hospital. In northern India politics is so corrupt that it makes a mockery of democracy. This is a country where the poor fear tuberculosis, which kills 1,000 Indians a day, but people like me - middle-class people with access to health services that are probably better than England's - don't fear it at all. It's an unglamorous disease, like so much of the things that the poor of India endure.
"At a time when India is going through great changes and, with China, is likely to inherit the world from the west, it is important that writers like me try to highlight the brutal injustices of society. That's what writers like Flaubert, Balzac and Dickens did in the 19th century and, as a result, England and France are better societies. That's what I'm trying to do - it's not an attack on the country, it's about the greater process of self-examination."
P.S. (Nov. 1) I finally read the book. It is readable but his interviews and articles are more interesting than the novel.
Interview with the author as well as links to excerpts from the book here.
His website. Excerpts from an interview
with Stuart Jeffries of The Guardian:
"Well, this is the reality for a lot of Indian people and it's important that it gets written about, rather than just hearing about the 5% of people in my country who are doing well. In somewhere like Bihar there will be no doctors in the hospital. In northern India politics is so corrupt that it makes a mockery of democracy. This is a country where the poor fear tuberculosis, which kills 1,000 Indians a day, but people like me - middle-class people with access to health services that are probably better than England's - don't fear it at all. It's an unglamorous disease, like so much of the things that the poor of India endure.
"At a time when India is going through great changes and, with China, is likely to inherit the world from the west, it is important that writers like me try to highlight the brutal injustices of society. That's what writers like Flaubert, Balzac and Dickens did in the 19th century and, as a result, England and France are better societies. That's what I'm trying to do - it's not an attack on the country, it's about the greater process of self-examination."
P.S. (Nov. 1) I finally read the book. It is readable but his interviews and articles are more interesting than the novel.
Wednesday, October 15, 2008
John Kay on Taleb distributions
In 2003 A strategy for hedge funds and dangerous drivers :
"The practice of bad driving has what I call a Taleb distribution, after one of the themes in Nassim Nicholas Taleb's brilliant Fooled by Randomness. A Taleb distribution has the property that many small profits are mixed with occasional large losses. Overtaking on the inside is an activity with a Taleb distribution....
Many apparently successful traders and business people are still on the upside of their Taleb distribution. They are accidents waiting to happen. It puzzled me for years that so many organisations believed they were making money out of proprietary trading in securities markets. These businesses were trading mostly with each other: since there is no perpetual motion, where did the money to fuel the system come from? From Taleb distributions.
Arbitrage in financial markets generates a continuing stream of small profits. Large losses are exceptional items. They are the product of misjudgments, rogue traders, unpredictable events and the failures of risk control. The same misjudgments, rogue drivers, unpredictable events and system failures that lead to crashes on the French motorways.
We find Taleb distributions not only on the road and in financial institutions. Hedge funds make them accessible to a general public. Business people learnt centuries ago that you can water the milk again and again and again. Until Taleb strikes back: people notice and take their custom elsewhere. Marks and Spencer, the UK retailer, pushed to the limit of what its customers could stand until it discovered that it had crossed that limit. Banks have treated their account holders the same way. Eventually, you pass on the inside once too often.
Evolution favours Taleb distributions. The gene pool of dreadful French drivers is depleted by road accidents - but only at the rate of 8,000 a year. Most young Frenchmen make it to their dates. Evolution within organisations has a similar bias. Someone who makes steady, small gains ranks as a safe pair of hands and is promoted until he meets his apotheosis."
and yesterday Banks got burned by their own ‘innocent fraud’:
"I have several times in this column described the Taleb distribution of regular small profits interspersed by large losses. Taleb distributions are the basis of the carry trade – which exploits interest rate differentials – and many types of statistical arbitrage. Taleb distributions are exploited by traders in hedge funds and at proprietary trading desks.......
Ponzi schemes, Taleb distributions and martingales, revenue recognition and mark-to-market accounting: these are the means by which successive generations of financial hotshots perpetrate what John Kenneth Galbraith described as innocent fraud. This is the process that systematically benefits one group at the expense of another but generally falls short of outright criminality.
But to benefit from the innocent fraud, you must be organiser rather than participant. In the New Economy, banks collected commissions on transactions but limited their own direct involvement. The participation of banks in the recent round of follies brought humiliation. Is the deception of others more or less venal when one has also deceived oneself? That question must be left for moral philosophers – and historians of our era – to answer."
P.S. From today's Bloomberg Taleb's `Black Swan' Investors Post Gains as Markets Take Dive ( via a comment in "Taleb vs Economists")
P.P.S. Yves Smith's reaction to "Innocent Fraud":
"I much prefer the terminology and analysis of George Akelof and Paul Romer. From the abstract of their paper, "Looting: The Economic Underworld of Bankruptcy for Profit""
"The practice of bad driving has what I call a Taleb distribution, after one of the themes in Nassim Nicholas Taleb's brilliant Fooled by Randomness. A Taleb distribution has the property that many small profits are mixed with occasional large losses. Overtaking on the inside is an activity with a Taleb distribution....
Many apparently successful traders and business people are still on the upside of their Taleb distribution. They are accidents waiting to happen. It puzzled me for years that so many organisations believed they were making money out of proprietary trading in securities markets. These businesses were trading mostly with each other: since there is no perpetual motion, where did the money to fuel the system come from? From Taleb distributions.
Arbitrage in financial markets generates a continuing stream of small profits. Large losses are exceptional items. They are the product of misjudgments, rogue traders, unpredictable events and the failures of risk control. The same misjudgments, rogue drivers, unpredictable events and system failures that lead to crashes on the French motorways.
We find Taleb distributions not only on the road and in financial institutions. Hedge funds make them accessible to a general public. Business people learnt centuries ago that you can water the milk again and again and again. Until Taleb strikes back: people notice and take their custom elsewhere. Marks and Spencer, the UK retailer, pushed to the limit of what its customers could stand until it discovered that it had crossed that limit. Banks have treated their account holders the same way. Eventually, you pass on the inside once too often.
Evolution favours Taleb distributions. The gene pool of dreadful French drivers is depleted by road accidents - but only at the rate of 8,000 a year. Most young Frenchmen make it to their dates. Evolution within organisations has a similar bias. Someone who makes steady, small gains ranks as a safe pair of hands and is promoted until he meets his apotheosis."
and yesterday Banks got burned by their own ‘innocent fraud’:
"I have several times in this column described the Taleb distribution of regular small profits interspersed by large losses. Taleb distributions are the basis of the carry trade – which exploits interest rate differentials – and many types of statistical arbitrage. Taleb distributions are exploited by traders in hedge funds and at proprietary trading desks.......
Ponzi schemes, Taleb distributions and martingales, revenue recognition and mark-to-market accounting: these are the means by which successive generations of financial hotshots perpetrate what John Kenneth Galbraith described as innocent fraud. This is the process that systematically benefits one group at the expense of another but generally falls short of outright criminality.
But to benefit from the innocent fraud, you must be organiser rather than participant. In the New Economy, banks collected commissions on transactions but limited their own direct involvement. The participation of banks in the recent round of follies brought humiliation. Is the deception of others more or less venal when one has also deceived oneself? That question must be left for moral philosophers – and historians of our era – to answer."
P.S. From today's Bloomberg Taleb's `Black Swan' Investors Post Gains as Markets Take Dive ( via a comment in "Taleb vs Economists")
P.P.S. Yves Smith's reaction to "Innocent Fraud":
"I much prefer the terminology and analysis of George Akelof and Paul Romer. From the abstract of their paper, "Looting: The Economic Underworld of Bankruptcy for Profit""
A Ph.D at the age of 91
The story of a scholar, at 91:
"The Italian immigrant has been awarded a PhD in Spanish literature — at the age of 91. His dissertation — written in Spanish — explored the work of the "esoteric theorist" Spanish writer Carmen Martin Gaite, and her experiments with the art of storytelling."
With longer working lives, I hope that there will be less emphasis on training from cradle to get in to the work force and more emphasis for a broader and longer education.
"The Italian immigrant has been awarded a PhD in Spanish literature — at the age of 91. His dissertation — written in Spanish — explored the work of the "esoteric theorist" Spanish writer Carmen Martin Gaite, and her experiments with the art of storytelling."
With longer working lives, I hope that there will be less emphasis on training from cradle to get in to the work force and more emphasis for a broader and longer education.
Tuesday, October 14, 2008
Strange
Using expertise:
"FORMER Foreign Minister Alexander Downer has joined Kevin Rudd's infrastructure chief, businessman Sir Rod Eddington, in advising a secretive British firm that sells intelligence on government policy intentions - including those in Australia - to big business."
And a data base to save souls. May be useful to intelligence organizations and NGOs. Clicking on 'start here' takes you to reached and unreached territories.
P.S. Eddington quits British intelligence firm over 'conflict'.
"FORMER Foreign Minister Alexander Downer has joined Kevin Rudd's infrastructure chief, businessman Sir Rod Eddington, in advising a secretive British firm that sells intelligence on government policy intentions - including those in Australia - to big business."
And a data base to save souls. May be useful to intelligence organizations and NGOs. Clicking on 'start here' takes you to reached and unreached territories.
P.S. Eddington quits British intelligence firm over 'conflict'.
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