Does this article remind you of what happened during the Vietnam War?
The more the US worked to prop up the Saigon leaders as fighters for democracy, the more the south Vietnamese people turned cynical and became more sympathetic to the Vietcongs.
History is repeating itself. Sad.
Tuesday, September 22, 2009
Monday, September 21, 2009
Nation Building?
Note the two simple words in General McChrystal's 66-page report military assessment of the Afghanistan war: "nation building".
This is an excerpt from today's Washington Post:
"...McChrystal said he thinks the way to meet the president's relatively narrow objective of denying al-Qaeda's return to Afghanistan involves a wide-ranging U.S. and NATO effort to protect civilians from insurgents by improving the Afghan government's effectiveness. That means not only more troops, but also a far more aggressive program to train Afghan security forces, promote good local governance, root out corruption, reform the justice sector, pursue narcotics traffickers, increase reconstruction activities and change the way U.S. troops interact with the Afghan population.
The implicit recommendation is that the United States and its NATO partners need to do more nation-building, and they need to do it quickly..."
You should know immediately this war is doomed if these two words are part of the necessary conditions to win it. Why this is so is straightforward.
You cannot change a nation by adding more troops unless the country you wish help had a democratic tradition by way CORE Values held broadly by the people and second by the way of INSTITUTIONS that embodied those values before trouble began.
Afghanistan before troubles started when the Taliban took over was a primitive, medieval run by tribes.
US leaders are still not learning history. You cannot change it into a country with values worth our lives to defend when it is not ready.
Bush lost it when he pulled his troops from Afghanistan to Iraq. Now to refight that battle to destroy Al Qaeda now helped by a resurgent Taliban is near impossible when Kabul is run by corrupt drug lords.
What Afghan is his or her right mind would help the US to keep those drug dealers as rulers of a "democratic" Afghanistan?
This is an excerpt from today's Washington Post:
"...McChrystal said he thinks the way to meet the president's relatively narrow objective of denying al-Qaeda's return to Afghanistan involves a wide-ranging U.S. and NATO effort to protect civilians from insurgents by improving the Afghan government's effectiveness. That means not only more troops, but also a far more aggressive program to train Afghan security forces, promote good local governance, root out corruption, reform the justice sector, pursue narcotics traffickers, increase reconstruction activities and change the way U.S. troops interact with the Afghan population.
The implicit recommendation is that the United States and its NATO partners need to do more nation-building, and they need to do it quickly..."
You should know immediately this war is doomed if these two words are part of the necessary conditions to win it. Why this is so is straightforward.
You cannot change a nation by adding more troops unless the country you wish help had a democratic tradition by way CORE Values held broadly by the people and second by the way of INSTITUTIONS that embodied those values before trouble began.
Afghanistan before troubles started when the Taliban took over was a primitive, medieval run by tribes.
US leaders are still not learning history. You cannot change it into a country with values worth our lives to defend when it is not ready.
Bush lost it when he pulled his troops from Afghanistan to Iraq. Now to refight that battle to destroy Al Qaeda now helped by a resurgent Taliban is near impossible when Kabul is run by corrupt drug lords.
What Afghan is his or her right mind would help the US to keep those drug dealers as rulers of a "democratic" Afghanistan?
It's Too Late, Mr. Krugman!
Paul Krugman is furious that Obama is reluctant to cap the paychecks of Wall Street even as some of his senior staff are finally making noises that obscene bonuses should be.
Well, as I have pointed out on several occasions, it's too late. Reforms should have taken place when the government was on the verge of forking over the many billions to rescue those responsible for blowing up their firms. Now the horse has already bolted from the gate. $$ cashed and pocketed. The accessories to arson folks are still in charge.
Second, it is enormously difficult to determine what should the paycheck sizes should be from the OUTSIDE.
DC should have replaced the sitting Boards with a totally new cast of characters accountable to the shareholders and the public and not to the CEO's and Chair that appointed them to the Boards. They should institute new paycheck policies. Right now the same Boards that had allowed the management to run amok are still there. How can you work with them to put in new policies?
Third, as Krugman pointed out, Obama himself is not on board on changing Wall Street in any significant fashion. His senior staff, while making noises about reforms, are not all on board either.
I am going to make a bet. Nothing much will change on Wall Street. It is 5 minutes to game end and the score is Wall Street 4, Joe Public 0. It will take a miracle to even the score. No way. His New York Times column is reproduced here:
By PAUL KRUGMAN
Published: September 20, 2009
In the grim period that followed Lehman’s failure, it seemed inconceivable that bankers would, just a few months later, be going right back to the practices that brought the world’s financial system to the edge of collapse. At the very least, one might have thought, they would show some restraint for fear of creating a public backlash.
But now that we’ve stepped back a few paces from the brink — thanks, let’s not forget, to immense, taxpayer-financed rescue packages — the financial sector is rapidly returning to business as usual. Even as the rest of the nation continues to suffer from rising unemployment and severe hardship, Wall Street paychecks are heading back to pre-crisis levels. And the industry is deploying its political clout to block even the most minimal reforms.
The good news is that senior officials in the Obama administration and at the Federal Reserve seem to be losing patience with the industry’s selfishness. The bad news is that it’s not clear whether President Obama himself is ready, even now, to take on the bankers.
Credit where credit is due: I was delighted when Lawrence Summers, the administration’s ranking economist, lashed out at the campaign the U.S. Chamber of Commerce, in cooperation with financial-industry lobbyists, is running against the proposed creation of an agency to protect consumers against financial abuses, such as loans whose terms they don’t understand. The chamber’s ads, declared Mr. Summers, are “the financial-regulatory equivalent of the death-panel ads that are being run with respect to health care.”
Yet protecting consumers from financial abuse should be only the beginning of reform. If we really want to stop Wall Street from creating another bubble, followed by another bust, we need to change the industry’s incentives — which means, in particular, changing the way bankers are paid.
What’s wrong with financial-industry compensation? In a nutshell, bank executives are lavishly rewarded if they deliver big short-term profits — but aren’t correspondingly punished if they later suffer even bigger losses. This encourages excessive risk-taking: some of the men most responsible for the current crisis walked away immensely rich from the bonuses they earned in the good years, even though the high-risk strategies that led to those bonuses eventually decimated their companies, taking down a large part of the financial system in the process.
The Federal Reserve, now awakened from its Greenspan-era slumber, understands this problem — and proposes doing something about it. According to recent reports, the Fed’s board is considering imposing new rules on financial-firm compensation, requiring that banks “claw back” bonuses in the face of losses and link pay to long-term rather than short-term performance. The Fed argues that it has the authority to do this as part of its general mandate to oversee banks’ soundness.
But the industry — supported by nearly all Republicans and some Democrats — will fight bitterly against these changes. And while the administration will support some kind of compensation reform, it’s not clear whether it will fully support the Fed’s efforts.
I was startled last week when Mr. Obama, in an interview with Bloomberg News, questioned the case for limiting financial-sector pay: “Why is it,” he asked, “that we’re going to cap executive compensation for Wall Street bankers but not Silicon Valley entrepreneurs or N.F.L. football players?”
That’s an astonishing remark — and not just because the National Football League does, in fact, have pay caps. Tech firms don’t crash the whole world’s operating system when they go bankrupt; quarterbacks who make too many risky passes don’t have to be rescued with hundred-billion-dollar bailouts. Banking is a special case — and the president is surely smart enough to know that.
All I can think is that this was another example of something we’ve seen before: Mr. Obama’s visceral reluctance to engage in anything that resembles populist rhetoric. And that’s something he needs to get over.
It’s not just that taking a populist stance on bankers’ pay is good politics — although it is: the administration has suffered more than it seems to realize from the perception that it’s giving taxpayers’ hard-earned money away to Wall Street, and it should welcome the chance to portray the G.O.P. as the party of obscene bonuses.
Equally important, in this case populism is good economics. Indeed, you can make the case that reforming bankers’ compensation is the single best thing we can do to prevent another financial crisis a few years down the road.
It’s time for the president to realize that sometimes populism, especially populism that makes bankers angry, is exactly what the economy needs.
Well, as I have pointed out on several occasions, it's too late. Reforms should have taken place when the government was on the verge of forking over the many billions to rescue those responsible for blowing up their firms. Now the horse has already bolted from the gate. $$ cashed and pocketed. The accessories to arson folks are still in charge.
Second, it is enormously difficult to determine what should the paycheck sizes should be from the OUTSIDE.
DC should have replaced the sitting Boards with a totally new cast of characters accountable to the shareholders and the public and not to the CEO's and Chair that appointed them to the Boards. They should institute new paycheck policies. Right now the same Boards that had allowed the management to run amok are still there. How can you work with them to put in new policies?
Third, as Krugman pointed out, Obama himself is not on board on changing Wall Street in any significant fashion. His senior staff, while making noises about reforms, are not all on board either.
I am going to make a bet. Nothing much will change on Wall Street. It is 5 minutes to game end and the score is Wall Street 4, Joe Public 0. It will take a miracle to even the score. No way. His New York Times column is reproduced here:
By PAUL KRUGMAN
Published: September 20, 2009
In the grim period that followed Lehman’s failure, it seemed inconceivable that bankers would, just a few months later, be going right back to the practices that brought the world’s financial system to the edge of collapse. At the very least, one might have thought, they would show some restraint for fear of creating a public backlash.
But now that we’ve stepped back a few paces from the brink — thanks, let’s not forget, to immense, taxpayer-financed rescue packages — the financial sector is rapidly returning to business as usual. Even as the rest of the nation continues to suffer from rising unemployment and severe hardship, Wall Street paychecks are heading back to pre-crisis levels. And the industry is deploying its political clout to block even the most minimal reforms.
The good news is that senior officials in the Obama administration and at the Federal Reserve seem to be losing patience with the industry’s selfishness. The bad news is that it’s not clear whether President Obama himself is ready, even now, to take on the bankers.
Credit where credit is due: I was delighted when Lawrence Summers, the administration’s ranking economist, lashed out at the campaign the U.S. Chamber of Commerce, in cooperation with financial-industry lobbyists, is running against the proposed creation of an agency to protect consumers against financial abuses, such as loans whose terms they don’t understand. The chamber’s ads, declared Mr. Summers, are “the financial-regulatory equivalent of the death-panel ads that are being run with respect to health care.”
Yet protecting consumers from financial abuse should be only the beginning of reform. If we really want to stop Wall Street from creating another bubble, followed by another bust, we need to change the industry’s incentives — which means, in particular, changing the way bankers are paid.
What’s wrong with financial-industry compensation? In a nutshell, bank executives are lavishly rewarded if they deliver big short-term profits — but aren’t correspondingly punished if they later suffer even bigger losses. This encourages excessive risk-taking: some of the men most responsible for the current crisis walked away immensely rich from the bonuses they earned in the good years, even though the high-risk strategies that led to those bonuses eventually decimated their companies, taking down a large part of the financial system in the process.
The Federal Reserve, now awakened from its Greenspan-era slumber, understands this problem — and proposes doing something about it. According to recent reports, the Fed’s board is considering imposing new rules on financial-firm compensation, requiring that banks “claw back” bonuses in the face of losses and link pay to long-term rather than short-term performance. The Fed argues that it has the authority to do this as part of its general mandate to oversee banks’ soundness.
But the industry — supported by nearly all Republicans and some Democrats — will fight bitterly against these changes. And while the administration will support some kind of compensation reform, it’s not clear whether it will fully support the Fed’s efforts.
I was startled last week when Mr. Obama, in an interview with Bloomberg News, questioned the case for limiting financial-sector pay: “Why is it,” he asked, “that we’re going to cap executive compensation for Wall Street bankers but not Silicon Valley entrepreneurs or N.F.L. football players?”
That’s an astonishing remark — and not just because the National Football League does, in fact, have pay caps. Tech firms don’t crash the whole world’s operating system when they go bankrupt; quarterbacks who make too many risky passes don’t have to be rescued with hundred-billion-dollar bailouts. Banking is a special case — and the president is surely smart enough to know that.
All I can think is that this was another example of something we’ve seen before: Mr. Obama’s visceral reluctance to engage in anything that resembles populist rhetoric. And that’s something he needs to get over.
It’s not just that taking a populist stance on bankers’ pay is good politics — although it is: the administration has suffered more than it seems to realize from the perception that it’s giving taxpayers’ hard-earned money away to Wall Street, and it should welcome the chance to portray the G.O.P. as the party of obscene bonuses.
Equally important, in this case populism is good economics. Indeed, you can make the case that reforming bankers’ compensation is the single best thing we can do to prevent another financial crisis a few years down the road.
It’s time for the president to realize that sometimes populism, especially populism that makes bankers angry, is exactly what the economy needs.
A Tired Old Movie
Here we go again, just as in Vietnam. Read this article.
The US military is calling for more troops to be sent in Afghanistan. Without it, the military predicts failure.
I don't blame the military. When the going is not well, they will always call for more troops. You can easily conclude that the enemy is stronger than you and therefore you need more help.
Stronger does not mean the "other" side has more troops or more fire power. It means the objective in Afghanistan of securing the country for your own military and political is beyond your capability given the level of troops.
Question is this: how much more is enough? That's the central issue in the logic of escalation. It is a moving target.
US's Vietnam effort failed for similar reasons. The objective of turning the country in favor of the US/Saigon alliance was beyond the capability of the US. Why was that has been the subject of many many books.
Unless you can win the hearts and minds of the people you want the help, over time the war becomes unacceptable to any civilized people.
Remember that famous interview by a CBS TV reporter with a marine who had just torched a Vietnamese village: "Sir, we need to burn down this village in order to save it."
If the Afghan tribes are not risking their lives to support the West in their own country and are instead giving aid and comfort to Taliban and Al Qaeda, however reluctantly, the ending of this tired old movie is a sad and a predictable one.
Afghanistan was not called the burial place of empires for nothing.
The US military is calling for more troops to be sent in Afghanistan. Without it, the military predicts failure.
I don't blame the military. When the going is not well, they will always call for more troops. You can easily conclude that the enemy is stronger than you and therefore you need more help.
Stronger does not mean the "other" side has more troops or more fire power. It means the objective in Afghanistan of securing the country for your own military and political is beyond your capability given the level of troops.
Question is this: how much more is enough? That's the central issue in the logic of escalation. It is a moving target.
US's Vietnam effort failed for similar reasons. The objective of turning the country in favor of the US/Saigon alliance was beyond the capability of the US. Why was that has been the subject of many many books.
Unless you can win the hearts and minds of the people you want the help, over time the war becomes unacceptable to any civilized people.
Remember that famous interview by a CBS TV reporter with a marine who had just torched a Vietnamese village: "Sir, we need to burn down this village in order to save it."
If the Afghan tribes are not risking their lives to support the West in their own country and are instead giving aid and comfort to Taliban and Al Qaeda, however reluctantly, the ending of this tired old movie is a sad and a predictable one.
Afghanistan was not called the burial place of empires for nothing.
The State of Macro Economics - End it!
The back and forth between fresh and saltwater economists has to end soon. The details are of interest only to the few ordained in what they think is higher mathematics. Most mathematicians I have talked to, in fact, consider the sort of math economists indulge in suspect in their selective usage -- a bit like shopping in supermarket. You take what you like on different shelves without too much attention how a math theorem is proved.
The "big picture" of this whole debate is not all that vague.
Market economics, read some version of laissez-faire, has to be the best available tool to create more wealth than any other know systems. To paraphrase the immortal words of Winster Churchill, "Free market is the worst economic system, except for all the others."
However, it is also clear that to allow total freedom in the economy is like allowing two football teams to police their matches without a competent, fair and uncorrupted referee. In other words, we need a government.
Here is the perennial problem. Call it "human conditions". You can't live with it (government), you can't live without it.
Most governments are indeed incompetent, unfair and corrupt. But if you totally abolish them, the end result may well be a state of permanent chaos and wars, a la tribal conflicts in Africa.
So what to do?
Well, free market won't work without a fair referee. To ensure the referee stay clean and fair, you need a political system to enforce. Ergo, democracy.
And then you need to invest in a competent government. It sounds easy, but history shows it ain't. Otherwise, we won't have so many underdeveloped countries whose biggest problem lies squarely in dismal public governance. Ergo they have lousy governments.
Ask any African, Latin American, Vietnamese, North Korean, Thai, and most recently Americans.
There are not so many secrets in economic or, indeed, political theories. It's the people, "stupid".
We cannot NOT have laissez-faire, but we cannot have total laissez-faire. We cannot allow a government to become "too" big, yet we cannot NOT have a government.
To find the "optimal" mix will continue to be a huge challenge for all of us. For there isn't one simple answer. The rest is just conversation. Sometimes it is interesting. Often it is self-indulgent for academics.
The "big picture" of this whole debate is not all that vague.
Market economics, read some version of laissez-faire, has to be the best available tool to create more wealth than any other know systems. To paraphrase the immortal words of Winster Churchill, "Free market is the worst economic system, except for all the others."
However, it is also clear that to allow total freedom in the economy is like allowing two football teams to police their matches without a competent, fair and uncorrupted referee. In other words, we need a government.
Here is the perennial problem. Call it "human conditions". You can't live with it (government), you can't live without it.
Most governments are indeed incompetent, unfair and corrupt. But if you totally abolish them, the end result may well be a state of permanent chaos and wars, a la tribal conflicts in Africa.
So what to do?
Well, free market won't work without a fair referee. To ensure the referee stay clean and fair, you need a political system to enforce. Ergo, democracy.
And then you need to invest in a competent government. It sounds easy, but history shows it ain't. Otherwise, we won't have so many underdeveloped countries whose biggest problem lies squarely in dismal public governance. Ergo they have lousy governments.
Ask any African, Latin American, Vietnamese, North Korean, Thai, and most recently Americans.
There are not so many secrets in economic or, indeed, political theories. It's the people, "stupid".
We cannot NOT have laissez-faire, but we cannot have total laissez-faire. We cannot allow a government to become "too" big, yet we cannot NOT have a government.
To find the "optimal" mix will continue to be a huge challenge for all of us. For there isn't one simple answer. The rest is just conversation. Sometimes it is interesting. Often it is self-indulgent for academics.
Sunday, September 20, 2009
Giving Economists a Bad Name
Greg Mankiw is a famous professor of economics at Harvard. He writes one of the most popular blogs in cyberspace. He worked for George W Bush, not a crime for sure, and is against much of Obama's economic policy based on what he has been writing. For the record, so am I.
He is not in favor of the Obama's medical plan. I am neutral on this issue. However, I do find his latest thought on medical cost disappointing because it is disingenuous. Here is an except....
"...Imagine that someone invented a pill even better than the one I take. Let’s call it the Dorian Gray pill, after the Oscar Wilde character. Every day that you take the Dorian Gray, you will not die, get sick, or even age. Absolutely guaranteed. The catch? A year’s supply costs $150,000.
Anyone who is able to afford this new treatment can live forever. Certainly, Bill Gates can afford it. Most likely, thousands of upper-income Americans would gladly shell out $150,000 a year for immortality..."
His full article is here.
He is defending the high cost of medical care in the US implicitly because it takes money to invent a pill and by inference the high cost of such care in the US is justifiable. His article ignores totally the well-documented argument that medical cost/GDP is much lower in other advanced countries with a government sponsored plan that has produced as good if not better result in health care.
Read this for comparative costs of US vs Europe.
He is not in favor of the Obama's medical plan. I am neutral on this issue. However, I do find his latest thought on medical cost disappointing because it is disingenuous. Here is an except....
"...Imagine that someone invented a pill even better than the one I take. Let’s call it the Dorian Gray pill, after the Oscar Wilde character. Every day that you take the Dorian Gray, you will not die, get sick, or even age. Absolutely guaranteed. The catch? A year’s supply costs $150,000.
Anyone who is able to afford this new treatment can live forever. Certainly, Bill Gates can afford it. Most likely, thousands of upper-income Americans would gladly shell out $150,000 a year for immortality..."
His full article is here.
He is defending the high cost of medical care in the US implicitly because it takes money to invent a pill and by inference the high cost of such care in the US is justifiable. His article ignores totally the well-documented argument that medical cost/GDP is much lower in other advanced countries with a government sponsored plan that has produced as good if not better result in health care.
Read this for comparative costs of US vs Europe.
The Rage!
Frank Rich, the NY Times columnist, was a fervent Obama supporter in his columns when Obama was campaigning. His writings were lethal against the right wing GOP, Fox News, anti-Obama crowd.
Glenn Beck is the controversial Fox News TV so-called newsman who, like his cohorts on Fox News, uses that platform to express their opinions more than reporting news.
Now we find Frank Rich telling us Beck is not all wrong at all when he criticizes Obama on his economic policies.
In the Asian context, it is like ex Taiwan President Chen Shui-bian saying KMT, his life-long enemies, were not all that wrong at all.
So, you know there is something very fundamental going on. Frank Rich and Beck are both expressing a rage felt across the land about Obama's kids glove treatment of Wall Street bestowing on them billions without getting much in return.
You can read Frank Rich's column here.
Glenn Beck is the controversial Fox News TV so-called newsman who, like his cohorts on Fox News, uses that platform to express their opinions more than reporting news.
Now we find Frank Rich telling us Beck is not all wrong at all when he criticizes Obama on his economic policies.
In the Asian context, it is like ex Taiwan President Chen Shui-bian saying KMT, his life-long enemies, were not all that wrong at all.
So, you know there is something very fundamental going on. Frank Rich and Beck are both expressing a rage felt across the land about Obama's kids glove treatment of Wall Street bestowing on them billions without getting much in return.
You can read Frank Rich's column here.
The State of Macro Economics 4
In rereading David Levine's complaint about Paul Krugman's complaint, I couldn't help feel this is the sort of things you hear in a bitter divorce. How? It is just petty.
Krugman was not of course totally correct. What ailed macroeconomics is more than fresh vs saltwater. That too. The idea that mathematical models can describe an entire economy and then predict what it may become is rather ambitious to be polite.
By contrast, in particle physics, the Standard Model is based firmly in probabilistic statements.
Worse, the arrogance of economists is usually unbearable. It is in no small part helped by this equally arrogant Nobel Prizes of Economic Science handed every year to certify the "scientific" accomplishment of economic theories.
What is wrong with economics?
Nothing -- until you take it too seriously.
Human behavior is intrinsically difficult to "model" by mathematics. Do we understand how we behave in a couple situation? Parents and children? Can we "model" their behavior by mathematics?
Yet economic models are passed out as if they really meant something "scientific".
A cursory look of professional articles, like the one I posted, should be a warning sign to anyone making an honest living that these academic economists are living in a different world pretending they could "model" what we do.
The Levine article is fundamentally flawed. He didn't really answer Krugman's complaint. True you can always find this or that economist talking about bubbles, depressions and unexpected disasters.
Yet, pick any serious textbooks on macro, look at any top 10 PhD programs in economics, those cases are never, ever at the center of studies
99% of all models PhD students MUST study at freshwater universities describe a world where little of what we have witnessed happened. As Krugman correctly pointed out at those places if Keynes was mentioned at all, it would be presented as a case for dismissal.
Krugman is correct in pointing out the principal way economics is taught is terribly wrong, especially at freshwater universities. He was somewhat too generous with saltwater universities that have placed too much importance on modeling using mathematics increasingly irrelevant to realities, even when these saltwater types are not free market ideologues like the Chicago guys.
Krugman was not of course totally correct. What ailed macroeconomics is more than fresh vs saltwater. That too. The idea that mathematical models can describe an entire economy and then predict what it may become is rather ambitious to be polite.
By contrast, in particle physics, the Standard Model is based firmly in probabilistic statements.
Worse, the arrogance of economists is usually unbearable. It is in no small part helped by this equally arrogant Nobel Prizes of Economic Science handed every year to certify the "scientific" accomplishment of economic theories.
What is wrong with economics?
Nothing -- until you take it too seriously.
Human behavior is intrinsically difficult to "model" by mathematics. Do we understand how we behave in a couple situation? Parents and children? Can we "model" their behavior by mathematics?
Yet economic models are passed out as if they really meant something "scientific".
A cursory look of professional articles, like the one I posted, should be a warning sign to anyone making an honest living that these academic economists are living in a different world pretending they could "model" what we do.
The Levine article is fundamentally flawed. He didn't really answer Krugman's complaint. True you can always find this or that economist talking about bubbles, depressions and unexpected disasters.
Yet, pick any serious textbooks on macro, look at any top 10 PhD programs in economics, those cases are never, ever at the center of studies
99% of all models PhD students MUST study at freshwater universities describe a world where little of what we have witnessed happened. As Krugman correctly pointed out at those places if Keynes was mentioned at all, it would be presented as a case for dismissal.
Krugman is correct in pointing out the principal way economics is taught is terribly wrong, especially at freshwater universities. He was somewhat too generous with saltwater universities that have placed too much importance on modeling using mathematics increasingly irrelevant to realities, even when these saltwater types are not free market ideologues like the Chicago guys.
Saturday, September 19, 2009
The State of Macro Economics 3
Professor of Economics at Washington University, St Louis, David Levine, wrote a sarcastic rebuttal of Paul Krugman's famous essay on the profession. In Levine's essay, he used this article as one "proof" that Krugman had no idea what he was talking about.
Do take a quick look. Quick is the key. If you know how to translate it into human language about inflation, which should have been a simple enough concept, let me know.
Levine's letter is HERE.
Do take a quick look. Quick is the key. If you know how to translate it into human language about inflation, which should have been a simple enough concept, let me know.
Levine's letter is HERE.
This is Wrong!
Private firms should be able to pay whatever they want to their employees. What the US Government is proposing now is not just too late and impossible to implement lest they are run directly by the government, it is counter to the spirit of capitalism. Read this.
It is up to the Boards of Directors of Wall Street and other firms to ensure that what is done within the firms are fair and proper to the shareholders.
"Excessive" payments in the past that led to bonus-fixated executives to sell whatever toxic assets to whichever unsuspecting clients was not "clean and proper". They, as we know now, hurt shareholders' interest. Along the way such tactics violated various checks and balances by SEC or other regulatory agencies which these agencies had failed to implement.
It is just mind-boggling to see the government trying to work with Wall Street with the same wrecking crews responsible for excessive payment checks as well as selling toxics.
This proposal to restrict salaries on Wall Street which I doubt will come to pass sounds more like a PR tactic to placate the boiling resentment of taxpayers who see Wall Street obscene bonuses continue to rise while theirs are either cut or, for many, worse -- they are out of a job.
It is up to the Boards of Directors of Wall Street and other firms to ensure that what is done within the firms are fair and proper to the shareholders.
"Excessive" payments in the past that led to bonus-fixated executives to sell whatever toxic assets to whichever unsuspecting clients was not "clean and proper". They, as we know now, hurt shareholders' interest. Along the way such tactics violated various checks and balances by SEC or other regulatory agencies which these agencies had failed to implement.
It is just mind-boggling to see the government trying to work with Wall Street with the same wrecking crews responsible for excessive payment checks as well as selling toxics.
This proposal to restrict salaries on Wall Street which I doubt will come to pass sounds more like a PR tactic to placate the boiling resentment of taxpayers who see Wall Street obscene bonuses continue to rise while theirs are either cut or, for many, worse -- they are out of a job.
Economics of NeoCon!
Irving Kristol has died. Known popularly as the Father of Neo Conservatism in the US, Kristol's proteges including his famous son, William Kristol, have had a huge influence on the Bush Administration. Thanks to Professor Brad deLong's blog at his Berkeley campus, I was greatly amused by Mr Kristol's comments in his frank moments:
Irving Kristol explains where the economics articles he published in The Public Interest came from:
Among the core social scientists around The Public Interest there were no economists.... This explains my own rather cavalier attitude toward the budget deficit and other monetary or fiscal problems. The task, as I saw it, was to create a new majority, which evidently would mean a conservative majority, which came to mean, in turn, a Republican majority - so political effectiveness was the priority, not the accounting deficiencies of government...
Now it is clear. He and his influential neo conservative never gave 2 hoots about economic policies!
Irving Kristol explains where the economics articles he published in The Public Interest came from:
Among the core social scientists around The Public Interest there were no economists.... This explains my own rather cavalier attitude toward the budget deficit and other monetary or fiscal problems. The task, as I saw it, was to create a new majority, which evidently would mean a conservative majority, which came to mean, in turn, a Republican majority - so political effectiveness was the priority, not the accounting deficiencies of government...
Now it is clear. He and his influential neo conservative never gave 2 hoots about economic policies!
The State of Macro Economics 2
I forgot about this well-written article. Read here.
No American newspaper or magazine has done such a good job explaining economics to the lay public.
No American newspaper or magazine has done such a good job explaining economics to the lay public.
Introducing....
Two young students of economics who are only 20 years. They write well. A good read and a new discovery. Well done, fellas.
Click here.
Click here.
The State of Macro Economics
Thanks to Paul Krugman, the entire economics profession is undergoing a rare soul searching that ranges from indignation to Krugman's criticism to reinforcing his argument with new criticisms.
The attached note written by one of the calmer academics tries to be analytical and fair. It is. Yet it has the unintended effect, at least to me, of confirming how utterly out-to-lunch the mainstream academics have been in connecting with the world in which we live in.
Yes, they supposedly study the economy we all help build every day, 365 days a year. But if you can decipher what they are saying in plain English about our economy of which we are a part, I am all ears.
I salute their tireless effort. Don't get me wrong. But I cannot help but feel they are on a different planet solving irrelevant problems using obscure language and mathematics that are really only interesting to their own "fraternity" unrelated to ours.
And that's why I quit wanting to be an academic economist many years ago. For the record my macro economics professors back then represented both fresh and saltwater varieties and I found both wanting.
The attached note written by one of the calmer academics tries to be analytical and fair. It is. Yet it has the unintended effect, at least to me, of confirming how utterly out-to-lunch the mainstream academics have been in connecting with the world in which we live in.
Yes, they supposedly study the economy we all help build every day, 365 days a year. But if you can decipher what they are saying in plain English about our economy of which we are a part, I am all ears.
I salute their tireless effort. Don't get me wrong. But I cannot help but feel they are on a different planet solving irrelevant problems using obscure language and mathematics that are really only interesting to their own "fraternity" unrelated to ours.
And that's why I quit wanting to be an academic economist many years ago. For the record my macro economics professors back then represented both fresh and saltwater varieties and I found both wanting.
Friday, September 18, 2009
Winners & Losers?
Typical slapdash mainstream journalism. Read Newsweek's facile report.
Missing among the Winners are: Bob Rubin, chair of Citicorp, ex chairman of Goldman Sachs, on whose watch Citicorp went wild with its derivatives and had to be rescued by Uncle Sam but he got away with a cool $500 million in cash compensation and stock options.
Alan Greenspan who kept interest rates low and lower fueling a hot bubble.
Hank Greenberg of AIG who poisoned the company's integrity by allowing creative accounting misrepresenting the truth financial conditions of the firm but paid only $15 million to SEC to settle his criminality.
Christopher Cox, former chair of SEC, who turned the other way while Wall Street and the Rating Agencies scratched each other's back misrepresenting the true nature of firms given AAA ratings.
John Mack, chairman of Morgan Stanley, who managed to squash a near certain verdict of wrong doings through his political connections.
You got the drift?
Missing among the Winners are: Bob Rubin, chair of Citicorp, ex chairman of Goldman Sachs, on whose watch Citicorp went wild with its derivatives and had to be rescued by Uncle Sam but he got away with a cool $500 million in cash compensation and stock options.
Alan Greenspan who kept interest rates low and lower fueling a hot bubble.
Hank Greenberg of AIG who poisoned the company's integrity by allowing creative accounting misrepresenting the truth financial conditions of the firm but paid only $15 million to SEC to settle his criminality.
Christopher Cox, former chair of SEC, who turned the other way while Wall Street and the Rating Agencies scratched each other's back misrepresenting the true nature of firms given AAA ratings.
John Mack, chairman of Morgan Stanley, who managed to squash a near certain verdict of wrong doings through his political connections.
You got the drift?
Team Obama Incompetence
Jon Stewart said it best.
"..Stewart pokes fun at President Obama's frustrating tendency to speak about the financial reform as work in progress. Namely, he quotes the President as saying "We've got to close the financial loopholes were at the heart of the crisis." Here's Stewart's response:
"We've got to close? We're going to close....We gave them $700 billion BEFORE we closed the loopholes?"
Read more at: http://www.huffingtonpost.com/2009/09/17/daily-show-on-lehman-brot_n_290677.html
It is a sad commentary on US mainstream journalism for its lame performance during 8 years of Bush Administration that in a poll most Americans voted Jon Stewart, a comedian with his own daily "news" show, the most trusted "journalist".
The quote above is a gem that bested many "investigative" reporting.
"..Stewart pokes fun at President Obama's frustrating tendency to speak about the financial reform as work in progress. Namely, he quotes the President as saying "We've got to close the financial loopholes were at the heart of the crisis." Here's Stewart's response:
"We've got to close? We're going to close....We gave them $700 billion BEFORE we closed the loopholes?"
Read more at: http://www.huffingtonpost.com/2009/09/17/daily-show-on-lehman-brot_n_290677.html
It is a sad commentary on US mainstream journalism for its lame performance during 8 years of Bush Administration that in a poll most Americans voted Jon Stewart, a comedian with his own daily "news" show, the most trusted "journalist".
The quote above is a gem that bested many "investigative" reporting.
Justice on Wall Street - 3?
A classic Wall Street question. If a talented trader and his division are capable of generating a billion dollar profits, shouldn't he and his staff be entitled to a percentage of that profits. Perhaps a $100 million a year? Sounds reasonable? Ask say Lloyd Blankfein, he would most likely say yes.
This is not a hypothetical situation. A trader at Citibank is expected to walk away with $100 million bonus because his trading division has been very profitable. Read this.
Spare a moment to think through this. A George Soros,, founder and owner of Soros Management who has generated many billions over the years starting from scratch with a two person office has earned his bonuses by proving to the world that he did it "his way", none others.
Citicorp, a giant corporation with a global reach, whose origin goes back to Citibank, founded in 1812, has access to more privileged information without much cost of gathering and at a speed unavailable to most of us. So a trader working for Citicorp would have an advantage that comes with the corporation he had done nothing to contribute.
To reward him with a $100 million without rewarding to many others in the same corporation to have helped gathered whatever information he needed, or who have given the trader insights to make a big profit for the company is simply mindless and unfair which was, indeed, symptomatic of the twisted values during a bubble.
By the way if he had bet wrong, the shareholders of Citicorp would have suffered, and indeed, many shareholders and clients of Wall Street firms have due to that very same reason.
But when he bet right, he and other traders would walk away with a prince ransom.
If Soros had bet wrong, his own personal pocket would have suffered along with his clients. The worse that could happen to the Andrew Halls of the world would be just their job.
So, it would be interesting to see how the US Government is going to handle this case. The guy had a contract signed, of course, during the bubble years that, I guess, would bind Citi legally to pay him.
During those years Wall Street firms would sign any similar contracts to traders who they thought were geniuses. Those Wall Street leaders forgot and will continue to forget that in a bubble "everyone" is a genius, until the bubble bursts.
This is not a hypothetical situation. A trader at Citibank is expected to walk away with $100 million bonus because his trading division has been very profitable. Read this.
Spare a moment to think through this. A George Soros,, founder and owner of Soros Management who has generated many billions over the years starting from scratch with a two person office has earned his bonuses by proving to the world that he did it "his way", none others.
Citicorp, a giant corporation with a global reach, whose origin goes back to Citibank, founded in 1812, has access to more privileged information without much cost of gathering and at a speed unavailable to most of us. So a trader working for Citicorp would have an advantage that comes with the corporation he had done nothing to contribute.
To reward him with a $100 million without rewarding to many others in the same corporation to have helped gathered whatever information he needed, or who have given the trader insights to make a big profit for the company is simply mindless and unfair which was, indeed, symptomatic of the twisted values during a bubble.
By the way if he had bet wrong, the shareholders of Citicorp would have suffered, and indeed, many shareholders and clients of Wall Street firms have due to that very same reason.
But when he bet right, he and other traders would walk away with a prince ransom.
If Soros had bet wrong, his own personal pocket would have suffered along with his clients. The worse that could happen to the Andrew Halls of the world would be just their job.
So, it would be interesting to see how the US Government is going to handle this case. The guy had a contract signed, of course, during the bubble years that, I guess, would bind Citi legally to pay him.
During those years Wall Street firms would sign any similar contracts to traders who they thought were geniuses. Those Wall Street leaders forgot and will continue to forget that in a bubble "everyone" is a genius, until the bubble bursts.
Remember those Rating Agencies?
Finally, the Securities & Exchange Commission (SEC) in the US seems to be doing something about the rating agencies that in my view had criminally helped pour oil on fire during the financial bubbles putting on knowingly high ratings on junk. Read this.
However, to send a clearer message to the agencies management, why not put them on trial for providing false information which would be against SEC regulations? Once some of those senior guys end up behind bars, these agencies, and yes, their respective negligent boards would then and only then behave differently.
However, to send a clearer message to the agencies management, why not put them on trial for providing false information which would be against SEC regulations? Once some of those senior guys end up behind bars, these agencies, and yes, their respective negligent boards would then and only then behave differently.
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