That is the new and oddly underreported book by Mark Kurlansky, about Clarence Birdseye and the early history of frozen food. I found it consistently good and enjoyable, here is one excerpt:
Birdseye asked himself many questions about food and survival in the subarctic. Why, he wondered, did people in Labrador eat lean food in the summer but a tremendous amount of fat in the winter? The ultimate winter survival dish was something he called bruise, which is sometimes known as brewis, a combination of dried and salted food mixed with a tremendous amount of fat. Usually it was salt cod, hardtack, flour, and water, baked hard and mixed with cubed salt pork, and then boiled and served like a hash with huge globs of melted pork fat. Bowls of melted fat were often served on the table to spoon onto food. Birdseye laughed when heard a host say, “Have some more grease on your bruise,” but everyone then took a few spoonfuls. It was a Sunday morning breakfast favorite. He remembered that people also ate a great deal of grease in the Southwest, where it was hot in the summer. They would open a can of corn and eat it with pork fat.
Here is one picture of fish and brewis. I found this book especially interesting on the early history of European-settled Labrador.
In a fascinating research note*, Matt King of Citigroup calculates the outflows of capital from various euro zone nations, in particular Italy and Spain. He concludes that Italy saw 160 billion euros exit in 2011, while Spain lost 100 billion euros, in a mixture of bank withdrawals and sales of government and corporate bonds. He thinks a further 200 billion euros could follow.
…Foreign bank deposits have fallen 64% in Greece, 55% in Ireland and 37% in Portugal; in Italy, the fall is 34% and Spain 13%. Foreign government bond holdings have dropped 56% in Greece, 18% in Ireland and 25% in Portugal; in Italy the fall is 12% and Spain 18%. So if Italy and Spain were to move to the average for the other three, a further 200 billion euros would flow out.
A final thought. This is another example of the nationalisation of markets, in which official flows are steadily replacing private sector capital. It is a trend that seems unstoppable.
Here is a bit more.
You’ve heard how microcredit was born. In a nation long shackled by British rule and wracked by famine, a brilliant man was seized with a desire to strike a blow against the poverty all about him. Defying common sense and the skepticism of his colleagues, he began lending tiny sums out of his own pocket to poor people, which they were to invest in tiny businesses. He demanded no collateral, only the vouchsafe of the borrowers’ peers. The borrowers rewarded his faith with punctual repayment. In time, his experiment spawned a national movement that delivered millions of loans to poor men and women and broke the power of money lenders.
The hero of this story is…Jonathan Swift, author of Gulliver’s Travels.
Swift developed the main ideas of microcredit–small sums, co-signers on the loan who knew the recipient, loans to women–in the 1730s. Although the system did not grow large in his lifetime, by the 1840s Irish microcredit institutions served a fifth of the population of Ireland.
The quote and information are from David Roodman’s excellent book Due Diligence: An Impertinent Inquiry into Microfinance. Roodman is a remarkable scholar, equally at ease collecting information in the slums of Bangladesh as writing complex computer code, and Due Diligence is a very good book not just on microcredit but on development more generally.
(Loyal readers may recall that Tyler also noted Swift’s connection to microcredit in a post from 2006.)
Nonetheless those are the words which come to mind, to me, in my safe Fairfax home, far from China and European bank jogs:
Chinese consumers of thermal coal and iron ore are asking traders to defer cargos and – in some cases – defaulting on their contracts, in the clearest sign yet of the impact of the country’s economic slowdown on the global raw materials markets.
The deferrals and defaults have only emerged in the last few days, traders said, and have contributed to a drop in iron ore and coal prices.
“We have some clients in China asking us this week to defer volumes,” said a senior executive with a global commodities trading house, who warned that consumers were cautious. “China is hand to mouth at the moment.”
A senior executive at another large trading house also confirmed there had been defaults and deferrals in both thermal coal and iron ore.
Here is more, and here is a bit more detail.
Some 65 per cent of the senior executives questioned by Accenture said they had moved their manufacturing operations in the past 24 months, with two-fifths saying the facilities had been relocated to the US. China was the second destination for relocated factories, with 28 per cent, followed by Mexico with 21 per cent.
Here is more.
…experts and consumers agreed in aggregate about the quality of a book.
Amazon reviewers were more likely to give a favourable review to a debut author, which the Harvard academics said suggested that “one drawback of expert reviews is that they may be slower to learn about new and unknown books”.
Professional critics were more positive about prizewinning authors, and “more favourable to authors who have garnered other attention in the press (as measured by number of media mentions outside of the review)”.
Discovering that an author’s connection to a media outlet increased their chances of being reviewed by roughly 25%, and that the resulting review was 5% more favourable on average, the academics then investigated whether this was down to collusion.
They concluded that the bias was down to the media outlets aiming their reviews at their audience, “who have a preference for books written by their own journalists”, rather than collusion.
Here is more, written up by The Guardian. The research paper, by Michael Luca, is here. It is not his first published paper, and he teaches at Harvard Business School.
Rather than demanding an end to default-prone subprime lending funded with hair-triggered short-term debt, bank critics have, ironically, demanded an end to proprietary trading, which they view as unnecessarily risky, but which was inconsequential to the cause of the Crisis. In a world where banks underwrite and trade risk, what constitutes proprietary trading? When a bank takes credit-default risk by making aloan, is it taking proprietary risk? It is, without a doubt. But loaning money is what banks do. When a bank like Goldman Sachs seeks to unwind that risk by shorting mortgages prior to the downturn, is that proprietary trading? Yes. So is borrowing short and lending long. With banks now primarily underwriting, pricing, and trading risk rather than merely funding loans, restrictions on proprietary trading unnecessarily imperil banks and distort capital markets to restrict banks to only the long side of the trade. restricting banks to long-only positions substantially increases withdrawals in the event of a panic.
I would stress that the real problems come when the overwhelming majority of banks go heavily long on some fairly simple assets — usually real estate — in an overly optimistic way. Think Ireland, Iceland and the United States during the last crisis, among many other instances. Once the short-term debt behind those banks starts to unravel, all hell breaks loose and the central bank can at best limit but not stop the carnage. That is the main problem financial regulation should be trying to address and it isn’t easy.
I am much less worried about “rogue trades” or “rogue investments” at individual banks (or non-banks), even very large ones. Such trades surely exist: think LTCM or even Continental Illinois. Ex post, there is usually a way to plug the gap, if only by having the Fed backstop a deal. After all, the rest of the banking system is sound in these scenarios. Prop trading may increase the chance of this second problem, but arguably it decreases the chance of the first and larger problem.
You can buy Conard’s stimulating book, Unintended Consequences, here. Conard, by the way, does object to how the government implicitly subsidizes the short-term debt of the major U.S. banks and he views that as the root of the problem behind proprietary trading, not the trading itself.
EK: To go back to Krugman, if he were sitting here, he’d say in this crisis there’s been no evidence anywhere that cutting deficits leads to growth. We’ve not seen it in the euro zone or the UK. And he’d say the Reinhart/Rogoff story is a correlation story. It doesn’t prove that high debt always and everywhere hurts growth.
TC: Go look at Sweden. Here’s what Sweden did. They cut their spending and their taxes. They have the best growth rate in Europe. They had a surplus this year. They had growth at six-plus percent. They actually did a Reagan style approach to their problem by cutting spending and cutting taxes. And they’re the fastest growing with a decline in their debt-to-GDP ratio.
EK: But correct me if I’m wrong, but if I recall, Sweden’s monetary policy went towards a very sharp devaluation, they’ve been driven by export growth, and alongside Israel, they’ve been more aggressive than any other central bank in the world. They’ve done stuff that if we did it here, people would lose their minds.
TC: I think there are monetary parts to that. But their finance minister put in place tough stuff. They had people who left Sweden because of the tax ratio. Now they’ve moved back. And it’s not a perfect example, but it’s an exception to the Krugman story.
The entire dialogue is interesting, noting that, as Ezra points out, Coburn is more worried about inflation than he needs to be.
Divorce lawyers and wedding planners have been gearing up for the Facebook IPO, waiting for the influx of wealth in Silicon Valley to stir up drama in romantic relationships, for better and for worse.
“When Google went public, there was a wave of divorces. When Cisco went public there was a wave of divorces,” says Steve Cone, a divorce attorney based in Palo Alto, near the social network’s Menlo Park headquarters. “I expect a similar wave shortly after Facebook goes public.”
There is more at the link.
Edward Conard, author of Unintended Consequences: Why Everything You’ve Been Told About the Economy is Wrong, offers a hypothesis. He suggests the underlying cause is the (relatively recent) prevalence of risk-averse foreign capital:
With an abundance of risk-averse offshore capital, the constraint to increase investment and risk taking has been the capacity of risk underwriters, not capital providers. Today, Wall Street uses financial innovation to decouple risk from investment capital and predominantly sells risk to risk underwriters, which is no different from an insurance broker or insurance company. Wall Street deconstructs, prices, underwrites, syndicates, trades, and makes markets for risk. Because Wall Street now performs the more abstract function of syndicating risk rather than merely raising capital, people — even people as well informed as former president Bill Clinton — have naively concluded that these transactions serve “no economic purpose.” Risk underwriting is every bit as important as funding investment, perhaps even more so in today’s economy where the trade deficit leaves us awash in risk-averse short-term debt to fund investment provided someone else underwrites the risk.
So far I find parts of this book brilliant and other parts dead wrong. In any case it is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.
There is much in the review, excerpt:
In their narrow focus on inclusive institutions, however, the authors ignore or dismiss other factors. I mentioned earlier the effects of an area’s being landlocked or of environmental damage, factors that they don’t discuss. Even within the focus on institutions, the concentration specifically on inclusive institutions causes the authors to give inadequate accounts of the ways that natural resources can be a curse. True, the book provides anecdotes of the resource curse (Sierra Leone cursed by diamonds), and of how the curse was successfully avoided (in Botswana). But the book doesn’t explain which resources especially lend themselves to the curse (diamonds yes, iron no) and why. Nor does the book show how some big resource producers like the US and Australia avoid the curse (they are democracies whose economies depend on much else besides resource exports), nor which other resource-dependent countries besides Sierra Leone and Botswana respectively succumbed to or overcame the curse. The chapter on reversal of fortune surprisingly doesn’t mention the authors’ own interesting findings about how the degree of reversal depends on prior wealth and on health threats to Europeans.
Do read the whole review (that is not just the usual cliched command to do so), and I will gladly link to any response by Acemoglu and Robinson. Here is Diamond’s bottom line:
My overall assessment of the authors’ argument is that inclusive institutions, while not the overwhelming determinant of prosperity that they claim, are an important factor. Perhaps they provide 50 percent of the explanation for national differences in prosperity. That’s enough to establish such institutions as one of the major forces in the modern world. Why Nations Fail offers an excellent way for any interested reader to learn about them and their consequences. Whereas most writing by academic economists is incomprehensible to the lay public, Acemoglu and Robinson have written this book so that it can be understood and enjoyed by all of us who aren’t economists.
1. Héctor Abad, Oblivion: A Memoir. A charming and intense memoir of a boy and his relationship to his father. It seems to be true, but it can be read profitably as either non-fiction or the equivalent of fiction. Recommended. Abad is still an underrated author in the United States.
2. Steve Coll, Private Empire: ExxonMobil and American Power. It’s OK enough, and certainly informative, but I found it a little boring. Somehow the organizing principles behind the material needed to be stronger.
3. Michael Dirda, On Conan Doyle: Or, the Whole Art of Storytelling. Short meditation on both the merits of Doyle beyond Sherlock Holmes and why fiction, and our responses to it, are and should be deeply strange. I very much liked it.
4. Nell Freudenberger, The Newlyweds. For modern fiction this is not too trendy, and it ends up being deeper than one expects. It is the story of an American man who meets his Bangladeshi bride over the internet and flies to Bangladesh to woo her and bring her back.
5. Arthur Herman, Freedom’s Forge: How American Business Produced Victory During World War II. I wish the book had more explicit economic content, but it is nonetheless an interesting look at the supply-side improvements which helped the American economy during World War II.
