Month: October 2011

Alleged Moscow markets in everything

Yet even they have nothing on the Moscow chef who killed his father-in-law and then allegedly served him to customers at his restaurant. According to police, the 54-year-old chef at the unnamed restaurant, well-known for its chebureki, or big meat-filled pastries, killed his 82-year-old father-in-law during a drunken brawl. Police refused to confirm or deny a report by tabloid Life News that the chef then ran his father-in-law’s body through a meat grinder in order to fill his chebureki – and serve them to customers for three days before being caught and sent to a psychiatric institution.

Here is more, oddly the article is on a different topic altogether, namely dealing with the snow in Moscow.  For the pointer I thank Chug Roberts.

Roger Kerr passes away

Here is the obituary, and here, this is very sad news for me.  Roger had a huge influence on my life.  I spent a good deal of time working for him and with him at the New Zealand Business Roundtable in Wellington and he was always up for a discussion and an argument.  He seemed to have boundless energy, and he played a key role in making New Zealand a sounder and better country.  A lot of my interest in economic policy comes from my time spent with Roger, most of all my interest in the institutional design of central banks but not just.  Roger expected you to be ready to discuss anything, at the drop of a hat, and I consider my time with Roger a major influence on my blogging.  He exposed me to the New Zealand classical liberal tradition and from that I saw a lot of deficiencies (and some strengths) of the North American traditions.  Roger will be missed but we all know that his influence extended far.

Assorted links

1. Dolphins have non-instrumental curiosity and orangutans have cultural transmission.

2. Phone storage trucks, markets in everything, also endangered species kakapo vomit remains.

3. Peter Chang update, including a feature filmDomestic mobility is way down, but still not for him.

4. They made me buy the new John Fahey box.

5. Peter Thiel’s latest project: independent entrepreneurial scientists.

Were non-bank banks actually a good idea all along?

I’ve been wondering that for the last few days.  These entities were capped and banned in the late 1980s but once upon a time Sears Roebuck and American Express offered full banking services and their financial arms grew at a rapid clip.  They took deposits but did not make commercial loans, thereby skirting banking legislation at the time and, I believe, avoiding FDIC premiums.

The big debate today is how to get more capitalization for the banks, and we have such absurdities as Basel III, not bad in spirit but somehow wishing that a bunch of essentially insolvent institutions magically had another $700 billion or so.  I say the way to recapitalize banks is to keep them well capitalized to begin with.  Indeed, we just bought a new microwave at Sears the other night.  These institutions have a lot of commercial capital on the line.

At the time non-bank banks were banned because many people feared — and I can see why –that the non-bank banks would take big risks, backed ultimately by taxpayer money.  (The banks also didn’t like the “unfair competition” and indeed it was unfair but of course it would have been fair had the model been allowed to spread more widely, allow more of them or by allowing commercial affiliation more generally, even mixed with commercial lending.)  Prescient, no?  Well, sort of.  In reality, it turned out that the non-non-bank banks (i.e., the banks) did that anyway.  With all the financial instruments and risky loans around, it is so much an extra problem that Sears Roebuck might initiate an overly aggressive lawnmower marketing strategy?  I don’t know.

I do see the potential downside to the non-bank bank model, namely that systemic risk can become bigger yet through the traditional commercial sector.  Not every company is as safe as Sears and even Sears has not always been safe.  Still, at a time when the radicals amongst us wish that banks could be capitalized at say forty percent, is this not a model worth looking at once again?

Here is a 1987 Cato Institute defense of non-bank banks.  Here is further background.  And you can trace Adam’s posts on the idea here.

Andrew D. Smith has a question

There are a lot of companies out there trying to help consumers reduce energy consumption, theoretically to save money AND the environment. The NYT had a long story on a smart thermostat company today:

Can you discuss whether this can possibly work? As I understand the power industry, such a high percentage of the costs are upfront (with nuclear plants  in particular, but with carbon burning plants as well) and the marginal price of producing energy (up to plant capacity) is so low, that falling demand would  mostly cause plants to cut prices until they were again operating at capacity.

So “saving” energy at the consumer level won’t really reduce total energy consumption or gas emission.

Is that right?

The 99% 98%

The Occupy Wall Street volunteer kitchen staff launched a “counter” revolution yesterday — because they’re angry about working 18-hour days to provide food for “professional homeless” people and ex-cons masquerading as protesters.

For three days beginning tomorrow, the cooks will serve only brown rice and other spartan grub instead of the usual menu of organic chicken and vegetables, spaghetti bolognese, and roasted beet and sheep’s-milk-cheese salad.

They will also provide directions to local soup kitchens for the vagrants, criminals and other freeloaders who have been descending on Zuccotti Park in increasing numbers every day.

This is from the NYPost so take it with a grain of salt but still there is a lesson to be learned beyond the chortle.

Left out of some headlines

Nonetheless the FT reports:

“Here’s where you may be a little bit surprised, but this is where we decided to end last night: the specific elements of the deal, that is to say the structure of the new claim on Greece, remains to be negotiated,” said Charles Dallara, managing director of the Institute of International Finance, the consortium of banks that negotiated on behalf of Greek bondholders.

Signaling or human capital?

Is there any way to sustain the current revenue model of higher ed?  How about firefighters?  You can read this story as illustrating human capital theories of education, signaling theories, or both:

“We still put out fires with water,” said Deason, who is also a lieutenant and paramedic at a fire department in Homewood, Ala. But fire companies these days “need people who are a little more advanced with their education.”

As a result, college degrees that are not fire-related can also help. Deason and Crowther said fire departments increasingly want career employees who have strong critical thinking skills, and who can write grants or do public speaking, particularly as they progress to leadership roles.

Two other drivers of the growing higher education demand among firefighters are the recession and colleges’ online offerings. Purchasing and budget decisions are more important than ever, as most municipalities have tight finances. And financial and technical know-how helps when considering big expenses, like the $675,000 fire engine Deason said his company recently bought.

… In the future, he said advanced degrees will probably be an “absolute requirement” for most chief positions.

Assorted links

1. On the new EU deal, and here too, the Italian ten-year yield is down only a small amount.

2. On TGS, the excellent Edward Tenner.

3. Telemundo will start using some English subtitles and other smatterings of the language.

4. More on Italian small firms, and here is Henry’s post  but I think Italian small firms have to do better than just OK, once you consider the volatility of different sectoral fates.

5. Observations about successful fiscal adjustments, and economics Haiku.

6. Good profile of David Graeber.

Why the current revenue model of higher education is in trouble

The picture for females is also not pleasant, all from the excellent Michael Mandel.  Those are simple facts, denied by some.

Non-college grads also have seen declining wages, and so one can look at the “finish college vs. finish high school only” margin and conclude that the return to higher education is robust.  Another approach is to look at the “finish college and get on a real career track” vs. “finish college and hang out” margin and conclude the sector is in trouble, which indeed is the case.  Don’t get stuck looking at the old margins only, the new and powerful margin, I am sorry to say, is relative to unemployment or extreme underemployment.  The status and avoid-shame returns are high enough to keep a lot of people going to college, at current prices, but the falling real wages for graduates aren’t going to sustain an enormous amount of extra sectoral growth, including on the price side.  Nor do I expect the preceding orgy of student debt to repeated, at that level, anytime soon.

Sikhs defend and promote Parmesan cheese the culture that is Italy

Many of Italy’s 25,000-strong Sikh community originate from India’s Punjab region but have found their calling producing Parmesan and prosciutto ham in Lombardy and Emilia Romagna.  Most are employed as dairy hands but some, such as Singh, are taking over key roles in preparing the sharply flavoured hard cheese grated onto pasta dishes and shaved into salads the world over. “I looked for any work when I first arrived, even as a dishwasher. I was ready to do anything, but I like being a cheesemaker a lot,” said the 34-year-old father of two.

…There aren’t Italians in the industry any more. Making Parmesan means long hours: you have to work weekends, holidays, every day of the year. Italians have money and the young won’t do the job any more,” he said. “I’ve stayed because I’m passionate about it, you have to be,” said the 71-year-old as he supervised Singh stir vat after vat of slowly heated cow’s milk, breaking up the curds with a huge, unwieldy whisk.

“We’re really lucky to have found foreigners to milk our cows”.

At the dairy in nearby Novellara, which specialises in producing milk for making Parmesan, half the labourers are Sikhs, prized as methodical, hard workers who are eager to fill the posts that open as Italians desert the industry. By Italian standards, the money is very good too, with Sikh cheesemakers earning up to 2,000 euros (USD 2,800) a month.

“Most of our workers are Indian,” said farmer Stefano Gazzini. “They are more dedicated to their work. They seem to have integrated well into the community, and even have their own temple.”

The story is here and for the pointer I thank Kurt Schuler.

Addendum: Here is an NYT version of the story as well.

Is Iceland really doing so well?

I agree with Megan McArdle’s general point that the winners and losers from this financial crisis have not yet been sorted out.  Here is Jon Danielsson, with some negative notes on Iceland’s economic performance:

Based on the current state of the Icelandic economy, the Fund’s claim of success [for Iceland] does not stand up to scrutiny.

  • Public finances are not on a sustainable path,
  • Exchange rates are not fully stable even with capital controls,
  • Investment has collapsed, and
  • The financial sector is dysfunctional.

At the same time, the Fund forced Iceland to impose a high interest-rate policy at the time when every other developed economy was doing the opposite…

GDP has declined by about 11% since the crisis of October 2008, but modest and volatile growth has returned, sustained primarily by an increase in private consumption catching up after two years of austerity. Worryingly, export growth is low, even with a sharp fall in the exchange rate, while investment is at a record low.

Business investment rates in Iceland equalled the EU average from 1995 to 2008, according to Eurostat.

  • Over the past two years the investment rate in Iceland collapsed to 10% whilst the EU only suffered a small decline to 17%.

…Initially, the capital controls were touted as a temporary measure to prevent a sharp depreciation of the currency, but by now the domestic economy has adapted to their presence, and become increasingly inward looking. The signs point to the controls remaining.

…Unfortunately, the government has also been using the capital controls as means to implement industrial policy, politically selecting those allowed to use cheap offshore kronas to buy Icelandic assets. Such direct political selection of investors can only breed corruption, mistrust, and inefficiency.

From PaddyPower, not the same as the InTrade odds

From an email:

As EU leaders gather in Brussels to formulate a financial package to avert monetary meltdown, the latest odds from bookmaker Paddy Power show they face a mammoth task to convince the cynical markets.

Odds for Greece to leave the Euro first and a complete Eurozone break-up have shortened as analysts nervously wait for any detail which will secure the financial fate of the monetary union.

Greece is 2/7 to be first to leave the economic union, with Portugal next at 6/1. Germany is at 16/1 – perhaps an indication that the major player in the currency may fancy leaving the worst countries to their own devices. It is 6/5 at the Eurozone will be non existent by 2015.

Paddy Power said: “The ministers have a lot of work to do here. Concerns continue to grow about the stability of Spain and Italy and Greek financial stability still isn’t a foregone conclusion. If the great and the good in Brussels don’t come up with a detailed plan soon, it’s going to get a whole lot worse and that is what we are seeing in our betting.”

First to leave the Euro
2/7       Greece
6/1       Portugal
8/1       Ireland
12/1      Italy
12/1     Spain
16/1     Germany
16/1     Cyprus

Eurozone Break Up
6/5       Eurozone to break up by 2015
4/7       Eurozone to break up by 2020

Caveat emptor!