Category: Current Affairs
*The Future History of the Arctic*
I loved this book, which is written by Charles Emmerson. Here is one short bit:
Despite the prominence of the colors of Norway on Svalbard — and the firm insistence from any government representative that Svalbard is an integral part of the kingdom of Norway — there are reminders that the archipelago is both something more and something less than that. Russians and Ukrainians live here, some in Longyearbyen, though most are at the Russian settlement at Barentsburg. The girls at the supermarket checkout counter speak Thai. Somewhere in town is an Iranian who came here six years ago and, under the terms of the Spitsbergen Treaty, was able to settle here. If he were to return south to the Norwegian mainland, he would almost definitely be forced to leave the country, his asylum claims having been refused. Import duties are nonexistent on Svalbard: Cuban cigars cost less in Longyearbyen, at 78 degrees North, than they do in Oslo, three hours' flight to the south.
Here is Wikipedia on Svalbard.
This book covers why and how Greenland might become independent, what kind of presence in the Arctic Canada can realistically expect to have, the changing historical fortunes of Vladivostock, what the Law of the Sea really means, and why Norway manages its fossil fuel revenues so well, among other matters. The Future History of the Arctic has fun and useful information on just about every page.
Law and order in the world’s newest city
Remember that tent city on the former Petitionville golf course? Here is the latest:
…an unarmed Haitian security force, composed of about 200 volunteers wearing neon yellow vests, patrols the golf course, trying to mediate disputes.
“We get a lot of cases: men beating up women, women beating up other women, people biting off other peoples’ ears,” said Romulus Renald Black, one of the volunteers. “We bring them into our security tent, judge them, and, if it’s a big case, we call in the police.”
Another patrolman said that there had been several rapes and assaults but only one killing. As to the number of ear bitings, Mr. Black said, “You’d be surprised.”
“Given the conditions, it has been remarkably calm and brotherly here,” said Clerveau Rodrigue, who has emerged as one of the camp’s leaders.
Strategies of (unintended) precommitment
Geoff Robinson writes to me and speculates:
I was thinking that Scott Brown's election was instrumental in yesterday's passage of the health care bill, in the game theory sense. The Senate managed to pass a bill, and then, with Brown's election, credibly declare that it would not be able to consider any changes to the bill. No health care legislation would make it through the body again. House Democrats, faced with this take it or leave it scenario, were forced to pass the Senate version without modification (or let it fail).
I wonder how things would have proceeded if Martha Coakley had won? The House would have had (and certainly used) the option to force changes. This would have required the Senate to hold its super-majority coalition together for one more vote. Would all 60 senators have held the line? Would the use of reconciliation have been a viable political alternative? Would we have been debating health care all summer as negotiations dragged on?
My guess is the bill still would have passed, nonetheless this is an interesting exercise in the idea of unintended consequences.
Can this be true?
Vero de Rugy sends me this link from Bloomberg:
Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market.
I am skeptical but do not have any particular counter. What do you all know about this? Is this a temporary liquidity effect? Are there other embedded rights in these securities?
The health care bill
Yes, I will have more to say about the health care bill (maybe Alex will too!). But I recall the passage from Herodotus, where he writes of a group (I can't remember which one) which debates all major policy issues both sober and drunk, both reasonably and full of irresponsible passion. That's not my personal model, nor do I wish to see it in the comments. So I'll wait just a wee bit, and let others get both their celebrating and hand-wringing out of their systems…
I worry about this
The Russians are not alone in pushing the idea that the next generation of nuclear reactors should have more in common with the small power plants on submarines than the sprawling installations of today.
And this in particular:
The promise of miniature reactors powering homes, offices and schools is still years from being realized. The first Russian design, a pontoon-mounted reactor intended to be floated into harbors in energy-hungry developing countries, is already being built. But most promoters expect small reactors to come online at the end of this decade.
And this:
Some models are tiny. One, for example, would be small enough to fit into a shipping container and would be trucked from site to site, like a diesel generator, except that it would need to be refueled only once every seven years or so.
The opening cost for these "mini-reactors" is expected to run about $100 million. The full story is here.
The Rousseauian exodus
Life has come full circle for many Haitians who originally migrated to escape the grinding poverty of the countryside. Since the early 1980s, rural Haitians have moved at a steady clip to Port-au-Prince in search of schools, jobs and government services. After the earthquake, more than 600,000 returned to the countryside, according to the government, putting a serious strain on desperately poor communities that have received little emergency assistance.
The full story is here. The article notes that in the countryside food is growing ever scarcer. Here are two final quotations:
“It’s like you become a Communist here because you never touch money,” she said. “But it’s not so bad. Even though I left 25 years ago, Fond-des-Blancs is still the place that I call home.”
And:
“These three girls were all university students, and now their future is uncertain,” she said. “They don’t know what to do with themselves here. Every morning they wake up and say, “Mama, take us back. We’d rather sleep on the street.’ ”
The Harvard thesis that everyone is talking about
Sentences to ponder
On the new Dodd proposal, Steven Pearlstein writes:
There are so many political accommodations involving carve-outs and size limits and overlapping responsibilities that it creates exactly the kind of complexity, the opportunities for regulatory arbitrage and the lack of accountability that got us into this mess in the first place. It's worth remembering that many of the credit-default swaps that contributed to the recent crisis were originally devised by banks as a way around the old Depression-era law meant to keep banks out of the securities business, and by insurance companies looking to avoid insurance regulation.
Read the whole thing.
*The Big Short*, by Michael Lewis
The big fear of the 1980s mortgage bond investor was that he would be repaid too quickly, not that he would fail to be repaid at all.
That's one good sentence from the book, which you can order here. There is an excerpt from the book, on Michael Burry, here. Here is a Felix Salmon review of the book. In terms of policy, Lewis attaches great weight to the fact that the major investment banks became publicly-traded companies rather than partnerships. I liked the stories and much of the inside scoop, but it didn't have the giddy fun of Liar's Poker or Moneyball nor did it have the analysis of some other books.
A daylight savings time confession
Had the idea of a government plan to shift the clocks back and forth twice and year been proposed today I am reasonably certain that I would have been against it. I probably would have argued that it would be chaotic, inefficient and unnecessary (private firms could agree with their employees to change working hours at any time, right?). Central planning of time! Washington bureaucracy messing with the clocks! Get your government hands off my time!
And yet, it works and I like it. It is good to be reminded of this twice a year.
Facts and figures about Greece
Simon Johnson serves up a grim but realistic report:
…Every 1 percentage point rise in interest rates means Greece needs to send an additional 1.2 percent of GDP abroad to those bondholders.
What if Greek interest rates rise to, say, 10% – a modest premium for a country which has the highest external public debt/GDP ratio in the world, which continues (under the so-called “austerity” program) to refinance even the interest on that debt without actually paying a centime out of its own pocket, and which is struggling to establish any sustained backing from the rest of Europe? Greece would need to send a total of 12% of GDP abroad per year, once they rollover the existing stock of debt to these new rates (nearly half of Greek debt will roll over within 3 years).
This is simply impossible and unheard of for any long period of history. German reparation payments were 2.4 percent of GNP during 1925-32, and in the years immediately after 1982, the net transfer of resources from Latin America was 3.5 percent of GDP (a fifth of its export earnings). Neither of these were good experiences.
On top of all this Greece’s debt, even under the IMF’s mild assumptions, is on a non-convergent path even with the perceived “austerity” measures. Bubble math is easy. Hide all the names and just look at the numbers. If debt looks like it will explode as a percent of GDP, then a spectacular collapse is in the cards.
Addendum: Paul Krugman comments.
Henry Farrell on a European Monetary Fund
The IMF usually has maximal bargaining power at a country’s moment of crisis – it typically cares far less about whether the country makes it through than the country itself does, and hence can extract harsh conditions in return for aid. But – as we have seen with the Greek crisis – EU member states are far less able to simulate indifference when one of their own is in real trouble, both because member states are clubby, involved in iterated bargains etc, and because any real crisis is likely to be highly contagious (especially within the eurozone). In other words, the bargaining power of other EU member states (and of any purported EMF) is quite limited. If Greece really starts going down the tubes, Germany faces the unpalatable choice of either helping out or abandoning the system that it, more than any other member state, created. In short – any EMF, unlike the IMF, needs (a) to concentrate on preventing countries getting into trouble rather than dealing with them when they are already in trouble, and (b) deal with the fact that any country in trouble likely has significant clout in the architecture overseeing it.
Update on Austro-Chinese business cycle theory
Here is David Ignatius:
My favorite analyst of bubble economies is David M. Smick, who predicted the U.S. financial mess in his book "The World Is Curved." He notes some worrying statistics: Until the global financial crisis, Chinese exports represented 43 percent of its gross domestic product. To make up for collapsing foreign demand once the recession hit in 2009, China launched a $1.8 trillion stimulus and lending program — amounting to about 38 percent of its GDP. This money was supposed to reach consumers, but Smick estimates that 85 percent of the subsidized loans went to state-run companies and banks — pumping the investment bubble even larger.
Here is from the FT:
Prices of commercial and residential property in China’s 70 largest cities rose by 10.7 per cent in February from the same period a year earlier, a marked increase from the 9.5 per cent year-on-year gain in January, according to China’s statistics bureau.
I believe that in a time when the U.S. fiscal stimulus is under political fire, many American economists have been reluctant to criticize the Chinese program and send a potentially mixed message.
On a separate but related note, here is a piece on forthcoming rural migration in China.
Sentences to ponder
In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.
There is much more here. I would be surprised if the proposed incentive of $1,500 made a noticeable difference. If I understand the program correctly, the servicing bank also gets $1,000, plus $1,000 toward a new loan.