I am seeing reports of 7.7 on the Italian ten-year bond, over eight percent on the two-year bond, 6.5 percent on the six-month note, and so on. Here is one account.
Maybe these markets simply will shut down soon. There is so much talk about what the Germans should do, but I don’t see the viable options. With Germany’s own credit status now in doubt, eighty percent debt to gdp ratio, massive welfare state, and unfavorable demographics, are they supposed to endorse — going to endorse — ten or fifteen percent price inflation for a few years’ time, all with no guarantee of reforms in the economically weaker countries? And is that inflation then followed by a subsequent deflation? Or does it continue forever? And would Germany have to move to a regime of wage flexibility for the professions too? How politically feasible is that? I don’t see how the Germans benefit from going down this road, even if you think, as I do, that the alternatives are quite dire.
Honduras is doing much worse than Portugal, and is a much smaller country. I don’t see the United States even considering significant aid to Honduras. If you’re going to play the “who is in a formal political agreement?” card, note that the current EU agreement explicitly specifies that, fiscally speaking, countries are pretty much on their own.
The motto “no monetary union without a fiscal union” isn’t wrong, but more to the point is “no fiscal union without a common electorate.”
I don’t see anybody who has put a successful reform option on the table. I do see a lot of articles and Op-Eds trying to create a moral equivalence between Germany and the periphery, followed by proposals which ignore the question of what is a sustainable political equilibrium in Germany. Germany can’t just plop down the money, or turn on the monetary spigot, and get back to where it was.
In recent years, large retail chains have been competing to be the first to open their doors on Black Friday. The race is driven by the theory that stores with the earliest start time capture the most buyers and make the most sales. For many years, stores opened at a reasonable hour. Then, some started opening at 5 a.m., prompting complaints from employees about having to go to sleep early on Thanksgiving and miss out on time with their families. But retailers ignored those complaints, because their earlier start time proved so successful in luring customers away from rival outlets.
This is portrayed as a zero-sum or negative-sum game, but I view the matter, at least in efficiency terms, more optimistically. The alternative to waiting in line and fighting the crush is to go shopping some other day, hardly a terrible fate. More analytically speaking, the average return in other endeavors limits how bad these rent-seeking games can get, otherwise just switch and stay home and read your blogs, as some of you perhaps are doing right now.
Dare I suggest that some people like waiting in those lines with their thermos cups and stale bagels. You could try to argue they are “forced to do so,” to get the bargains, but in a reasonably competitive world each outlet will (roughly) try to maximize the consumer surplus from visiting the store, including the experience of waiting in line.
If your store does a crazy sale at 5 a.m., and mine does a crazy sale at 9 a.m., the somewhat saner people still can go to my store, if they prefer to, without losing any bargains. Maybe the truly early opening hour signals bargains, and customers would assume that a 9 a.m. opening means no bargains, but of course there are plenty of other ways to signal low prices, including through advertisements and the overall reputation of the store’s Black Friday over the years. I don’t see any line in front of Bon Chon Chicken, now at Fairfax Circle by the way on Old Lee Highway.
You might try a behavioral story that consumers are tricked by the prospect of low prices, yet shelves rapidly empty, but it’s hard to see that working year after year, or even in one year, if pissed off customers won’t buy anything else. More likely, the mix of low price and queue is a form of price discrimination, which as we know is generally welfare improving.
Although my efficiency prognosis is more optimistic than Frank’s, my underlying view of human nature — or perhaps economic growth — may be worse. Is that really what people want to be out there doing? I saw the Best Buy line last night and those people looked pretty normal. That’s scarier than postulating a bunch of negative-sum games.
I’ve already covered best economics books, best fiction, and the very best books. General non-fiction remains missing. It’s been a very good year, and these are the other non-fiction books which I really liked, a stronger list than the year before:
Javier Cercas, The Anatomy of a Moment: Thirty-Five Minutes in History and Imagination. In the waning of Franco’s time, how did Spain turn away from military rule and toward democracy? Can a mediocre man make a difference in history simply by retreating at the right moment? Can a political life boil down to a single response, under gunfire at that? Half of this book is brilliant writing, the other half is brilliant writing combined with obscure, hard-to-follow 1970s Spanish politics (does Adrian Bulli understand the life of John Connally? I don’t think so). Cercas is a novelist, intellect, and historian all rolled into one, and he is sadly underrated in the United States. There’s nothing quite like this book. On top of everything else, if you can wade through the thicket, it is an excellent public choice account of autocracy.
Jonathan Steinberg, Bismarck: A Life. This vivid biography brings its subject to life through the extensive use of correspondence and quotation. The reader gets an excellent feeling of how Bismarck’s government actually worked, his intensity and also his mediocrities, and also the importance of Bismarck in building up Germany as a European power. The story is as gripping as a good novel. Sadly, almost no attention is paid to the origins of the welfare state. Still, this has received rave reviews and rightly so.
Joshua Foer, Moonwalking with Einstein: The Art and Science of Remembering Everything. Funny thing is, I read this on Kindle, didn’t have a physical copy to put in “my pile,” had no visual cue as to the continuing existence of the book, and thus I forget to cover it on MR. I enjoyed it very much.
What is striking is how many “big books” make this list, and that is exactly what you would expect in an age of Twitter, namely that a lot of shorter books are being outcompeted — aesthetically though not always economically — by on-line reading.
Here from 2004 is my post on the lessons of thanksgiving.
It’s one of the ironies of American history that when the Pilgrims first arrived at Plymouth rock they promptly set about creating a communist society. Of course, they were soon starving to death.
Fortunately, “after much debate of things,” Governor William Bradford ended corn collectivism, decreeing that each family should keep the corn that it produced. In one of the most insightful statements of political economy ever penned, Bradford described the results of the new and old systems.
[Ending corn collectivism] had very good success, for it made all hands very industrious, so as much more corn was planted than otherwise would have been by any means the Governor or any other could use, and saved him a great deal of trouble, and gave far better content. The women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability; whom to have compelled would have been thought great tyranny and oppression.
The experience that was had in this common course and condition, tried sundry years and that amongst godly and sober men, may well evince the vanity of that conceit of Plato’s and other ancients applauded by some of later times; that the taking away of property and bringing in community into a commonwealth would make them happy and flourishing; as if they were wiser than God. For this community (so far as it was) was found to breed much confusion and discontent and retard much employment that would have been to their benefit and comfort. For the young men, that were most able and fit for labour and service, did repine that they should spend their time and strength to work for other men’s wives and children without any recompense. The strong, or man of parts, had no more in division of victuals and clothes than he that was weak and not able to do a quarter the other could; this was thought injustice. The aged and graver men to be ranked and equalized in labours and victuals, clothes, etc., with the meaner and younger sort, thought it some indignity and disrespect unto them. And for men’s wives to be commanded to do service for other men, as dressing their meat, washing their clothes, etc., they deemed it a kind of slavery, neither could many husbands well brook it. Upon the point all being to have alike, and all to do alike, they thought themselves in the like condition, and one as good as another; and so, if it did not cut off those relations that God hath set amongst men, yet it did at least much diminish and take off the mutual respects that should be preserved amongst them. And would have been worse if they had been men of another condition. Let none object this is men’s corruption, and nothing to the course itself. I answer, seeing all men have this corruption in them, God in His wisdom saw another course fitter for them.
Among Bradford’s many insights it’s amazing that he saw so clearly how collectivism failed not only as an economic system but that even among godly men “it did at least much diminish and take off the mutual respects that should be preserved amongst them.” And it shocks me to my core when he writes that to make the collectivist system work would have required “great tyranny and oppression.” Can you imagine how much pain the twentieth century could have avoided if Bradford’s insights been more widely recognized?
PsycNet: The effect of a grateful outlook on psychological and physical well-being was examined. In Studies 1 and 2, participants were randomly assigned to 1 of 3 experimental conditions (hassles, gratitude listing, and either neutral life events or social comparison); they then kept weekly (Study 1) or daily (Study 2) records of their moods, coping behaviors, health behaviors, physical symptoms, and overall life appraisals. In a 3rd study, persons with neuromuscular disease were randomly assigned to either the gratitude condition or to a control condition. The gratitude-outlook groups exhibited heightened well-being across several, though not all, of the outcome measures across the 3 studies, relative to the comparison groups. The effect on positive affect appeared to be the most robust finding. Results suggest that a conscious focus on blessings may have emotional and interpersonal benefits.
China’s Ministry of Education announced this week plans to phase out majors producing unemployable graduates, according to state-run media Xinhua. The government will soon start evaluating college majors by their employment rates, downsizing or cutting those studies in which less than 60% of graduates fail for two consecutive years to find work.
The move is meant to solve a problem that has surfaced as the number of China’s university educated have jumped to 8,930 people per every 100,000 in 2010, up nearly 150% from 2000, according to China’s 2010 Census. The surge of college grads, while an accomplishment for the country, has contributed to an overflow of workers whose skillsets don’t match with the needs of the export-led, manufacturing-based economy.
One of the targeted sectors might be biology, whose majors are not currently finding good jobs. But is that the right decision for the future of China? Here is yet another problem with the plan:
An op-ed in the Beijing News criticizes the approach for a different reason, saying that it will only spur false reporting of employment rates from schools that are looking for greater autonomy to produce more diversified, higher qualified students.
By the way:
What if the U.S. government were to adopt China’s approach? According to the most recent U.S. census data, among the first majors to go: psychology, U.S. history and military technologies.
Investors seem to have lost their taste for Germany’s once much sought-after government bonds. At an auction on Wednesday of the country’s 10-year bonds, one-third went unsold according to the German Finance Agency, which manages the nation’s debts. The federal government had initially intended to sell bond issues worth some €6 billion (around $8 billion), but managed to garner just €3.89 billion.
The Germans are being told they shouldn’t try to auction off so many bonds so quickly, further comment here. Yet don’t the PIIGS have to roll over $100 billion plus by the end of this calendar year?
And who a week ago — or even two days ago –was predicting this for a German bond auction?
I hear the market whispering in the ear of the Netherlands “get out of the eurozone, before it’s too late!” At this point all bets are off as to which country will be the first to bail on the arrangement. It could be virtually anyone but France.
Male nursery web spiders often woo potential lady-friends with gifts wrapped in silk. Mating may ensue, during which a female unspools the present, expecting to find a tasty treat. But the males can be unscrupulous. Some offerings contain inedible plant seeds or empty insect exoskeletons.
…The empty-handed males were mostly unsuccessful at mating. Whereas those with a gift could get the girl. But if the gift was worthless, the females quickly realized the deceit and pushed the copulating males off.
The Scientific American blog post (based on this paper) makes it sound as if the males are the only ones using deception and dirty tricks. But why do the males silk wrap their gifts? Why not just present the females with food?
Females presented with food will often grab the food and run, leaving the males doubly hungry. A wrapped package is harder to steal (the males have a better grip on the silk) and as the females slowly unwrap their potentially delicious presents the males copulate. Thus, the rituals of silken wrapped gifts conceal intricate conflicts over resources and sex. Only among spiders, of course.
Since a regular NBA season is looking unlikely, what are the remaining options? I don’t see why the lead players should be so keen to start up in Europe. What if Comcast (or cash-rich Google?) said to a bunch of top stars something like the following?:
We’ll take care of renting the arenas, you all just show up and play. We’ll create four teams, heavy with stars and key role players, and let them barnstorm in a multi-round tournament, twenty-four games total, with elimination games toward the end. Past stars, like Magic Johnson and Charles Barkley (no MJ!), will be the coaches and maybe sometimes the referees as well. We’re going to pay you all with equity, with the final return depending on how much the TV ads sell for. There also will be bonuses for the winners, so you don’t all mess around like in the All-Star game.
If more than four teams can be managed and coordinated, so much the better. At the end of a tournament the world champion is announced, and come September or October you can pit that team against the Dallas Mavericks.
One of the four teams can be non-American-born players only, to get the rest of the world involved.
Couldn’t this be…um…more fun, or as much fun, as the so-called regular season?
European banks, vowing to sell distressed assets as regulators tighten capital requirements, are lending money to buyers to get deals done.
Royal Bank of Scotland Group Plc (RBS) may provide as much as 600 million pounds ($939 million) in debt to help Blackstone Group LP acquire part of a 1.4 billion-pound portfolio of commercial mortgages from the bank after the private-equity firm struggled to get outside funding, three people with knowledge of the transaction said. The deal, scheduled to close within weeks, follows Credit Suisse Group AG (CSGN)’s agreement to finance the sale of $2.8 billion of property loans to Apollo Global Management LLC in December, two people with knowledge of the matter said.
“The use of vendor financing to de-lever defeats its own purpose,” said David Thesmar, a professor of finance at HEC Paris, a business school. “The assets may become safer because the buyer injects equity, but the actual gain in core Tier 1 capital ratio for the bank isn’t as great as if it was purely and simply sold. It shows banks’ deleveraging is going to be tougher than planned.”
There is a longer discussion here. One way to read this is: “That’s not yet a lot.” Another is: “Oh my goodness, they’ve already been doing quite a bit.” Another is: “Lots of buying without a credible signal of future intent isn’t worth a whole lot.” I would stress the point that credible long-run signals don’t exist for Europe right now. No one knows what “the game” will be like a year now, or less. That makes all possible solutions harder to pull off, since announcements can be shrugged off as idle chatter.
