Monthly Archives: September 2008
Indian summer
Burnham Overy Staithe yesterday afternoon.
Mellow fruitfulness
We went on a wonderful walk on the North Norfolk coast this morning, and everywhere we went came on bushes of luscious blackberries. Accordingly, progress was slow at times.
And everywhere we went we were accompanied by dragonflies, often flying in pairs in very tight formation. Here’s one who alighted on my sleeve when I was trying to photograph the berries.
LATER: Richard Earney emails to say that this is “a mature Common Darter” (aka Sympetrum striolatum). What a wonderful thing it is to have erudite readers.
Who killed New Labour?
Terrific essay in the Economist.
New Labour is dying. It has lost the three vital qualities that kept it alive and vibrant. First, discipline. A shared purpose and scowling party apparatchiks once bound Labour MPs to a party line; now some are calling for Mr Brown to stand down—and he may yet have to, little more than a year after he moved into Number 10. The rumblings about his leadership already constitute a crisis, and a humiliation, for him and his party.
Second, intellectual confidence: the party that once defined the intellectual terrain of politics has been reduced to aping its opponents’ policies. Most important, New Labour has lost the habit of winning.
What has been one of the great election-winning forces in British political history has been routed in a run of parliamentary by-elections and local votes. Its poll ratings are so bad—a survey released on September 18th gave the Conservatives a 28-point lead—that recovery before the next general election, due by June 2010, looks almost impossible. On current form, the resulting defeat may be Labour’s worst since the second world war. In the aftermath of such a rout, some Labour supporters fear, the party may disintegrate, with a revived Old Labour faction, wedded to the ideals of punitive taxation and a monolithic state, reasserting its anachronistic grip…
Best analysis I’ve read.
Books to read in times of financial madness
Nice list by Niranjan Rajadhyaksha. Includes one of my favourites — JK Galbraith’s A Short History of Financial Euphoria.
The end of American capitalism as we knew it?
From Willem Buiter’s blog…
This is what I read this morning on FT.com: “The US Federal Reserve announced that it will lend AIG up to $85bn in emergency funds in return for a government stake of 79.9 per cent and effective control of the company – an extraordinary step meant to stave off a collapse of the giant insurer that plays a crucial role in the global financial system. Under the plan, the existing management of the company will be replaced and new executives will be appointed. It also gives the US government veto power over major decisions at the company.”
I almost decided to go back to bed, convinced I must be dreaming.The proximate cause of the demise of AIG as a private firm were its ‘monoline’ activities, its exposure to massive amounts of credit risk derivatives like CDS, many of them linked to the US real estate sector. The largest insurance supermarket in the world, with a balance sheet in excess of $1 trillion nationalised because it was deemed too big and too globally interconnected to fail! The fear that drove this extraordinary decision is that AIG’s failure would increase counterparty risk, actual and perceived, throughout the financial system of the US and the rest of the world, to such an extent that no financial institution would have been willing to extend credit to any other financial institution.Credit to households and non-financial enterprises would have been the next domino to fall, and voilà! , financial Armageddon.
Professor Buiter knows about this stuff. He used to be on the Bank of England”s Monetary Policy Committee and he has a Chair at LSE. Next to Paul Krugman, he’s the most astute economic commentator I know.
He goes on:
If financial behemoths like AIG are too large and/or too interconnected to fail but not too smart to get themselves into situations where they need to be bailed out, then what is the case for letting private firms engage in such kinds of activities in the first place?
Is the reality of the modern, transactions-oriented model of financial capitalism indeed that large private firms make enormous private profits when the going is good and get bailed out and taken into temporary public ownership when the going gets bad, with the tax payer taking the risk and the losses?
If so, then why not keep these activities in permanent public ownership?There is a long-standing argument that there is no real case for private ownership of deposit-taking banking institutions, because these cannot exist safely without a deposit guarantee and/or lender of last resort facilities, that are ultimately underwritten by the taxpayer.
I’ve often wondered what it was like to live through the (first) Wall Street Crash. Now I have some idea. What’s strange is the way, at each stage in the crisis, there’s a feeling that perhaps it has bottomed out. And then it gets worse again. Today we’ve seen the unthinkable happen — the US Treasury is running out of cash, and the markets are beginning to contemplate the possibility (still deemed extremely remote, but still…) of the US government defaulting on its loans.
And it’s coming closer to home. Most of my savings, and some of the money I hold in trust for the kids, is held in funds managed by Lloyds. What happens if it turns out that the proposed Lloyds-HBOS ‘superbank’ in turn becomes vulnerable? Should I be moving the money into something safer? And if so, what? Gold bars? Government bonds? If the latter, which government? China? Dubai?
Years ago, I decided that I didn’t want to have a mortgage from a bank and went to an old-fashioned well-managed Building Society instead. Boy am I glad that I made that decision.
Bloomsbury Academic
Hooray! My friend Frances Pinter has launched her new publishing venture — Bloomsbury Academic — in conjunction with Bloomsbury.
Bloomsbury Academic is a radically new scholarly imprint launched in September 2008.
Bloomsbury Academic will begin publishing monographs in the areas of Humanities and Social Sciences. While respecting the traditional disciplines we will seek to build innovative lists on a thematic basis, on issues of particular relevance to the world today.
Publications will be available on the Web free of charge and will carry Creative Commons licences. Simultaneously physical books will be produced and sold around the world.
For the first time a major publishing company is opening up an entirely new imprint to be accessed easily and freely on the Internet. Supporting scholarly communications in this way our authors will be better served in the digital age…
I’m on the Advisory Board, along with Hal Abelson, Lynne Brindley, Robin Mansell, Reto Hilty, Winston Tabb and Shira Perimutter.
McCain the technophobe?
Obama campaign video.
Horse sense
From the first Leader in today’s Financial Times:
The world has not ended. The international economy has not yet collapsed. But one thing is now quite clear: the banking system as we know it has failed…The US government does not have limitless resources; even if it did, the challenge in a serious financial panic is for the government to choose the right place to draw the line. Allow a Fannie Mae to collapse, and the US economy might well collapse with it. Yet bailing out anyone who asks nicely is a recipe for promoting (even more) recklessness and yet another crisis in the future.
Right on, man, right on.
TBL and web-based disinformation
From BBC NEWS …
The internet needs a way to help people separate rumour from real science, says the creator of the World Wide Web.
Talking to BBC News Sir Tim Berners-Lee said he was increasingly worried about the way the web has been used to spread disinformation…