Appreciation: The Origin of Financial Crises

I'm off at the crack of dawn for a few days on the East Coast, but I don't want to let slip a chance to put in a good word for George Cooper's The Origin of Financial Crises. That's "Crises" plural--so, not just about the current uproar. I made that mistake a few months ago when I opened Cooper looking for a tictoc of recent events; no such luck, so I set aside in favor of this and this--and got back to Cooper just now.

Anyway, say this for Cooper: Origins is a marvel of exposition. I don't know of anybody who puts the common sense of macro policy* into such a straightforward and comprehensible form. Cooper's style is a bit jaunty and chatty which puts your--or at least my--guard up at first. But he is able to deliver with examples and and analysis that are simple without oversimplification.

Cooper's content isn't terribly original and I don't think he means it to be so. It is, rather, a distallation (in varying degrees) of John Maynard Keynes, Hyman Minsky and perhaps Bernard Mandelbrot. He casts it all in a frontal attack against the Efficient Capital Market Hypothesis. This works for purposes of presentation, but I think it is overdone: as I have argued elsewhere I think the ECMH emerges in the current debate emerges as not so much wrong but rather crashingly irrelevant--offering no help on issues for which it didn't presume to offer help to begin with.

Cooper also undertakes to hook his argument onto some 19th Century mathematics developed by the great Clerk Maxwell for use in the making of machines (he even reprints a critical Maxwell paper at the end of the book). It's elegant and it may be right, but I think it may be a sidetrack. Insofar at it is an accessible analogy, it risks a false comparison. Insofar as it is trying to say something about the behavior of markets, it is probablywell enough said by more conventional sources.

Which leaves us with a straightforward message, not exactly unfamiliar, but too much forgotten of late. That is: bubbles happen. Financial markets carry an inherent risk of instability. It is the "the job of the Federal Reserve...to tke away the punchbowl just when the party gets going." Cooper quotes those words; if they sound familiar, it is because they come from former Fed governor WilliamMcChesney Martin, who died in 1998.
==
*Well: there is a wonderful mini-text on macro issues: David A. Moss, A Concisse Guide to Macroeconomics.

Appreciation: Parade's End

Well, Chez Buce has completed its readaloud of Ford Madox Ford's Parade's End--all 836 pages of it, all four volumes including the one that Graham Greene seemed to feel shouldn't ever have been written. It was worth it (having done the work, how could we think otherwise?)--worth it, but I must say a bit of a slog sometimes. It's hard to remember a book that is such a conbination of dazzling structure, delicate insight and perverse, wrong-headed self-indulgent eccentricity--if I see another exclamation point or ellipse, I may break something!...but either way, I can't remember anything else quite like it.

I guess Parade's End is remembered (if at all) as a "war novel"--World War I again, as with so many others. But as Robie Macauley points out in a superb introduction, it is not about the war per se as it is about a whole way of life--call it "Edwardian" or more broadly "Tory," or for lack of anything more adequate, just "before the war."

Here it gets stylistically interesting. A second-rate novel would try to paint a panorama. Ford is acute enough to recognize that he can't do that so he focuses instead on a small number--half a dozen or so--incidents, carefully and lovingly developed: a progression d'effect, Macauley observes, channeling Flaubert. Most of these have little or nothing to do with the war itself, although I must say Ford's account of one German bomb landing on one English trench--and its aftermath--is as hair-raising a piece of war literature as ever I've read. Virtually all the others count as something closer to drawing-room drama, although the war is always somewhere in the background, a looming presence.

Reading the closing chapters this past week or so, I found myself to my own surprise reminded of another book I was reading at the same time --Gyula Krúdy's Sunflower. One of my problems with Sunflower is that I didn't know quite how to take it, because the world of rural Hungary seemed so far away. Oddly enough, Ford's Edwardian England seems almost equally distant, and I sometimes found myself just as wildered with Ford as I had with Krúdy. At one point, Mrs. B interrupted to say (testily?)--you're reading it as comedy. Are you sure it is comedy? The answers were no, I wasn't sure it was comedy, but yes, I was reading it as comedy because I couldn't think of it any other way. I suppose the fall of a civilization should not be lightly regarded but there may be something to laugh about in it even so.

I do think there is one insurmountable problem with Parade's End and that is a certain hollowness at the core--Christoher Tietjens, the hero, the protagonist, the one who acts or suffers (mostly suffers) through the tumultuous events of his time. Macauley reports that he was modeled on a real person. Maybe, but I suspect the really real person was Ford himself who, from his pictures, looks just about the same as Tietjens is described. I think the best you can say for Christopher is that he fits in the classic tradition of novelistic heroes, from Don Quixote to Prince Myshkin. The trouble is that both Don Quixote and Prince Myshkin are to be treated with irony, and it is the irony itself that makes them so rich and subtle. I suppose you can give an ironic reading to Tietjens, but I'm not sure Ford understood it or intended it.

In my mind, that is a major drawback, but it isn't fatal. Even given the difficulty with the protagonist, there is so much richness of detail in the individual scenes-comic or otherwise--that I'm delighted to have read it and will cherish the experience.

The Dog Did Nothing in the Moonlight (Surplus Men Dept.)

I've been reading Jonathan Steinberg's Why Switzerland? in the hope of finding out something about how this mountain fastness became a banking power. On that point I think I may come away unenlightened, but I'm picking up some fascinating stuff along the way. For example, about the Peace of Aarau.

You remember? Course you do. That's the one that ended the Second Villmergen War (with me now?) in 1712. By Steinbserg's account, it was a bloody and bitter conflict, essentially a religious war, a fit successor to the dreadful Thirty Years' War that tore Europe asunder between 1618 and 1648. Yet it ended with in a settlement, shaky at first but enduring. More: it was a treaty in which (as Steinberg says) "[t]he Catholic party lost its commanding position ... and was forced to accept parity of faiths ..." He marvels:

Here was a group of defeated states, profoundly convinced of the God-given rightness of their cause, accustomed to think of themselves, and rightly, as the founders of the Confederation, and absolutely sure that the heretical beliefs preached by the Reformed pastors brought death and damnation. In the wings, a powerful Catholic ally [sc. France] with inexhaustible funds stood ready to finance their crusade. A war of revenge seemed natural, inevitable and right.

No war took place. The Confederation survived. Another turning point pased at which nothing turned.

Why not? Exhaustion may have been a factor--Protestants had been fighting Catholics here for 200 years. Realpolitik certainly played a part, but that only begs the question. But Steinberg offers another reason, bound to suit the prejudices of staff and management here at Underbelly--something about surplus men:

A very shrewd Englishman travelling in Switzerland at jsut this period put it well: "If they did not continually drain their Country, by keeping troops in foreign service, they would soon be so much overstocked in proportion to the extent and fertility of it that in al probability they would break in on their neighbors in swarms or go further to seek out new seats." Obviously the service of the Bourbon King of Naples was a better place to see a turbulent young Obwaldner than at the gates of Basel, and no doubt the acceptance of compromise owes much to the export of the uncompromising.

--Jonathan Steinberg, Why Switzerland? 35-37 (Second ed. 1996)

But I'm still looking for the bankers. I have a vague sense that I've heard somewhere about banking families from Lucca coming up to settle when things got too hot for them at home during thee counter-reformation. But I haven't yet been able to put any flesh on those bones.

Update: That stuff about Lucca--apparently I said it before.

Oh All Right, Very Funny, Very Funny...

Link. Actually, some of them are kind of cute. H/T Joel.

The Uighurs and the World

Ask a Uighur (I have done this) about his or her family background and you may find yourself baffled. You'll get an odd melange of stories about Uzbeks, Kazakhs, perhaps even Tadjiks, but nothing at all about what you thought you were asking for: the background of the Uighurs themselves.

There's a good reason why this is so. That is: the modern "Uighur" identity is in large measure a late-come thing, the work of a fairly small group of urban visionaries who wanted to work to develop the society of Turkic peoples in the Xinjiang basin and knew they had a better chance if had a single identity with some claim at a history.

There is absolutely nothing sinister about this. You could say it is just exactly what almost every European nation has done (not to say however many non-nations) to try to nurture a collective identity. But it helps to explain one problem the Uighurs face in their conflict with "the Han"--the majority Chinese with whom they are in such visible conflict just now. Tibetans really have a history; we'd probably know about them even if they weren't being beaten up on. For Uighurs, the story isn't nearly so rich or textured and therefore harder to tell.

You get a clue from the Uighur Wiki page, where you can find an account of a Uighur empire that ended in 840 AD and followed by--read it critically now--a longish, convoluted, fairly difficult-to-follow account of the adventures and misadventures of various Turkic people. The story only gets bite with the coming of the Soviets in 1921: thenceforward we get a Uighur identity.

None of this for a moment denies the reality of the conflict in Western China, rooted in a long-standing and persistent conflict of cultures. None of this obscures the fact that the Chinese have poured ethnic Han into Western China with the purpose (to all appearances) of swamping and ultimately dissolving the ethnic Turkic peoples. But it may help to clarify just why it is the Uighurs (might as well call them that) have so much trouble developing a story with any traction.

Well, Who'd Have Guessed...

Last week when I cracked that there ought to be some sort of "progressive taxation" on University employees in time of trouble, I assumed I was just being snide. But here is UC President Mark Yudof with just such a plan and it looks like it is going to happen:

Most University of California professors and staff would have to take between 11 and 26 unpaid furlough days a year, cutting their pay by 4% to 10% under a revised budget proposal announced Friday by UC President Mark Yudof.

The UC Board of Regents is expected to approve the emergency plan next week in response to deep reductions in anticipated state funding. ...

The proposed furlough days would progress in seven steps up the pay scale, from those earning less than $40,000 to those above $240,000. For example, the group earning $60,001 to $90,000 would face 18 furlough days, equal to a 7% pay cut. The stepped plan is a major change from a controversial earlier proposal that had only two salary groups, and from an idea to cut pay without offering furloughs in exchange.

Link. Though exactly how a faculty member "takes a furlough" is far from clear. The typical professor's career is built around his research agenda. Although she may draw a paycheck from the university, she is in fact a kind of entrepreneurial free agent, devoting his primary efforts toward more and better publication so she can promote herself to a better job or at least more prestige. Meanwhile, Yudof is making it clear that is proposal does not allow for class cancellations. Meanwhile the primary. That leaves what? Committee service? Most faculty either (a) pretty much blow that off; or (b) do it for fun--so in either case, it is unlikely that their output will change much. Student contact? The truth is, in most departments, students don't demand that-all much student contact, and if faculty members provide contact hours, the chances are they do it because they are motivated from a sense of loyalty to their craft.

So for faculty (unlike staff), what we have here is an outright pay cut. That's lamentable. They need to put food on the table, and they deserve to be recognized. But in their heart of hearts, most of them know that they love the job and that if they had to, they'd probably do it for for free.

Judge Sotomayor Again

Chris Mealy offers a provocative two-part comment re Sonia Sotomayor,each part of which deserve a response.

One: I had said that Judge Sotomayor struck me as "lonely." Chris said "worked for Souter." I don't agree at all. Seems to me that Souter is one of those rare creatures who actually enjoys his own company. For money, got zillions; he doesn't have to live up a dirt road in Weare. Hey, if he wanted bright lights, he could move to Concord. Sotomayor, meanwhile, is there in the West Village, ensconced--uneasily, as it seems to me--alone in the middle of her vast network.

Chris' other point is more intriguing:

What is the ideal temperament and personality for a supreme court judge then? I suspect creativity might not be that useful. Creative people often go too far and in weird directions. That's what makes them fun (I'm thinking of Posner here). A boring old grind with a good heart might be just right.

You know, I have often wondered about that. And I may have said earlier (I'm too lazy to check)--I think that of all the qualities you might want in a good judge, brain power is not at the top of the list. It may be on the list somewhere, but I think I'd put it somewhere around sixth or seventh, behind--

Well, behind what? Might depend on your point of view. For a lawyer practicing in her court, I suppose steadiness/predictability is at the head of the list. Followed by diligence (which is not the same as workaholism). An ability to listen. Empathy/compassion gets in there, although even compassion can be overrated if it blots out any sense of principle or focus.

I suppose "knowledge of the law" gets in here somewhere also, but again, I suspect that as a quality it maybe, if not overvalued, at least misunderstood. A judge should know the basics of course, but beyond that, but she can't be expected to know everything. And part of the job of counsel is to advise him on the law; to make sure he does not fall into error. See steadiness, diligence, an willingness to listen, empathy, supra.

What is that, five? Okay, maybe I will let brain-power come next, but with a warning. As with being a lawyer, being a judge is in large part drudgery (think Mickey Mouse in the Sorcerer's Apprentice). Any experienced lawyer can point to judges who have been at it too long and who get bored with it and get weird--and this peril is likely to afflict the smart ones more severely than the stupid.

I'm pretty sure that judge Sotomayor is not "brilliant" in this sense, and as I suggest, I think that counts in her favor (I think I am more or less agreeing with Chris here). A particular problem for her is that she is joining a court of people who, for the most part, count themselves as "brilliant." Some--Alito, Breyer, maybe Roberts and Ginsberg--may deserve the imputation. Others--Scalia and Kennedy--probably less so than they think. I suspect that Thomas is pretty sure he is not brilliant and I wish I could persuade him that he is perhaps the better for it (John Paul Stevens was off playing golf in Florida and not available for testing). Part of her challenge will be figuring out how to cope with such a bunch of thoroughbreds--it's one of the reasons I tended to favor the former dean at Harvard, who has been dealing with a stable full of prima donnas for years now. Or Judge Wood from Chicago, who has some how learned to put up with Judges Posner and Easterbrook. It's hard to guess how she will do it: the Second Circuit, for all its talent, is really not the same kind of club. For this duty, maybe Judge Sotomayor's best preparation was not her childhood in the Bronx, nor her coming-out at Princeton and Yale, but her time going to lunch in Chinatown in a bullet-proof vest.

John Calvin

Happy big 4-0-0 to Jean Cauvan, born in Noyon in Picardy on 10 July 1509. better known to the English-speaking world as John Calvin, sometimes held responsible for everything that is wrong with Anglo-Saxon Protestantism. That's a lot of influence--I was going to say "for somebody who never seems to be read"--but the Amazon Calvin community lists 115 "products." That's mostly books, although there is a listing for the DVD Boris and Natasha, which claims "John Calvin" as an auteur. Calvin gets a (perhaps unexpected) show of support from Marilynne Robinson, the author of Gilead and Home and Housekeeping in a number of essays where she declares her loyalty to a person she perceives as a misunderstood (or perhaps better, "not understood at all") writer.

No Waiting....

Four Berbers:

Four Berbers, No Waiting, Get It? Oh, Tee hee...

Gyula Krúdy

"That Dreadful Hungarian?" says Mrs. Pearce, "was he there?" I guess I share some of Mrs. Pearce's insularity and unease with a people she doesn't understand. Granted, I like Bartok a lot, and I've enjoyed a good deal of John Lukacs, even though I have always suspected he is laying it on a little for effect.

In just this vein, I can't quite figure out what to make of Gyula Krúdy and in particular of his "novel" Sunflower which comes to me from NYRB with Lukacs' enthusiastic endorsement. I say "novel," because I'm not quite certain whether it is that, or "meditation" or a "romance," or an extended parlor trick designed tto amuse the cogniscenti and leave the yokels (that would be me) gaping.

Like it or not, you'd have to say that Krúdy is "overheated," and that seems to be the point. Apparently he feels he can't tell the story of his homeland without turning off the air conditioner and turning on the exhaust fan. It's also wonderful in a way, though I guess it is a way that you would have to call, well, Hungarian:

It was a May twilight, when all things appear to be full of life and purpose, and there was nothing and no one moribund or suicidal near the golden, dusty highway. Frogs had not yet struck up their evensong, although one or two concert masters in the reeds did sound a few tentative croaks, basso profundo. It was easy to see that within an hour the impromptu concert would be in full swing--and who knows why frogs sing? A bridal veil lowered over the sun's disk. A day in May is still whimsical and sentimental, like a young bride running her fingers over the wolflike backbone of a man. She distributes her kisses equally among highwaymen, hanged men, deep ditches and coldhearted old birches. She belongs to everyone and no one. Meanwhile at nightfall the clouds are ascending so that rain might start to fall round about midnight, tapping and palpating like a physician, examining roof tiles, people's dreams, and checking the resonance of windowpanes. The rain swishes over meadows, dallies with the flowering trees, speeds up and slows down, just like a skilled dancer; and plays by herself in the night, like an orphaned child. But still, this is May, and even the oldest crone would be startled to find death's ugly black spider hiding in her nightshirt.

--Gyula Krúdy, Sunflower 191-2(John Bátki Trans., 1997 NYRB)

Judge Sotomayor's Loneliness

I hung onto every word of this morning's New York Times profile of Sonia Sotomayor. I confess having been somewhat underwhelmed with Judge Sotomayor as a Supreme Court choice. It's not I think she's a racist or a radical or any of the rest of the silliness that the slime machine has been throwing at her. It's rather simply because she struck me as a bit of an overachiever: a super-hard worker who can and does achieve a lot because, when you get right down to it, the practice of law is a form of the higher drudgery at which overachievers can often do pretty well.

The Times piece did an admirable of presenting her as three-dimensional human being. "To Get to Sotomayor’s Core," the Times reports, "Start in New York," fleshing its account out with winning and plausible tidbits about the Yankees. That's a plausible hook and the musters plenty of evidence to support it, but what struck me more than New York per se was the manic, obsessive pace of her life, coupled with what presents itself to all appearances as an appalling loneliness.

Granted, "lonely" may seem like an unlikely word to apply to somebody whose life is so full of her law clerks, her family, her colleagues, her friends--"a Puerto Rican tía, an aunt, replete with dishes of rice and chicken." But the story may tell more than it knows. "“You make play dates with her months and months in advance because of her schedule,” the Times quotes a friend as saying. And here's the ex-husband, and the ex-boyfriend--amicable separations both, so it appears (at least they have the sense not to throw bottles and dead cats at each other). “I cannot attribute that divorce to work," she tells the Times--anbd then goes on to do exactly that, without seeming to notice how flatly she contradicts herself. Another friend says she "walks with purpose," but the more you read, the more you wonder what the purpose might be, and whether she knows herself.

And now, if the Lord is willin' and the creek don't rise, she's off to Washington, to a new assignment in a new environment even more isolating and disconnected than the one in which she has spent her life. I wish her well. I think she is a well-intentioned choice and heaven knows she will do everything she knows how to make the best of it. But it's a little chilling to think of imposing all that burden on somebody who seems to face life so completely alone.

Dumbest. Idea. of. This. Session.

And there is plenty of competition (link):

Womanless Library

Okay, not everybody is done with men:

Will Calls for Womanless Library

When Iowa attorney T.M. Zinkdied, his will directed that $35,000 be placed in a trust fund. After 75 years, Zink directed that the money be used to build the Zink Womanless Library, which would contain no books written by women and each entrance would state "no women allowed." Zink's daughter successfully challenged the will and the library was never built. Zink left his daughter $5 in the will.

See TruTV, Weirdest Wills.

Link. Thanks,Joel.

Brave Men There Were Before Agamemnon, Not a Few...

From a small museum in Utica, near Tunis:

That is:

D(is) M(anibus)
Iulius
Pullus
miles
c(ohortis) I F(laviae) A(frorum)
comilito
nes eo fec(erunt)
v(ixit) a(nnos) XXII

In English:

To the divine shades.
Julius
Pullus,
a soldier
of the First Flavian Cohort of Africans.
His fellow sol-
diers made this for him.
He lived 22 years.

Or "C I f a" might be "Centuratio I Fecit Annorum", i.e., "He served out one year as a centurion." Thanks to Michael and Pedar for translating; Michael adds: "The Latin is a bit shaky, especially eo, which would normally be ei (dative ei rather than ablative eo)."

The carving is obviously somewhat unstudied. And it is a rough, unfinished piece of stone. I.e., a labor of love, soldiers to a soldier.

Thanks Pedar also for making sure I didn't overlook it.

Dowry Baskets: I've Always Wondered

Recognize this?


It's a dowry basket, as offered in a shop window in a Souq in (I believe) Gafsa in Tunis--there's a whole window full of them, and more in the shops next door. The guy fills it with goodies for his beloved (gold is always acceptable, I am told).

Which brings up an issue that has always puzzled me: since it is the males who are pursuers and women the pursued, why is it the woman who typically brings the dowry? Apparently the best answer I have so far is: not always.

Twelve Chairs Again (aka Las Doce Sillas)

Courtesy of Netflix, we've now enjoyed our second avatar of The Twelve Chairs--that comic Russian about enterprise and mayhem during the birth pangs of a revolution. This one is not the Mel Brooks we saw a few days ago, and not the Soviet version: it's the work of Tomás Gutiérrez Alea, in his time (per Wiki) "an influential Cuban filmmaker." This one doesn't even get a mention in the director's Wiki. Best I can tell it was actually made in Cuba, shortly after the Revolution, and it is easy to see why he quickly made himself unwelcome in what so soon became an ugly police state. What's perhaps most remarkable how well the story (first crafted in Russia in the 20s) so well suits the new revolution and the new emergent dictatorship.

It's Getting to be a Meme...

... but you heard it here first:

Would a world without men really be so bad?

With scientists now claiming they can make sperm in a lab, does the world need men any more, asks Tanya Gold

[T]he possibility grows (and I'm wilfully hopping and skipping and bouncing over the science bit here) that we will at some vague point in the future be able to breed without men.

And so a misanthropic fantasy is conjured: what would a world without men be like? Would it be a gently slumbering paradise, full of women eating pot noodles and watching Dallas? Would there be more gilded, stripy cushions, but less armed robbery? Or would it be like being trapped in an Overeaters Anonymous meeting, or at an all girls' school - for ever?

Let us examine our history and see how men - the master race for all of our recorded history in almost every corner of every human civilisation - have fared so far. Applying all the fairness and equilibrium of my sex, naturally. And then I must ask myself: could women do better? ...

You can guess where this is going. For details, go here (H/T Joel). But she goes all squiggly at the end, with some saucy hints about the bonobo.

Afterthought: Tanya, meet W.C. Fields: If they didn't &%#!, there'd be a bounty on 'em.

Appreciation: Fool's Gold

There's every reason to that a book on the meltdown by Gillian Tett will be a profitable read. Covering credit markets for the Financial Times, she has had a front-row seat at the comedy. And her previous book (about the American takeover of a Japanese bank) was readable and instructive.

Fools Gold, her new book, is indeed worth the reader's effort, although it isn't quite as good as one might hope. A core difficulty is organization: for all her pretensions, Tett hasn't quite found a thread here, and the result is a narrative with rather less structure than either she or the reader might hope.

The problem might be with the editor. The subtitle is How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe--one of those longer-than-the-text titles that seem to be so much the fashion among marketers these days.

But it doesn't really hold up, for a couple of reasons. One: virtually all her sources seem to be the J. P. Morgan people themselves. So she tells a story that cries out for more context, and critical scrutiny. One would love to know what other bankers have to say, either about their own work, or about the claims of the J. P. Morgan crew.

And two: even if you accept every word of the Morgan story is true, you come up against the fact that the crew disintegrated very early in the game; that virtually all went on to other jobs and other lives; and that indeed Morgan itself never played nearly so prominent a role in the events leading up to the meltdown as many--most?--of its major competitors.

Turn this point around: after several absorbing chapters about the work of the Morgan innovators, the authority of the narrative forces Tett to change her focus. And indeed she does: onto the merged, reorganized, JP Morgan Chase, and its celebrity CEO, Jamie Dimond. Dimond is one of the few senior bankers who has come through the meltdown with his reputation more or less intact (in some ways, enhanced). On the evidence, he seems to deserve at least some of the acclaim he has enjoyed, although in a story this complex, a lot of it is surely do to others, and an uncountable portion to sheer dumb luck. One difficulty with Tett's organizational structure is that she tells part of this story, but not as much as one might want: since she thinks she is telling the story of the Morgan wunderkind, she doesn't seem to notice that her focus has shifted to the bank as a whole, and leaves parts of that latter story somewhat casually dismissed.

One virtue of the story that she does tell is that she raises a lot of tantalizing questions which, perhaps inevitably, she does not answer. For one: how did it happen in the first place? How did it happen that J. P. Morgan, of all places--which almost anyone would say had a reputation for being somewhat stodgy and unimaginative--how did Morgan come to put together such a fissiparous mix of talent? Or for another: how come Morgan, having filled the can with fireworks, succeeded in kicking it down the street--sidestepping precisely those hazards implicit in the new financial innovations that led other bankers to grief? Was it Dimon? Was it (whatever this means) "institutional culture?" Was it dumb luck?

Sales of books like Tett's make it clear that there is a market niche avid for accounts of exactly what went on, and how. One recent account--William D. Cohan's House of Cards, about the collapse of Bear, Stearns--is helpful, but impaired by the fact that Bear was such an outliner that its failure may not teach us very much. Tett may have the opposite problem: the story of Morgan is not central to the story of the meltdown, precisely because it avoided the worst excesses and escaped the worst calamities.

Tett remarks at the end that she bring something special to this task because she was trained as a social anthropologist gives her a distinctive concern for "wider social matters." I think she may overrate the value of the purely technical training: it may be simply that her concern for "wider social matters" was what led her to social anthropology in the first place. Still, it is true that she exhibits a feel for context that may not be typical among credit analysts or even journalists who report on credit analysists. Either way, it's to her credit that she has found a mix of text and context that allow her to tell her story in a matter at once satisfying and compelling.

I'll Take Nazi War Criminals for $200, Alex!

Tom McMahon finds (in his bottom desk drawer?) a chart of IQs of defendants at the Nuremberg trials. What strikes me as interesting are two things. One, that we did it at all: folks really believed in that stuff in those days. And two, the scores aren't really all that dazzling. Okay, nobody is exactly a box of nails but the range from a ho-hum 106 (Julius Streicher) up to a not-quite-so-ho-hum 143. And that last is Hjalmar Schacht, more precisely Hjalmar Horace Greeley Schacht, the evil genius behind the Nazi's pre-war fiscal policy; he fell out of favor and actually ended the war in a concentration camp, having plotted to overthrow the regime (it is a moot point how far he was motivated by hostility to Hitler and how far by his own zeal to return to power). The vainglorious Herman Goering gets only a 138; the oily and manipulative Albert Speer, only 128.

Questions: how much does this matter, and how? Would these guys have been more effective if smarter? Or stupider? And, just for deviltry, how would these scores stack up against the leadership of the U. S. House of Representatives.

Why Mises? Why Hayek?

Roger Scruton writes:

...the Austrian school--...Mises and Hayk especially--whose defense of the market against state planning and socialist distribution had the on a new credibility in the light of the tyranny and economic disorder of the Bolshevik experiment.

--Roger Scruton, "The Journey Home" The Intercollegiate Review 31-28, 31 (2009)

I suppose this is technically correct to describe Mises and Hayek as a reaction to Bolshevism. and I don't suppose many readers will gag at Scruton's phrasing, but I think it think it obscures an important question. That is: how did two men (with a spare "von" before), each nurtured in so venerable, so august an institution as the Austrian Empire, have become such pillars of anti-statism?

There's a plausible answer, once you stop to think about it. That is: a good man might turn libertarian precisely because-not in spite of--its "conservative" trappings. The point is that the Austrian Empire, so venerable and so august, was also a blinking mess: a grotesque anachronism and a drain on the lifeblood of anything like a vigorous and dynamic modern economy. The Austrian Empire loved the First and Second Estates well enough--the military and the church--well enough, but for 19th-Century liberalism it had entertained something worse than contempt: it nourished incomprehension. Couple that with the fact that in the Empire nothing worked. Well: the Emperor worked, so they say, every day of his life. But the whole enterprise, so it is also said, came to represent a great antique cuckoo clock, ticking slowly and ever more slowly until it finally ground to a halt.

Okay, That Was My Next Guess

Froomkin to Huffington Post. I had suggested TPM. But TPM had a pretty good day yesterday, too. Now I will have to start paying attention to Huffington Post which, for all sorts of perverse reasons, I have been staying away from. Glenn Greenwald puts it all in context.

...and a Dylan Thomas Reading

Nigel Rees on Quote, Unquote last night was curiously dismissive as to the provenance of the parodyd, "Chard Whitlow," recorded here. It is, indeed, a parody of T.S. Eliot, but more specifically of his poem "Burnt Norton"--a fact I learned in college from my friend Kenny which made Kenny, in my eyes, the coolest guy around.

Searching for the Real America

Flipping through the night's detritus, I stumbled on the story that some lady hyping her website has deemed the best college town in America to be--ta da--Amherst, MA.

An obvious choice perhaps. But while I really haven't spent enough time in Amherst to judge, my impulsive, unedited, untutored, first thought was: boy, I'm glad I don't live there.

Hey, wait minute, Buce, whoa. What is this, reverse snobbism? You know perfectly well that college towns are really nice places, and Amherst surely carries niceness to a power of n.

Well, very likely (including, I suspect, the reverse snobbism part). So, what can I say in my own defense? This at least, perhaps: recall the old rule that too much of anything is funny. Think of a convention of undertakers. Or deputy sheriffs. Or law professors (that last has the loudest elevator conversation, for sure). College towns can indeed be fun. But there is such a thing of having too much fun, and feeling the urge to yelp "Help! Get me out of here!"

Scrolling further down the page, I ran across a new crop of stories on the perennial journalistic favorite, "the real America." Where exactly, I wondered again, is "the real America?" And do I have any part in it?

Let's stipulate, first off, that it probably isn't Amherst MA. Indeed, I used to live in a college town and I'm pretty sure it wasn't there either, probably for the same reasons. Too ingrown, too cosseted, too sleek and comfortable.

I'm relieved, actually, that I moved away from that college town to--um. Well, it's a nice place with a (seemingly) vigorous economy, lots of people on the streets and in the stores and in the parks. But, um, actually another college town. Though in mitigation, your honor, this time the college isn't anywhere dominant a facctor as it was in my previous home (nor as it is, I gather, in Amherst MA).

No; per Wiki, the University (but old-timers still call it "the college") is only the third largest employer around here. Well, hey, that says something for diversity.

Except. Except the first-largest employer here is the medical center and the second is the County government. An FWIW, the fourth largest is the public school district.

You can see where this is going. Palookaville is indeed a thriving, diverse, enjoyable place to live. Except that everything around here seems to be driven, directly, or indirectly, by taxpayer money. County and school district are all public money. The hospital--well, where would a hospital like this be without Medicare? And without the tax-supported insurance bennnies of the public employees.

The University is perhaps a special case. Like all Universities, they've been jacking up prices like crazy over there, and the prospective students are howling. Yet it remains largely public money. And in any event, the employees all count themselves as enjoying the privileges and prerogatives of the public payroll--and don't you forget it.

Still, you have to go all the way to number five on the list before you find a private employer--a (local) bank. And to number eleven before you find a manufacturer--a brewery (and good stuff it is, too, let me assure you). Maybe the brewery ships out; I suspect that even the bank must be regarded, albeit indirectly, as the beneficiary of a public payroll.

Does this count as "the real America?" --a functioning polity, held together by tax dollars? For perspective, I might compare it to some other towns, not at all far away, but with nothing like the same taxpayer base. I'm thinking of one in particular that I drive through once a week. You get some drift of its character from the billboards. There's a huge matched set of before-and-after methamphetamines pictures. There's a wall of big type urging me not to abort the baby, but to give it up for adoption. And another one warning that messing with 12-year-olds is a felony.

I lead a sheltered life; I really don't know a lot about these neighboring towns. Well: I've sat on jury panels a few times (never get chosen, I wonder why). I can tell that these smaller towns have a whole lot of hurt. And that without a big government employer (or equivalent), you're pretty much toast.

Back to Amherst MA, and I realize story doesn't quite mortice at the joints. I assume Amherst is not a giant meth lab. On the other hand, I am not clear that the public payroll looms quite so large there as it does in Palookaville. Best I can tell, the largest employer is UMass, which is a public entity, although I gather the economy as a whole may be more complex and diverse.

Still, I think the general principle may apply. If you've got access to dollars, if you have friends in high places, if you are plugged in, you can have a pretty comfortable life. If not, you'd better have a meth lab or you may have nothing at all.

Pesto

Brian brought us the cuttings from a half row of basil. We stumped up for oil and garlic and pine nuts--a kind of a sharecropper thing. Mrs. B turned the kitchen into a pesto factory. It's all in the freezer now, in little muffin tins. The whole house smells of perfume.

Mmmm, pesto.

Who Saw It Coming?

Michael J. Panzer offers up a list of market watchers who were not just delusional bonehead optimists in the runup (and who are not today) (link)--and do not miss the interesting add-ons in the comments. A thorough read of Fool's Gold by GillianTett will offer up a few more. All of which raises an interesting and I think not-obvious point. Specifically--when we speak of people who "saw it coming," we tend to make it sound like they were isolated voices crying in the wilderness. Okay, granted, they weren't running major banks (although JP Morgan Chase seems to have pulled itself through fairly well). But in fact, they were not isolated; in fact there were quite a lot of informed, intelligent, non-crazy observers (or participant) observers who "saw it coming" and said so. Fat lot of good it did them, except maybe they constructed their own portfolios accordingly.