Links 10/2/09 « naked capitalism

Friday, October 2, 2009

Links 10/2/09

Dear readers, apologies for thin posts. Had 4 hours of book stuff, thought I was past that, put me very much behind schedule. Also still a bit burned out. Please send links, they are very helpful.

Doomed Dome: The Future That Never Was h+ (hat tip reader John D)

A planet that rocks Buffalo News. Today’s weird science offering.

Crisis creates new sophistication in risk Financial Times. Dear God, we just saw that models that rely on measuring correlation risk failed spectacularly, Markowitz and Sharpe, who invented it, have both abandoned it, but what do we see? Efforts to make a fundamentally flawed concept work. Ugh.

Strong dollar “very important”: Geithner Reuters. Talk will only take you so far….

Consumption Up in August, Expect a Decline in September Econompic Data

Banks With 20% Unpaid Loans at 18-Year High Amid Recovery Doubt Bloomberg. Sexy headline and no story…yet

Financial Versus Real David Merkel

Eurozone confused about exit strategies Eurointelligence

Does money contraction signal serious trouble? Ambrose Evans-Pritchard, Telegraph. AEP takes an uncharacteristically cautious stance.

Hawkishness Dominates Tim Duy

Antidote du jour:

Unknown-9

13 Comments:

fresno dan says:

October 2, 2009 at 6:36 am

“Consumption Up in August, Expect a Decline in September”
Calculated Risk had the auto sales – of course a big crash after the end of “cash for clunkers” SAAR of 9 million or so.
Maybe we can have cash for clunkers II. than cash for crapshacks (very much like to get rid of my townhouse), cash for all that crap in the basement, cash for my 2001 Dell, ad infinitum.

chad says:

October 2, 2009 at 10:12 am

heh if that’s a lab in the picture i wouldn’t be surprised. My lab sleeps on her back in the weirdest positions all the time. She’ll get on the couch roll on her back and twist into like an S shape and sleep happily ever after.

Fed Chest-Thumping for Beginners « The Baseline Scenario says:

October 2, 2009 at 10:37 am

[...] has been a micro course, and besides Simon is a macroeconomist, among other things. But since just about everyone in my RSS feed has been linking to Tim Duy’s recent article on the Fed, I thought I [...]

Jim in MN says:

October 2, 2009 at 12:50 pm

Merideth Whitney points out in the Wall Street Journal that credit is still contracting and zeros in on small business credit, a key mechanism between the ‘finanacial’ and ‘real’ economies that is broken. It remains appalling to me that no major players are addressing this (Krugman especially has let us all down on this). In the 1930s this became a critical policy area but we appear doomed to take a similarly long time to reach the same conclusions. In today’s economy that is an eternity of damage and lost opportunities.

http://online.wsj.com/article/SB10001424052748704471504574445470989162030.html

chad says:

October 2, 2009 at 1:43 pm

I’ve always felt that small business is where the real recovery will spring from. America is good at small business and the entrepreneurial cause I don’t understand why small business isn’t close to the top of the priority list.
- Scott says:
  
  October 2, 2009 at 3:04 pm
  
  “close to the top of the priority list”??
  See LOBBYISTS, PAID in the index of the “Real World of USA”. If healthcare reform opponents are spending ONE MILLION dollars per DAY to maintain the status quo, why would any good congressmon hoping for re-election, deal with anyone but the top lobbyists?
  
  Lobbyists tied to a small but malleable group of strategic committee members run the country. Unconstitutionally, but they run it.

Tortoise says:

October 2, 2009 at 1:27 pm

I love Chicago, which I used to visit a lot when I was younger, but I am puzzled by their reaction to the decision of the Olympics Committee. There were several good candidates but Rio had to win. If for no other good reason because, I believe, the Summer Olympics were never held in South America. For crying out loud, we had the Olympics in the US so many times that we should not even expect to get another until 2050!

There are a lot of countries in the world. Europe and North America should get used to that.

TraderMark says:

October 2, 2009 at 1:33 pm

I am glad to see Brazil win

world cup and olympics back to back – awesome for them

on a different note – unemployment in america as measured pre early 1990s hits roughly 14%

http://www.fundmymutualfund.com/2009/10/true-september-unemployment-in-america.html

Learning to Speak Fed | Reaction Radio says:

October 2, 2009 at 1:37 pm

[...] has been a micro course, and besides Simon is a macroeconomist, among other things. But since just about everyone in my RSS feed has been linking to Tim Duy’s recent article on the Fed, I thought I [...]

Tortoise says:

October 2, 2009 at 1:59 pm

Re: Credit to small businesses

Sadly, there are a lot of good reasons why many businesses should not get credit: They cannot be profitable when the consumers are in such a bad shape.

Think of it in community dynamics terms. Think of consumers are the deer and businesses are the mountain lions and coyote (OK, in a biological non-judgmental way …) You can introduce more predators in an environment but, at the end, the ratio of predators to pray must remain constant.

I was thinking of this as I was at an airport. The old water fountains when I could quench my thirst for free are gone and replaced by stands where I can get a little bottle of water for 3 dollars. Someone expects to make a living from selling these bottles but where will the consumers find the additional money? Perhaps rather than giving more credit to small businesses someone should give every passenger ten dollars in coupons to spend at airport businesses. (I am kidding on this one but you get the idea of where I see the problem.)

Of course, saving dinosaurs because they are too big to fail is an even worse strategy. These dinosaurs, on top of everything else, take too much space and prevent others from getting ahead. Again community dynamics…

Scott says:

October 2, 2009 at 3:10 pm

“they cannot be profitable…”
Well, Virgin Records survived -fourteen years- of unprofitability.
Was it a measure of “profitability” that led to billions being thrown at Citibank and AIG? As has been written, the best way out of the crisis of September 2008 and Lehman, was simply for the government to guarantee Lehman’s short term paper. Paulson didn’t convene enough “smart heads”. Would a council of fifty hedge fund managers come up with the =best= idea in twenty four hours? Certainly, compared to picking CEOs and expecting results.
- Jim in MN says:
  
  October 2, 2009 at 5:01 pm
  
  Simply put, a modicum of subsidy or forced lending to small businesses can cushion the worst impacts of the crash. It is an efficient use of resources on many dimensions compared to the straight up safety nets that come into play when a small business folds and fires everyone.
  
  As with everything it is a matter of degree. What’s shocking is how little discussion this aspect of the situation gets. More employment, economic growth and social well-being hinge on this issue than all the bonuses on Wall Street.
  
  No doubt, fewer businesses can thrive when consumer spending is slashed by (pick a number) 30% on a multi-year basis. But the credit contraction is almost by definition going to overshoot the ‘optimal’ degree of pullback, instead cratering completely as banks save reserves for the upcoming wipeouts/markdowns/balance sheet hits.
  
  Add to that the pervasive, almost mandatory shift in business operations to running on short term credit. “Who keeps six months of operating expenses in a drawer? Ha ha ha etc.” So small business was basically pushed into the credit markets for normal operations, then shot in the head. Nice.
  
  Hence, a clear and compelling role for carefully crafted government intervention to backstop the contraction.
  
  Just my opinion, but where is the debate?
  - Tortoise says:
    
    October 2, 2009 at 6:27 pm
    
    I sympathize with the logic when it comes to a single business. However, when MOST businesses depend on credit, then a crisis is bound to happen — the only question being when. If someone could now give every business, say, a loan equal to 3 months operating cost, the crisis would be averted for a while and, in fact, chances are that rents and wages would go up. But when these loans need to be repaid (or even when there is no new infusion coming after the money is used up) the problem comes back in a scarier larger scale. The issue as I see it is that if a business cannot make it through its cash flow after an initial period (including maintaining a cushion to survive a recession), then it is asking for trouble. We all may be forced into this situation but I am skeptical that giving more credit to a lot of of small businesses will be the solution. May small businesses could not turn a profit even in periods of boom.
    
    If we do not talk about credit (loans that need to be repaid) but giveaways, then would it not be fairer and more reasonable to send a check to every citizen in this country and let them spend or save the money as they see fit? (Again, I am not advocating this particular solution but just mentioning what I would consider more reasonable.)

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