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Links 8/31/10

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ACLU Sues U.S. Over Targeted Killing of Citizens Bloomberg

NC farm produces emerald shaped into massive gem Associated Press (hat tip reader John M)

British Airways No Longer Forcing Women to Sit Next to Children Flying Solo Helaine Olen. Hah, I had this done to me once.

Climate Skeptic Bjørn Lomborg Reverses Himself on Climate Change Firedoglake

Broken Politics, Bubble Pricing, Environment, and Agriculture Joe Costello

How the Germans Are Hurting the Recovery Noam Schreiber, The New Republic

Dragon could get burnt Sydney Morning Herald (hat tip reader Crocodile Chuck)

Backlash over China curb on metal exports Ambrose Evans-Pritchard, Telegraph (hat tip reader Don B)

China to Job-Seeking C.E.O.’s: Come Work for Us Michael Wines, New York Times (hat tip reader Don B)

Lehman Derivatives Records a `Mess,’ Barclays Executive Says Bloomberg (hat tip Economics of Contempt). There have been rumors about this, but this report if anything is even worse than the scuttlebut.

US pay law branded ‘logistical nightmare’ Financial Times. Ahem, the lady doth protest WAY too much.

BOJ Is `Too Little, Too Late’ in Tackling Yen, Nakahara Says Bloomberg

Beware those who think the worst is past Carmen Reinhart and Vincent Reinhart. A short recap of their Jackson Hole paper.

Antidote du jour:

Picture 5

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34 comments

  1. Foppe

    Re “Germany is hurting the recovery”
    Yes, the germans are (partly) to blame for the problems in ‘europe’s periphery’ (although I would argue that the teethlessly created ECB, and ‘facilitating’ predator banks have at least as much to do with it, but half of this article consists of cultural claptrap, and another quarter misleads. What’s with painting the G7/8 meeting in Canada as a failure entirely due to German wilfulness, while ignoring China’s – far worse – mercantilism entirely? Pathetic.

  2. attempter

    Re Lomborg:

    I clicked on that link with skepticism, and sure enough:

    Specifically, Lomborg favors investment in clean energy, including R&D, and geoengineering options.

    “R&D” is code for god knows what kind of corporatist boondoggles; geoengineering is one of the worst.

    As Joe Romm points out over and over, anyone who really wants a renewable energy transformation would call for the deployment and buildout of existing ren en technology. Wind and CSP are as good as it gets.

    Whenever you see someone calling for more R&D you know he’s really a crook who doesn’t want to solve the problem but is just looking for a way to extract fees and grants, maybe to trump up boondoggles like geoengineering which would not solve the climate problem (on the contrary they would be taken as license to keep promiscuously emitting), which would almost certainly generate catastrophic new environmental problems, and whose only intent would be to extract vast amounts of corporate welfare from the taxpayer.

    So the import of this story is that the arch-mercenary Lomborg seems to be on the scent of a potentially more lucrative scam.

    For more on this, I have a related comment on the other thread about the banks and environmental dubiety.

    1. eric anderson

      Also, from the Guardian piece on Lomborg:

      “Lomborg denies he has performed a volte face, pointing out that even in his first book he accepted the existence of man-made global warming. ‘The point I’ve always been making is it’s not the end of the world,’ he told the Guardian. ‘That’s why we should be measuring up to what everybody else says, which is we should be spending our money well.’”

      He says it’s not the end of the world. And he is advocating a 100bn investment annually. In terms of the world economy, that’s peanuts, a far cry from what the alarmists are recommending. It is an investment commensurate with the “not the end of the world” nature of the problem.

      This comes, oddly, at a time when the Interacademy Council has released a report damning the IPCC’s sloppy and erroneous presentation of climate change. Everyone closely following the news since the Climategate revelations last fall knows of numerous embarrassing exposures of the IPCC touting questionable or false “data” from non-scientific sources. The NY Times article about the new report says the IAC calls for IPCC-associated scientists to be “more open to alternative views,” and to deal with the conflicts of interest that have now become apparent among the IPCC officials and scientists, aka the IPCC climate change cabal. (That would be the IPCCCCC. Snicker.)

      http://www.nytimes.com/2010/08/31/world/31nations.html?_r=3&hp

      So, this week we have a noted “skeptic” who still says climate change is no reason to run around like our hair is on fire shouting about climate doomsday, and an august independent panel smacks down the unprofessional behavior of the world’s premier “authority” on climate change. Not exactly a vindication of Gore, Hansen, and the rest of the alarmists.

        1. BondsOfSteel

          This adds less than zero to the conversation. All you had to do was reply with this quote from the link he posted:

          “Although there is widespread scientific consensus that human activity is heating the planet, critics used the mistakes — which emerged at the same time as the unauthorized release of hundreds of e-mails from a climate research center in Britain — to question all the science involved. The e-mails opened prominent climate scientists to charges that they had manipulated some data. Numerous investigations have largely cleared the scientists. “

        2. Anonymous Jones

          As hateful and hypocritical eric is at his core, he did not deserve that response. Stay classy, San Diego…

      1. TDK

        Interesting how off-the-cuff anecdotes (which is really what the whole Himalayan thing was about) get blown up into talking points and yet …

        The science community has been doing climate modeling for over 30 years, which is long enough to get at least initial validation of the models, and the one constant in all that time is that so far they’ve systematically underpredicted both the magnitude and the rate of change of warming, even as we learn more and more about the system and as model precision improves. Don’t hear about that in the MSM.

      2. Francois T

        It never ceases to amaze me how illiterate someone can become when the content read goes against their beliefs. One can only marvel at the Koch brothers’ mercenaries: they’ve hired the best spinmeisters around.

        Like Bonds of Steel quoted, there were NO devious conspiracy ridden with conflicts of interest.

        Get used to it Eric: Man made climate change is all too real. Get ready for it, and if you’re really smart, just do like famed money manager Jeremy Grantham: invest in it.

    1. MyLessThanPrimeBeef

      I wonder whom British Airways is forcing to sit next to children flying solo these days – doctors, lawyers, bankers?

      1. Larry

        When I was 18 flying with my 8-year old brother, we were seated next to an unaccompanied boy who was a bit older than my brother. The relationship started with a game of 52 pickup and a big bag of candy. And the flight was non-stop from the US East Coast to East Asia…

    2. Yves Smith Post author

      No, I had work to do. The girl, about 8 years old, kept squirming in her seat and trying to get my attention. And I am not making this up, she eventually started talking about watching her parents have sex (as in she gave a pretty accurate description, given that she could only have a partial view, presumably from a doorway). Note this was probably 25 years ago, when kids that young would not have gotten sex education, although she could have been adapting a report from her peer group or elder children.

  3. Bates

    RE: “Beware those who think the worst is past”

    I find it interesting that the Reinharts mentioned a smorgasbord of problems that might hinder a ‘recovery’ in developed countries.

    What they failed to mention is that citizens are reluctant to spend because their personal balance sheets are very in the red. Citizens that have seen their net worth decimated by losses (although paper losses) of their home values and retirement funds are reluctant to spend and are in process of defaulting, paying down debt and saving.

    There is nothing the Fed can do about citizens attitudes about spending vs saving/defaulting. Oh, there is some things that the Fed could do that are experimental; such as time date money, enforce negative interest rates, etc, which are nothing more than untried petri dish experiments. But, there are no historically proven courses that the Fed/treasury can take to quickly change citizens attitudes about spending/saving.

    None of the papers presented at the Jackson Hole get together addressed the problem of consumer attitudes.

    The Reinharts did mention all their collected data on how long housing deflations last, how long till jobs recover, how long before GDP recovers, etc. But, nothing about how long it takes for citizens to get over their fright from severe losses on assets. Why, you ask? Because the length of time for ‘recovery’ of various economies that have crashed are always effected by citizen attitudes…it is baked in the cake.

    Of course length of recovery can be made longer by monetary/fiscal intervention…but, it cannot be made shorter by monetary/fiscal intervention.

    If you need further proof of this simply read Reinharts and Rogoffs well researched book regarding the last 800 years of documented soverign economic defaults. “This Time is Different: Eight Centuries of Financial Folly”

    Of course no one in the last eight centuries had the smarts to devise MMT…It amazes me that only now are people coming out of the woodwork with prescriptions like MMT that will solve all the world’s economic problems! Glory be! We are saved! LOL

    Through out my life I have notice that the trend in entertainment has been to more fantasy and escapist themes. With that in mind why shouldn’t we have escapist economic theories? I believe that we should employ MMT immediately…the sooner to destroy the Fed and the corrupt pols and bankers! The sooner to bring down the entire system of fiat currency and introduce a currency backed by a basket of real commodities! Let’s do it!

      1. tyaresun

        Yves,

        Would love to hear your take on Krugrman’s view of recent Reinhart statements.

        http://krugman.blogs.nytimes.com/2010/05/27/bad-analysis-at-the-deficit-commission/

        Reinhart and Rogoff specifically cite data from the United States showing slower growth when debt was above 90 percent of GDP. But if you know the data at all, you know that so far, the only years in which US debt was above 90 was in the immediate postwar period, when growth was indeed slow — but not because of the debt burden; instead, the US was demobilizing after the war, with many women leaving the paid work force. So it’s a terrible example to use.

        And I suspect that much of the rest of their result reflects reverse causation: Japan had low debt and fast growth before the 90s, high debt and slow growth since, but surely we believe that Japan’s financial crisis is what both slowed growth and increased debt; similarly, the onset of Eurosclerosis is what led both to slowing growth and higher debt in Europe. And here’s the thing: Reinhart and Rogoff have not, as far as I can tell, made any effort to disentangle the causation here.

        1. tyaresun

          Here is a more recent one:

          http://krugman.blogs.nytimes.com/2010/08/11/reinhart-and-rogoff-are-confusing-me/

          So surely the question is how much of the correlation survives once we restrict ourselves to cases in which the causation is plausibly from debt to poor growth, rather than likely being spurious or reversed.

          But R-R don’t offer any response to that question. They do give us a list of peacetime high-debt episodes:

          the 1920s and 1980s to the present in Belgium,
          the 1920s in France,
          Greece in the 1920s,
          1930s and 1990s to the present,
          Ireland in the 1980s,
          Italy in the 1990s,
          Spain at the turn of the last century,
          the UK in the interwar period and prior to the 1860s and, of course,
          Japan in the past decade.

          If I’m reading this right, then the postwar cases other than Japan — which I’ve argued looks like reverse causation — are Belgium, Ireland, and Italy. Are these cases enough to bear the weight now being placed on that supposed 90 percent red line?

          I’m also puzzled by the way R-R deal with the reverse causation argument: they admit it can happen, but argue that causation doesn’t always run from growth to debt, but can run the other way. Isn’t that attacking a straw man?

          Anyway, I come out of this with no more clarity than I had going in; I still don’t know what, if anything, the R-R data tell us about the growth effects of debt at the levels now in prospect.

          1. Bates

            What is debt? When every gov counts debt differently it’s difficult to say, isn’t it?

            R&R, in their book, even point out that gov debt is very difficult to determine…not only becuase each gov counts debt differently but because govs do not want to give away too much info…especially if it reflects badly on the gov.

            Examine the current US Gov off balance sheet obligations and the debt picture changes radically.

            Gotta sell those bonds, you know.

        2. Yves Smith Post author

          Two different pieces of work. The Reihnart and Rogoff work is from their book. This Time It’s Different. The 90% debt to GDP number is worthless, since it combines gold standard and currency board countries with sovereign currency issuers. It’s an apples and oranges data set.

          The Reinhart and Reinhart work for the Fed confab does resemble an earlier Reihhart and Rogoff paper, in which they analyzed the fates of countries in the modern era that had suffered serious financial crises. That’s an interesting analysis, the big caveat is the small number of data points.

      2. Bates

        Yeah, I am…Malthus did his job and collected the data for the crown.

        He wasn’t wrong…he just had no way of seeing the ‘green revolution’ coming in farm productivity per acre. From 4 bushels to 200+ is quite a jump.

    1. Doug Terpstra

      From “Beware” in its closing sentence: “And central bankers like Mr Bernanke may soon attempt to restore employment to unattainably high levels. If they do so, the road to recovery will be long, and the lessons of history will have been ignored once more.”

      Ah, yes, the nightmare scenario: Bernanke may actually prioritize the mandate of maximum employment. And now I see why this closing caution: “…Vincent Reinhart is resident scholar at the American Enterprise Institute.”

  4. anonymous

    I’m grateful anytime Yves links to thoughtful pieces that remind us that there’s nothing remotely inevitable about an improving economy. That said, I’m even more confident post-Beckworthy than before. There’s something really sad about the organized left these days since they signed on to protect the corporate renditioner-in-chief. Just wandered over to TNR where one of Beck’s professional hostile critics penned a piece claiming…wait for it….Beck is an asshole. I happen to agree. The problem is Beck isn’t the only asshole on the block and for all the warnings about a seething cauldron of hate threatening to boil over and scald the sainted memory of MLK, Beckfast offered nothing but sweet populalism. It remains to be seen how much of this was really nutrasweet and we can be sure Dick Army would love to get all those in attendance on his email list, that is if they aren’t there all ready.

    Enough people believe the stock market is going to tumble and stay more or less down to justify a little bit of “hold-onnnn, here we gooo.” However, the absence of any real violence in a highly polarized polity speaks very well to the future, at least to me.

    Wouldn’t surprise me in the slightest if the majority decide to pull together and ignore all the “leaders.” There’s a pent-up need to get along that can’t be suppressed forever. Beck did the unthinkable, rallied what TPM and the NYT claimed would be a slavering mob, and demonstrated that the mouth-breathers are as capable of restraint as the next person. That bodes well for the future in my book.

  5. TomOfTheNorth

    The testimony by Barclays Director Liz James is specific to exchange traded futures & options operations. In my experience, Lehman had a top-notch team in that area – Barclays not so much.

    Exchange traded futures & options are standardized and straightforward instruments easily reconciled with a central counterparty. Rather than Lehman being the mess she described in testimony, it seems more plausible to me that James was merely overwhelmed by a task that perhaps a more capable manager would have accomplished.

    1. Yves Smith Post author

      There are numerous reports that Lehman was running its derivatives positions on literally hundreds of not integrated systems. That makes effective risk management impossible.

      Also, when Lehman failed, Alvarez & Marsal kept revising the number of open derivatives positions at the time of collapse upwards, 100K a pop. This isn’t the sign of a well run trading operation.

      1. TomOfTheNorth

        hi Yves,

        I dont disagree with you, however my comment was narrowly directed at exchange-traded futures & options – specifically the area that Liz James has responsibility for at Barclays – and the accuracy of her stated views.

        You may be surprised to learn that Lehmans F&O activity WAS consolidated on a single global system running the Rolfe & Nolan RISC application (I believe they booked FX on that system too). Barclays on the other hand ran their European F&O book on Rolfe & Nolans RANsys app and ran their US F&O book on the Sunguard GMI app (NOT a single, global system)requirin data to be converted & fed between the systems as well (I suspect) as some additional reconcilliation between the two data-sets.

        When I tell you that it is unlikely that Lehmans F&O business was a mess, this opinion derives from considerable insight into both the practical aspects of F&O operations and complex position transfers requiring data conversion for dissimilar systems, as well as personal familiarity with the individuals at the respective organizations.

        I could be wrong, however I think Barclays is just talking smack here. I mean, there IS some money on the line should the Lehman trustee prevail…

    1. Yves Smith Post author

      Steve does not have an RSS feed on his blog. I seldom get to blogs not on my RSS reader, no matter how good they are.

  6. renting_in_hell

    That article about Germany is hilarious – ‘As a practical matter, the ruling meant Germany was assuming the right to pick and choose which EU laws it would abide by, something no other European country has claimed.’

    Tell that to the British. And even more, the German Verfassungsgericht argued a sligthly more subtle point – no EU body is entitled to diminish the rights granted to Germans by the Grundgesetz. In other words, no end runs in the eyes of the body entrusted with German democracy. Assuming we are talking about the decision concerning ‘Vorratsdatenspeicherung’ – that is, the storing of data over time without suspicion. After all, Germany has a lot of experience in how police states work, and that is one of the most telling signals – just ask your favorite middle aged Stasi officer if memories of WWII are growing too dim.

  7. Jojo

    In other news:
    ———
    Oxford English Dictionary ‘will not be printed again’
    The next edition of the Oxford English Dictionary, the world’s most definitive work on the language, will never be printed because of the impact of the internet on book sales.

    By Alastair Jamieson
    Published: 3:01PM BST 29 Aug 2010

    http://www.telegraph.co.uk/culture/books/booknews/7970391/Oxford-English-Dictionary-will-not-be-printed-again.html
    =============
    Retargeting Ads Follow Surfers to Other Sites
    Published: August 29, 2010

    The shoes that Julie Matlin recently saw on Zappos.com were kind of cute, or so she thought. But Ms. Matlin wasn’t ready to buy and left the site.

    Julie Matlin was tempted by a pair of shoes on Zappos.com. Then the shoes started showing up in ads on other sites she visited.
    Readers’ Comments

    Then the shoes started to follow her everywhere she went online. An ad for those very shoes showed up on the blog TechCrunch. It popped up again on several other blogs and on Twitpic. It was as if Zappos had unleashed a persistent salesman who wouldn’t take no for an answer.

    ….

    http://www.nytimes.com/2010/08/30/technology/30adstalk.html
    =============
    Under Pressure: The Search for a Stress Vaccine
    By Jonah Lehrer
    Wired August 2010

    http://www.wired.com/magazine/2010/07/ff_stress_cure/all/1

  8. MyLessThanPrimeBeef

    China welcoming job seeking CEOs.

    It was said that during the great Tang dynasty, foreign students from Japan, Korea, countries to the west and south, studied with total imperial support without paying a dime.

    Of course, if you wanted to have yellow-haired Tocharian sing-song winemaids, with smiles like warm spring wind (according to the greatest Chinese poet Li Po in a poem), working in the cheap wineshops just inside the eastern or southern walls of Xian, pour your a drink or do a little dance for you, you would have to paid out of your pocket.

  9. MyLessThanPrimeBeef

    Today’s antidote – just curious, but can a horse own a pet human?

    One more question – I know people have pet dogs, pet cats, pet rocks, but can you have pet bonsai trees, pet telephone poles, pet trash cans or pet toilets?

    1. Yves Smith Post author

      Bonsai trees are living and take a lot of work, so that is a yes. Not sure re inanimate objects. Pet rocks were a joke. But then again, we also had Tamagouchi….

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