Mathematician proposes another way of divvying up the US House Nature. While gerrymandering is a proud US tradition, mathematician Paul Edelman argues that current districting is so far out of line with the “one person, one vote” standard as to invite lawsuits.
Bank May Buy Troubled Giant in Home Loans. New York Times. There’s plenty of chatter about the pending acquisition of Countrywide by Bank of America. Why would anyone with an operating brain cell want to take on a liability like this in a deteriorating banking market? While BofA isn’t taking the capital markets hits that banks like Citigroup are, it does have a big credit card business which will soon show signs of stress. A bank’s equity base is its most important commodity in a down cycle, and throwing away $4 billion plus God only knows how much in litigation costs to acquire Countrywide will come to be seen as a bad move. Note that the Financial Times coverage says BofA is trying to structure a deal to leave the legal risk behind. I’d be curious as to how they can possibly achieve that. They’d need to leave a legal entity and some assets behind (or put Countrywide in bankruptcy and then acquire assets out of the BK, but I thought the point of this exercise was to avoid bankruptcy).
Why sterling is the next dollar Martin Wolf, Financial Times. Expect the pound to continue to fall.
Moody’s says spending threatens US rating Financial Times. Oof, if this isn’t politically influenced, I don’t know what is. Moody’s says the US risks a downgrade on its debt rating unless it does something about its “social security and healthcare” spending.
First, everyone who has looked at the data says Social Security is not the problem. And even if it gets worse, some very minor fixes (raising the ceiling on payroll tax liability) will take care of it. The big problem is Medicare, and that in turn results not from demographic change, but from out of control health care costs. In other words, the answer is health care reform, not cutting entitlements. But you’d believe the reverse if you read Moody’s.
And why does the report not mention the fiscal sinkhole called Iraq?
China imposes price freeze to curb inflation Asia Times. Mind you, these are additional price controls.
Credit Card Debt Soars, No One Notices Dean Baker. Scary stuff. Retail sales growth appears to be the result of spending future earnings. Senator Lloyd Bentsen once said, “It’s easy enough to create the illusion of prosperity. All you have to do is write hot checks for $200 billion a year.” He was referring to deficit spending, but even though the numbers are now bigger, the same principle applies.
Everybody Knows… Cassandra Does Tokyo. This seemed fitting today.
The Comeback Continent Paul Krugman, New York Times. Claims that Europe has an underperforming economy are incorrect.