Links 3/4/09

Climate ‘hitting Europe’s birds’ BBC

America’s Loss is the World’s Gain: America’s New Immigrant Entrepreneurs, Part 4 Vivek Wadhwa. AnnaLee Saxenian. Richard B. Freeman, and Gary Gereffi, SSRN. On the reversal of the brain drain.

China’s jumbo rocket “carrying capacity factor” world’s second largest: expert Xinhua

Geithner ducks a big question Bruce Krasting

Merrill’s $10 Million Men Wall Street Journal. Someone leaked a document. Repeated references to “the figures show”.

Wall Street on the Tundra Michael Lewis, Vanity Fair (hat tip readers AlanM and Richard, who both say they saw it via Felix Salmon)

The NPC meets, and Krugman refers to the savings glut Michael Pettis

The unfortunate uselessness of most ’state of the art’ academic monetary economics Wilem Buiter. A bit wonkier than it needs to be, but a must read nevertheless. Comments encouraged.

Antidote du jour (hat tip reader Barbara):

Most babies measuring 5ft would be considered big, but newborn giraffe, Margaret, at Chester Zoo, UK is seen as unusually small for her species. She is one of the smallest giraffes ever born at Chester Zoo but pint-sized Margaret will soon be an animal to look up to.

Little Margaret, who is the first female Rothschild giraffe born at the zoo, is being hand-reared by her dedicated keepers. The first calf for six-year-old mum Fay, Margaret, who was born two weeks early, tipped the scales at just 34 kilos and is a mere 5ft tall.

Tim Rowlands, team leader of the Giraffes section, said: ‘Margaret is potentially one of the smallest giraffe calves we have ever seen. Fay isn’t the largest of giraffes and Margaret was also early which might go some way to explaining her size. ‘Margaret was having difficulty suckling so our keeping team are now hand-rearing her’ …….

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  1. brushes9

    “Anger and Metamorphosis:
    Lessons from Metal”

    My struggle is to develop neural pathways for dissipating my angry, quickly, safely and decisively.

    But, accomplishing this means learning how to meet my needs, which includes the need to defend myself from present and future aggressors and insults, or to deliver myself from frustrating situations.

    I’m 46, but I have recently been studying the various metal bands and the lyrics to their songs. After a couple of hours of study, I find that my anger more easily surfaces…for processing.

    In metal songs, there is always an aggressor, or oppressive situation. The singer talks about the pain and anger, but also that their bodies are undergoing “change.” Yes, this metamorphosis theme is pervasive.

    The formula of these songs includes the following: A person is oppressed and violated, they use their anger to meet their needs: destroy the aggressor, or change into something that the aggressor can no longer touch.

    The lesson is that anger cannot be the end. It has to be celebrated and used as an agent of change. Also, it requires faith in the dark path of anger to be able to let go of things of the past and to be available for the various stages of change, to finally enter the reality that is above and beyond decadent, mass society, where compromise and frustration are universal.


    Lyrics to Sacrifice by Diecast:
    Click “brushes9” above to hear the song and follow along!

    Tear away from my life force
    Torn away from my existence
    Take me away from all reason
    Tearing away

    How does a soul solidify, and create destination
    With ecstasy comes agony, how do I find a balance

    Must… Must de-… Must decide… Must decide, sacrifice

    Emotions set on high, living and dying by the sword
    Weight of risk is great, I am ready for the passing
    Turn the key, push the gate
    Step by step, inch by inch

    Now is the time, my day is near
    Encompassing my inner fabric
    Taking shape, will I approve of my current evolution
    It takes two halves to make a whole
    How can I be complete if I’m hollow
    I must expand my life, for this I give my sacrifice
    Can I travel this path alone… No…

    Travel this path alone (this path)

    Counting down all my days, until my future does unfold
    Will you hold on, on to me, or just let go

    Tear away from my life force
    Torn away from my existence
    Take me away from all reason
    Tearing away

    Know where my faith exists, undying and forever
    Believe the words I script, invest all of your worth
    Strengthen your sanity, it will reward in due time
    In due time

  2. bg


    “So they took these non-linear stochastic dynamic general equilibrium models into the basement and beat them with a rubber hose until they behaved. This was achieved by completely stripping the model of its non-linearities and by achieving the transsubstantiation of complex convolutions of random variables and non-linear mappings into well-behaved additive stochastic disturbances.”

    I had to look up the word transsubstantiation, which essentially is the act of changing water to wine. The rest of the quote stands on its own.

    Please, please, please everyone, try and avoid the use of well-behaved additive stochastic disturbances.

  3. fresno dan

    Wall Street on the Tundra
    “Iceland instantly became the only nation on earth that Americans could point to and say, “Well, at least we didn’t do that.” In the end, Icelanders amassed debts amounting to 850 percent of their G.D.P. (The debt-drowned United States has reached just 350 percent.) As absurdly big and important as Wall Street became in the U.S. economy, it never grew so large that the rest of the population could not, in a pinch, bail it out.”

    Lets give it some time, and we’ll see if we can actually bail it out. I am betting that at some point people will realize that dollars are just scraps of paper.

  4. Anonymous

    AIG Financial Group: 2 Trillion of Exposure!!!

    AIG Q4 2008 Earnings Call, 3/2/08

    Ed Liddy says financial products group has 2 trillion of exposure, with 1 trillion of that to 12 major counterparties.

    “The following is just a sampling of our global reach and our interconnectedness. We operate in more than 130 countries and jurisdictions and have approximately 74 million customers and policyholders. We are the world’s largest property casualty insurer. We are the largest provider of retirement savings for primary and secondary school teachers and healthcare workers. We have a $2 trillion financial products operation, with over $1 trillion of that amount concentrated with 12 major global financial institutions. We are one of the largest life insurance providers in the US and in Asia. We insure the property of 94% of the Fortune 500 companies. And we are the largest owner of airplanes in the world and the largest customer of Boeing and General Electric’s Aircraft Maintenance Division, among others.”

  5. dearieme

    Buiter: I thought that Wullie Boots was in fine fettle. I'd be interested to know the answer to the following question. Consider 10 leading "Anglo-Saxon" University Economics departments. (Say: Oxford, Cambridge, LSE; Harvard, Yale, Princeton; Chicago, MIT, Berkeley; and one more of your own choice.) Count the number of academics and the number of them who saw the current catastrophe coming. That is to say, not in their private musings, but in their lectures or publications. Now then, what is the percentage that succeeded? 5%? 1%? <0.1%. Really, I think the least we should do is to instruct the Swedish Central Bank to withdraw its silly, pretendy quasi-Nobel Prize. Or retitle it as being for "Astrology".

  6. brushes9

    What the aggressor teaches is that we cannot be angry..

    “I’m angry.”
    “No you are not!”

    The balanced parent demands only that our anger be sincere (an expression) and not just an attempt to cause harm (an act of oppression).

    The aggressor denies the young man the one force that is required the most in this world: his anger, that is, the nervous tracer that identifies that he is running-up a needs-deficit, and has an urgent need pending. This is why the aggressor must be and is overcome by our growing metal.

    When the Fed goes before Congress and says that we must back-stop the banks at all cost, to protect the American people, one’s metal radar will sound the alarm. The Fed is asking that the collective anger of the American people should be marshaled to defend the bankers, the ENEMY!

    By denying us our anger, the aggressor makes us his weak follower, because we can’t meet our own needs long enough to mount our defense, and see it through. The aggressor needs us and our compliance, on the other hand, to marshal our collective anger to meet HIS needs.

    So, being children of metal, we know this subconsciously and we are livid, reaching for our swords when we hear the Fed testifying before Congress.

    The Fed’s strategy will not be defeated without a fight. So, all metal heads must unite. While the bankers strategy has generational power and intent, our power is undeniable and has been patiently built.

    Look to the left of you. Look to the right. Chances are, you see metal, everywhere. This is a psychic war. You will know who wins this fight, just trust your metal.

  7. M.G.

    Here I agree that there is an unbearable lightness of being economists. Milan Kundera made an interesting case that kitsch is the absolute denial of shit. I contend that during these days many economists are in this respect simply kitsch. Some aren’t like Prof. Buiter here as he makes an interesting case for the unfortunate uselessness of most ’state of the art’ academic monetary economics. I am not sure that is unfortunate but I would extend this uselessness analysis also to most of state of the art academic fiscal economics and engineering finance.

  8. Anonymous

    From Buiter:

    “Indeed, the typical graduate macroeconomics and monetary economics training received at Anglo-American universities during the past 30 years or so, may have set back by decades serious investigations of aggregate economic behaviour and economic policy-relevant understanding. It was a privately and socially costly waste of time and other resources.”

    Amen, Willem. Echoes of Nassim Taleb who advocates an immediate shutdown of the “education” of Financial Engineers.

    I have yet to see any Economist (or Criminologist for that matter) produce any study analysing the cost of Corporate and Political Corruption in the current Disaster. Yet, these seem very significant factors. Is this subject then TABU to academic careers? Hey, folks, look at the Elephant in the Economic Room!

    If academic Economics is of dubious value, then what about all those other academic disciplines and departments, like Medicine (docs in bed with PHARMA), Engineering, etc. We think the Best and Brightest are running things when it may be the Worst and Dimmest, but well-connected.

    Let’s not ignore the fact also that Universities are in the main heavily publicly subsidized but the Public has little say over who gets access to them. Hmmm, that sounds like the Socialized Banks.

  9. brushes9

    Further thoughts on metal:

    We are fighting a generation who is not ashamed to birth you and then feed on your carcass. You can easily imagine Bill Clinton saying, with powerful cadence:

    “We eat our young!”

    How do you fight such a foe?

    The key is to attack with overwhelming force at all weak points, then, on all points. This will violate your training when you were oppressed, before metal, so you are likely to “play nice,” “not get angry” and, “do nothing inappropriate.”

    Watch fighters…Ali and Bruce Lee, for example. Self doubt and lack of confidence will dog you the whole way, because that is the pull of your old leash. After Ali, and Lee, study Tyson. You have to take pleasure, like Tyson, in defeating the enemy; they are taking pleasure in defeating you.

    Once you know that your anger is justified,..that your need to live is being DENIED you, then your metal way will do the rest. Right now, your old training is trying to re-surge, you are discounting your anger,..discounting your own reality,..”I’m angry,”..”No, you are not!,” right?

    The path of anger is only dark, because it is unknown to you. It is Evil, only because you were taught that you were Evil, along with your path to freedom.

    So, marry the Evil, join the dark forces, embrace the warlocks, bring on the DOOM,..and don’t lose faith in the ways of metal.

  10. Anonymous

    Cute Giraffes Department. Here is another look at giraffes:

    This video really shook up my conception of what a giraffe is. A good example of how our conceptions are in the main formed by the data we receive. In the larger frame how could I ever have believed we had a properly functioning Economy now that so much new information has been received?

  11. Anonymous

    Interesting link to piece about Geithner’s refusal to speak clearly about whether the Chinese will keep funding our debt. Maybe his new name should be Stonewall Geithner.

    Alas, the Pettis piece takes Krugman’s nuanced view and oversimplifies it into stupidity — as if Krugman believes that Asian savings is entirely, or even primarily, responsible for our financial crisis.

  12. Anonymous

    “Interesting link to piece about Geithner’s refusal to speak clearly about whether the Chinese will keep funding our debt. Maybe his new name should be Stonewall Geithner.”

    Congress should subpoena Geithner/Bernanke/summers for the names of the 12 institutions that Ed Liddy of AIG says have 1 trillion of exposure to it. And hold the three musketeers in contempt of Congress unless they cough up the name. See how the troika like sharing a jail cell with divorces held in contempt for refusing to disclose assets to the ex-wife.

    Bloomberg/FT/WSJ should sue the Fed and Treasury under FOIA to get the information.

    Transcript of AIG Q4 2008 mentioning the 1 trillion of exposure to 12 institutions, and 2 trillion to smaller institutions.

  13. ruetheday

    Details of the Mortgae Program released by Treasury:

    “To reach the target affordability level of 31%, interest payments will first be reduced down to as low as 2%. If at that rate the debt to income level is still over 31%, lenders then extend the term or amortization period up to 40 years, and finally forbear principal at no interest, until the payment is reduced to the 31% target.

    Treasury will share the costs of reducing the payment from 38% DTI to 31% DTI dollar for dollar.”

    In other words, cut the interest rate to 2%, extend the loan to 40 years, defer principal payments back into the balance interest free, with the Treasury picking up 50% of the cost of the above.


  14. tyaresun

    Anon @7:06.

    I completely agree that US universities are highly subsidised by the public but the private sector has tremendous influence by contributing the last few marginal dollars.

    I quit academics in 1996 to join the private sector, at least now I do not have any delusions about who I am working for.

  15. Anonymous

    Regarding Wall Street on the Tundra…

    I almost dropped my bacon sandwich reading that! We use a custodian in Iceland that was once part of Kaupthing called Arion. The young fisherman who went to banking and came back is on their front page. Check

  16. MyLessThanPrimeBeef

    Regarding economists, sorry, dismal scientists and just plain scientists in general, it’s time they step out from the victimhood mentality and stop using the Galileo trial as a shield and open themselves up to valid, rational criticism.

    If you ask, why can’t we go back to the way things were in the 1800’s? Before they give a straight answer, they will say, why do you want to go back? Look at how fantastic life is today?!?! The best way to respond is to tell them, in the 1800’s, every apple your kids eat is organic. Still, they will put up lots of reasons. But, in truth, the simple answer is, no, we can’t because…well, there are many excuses, because we have too many people to feed, to take care, or what not. But why do we have too many people in the first place? Well, here you would have to look to ‘science’ and ‘progress,’ that can give you a joy ride from one place to another place but can’t take you back to where you started.

    What kind of things in life can take you from one place but not back? Well, aging, I suppose, which is natural and unavoidable. But a lot of bad, unnatural and unnecessary things offer one way trips – mouse trap for one, drugs, the apple in the Garden of Eden, and yes, that Siamese Twins, ‘science’ and ‘progress.’

    So, ‘science’ and ‘progress’ seduce you into thinking you are getting a bargain, but once you have taken it, you don’t have the option of not wanting it anymore. You’re not free anymore. You lose the freedom George Bush fought so hard to give to you.

  17. donna

    Is there an English version of Buiter’s piece? I feel like I should be able to understand it somehow, but I don’t.

  18. MyLessThanPrimeBeef

    The Chinese better not think about using their trillion dollar reserve to buy up all the nuclear weapons from cash-starved Russia in order to collect debt.

  19. Anonymous


    I’m 41, and I’ve been listening to metal since I was junior high school.

    While your analysis of metal lyrics holds true for some sub-genres of metal, it does not hold true for all of them, and even then it does not hold true for all songs within those sub-genres (i.e., death metal, speed metal, nu metal, etc.)

    I’d also argue that many metalheads care far more about the music itself than they care about the lyrics. And some of us can’t get past the swallowed growling that passes as singing in many of the sub-genres.

    For some music that is unmistakably metal but with lyrics that are more light-hearted, check out Volbeat (Danish death metal meets rockabilly, see Dead Man’s Tongue), Steel Panther (80s tribute band that is now doing its own stuff), and Psychostik (Beer!!!). For heavy lyrics that don’t match your pattern, check out Stone Sour’s “Made of Scars” and Slipknot’s “Duality.”

  20. brushes9

    Well, if I follow Slipknot, or any artist literally, I might just hang myself.

    My interest is in the information metal has to offer blogging economist (and it is decisive), is not to kill one’s self, nor is it mental-masterbation-and-doing-nothing, but to accept your anger, and to act. Do not hold back!

    In fact, holding back is symptomatic of the original oppression that led to this crisis, in the first place.

    But, I’m glad that you asked. I believe that Obama, with Geitner and Bernanke, is expressing his early Stockholm syndrome, after achieving presidency.

    It will pass. We must support him, now, by attacking him. He is a man of the sword. Obama is metal.

  21. Cat

    [why can’t we go back to the way things were in the 1800’s?] A big part of what brought us this far was not science itself (though your point is a good one) but also free energy. Science didn’t have much power, literally, until the discovery of fossil fuels, and in particular oil. Oil is propping up almost everything right now, like some kind of genie furiously doubling and redoubling on our wishes. Most people have no concept how much of the Modern World pours out of a barrel of oil.

    Oil is finite, and we may already be on the downside of supply. Coal is more abundant but not a fraction as useful as oil. In many respects (transport, heating, electricity, food production and processing, manufacturing, medicine, probably others) we are probably headed back for the 1800s like it or not. That also means, headed back to something like 1.5 billion people, the likely carrying capacity for humans at that time. And that’s the scary bit.

  22. doc holiday comes clean

    Being not one to normally pound on my chest and make jungle noise, this is a rare moment when I think I can suggest that I was somewhat on target with being a ranting and raving lunatic, in warning bloggers to beware.

    I live here in this zoo as Doc, lived a quiet happy life as Kona at Calculatedrisk, then had a very long life at Yahoo as Scotty at the helm, et al, where I ranted and raved about earnings, accounting fraud and misrepresentation for at least 10 years.

    All-in-all, it was and remains a waste of time, and I wonder if any of these messages here matter to anyone, or if this stuff matters in trying to speak out about the lack of regulation and the corruption and the fraud.

    I respect the fact that Yves keeps on top of this and works so hard to stay on task! In the long run, hopefully, there are people that will do due diligence and run across topics here and there that will make them second guess mass media hype and to take more time to accumulate information for investing. There is no short cut, and if Madoff and TARP and Pimco and Enron and Buffett seem confusing — don’t be stupid and buy into the next great thing!

    I think we live in an age of lotto mentality and people in general tend to trust fast talking people in suits, on TV that are selling bullshit. I think it is impossible to find anyone in media that is being honest in terms of investment advice, because they all have Pied Piper agendas, where they play tunes in hopes of luring sheep into manipulated games.

    I guess the reason I felt like writing this, was because I saw that crap the other day where Obama was saying it was a great time to buy stocks, and it made me sick to hear that used car sales pitch from The President. Last time we heard that shit, was when Bush and Cheney said the same thing after 9/11 when it was a patriotic thing to shop and buy into stocks as a show of support — so many listened and went that path — while the vast majority of insider CEO’s sold as many options as they could find, not to mention, backdating as many options as they could find, as they cashed out their chips in a show of patriotism!

    That kind of hype and pumping makes me sick and I’m disgusted with Obama’s lack of intellect and integrity.

    The only reason I think I can suggest insults like that, is because I have tried to warn people and I have not believed the lies and I do understand valuation and I do try to do DD. I think we will see a start of a recovery in about 10 months, and then about another year of painfully slow “growth”, so as for the concept of getting in too early and being lied to, people should spend a lot of time doing DD and think about separating the bullshit from the best info.

    In closing, I’d like to give you an example of what I was thinking many months back, starting with July 10, 2008:

    1. For the benefit of Mr. Kite
    BAC will cut Div FYI or cut staff 50%

    2. Various other crap:

    NOVEMBER 26, 2008 3:21 AM
    doc holiday said…
    Dividends are universally dead meat! IMHO, the reason stocks are still highly overvalued is because of dividends that are out of line with fundamental future valuation. These days, I just look at the dividend as the percentage that the stock is over-valued.

    Also see @ CR: Kona says:
    November 17, 2008, 12:17:33 PM PST

    Next shoe will be dividend cuts, because share valuations will decline from fundamentals that will be linked to slower growth, and operating cash will be burned up faster and thus will be needed for operating costs versus being in place to offer competitive dividend yields. That implies, P/Es going higher and yields dropping, offset by deflationary impacts on commodity stuff like oil which will fall and leave the dollar floating against the yen in a liquidity trap.

    U.S. Bancorp said Wednesday its board of directors approved a plan to slash its quarterly dividend on common stock by 88 percent.
    The dividend will be cut to 5 cents per common share from 42.5 cents per common share. The new dividend will be paid April 15 to shareholders of record as of March 31

    >> One last thing — the next thing, is inflation! Beware! I'm tired of this and really don't care anymore, so I hope Yves is stronger!

  23. brushes9

    Oil and coal are going to be around for a long time:

    And, bearing the fruit of the womb will always be free. So, we must deal with it,..6.5 billion,..9 billion people…

    What are you going to do about it?..

    You young people out there, tell me, what are you going to do?

  24. Judith

    Cute giraffes/antidotes du jour: Thank you for finally posting back story to the antidote! As the days go by and the world gets weirder, it is a relief to have not just the photos, but reference. The brain works better when it has a bit of relief.

  25. asphaltjesus

    I’ve got plenty of bias going into railing against Economic models.

    20 years ago I had a professor at a lowly City College who had a very recently completed PHD from a prestigious University. He commented that the study of economics was driven into econometric modeling by two forces:

    1. The computer made modeling possible. Which worked for program-based traders. Everything else was disregarded.

    2. The not-so-subtle cultural disregard for Social Sciences. Social Sciences aren’t a big money-maker for a University. Coming up with a new day-trading scheme, or any other way to make shareholders rich are ideas that might, *possibly* generate endowments or research grants.

    So, there’s little, if any interest in the scientific pursuit of Economics. Which is why it’s only purpose in politics is to provide minor assistance on policy matters within the context of a political group.

    This was “water under the bridge” 20 years ago. Like most things, until it comes from some entity policymakers listen to, it’s as if it never happened.

  26. brushes9

    Our minds are not designed to solve the worlds problem. So, the third lesson from metal is:

    Keep it close, keep it personal.

    Or, to borrow from Ghandi and Tony Soprano:

    Do your work,..and then FORGET ABOUT IT.

  27. particle61

    hello friends-

    here, from bank run blog, are another couple of antidotes to the symptoms many are experiencing related to TARP awareness syndrome…

    ‘the truth never damages a just cause’ – m gandhi

  28. MyLessThanPrimeBeef

    Gandhi was a cool fellow and as he promoted spinning wheel for making the clothes he wore and for giving away, I too do spin a potter’s wheel for my bowls and mugs to use and to give away.

    And non-violent protests are all good, but this starving yourself to death in order to get something you want, whether for a lofty goal or not, and by the way, a real Zen men loses himself and does not think himself lofty or not (it’s the ‘if you practice archery, be the arrow thing’ or ‘if you want to be charitable and alleviate poverty, be poor, get that? and not for tax dedcution, Bill Gates’ thing)…well, in any case, this starvation business just seems like something a spoiled kid would do to get the parents to give in.

    By the way, I am a firm believer in resepcting people/animals who are giving you the silent treatment. My cat knows that – when he gives me the silent treatment, I respect him enough to not bug him. And all my ex’es know that too.

  29. Kristina

    Clearly, I am not educated enough to speak to the economics profession in general (not my field), but Willem Buiter’s piece strikes me as very similar to the beating that Soviet political scholars took after the Wall fell.

    There has been a lot of discussion (that I have learned from reading this most excellent blog) of “group think” and the failure of economists to speak out against the majority. It’s interesting to me that this has happened in at least one other field (Political Science), and now I’m curious as to whether it has happened in other fields. If so, is there some overarching lesson we keep missing?

  30. particle61

    you are right-

    the death by starvation of an activist motivated by an honest apprehension of the inequalities inherent in human (an much more, modern consumerist) existence would be a needless loss.

    let’ consider Aristotle’s assertion as a good beginning point-“democracy is when the indigent, not men of property, make the laws”

    “there is no greater misfortune than having an enemy” – lao tzu

  31. brushes9

    MLTPB said:

    “..well, in any case, this starvation business just seems like something a spoiled kid would do to get the parents to give in.”..

    ..yes, and an adult would do when there are no other options left. I believe that is why it is called “suffering” and “death.”

    If you are still alive, on the other side, then…Ghandi.

  32. MyLessThanPrimeBeef

    There ARE always options. Only violent people who do harm to others and themselves proclaim that there are no other options.

    And here is an interesting story from Laotzu’s contemporary, Lie tzu, not as well known perhaps as Lao Tzu or Zhuang Tzu. The story was told in the movie “Charlie Wilson’s Private War” as a Zen story, though Lie Tzu wrote that at least 1,000 years prior about ‘death’ and ‘suffering’:

    A boy is given a horse and everyone says “How fortunate your are to have such a fine horse”. The Zen Master says “We’ll see”.

    The boy falls off the horse and breaks a leg, and everyone says, oh it’s awful. The Zen Master says “We’ll see.”

    Then war breaks out and all the young men have to go join the army, except our young friend, who’s leg is broken, so he can’t go. His life is saved.

    In any case, Lao Tzu once said, ‘Those who know, don’t speak. Those who speak, don’t know. So, here is a Zen koan for you, brush and particle:

    Did Lao Tzu know or did he not know when he spoke that line?

    Another koan, and you might find it in what they refer to as ‘The First Book of Zen’ or ‘The Blue Cliff Records,’ (in Japanese, “Hekiganroku”):

    It’s not this
    It’s not that
    It’s not both
    and it’s not either.

    So what is it?

  33. Keenan

    doc Holiday:

    And here in the mid Atlantic another bank chops the dividend:

    PNC Financial Services Group Inc., the Pittsburgh company that owns National City Corp., this morning said it is slashing its quarterly dividend by 85%, a move that will save $1 billion annually.

    Directors of PNC will reduce the company’s quarterly common stock dividend to 10 cents a share from the current 66 cents. The next dividend is expected to be declared in early April, PNC said in a news release.

    “We are taking this proactive step to build capital, further strengthen our balance sheet and serve our customers in an unprecedented and uncertain economy,” said James E. Rohr, PNC chairman and CEO, in a statement.

    He added, “While our overall capital and liquidity positions are strong, extreme market deterioration and the changing regulatory environment drove this difficult but prudent decision.”

    Used to be that dividends were the reason to hold stocks in a downturn.

  34. bg


    Despite making jokes, I do understand his argument. Non-linear math is a horribly complicated mess. A simple example of this is that people are pretty reluctant to lower the price of their home once it goes up. So the movement of goods is different on the way up than the way down. Very inconvenient for the math.

    Another messy math problem is that risks don’t add up very well. Is Best Buy stronger or weaker post Circuit city? Hard to say, even emperically, much less mathematically.

    Tipping points, are another form of non-linearity. One extra snowflake starts an avalanche. But which one? Very hard to model.

    But what the economics departments have done is simply remove all the inconveniences from the models. The resulting math does a good job of predicting results during the boring times. Risks don’t change much, the world is functioning as expected. But when things go haywire, the world goes nonlinear, risks don’t add, and the models don’t work.

    The irony (he states) is that the models are usually unfailingly stable (no crisis possible) or unfailingly unstable. As a biproduct of this noone knows what to expect when it matters (now!)

    I am an engineer, and the real world is full of non-linear problems. Many are untractible unless the engineer can constrain the problem. (for example keep leverage to GDP under 100%). The engineer also has the benefit of trial and error and large numbers of samples. Macro economic theory lacks both.

    I would predict that the mathematics of macroeconomics will move towards the more traditional approach to nonlinear control systems – constrain them, and understand how to detect instabilities rather than model them.

    Buiter can write and think.

  35. Richard Kline

    That is a bitchin’ good discourse by Buiter, though one has to be able to breathe at 20000m without supplementary oxygen to follow the footprints. I agree completely with his overall position, but he puts it well, and in detail.

    The takeaway, WB: “The future surely belongs to behavioural approaches relying on empirical studies on how market participants learn, form views about the future and change these views in response to changes in their environment, peer group effects etc.” That’s called ‘doing history’ if we are calling a spade a spade, plus a little Behavioral Psych 301. Well, yes.

    But I do have one complete, if wholly secondary, disagreement with the argument in his article. [And, btw, kudos to the FT for giving a platform to it; name me one other major media source that would tolerate Serious Ideas like that.] This point in no way compromises his argument, to which it is quite minor. But it is vrey relevant in a broader sense. WB: “Time is a continuous variable . . . .” With regard to mass social behavior spaces, no, it is not. The importance of this cannot be overstressed from a broader analytical perspective. Mass social behaviors are not continuous but underlying aggregative functions which vary, largely predictively, a phenomenon which I refer to as ‘moment.’ I can prove this, Willem m’Friend; it would take about six hours or so, and a couple of bottles of claret. Perhaps some day we’ll have that chat. I live in hope that I will complete the research program behind that position. Well.

  36. Richard Kline

    And MLTPBeef, the space between. That is not ‘the’ answer, but one the queriers would appreciate.

  37. particle61

    MLTPB…the answer is clearly “yes”

    and thank you for choosing the option of relating thoughts for me to consider-

    ‘I don’t know what is more dangerous, a politician talking religion, or a preacher talking politics’
    g singlaub

  38. brushes9


    Fun questions!

    Answer to number one:

    I’ve never heard or read, in Eastern literature, about the efficacy of mind reading, which is what you are asking us to do.

    Lao Tzu mind is empty. There is no way to game-play, using our categories, to explore Lao Tzu’s mind.

    For instance, when you use the word “know,” is it the same when Lao Tzu uses the word “know.” I don’t think so. “Know” for Lao Tzu means to have a cluttered mind. “Know” for you means to have all the fact about something.

    So, the answer is no, Lao Tzu did not know.

    Answer to number two:

    This question is easier. This koan points out that the we only have a model of the world, within our minds. The real world is “out there,” and our symbols and models, built up upon sensory data and thoughts, is not “it.”

  39. MyLessThanPrimeBeef

    Richard Kline, no answer is an excellent place to be at. Like they say, nothing is better than something, and not just in zazen.

    Particle, you’re welcome.

    Brushes, I think Lao Tzu both knew and did not know. It’s like Tao or Dao, if you will. Dao is infinite and finite. It’s everything and it’s nothing. Lao Tzu said that dao can not be worded, for only the dao that is not the eternal dao can be put into words. On the other hand, Lao Tzu did spend about 10,000 words trying to explain it. So, I believe that he both knew and did not know.

    And I try to do the same. I tell my cat that I both love and don’t love him.

    The second koan, I agree with you – What is is, as Bodhidharma’s transmission was outside of the scriptures, not dependent on the written word. But then, it depends and depends not on the written word and if we keep this up, no one will ever get any sleep.

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