Links 4/20/09

Hungary’s Spirits Are Back Up, on a Horse New York Times

Early recording of Britain’s Got Talent’s Susan Boyle unearthed Telegraph

Cancer brake ‘could halt disease‘ BBC

Funds try to spot the great oil rebound Ambrose Evans-Pritchard, Telegraph

Inflation is looming on America’s horizon Martin Feldstein, Financial Times

How to really scare China Free Exchange

Google is accused of UK tax avoidance Guardian

Calculated Risk: Undisputed Champion of the Econo/Financial/Business Blogosphere Real Property Alpha. Congrats CR!

The Fed’s Cash Machine Timothy Lavin, Atlantic (hat tip reader Dwight). Includes a very cool interactive graphc

Antiques rise as a safe haven for wary savers Independent

This is getting tiresome, so please let’s declare the crisis over Michael Pettis

(Green) bamboo shoots? Brad Setser

Erin Go Broke Paul Krugman. OMG, Krugman is beginning to sound like Buiter! He didn’t use that turn of phrase, but he is worried about constraints on fiscal action.

Bank Lending Keeps Dropping Wall Street Journal. A very good piece of reporting. As we have said before, the media keeps focusing on the absolute level of lending activity, when the real issue is lending HAS to fall, since the bubble level was unhealthy and unsustainable. But it also is plenty likely that banks are reverting to usual downturn behavior and being too stringent. Regardless, this development will be used as an argument against letting banks pay back TARP funds. But presumably Goldman, as a non-lender, will slip the noose.

America close to the tipping point Animal Spirits. Today’s must read. An IMF analysis contradicts conventional wisdom among economists, borne out of America’s WWII experience, that the US could (maybe even should) run up a monster Federal debt to GDP (m dim recollection is we got to 110% of GDP then versus 40% now, please correct if wrong). The IMF contends that debt to GDP in excess of 60% increases deflationary pressures.

Antidote du jour (hat tip reader Kevin);

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  1. jbmoore

    The BBC article about the cancer brake is mostly hype for now. If the hypothesis is correct that malfunctioning gene networks are the cause, then each cancer might have a unique network. They are looking for common genes in the majority of cancer cell networks that they can target, common bottlenecks. If the hypothesis that cancer is a metabolic disease due to malfunctioning mitochondria, then the above search may prove fruitless (and there is evidence to support this). If the majority of cancers are due to viruses, then the above approach may prove fruitless as well (a few cancers are caused by infectious diseases). If the majority of cancers are due to chromosomal translocations, then the genetic network approach may prove fruitless. They tried something similar by DNA sequencing pathogenic bacteria looking for common targets they could make inhibitors to (antibiotics). It pretty much failed.

  2. mistah charley, ph.d.

    You point to a report in The Independent, the first sentence of which is

    “Wary savers are turning to antiques as a safe investment opportunity, pushing up auction prices.”

    “Pushing up prices” reminds me of “bubble.” As the Antiques Road Show on PBS illustrates, the value [price you can get when you want to sell] of antiques and objets d’art is very much context-dependent.

    Were I to be at the stage of wanting to turn money into things of lasting value, I’d probably get gold coins, which I would diversify according to the method Stephen Colbert suggests – keep some under my mattress and some buried in my back yard.

    It’s the time of year when digging in your back yard – to prepare the ground for gardening – would be perfectly unremarkable.

  3. tyaresun

    The Lavin article and graphics should be viewed alongside the Volker interview in which he says that the Federal Reserve Act will be reviewed by the Congress.

    I presume he believes that the Fed will indeed take a hit on the collateral it is holding. promting a review. I wish he gave a date for this congressional review. My guess is 2010 at the latest.

  4. john c. halasz

    U.S. public debt-to-gdp was 120% after WW2, but household savings were extraordinarily high and all the debt was owed domestically.

  5. emca

    “U.S. public debt-to-gdp was 120% after WW2, but household savings were extraordinarily high and all the debt was owed domestically”

    It could also be added that the U.S. had a near monopoly of steel production after the war, due in no small part to the destruction of Europe’s manufacturing base.

    On another note, I have a problem seeing the source of wealth that’s to pay for our current fiscal salvation. What kind of asset base does this country have today? Fraudulent speculation based on unrealistic housing prices? Short term earnings devoid of long term consequence?

    I’ll could go on, but won’t… other then to ask, could someone humor a old-timer and explain how this is all going to work, in the long term?

    On a completely different if similiar note, I particularly like this comment headline courtesy of “The Big Picture”:

    ‘Stress Test,’ a new drama tv show premiering May 4th

  6. john bougearel


    No one at Real Property Alpha asked us for our votes.

    Susan Boyles rendition of Cry me a River and Killing Me Softly are spectacular, thank you for posting the link. Cry me a River is a fave of mine anyways.

  7. emca

    Real Property alpha’s methodology was limited to evaluate the number of links each site had, what they term “love links”. Also they mention, the numbers for the lower run sites are probably the result of good promo, the top tier though reflect actual perceived quality, in an indirect way.

  8. hbl

    I’m not certain that the IMF analysis reaches the right conclusion. In the copy posted at ZeroHedge, the most relevant line appears to be on page 127:

    “For instance, Perotti (1999), using a sample of 19 OECD countries, finds that a fiscal stimulus reduces private consumption in periods during which the level of government debt is particularly high.”The abstract for the referenced paper says “In the 1980s several countries with large government debt or deficit implemented substantial, and in some cases drastic, deficit cuts. Contrary to widespread expectations, in many cases private consumption boomed rather than contracted…” (I don’t have access to the paper).

    But how many of these countries the study was based on fit the “weak or non-existent demand for funds” column of Richard Koo’s “Exhibit 19: Four kinds of banking crises” categorization of crisis types, and were undergoing a debt-driven crisis? That is the column relevant to the US today.

    Animal spirits also gets carried away with “Recently released IMF analysis (via Telegraph) indicates that federal debt/GDP ratios in excess of 60 percent tend to become deflationary black holes.”. The IMF report only claims fiscal stimulus results become negative when debt to GDP is over 60 percent at the start of the recession. With the US starting at 45 percent, that would lead to slightly positive results for fiscal stimulus even by the standard of this IMF analysis.

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