Links 12/4/09

That musty smell may be the key to preserving old books Los Angeles Time (hat tip reader DoctoRx)

Occupied Paris: The Sweet and the Cruel Ian Buruma, New York Review of Books

The Bad Ben Bernanke Bet Paul Kedrosky

Changing My Mind on Bernanke Economics of Contempt. Coming from a self-professed Team Obama stalwart, this is pretty surprising.

Fed Chairmen Never Learn Calculated Risk. Although I agree with the sentiment completely (the blog has inveighed on this topic), I have to correct the chronology. The Fed never opined on fiscal policy prior to Greenspan.

Jim Bunning Does Not ♥ Ben Bernanke Tim Iacono

David Wessel Can’t Acknowledge that His Colleagues Really Really Blew It Dean Baker

Copenhagen climate change talks must fail, says top scientist Guardian (hat tip reader John D)

Hedge funds plowing into stocks, short AllAboutAlpha

The Mother Of All CDOs Wilmott (hat tip Felix Salmon)

Red Ink: Not an Illusion Michael Panzner

Gold and the central banks: the game theory Mencius Moldbug. Some interesting ideas here, but I’m not sure I buy his central premise, that outcomes are binary. Despite its following among a lot of financial blog readers, the gold standard has a bad name for a good reason. Inflation is MORE VOLATILE with a gold standard than under our current regime (check the stats here before you start ranting, the evidence is overwhelming) and with a gold standard, you can and do get deflation. That means formal monetization is less likely than its fans want to believe. But informal monetization, as a store of value in times of uncertainty, is another matter. People also used to use diamonds for this purpose, but now that they can be manufactured, they are less useful.

The Greatest Deception in the History of Finance Ken Thune (hat tip reader Doug)

Antidote du jour (hat tip reader Buzz):


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  1. Captain Teeb

    “Inflation is MORE VOLATILE with a gold standard than under our current regime”


    Could you clarify? In the current regime, are you referring to nominal or real inflation?

    Keynes himself agrees (Essays in Persuasion) that purchasing-power stability was a non-issue under the gold standard.

  2. Dave Raithel

    I put this link in a comment re Bunning/Bernanke, but I am putting it here also as a supplement to the piece on Hansen:

    “Carbon Capitalists Warming to Climate Market Using Derivatives”

    … the issue of permissible changes bearing the stamp of its paternity. I prefer Pigouvian taxes too. They won’t happen UNLESS we extend the “slavery” and “anti-Nazism” analogies to their full implication: Resistance cannot be tolerated, people will comply or be shot.

    Hands of those who want to go there? Me neither. (I’ve still heard no stories of truck bombs being driven into the lobby of Goldman-Sachs.) So we pit various capitals against each other, and do what we can…

  3. MyLessThanPrimeBeef

    The cat on the left was stunned by the bad smell coming out of the cat on the right…an obvious metaphor for people not to open their mouths.

  4. just doug

    I think a distinction needs to be made between a gold exchange standard and a real gold standard (where it circulates as currency) before the numbers will make any sense.

    What’s wrong with deflation? To say falling prices are bad is to say the 2 decade long decline in computer and electronics prices has been an unmitigated economic disaster. Contracting money and credit is only negative in that it prevents some projects from being undertaken that would otherwise be viable (in that consumers were willing to pay for them with money they saved). A sharp contrast to the downside of credit expansion.

    1. Walter

      “What’s wrong with deflation?”

      Nothing if you are very wealthy, and neither you nor anyone you care about depends on steady employment for food, clothing and shelter against the elements.

  5. Steve2241

    Regarding Financial Freedom’s deception and the reference to Viktor Frankl’s book “Man’s Search for Meaning”, I wonder what Bernanke considers to be a meaningful life; of what does he search? Perhaps, it’s those tasty “Financial Freedom fries”, as well.

    Brilliant piece.

  6. Jack Parsons

    “2 decade long decline in computer and electronics prices” – nice counterpoint, deserving of further thought.

    “That musty smell may be the key to preserving old books” – I’m training my bloodhounds to search for first editions.

  7. Anonymous Jones

    Thanks for the link to the Thune article about freedom and the concept of enough. It is so easy to be distracted from the most elemental question, how to live.

    I hope that we can all find meaning in our lives on a daily basis, though work, through community and through leisure. I think I mostly understand the concept of enough, but still (and alas), I remain terrified of falling short of enough, of living in a universe that will not provide what I “need.” I wish I were more successful in focusing on what is really important to me in real time, as opposed to being distracted by things that seem really important at the time but upon deeper reflection are not, but it’s difficult!

  8. Hugh

    Jim Bunning is a demented old coot. So what does it say about our political system that he absolutely nails Bernanke while essentially all Democrats and most Republicans can only talk about Emperor Ben’s new clothes?

    As for Copenhagen, whether it is sold as a political success or not, Hansen is right. In terms of actually addressing global warming, it will be a failure. All you have to do is look at Waxman-Markey or Kerry-Boxer, a goofy cap and trade giveaway with the big cuts coming decades on when the current elites including those above are retired or in the ground.

    The Thune piece is thoughtful and gets to the point that Stiglitz was talking about recently, that it is not just the quantity of our life but its quality that should occupy us.

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