Price deflation isn’t necessarily a bad thing if it is short-lived and does not lead to downward pressure on wages. But falling wages produces a nasty spiral. Not only do consumers have less to spend, but worse, even if they keep their jobs, they can be legitimately worried about even lower pay packages down the […]
Read more...Why is no one willing to call things by their proper names, and instead resort to euphemism and double-speak? A New York Times story today, “On Wall Street, Bonuses, Not Profits, Were Real,” makes its most important point in its headline, and managed to get some good data points on how rich investment bank compensation […]
Read more...Over a weekend, word leaked out that AIG is paying yet more retention bonuses. This move is making a complete and utter sham of the supposed punitive elements of the rescue. But clearly, there was not enough of an adverse reaction to the earlier announcements of retention bonuses to deter the giant insurer. A few […]
Read more...A comment in the Financial Times, “Prudent Asia is unlikely to bail out the west,” by David Piling, provides a badly needed reminder: societies watch out for themselves first. And the way they define their best interest may not correspond with what we think is good for them. Forgive us for repeating ourselves, but we […]
Read more...One of the most pervasive findings in social science, although it is seldom codified this way, is how suggestible people are. Numerous studies in behavioral economics have found that the same underlying bet elicits very different take-up rates when framed as a wager versus as insurance. Even worse, humans are susceptible to obviously exogenous influence. […]
Read more...This ought to be a celebratory event, the scrutiny of a powerful player in the financial system who heretofore seemed immune to criticism. And what is interesting about the spotlight on Citigroup consigliere and board member Robert Rubin is that, unlike Greenspan, the reassessment is starting while he would still appear to have his hands […]
Read more...And he was not the only casualty. From the New York Daily News: A worker died after being trampled and a woman miscarried when hundreds of shoppers smashed through the doors of a Long Island Wal-Mart Friday morning…. “He was bum-rushed by 200 people,” said Jimmy Overby, 43, a co-worker. “They took the doors off […]
Read more...Why are we in the mess we are in? There are lots of proximate causes: overleverage, global imbalances, bad financial technology that lead to widespread underestimation of risk. Readers can no doubt improve on that list. But these still are all symptoms. Until we isolate and tackle fundamental causes, we will fail to extirpate the […]
Read more...This story from the BBC covers largely familiar ground as far as the deterioration of the Chinese economy is concerned, but in contrast to some other articles featured here, stresses the political implications of lower growth. Note that while many in passing observe that lower economic growth could be destabilizing for China, it also appears […]
Read more...One theory I derided earlier was the notion that that there are certain expenditures that do not get cut even when budgets are strained. The subject of my mini-rant last time was the idea that women would not cut back on going to their hair colorist. If people are cutting back on their medications, which […]
Read more...The UK’s Times reports that Swiss bank UBS intends to change its bonus program so that current year bonuses can be largely reversed if performance in subsequent year falls or generates losses. Even more striking, the bank is considering trying recoup bonuses already paid to certain executives. The UBS move is a worthwhile effort towards […]
Read more...Nearly 20 years of stagnant to falling wages, threadbare social safety nets, and no returns on savings has produced a retiree class in Japan struggling to make ends meet. Good reason to worry at the sight of the US cribbing heavily from the Japanese playbook. From Bloomberg (hat tip Ed Harrison): More senior citizens are […]
Read more...As readers may have noticed, we have gotten exercised about how brazenly the Treasury has been in lavishing cash on favored interests. Felix Salmon took up the theme, admittedly with less choler: There does indeed seem to have been a visible change in Treasury policy since the election. Until that point, it cared a little […]
Read more...Note that the headline above was on a Wall Street Journal story about the new taxpayer-raping improved version of the AIG bailout. The current headline is anodyne: “New AIG Rescue Is Bank Blessing.” Just as one wonders why the government backed down on a deal that was appropriately punitive to AIG (at worst, it was […]
Read more...The Wall Street Journal reports, as was rumored on Friday, that AIG appears on the verge of approving a considerably enlarged and sweetened rescue package from the government. We were less than happy with the idea when it first surfaced (see our rant “The Black Hole Gets Bigger: AIG Back for Yet Another Bailout“). Let […]
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