Monthly Archives: September 2008

The whirlwind!

I got back to the U.S. on August 19, and in the time I’ve been back, the following highlights have come and gone so fast it’s hard to remember them all:

  • Beijing Olympics – here we found that certain individuals are capable of amazing feats… and the Chinese stage-managed the whole thing pretty well, though they don’t seem to like public protests much more than the U.S. does.
  • Democratic Convention – went almost too smoothly, despite all sorts of talk that the Clintons would hijack things. Obama’s stadium speech was historic, not stirring, but a clear statement of what he wants to do. The choice of Biden was not exciting, but added experience to the ticket.
  • Republican Convention – in a brilliant political move, McCain’s choice of Palin sucked the air right out from the Democrats (while basically invalidating the logic of McCain’s attacks on Obama up to that point). I know Palin can read a speech, but there’s precious little evidence of greater ability so far. Only one direction for 90% favorable ratings, and that’s down.
  • Two hurricanes – one that spared New Orleans, one that was pretty hard on Galveston and Houston.
  • Financial meltdown – still ongoing drama of Wall Street that is growing to epic proportions.  There’s a growing undercurrent of suspicion on both sides about this latest alarm (see for example “Don’t Believe the Hype” by Daniel Larison over at the American Conservative).

What’s next??

Today I was able to get my ballot for the November election, so I’ve already placed my vote, regardless of the events of the next few weeks. Both tickets are led by Senators who have little background as executives, both have a combination of younger and older. We really can’t know what the person who is elected will do once in office, nor do we know what they will be faced with, so the vote is a bet on the judgment and capability of the candidate. I hope the debates shed a bit more light on the differences of the tickets, but I fear they will be more about ‘gaffes’ and ‘gotchas’.

My vote goes to Obama, based on what I’ve seen over the last year or so in terms of how he’s run his campaign, beaten long odds, and pretty much kept his cool.

Tomorrow morning I fly back to the Netherlands for about 7 weeks, so when I get back the election may be old news! For America’s sake I hope things settle down a little.

House of Cards, part 4

Lots of interesting commentary out there on the blogs.

Hank Paulson tells us that we really better give him a blank check for $700 billion, with essentially no oversight.  Is it true that this is the only solution?

“Many Economists Skeptical of Bailout” by Avi Zenilman at politico.com

Arnold Kling posts an open letter to Ben Bernanke, reminding us of an earlier time when a Treasury Secretary performed radical acts on the economy…

House of Cards, part 3

Is the Paulson bailout plan the right way to go?

I’m increasingly thinking it’s not.  But let’s hear from some others:

Luigi Zingales, professor at University of Chicago, in his short paper “Why Paulson is Wrong”:

If banks and financial institutions find it difficult to recapitalize (i.e. issue new equity) it is because the private sector is uncertain about the value of the assets they have in their portfolio and does not want to overpay.  Would the government be better in valuing those assets? No. In a negotiation between a government official and banker with a bonus at risk, who will have more clout in determining the price?  The Paulson RTC will buy toxic assets at inflated prices thereby creating a charitable institution that provides welfare to the rich – at taxpayers’ expense.  If this subsidy is large enough, it will succeed in stopping the crisis.  But, again, at what price?  The answer: Billions of dollars in taxpayer money and, even worse, the violation of the fundamental capitalist principle that she who reaps the gains also bears the losses.

Zingales recommends a debt forgiveness plan which keeps the taxpayer out of the mess (and of course acknowledges that the financial folks far prefer a bailout!).

More points are made in this article, “Concerns about the Treasury Rescue Plan” by Douglas Elmendorf at Brookings.

First, the affected debt instruments are quite heterogeneous, which makes setting appropriate prices and quantities very difficult.

A second problem with buying troubled debt is that it provides the most help to the financial institutions that made what are, in retrospect, the worst investment decisions. Banks that stayed clear of this debt or sold such debt at cut-rate prices earlier this year in an effort to move beyond the crisis would receive no direct gain from such a program, while banks that made the biggest commitments to low-quality mortgages and have delayed dealing with their balance-sheet problems would be the biggest beneficiaries.

I’d suggest that we slow things down just a bit, rather than ramming a plan through Congress before anyone understands the ramifications…

House of Cards, part 2

Back in November last year I had the first House of Cards post, which at the time seemed a bit alarmist, but at least plausible to me.

The past week (and the weeks to come) appear to be going way beyond what I would have thought possible, but I must assume that things are very close to coming completely apart in the financial world.

A story from the NY Times, “Fed and Treasury Offer to Work with Congress on Bailout Plan” by Edmund L. Andrews  indicates that a initiative is in the works to set up a government organization to buy up bad mortgages…

The head of the Treasury and the Federal Reserve began discussions on Thursday with Congressional leaders on what could become the biggest bailout in United States history.

if (acm.rc) acm.rc.write(); While details remain to be worked out, the plan is likely to authorize the government to buy distressed mortgages at deep discounts from banks and other institutions.

While I don’t think it’s fair to simply call this a failure of the ‘free market’ (since Fannie/Freddie were deeply involved in making mortgage money available and loosened standards at governmental request), it certainly indicates that many things have gone very wrong.  When the government becomes the only buyer left, the market has collapsed.

In the end, it seems possible that given a long-enough time horizon (presumably the government can hold onto these mortgages for a real long time), this may actually be a good deal for the taxpayer (or perhaps equally likely it could turn out miserably).  But how can anyone know today?

Anathem – Neal Stephenson (2008)

Anathem by Neal Stephenson

I made a quick trip down to San Francisco, and was able to attend the Long Now‘s ‘release event’ on the 9th for Neal Stephenson’s new tome, entitled Anathem. Neal read a bit from the beginning of the book, and then there was a chat with Neal and Danny Hillis, designer of the 10,000 year clock.

The basic idea of the book is that it’s set in a culture that takes a much different view of time than we do; I’ve only just started the book, and it will take a while to get through, but I’m intrigued by the premise.

If you’ve never read any Stephenson, this probably isn’t a good place to start… his Crytonomicon, while also long, is a great, action-packed and fun read.

Update on Sept-22:  Finished the book this morning.  I won’t give any spoilers, I’ll just say that the book deals with both philosophical and scientific issues from the time of the Greeks to the modern day.  There is some action to the plot, but it does take a while to get started.  As you get toward the end you start to see that the whole book has a consistency of approach that was not so evident as you started.  He uses lots of made up words for this world, but there is a glossary and definitions scattered in the text to make it fairly easy to follow.  I like his definition of ‘bulshytt’.  Overall I liked it quite a lot, but certainly won’t be to many readers’ tastes.

Music Fest NorthWest 2008

Each September in Portland is the indie pop Music Fest, and this year’s version wrapped up last night.  I ended up seeing 14 acts in 4 days, using the bicycle to hop around town from venue to venue (weather lately has been just lovely as well, making the river crossing beautiful each night).

Highlights for me this year:

  • Battles – third time I’ve seen them, another intense, sweaty show, perhaps the best of the lot.
  • Britt Daniel w/Janet Weiss – the lead man from Spoon played solo for his old songs, and with drummer extraordinaire Janet Weiss on five or six new songs.
  • Built to Spill – performed 1997 album ‘Perfect from now on’ in its entirety.
  • Nada Surf – just real nice ‘power pop’
  • John Vanderslice & band – nice arrangements, I’ll have to check out some of his CDs.