Sep
21
2008

I feel that this is good advice for friends/lovers/families too.

read the whole thing from here: Unfogged

Ten Commandments for a Responsible Pet Owner as dictated by the pet.

4. Don’t be angry with me for long and don’t lock me up as punishment. You have your work, your friends, your entertainments. But I have only you.

5. Talk to me. Even if I don’t understand your words, I do understand your voice when speaking to me.

9. Please take care of me when I grow old. You too will grow old.

10. On the difficult journey, on the ultimate difficult journey, go with me please. Never say you can’t bear to watch. Don’t make me face this alone. Everything is easier for me if you are there. Because I love you so.

Unfogged.

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Sep
21
2008

rePost: -Last War Syndrome-Is 2008 our 1929?

Posted by: angol in Categories: rePosts.

From brad delong: I dub thee THE LAST WAR SYNDROME: ‘Everyones fighting the last war!’

Is 2008 Our 1929?

No. It is not. The most important reason it is not is that Bernanke and Paulson are both focused like laser beams on not making the same mistakes as were made in 1929.

They are also focused, but not quite as much, on not making the mistakes made by Arthur Burns in the 1970s.

And they are also focused, but not quite as much, on not making the mistakes the Bank of Japan made in the 1990s.

They want to make their own, original, mistakes…

Grasping Reality with Both Hands: The Semi-Daily Journal Economist Brad DeLong.

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Sep
21
2008

What Paul Should have asked was, who would trade your health system with ours??

Saturday, September 20, 2008

The Problem with Audience Participation

James Taranto reports this recent interchange, during which economist Paul Krugman tries to make the case for a Canadian-style national health care system:

Krugman: –and I wanted to ask, actually two questions, to the audience. First, how many Canadians, would Canadians in the room please raise your hands. [One person applauds, laughter]

Donvan: We have about seven hands going up—

Krugman: OK, not as many as I thought. OK, of those of you who are not on the panel who are Canadians, how many of you think you have a terrible health care system. [pause] One, two–

Donvan: We see—almost all of the same hands going up. [laughter]

Krugman: Bad move on my part.

Greg Mankiw’s Blog: The Problem with Audience Participation.

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Sep
21
2008

September 21, 2008, 11:12 am

Thinking the bailout through

What is this bailout supposed to do? Will it actually serve the purpose? What should we be doing instead? Let’s talk.

First, a capsule analysis of the crisis.

1. It all starts with the bursting of the housing bubble. This has led to sharply increased rates of default and foreclosure, which has led to large losses on mortgage-backed securities.

2. The losses in MBS, in turn, have left the financial system undercapitalized — doubly so, because levels of leverage that were previously considered acceptable are no longer OK.

3. The financial system, in its efforts to deleverage, is contracting credit, placing everyone who depends on credit under strain.

4. There’s also, to some extent, a vicious circle of deleveraging: as financial firms try to contract their balance sheets, they drive down the prices of assets, further reducing capital and forcing more deleveraging.

So where in this process does the Temporary Asset Relief Plan offer any, well, relief? The answer is that it possibly offers some respite in stage 4: the Treasury steps in to buy assets that the financial system is trying to sell, thereby hopefully mitigating the downward spiral of asset prices.

But the more I think about this, the more skeptical I get about the extent to which it’s a solution. Problems:

(a) Although the problem starts with mortgage-backed securities, the range of assets whose prices are being driven down by deleveraging is much broader than MBS. So this only cuts off, at most, part of the vicious circle.

(b) Anyway, the vicious circle aspect is only part of the larger problem, and arguably not the most important part. Even without panic asset selling, the financial system would be seriously undercapitalized, causing a credit crunch — and this plan does nothing to address that.

Or I should say, the plan does nothing to address the lack of capital unless the Treasury overpays for assets. And if that’s the real plan, Congress has every right to balk.

So what should be done? Well, let’s think about how, until Paulson hit the panic button, the private sector was supposed to work this out: financial firms were supposed to recapitalize, bringing in outside investors to bulk up their capital base. That is, the private sector was supposed to cut off the problem at stage 2.

It now appears that isn’t happening, and public intervention is needed. But in that case, shouldn’t the public intervention also be at stage 2 — that is, shouldn’t it take the form of public injections of capital, in return for a stake in the upside?

Let’s not be railroaded into accepting an enormously expensive plan that doesn’t seem to address the real problem.

Thinking the bailout through – Paul Krugman – Op-Ed Columnist – New York Times Blog.

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