Weekly Roundup 01: A Curated Linkfest For The Smartest People On The Web
1. Why Americans Vote the Way they do – The basic argument of Red State, Blue State, Rich State, Poor State is that the assumption by many mainstream pundits that the socioeconomic elites tilt left while the masses tilt right is wrong. To a first approximation the rich tend to vote Republican, the poor tend to vote Democratic, the old stereotype holds. But there is also the reality that the wealthier states tend to vote Democratic and the poorer ones tend to vote Republican. In a book generously larded with charts I believe this is the most representative and informative one:
2. Do you implicitly Prefer Markets or Regulation – Quick assessment that determines whether you prefer “free”markets or regulation.
3. Whats really wrong with the Price of Oil – When the new president takes office, high energy costs will be — as they are already — a drag on the economy, one that is becoming conflated with the credit crisis. Last month, the U.S. auto industry sold fewer than one million cars — its slowest sales rate in 15 years. Tight credit and high gas prices each contributed to that. There is no way to completely unravel the two, but here is one fact: In the early part of this decade, when oil was cheap, Americans spent only 2 percent of their income on gasoline. Recently they have been spending about 4.5 percent — more than twice as much. And you can bet that the percentage is higher among families with lower incomes.
4. We Forgot Everything Keynes Taught us – The Great Financial Meltdown would not have surprised the British economist John Maynard Keynes,… for he thought that this was exactly how unregulated markets would behave. …Keynesian economics was … designed to prevent such turbulence. It held that governments should vary taxes and spending to offset any tendency for inflation to rise or output to fall.
5. What caused the crisis- Cowen’s View – How did the world’s financial system get into such a mess? It’s tempting to blame specific politicians, decisions and laws (or the lack thereof), and leave it at that. While it’s certainly true that a great number of serious, identifiable mistakes have been made, we need to broaden our thinking… The crisis is global in nature and its causes are more general and less country-specific than is commonly reflected in the political discourse… The current financial crisis comes from a conjunction of three major trends, common to many countries and to a wide variety of financial institutions.
6. Krugman & How Bubbles Happen – Krugman uses the Clan of the Cave Bear versus the Clan of the Cave Bull to explain herding behavior and bubbles:
7. Measuring Regulatory Swings – I have been looking for a way to quantify such swings in regulation or deregulation. Jackie’s story was accompanied by a graphic showing the changes in government spending on regulatory functions during previous administrations, which is one way measure of regulation. By this index, though, “regulation” has increased in every administration since Lyndon Johnson, with the exception of Ronald Reagan’s first term.
8. Shiller’s Subprime Solution – But here I’ll tell you about six solutions proposed by Robert Shiller in his book The Subprime Solution. (He has also recently published an op-ed in The Washington Post and an op-ed in The Wall Street Journal.) Shiller separates the short-term need for a bailout from the need for long-term solutions. Much is being written now about short-term bailouts, and Shiller presciently has a chapter in his book on the inevitable need for cleaning up the past.
9. Small Businesses and what we should Know – have been diligently researching this matter, in the hope of winning a Nobel Prize in Economics, and my preliminary conclusion is that the situation is even more extreme than John McCain suggests. Although I really should run this past Paul Krugman before going public, the evidence seems to suggest that as much as 100 percent of small business income taxes are paid by small business. Of course, both candidates seem to believe it is a scandal that the owners of small businesses pay any taxes at all, and from the way Barack Obama and McCain talk, they soon won’t have to, no matter which man gets elected.
10. What history tells us about the Market – A study of the great crash and reasons for optimism.
11. Banks admit bailout won’t work – So much for that story. A few days ago, when Hank Paulson called the heads of the nine families to Washington and shoved cash down their throats, he announced that the banks would use this new taxpayer cash to lend. They won’t, of course. They’ll hoard it like a starving family who has just been given a grocery cart full of food.
12. Future Files: A history of the next 50 years – Predicting the future is a dangerous game. “Future Files” is filled with startling facts from the present, from which are derived staggering insights about the next half century. It examines emerging trends and developments in society, technology, economy, and business, and makes educated speculation as to where they might take us.“Future Files” will prove indispensable to business planners, strategists or anyone that needs to stay ahead of the game.
13. A Brief History of the 1929 Crash – “The Crash of 1929,” a documentary that aired as part of PBS’ The American Experience Series.
14. Steven Pinker thinks your a Liar – When we asked experimental psychologist Steven Pinker about the existence of an inherent “human nature,” he said that he believes we possess one. And one important aspect of our nature is to lie to ourselves about our own virtues.
15. Can Bayes Theorem Convert Sam Harris – Have you ever yearned for hard proof that miracles really do exist? Well, Presh Talwalkar over at Mind Your Decisions suggests using Bayes Theorem to turn cynics into believers, all while maintaining their status as “rational person.” The formula is used to determine the likelihood of an event, by computing the probability of an occurrence that is conditional on a prior hypothesis.
16. Why we know less than ever about our world – Alisa Miller, head of Public Radio International, talks about why — though we want to know more about the world than ever — the US media is actually showing less. Eye-opening stats and graphs.
17. Mark Cuban on the Cause of Bubbles Investment vs Financial Engineering – Let me get this straight. In 2008, funds trying to squeeze out another basis point or two thought they were being conservative buying insurance on heavily leveraged portfolios of sub prime loans and other debt. Once those loans started to default, it created a cascading deleveraging event which lead to major financial institutions failing and the “smartest” minds on Wall Street being forced to dump everything to raise cash, which in turn lead to a crisis of confidence and deleveraging that created the worst week in the history of the stock markets.
18. Deflation Primer – Deflation is the debtor’s worst enemy just as inflation is the debtor’s best friend. In inflationary times the value of the asset you borrowed money to buy goes up so quickly that you can always sell and come out ahead despite the interest you paid in the meantime. In deflationary time, the outstanding amount of the loan can easily become greater than the current value of the asset. Now you’re underwater and can’t sell without putting money in. If you’re having trouble making the payments, you have big trouble.
19. What the recession means for free – I get asked this all the time these days, so before I crash after a speaking tour of Latin America (eight cities in four days!), here are my thoughts on what a recession will mean for free-based business models.
20. Good Financial Information Matters More than Ever – The subprime crisis along with its associated financial and economic problems is due, in good measure, to some failures of democracy — financial democracy, that is. Many working-class people and first-time home buyers who took out high loan-to-value mortgages with adjustable rates did not have ready access to information about what they were doing — the kind of information easily available to wealthier people — and so made serious mistakes. By the same token, many people who bought securitized mortgages had little access to financial advice that might have warned them how risky these instruments really were.