Best of Both Worlds

Theatre of Screams

2013-05-18T13:33:00.004Z

New York Times interview with EU Commissioner for economic and monetary affairs, Olli Rehn --

He roots for Manchester United, his favorite club for decades ...

Enough said.

Arriviste

2013-05-17T01:53:00.000Z

Paul Krugman takes note of a Wall Street Journal blog post praising a warning from Jaime Caruana, the general manager of the Bank for International Settlements ("the central banks' central bank) about the dangers of keeping interest rates for too long. As Krugman notes, the WSJ sees one credential for this warning being that --

the BIS is one of the few international financial institutions (some say the only one) to see the financial crisis coming and to issue clear warnings ahead of time.

Now at the institutional level, that's true. But Jaime Caruana wasn't at the BIS prior the financial crisis. He was head of the capital markets department at the IMF. And did he then see the financial crisis coming and issue clear warnings ahead of time? Here he is summarizing the IMF's Global Financial Stability Report in April 2007 --

Overall, then, we note that the structural transformations occurring in global financial markets are likely to have a positive impact on financial stability. However, the increased complexity of instruments and linkages and the very benign circumstances associated with the rapid rise in the types of institutions investing abroad and increasing global reach of financial institution suggests there may be pockets of vulnerability, and that we must continue to analyze all these trends in greater depth ... We think that over the last years the improvements in risk management techniques and processes in many financial institutions has been really very important, very relevant, and very positive, and this has contributed to strengthen the resilience of the financial system. We see these developments positively. There is liquidity in the financial system, and I would like to say that part of this liquidity comes from the innovation of the financial systems, so it is the very financial system that also is helping to create additional liquidity in the system.

If you read the whole thing and indeed his other pronouncements from that era, there are indeed enough CYA paragraphs about risks where he can say he did mention some possibility in advance. But clear warnings about an impending crisis? No way.

One side note to this is that the international financial policy elite has been a very nice landing spot for Spanish bankers whose record at home and their institutional prognostications prior to the crisis leave a lot to be desired. Now they're heralded as the people who saw it coming.

Confidence-inspiring

2013-05-15T02:03:00.004Z

European Council 14 May post-meeting statement --

In summarising the discussion, the presidency noted convergence along the following points:
[...]
- agreement amongst most member states that deposits under EUR 100,000 must be fully guaranteed;

Which member states didn't want to fully guarantee such deposits?

Transnational conservative elites

2013-05-10T20:19:00.001Z

Boston Cardinal Sean O'Malley will not attend the graduation ceremony at Boston College because the guest is Taoiseach Enda Kenny and O'Malley says that Kenny is "aggressively promoting abortion legislation." This prompts two questions.

First, which set of Irish or Irish American pro-life activists got to the Cardinal to inspire this course of action? Second, does the answer to question 1 form his only news source on the topic?

The answer to question 2 is most likely Yes, since it will come as news to any actual pro-choice campaigners that Enda Kenny or the relevant legislation is pro-abortion. Here's the outline text (the bill is still being drafted). One hint to his eminence that he might have been misinformed should come from the bill's title: The Protection of Life During Pregnancy.

The bill legislates for abortion in highly restrictive circumstances, and the necessity to legislate for those circumstances was created by a Church-backed constitutional amendment, subsequent Supreme Court legislation, and the likelihood of further Savita-type cases which exposed the gaps in the current framework. The Cardinal needs some more diverse information sources.

Half hidden agenda

2013-05-09T23:52:00.003Z

European Commission President Jose Manuel Barroso in another of his Big Think speeches about the future of the EU --

One of Europe's most important and respected philosophers, Jürgen Habermas, recently referred to our Blueprint as "the first more detailed document in which the European Union develops a perspective for reforms in the medium and long term that go beyond the present".

Relevant section of the address by Habermas --

The Commission, the Presidency of the Council, and the European Central Bank — known in Brussels parlance as “the institutions” - are least subject to legitimation pressures because of their relative distance from the national public spheres. So it was up them to present in December 2012 the first more detailed document in which the European Union develops a perspective for reforms in the medium and long term that go beyond the present, more or less dilatory reactions to critical symptoms.

Which is a little less of an endorsement of the document in general and the Commission in particular than Barroso implies. Habermas goes on to discuss how the only logical solution to the EU's problems is a political union, which will be reached by German-led treaty changes. Somehow that part wasn't in Barroso's speech.

It's background all the way the down

2013-05-05T16:17:00.000Z

The White House has given the New York Times the privileged deep background anonymous quote filled pull-back from Barack Obama's now infamous "red line" to Bashar al-Assad on chemical weapons use, which turns out to have been an invitation to the al-Assad clan to test the line both in terms of massacres and atrocities but ultimately in the use of chemical weapons itself. Anyway, there's one obvious problem with the New York Times article. If all the president's men were so uneasy about the whole concept of a red line, why were they still freely discussing it in those terms less than 2 weeks ago -- in a on-the-record background interview? --

We go on to reaffirm that the President has set a clear red line as it relates to the United States that the use of chemical weapons or the transfer of chemical weapons to terrorist groups is a red line that is not acceptable to us, nor should it be to the international community. It's precisely because we take this red line so seriously that we believe there is an obligation to fully investigate any and all evidence of chemical weapons use within Syria ... On your red line question, it is absolutely the case that the President's red line is the use of chemical weapons or the transfer of chemical weapons to terrorist groups ... So again, it’s precisely because we take the red line seriously that we feel like there needs to be clear, factual, evidentiary basis for our decisions ... But I think nobody should have any mistake about what our red line is. It is when we firmly establish that there has been chemical weapons use within Syria, that is not acceptable to the United States, nor is the transfer of chemical weapons to terrorist organizations. And the people in Syria and the Assad regime should know that the President means what he says when he set that red line.

If the concept was seen as a mistake from the start, why did the advisers dig themselves in 2 weeks ago before rushing to brief the New York Times that really they didn't like it at all?

The phrase should have been dumped once the problem was realized. Right now it's on the way to being the equivalent of the State Department's "no opinion on your border dispute with Kuwait" communication to Saddam Hussein.

The General Theory of the Future

2013-05-04T22:00:00.002Z

Wading into the Niall Ferguson controversy (with Ferguson himself already having conceded defeat), Jonah Goldberg finds an old Gertrude Himmelfarb quote --

There is a discernible affinity between the Bloomsbury ethos, which put a premium on immediate and present satisfactions, and Keynesian economics, which is based entirely on the short run and precludes any long-term judgments. (Keynes’s famous remark. “In the long run we are all dead,” also has an obvious connection with his homosexuality — what Schumpeter delicately referred to as his “childless vision.”)

Above, part of the table of contents of Keynes 1930 book, Essays in Persuasion.

Big Gay is going to have to be bigger

2013-05-04T16:53:00.000Z

Niall Ferguson's bizarre remarks about John Maynard Keynes -- that his philosophy discounted the future since he was gay -- makes for an interesting juxtaposition with Ferguson's other views about what happens when there are too many men, as appears to be happening in China and India:

It may be that the coming generation of Asian men without women will find harmless outlets for their inevitable frustrations, like team sports or videogames. But I doubt it. Either this bachelor generation will be a source of domestic instability, whether Brazilian-style crime or Arab-style revolution—or, as happened in Europe, they and their testosterone will be exported. There’s already enough shrill nationalism in Asia as it is. Don’t be surprised if, in the next generation, it takes the form of macho militarism and even imperialism. Lock up your daughters.

The solution is clear. We just need to divert these hundreds of millions of excess males to that Keynesian form of effete selfish liberalism.

UPDATE: Ferguson has retracted his original remarks.

Daily Mail in "made up story" shock

2013-05-01T18:27:00.002Z

Let's start this episode at the end. The Daily Mail story alleging a Saudi angle to the information on the Tsarnaev brothers has the following credit --

Richard Miniter contributed the American Media Institute’s reporting for this story.

If you're wondering why a 501(c)(3) organization is getting a journalism credit on a Daily Mail story, read on. Or read on anyway.

Statement via Saudi Press Agency --

Riyadh, Jumada II 21, 1434, May 1, 2013, SPA -- The Security Spokesman at the Ministry of Interior, dismissed here today, the British Daily Mail claims that the Kingdom of Saudi Arabia had rejected to give an entry visa to (Tamerlan Tsarnaev), one of the culprits behind Boston Marathon bombings. He also denied the London-based newspaper claim that the competent authorities in Saudi Arabia had any information, related to the culprit's intentions to carry out a terrorist act in the United States of America or that it had warned the U.S. authorities, in this regard. The Ministry of Interior Security Spokesman also asserted that no official within the ministry of interior, had been interviewed by this paper or made statements to it, in this regard or otherwise, and that the ministry has the right to take appropriate action against such baseless and unfounded news. --SPA

Now you might ask whether you have to choose between believing the Daily Mail or the Saudi Ministry of Interior. Except that the Saudi Ministry of Interior has surely calculated that at least two intelligence services (the FBI and the FSB) know an awful lot about Tamerlan Tsarnaev, so why would they risk denying an easily provable fact? Signs therefore indicate that the Daily Mail story is false, and it is being updated during the day to reflect the denials while keeping its original claims in the text.

So what's going on? What's going on is that the Mail went deep into the Obama-hating cesspit for "news" (which is what happens when you're chasing the same audience as Matt Drudge) when about two seconds Googling would have warned any editor to be careful. Unless appealing to the audience that he brings was part of the plan.

There is progress of a sort. In the Clinton-hating days, the trick was to give the dubious material to Ambrose Evans-Pritchard at the Sunday Telegraph, and then use the line "London's Sunday Telegraph is reporting that ..." to launder it back into the American news cycle. Now the haters are just given the explicit credit for the story. It's the other media outlets that run with the Mail story who need to validate the material.

UPDATE: There's something about Saudi Arabia that seems to attract journalistic fiction.

Conservative alternative to Obamacare would create new tax on healthy people

2013-04-27T01:46:00.001Z

The political website Buzzfeed (via Ramesh Ponnuru) provides an entertaining if convoluted account of how US House and Senate Republicans (or rather one particular Senator, Ted Cruz) have fallen out over what seemed like a wizard wheeze to undermine Barack Obama's healthcare law. Specifically, the House faction had come up with a scheme to divert some of the act's funding to patch a loophole relating to pre-existing conditions, whereas some true believers (i.e. Ted Cruz) maintain under the magic of the free market, there'd be no such thing as pre-existing conditions on health insurance, therefore attempting to pass laws to deal with it is sacrilegious.

The theory underpinning the idea that there'd no problem with pre-existing conditions in a free market is sourced to Paul Krugman's occasional sparring partner, Professor John Cochrane at the University of Chicago. But much as with Senator Ted Cruz's claimed knowledge of Rawlsian philosophy, his staff might want to read the original source material for Cochrane's proposal before getting too excited.

Note to Cruz staff: the Cato 2009 paper setting out these seemingly appealing contracts -- the ability to insure against not getting insurance -- dances around a key detail of these contracts. But the 1995 Journal of Political Economy article is much clearer: the scheme works because people who turn out to be healthier than expected when they first got insurance pay money to the insurance company! Now this detail is dressed up in the language of incentive-compatible contracts, but that's what it boils down to: there would be a pre-assigned pot of money for each individual to transact with health insurance companies, and that money would be drawn down from healthier-than-expected people to pay for "excess" costs associated with sicker than expected:

Every period, the consumer pays a constant amount into the account, and the account pays a premium to an insurer for one-period insurance. Competition requires that sick people pay higher premiums and healthy people pay lower premiums. If a person is diagnosed with a disease that raises his premiums, the insurer pays into the account a lump sum equal to the increase in the present value of premiums. If he gets healthier so that his premiums decline, the account pays the insurer a lump sum equal to the decline in the present value of premiums ... The account may be used only for health insurance payments because, as long as the sum paid by the insurer when a consumer got sick is located in the account, it is easy to require that the consumer pay the lump sum back to the insurer if he gets healthier. If the lump sum were paid directly to the consumer, it might be hard to get it back. The consumer might spend the money and declare bankruptcy. Finally, one hopes that courts will enforce an insurer's right to receive payments from an account that is explicitly set up for that purpose, while they may not enforce severance payments taken directly from consumers.

And one thing he doesn't discuss, but which appears to be implicit in his proposal, is that the government would have to require that everyone participate in "health status insurance," since it just shifts up one level the problem of currently healthy people convincing themselves that they'll never need health insurance.

Anyway, the point is that a favoured proposal of those advocating a "free market" approach to health insurance wouldn't stand up to about one hour of creative sloganeering: "It's your money, not the insurance company's; Why should being healthy cost you money?" There's understandable concern among liberals that the Obama healthcare reform may be complicated to implement. But getting free markets to work is no picnic either.

We'll understand the Treaty of Lisbon in 2030

2013-04-25T16:54:00.000Z

Speech by Jörg Asmussen, Member of the Executive Board of the ECB, The Economist’s Bellwether Europe Summit, London, 25 April 2013 --

The enhancement of the governance framework shows that governments in the euro area have finally understood, what had been laid down in the Maastricht Treaty already: that in a monetary union, the economic policies of each country are “a matter of common concern” for all.

The Maastricht Treaty was agreed in 1992 and ratification was completed in 1993. Two decades later, an influential ECB board member says that only now have the governments finally understood it. Lucky that the pesky people were kept out of it or we would be waiting even longer!

Gulf Media Notes: 2

2013-04-25T00:53:00.001Z

Saudi Arabia Friday news dump (noting that in Saudi Arabia, Friday is Wednesday) --

Tabuk, Saudi Arabia, Jumada II 14, 1434, Apr 24, 2013, SPA -- Director of police of Tabuk region Major General Matouk Al-Zahrani announced that Tabuk police has received, at about one o'clock afternoon, a tip that a car driven by an expatriate of U.S. citizenship was subject to a car collision and fire shooting by someone driving another car on a road in Tabuk city. He indicated no injuries resulting from the incident but just some damages afflicted the U.S citizen's car due to the collision and shooting. Major General Al-Zahrani also reported that the competent authorities of Tabuk Police had begun procedures for the criminal investigation into the incident. --SPA

Gulf media notes: 1

2013-04-25T00:49:00.002Z

There's been a story circulating for over a week that Saudi Arabia deported three men from the UAE for being "too handsome." In terms of truth, the story stinks to high heaven. It doesn't sound right, and no one can produce an original source for it (note: saying it was an Arab language newspaper "Elaph" doesn't count). Our own view is that it's being circulated to distract attention from an actual documented event involving a Dubai resident Egyptian woman who was involved in a plausible and widely witnessed incident at the same festival -- Janadriyah -- at which the alleged deportations took place.

But the supposedly edgy media would rather chase the more implausible story, especially when they can show off the capability to stack tweets and write a few words around it.

UPDATE: There is zero evidence that Omar Borkan al Gala was one of the three deported men but since the claim that he was has "gone viral," it must be true, right?

What the Islamophobes fear most

2013-04-24T13:59:00.003Z

Noted without further comment, story from Saudi Press Agency --

Riyadh, Jumada II 14, 1434, Apr 24, 2013, SPA -- The Undersecretary of the Ministry of Islamic Affairs for Mosques, Call and Guidance Dr. Tawfiq bin Abdulaziz Al-Sudairi received here today Member of Dutch right-wing Freedom Party Ernaud Van Doorn, who converted to Islam recently, and currently on a visit to the Kingdom of Saudi Arabia during which he performed Umrah rituals and met with a number of scholars and preachers in the Kingdom. During the meeting, Ernaud briefed Dr. Al-Sudairi on his experience in life, and how he converted to Islam and his change from anti-Islam to pro-Islam. Dr. Al-Sudairi congratulated Ernaud on converting to Islam, noting that Islam is the religion of mercy, love and peace. Ernaud expressed his thanks to the Undersecretary for the warm reception and generous hospitality accorded to him in the Kingdom of Saudi Arabia. On the other hand, Ernaud visited the Exhibition of the Construction of the Two Holy Mosques. At the end of the visit, he expressed his pleasure to visit the Kingdom, perform Umrah rituals, visit the Prophet's Mosque, and greet the Prophet (peace be upon him). Ernaud was one of the participants in the production of the film offending the Prophet. He converted to Islam last March. --SPA

You'll never beat the Euro-federalists

2013-04-22T18:37:00.001Z

European Commission President Jose Manuel Barroso tells the Europe of nations that he feels their pain --

For European countries, most of which have fought long and hard to become united and/or independent, the thought of being a mere sub-federal entity is unbearable. This aversion to centralisation is both understandable and unsurprising. One of the classic 19th century Irish nationalist songs goes: 'and Ireland, long a province, be a nation once again'. It is only natural that such a nation does not want to go back to being, even if only symbolically, 'a province once again', and the same feeling lives just as strongly in many, if not in all Member States.

He then goes on to say that each crisis in the EU has been really helpful in promoting federalism because they have forced the countries into collective solutions to various problems.

We're going to need new rebel songs.

Fogra

2013-04-22T00:00:00.002Z

We have a post about George Osborne playing the selective quotation game over at A Fistful of Euros.

Pulling a fast one

2013-04-20T18:22:00.002Z

Slovenia is setting up a bad bank. It's a sign of the times in Europe that you have to pay attention to bad banks in Slovenia. The European Central Bank has issued a couple of legal opinions on the Slovenian case. They include comments on the role of the national central bank in the arrangements --

[September 2012] Banka Slovenije as the banking supervisor should be more actively involved in the activities of the BAMC (the bad bank), in particular in any procedure identifying the banks drawing on the measures under the draft law as well as identifying and defining the value of the assets to be transferred to the Fund. The draft law could clarify how the measures under the draft law fit into the system of supervisory measures taken by Banka Slovenije within its supervisory competence pursuant to the Law on banking. The ECB would therefore suggest explicitly providing for an appropriate role of Banka Slovenije either in the draft law or in any other relevant legal act3.

[March 2013] In Opinion CON/2012/71 (i.e. the above), the ECB noted that Banka Slovenije should be more actively involved in the BAMC, in particular in any procedure identifying the banks that would be eligible to draw on the measures. Against this background, it should not be the Government or the Committee, but rather Banka Slovenije assessing and deciding whether the stability of the financial system is threatened20. Banka Slovenije should also be given a role in the valuation of assets to be transferred to the BAMC or any dedicated company. Article 16(2) provides that the long-term real economic value of assets is assessed by the bank and the assessment confirmed by an authorised independent auditor. While the ECB welcomes the involvement of an independent auditor, Banka Slovenije should be given a prominent, if not leading, role in determining the long-term real economic value, with the valuation to be confirmed by such auditor.

Ireland's National Asset Management Agency (NAMA) -- the Celtic Tiger's bad bank -- meets none of these requirements in terms of the role of the Irish Central Bank. Zero. Zilch. Nada.

It would be nice to know even after the fact why this was allowed to be the case and whether it actually matters.

Embarrassing friend

2013-04-20T17:49:00.000Z

Eurocrats recycle the wording for the statements from one event to the next. So what they leave out between statements is often as revealing as what's left in. Example: here's a sentence from the concluding statement of the EU finance ministers meeting in February --

EMPHASISES that sound and sustainable public finances are an essential prerequisite for market confidence and macroeconomic stability, and hence for growth.

Now here's the equivalent section of the sentence from the statement of EU Monetary Affairs Commissioner Olli Rehn to the IMF Spring Meetings --

Sound and sustainable public finances are an essential prerequisite for macroeconomic stability and hence for growth.

Note: they've dumped the claim that austerity has to be done to keep the markets happy.

The USA has the worst approach to terrorism*

2013-04-19T13:49:00.004Z

Except for all the other countries. France is busy paying ransoms to militants in Africa knowing that this will blow up on a future incident like the Algerian gas field attack, while Russia is busy facilitating Bashar al-Assad in a Chechnya approach to the Syrian insurrection, with the original version thereof now having arrived in Boston.

It's not just in the field of economic policy where we are ruled by idiots.

UPDATE: The emerging profile of the Tsarnaev brothers has some resemblance to the trajectory of Mohammed Merah.

The bad guy shuffle

2013-04-19T00:31:00.001Z

Above is the Hezbollah operative trying to look like a dorky tourist waiting for Israelis to get on to a bus in Burgas, Bulgaria, into which he would then place his heavy black backpack containing a bomb which blew up, apparently ahead of schedule, since he was killed in the explosion.

Now in the case of Boston we're again looking at baseball capped young men looking like part of the crowd but upon reflection with overly large backpacks and looking a bit too much like trying to look like part of the crowd.

There are only so many ways to carry out atrocities like the Boston bombing and of course many different types of group could converge on the same modus operandi. But this particular MO looks like Hezbollah.

Photo: BBC.

UPDATE: As of Friday morning, the speculation in this post appears to be wrong.

Heckuva job Russian War on Terror.

They seek him there

2013-04-18T01:37:00.000Z

That Arab freedom agenda just keeps getting messier. The above is former member of the Kuwait National Assembly Musallam Al-Barrak, who popped up at a rally in his favour a few hours after special forces raided his house seeking to arrest him on foot of a 5 year jail sentence for insulting the Emir.

On the one hand, the good news is that you can pop up smiling at a supporters' rally a few hours after the police showed up to arrest you. On the other hand, a politician is now essentially a fugitive on the basis of words, not deeds, in what is the Gulf's most liberal country. And the one for which Maggie Thatcher expended the last of her overseas political capital in 1990. Bad timing.

Photo: Kuwait Times.

Reader service

2013-04-16T00:49:00.005Z

Wall Street Journal news article on the gold price crash --

Gold bugs proliferated. Steve Forbes, the onetime Republican president candidate, predicted in 2011 that loss of confidence in paper currency would force the U.S. to return to the gold standard after the 2012 election. Peter Hambro, chairman of London-listed Petropvlovsk, which mines gold in Russia, was cited in a British newspaper as saying that a big U.S. bank sent a text message to him in the summer of 2011 saying that, if the Fed unleashed a third-round of money-printing and bond-buying (as it later did), gold prices would hit $5,000 an ounce.

The quote was given to the Daily Telegraph's Ambrose Evans-Pritchard.

If that's his original spot, I'm Arnold Palmer

2013-04-13T17:52:00.002Z

Nothing seems more apt for the Tiger Woods/Masters/bad drop situation than the golf sequence from Goldfinger. Yes, we've changed the quote slightly to suit Tiger's situation.

Party like it's 1924

2013-04-13T01:38:00.004Z

European Union Commission President Jose Manuel Barroso at a speech in New York, celebrating the results of European austerity --

Europe has a manufacturing trade surplus of almost 300 billion euro, five times as large as it was in 2000. Sometimes people tend to forget this, that even in the crisis, Europe is in fact increasing its surplus. Our services surplus has expanded to over 100 billion euro. And our agricultural trade has shifted from a deficit to a surplus.

John Maynard Keynes, "The German Transfer Problem," Economic Journal Vol 39 (March 1929) --

If, however, we suppose that, by agreement with the Reichsbank, deflation is enforced, how will this help? Only if, by curtailing the activity of business, it throws men out of work, so that, when a sufficient number of millions are out of work, they will then accept the requisite reduction of their money-wages. Whether this is politically and humanly feasible is another matter. Moreover, an attempt by foreign financiers to withdraw some part of their vast short-term loans to the German Money Market, estimated at $300,000,000, might be a by-product of a violent political and economic struggle aimed at the reduction of wages in the interests of foreign creditors.

Free trade is just other words for nothing left to lose

2013-04-13T01:15:00.000Z

European Union Commission President Jose Manuel Barroso in New York City hyping up the benefits of an EU-USA free trade deal --

If the agenda and the ambition are undeniable, so are the potential benefits of such a deal. If we manage to come to a comprehensive agreement, the overall gains could add up to a 0.5% increase in GDP for both sides.

So all that excitement is over a once-off half of one percent increase in GDP. As EU Commission President, Jose Manuel Barroso is the chief technocratic advocate of austerity policies that are costing countries several percentage points of GDP every year.

Photo: Use of Dr Evil via Wikipedia for commentary purposes.