MobKool Blog

Radical or Gradual Reform?

JFP — Thu, 02 Jul 2009 23:38:11 +0000

By temperament, I am a conservative. By conservative, I mean that I believe that society and institutions are difficult to change successfully, and that, in general, things are better left alone. Having said that, I do believe that radical reform is much more likely to be successful than incremental. To my mind, the chances of fixing a fundamentally, broken system by making a series of small changes is low. Now, I find myself in the happy situation of having my prejudice in favor of drastic reform confirmed by a scholarly study. In a study of the effects of the civil reforms imposed across Europe by the French Revolutionary armies, four economists have found that in those areas where the most drastic changes were made from past practice, the greatest economic growth subsequently occurred. You can find a good summary of the study at The Economist’s View in a post titled The Consequences of External Reform: Lessons from the French Revolution.

Imagine Where Microsoft Would Be If It Had The Discipline of Oracle

JFP — Tue, 28 Apr 2009 15:34:23 +0000

I woke up this morning to hear the news that Microsoft was launching a competitor to Twitter. In my mind, I can’t help but juxtapose that story with the news from last week that Oracle is buying Sun. Now, I’m not a big fan of Larry Ellison. I still have bitter memories from the 90s when my wife’s raise was held up, because Larry had to approve it, and he was off yacht racing. But, you have to admire the way that he approaches his business. I never have any questions about what Oracle is doing. Larry knows what Oracle is about: Enterprise Software. He has a vision of where the market is going: a few big players. And, he has a strategy to make Oracle the dominant player in this new world: buy up key technologies; offer the complete Enterprise stack. Once you understand Larry’s vision, you can understand and justify every move Oracle has made.

Now, contrast that with Microsoft. Ballmer doesn’t know what the company is about. Is it focused on the desktop, games, internet, enterprise? Who knows? He doesn’t have a coherent vision of where all these markets are going. Who could? As a result, Ballmer doesn’t have a coherent strategy. He’s attempting to do everything; and he’s doing nothing well. Seriously, does anyone have a clue what Ballmer will do next, and why? If you say you do, you’re lying. You can’t know, because there is no strategy. There’s just a bunch of incoherent initiatives. It’s too bad, because if Microsoft had been as focused as Oracle, they could be hugely dominant in the enterprise space. As it is, they’ve wasted ten years.

J. G. Ballard

JFP — Mon, 20 Apr 2009 03:26:02 +0000

J. G. Ballard died today aged 78. Ballard was one of the most innovative writers of the Sixties. He shared with Philip K. Dick an awareness of the fragility of normality, and expressed it powerfully in all he wrote. As a teenager, Concrete Island and Crash had a profound effect on me. Later, my favorite work of Ballard’s became the short story collection The Terminal Beach. Although Ballard’s later work became increasingly repetitive, I still consider him one of the greatest writers of the second half of the Twentieth Century. Rest in Peace, J. G. Ballard.

Here’s a good obituary.

Ron Paul Rips Bernanke

JFP — Sat, 28 Feb 2009 04:11:55 +0000

Why The Stimulus Will Fail

JFP — Mon, 09 Feb 2009 00:29:17 +0000

If you want to understand why the stimulus will fail, just read Ambrose Evans-Pritchard’s article in the Telegraph entitled Bond Market Calls Fed’s Bluff As World Falls Apart. As Ambrose points out:

The yield on 10-year US Treasury bonds – the world’s benchmark cost of capital – has jumped from 2pc to 3pc since Christmas despite efforts to talk the rate down.

This level will asphyxiate the US economy if allowed to persist, as Fed chair Ben Bernanke must know. The US is already in deflation. Core prices – stripping out energy – fell at an annual rate of 2pc in the fourth quarter. Wages are following. IBM, Chrysler, General Motors, and YRC, have all begun to cut pay.

The “real” cost of capital is rising as the slump deepens. This is textbook debt deflation. It was not supposed to happen. The Bernanke doctrine assumes that the Fed can bring down the whole structure of interest costs, first by slashing the Fed Funds rate to zero, and then by making a “credible threat” to buy Treasuries outright with printed money.

Mr Bernanke has been repeating this threat since early December. But talk is cheap. As the Fed hesitates, real yields climb ever higher. Plainly, the markets do not regard Fed rhetoric as “credible” at all.

Who can blame bond vigilantes for going on strike? Nobody wants to be left holding the bag if and when the global monetary blitz succeeds in stoking inflation. Governments are borrowing frantically to fund their bail-outs and cover a collapse in tax revenue. The US Treasury alone needs to raise $2 trillion in 2009.

Where is the money to come from? China, the Pacific tigers and the commodity powers are no longer amassing foreign reserves ($7.6 trillion). Their exports have collapsed. Instead of buying a trillion dollars of extra bonds each year, they have become net sellers. In aggregate, they dumped $190bn over the last fifteen weeks.

The Fed has stepped into the breach, up to a point. It has bought $350bn of commercial paper, and begun to buy $600bn of mortgage bonds. That helps. But still it recoils from buying Treasuries, perhaps fearing that any move to “monetise” Washington’s deficit starts a slippery slope towards an Argentine fate. Or perhaps Bernanke doesn’t believe his own assurances that the Fed can extract itself easily from emergency policies when the cycle turns.

Now, the stimulus is going to add another $800 billion to the borrowings, and who knows how much Geithner’s “Bad Bank” plan will add in addition. Borrowing of that much money is bound to increase interest rates even more. And that increase will directly counter a stimulus bill that is already badly constructed to produce immediate benefits.

The Keene Act And You!

JFP — Sun, 08 Feb 2009 00:40:44 +0000

Wrestlers Talk About The Wrestler

JFP — Thu, 05 Feb 2009 04:31:22 +0000

I saw the movie The Wrestler the other day, and I was blown away by the quality of Mickey Rourke’s acting. Here’s a clip of some wrestlers talking about the movie:

Some Books I Read In January

JFP — Sat, 31 Jan 2009 23:17:43 +0000

The Painter of Battles: A Novel. Perez-Reverte’s latest and darkest of novels.

Inside Hitler’s Bunker: The Last Days of the Third Reich A collection of four essays dealing with the events around the fall of Berlin and the death of Hitler.

In the Bunker with Hitler: 23 July 1944-29 April 1945. Despite being an eyewitness account, adds almost nothing to our knowledge of the last days of Hitler.

The Halo Effect: … and the Eight Other Business Delusions That Deceive Managers. Great book on how a company’s success colors the analysis of it’s strengths and weaknesses.

Supplying War: Logistics from Wallenstein to Patton. Classic book on how logistics controls military success and failure.

The Road to War: The Origins of World War II. Series of essays that, country by country, describes the path to war. Very good chapters on France and England.

The More Things Change …

JFP — Sat, 31 Jan 2009 17:22:27 +0000

The following was written in the 1930s:

“The general shape of this universal delusion [that is, credit] may be indicated by three of its familiar features.. First, the idea that the panacea for debt is credit.. The burden of Europe’s private debt to this country now is greater than the burden of her war debt; and the war debt, with arrears of interest, is greater than it was the day the peace was signed.. Debt was the economic terror of the world when the war ended. How to pay it was the colossal problem. Yet you will hardly find a nation, state, city, town or region that has not multiplied its debt since the war. The aggregate of this increase is prodigious, and a very high proportion of it represents recourse to credit to avoid payment of debt.

“Second, a social and political doctrine, now widely accepted, beginning with the premise that people are entitled to certain betterments of life. If they cannot immediately afford them.. nevertheless people are entitled to them, and credit must provide them.. Result: Probably one half of all government, national and civic, in the area of western civilization is either bankrupt or in acute distress from having over-borrowed according to this doctrine.. Now as credit fails and the standards of living tend to fall from the planes on which credit for a while sustained them, there is political dismay.. When [people] have been living on credit beyond their means the debt overtakes them. If they tax themselves to pay it, that means going back a little. If they repudiate their debt, that is the end of their credit. In this dilemma the ideal solution, so recommended even to the creditor, is more credit, more debt.

“Third, the argument that prosperity is a product of credit, whereas from the beginning of economic thought it had been supposed that prosperity was from the increase and exchange of wealth, and credit was its product.”

The more things change, the more they stay the same.

Boy’s In A Band!

JFP — Thu, 29 Jan 2009 01:16:15 +0000

A picture from a time much longer ago than I care to remember: