Tuesday, March 02, 2010

Quotes of the day

Every decision can't be a political decision. Whatever happened to doing what's right?--John Mack, Chairman of Morgan Stanley

FDIC is going to cost us a lot of money. TARP cost us a lot of money. This bank tax, my first reaction was, 'That will cost us a lot of money'. I think we are getting into capricious, arbitrary and punitive behavior.--Jamie Dimon

Politicians are anti sovereign CDS as their existence accelerates the requirement for a response to deal with local country deficits and structural eurozone imbalances. Specious "uninsurable interest" claims are a smokescreen and banning CDSs would be as unproductive a gesture as the ban on short sales of financial stocks in 2008.--Andrew Clavell

China’s hidden borrowing may push government debt to 96 percent of gross domestic product next year, increasing the risk of a financial crisis in the world’s third-biggest economy, Professor Victor Shih said.--Bloomberg News

Britain has four, inconsistent, features. It is a small, open economy, with a large, internationally exposed financial sector, its own minor-league currency and limited fiscal spare capacity. This makes it uniquely vulnerable. Its central bank is limited in the liquidity support it can give banks with short-term foreign-currency liabilities. Its fiscal authorities may discover that major banks are not just too big to fail but also too big to save. The markets have recognised this, become nervous and started testing it. When a government has credibility – its promises and commitments are believed by its citizens and by the markets – the best policy is not an immediate fiscal tightening. A credible government would implement an immediate fiscal stimulus of, say, 2 per cent of GDP and commit itself to sufficient future tightening to restore fiscal sustainability. Unfortunately, thanks to a decade of fiscal mismanagement, the British government has little credibility.--Willem Buiter

To read the 1,802 pages of the Swedish crime novelist Stieg Larsson's Millennium trilogy is to be told that, for all their perceived virtue, the institutions of social democracy are a farce. In Larsson's books, American readers will find the Sweden they expect: the welfare-state comforts, Volvo security, and Ikea practicality for which the country is known. But they will also find a country they didn't expect. In this Sweden, the country's well-polished fa├žade belies a broken apparatus of government whose rusty flywheels are little more than the playthings of crooks. The doctors are crooked. The bureaucrats are crooked. The newspapermen are crooked. The industrialists and businessmen, laid bare by merciless transparency laws, are nevertheless crooked. The police and the prosecutors are crooked. And the criminals, of course, are crooked, though not always: it's often the case that criminal acts committed by do-gooders in the name of justice—from petty larceny to massive bank fraud—are the only means by which to overcome the comprehensive failure of the world's most comprehensive welfare system. ... In the best Swedish crime novels, including Larsson's, the cradle-to-grave welfare system takes care of its wards. But you start to wonder just which meaning of the verb "to take care of" that phrase refers to and whether the all-too-visible hand of the state isn't rocking the cradle over an open grave.--Ian MacDougall

And while almost 200 U.S. banks have failed since the start of the global recession in early 2008, Canada remains the only industrialized country in the world that has survived the last two years of financial and economic stress without a single bank failure.--Mark Perry

We show that: (1) African poverty is falling and is falling rapidly; (2) if present trends continue, the poverty Millennium Development Goal of halving the proportion of people with incomes less than one dollar a day will be achieved on time; (3) the growth spurt that began in 1995 decreased African income inequality instead of increasing it; (4) African poverty reduction is remarkably general: it cannot be explained by a large country, or even by a single set of countries possessing some beneficial geographical or historical characteristic. All classes of countries, including those with disadvantageous geography and history, experience reductions in poverty.--Xavier Sala-i-Martin and Maxim Pinkovskiy

[Christopher] Preble gives good ways of grasping the huge cost of America’s foreign policy. In 2007, for example, the Pentagon’s budget, plus its special funding for the wars in Iraq and Afghanistan, totaled $622 billion, or $2,065 for every American resident. He compares that to military spending by Britain (just over $1,000 per resident), France ($845), Japan ($340), Russia ($495 in 2006), and China (a piddling $92 in 2006). Preble goes further, noting that the number for the U.S. should include the part of the Department of Energy’s budget for nuclear weapons ($17.1 billion), the Department of Homeland Security, the Department of Veterans’ Affairs, and the Treasury Department’s expenditures on military retirement costs.--David Henderson

I suspect that [Greg] Mankiw and I have pretty similar views on optimal tax regimes, but I get there from a different direction. I don’t think we can rely on moral intuitions. At various points in history our moral intuitions about the dignity of aristocrats was quite different. Our moral intuitions about war and slavery have changed. Ditto for women’s rights, civil rights, and gay rights. Indeed our views on gay rights are still changing, as the younger generation has more liberal views than the older generation. And what do you notice about all these changes? In every single case our moral intuitions have moved in the direction of utilitarianism.--Scott Sumner

But the sad fact is that if the world had been perceptive enough to see the 19th-century socialists as totalitarian hate-mongers in idealist clothing, the [Berlin] Wall would never have been built in the first place.--Bryan Caplan

Almost all self-styled "anti-capitalists" hate free markets per se. But it's easier to incite outrage against visible injustices than against the invisible hand, and they take the path of least resistance. Don't believe me? Try going to an anti-globalization rally. Tell people you're for free trade, but against government subsidies for exports. Tell them you favor freedom to form unions - and the freedom to fire workers for joining unions. See what happens. I bet it won't be pretty.--Bryan Caplan

So they landed the Sikorsky near our home and waited for me, and they were not leaving without me. Can you imagine the pressure? I have this really sick child, but I know that if I don’t get on that helicopter it’s going to hurt Brad.--Karin Jack, wife of former Lehman exective

After her husband left Lehman, Karin Jack was extremely hurt never to hear from Kathy Fuld again. The two had often gone shopping or antiquing together. Kathy, in turn, would voice surprise that once Dick was booted from Lehman she was no longer befriended by the wives of other Wall Street C.E.O.’s. She burst into tears at a dinner with Peter A. Cohen, now the C.E.O. of the Cowen Group, a securities-and-investment-management firm. “I thought all those people were my friends,” she told Cohen, who said he felt very sorry for her. After Lehman filed for bankruptcy, Kathy stayed on the MoMA board but was no longer in contention for the chairmanship. She just wasn’t rich enough anymore. Over the past year and a half, the Fulds sold some of Kathy’s art collection for $13.5 million and their 16-room Park Avenue apartment for $25.87 million. She learned something that other Lehman wives had learned before her: “When your husband leaves Lehman, you become a ghost.” But in Kathy’s case, Lehman had become a ghost along with her.--Vicky Ward

... ordinary people just want something cheap that works. And that's how the iPad will seem to them. Many will never make a conscious decision to switch. They'll get an iPad as well, then find they use their Windows machine less and less. When it dies they won't replace it.--Y Combinator

Updating your mesofacts can change how you think about the world. Do you know the percentage of people in the world who use mobile phones? In 1997, the answer was 4 percent. By 2007, it was nearly 50 percent. The fraction of people who are mobile phone users is the kind of fact you might read in a magazine and quote at a cocktail party. But years later the number you would be quoting would not just be inaccurate, it would be seriously wrong. The difference between a tiny fraction of the world and half the globe is startling, and completely changes our view on global interconnectivity.--Samuel Arbesman

I don’t tweet, I don’t Twitter, I couldn’t even tell you how to read or where to find a Twitter message. I don’t actually see the point of limiting communication to a haiku. ... I’m surrounded by people who are alive to what’s going on in the world and who are quick to be outraged by it.--Michael Lewis

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