Category Archives: ECONOMICS

In Defense of Scrooge

Bah! Humbug! Go ahead, say it. It feels good –about as good as 45 minutes of power yoga I’d say. Though I’m no Dickensian scholar I’ve always enjoyed the story of A Christmas Carol –especially the 1970 musical version staring Albert Finney. I find the performances and the music mesmerizing. It’s one of the few musicals I own.  However, I always felt the Scrooge character-type was misunderstood. Dickens artfully uses an aging business man as the representation of greed and hatefulness.  But strip away Dickens’ biases(as mentioned in the article link below) for artistic effect and what do you have? An elderly and honest businessman who at every turn is mocked and interfered with simply for being himself.  Imagine a small, decrepit man, shuffling down Broadway, his face, body and mind the result of  a lifetime of loss and abuse who only wants to be left alone for that is the only place where he can be truly peaceful…until the ghosts appear.  You only have to revisit the scenes with the ghost of Christmas past to understand where I’m coming from. Interestingly I found an article online, on a Ludwig Von Mises site of all places, that takes the defense of Scrooge a step further. It looks at Scrooge through the filter of the Austrian School of economics and libertarian values.  In the article author Michael Levin poses some questions that are both funny and insightful. Who did Scrooge ever lie to? Who has Scrooge actually taken advantage of?  Does he have a right to be left alone?

In Defense of Scrooge by  Michael Levin

Iceland Back From The Brink: Lessons For America

The people of Iceland non-violently reclaimed their country. They demanded new elections and a new banking board. They also voted against paying back massive debts to the UK that they themselves had nothing to do with.  Most importantly,
Iceland let their banks default.

Iceland took the pain and faced it head on and now, four years later, they are seeing signs of growth and recovery. Some Americans were on the same page back in the 2008. We defeated the initial Henry Paulson bailout plan when it first came to a vote. Then the following week Paulson resubmitted an updated version of his original three-page, 600 billion-plus request and forced it through.  With this pushy, CEO-like move he ignored the will of the people.

The FDIC protects accounts up to 250K, if they honored this could we have also let poorly run banks fail?  Was it time for the American people to force common sense on the banking  industry? Though Iceland has a small homogeneous population they may have the answers America is looking for.  Here’s a nice little page with an overview of how they returned from the brink.

http://www.businessinsider.com/what-the-world-can-learn-from-icelands-default-model-2011-8?op=1

I’m not a big regulation guy but here’s a few rules that I’ve learned from others that make a lot of sense.
1. Banks must hold loans for the life of the loan. No more wrapping up loser loans and selling them to others. The purchasers of these loser loans(and their Quants) soon realize they need insurance in the form of a credit default swaps. When these contracts fail what happens? It’s an unregulated cascade.

2. Banking should be a boring business. Reinstate the Glass-Steagall Act. If you can’t make a profit making loans you shouldn’t be a banker. With fractional reserve banking allowing a bank to lend 10 times its deposit base it should be a fairly easy thing to do. Many current large bank CEOs really want to be and essentially are hedge fund managers. Let them run private hedge funds and get all the glory and all the risk. This way if they fail the American public doesn’t have to bail them out and then be lectured to that it was necessary.

Russell Means: Welcome To The Reservation

Russell Means: Welcome To The Reservation

ECONOMICS: Nassim Taleb On QE2 & Newish Book

Logical views and possible solutions from the author of FOOLED BY RANDOMNESS and THE BLACK SWAN.