Guy Berger

You are being sarcastic? Guy Uh. No. I am being obvious. The American people were the ones who demanded inexpensive toys (and other goods)... the manufacturers complied. Guy Yeah, but not to get poisoned. Of course not. I was only objecting to GoodSpeak's specific claim that Americans had inexpensive Chinese products somehow "forced upon them". Guy

Well -- there is no direct connection between Northern Rock and dodgy US mortgages. However, Northern Rock engaged in securitization of (British, as far as I know) mortgages and financial institutions in the US engaged in securitization of (mostly American) mortgages. Guy

You are being sarcastic? Guy Uh. No. I am being obvious. The American people were the ones who demanded inexpensive toys (and other goods)... the manufacturers complied. Guy

I'm surprised you didn't include Shades or Backhand on the list -- they are among the group's best albums. I voted for Fort Yawuh. IMHO BopBe is one of the group's weakest albums. Guy

You are being sarcastic? Guy

I got mine this week as well. Currently doing the tedious "move" of music from the 20 to the 160. Unfortunately my laptop only has about 2 gigs of free space so I am doing it in installments. To enjoy all of this new space, I am re-encoding my music in 192. No clue if I'll be able to hear a difference on my $15 headphones... Guy

Reminds me of the old joke about how the only thing worse than being exploited by capitalists is not being exploited by capitalists. Guy

9/22/2007

By the way, I thought this WSJ blog item offers some historical perspective:

No, they didn't do it to skirt the health laws, they did it for the cheap labor costs. However, I'd be very surprised if the thought didn't cross their minds that something like this could happen. Guy

9/19/2007

I hope all my fellow Tribesmen have a bearable fast. Guy

Well, this is a silly response (to a silly statement), but iPods. If you were to value the US economy in terms of iPods, it's worth a lot more iPods now than it was 5 years ago. (And that's before we even adjust that today's iPod is much better than that of 5 years ago.) We could do the same for a bunch of other goods. I think focusing exclusively on exchange rates to compare international living standards is a mistake, because price levels aren't identical across countries. To some extent the depreciation of the dollar has made us poorer because imports are more expensive... but since a lot of what we consume is nontradeable, it will be less affected by shifts in exchange rates. For example, we all know that Venezuela has experienced quite a bit of inflation in past months; I'm almost sure that the Bolivar has depreciated against the US dollars. If I were to melodramatically conclude that the US has experienced great economic growth from the fact that it would cost me xxxx% more Bolivars to buy our country, you would burst out laughing. This guy has a very narrow definition of what has "intrinsic value". There's no doubt that the increase in the prices of these commodities, at least the ones we import in net, has made us poorer -- and that for those we import, the falling dollar has contributed to that increase. But these aren't the only goods in the economy, not by a long shot. Usually most knowledgeable people focus on real GDP, which involves draining away the effect of inflation on the numbers. (And we are talking about full inflation here, not just "core" inflation.) In other words, once you remove the effects of rising prices, the real economy is still growing. There are some statistical issues/controversies surrounding the calculation of real GDP, but I haven't heard any serious economists argue that in general the numbers are sound. Look, I fundamentally agree that occasional mild recessions are not an unmitigated disaster in the aggregate (though they can be horrible for particular individuals in the economy, and probably disproportionately harm the poor). And yes, it's possible that by delaying a mild recession in the short run you may get a worse recession in the medium run. But the idea that smoothing the business cycle (as has happened since WW2) is inevitably going to lead to a "huge recession (ie. depression)" is simply not true -- if anything, most of the worst recessions in the US's history (including the Great Depression) happened before people really figured out monetary policy. As far as "inflating its way to health" -- look, in the short run it's pretty well established that loosening monetary policy (particularly in low-inflation environments) can increase growth. If the Fed thinks that they can do this indefinitely they are in fact idiots... but they DON'T think they can do this. Guy

Out of curiosity, I checked today. If you look at the CPI (consumer price index), for the last year or two, year-on-year percentage changes for the full index have been higher than those for the core index... until the most recent month. (Which I think was August?) I think the same is true for the PCE (personal consumption expenditure) deflator, which is the measure that I believe the Fed prefers. In other words, for the past year, inflation if you include energy and food prices has been lower than if you exclude them. Somebody who is curious and less lazy than me can go to the BEA website (or is it the BLS?) and give us the exact numbers. Guy

A few months ago we were discussing the mysterious die-off of American bees. Some biologists may be onto the reason: 9/16/07

Point #1 -- This guy misunderstands the significance of "core" inflation (inflation which ignores changes in food and energy prices). Nobody disputes that food and energy prices are important (in fact they are very important). However, these tend to be quite volatile from month to month, which means that it's tough to tell what the underlying trend in inflation is when include them. In the long run it would be extremely foolish for a central bank to ignore them, especially if inflation is routinely higher/lower than core inflation. But in the short run the Fed is taking the right approach. Seasonal adjustments make sense. As MG said already, if you're going to compare pumpkin sales in October to pumpkin sales in November, you're obviously going to find a decline. But that doesn't tell you anything about the relative health of the pumpkin market; you have to adjust for higher pumpkin demand in October relative to November. Or in the inflation example -- if you're going to estimate oil price changes from March to August, you need to control for the fact that oil prices routinely go up in the summer. Otherwise you will overestimate the actual trend in inflation. I don't know enough about how seasonal adjustments are calculated to know how accurate they are. That said, I don't believe that central banks and statistical agencies in most rich countries are "cooking the books", so to speak. In some developing countries this is a different story. (eg Argentina) Point #2 - I assume he is responding to the cut in the Fed funds rate here. Like the French revolution, I think it's too early to tell whether this was a wise move. I am guessing the Fed figured (not without reason) that if they only cut 25 basis points, they would have ended up looking back a few months down the road and thinking "gee, I wish we had cut 50 basis points in the first place". Obviously if as a result of this cut the economy overheats and inflation ramps up, they will look really stupid (especially if they don't retighten monetary policy in response). Point #3 is going to take a much longer response that I don't have the time for right now. But I think it's mostly BS. Guy

My understanding of Northern Rock (which I have been following tangentially) was that the problem wasn't subprime. (In fact, most of the problems with "subprime", at least as far as financial markets go, don't have to do with the mortgages themselves, but rather with liquidity risk surrounding assets backed by subprime -- not the chance that those assets will default (very small), but rather the chance that you will have difficulty selling those assets in the short term.) The problem with Northern Rock was that it relied on funding from interbank borrowing, rather than deposits. Normally that is not a problem. But when the interbank lending market dried up in the recent weeks all of a sudden Northern Rock faced a serious crunch. I'll read Moose's article and comment about it shortly. Guy

This one was the cleverest:

This one is actually apropos given the hype over his new book:

Somebody posted this on the Miles list:

Al, In my opinion the band made its best music during 1971-73, both in the studio and live. Gotta go to work, will write more in detail tonight. Guy

I think on the particulars, the rating agencies are correct -- they were rating default risk, not liquidity risk. And from the data mentioned in this article, it seems like they were doing an OK job. (1% downgrades seems quite low; but perhaps the data.) For people to shout and scream that the rating agencies fucked things up... well, I just don't see it. It seems like a lot of buck-passing by investors that should have known better. That said, we're talking about a very serious conflict of interest. Perhaps the best solution would be to make them fully disclose the amount of money they are being paid by the issuer of the security they are rating. Needless to say that whatever "fix" legislators come up with will be a real mess.

Ubu, You can probably buy the original album as a replacement for cheap. That might not be aesthetically satisfying but you will get all the original music (if I remember the tracklist of the box correctly). I sympathize -- I get really pissed off when a favorite disc becomes unplayable or even mildly scratched. Guy