The following are some interesting articles I have read over the past few days that readers may also like to have a look at:
• Jo Becker and Gretchen Morgenson: (The New York Times): Geithner, as Member and Overseer, Forged Ties to Finance Club, April 26. 2009.
One year and two administrations into the bailout, Mr. Geithner is perhaps the single person most identified with the enormous checks the government has written. At every turn, he is being second-guessed about the rescues’ costs and results. But he remains firm in his belief that failure to act would have been much more costly. “All financial crises are a fight over how much losses the government ultimately takes on,” he said. And every decision “requires we balance how to achieve the most benefits in terms of improving confidence and the flow of credit at the least risk to taxpayers.”
• John Hussman (Hussman Funds): Money doesn’t grow on trees, April 27, 2009.
Yes, we can indeed abuse the US public in order to make the bondholders of US financial institutions whole and protect them from any losses. This was the policy of the Bush Administration, and has tragically become the policy of the Obama Administration as well. By doing so, we will commit our future production to foreign hands, or we will commit about a quarter of US non-financial profits and personal savings to these bondholders over the next decade.
• Gary Weiss (Portfolio.com): The reeducation of Timothy Geithner, May 2009.
Growing up is hard to do – especially in public. After his disastrous start, the Treasury secretary is scrambling to learn on the job. But how long can we afford to wait?
• Barry Ritholtz (The Big Picture): The elusive housing “fair value”, April 24, 2009.
Fair value for housing is a concept that under normal economic circumstances is dependent upon many different factors. But during the current secular economic shift, it is even more elusive. There are an increasing number of families who might have qualified for a standard conforming mortgages in the past, but no longer can today. We are still no way near a bottom in housing …
• Floyd Norris (The New York Times): Recession, far from over, already setting records, April 24, 2009.
• Tim Fernholz (The American Prospect): The unlikely revolutionary, April 22, 2009.
Simon Johnson isn’t a populist. He just thinks bankers run the country.
• Jon Berkeley (The Economist): A glimmer of hope, April 23, 2009.
The worst thing for the world economy would be to assume the worst is over.
• Paul Krugman (The New York Times): Alice in financeland, April 22, 2009.
• Portfolio.com: 20 Worst CEOs, April 22, 2009.
• David Piling (Financial Times): China flexes new economic muscle at sea, April 22, 2009.
If Beijing continues to expand its sea power until it has a navy to match that of the US it will raise questions of the postwar balance of power in the Pacific.
• William Cohan (Financial Times): Clever wheezes do not mend banks, April 22, 2009.
The recent improvement on Wall Street has been aided and abetted by some very clever schemes but honesty, integrity and transparency are the keys to a return to profitability.
• James Galbraith (New American Contract): James K. Galbraith on the Recovery to Come – remarks to the 18th Annual Conference Honoring Hyman Minsky, April 17, 2009.
It is … quite possible that the rest of the world will not cooperate in economic recovery even if one gets started here. It is possible that credit, debt and exchange-rate crises still to come will overwhelm the capacity of the global system to cope. We should be prepared, if we can, to deal with that risk.
• William Hester (Hussman Funds): Trading volume separates bull markets from bear rallies, April 2009.
Contracting volume is not enough evidence to qualify this is a bear-market rally with certainty. There are other measures that are showing more strength – such as various indicators of market breadth. But new bull markets, whether at their inception or soon after, have a history of recruiting noticeable improvements in volume. So far this rally lacks that important quality. Over the next few weeks stock market volume will be a metric to watch closely.
• Nassim Nicholas Taleb (Edge): The fourth quadrant: map of the limits of statistics, September 15, 2008.
Statistical and applied probabilistic knowledge is the core of knowledge; statistics is what tells you if something is true, false, or merely anecdotal; it is the “logic of science”; it is the instrument of risk-taking; it is the applied tools of epistemology; you can’t be a modern intellectual and not think probabilistically – but … let’s not be suckers. The problem is much more complicated than it seems to the casual, mechanistic user who picked it up in graduate school. Statistics can fool you. In fact it is fooling your government right now. It can even bankrupt the system (let’s face it: use of probabilistic methods for the estimation of risks did just blow up the banking system).
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