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links for 2008-10-15

nobel prize roundup

The Nobel Peace Prize went to former Finnish President Martti Ahtisaari. He’ll be receiving the prize without much fanfare, because he’s not quite audacious enough—he isn’t accusing a people trying to not-be-bombed of apartheid, and he isn’t cooking up AIDS conspiracy theories or starting a new religion. Ahtisaari—who grew up during the Finno-Russian Winter War, during which the Molotov Cocktail was invented—has only been spending his life trying to bring an end to warfare. In all seriousness, you can read his rather impressive resume here.

Meanwhile, former economist Paul Krugman won a Nobel (well, not technically) for his earlier work as a real economist. It’s actually an honorable body of work—it (along, of course, with the work of many others) considerably changed our understanding of the dynamics of free trade. The only problem is that giving Krugman the prize today is akin to rewarding a dog for an earlier trick while he defecates on your carpet.

  • 15 Oct 2008
  • 12:14am EDT
  • Politics
  • This post contains political opinions. Reader discretion is advised.

calm, nonpartisan discussion we can believe in

“I need you to go out and talk to your friends and talk to your neighbors. I want you to talk to them whether they are independent or whether they are Republican. I want you to argue with them and get in their face.”

—Barack Obama in Elko, NV, September 17

george soros on the danish model of mortgage investment

George Soros, a man who inexplicably cannot see the economic forest from the financial trees he knows so well, makes the case for a Danish-style mortgage market in the WSJ. His first point—that it doesn’t include a major government organization (Fannie/Freddie)—is a good one. But like everything Soros does outside of his own balance sheets, it’s one intelectual step forward and and two steps back:

Second, mortgage originators are required to retain credit risk and to perform the servicing functions, thereby properly aligning the incentives. Third, the mortgage is funded by the issuance of standardized bonds, creating a large and liquid market.

Finally, the asymmetric nature of American mortgages is replaced by what the Danes call the Principle of Balance. Every mortgage is instantly converted into a security of the same amount and the two remain interchangeable at all times. Homeowners can retire mortgages not only by paying them off, but also by buying an equivalent face amount of bonds at market price. Because the value of homes and the associated mortgage bonds tend to move in the same direction, homeowners should not end up with negative equity in their homes. To state it more clearly, as home prices decline, the amount that a homeowner must spend to retire his mortgage decreases because he can buy the bonds at lower prices.

So you restrict the way in which the mortgages can be financed—and call this a more liquid system. Then you peg the value of the loan to the value of the collateral. In other words, shift the brunt of the risk of mortgages to the lenders. Hey, Soros, why not just pass some usury laws and prevent lenders from charging interest while you’re at it?

Better idea: let’s peg the value of George Soros’s assets to his intellectual capital. I ought to be able to buy him out with the 58 cents on my desk right now.

links for 2008-10-14

links for 2008-10-10

  • 9 Oct 2008
  • 11:29pm EDT
  • Music

the summit doesn't differ from the deep, dark valley

And the valley doesn’t differ from the kitchen sink

I really need to hack into my CSS files and redo my ordered lists. Until then, another top10 in minor key…

1) This is Not a Test • Volume One • She & Him
2) Cherbourg • The Flying Club Cup • Beirut
3) Black & Gold • Sam Sparro • Sam Sparro
4) Love Will Tear Us Apart • Substance • Joy Division
5) Deep Blue • Velocifero • Ladytron
6) Nighttiming • Nighttiming • Coconut Records
7) Empty Hearts • The Historical Conquests Of Josh Ritter • Josh Ritter 8) Canadian Girl • You & Me • The Walkmen
9) Oh Yeah? • Cherry Kicks • Caesars
10) Tessellate • Elephant Shell • Tokyo Police Club

links for 2008-10-09

links for 2008-10-08

what the indians should learn from the chinese economy

A favorite game among Indian newspaper editors and op-ed writers was—at least back when I was there—to compare their nation’s economic ascendency with China. It was all superficial, course: it was focused on attaining shiny new towers and trains and smooth expressways and an Olympiad, if possible. They seemed to be taking home the wrong lesson—that only an authoritarian regime could bring economic growth.

The Economist (yes, the journal I just mocked) gives us the lesson India ought to take from the Chinese:

But then, in 1989, came the Tiananmen Square protests. A generation of policymakers who had grown up in the countryside, led by Zhao Ziyang, were swept away by city boys, notably the president, Jiang Zemin, and Zhu Rongji, his premier. Both men hailed from Shanghai and it was the “Shanghai model” that dominated the 1990s: rapid urban development that favoured massive state-owned enterprises and big foreign multinational companies. The countryside suffered. Indigenous entrepreneurs were starved of funds and strangled with red tape. Like many small, private businessmen, Mr Nian was arrested and his firm shut down.

True, China’s cities sprouted gleaming skyscrapers, foreign investment exploded and GDP continued to grow. But it was at a huge cost. As the state reversed course, taxing the countryside to finance urban development, growth in average household income and poverty eradication slowed while income differences and social tensions widened. Rural schools and hospitals were closed, with the result that between 2000 and 2005 the number of illiterate adults increased by 30m. According to Mr Huang, the worst weaknesses of China’s state-led capitalism—a reliance on creaking state companies rather than more efficient private ones, a weak financial sector, pollution and rampant corruption—are increasingly distorting the economy.

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