Archive for March, 2009

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BANFF 2009: MENSA IN THE MOUNTAINS
 

Seven months from the Banff Regional Gathering (September 11 through 13, 2009) amidst soaring peaks and world heritage sites. Combine world-class scenery, unique fossil fields, the low Canadian dollar and top minds: the result is a memorable experience. Check out our RG web site at www.mensabanffrg.com for more details. Like music, the arts, math, science, politics, games? Add your requests to the mix and book early through Patricia (almostp@shaw.ca) or volunteer to make this RG the best ever.

                                 

What could be more peaceful than nature? Well, plenty. We ply a schizoid approach to the old girl. Red in tooth and claw, the blood-strewn cradle of evolution, sanctuary over the weekend from the over-chilled office, leisurely picnics, fuzzily peaceful as a Monet, or contemplative as the bhong in a Michael Chabon novel, which is it? Nature kills when we stray outside our carefully demarked ski paths. Thus much we learned in the last week of February. We’ve recently suffered cascades of propaganda from the survivalists about how our very lives depend on growing our own vegetables and shooting our neighbours when they come too close. While National Geographic has reminded us, with a series of before-and-after shots, of the splendors that Alberta has transformed into a battered open-pit mine. But, hey, we need the money. And most of the press is too cowed to show us what oil sands development looks like. There’s no global warming, and the economic crisis is perfect reason to sacrifice the future on the sharp dirk of present need. Nature, whoever she is, can take care of herself. Right? While she lasts, you can’t beat Banff. Take in the RG and for more detail check out www.mensabanffrg.com.

 

Posted Sunday, March 1st, 2009 in Home | No Comments »

EVENTS

General
 
Feel life is passing you by? Activities with fellow Mensans will turn this around. Think coffees, martinis, movies, dinners, quizzes, anything that ravels up the tired sleeve of care. We’re informal, unstructured and intellectually challenging. Mensa Calgary is a community where members interact, network, support each other, and enjoy each other’s company. For further info, contact Patricia at kathleen4057@yahoo.ca ["There's no pleasure on earth that's worth sacrificing for the sake of an extra five years in the geriatric ward of the Sunset Old People's Home.” (John Mortimore)]
 
 
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Mensa Test
 
Likely March 16th. If you work at a post-secondary institution such as U of C, SAIT, or Mount Royal, or think potential Mensans are affiliated with your company or organization, post a notice on your bulletin board or wherever seems sensible. For further info about the date etc, contact Vicki at vherd@shaw.ca or (403) 243-6144. We’ll advertise generally, but let Vicki have your ideas. Likewise, tell your friends or colleagues about the upcoming test.  
 
The testing fee is $90, which covers two tests, receiving feedback on eligibility for Mensa membership, plus the first year’s membership if you qualify. You write two tests so have an enhanced chance to qualify. Full time students pay only $70.
 
A pictorial test is available if your mother tongue is not English and you do not want your test scores to be disadvantaged by language.
 
You need to score in the top 2% of the population in one of the two tests.
 
The test will likely be in meeting Room 2, Basement, W R Castell Central Library, 616 Macleod Trail SE, Calgary.
 
 
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MensaGenerationX
 
Viva the under-30s!! Ideas and participation are welcome. Beat the winter blues by contacting Robert Conn at robertanddiana@telus.net
 
 
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CoffeeFests
 
Brighten the heart of winter by attending our coffee fest on Thursday, March 5 and 26 at 7:00pm. The place is Kaffa (2138-33rd Ave SW, corner of 33rd Ave & 21st St). Parking on 21st. Cash only, a copy of Harry Potter will be at the table, RSVP not required, atmosphere great, munchies superb. Funky to the max. Email Patricia for more info: kathleen4057@yahoo.ca
 
 
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DinnerNight
 
Feast to your heart’s content on Friday, March 13th, 2009 at 6:30 pm at Murietta’s West Coast Bar & Grill (200, 808 – 1st St SW 403-269-7707).
 
Frommer’s Review
Just around the corner from the vibrant Stephen Avenue restaurant scene, Murietta’s is a popular and stylish bar and dining room that combines the best of historic and contemporary Calgary. Located on the second story of the 1890s Alberta Hotel, Murietta’s huge bar is a favorite watering hole for urban professionals, and the art-filled, two-story stone-walled dining room is the place for Alberta steaks and local lamb, pork, and game. For appetizers, choose fresh oysters or tuna tartare, and if excellent, locally sourced red meat’s not your thing, Murietta’s offers a daily changing selection of fresh fish with a choice of sauces — perhaps spicy maple-ginger sauce on seared wild Pacific salmon.
 
RSVP with Patricia at almostp@shaw.ca. Check the restaurant’s site at: http://www.murrietas.ca/webpage/1001781/1000533
 
 
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BookClub
 
The March meeting will be held Friday March 20, 2009, at 7:00pm hosted by Susan Spooner. We’ll discuss Animals in Translation by Temple Grandin and Catherine Johnson. Grandin draws on her own experience with autism as well as her distinguished career as an animal scientist to deliver an extraordinary message about how animals think, act, and feel. You may also discuss any other book you’ve recently read. New members welcome. 
 
 
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SecondTuesdays
 
Join us on Tuesday March 10th, 7:30pm, at the home of Vicki Herd (2469 Sorrel Mews SW/Garrison Woods near the Marda Loop Safeway). Contact Patricia at (403) 212-1461 with any questions. Second Tuesday is a casual open-house providing an opportunity to mellow out with your peers, fume at the idiocies of the universe, and generally find a sympathetic or intelligent ear. RSVP not required.
 
 
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OtherUpComings

Flames Nights are Thursday, March 12 at 5:00pm, and Monday, March 30 at 7:30pm. Both at Bottlescrew Bills. Look up the venue at http://www.bottlescrewbill.com/   If it’s your first time, let Robert know you plan to come: robertanddiana@telus.net, rc@arcondesign.com.

 
 

Posted Sunday, March 1st, 2009 in What's Happening/Comments | No Comments »

PUZZLES

1) Viewed from the side, two ladders span a narrow alley like a lop-sided ‘X’. The first ladder (AB) runs from the base of one wall straight to (and part way up) the opposite wall. The second ladder (CD) runs from the base of this second building straight back to (and part way up) the first wall. The ladders are different lengths. The ladders cross at point E, which is directly above point F on the floor of the alley. What are the shortest lengths of each of these distances, measured in inches, such that all measurements are an exact number of inches?
 
2) The manager of a ranch asked a stable hand how many men were tending the horses in the corral. The stable hand said: “I saw 82 feet and 26 heads.” How many men and horses were there?
 
 
The answers to February’s puzzles were supplied in the February issue.
 
Here are the answers to this month’s puzzles:
 
1) The key is that EF (the height of the cross-point) must be the shorter leg of one 3-4-5 right-angle triangle and the longer leg of another such triangle at the base of the alley. EF therefore must be a multiple of 12. The shortest triangles (AEF and CEF), however, do not produce an exact number of inches for the other measurements. For this we take the values and simply multiply them all by 12. The cross point becomes 144 inches. The long ladder is 500 inches. The short ladder is 375 inches. The alley is 300 inches wide. 
 
2) The most intriguing solution seems to start with the men. If the 26 heads all belong to men, that accounts for only 52 feet. But there were 82 feet in all. This leaves 30 feet to explain by horses. Each horse has two feet more than a man, which means that there were 15 horses. Returning to the heads, the total of 26 less the 15 horses leaves 11 men.

Posted Sunday, March 1st, 2009 in Puzzles Etc | No Comments »

Feature1 Forecasters Phooey

According to a survey that greeted the 2,000 captains of industry, Nobel laureate economists and heads of government arriving in Davos for the World Economic Forum, confidence among them has “plummeted” and hopes of an economic recovery have “evaporated” in the past four months. Only 21 per cent of corporate leaders now expect their businesses will improve significantly (down from 50 per cent a year ago) and most of them hope for nothing better than a slow and feeble recovery over the next three years.
 
The good news is that captains of industry, Nobel laureate economists and heads of government are usually wrong about the future. Like the cover stories of Time or Business Week, “the view from Davos” is one of the more reliable “contrary indicators” of what will happen.

 

 

The reason why magazine covers and surveys of elite opinion are so often wrong is not because magazine editors and business leaders are stupid or irresponsible. On the contrary, these people are intelligent and responsible enough not to put a story on their covers or to express a strong opinion until they are sure it is right. And by the time all these distinguished people are sure enough about a trend to create an almost unanimous elite consensus, the chances are that almost everybody in the world has also recognised and acted on this trend – and therefore the trend does not have much farther to run.
 
It is a cliché of financial markets that the four most expensive words in the English language are “this time it’s different”. In every speculative mania, optimistic investors convince themselves that they have discovered some new magic ingredient that will make the current boom more durable than previous boom-bust cycles. And every time they turn out to be wrong.
 
But cynics who ridicule the gullibility of bullish investors forget that exactly same thing happens on the way down. Just as in every boom the bulls proclaim that “this time it’s different” so in every slump the pessimists insist that the world faces unprecedented disaster and that this time the recession will not be followed by recovery, as it always has before.
 
And in a sense the pessimists are right – every recession and financial crisis really are different. This time, the driving force is an unprecedented credit crunch. In the 1990s it was the hangover from German reunification and the expulsion of Britain, Italy and Sweden from the European Monetary System; in the 1980s it was 20 per cent interest rates and a one-day fall in share prices which, according to statistical models, should only have occurred once in a billion years; in the 1970s it was the break-up of the Bretton Woods currency system, closely followed by an oil shock and inflation that nobody imagined possible.
 
After each of these unthinkable disasters, the prophets of doom declared that capitalism was finished, that markets would never recover and this was the biggest crisis since the Great Depression. Yet every time the world economy recovered and capitalism survived. A lovely illustration of this syndrome was brought to my attention this week.
 
Denis Gartmann, a prominent US investment adviser, quoted an academic friend who had studied media reports of the US recession of the 1990s. This was a selection of comments from the US press in early 1991: “There is no question that this is the worst economic time since the Great Depression”; “Forecasts for a weak recovery in 1992 suggest the period since 1990 will be the worst for the economy since the Great Depression”; “This recession is hitting white-collar workers more heavily than any since the Great Depression of the 1930s.” And so on.
 
Most of these comments were published near the low point of the 1990-91 recession – a recession that, far from being the deepest and longest since the 1930s, turned out to be the shallowest and shortest to date.
 
This is not to deny that many features of the present crisis really are worse than ever before. The collapse of global finance triggered by the Lehman bankruptcy really was the greatest banking crisis in history and the fall in output triggered by this financial panic really has been the steepest since 1981.
 
The upshot is that world economy does now face the greatest deflationary pressures since the 1930s. But against these deflationary forces some equally unprecedented expansionary forces are arrayed: the lowest interest rates in history; the fastest fall in oil and commodity prices; the biggest peacetime public works programmes; and, most importantly, a willingness and ability by governments to print money and support their financial systems with open-ended guarantees.
 
So what can we say about the outcome of this tug-of-war between the forces of expansion or deflation? Only one thing for certain: no economic forecaster will predict what happens in the next year correctly, except by chance. This is not because economists are stupid, but because computer models they use are based on past experience – and at a time of unprecedented upheavals, computer forecasts are of no use.
 
Does this mean that all economics is useless? Not at all. But it does mean that we should not trust any quantitative forecasts produced by computers and return instead to qualitative reasoning about society and human nature. This is how the word economics was understood by Adam Smith, Joseph Schumpeter and Maynard Keynes and why the subject was called “political economy”. These great economists never claimed to be able to predict the future. What they tried to do instead was to shed light on the social processes and political and psychological pressures that lead to the creation or destruction of wealth.
 
These qualitative economic theories tell us that the creative force of the profit motive, backed by the expansionary power of ultra-low interest rates and government deficit spending, will eventually prevail.
 
But political economy cannot tell us exactly when or how. It cannot tell us, for example, whether Britain and America will suffer more than continental Europe, as several of the spurious computer forecasts are suggesting – or whether the Anglo-Saxon economies will, as I believe, recover sooner because of their more flexible markets and policies. Neither can it predict what new industries and jobs will be created by market forces to fill the vacuum left behind by the demise of leveraged finance in the City of London and New York.
 

The masters of political economy should, however, leave us confident that in a capitalist system “something will turn up”, as Mr Micawber put it – a much more reasonable expectation, in a market economy, than most people realise. And pretty soon what will turn up will be the world economy. Followed, a year or so too late, by the “view from Davos”.

(by anatole kaletsky, The Times, 29 January 2009)

Posted Sunday, March 1st, 2009 in Articles | No Comments »

Feature2 Common Sense

Perhaps the Obama administration will be able to bring a surprisingly early end to the ongoing U.S. financial crisis. We hope so, but it is not going to be easy. Until now, the U.S. economy has been driving straight down the tracks of past severe financial crises, at least according to a variety of standard macroeconomic indicators we evaluated in a study for the National Bureau of Economic Research (NBER) last December.
 
In particular, when one compares the U.S. crisis to serious financial crises in developed countries (e.g., Spain 1977, Norway 1987, Finland 1991, Sweden 1991, and Japan 1992), or even to banking crises in major emerging-market economies, the parallels are nothing short of stunning.
 
Let’s start with the good news. Financial crises, even very deep ones, do not last forever. Really. In fact, negative growth episodes typically subside in just under two years. If one accepts the NBER’s judgment that the recession began in December 2007, then the U.S. economy should stop contracting toward the end of 2009. Of course, if one dates the start of the real recession from September 2008, as many on Wall Street do, the case for an end in 2009 is less compelling.

         

On other fronts the news is similarly grim, although perhaps not out of bounds of market expectations. In the typical severe financial crisis, the real (inflation-adjusted) price of housing tends to decline 36%, with the duration of peak to trough lasting five to six years. Given that U.S. housing prices peaked at the end of 2005, this means that the bottom won’t come before the end of 2010, with real housing prices falling perhaps another 8%-10% from current levels.

Equity prices tend to bottom out somewhat more quickly, taking only three and a half years from peak to trough — dropping an average of 55% in real terms, a mark the S&P has already touched. However, given that most stock indices peaked only around mid-2007, equity prices could still take a couple more years for a sustained rebound, at least by historical benchmarks.
 
Turning to unemployment, where the new administration is concentrating its focus, pain seems likely to worsen for a minimum of two more years. Over past crises, the duration of the period of rising unemployment averaged nearly five years, with a mean increase in the unemployment rate of seven percentage points, which would bring the U.S. to double digits.
 
Interestingly, unemployment is a category where rich countries, with their high levels of wage insurance and stronger worker protections, tend to experience larger problems after financial crises than do emerging markets. Emerging market economies do have deeper output falls after their banking crises, but the parallels in other areas such as housing prices are quite strong.
 
Perhaps the most stunning message from crisis history is the simply staggering rise in government debt most countries experience. Central government debt tends to rise over 85% in real terms during the first three years after a banking crisis. This would mean another $8 trillion or $9 trillion in the case of the U.S.
 
Interestingly, the main reason why debt explodes is not the much ballyhooed cost of bailing out the financial system, painful as that may be. Instead, the real culprit is the inevitable collapse of tax revenues that comes as countries sink into deep and prolonged recession. Aggressive countercyclical fiscal policies also play a role, as we are about to witness in spades here in the U.S. with the passage of a more than $800 billion stimulus bill.
 
Needless to say, a near doubling of the U.S. national debt suggests that the endgame to this crisis is going to eventually bring much higher interest rates and a collapse in today’s bond-market bubble. The legacy of high government debt is yet another reason why the current crisis could mean stunted U.S. growth for at least five to seven more years.
 
Yes, there are important differences between the current U.S. crisis and past deep financial crises, but they are not all to the good. True, for the moment the U.S. government is in the very fortunate position of being able to borrow at lower interest rates than before the crisis, and the dollar has actually strengthened. Still, deep financial crises in the past have mostly been country-specific or regional, allowing countries to export their way out.
 
The current crisis is decidedly global. The collapse in foreign equity and bond markets has inflicted massive losses on the U.S. external asset holdings. At the same time, weak global demand limits how much the U.S. can rely on exports to cushion the ongoing collapse in domestic consumption and investment.
Can the U.S. avoid continuing down the deep rut of past financial crises and recessions? At this point, effective policy prescriptions — such as coming up with realistic costs of the size of the hole in bank balance sheets — require a sober assessment of where the economy is going.
 
For far too long, official estimates of the likely trajectory of U.S. growth have been absurdly rosy and always behind the curve, leading to a distinctly underpowered response, particularly in terms of forcing the necessary restructuring of the financial system. Instead, authorities should be prepared to allow financial institutions to be restructured through accelerated bankruptcy, if necessary placing them under temporary receivership, and only then recapitalizing and reprivatizing them. This is not the time for the U.S. to avoid painful but necessary restructuring by telling ourselves we are different from everyone else.
 
(by carmen m. reinhart and kenneth s. rogoff, The Wall Street Journal, 3 February 2009)

Posted Sunday, March 1st, 2009 in Articles | No Comments »

Feature3 Trash Economics

In the search for the “guilty men” responsible for the near-collapse of the global economy, one obvious group of scapegoats has escaped blame: the economists.
 
By “economists” I do not mean the talking heads (myself included) employed by the media and financial institutions to “explain”, usually after the event, why share prices or currencies have gone up or down. Nor do I mean the forecasters whose computers churn out scientific-looking numbers about what will happen to growth or inflation, but whose figures are revised so drastically whenever something “unexpected” happens – as it always does – that their forecasts are really nothing more than backward-looking descriptions of recent events.

 

What I mean by “economists” are the academic theorists who win Nobel prizes, or dream of winning them.

To see why these seemingly obscure academics deserve to be hauled out of their ivory towers and put in the dock of public opinion, consider why the bankers, politicians, accountants and regulators behaved in the egregious ways that they have. It may be true that all bankers are greedy, all politicians venal, all regulators blind and all accountants stupid. But such personal failings do not explain their behaviour in the past few years. After all, bankers do not like losing money and politicians do not like losing power. All these “guilty men” behaved as they did because they thought it made sense.
 
And why did these greedy bankers and stupid politicians hold beliefs that, in hindsight, seem so ludicrous and self-destructive? Why, for example, did they think it reasonable for a bank with just $1billion of capital to borrow an extra $99 billion and then buy $100 billion of speculative investments?
 
The answer was beautifully expressed two generations ago by John Maynard Keynes: “Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”
 
What the “madmen in authority” were hearing this time was the echo of a debate that consumed academic economists in the 1960s and 1970s – a debate won by the side whose theories turned out to be wrong. This debate was about the “efficiency” of markets and the “rationality” of the investors, consumers and businesses who inhabit them.
 
On those two dubious adjectives “rational” and “efficient” an enormous theoretical superstructure of models, regulatory prescriptions and computer simulations was built. And without this intellectual framework, the bankers and politicians would never have built the towers of bad debt and bad policy that have come crashing down.
 
I am not suggesting that the bankers who borrowed 50 times their capital to gamble on mortgage bonds or the regulators who allowed them to do it were consciously following academic theories. As Keynes said, these practical men had no interest in theories, which was why they left so many technical judgments to supposedly expert economists and consultants. What the practical men didn’t realise, however, was that the risk management consultants who told them their banks would face no solvency problems and the economists who advised them that financial markets were always right were basing their analyses on two theories that were catastrophically wrong.
 
These two theories – called “rational expectations” and “the efficient market hypothesis” – essentially assume that the economy is a predictable, comprehensible machine with a defined set of instructions. That in itself may seem preposterous, but the theory goes farther and assumes that every “rational” participant in economic life knows these instructions and assumes that everyone else knows them too. To make matters worse, it is then applied to financial markets so that any economically inexplicable gyrations that do occur are explained a way as purely random, like tossing a coin. This leads to the conclusion that financial prices, although they may fluctuate randomly in the short term, are highly predictable in the long term, in the same way that the takings of a casino are.
 
Why did these implausible theories defeat more realistic ones? Partly it was the ideological mood of the 1980s and partly the ease with which rational expectations theories could be turned into mathematical models. By using these models, bankers and policymakers could be “blinded with science” – and even better from the standpoint of academic economists, their discipline could be elevated to the scientific status of physics.
 
The impact on both economics and public policy has been dire. The obvious effect has been the reckless behaviour of bankers and regulators, who were told by reputable-sounding economists that the bankruptcy of Lehman Brothers could be expected only once every billion years or so even though similarly “impossible” events – such as the collapse of the LTCM hedge fund and the 1987 stock market crash – had occurred twice in the previous 15 years.
 
Equally pernicious has been the stifling of intellectual debate among academic economists, who have spent the past 20 years arguing about the properties of their imaginary mathematical models rather than the behaviour of the real economy these models were supposed to describe.
 
The question, not only for professional economists but for all those in politics and business who have relied on these ideas, is what will happen to economics now that its fundamental assumptions and mathematical models have been totally discredited by events.
 
There seem to be only two options. Either the subject has to be abandoned as an academic discipline and becomes a mere appendage of the collection and analysis of statistics. Or it must undergo an intellectual revolution.
 
The prevailing academic orthodoxy has to be recognised as a blind alley. Economics will have to revert to a genuine competition between diverse intellectual approaches – such as behavioural psychology, sociology, control engineering and the mathematics of chaos theory.
 
So economics is on the brink of a paradigm shift. We are where astronomy was when Copernicus realised that the Earth revolves around the Sun. The academic economics of the past 20 years is comparable to pre-Copernican astronomy, with its mysterious heavenly cogs, epicycles and wheels within wheels or maybe even astrology, with its faith in star signs.
 
The academic Establishment will resist such a shift, as it always does. But luckily economists understand incentives. They should now be given a clear choice: embrace new ideas or return their public funding and Nobel prizes, alongside the bankers’ bonuses they justified and inspired.
 
(by anatole kaletsky, The Times, 5 February 2009)

Posted Sunday, March 1st, 2009 in Articles | No Comments »

Feature4 French Antisemitism

France prides itself on its big Jewish community. It has a strong law against anti-Semitic speech, and recent synagogue vandalism has been been put down mainly to anger in the big Muslim community over Israeli government policies.
 
But an old and sinister hostility towards Jews has also recently bubbled up to the surface, serving as a reminder of ugly periods in France’s past. The latest instance is a vitriolic new book that uses 1930s style innuendo to blacken Bernard Kouchner, the Foreign Minister.
 

        

In the most chilling anti-semitic incident, in December, a sulphurous stand-up comedian called Dieudonné gave an award to Robert Faurisson, a notorious denier of the Holocaust. The 5,000 audience at the Paris Zenith theatre applauded as "a Jew" with a yellow star of David, handed him the award.

Dieudonné is of African origin and has lately allied himself with Jean-Marie Le Pen, the xenophobic boss of the far-right Front National. The comedian is partly behind a vicious campaign against Arthur Essebag, a star television presenter and producer.
 
On Saturday, Arthur – who uses only that name – took half a page in Le Monde to denounce a campaign against him on the false pretext that he helps finance the Israeli army.
 
"Zionist …finance …money, it’s all there…For the first time in my life, I discover this form of hatred," he wrote. "Never would I have imagined that in my own country, they would demonstrate against me solely because I am Jewish."
 
The book on Dr Kouchner, the ageing rock star of President Sarkozy’s cabinet, is particularly revealing because there is no link with the Arab-Israeli conflict and because some of the chattering classes are defending the offensive tones of Pierre Péan, its author.
 
"The World According to K" reports on consulting work that Dr Kouchner, a humanitarian campaigner, carried out for African dictators. Péan paints him as a money-mad outsider whose main motivation springs from his Jewish origins. The Foreign Minister loathes France and has "sold off" French interests to the United States, he writes. Dr Kouchner is driven by "hatred for the values of the French Revolution, of the wartime Resistance, of a national independence that is detested in the name of an Anglo-Saxon cosmopolitanism."
 
That kind of language was used against supposed Jewish enemies of France in the Dreyfus affair of the late 1890s and in the 1930s and 40s. As was the case elsewhere in Europe, Jews were depicted as aliens who worked against the interest of the nation. Even Mr Le Pen would think twice before using the old anti-Semitic codeword "cosmopolitan".
 
Dr Kouchner has damned the book as sickening and redolent of the 1930s and President Sarkozy – himself the target of some anti-Semitism due to his Jewish ancestry – has stood by him. Some media have attacked Péan’s language. Le Monde called it a loathsome cocktail from the old far right.
 
But the book has not been widely discredited, and Dr Kouchner has been damaged. Péan is denying that he wrote anything anti-Semitic and he is being backed by sections of the press – and by many in the blogosphere. Le Journal du Dimanche, the main Sunday paper, said that he was not anti-Semitic but that the targets of his investigative books often cried anti-semitism "as a pretext".
 
Foreign journalists are often charged with anti-French prejudice when they touch the dangerous groud of anti-Semitism. So I shall leave the conclusion to Jean-Michel Aphatie, the toughest political interviewer on French radio. "It takes a lot of bad faith to continue to defend the indefensible book of Pierre Péan," he said.
 

(by charles bremner, The Times Online, 9 February 2009)

Posted Sunday, March 1st, 2009 in Articles | No Comments »

Feature5 The Price of Lending

President Obama has rediscovered his true voice and not a moment too soon. After spending the first month of his presidency telling the American people that their country was in a catastrophic and possibly irreversible economic crisis, Mr Obama suddenly reverted on Tuesday to the audacity of hope that got him into the White House.
 
Was this rhetorical U-turn a reaction to last week’s very public advice from Bill Clinton not to over-egg the misery, or did it reflect a carefully considered political strategy of showing the American people that the President shared their pain before leading them out of the wilderness? These are questions that can be left to historians in the future. What is certain is that this rhetorical transformation has come just in the nick of time.
 
This week US consumer confidence fell to its lowest level on record, the US stock market plumbed depths not seen since 1997 and the US banking system seemed to be on the verge of another meltdown as the shares of the country’s two biggest financial institutions, Citibank and Bank of America, plunged inexorably towards zero. This was a terrible start to the week in which the Administration had promised to announce details of the stress tests that were supposed to guarantee the stability of the US banking system. And, viewed from an international perspective, the evaporation of financial and consumer confidence in America created the worst possible background for the British Government’s announcement this morning of measures to draw a final line under the losses at Royal Bank of Scotland and Lloyds.
 
Of course, the change in Mr Obama’s tone is unlikely on its own to lift the mood of the American public, never mind the shell-shocked investors in bank shares, who have lost more than 90 per cent of their money in the past four months and seen the entire US banking system reduced to a lower value than the soft-drink sector.
 
Nevertheless, Mr Obama’s words may prove to be crucial not only for America but also for Britain, for another reason connected with the public mood. Whether or not Mr Obama manages to revive consumer and investor confidence, his speech is likely to achieve another political objective. It is likely to change the terms of public debate about the role of government in this economic crisis and specifically about the need to channel public money, potentially without limit, into whatever measures may be required to support the banks.
 
To explain what I mean, I can do no better than quote some extracts from the most important passages in Mr Obama’s speech. Their reception by the public will determine the outlook for the US and world economy for years ahead:
 
“If we do not restart lending in this country, our recovery will be choked off before it even begins. The flow of credit is the lifeblood of our economy. The ability to get a loan is how you finance the purchase of everything from a home to a car to a college education; how stores stock their shelves, farms buy equipment, and businesses make payroll.
 
“I know how unpopular it is to be seen as helping banks right now. But I also know that in a time of crisis, we cannot afford to govern out of anger, or yield to the politics of the moment. My job is to solve the problem. I will not spend a single penny for the purpose of rewarding a single Wall Street executive, but I will do whatever it takes to help the small business that can’t pay its workers or the family that has saved and still can’t get a mortgage. Because when credit is available again, that young family can finally buy a new home. And then some company will hire workers to build it… etc; slowly, but surely, confidence will return, and our economy will recover.”
 
If this message finally gets through and public opinion can be persuaded that supporting banks is about supporting bank depositors and business borrowers, not about subsidising greedy bankers, then there is a good chance that this week will mark a turning point. More precisely, this week will confirm the turning that actually occurred in many financial markets in November, around the time of Mr Obama’s election.
 
If, on the other hand, public opinion rejects this message and forces American and British politicians to drive their banks into insolvency and full-scale nationalisation, then this week will mark the end of 200 years of market-based capitalism throughout the world.
 
The choice really is so simple and so stark. Suppose a leading bank were fully nationalised, wiping out by regulatory fiat the entire investment made by its shareholders, in the same way as the investors in Lehman Brothers and Fannie Mae were wiped out. It would then be a mathematical certainty that shareholders in all other banks would realise that they risked the same fate. One after the other, the share prices of all other big banks would fall to zero, requiring every leading bank, and ultimately also every leading insurance company in the world, to be nationalised. This was exactly the financial contagion that spread panic in September from Fannie and Lehman and then to every other bank in America, before leaping across the Atlantic Ocean to infect Halifax Bank of Scotland, Barclays, Lloyds and every leading European bank. I call this process Henry Paulson’s Doomsday Machine, after the collapse of Fannie Mae and Lehman.
 
Having seen the catastrophic results of Mr Paulson’s decisions last autumn, it is hard to imagine that any responsible politicians would even consider reactivating his Doomsday Machine. Yet this is exactly what many economists, opposition politicians and financial commentators are demanding in Westminster and Washington. Worst of all, from both the standpoint of both the British and American governments, the demands for fiercer punitive action against the bankers evoke a powerful echo in media and public opinion.
 
Last autumn the Bush Administration decided to respond to this outcry by making a ritual sacrifice and chose Lehman as the scapegoat. The direct result was the greatest financial crisis of all time, in the carefully chosen words of the Deputy Governor of the Bank of England.
 
This week the British and American governments face the same temptation. After Mr Obama’s speech it is fairly clear that the US Government will resist the easy populism and will instead spend whatever it takes to support America’s banking system and to keep it in private hands. This morning, when the British Government reveals its support package for the Royal Bank of Scotland, we will know whether Gordon Brown has made the same choice.
 
Taxpayers in Britain should hope so. The more public money Mr Brown now commits to supporting the banks, the surer and faster will be the economic recovery and the smaller will be the ultimate loss of revenues to the Treasury, which stands to lose far more money from the recession than from the costs of any conceivable bank bailout.
 
As President Obama said: “While the cost of action will be great, I can assure you that the cost of inaction will be far greater.” Were you listening, Mr Brown?
 

(by anatole kaletsky, The Times, 26 February 2009)

Posted Sunday, March 1st, 2009 in Articles | No Comments »

N&Q1 The Part Left Out

[This comment by the contemplative Jim Szpajcher and the article which he sends us contain the same blatant gaps, like the holes in the grin of a jack-o’-lantern. The US GDP dropped in the last financial quarter of 2008. That’s news?! Hardly. The first estimate was just after the end of the quarter, when the GDP was predicted to have slipped by an annualized 5%. The first revision set the decline at 3.8%, ie 1.2% above the previous guess. This was enough to rally Wall Street. Hmmmmm. The figure was then quickly revised downwards to 6.2%. Nobody is asking for the margins of error or a detailed explanation. Nor do we compare economists to primitive astronomers after a solar eclipse fails to appear. Their science is in tatters. Why place any reliance on these birds? Because the real story is our failure to recognize the death of economics, we place it among the Notes and Queries like an obit. But deep thanks as always goes to Jim Szpajcher, who rain or shine brings what is most curious in life to his readers.]
 
 
Folks -
 
When first reported a few weeks ago, the drop was predicted to be 5%, so the 3.8% was less than people were expecting. This prompted a (short-lived) rally on Wall Street.
 
Now, the numbers are revised to a level that is a full 2.4% more than initially reported.
 
"It’s bigger revision than anticipated, although I do have to say that it’s a lot more plausible than the initial report," said Nigel Gault,
 
Which then goes on to say:
 
Some hail the decline in inventories as potentially good news.
 
Color me suspicious.
 
Jim Szpajcher
 
 
http://www.nytimes.com/2009/02/28/business/economy/28econ.html?_r=1&hp
 
February 28, 2009
In Revision, G.D.P. Shrank at 6.2% Rate at the End of 2008
By CATHERINE RAMPELL
The economy at the end of last year contracted at a far faster rate than initially estimated, a government report released Friday said.
 
The decline in the gross domestic product – a measure of a country’s total output of goods and services – in the last quarter of 2008 was the worst since the 1982 recession, and indicates that the recession has been deeper than previously believed.
 
With the exception of government spending, every major component of the economy shrank.
 
"It’s bigger revision than anticipated, although I do have to say that it’s a lot more plausible than the initial report," said Nigel Gault, chief United States economist at IHS Global Insight.
 
Output fell 6.2 percent at an annualized rate in the fourth quarter of 2008, revised downward from a previous estimate of a 3.8 percent decline. The drop was even steeper than many economists had feared, and was much lower than the 0.5 percent contraction from the previous quarter.
 
The announcement comes on the heels of a new budget from the Obama administration that assumes what some economists have called an unrealistically optimistic view of the near-term future of the American economy.
 
The economy took the biggest hits in exports, retail sales, equipment and software, and residential fixed investment.
 
The downward revisions, though, came primarily because of a larger-than-anticipated contraction in inventories of unsold goods. A wider trade gap than previously reported – that is, fewer American goods being purchased abroad – also pushed G.D.P. downward. Lower consumer sales sliced off some of the previously reported economic output, as well.
 
Some hail the decline in inventories as potentially good news.
 
"The only plus to take out of this is that inventories weren’t as high, and that implies you don’t have to cut as much this quarter to get them back under control," Mr. Gault said. He added that inventories were still too high, and he expected companies to further scale back their production, especially in response to the dismal consumer spending numbers.
 
While many economists had been somewhat suspicious of the previously reported numbers in several sectors – inventories in particular – they say the biggest surprises were the magnitude of the revisions and the change in prices.
 
Prices fell in the last quarter of 2008, but they fell slightly less than previously believed, meaning that on an inflation-adjusted basis consumers spent even less than originally reported.
 
Households also saved much more of their paychecks than initially estimated.
 
"Much of the money that would have been spent on gasoline during the gasoline price decline in large part was saved rather than spent," said Dean Maki, co-head of United States economics research at Barclays Capital.
 
Friday’s revision, which will be followed by a final number from the Bureau of Economic Analysis next month, usually garners little attention from analysts. But because the contraction was more severe than previously reported, and because the government has been grappling with how to remedy the recession, many are looking to the numbers for a clue for where the economy is headed.
 
Government officials and Wall Street analysts expect that the G.D.P. decline bled into 2009, and are anticipating a similar drop for the first quarter of this year.
 

The 2010 national budget released Thursday by the White House projected a 1.2 percent decline in G.D.P. over the course of 2009. The economy grew 1.1 percent during the full 2008 calendar year.

Posted Sunday, March 1st, 2009 in LocSec's Monthly Message | No Comments »

N&Q2 AIDS and China

In the first nine months of 2008, one Chinese died every hour from AIDS, the most deadly disease in the kingdom of economic miracles (figures supplied by China’s Ministry of Health).

Posted Sunday, March 1st, 2009 in LocSec's Monthly Message | No Comments »

ForYourContemplation1: Lies & Chaos in the Press

Folks -
 
How can Americans make any valid judgement of a war, when they have been lied to about it since it began? Material like this is propaganda, and have been a principle method of swaying public opinion for thousands of years.
 
What is so disturbing to me is that it distracts the population from paying attention to the trouble that the nation is in financially. Note the statement: Americans are about evenly divided about whether the war there has proved to be worth its costs.
 
Americans have no idea of what the cost has been, but the printing of that statement implies that the public is fully informed.
 
On Iraq: One relatively unchanged public attitude about the war in Iraq is the widespread opinion that it, on balance, has not been worth fighting.
 
Which begs the question: Will they hold anyone accountable? It appears not.
 
And there’s the rub. The American machine of government is a relentless, pitiless, soul-less monster. Trying to change the direction of such a monolithic bureaucracy is impossible without being damaged by the encounter. Few have the courage, the resources, or the stamina to challenge such inertia.
 
I’m reminded of an interview with a Vietnam veteran back in the 1980’s. The reporter asked the veteran if he thought that America had won the war. The veteran said: "No one wins a war, any more than one can win a hurricane. The best you can do is survive."
 
In America, the financial levees are giving way under the relentless battering of debt and criminal mismanagement, and the Press is telling us that the majority of residents want to paint their houses mauve, after the rain eases up. Endings are often happy or sad, but it is clear that this ending should not be unexpected.
 
For your contemplation.
 
Jim Szpajcher
 
 
http://www.washingtonpost.com/wp-dyn/content/article/2009/02/26/AR2009022600093.html?wpisrc=newsletter
 
Majority of Americans Back President on Afghanistan
 
By Jon Cohen
Washington Post Staff Writer
Thursday, February 26, 2009; 12:18 AM
 
About two-thirds of Americans support President Obama’s decision to send approximately 17,000 additional U.S. military forces to Afghanistan, and, in stark contrast to the sour public reception of former president George W. Bush’s "surge" of troops in Iraq, support for Obama’s move crosses party lines, according to a new Washington Post-ABC News poll.
 
Support for the proposed influx of troops to Afghanistan, however, comes as Americans are about evenly divided about whether the war there has proved to be worth its costs. They also split 50 to 41 percent on whether it is essential to win in Afghanistan to succeed in broader efforts against terrorism.
 
Nearly four in 10 who said the war has not justified its costs back the new troops, signaling that some people may expect better results after the troop levels rise. (Among Democrats, that number is closer to 50 percent.) While most Americans opposed Bush’s early 2007 decision to send additional troops to Iraq, the percentage who saw significant progress there trended sharply higher from the summer of 2007 through the end of last year.
 
A parallel, though less dramatic, shift over the past two years is a bump in the number who say that winning in Iraq is crucial to victory in the campaign against terrorism. On that question, 44 percent see a close linkage, the highest number since an overnight poll following Bush’s speech announcing the Iraq strategy.
 
One relatively unchanged public attitude about the war in Iraq is the widespread opinion that it, on balance, has not been worth fighting. Sixty percent in the new poll said the costs of that war have outweighed its benefits. That number is little changed from recent polls and has been the majority view for more than four years.

Posted Sunday, March 1st, 2009 in Home | No Comments »

ForYourContemplation2 Canadian Banks Rule OK

Folks -
 
For your contemplation.
 
Jim Szpajcher
 
 
http://www.bloomberg.com/apps/news?pid=20601109&sid=afWw27XA56jM&refer=home
 
Obama in Canada Finds World’s Best Financial System (Update1)
by David Scanlan, Theophilos Argitis and Sean B. Pasternak
 
Feb. 25 (Bloomberg) — David Denison, who oversees investments for Canada’s pensions, says his country’s banks are the best in the world right now and Barack Obama, like so many money managers from Beijing to Paris, can’t disagree.
 
Before President Obama made Ottawa his first visit to a foreign capital earlier this month, he couldn’t resist telling the Canadian Broadcasting Corp.: "In the midst of the enormous economic crisis, I think Canada has shown itself to be a pretty good manager of the financial system and the economy in ways that we haven’t always been."
 
The comment was something of an understatement, as no country among the so-called industrialized nations is showing as much confidence in its bankers as Canada. Not one government penny has been given to any of the 21 banks from British Columbia to Quebec since credit worldwide seized up in August 2007. Since then, American taxpayers have provided $300 billion to bail out more than 450 companies, led by Citigroup Inc. and Bank of America Corp., two of the three largest banks measured by assets.
 
Obama isn’t the only important person "looking at Canada" in a belated attempt to figure out how to fix a broken financial model, Denison said.
 
"Solid funding and conservative consumer lending criteria are key features" of Canadian banks, said John Haynes, senior U.S. equity strategist at Rensburg Sheppards Plc in London, which oversees the equivalent of $17 billion. "This has meant that they have had their hands caught in the cookie jar to a much more limited extent than their American and European counterparts."
 
Money managers from Brazil, China, France, Ireland and Australia scheduled visits to Denison’s Toronto office in the past two weeks to learn how Canada and its banks and pension funds are weathering the financial crisis. The visitors include the AustralianSuper Fund and the French National Reserve Fund, which together have assets of $53 billion, he said.
 
"They have assembled a high-quality team," said Ian Silk, chief executive officer of AustralianSuper, who visited Denison in May along with three other executives from the Melbourne-based fund and remains in contact with the Canadian money manager.
 
Canada’s higher capital requirements and loan limits that European banks exceeded by 50 percent helped Canadian lenders avoid most of the writedowns and losses crippling competitors worldwide, even as the nation’s economy slipped into a recession and the jobless rate jumped to a four-year high.
 
Just two Canadian regional banks have failed since 1923. The only government support has been a pledge to buy as much as C$125 billion in mortgages, allowing the banks to increase lending to companies and consumers.
 
"The Canadian banking system is a very good story," said Denison, chief executive officer of the Canada Pension Plan Investment Board, which manages C$108.9 billion ($86 billion) for retired Canadians. "People are looking at Canada" to determine how to fix their broken financial models, he said.
 
Canadian banks are more constrained than their international peers in the amount of loans they can extend. The nation’s lenders are required to set aside a minimum 7 percent for Tier 1 capital, compared with 6 percent for U.S. commercial banks. At the end of October, Canada’s eight publicly traded banks were above the minimum, at 9.6 percent, according to data compiled by Bloomberg.
 
Canada’s banking regulator says institutions can lend as much as 20 times their capital base. According to Bank of Canada data released in December, European bank non-risk weighted assets were more than 30 times capital, while that ratio for U.K. banks and U.S. investment banks was above 25.
 
Europe’s largest financial companies have reported $321 billion in writedowns and credit-related losses since the collapse of the U.S. subprime mortgage market in 2007 spread to other continents. The market turmoil has forced European lenders to raise $370 billion in fresh capital and sparked government-led bailouts in countries including the U.K., Germany and Switzerland, according to Bloomberg data.
 
European deficits have ballooned as governments committed more than 1.2 trillion euros ($1.5 trillion) to save their banking systems from collapse.
 
"When the crisis started emerging on those fronts, Canada was less affected," said Matthew Strauss, a senior currency strategist in Toronto at RBC Capital Markets, a unit of the country’s biggest bank. "Canada has always had a fairly conservative banking sector."
 
While Bank of America and Citigroup cut their dividends to 1 cent a share from as high as 64 cents, the payouts at Canada’s five biggest banks haven’t been reduced since the Great Depression. Toronto-based Royal Bank of Canada is now the third- biggest bank in North America by market value, almost three times the size of Citigroup, while Toronto-Dominion Bank ranks fifth. Royal Bank is almost three times bigger than European lenders Royal Bank of Scotland Group Plc and Deutsche Bank AG.
 
The Canadian banks, which begin reporting first-quarter results today, probably will say profit declined an average of 12 percent, the biggest drop in almost seven years, according to Scotia Capital analyst Kevin Choquette. By contrast, Bank of America reported its first quarterly loss since 1991 last month, and Citigroup posted a fifth straight loss.
 
The World Economic Forum in October ranked Canada’s financial system the soundest in the world.
 
The Canadian banks haven’t been in this position of global strength since between the two World Wars, said Charles Goodhart, a professor of finance at the London School of Economics, and a former Bank of England policy maker.
 
"They’re very diversified, didn’t get heavily involved in the international investment banking industry and they’ve benefited from good central banking," Goodhart said.
 
Countries need more "boring" financial systems like Canada’s, Finance Minister Jim Flaherty said Feb. 14 in Rome, where he was attending a meeting of finance ministers and central bankers from the Group of Seven industrialized nations.
 
The federal government in October set up a C$218 billion program to guarantee bank debt to help Canadian lenders compete in international markets with government-backed U.S. banks. None of the country’s lenders has tapped the credit.
 
"The Canadian government has a lot of firepower these days, not just because this has been such a well-managed economy, but frankly, because the Canadian government has not been bailing out the Canadian banks," Toronto-Dominion Chief Financial Officer Colleen Johnston told investors Jan. 28 in New York.
 
Toronto-Dominion reported today that fiscal first-quarter profit fell 27 percent to C$712 million, or 82 cents a share, because of higher loan-loss provisions. Results topped analysts’ estimates.
 
Toronto-Dominion and Royal Bank are among just seven banks in the world with the top credit rating of AAA from Moody’s Investors Service.
 
Canadian regulators resisted pushes from some bank executives to loosen lending restrictions when the economy was booming, says David Dodge, 65, who stepped down as Bank of Canada governor a year ago.
 
"The banks at the top of the cycle thought we were being too tight-assed," Dodge said in a telephone interview.
 
Even the strength of Canada’s banks hasn’t kept the economy from being dragged down by the global crisis. The world’s eighth- biggest economy will shrink by 1.2 percent this year, in part due to falling exports of oil and other commodities, according to Bank of Canada projections. Employers cut a record 129,000 jobs in January.
 
"We have major problems," said Stephen Jarislowsky, the 83- year-old chairman and founder of Montreal-based money manager Jarislowsky Fraser Ltd., which manages about $31.8 billion. "Our commodity boom is over for a long time."
 
Canada recorded its first monthly trade deficit in more than three decades in December, as exports plunged 9.7 percent. The country ships more than three-quarters of its goods to the U.S.
 
"We have some unique advantages, but we are being profoundly affected by the global crisis," Bank of Canada Governor Mark Carney said in a Feb. 14 interview from Rome.
 
Canada’s housing market has also held up better than in the U.S., where prices declined a record 19 percent in December from a year earlier, according to the S&P/Case-Shiller index. Resale home prices dropped 9.9 percent in Canada during the same period, the Canadian Real Estate Association said. Last year, Finance Minister Flaherty scrapped 40-year mortgages when they started to gain popularity among homebuyers seeking to reduce their monthly mortgage payments.
 
Canadian banks are less willing to lend to homebuyers with low credit scores: Subprime loans account for just 5 percent of the total. That compares with 20 percent in the U.S., where independent mortgage brokers and lenders competed with commercial banks to win business by attracting high-risk borrowers.
 
Another restraining factor is that Canadians, unlike their U.S. neighbors, can’t take mortgage interest as a tax deduction, removing an "inherent bias" to take on too much debt, Prime Minister Stephen Harper said in September.
 
Canada was the only Group of Seven nation to balance its budget for 11 consecutive years, before a stimulus package aimed at sparking growth pushed the country to a deficit for the fiscal year ending March 31, according to a government forecast.
 
The relative strength of the financial system may help Canada recover from the recession faster, Carney said. The Bank of Canada is forecasting growth of 3.8 percent for 2010, in anticipation of rising commodity and oil prices. Canada’s oil sands in Alberta contain more reserves than any region outside Saudi Arabia.
 
"Once this uncertainty is removed, and it will be removed ultimately," Carney said in an interview, "these strengths will kick in and that will have a bigger impact in our opinion in terms of the recovery in Canada."
 
To contact the reporters on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net; Sean B. Pasternak in Toronto at spasternak@bloomberg.net.
 

Posted Sunday, March 1st, 2009 in Home | No Comments »