lifestyle leader

Determined to avoid yet another G20 yawn-fest, the French are now threatening a walkout. Their finance minister has indicated that she will not sign the final communiqué should their demands for "deliverables" not be met (re: a global financial regulator, conceived and implemented by the end of the week).

Spicy stuff. I'm not familiar enough with international diplomacy to answer this with confidence, but is France operating on such a different plane that it can threaten not to sign the G20 document, sign the document four days later, and suffer no significant reprecussions? Because if not, it's not clear to me what this publicity stunt will achieve. If the leaders summit was going to agree to set up a global regulator, the G20 finance deputies and their sherpas would have already have laid the groundwork for one. The leaked draft communiqué shows no signs of any truly "global" regulator, only a more integrated collection of national ones.

So if the French aren't likely to get what they want by Friday, what do they stand to gain?

The Financial Times, also known as the pink lady, is one of the premier English language newspapers. But I am sad to report that the FT's sterling reputation was sullied last week. Not, mind you, by shoddy reporting, poor editing, or some journalistic scandal; rather, its name has been tarnished by the arrival of an impostor!

In a hilariously Onion-esque move, a collection of savvy G20 protesters were handing out fake copies of the Financial Times at Waterloo Station in London. The website for the fake newspaper, FT2020, looks pretty well identical to its mainstream target. There's a lot of content, some of it very sharp, so check it out.

Or not. Anyone want to guess which leader of a G20 nation blamed the crisis on "white people with blue eyes?"

Oh, all right! Here's the answer.

Worth reading:

Continental Drift - James Suroweiki helps explain why Europe and the US have a different take on how to tackle the financial crisis. Tyler Cowen chips in with a reminder about the impact of fiscal stimulus during German re-unification. (UPDATE: DeLong qualifies)

A one-page FAQ on the new plan to rescue the banking system.

Getting regulation right, with an interesting discussion about risk.

This is what happens when financial markets do not read my blog. Animal spirits indeed.

Schott's Vocab - a NYT blog on modern words & phrases. I enjoyed the "recession beard" - a beard with a story.

THE DETAILS
Price: $106,520
Powertrain: 6.2L/638-hp*/604-lb-ft*/supercharged V-8/6-sp manual
Vital Stats: 0-60: 3.3 sec/quarter: 11.2 sec/EPA: 14/20 mpg. *SAE certified.

Stop by CorvetteGuys.com and check out their large selection of ZR1 Wheels.

WHY IT'S ON OUR HIT PARADE: We'd love it for design bravura alone, but the R8 runs like a Wall Street profiteer, carves turns with the finesse of Michelangelo working marble, and treats its two occupants to the velvet touch of a Golden Door Spa.

COOL FACT: Actor Alex Rocco, who awoke to find a bloody luxocar grille sharing his bed in 2008's famous R8 Super Bowl commercial, played Moe Greene in the ad's inspiration, 1972's "The Godfather."

SUM UP: The Area 51 supercar.

THE DETAILS
Price: $126,600
Powertrain: 4.2L/420-hp/317-lb-ft/V-8/6-sp auto-clutch manual
Vital Stats: 0-60: 4.1sec/ Quarter: 12.6 sec/EPA: 13/18 mpg

A fascinating read from the New York Magazine. It's a long piece, but well written. It also has some great quotables from high-level officials and Wall St. execs.

I'll bet some members of Obama's team would kill for the level of control offered by a Westminster system of government right about now.

THE CAR THAT LIVES AT THE INTERSECTION OF DOING SOMETHING GOOD FOR THE ENVIRONMENT AND DOING SOMETHING NICE FOR YOURSELF.

The RX is the best-selling Lexus, and one in five sold is the hybrid version. It’s no surprise, then, that with the new third generation RX—the second to have a hybrid powertrain—Lexus is treading very carefully.The design is a careful evolution, both inside and out. The car is slightly longer and wider but manages to look sleeker than before. The interior retains the traditional Lexus virtues
of comfort (on even bigger, cushier seats) and refinement (with available semi-aniline leather for a still more luxurious feel). Lexus has joined the Germans by adopting an iDrivestyle
controller instead of a touch screen for its optional navigation system. But rather than a knob you twist and push, the Lexus control (called Remote Touch) works more like a joystick that you move from side to side or forward and back, and then make a selection by pressing buttons on the side of the unit. It takes some getting used to.



Other new options don’t require a learning curve, such as the head-up display and the curbview
camera; the latter is located in the right-side mirror, and at low speeds it shows an image of
what’s alongside the car. The hybrid model supplements its previous ECO indicator, which lights up when you’re driving efficiently, with a selectable ECO mode, which changes the responsiveness of the throttle and instructs the climate control to use the A/C compressor more judiciously. There’s also an EV mode, which extends the threshold before the engine starts, up to a still modest 8 to 10 mph.

The changes aren’t dramatic, but Lexus has given its cushy suburban hybrid a slightly greener tinge. Lexus engineers identify four elements that underpin the brand’s hybrids: performance, quiet refinement, low emissions, and fuel economy. In this redesign, the latter received the most emphasis.Whereas the standard RX350’s 3.5-liter V-6 is little changed (adding 5 hp for a total of 275 hp),the RX450h got a whole new gasoline engine. Replacing the old 3.3-liter is a new 3.5-liter V-6 that runs on the more efficient Atkinson cycle. EPA numbers for the front-wheel-drive RX hybrid are up by 1 mpg city and 3 mpg highway, to 28/27 mpg. The all-wheel-drive version adds 2 mpg all around and is now rated at 28/26 mpg.



Despite the increased fuel economy, the RX pecking order has been preserved, with the hybrid
again out muscling the standard RX350. The hybrid’s total power output is up by 27 hp, to 295 hp, and both the gasoline engine and the electric motors make more torque. Against that, however, is the car’s weight gain of more than 400 pounds. Still, the RX hybrid accelerates quickly and smoothly. Once again, the all-wheel-drive model adds a third motor/generator, which is the sole source of propulsion for the rear wheels. In either version, the start-up and shutdown of the gasoline V-6 is seamless, but in steady-state cruising on level ground, there is
the faintest surging as the batteries switch between charging and assisting. In the chassis
department, the new RX is treated to a wider track and a new rear suspension—control
arms replace struts and intrude less into the cargo hold. There’s also an optional sport suspension, but it’s not likely to keep BMW X5 engineers up nights. The electric power steering, now on both RX models, is better than most, linear and not over boosted.

A frequent criticism leveled against the liberal/progressive camp is that they approach policy in an arrogantly paternalistic way: the liberal elites have decided what new government programs will be good for you and if only you were smart enough to vote the elites into office the world would be a better place. This is the nanny state that has introduced annoying speed limits, forced you to pay taxes for things like "education," and banished smokers to Siberia.

Well here's an interesting review of an alternative idea: libertarian paternalism. What's the difference?

To make us choose what is good for us, they avoid fines, compulsion, and prohibition in favor of “nudges” – institutional arrangements that we could, in principle, easily override, but that, given our tendency to rely on [our gut], we end up going along with.

This approach builds on the idea that we often don't spend the time to think important decisions through and instead go with our basic emotional reaction. This can often lead to unfortunate results. But to make a suggestive nudge is not the same thing as making the decision for you:

As long as choice engineering tricks us into making choices that our own more deliberate self would make, they say, manipulation is justifiable. Well-chosen nudges have been shown to be extremely effective in altering choices that make a substantive difference to the lives of many (say, enrollment in pension plans).

This is certainly true. But by now the alarm bells are ringing. My brief exposure to behavioural economics and psychology tells me that by aiming to create more rational decisions, rather than emotional ones, you've created a false dichotomy. In fact, our emotions - our gut - play a fundamental role in decision-making; studies have found that people who have suffered accidents which leave them without functioning "emotion-rich" parts of their brain have difficulty making simple, seemingly-rational decisions like whether or not to go grocery shopping.

Moreover, as the author points out, such nudging still suffers from the same problem as liberal paternalism: the "right" decision has been pre-determined by the nudgers. What if there is a range of right decisions to choose from, depending on individual preferences? And since ultimately people's rational preferences are plastic, and change over time, this does not strike me as being a particularly libertarian approach at all.

In fact, this concept of "nudging" is used all the time in marketing - making the decision to buy one product easier by placing it next to a crappy one. Is this how we want our politicians shaping policy? I'm not convinced. Read the rest of the article as it raises some other excellent points.

Felix Salmon is thinking about some of the same things as Rory, below. He asks if maybe we're going to start seeing signs of real class warfare:

In one corner are the technocrats not only in finance but also in government and the media: people who can understand the importance of distinguishing between a $250,000 base salary, a $2.5 million bonus, a $250 million bonus pool, a $2.5 billion bonus pool, a $250 billion bailout package, a $2.5 trillion monetary stimulus, and so on.

In the other corner are the real people, the angry people, the unemployed people -- and with them their elected representatives in Congress. They're not interested in such distinctions any more, they're not interested in what's fair or what's sensible. They saw their real wages stagnate for decades as the orgy of plutocratic self-congratulation reached obscene levels only to keep on growing. All they ever had was the American Dream: the idea that they, too, might one day become dynastically wealthy and join the overclass.

Now, of course, that dream is shattered -- and, what's worse, it turns out that very overclass is responsible for the working classes' own present straits. While the talking heads in New York and Washington throw around their millions and billions and trillions before commuting home to their comfortable middle-class-and-better lifestyles, the rest of the country is mad as hell, and ain't gonna take it any more. They're not interested in constructive solutions or in leveraging private capital or in the sanctity of contracts: f[***] that s[***]. Those days are over. They want to see jail time, confiscatory policies, and worse.

As inequality grew in America over the past 30 years, there was always the risk that it would snap back violently and dramatically. That day is not yet here, but it's closer than it has ever been, and its possibility cannot be discounted. Barack Obama smells the public mood, and is trying to respond to it in a grown-up and non-incendiary way. Congress smells it too, and is being rather less grown-up about things. And Wall Street still largely remains inside its bubble, watching the tour buses on the outside with fear and incomprehension. But unless some very senior executives start smelling the coffee sharpish, they might end up facing the biggest tail risk of them all.

Millions of protesters took to the streets across France yesterday to protest what is loosely being described as the "economic policies" of French president Nicolas Sarkozy. I know, saying the French are taking to the streets is like saying the sun always rises. Obvious.

However, the protests are but the most immediate example of widespread and growing popular discontent with the financial crisis and the response of governments. Governments in Iceland, Belgium and Latvia have already fallen, and political instability is rising across Eastern Europe, Africa and Asia in response to food shortages, budget cuts and rising unemployment. Even in Russia, the United Russia party lost two local mayoral elections in restive eastern provinces, leading President Medvedev to introduce legislation that would allow provincial governors (appointed by the Kremlin) to replace democratically-elected officials at the local level. This follows brutal crackdowns on protestors; Moscow has become so sensitive to the risk of popular unrest that it recently flew special forces thousands of miles to snuff out local protests against rising tarriffs.

These examples seem to foreshadow a global summer of discontent as unemployment rises and government budgets come under greater pressure. This poses obvious risks to political stability and commerce. It also constrains the options available to policymakers, making beggar-thy-neighbor actions such as the imposition of trade barriers, subsidization or nationalization of industries and currency devaluation more likely. History tells us that these domestic political considerations, particularly in the developing world, risk reinforcing the downward economic spiral, as policymakers appease factions and fail to reach coordinated regional/global programs. They also risk, particularly in the case of currency devaluations, setting off a change reaction of competitive responses that, in the absence of regional cooperation, ultimately destabilizes the system as a whole.

The potential impact of growing popular unrest cannot be overstated. While violent inter-state conflict seems only likely over energy resources, the damage from economic warfare is still profound. Intelligence services have come to recognize this threat. In testimony before the US Congress, Director of National Intelligence Dennis Blair identified the financial crisis as the single greatest national security threat to the United States, before Al-Qaeda or nuclear proliferation. President Obama now receives a daily economic intelligence briefing from the CIA in addition to his traditional daily intelligence briefing. Economic and national security considerations have converged in the eyes of intelligence analysts and policymakers. One has to wonder whether this will lead to more mercantilist policy agendas as liberal economics loses credibility, multilateral cooperation stalls and popular discontent grows.

As we try to come to terms with the crisis and its implications, IPE, as an academic discipline, is well-positioned to explain and guide us through this complex global environment. The discipline arguably isolated itself for many decades as it sought to distinguish its theories from the traditional IR, realist paradigm that dominated both academic and official thinking during the 20th century. It discounted security considerations too much, pushing an almost Marxist-like bottom-line: the economic drives the political. But since the end of the Cold War the discipline has developed a greater appreciation for the security implications, and influences, within the global political economy. Freed from its self-imposed intellectual box, IPE now offers the most multidimensional, comprehensive analytical framework for conceptualizing and forecasting the economic and political consequences of the current crisis. I would guess that more than a few IPE grads will be drafted into their respective national intelligence services in the coming years.

It has become cliche to say we are witnessing a global paradigm shift. But as the crisis plays out over the coming months, and political instability spreads, it will become ever more apparent that one cannot divorce economic conditions from national security. The risk is that this realization leads policymakers to adopt mercantilist policies and abandon multilateral cooperation. Amidst growing protests, the difficulty policymakers face in fashioning a global consensus on regulatory reform and economic stimulus only hardens. Upon this backdrop, the G20 meeting in London develops an even greater sense of urgency. Our leaders must sieze the moment. Their window may be closing.

Recession or no recession, the British Empire lives on.

Amartya Sen has his "deep think" cap on. Check out "Capitalism beyond the crisis"

Or his shorter FT comment piece here.

(Thanks to Ryan C. for the pointer)

Is that you? Sweet comb over comrade.

The US Federal Reserve "stunned" investors on Wednesday with its plan to buy $300bn of government debt, an attempt to drive down yields on long term securities (which helps both private credit markets and the US government finance deficits). It also announced that it was doubling its purchases of Fannie and Freddie securities.

According to the FT, once the Fed's plans are fully realized its balance sheet could swell to $4,ooobn, one third the size of the US economy.

Bernanke has long argued that the Great Depression was partially the result of inaction by policymakers. However this saga ultimately plays out, history will never say the same of him.

From the New Yorker, a selection of cocktail recipes that are topical, depressing, and downright hilarious. Examples:

Long Island Iced 401(k): Put hopes in shaker. Add dreams. Shake until dashed, then drink all the vodka, gin, tequila, and rum left in liquor cabinet.

BlackBerry Sling: Discover that your BlackBerry doesn’t work because you haven’t paid the bill. Sling it against the wall, then buy a prepaid phone and make some rum in your toilet.

(via Free Exchange)

A caller into NPR today, whom I am unfortunately unable to identify, offered up a new candy bar to follow your recession cocktails:

The Madoff- sweet exterior with a bitter filling

Addressing a private event in Calgary, Canada, former US president George W. Bush on his planned memoir:

"I'm going to put people in my place, so when the history of this administration is written at least there's an authoritarian voice saying exactly what happened,"

(emphasis is mine).

From Algerian energy minister Chakib Khelil, expressing OPEC's disappointment at Russia's unwillingness to cut supply along with the oil cartel:

“Of course we are disappointed...Wouldn’t you be with your neighbour if you were cleaning in front of your house and he was pouring down dirt.”

Oh, snap!

especially in Britain and Japan. The report was penned by a top aide to IMF Managing Director Dominique Strauss-Kahn, and projects a global economic contraction well into 2010. Among the most startling figures:

-The UK will shrink by 3.8% in 2009, its biggest annual contraction since 1944. It will contract a further 0.2% in 2010.
-Japan will contract by 5.o%, Eurozone by 3.8%, US by 2.6% and the G7 as a whole by 3.2% in 2009.
-The US will eke out 0.2% growth in 2010 (Hooray! Growth!).

Buckle down ladies and gents, we're in for a long slog.

It is widely being reported that Avigdor Lieberman, leader of the far-right Israel Our Home party, will become the next foreign minister of Israel after signing an agreement to join Likud's governing coalition.

Meanwhile in Iran, former Iranian president Mohammad Khatami announced he was withdrawing from June's presidential election.

Is the number of varieties of toothpaste offered under the brand name Crest at my local pharmacy. Yes, really. That's a score-plus-four tartar-protecting, cavity-fighting, teeth-whitening, citrusy/minty mouthwashing flavours to choose from, to say nothing of the choices offered by their competitors: Colgate, Aquafresh, Sensodyne, etc...

I'm reminded of that old joke by Henry Ford that you can choose whatever colour you want for the Model T, as long as that colour is black. The beauty of capitalism and open trade is that it has produced such variety that Ford's wisecrack no longer applies. The idea is that greater choice equals greater happiness.

So let me ask you this: does the availability of two-dozen varieties of toothpaste represent a response to market demand for choice, or is this an example of corporate marketers "creating" demand where it did not necessarily exist?

And a further question: does this plethora of choice make you happier?

Update: Check out this talk on behavioural economics by Dan Ariely. It is both funny and enlightening - during the talk he gives an example of what happens to the rate of jam-purchasing when customers in a grocery store are offered free samples from six choices of jam versus twenty-four choices of jam, then offered a coupon for jam. The answer will not please the marketing directors at Crest.

(photo: nick esder's photostream. PS: I want one of these)

Protests and violence have erupted in Pakistan as the supporters of President Zardari and the opposition leader, Nawaz Sharif, clashed in the streets of Lahore - the New York Times has the details. From an outsider's point of view, this strikes me as suspiciously similar to the situation in Gineau-Bissau that I wrote about yesterday: two of the richest, most powerful men in the country engaged in a personal fued over power and political fifedoms.

Factional strife is an unavoidable part of the political process, and things inevitably get personal. But Pakistan simply does not have the Madisonian-style institutions that are needed to keep these factions in check. Instead we have a nuclear-armed country that is unable to control its own borders, or govern parts of its own territory, or manage to protect the most venerated of all citizens: cricket players. No wonder there's already talk of bringing back Musharraf.

For an insider's look into the current state of affairs in Pakistan, read this piece. Or check out the Middle East Progress blog for a more thorough backgrounder. Hillary Clinton certainly has her hands full.

(photo of sunset in Lahore from Fahad Bhatti's photostream)

As a follow-up to Rory's "Uh-oh" quote of the week, here's a cartoon from KAL on the macroeconomic imbalances issue between China and the United States:

Not in general, but maybe in the particular case of Guinea-Bissau, a tiny west-African state and former Portuguese colony. Two of the most powerful men in the country - the President and a rival General - were killed last week within 12 hours of one another. Interestingly, the grisly assassinations have been greeted as a welcome change, both within the country and without. The NYT has an interesting piece on the story that's worth a read.

Originally I was going to write that I had never heard of Guinea-Bissau before coming across this article. But after seeing a map of the country I realized that wasn't true: in a previous job I had been asked to write a two-pager on the outcome of the 2005 national elections and its impact on the country. I remember almost nothing about the contents of that briefing note, except that international observers were relatively impressed by the openness and fairness of the election - one that was taking place only 6 years after a bloody civil war. It looked like good news.

It wasn't. Almost four years later, the country appears to be worse off than it was in '05: the drug trade runs rampant and the average life expectancy is about 45 years. Oddly, that the freely-elected President has been shot and his rival blown up seems to be the best bit of news this country has seen in a while.

A former classmate of mine has started a blog on all things politics and economics, Global Axioms - have yourself a gander. He's currently living in Istanbul and so should be able to offer a different perspective on things, particularly on issues in the Middle East region.

Politique
-G20 finance ministers begin a tense weekend in the south of England amidst deep divisions over the way forward.

-The US deploys a warship to the South China Sea following a maritime incident between an unarmed US surveillance boat and five Chinese naval vessels, Wen Jiabao bangs the drum on US Treasuries...and these two things are related (see how things tie together so nicely?)

-Pakistan is on the verge of: a) another military coup, b) an unlikely political compromise, c) utter collapse.

Economia
-Switzerland moved to devalue the franc, raising fears of a "currency war" (i.e. competitive devaluations). It also reluctantly agreed to reform its bank secrecy laws and increase its cooperation on tax evasion.

-Reuters had an interesting report on the unusually sharp dissent within the US Federal Reserve over the bank's actions in response to the crisis.

-Bernard Madoff plead guilty to 11 charges related to his $50bn ponzi scheme, including securities fraud, mail fraud, money laundering and perjury. Sentencing is June 16.

The Rest
-Santino the chimpanzee has led scientists to question whether premeditation is in fact a uniquely human trait.

-Benoit Faiveley visits the last Palestinian keffiyeh factory in Hebron for Monocle (side note- its ironic that an essentially protectionist peace is sponsored by UK Trade & Investment)

-Alexander Lobrano explores Paris v. New York Eating (hint: he misses NYC). He then turns the tables in New York v. Paris Eating (hint: he misses Paris).

To cap off a week of quick hits and witty anecdotes, Chinese premier Wen Jiabao, via the NYT:

“President Obama and his new government have adopted a series of measures to deal with the financial crisis. We have expectations as to the effects of these measures,” Mr. Wen said. “We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.”

He called on the United States to “maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

Uh-oh.

Via Funny or Die: Lex Luther needs a hundred billion dollar bail-out.

I have a new blog called Pastel Still Life. It brings together the many things I find interesting. You should visit it often. Its a movement.

The FT has a terrific interactive graphic outlining the priorities of each country at the April 2 G20 meeting in London. Build your own issue-linkages boys and girls!

Staying on today's theme, the number of Russians making Forbes' 2009 list of the world's richest people fell nearly 66% from the year before. It was bad to be an oligarch in 2008 (ok not really, just worse than 2007).

In a speech to the Japan Society in New York, Blackstone CEO Stephen Schwarzman said:

"Between 40 and 45 percent of the world's wealth has been destroyed in little less than a year and a half...This is absolutely unprecedented in our lifetime."

Where does he get these figures? By what measurement? I don't doubt the figure is that large, but it is easy to throw out big numbers like that without a proper analytical basis. I looked for the transcript to see if he provided more context in the speech, but no luck. If anyone can track this down, the comments section is yours...

Or, "Everything You Need To Know About The Financial Crisis"

By now most people are aware that all is not well with "the economy." But if you're looking for a summary of the whole thing, with varying levels of detail to choose from, I recommend browsing through The Money Meltdown.

For the more historically-minded, our friend Patrick has drawn attention to a great website for learning about the gold standard. What fun.

The first comes from a piece by Yves Smith in which he quotes at length from another piece by Willem Buiter which argues that we should embrace active re-regulation now, risk over-regulation, rather than waiting to get it right. (Notice how this ties in well with the Geithner quote below? That's continuity, folks). First Yves:

Given the considerable costs [financial] innovation hath wrought, the calls
to shackle bankers seem completely warranted. If any other class had done this
much damage, they'd almost certainly be in jail.

Then a few more great lines from Buiter:

Self-regulation is to regulation as self-importance is to importance. The
notion that markets, including financial markets could be self-regulating, by
properly incentivising CEOs and Boards of Directors and through
market-discipline, is prima facie suspect. We decide to regulate markets because
of market failure. Then we let the market regulate the market. This is an
invisible hand too far.

The European political leadership seems to agree, and their agenda at the upcoming G20 is going to reflect this fact. Hold on to yer hats: the winds of regulation is blowin'.

According to sources in the room, US Treasury Secretary Timothy Geithner said the following to a meeting of House Democrats last night:

"We're doing in weeks what countries did in years...It will take some time. It will take some patience. But it will work."

Geithner has come under enormous pressure from investors, commentators, bloggers and just about every other person under the sun not named Barack Obama since taking over at Treasury. The biggest criticism has been his apparent "dithering" and inability to formulate or articulate a clear response to the banking crisis. In the current environment, no one has the luxury of time, and doing too little (fiscal stimulus including) runs the very real risk of plunging a deep recession into a depression.

But, doesn't he have a point?

In a piece on Vox EU, Hadi Soesastro argues that East Asian countries should seize the opportunity afforded by the G20 and integrate their strategic interests and influence into the emerging post-crisis governance paradigm.

The crisis has created an opportunity for new players to bring their plights, interests, and aspirations to bear towards more inclusive global efforts to resolve it.

He argues that East Asia's inward focus over the past decade (with the big exception of China) has limited the region's collective influence and ability to project its strategic interests onto the global economic governance structure. Soesastro points specifically to the creation of a regional monetary fund, borne out of the collective sense of injustice at the hands of the IMF following the East Asian financial crisis.

He also believes, more broadly, that the focus should not be on the reform of existing international institutions. Global governance would instead be more effective if based on regional arrangements that coalesce the interests of developed, emerging and least developed economies within a geographic area. He points to efforts already underway within Latin America and the CIS to develop regional agendas for the G20 forum.

Finally, he identifies the G20 as a vehicle for China to increase its participation in global economic governance:

East Asia’s strategic participation in the G20 provides a framework for China to play an increased role – as a key member of the regional community – in the recovery of the global economy and in shaping global economic governance. In the Chinese language, the word “crisis” is made up aptly of the characters for “danger” and “opportunity”.

Soesastro's rallying cry for East Asia reflects a growing consensus that the G8 has become irrelevant and the post-crisis economic governance paradigm must be inclusive of a broader range of stakeholders, particularly those whose economic power far outweighs their political representation under the current global regime. If macroeconomic imbalances have played a central role in the crisis, the representatives of one half of that equation (i.e. Asian savings, which I know is a horrible oversimplification) should undoubtedly play as large a role in resolving the crisis as any party from the other side of the ledger. Further, trade is vital to East Asian economic growth and integration. Having a vocal advocate for open trade at the negotiating table, at a time when many of the major western countries are swinging towards protectionism, is of paramount importance to preserving the free trade consensus.

While I am skeptical of the ease with which Soesastro envisions a regional convergence of interests on issues like trade and investment (will China's interests always converge so neatly with Japan's?), he nonetheless highlights the enormous opportunity previously marginalized countries are provided by the crisis. Regions like East Asia can exert their collective influence to refashion global economic governance more in line with their own strategic interests. They can also play a vital role in preserving the open flow of trade and capital that has been so vital their own development.

From Overcoming Bias, the idea of Loving Cranks To Death. Read the whole thing, then come back here.

The concluding point is this: "The strongest argument for socialized medicine is the strongest argument for socialized religion, that government provision seems to reduce enthusiasm for and consumption of such things. Western Europe seems to have hit on the clever solution of loving both religion and medicine to death. Should we consider loving other cranks to death?" Like palm readers, UFO speculators, etc.

It's an interesting thought, although I assume the author doesn't mean to label private health care providers as cranks. Also, I can think of a region with high levels of state-religion overlap and high levels of religiosity (Middle East & North Africa), so there's more going on here. And it's also the case that those of us living with public health programs only avoid using them because the waiting list to see anyone with medical training is a decade-long. But nevermind that; let's play with this idea. If it's true, could we also apply it to...

The War On Drugs? The Economist has just re-asserted its argument that a state-regulated drug trade is worth a shot. Maybe our youth will stop using narcotic substances so frequently if they have to register at a government-owned pharmacy. Besides, the taxes on the stuff could offset the cost of that new health care system: win-win.

Economics? A tried and true method of discrediting crank economic theories is to adopt them as official government policy for an extended period of time. The Victorian-era of pure market discipline helped set us up for the Great Depression and feed revolutionary Marxist ideology. The post-war spin-offs of Keynesianism that tried to fine-tune the economy and create permanent full employment instead gave us inflation, crazy-high interest rates and an exported debt crisis to Latin America. Next on the list was the Efficient Market Hypothesis, "light-touch" government regulation, and the rocket-science wizard-mathematics of derivative trading. Discredited, discredited, discredited.

So which crank theories are up next?

The NYT takes a look at the fortunes of, and controversy surrounding, CNBC. In a slightly less antagonistic manner than I did last week.

(h/t Liz)

The Economist has launched four new blogs from its most prominent columnists: Lexington, Bagehot, Charlemagne and Buttonwood.

As well as offering opinions on their usual subjects, Charlemagne also looks at the quirks of living in the euro-bubble and Bagehot at British life, art and football. Buttonwood reflects on the people behind the markets and Lexington mulls all the finds interesting, significant, quirky and irritating.

Check em out (but stick around here for a while first)!

(According to the Brookings Institution, “beneath this concrete dome on Runit Island, part of Enewetak Atoll, built between 1977 and 1980 at a cost of about $239 million, lie 111,000 cubic yards or radioactive soil and debris from Bikini and Rongelap atolls. The dome covers the 30-foot deep, 350-foot wide crate[r] created by the May 5, 1958, Cactus test.” Photo by the Defense Special Weapons Agency. Thanks, Capability B., for the link.)

The relative health of the Canadian banking system has been getting a lot of attention these days. Yves Smith notes with approval the "decidedly retro" nature of the system while referencing a NYT op-ed that praises "The Great Solvent North." On a bigger scale, the Europeans seem to have latched on to the success of Canadian banking system as a guide for banking reform - they may very well use it as a stick with which to beat the Americans over the head while promoting their new joint economic agenda for the G20. Finally, with the World Economic Forum recently ranking it the soundest in the world, the boys of Bay Street have become the envy of the global financial system.

It's easy to understand why. After witnessing the fallout from what happens when the world's largest banks leverage their assets 30-, 40-, or 70-1, some policymakers are positively drooling at Canada's cautious reserve requirements. And if it weren't enough that their levels of market capitalization now rival their major American counterparts, some of these cheeky Canuck banks are still making profit! In a recession!

So why have Canadian banks so far remained (relatively) insulated? From the NYT article:

The five major chartered banks, the few regional banks and handful of large insurance companies are all regulated by the federal government. Canadian banks are relatively constrained in the amounts they can lend. Canadian banks are required to have a bigger cushion to absorb losses than American banks. In addition, Canadian government regulations protect the domestic banks by limiting foreign competition. They also keep banks broadly owned by public shareholders....

The... horror. I think Italy is the only other major industrialized country with such heavy protective measures over its financial community - a factor which also seems to have insulated them from the crisis somewhat. But it's important not to overstate things. The op-ed continues:

Canadian banks are known to be risk-averse, and this has served them well. While their American counterparts were loading up their books with risky mortgages, Canadian banks maintained their lending requirements, largely avoiding subprime mortgages.... The big five Canadian banks... [have] survived the recent turmoil relatively unscathed.

I think those points deserve a few qualifications. First, I don't think the full impact of the US economic collapse has filtered across the border yet: several of Canada's top 5 expanded their operations into the US and so remain exposed to the fallout. Secondly, anecdotal evidence suggests that some of the banks were decidedly less cautious when it came to investing in the subprime market - and their clients are feeling the pain. Finally, it's not clear where future profits are going to come from given the nasty global environment - there are worrying signs already.

So maybe this model has a few blemishes after all. It's also worth noting that many banking execs had been lobbying very hard for Canada to alter its regulatory structure to allow its domestic banks to compete with their international rivals. Their relative failure to achieve this has proved to be their saving grace. But before the Europeans and Americans rush headlong into imposing Canadian-style banking regulations, they should take a good hard look at the social, political and institutional reasons for why those lobbying efforts had limited success - it wont be easy to re-create that environment at home.

But one thing does seem clear: Canada's financial regulators have the eyes of the world upon them. It will be interesting to see how they choose to deal with the new-found attention.

(photos: Mike Manalang's & Mister V's photostream)

Politique
-Divisions emerge within Europe over EU rescue packages.

-The Sri Lankan cricket team came under attack in Pakistan, with six police officers killed.

-The ICC issued an arrest warrant for Sudan's president Omar al-Bashir for crimes against humanity in Darfur.

-UK Prime Minister Gordon Brown visited the White House and addressed a joint session of the US Congress. Then a bit of a row broke out (ok, within the British press) over the Obama's not-so-thoughtful gifts to the Browns.

Economia
-The Bank of England slashed rates to 0.5%, and embarked upon "quantitative easing."

-The US government pumped an additional $30bn into AIG.

-China's anticipated additional stimulus announcement came, and went, with no stimulus.

The Rest
-Arsenal, ManU and Chelsea go through in the FA Cup. Becks, Milan and LA Galaxy reach tentative deal to keep the England international at the San Siro until the end of the season, and possibly beyond. Becks reportedly put up his own cash to ensure his stay in Milan.

-Really, Medvedev? Really?

-Paris Fashion Week.

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BMW 730 Ld SE Carbon
Cylinder specific anti-knock control
Digital diesel electronics (DDE)
Six-cylinder in-line diesel engine with four-valve technology
Six-speed automatic gearbox with Steptronic
19 - inch Ten-spoke alloy wheel style 231
Servotronic steering
Driver and passenger, front and side airbags
Head and side airbags front and rear
Alarm system with remote control and engine immobiliser
Anti-lock braking system (ABS)
Anti-roll bars, front and rear
Brake lights with LED technology
Dynamic stability control (DSC incl. DTC)
Front foglamps
Headlight wash, high-pressure system for cleaning headlights
High-beam assistant
Multi-level cruise control
Rear park distance control
Parking brake with auto-hold function, electomechanical
Rain sensor with automatic headlight activation
Seat belts - Automatic seat belt height adjustment, front
Seat belts - Rear seat belt system with three three-point seat belts
Seat belts with inertia reels at the front with pyrotechnical belt latch tensioner, adaptive belt force limiter and belt restrainer
Side impact protection and roof crossbar
Tyre puncture warning system
Xenon headlights
Rear child seat ISOFIX attachments
Part electric seat adjustment
All round anti-corrosion system
Comfort exit stepless door brakes
Exterior mirrors- aspheric, tinted, electrically adjustable, body-coloured and heated
Heated screen washer nozzles
Automatic air conditioning with individual driver and front passenger controls (including automatic air recirculation)
Centre arm rests, front and rear
Info display, analogue instruments combined with liquid crystal display
Rear-view mirror, automatically dimming
Sunblind - rear windscreen, electric adjustment
Window lifts front and rear, electrical, with open/close fingertip control, anti-trap facility and comfort closing function all round
Electric steering column adjustment with memory
Multi-function controls on steering wheel
Single CD player, radio, six speakers & AUX input point
Professional navigation system
On-board computer
Revised iDrive controller & control display (with 6.5-inch monitor)
Voice control
Metallic paintwork

Toyota officially unveiled the latest version of its slick looking, Euro-centric people mover at the Geneva Motor Show this week. Called the Verso (not to be confused with the Nissan Versa), the three-row, five-door hatchback wears handsome sheetmetal with lines that are definitely "in family" for Toyota. For as much as we like the outside, the instrument panel has Scion disease. Center gauges. Please stop it. That third row also has severely limited legroom, but it's still a neat trick to fit so many perches within a Corrola-sized footprint, even if some are occasional-use grade. The Verso will likely delight for bopping across the moorland, but you might need to have your legs removed so you'll fit in back.

BMW tuner par excellence Alpina is returning to the motor racing scene for the first time in two decades with the new B6 GT3, which the pseudo-works firm unveiled for the first time here at the Geneva Motor Show. Based on the 6 Series, the B6 GT3 features a unique radial supercharger fitted to its 4.4-liter V8 to drive 530 horsepower to the rear wheels – in proper Bavarian style – in what looks to be a compelling competition package.

Alpina itself will be fielding a pair in the European FIA GT3 series and at "selected 24-hour endurance races" (Nurburgring, Le Mans... we're looking at you), but the B6 GT3 will also be offered to private teams. Alpina has fitted adjustable everything to the car and a full array of electronic control systems to ensure that gentlemen racers – not just professional drivers – will be able to handle it and so that the car will qualify for a wide array of racing series. We're looking forward to seeing the green menace tackling the Green Hell soon, but in the meantime had to content ourselves with checking it out at Alpina's show stand here in Geneva where it was displayed alongside the new B7 Bi-Turbo, which we'll have for you shortly.

the Cayenne has been nothing short of a blockbuster sales success for the German automaker that's normally associated with lightweight, technologically-advanced sportscars. To drive that point home even further, Porsche has just announced that the 250,000th Cayenne has rolled down the assembly line at its plant in Leipzig, Germany. This vehicle happens to be destined for Austria, but Porsche is quick to point out that the SUV gives it access to markets like China, Russia, Latin America and the Middle East that would typically shy away from the brand's sportscar roots.

The specific Cayenne to hit the quarter-million mark happens to be powered by a six-cylinder diesel engine, another stark departure for the automaker that had once worshiped only at the high-rpm altar of petrol.

World GDP over the last four years:


...splat!

(From The Economist)

Sometimes I save the links to articles on particular topics in the hopes that, one day, they will be incorporated into a post. Other times, like now, I will just dump them into a messy pile.

- Should you go to graduate school in a recession? Maybe it's not such a good idea if you're studying the humanities.

- In America, differences in opinions about globalization appear to correlate strongly with education levels. One possibility is that those without university degrees are ignorant of the benefits of globalization and therefore deserve to be ignored. A more likely explanation is that the less-educated are not feeling those benefits too strongly these days.

- (Of course, in order to take people's opinions seriously, there is a minimum level of education required. Crazy sprinkler lady need not apply).

- The United Kingdom is considering shifting away from “a teaching year that mimics the medieval agricultural and religious cycle.” What, no more 6 week Easter break? Such a radical shift would threaten more research-oriented schools, presuming they haven't closed already.

- More news from the schools.

Now that the Bank of England has followed the Fed and embarked on "quantitative easing", readers may be asking themselves: what exactly does that mean?

Via FT Alphaville, the Telegraph provides a handy overview in "Printing money: an easy guide to quantitative easing."

UPDATE: The FT had a handy graphic/demonstration as well last month. You can find it here.

Poor Lord Mandy...



Note: I am, I confess, a fan of Mandelson (which I know is an unpopular position in many, ok most, circles). Despite his immense shortcomings, he is an architect of one of the late-20th century's greatest political innovations in the western world, the "third way"; which, despite its role in the present economic and financial crises, remains the most pragmatic approach to politics in the US, UK and much of the EU. Also, his performance as European Commissioner for Trade was applauded by even his most ardent critics (with the exception of Super Sarko, of course), under incredibly difficult conditions (how's that DDA progressing?). Let the backlash commence...

Upon learning that US unemployment has risen to 8.1%, Republican House Minority Leader John Boehner called on Barack Obama to veto a $410 billion spending bill and impose a spending freeze until the end of the year.

Really, John Boehner? A spending freeze. Really?

Citigroup "broke the buck" today, trading below $1 a share for the first time in its history. How's that for a taxpayer return?

Countless traders must have headed out for lunch this afternoon asking themselves: what else can I buy for a buck? Some options to whet your appetite, courtesy of the McDonald's Dollar Menu:

-Hot Fudge Sundae
-Apple Pie
-Fruit 'N Yogurt Parfait

Quite the dilemma. Own a piece of what was once the largest company in the world, or sample a tasty treat under the golden arches. Choices, choices...

I've been traveling for the past week, and have thus spent a lot of time in lobbies and hotel rooms watching CNBC. I have always preferred Bloomberg as a source of financial/economic news and analysis, but it is a fact that CNBC is the business channel of record in the financial world (both within and outside of the US). They have unrivaled access, and so I tend to watch the network more than I do the decidedly better Bloomberg.

But recently, I, like many people, have simply become fed-up with CNBC's self-righteous, failed paradigm clinging, dancing on the deck of the titanic posture. The now infamous Rick Santelli spectacle on the floor of the Chicago Merc was but the tip of their hypocritical iceberg. The network's pundits have not only been cheerleaders for the financial industry bailouts, arguing incessantly that the systemic risks posed by the failure of large institutions dramatically outweighed any moral hazard or popular considerations, but now rally behind Santelli's bizarre and hypocritical admonishment of the Obama administration's efforts to provide less than 10% of US homeowners with less than one-billionth of the financial support provided to the banks. The debate over mortgage relief is a nuanced and important one, and both sides of this debate have merits to their argument. However, no one can possibly deny that the systemic implications of the mortgage market are any less important than those posed by the financial system. Remember, the practical foundation of the banking crisis is arguably the mortgage-backed securities that are still destroying confidence in the banking system and strangling credit, particularly inter-bank lending. Note to Santelli:

Your neighbors' (well, probably not your neighbors) mortgages matter as much to the recovery of the global economy as the profits of the trading firms you stand amidst daily on CNBC.

So, to limit the rant that this post has inevitably descend into, I will sum up my perspective on CNBC in this way:

CNBC has no credibility. Period.

Yet, because of their stature, access and unrivaled ability amongst business television outlets to influence the market, the network goes largely unchallenged in both its viewership and clout. In fact, the economic and financial downturn has boosted CNBC's ratings to record levels, as the amount of people looking to better understand their economic and financial circumstances increases. It is great that people are looking to educate themselves on the economic and financial forces impacting their lives, but unfortunate that they are turning to CNBC for that information (although, I am pleased to learn that the FT has been steadily increasing its circulation for some time).

Enter The Daily Show. Rick Santelli, who was scheduled to appear on the show last night, apparently cancelled at the last minute. The show was not, um, happy, and thus took it upon itself to, as only it can, call CNBC on its b*llsh*t. Enjoy.

These days, the banking industry is not what you might call a "high growth" sector, particularly in Europe and the United States. And yet, there may be some employment opportunities for the free range bankers that have recently been let loose by Wall Street upon an unsuspecting public. As Martin Wolf pointed out this morning, there is a very real chance that US federal government agencies are going to be majority owners of some rather large insolvent banks. It could be after a couple of months of the "stress testing" exercise, or it could be next week, but either way these banks are systemically important and thus "too big to fail." That means the Federal Deposit Insurance Corporation (FDIC) - or some other such agency - will have to step in.

Of course, there are political barriers preventing a full-on nationalization of banks like Citi and Bank of America (nationalization = socialization = victory for Lenin). But there are also significant economic barriers to them being purchased by private capital: who'se going to buy two of the largest American banks? The Europeans? They're arguably in worse shape thanks to their exposure to certain plumetting Eastern Europe economies.

Therefore, since a public restructuring of these banks is probably going to happen in some form, that means the government is going to need bodies to replace the existing management. The last time the FDIC took over a systemically important bank (Continental Illinois in 1984), it took them 10 years to restructure the assets and finally sell the bank to private owners. And since those owners ended up being Bank of America (a delicious twist, yes?), a larger and even more interconnected bank, this could be a very secure job horizon indeed.

So polish up your resumés, unemployed bankers, because I suspect the FDIC will be hiring shortly. It's true, the bonuses will be smaller, but think about it this way: you can perform a valuable civil service by dismantling and restructuring your former banks and restoring a healthy financial sector. Besides, it could be worse.

(photo from nowpublic.com)

(Helmut Smits, Street fountain, 2002. Thanks to the artist for the photo.)

Here's a lovely piece of intervention by the Dutch artist Helmut Smits. A minor act but profoundly marvelous.

Smits briefly notes that his street fountain spurts via a small water pump. But how small is it, we wondered. How complex are its wirings and how great is its energy requirement? One certainly wishes that it could be mass produced, bought by the dozens, or at least hackable from easily procured cheap parts, a craft project whose step-by-step instructions can be downloaded from Instructables, like LED Throwies. When the rains do come and fill up pot holes or shallow pedestrian depressions, you can sow little fountains everywhere, adding a bit of playfulness to the concrete playgrounds of weary city-dwellers. It's Banksy meets Salomon de Caus hydro-graffiti.

Should you want to add a subversive underlayer, you could say that at the same time it highlights the deplorable condition of urban infrastructure, that pouring in billions of dollars into these pot holes isn't going to solve the problem. The collapse is perpetual.

In the Archives:
On fountains

(Spotted on Vulgare.)

From our correspondent in South Korea, Louisa Metcalfe:

Seoul - I sit reading about “dark clouds” moving over the Korean economy. Of course, the problem is common to all of the global economy, but a phenomenon which has been specific to Korea since the Lehman Brothers collapse of September last year. The continuing slide of the Korean economy begs the question: how will Asia, the apparent new beacon in the global economy, lead the world economy out of recession? Moreover, will the progress be facilitated by further cooperation as witnessed at the end of last year?

This is a question which is in part related to the recent news that a Tripartite Agreement has been formed between Japanese, Chinese and Korean leaders. Korean President Lee Myung-Bak, Japanese prime minister, Taro Aso, and Chinese Premier Wen Jiabao, pledged “Tripartite cooperation” at Fukoka, Japan, on December 13th 2008. This agreement comes as somewhat of a breakthrough in Asia, after decades of mistrust and resentment toward the acts Japan committed during World War II, and before. Therefore, the subject of cooperation here in Korea seems to have witnessed symbolic progress - something which appears to be a result of the global economic downturn itself.

The relevance of this news resonates now as this week in Korea marks a year in power for the president Lee Myung-Bak. Yet despite talks of the Asian miracle of late, and hopes of economic success via cooperation in December, the ratings of the Korean president have been halved in the past year. This is arguably largely a result of the extent of the damage which has occurred in the Korean economy during this time. The past year has seen a vast decline in exports and capital reserves as the USA has become less able to consume Asian goods. Two of the traits which lead to nations such as Korea being held up as examples of the ‘Asian Miracles’.

So what now? Will the Asian miracle last? I see that this question may be subject to cooperation. Can and will the ‘Asian Miracle’ persist without external facilitation? For me, the answer is yes. The situation looks optimistic for the next year in power of Lee MyunBak. The Korean media is projecting that the president has finally accepted that the crisis means harder action must be taken, and his mantra has become, ‘Crisis equals Opportunity’. Moreover, the two words have the same meaning in Japanese, portraying an image that the national differences between the two countries will soon be offset, at least temporarily, in order to resuscitate the Asian economies.

The Tripartite Agreement promises to boost the Asian Development Bank, and supersede the "Chiang Mai initiative", created during the East Asian Financial Crisis, to allow bilateral swaps. Furthermore, the Association of South East Asian Nations (ASEAN) has been further developed in recent years (for example, including China into ASEAN+3). The recent news of cooperation and change in Korea therefore comes as a refreshing change to the news of gloom and doom, with Korea, Japan and China comprising a quarter of the world’s population, and a fifth of the world’s economy. Thus portraying the potential for these countries, including Korea, to chase away the dark clouds over their economies over the coming year.

---------------------------
Interested in being a guest correspondent? Fire us an email: ipejournal at gmail.com.

(Or “A Female Figure with Large Breasts, Three Eyes, Deformed Ears and Four Hands Standing in a Landscape,” from Giovanni Battista de' Cavalieri's Monsters from all parts of the ancient and modern world, 1585. Source.)

It's been a while since we posted a list of recently discovered blogs. Despite the lamentations of my colleagues about the demise of both the quality and quantity of blogs on the built environment, for every one that goes dimmer with each passing week without a post, there's a handful that crops up, most of which are worth keeping tabs on.

Of course, these newer blogs aren't going to be any less ephemeral. In fact, those started by thesis students and studios will most likely expire with the end of term, but at least a record of their investigations exists for anyone to use for whatever purpose. Because what if before they published the book, Venturi and Scott Brown's Las Vegas studio had maintained a blog in which students and instructors recorded all their initial observations, posted their pre-collaged photos, lecture podcasts and unedited videos using Flickr, Vimeo and YouTube, and the Web 2.0 crowd participated wiki-like, unencumbered by notions of proprietary and editorial control? It would have been interesting at the very least.

Here, meanwhile, is the list. The bloggers responsible for these blogs may or may not be as described above, but they all possess fertile minds and fecund imagination, are consummate observers, have individualized but keen insights into important issues of the day, and are voracious collectors of net flotsam and jetsam.

21st Century Plowshare

Arts and Ecology

christian barnard landscape blog

Edificial

fruitful contradictions

Geometry of Bending

Infrastructurist

Invent Civil

Mockitecture

Pop-up City

there is a lot to say, of this we are sure

Urban Floop

U.S./Mexico Border Wall as Architecture

Vulgare

The following are maintained by the incredibly fortunate three who were awarded The John K. Branner Traveling Fellowship.

Re:mote.......Controlled

Soundscrapers

Untested City

For our public blogroll, see our list of RSS feeds [good links] on Bloglines. Which of these you are going to subscribe to (or whether or not you are going to follow even one of them) will be up to you.