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Hard Slogging

By | May 14th, 2009|

I thought the recession was over. With all the euphoric news and the stock market 40% above its lows, you might think that. After all, company profits are higher than expected, and real estate shows signs of bottoming. But we're not out of the woods yet. The latest retail sales data show that rising unemployment is weighing on consumer purchases. And mortgage data now show [...]

Geithner’s Mea Culpa

By | May 13th, 2009|

Learning from your mistakes is a hallmark of Western scholarship. It also characterizes Chinese thought. The Confucian thinker Mencius once praised a fellow scholar: "When someone points out a mistake [he] has made, he is happy." So Tim Geithner, student of the East, should be really happy now. Last week Secretary Geithner admitted that as Vice-Chair of the Fed he presided over policy that was [...]

Up or Down

By | May 12th, 2009|

So will it be inflation? Or Deflation? As the economy comes out of its funk, two opposing camps are preparing for battle. The inflation hawks point to the massive expansion of the Fed's balance sheet and monetization of the deficit as a likely precursors to accelerating inflation. Nature abhors a vacuum, and those dollars will find a home somewhere. The deflation bears point to the [...]

Muscle Cars

By | May 11th, 2009|

Why is the government so concerned about the Chrysler deal? Admittedly, autos matter to our economy. But there's only, say, 60 thousand jobs at stake. While that's a lot in itself, it's just about a tenth of the US auto workforce, and it represents only 2.5% of the jobs lost so far this year. So why should the Obama administration risk political intervention in the [...]

The Devil and Daniel Webster

By | May 8th, 2009|

Has Daniel Webster College made a bargain with the Devil? Back in April, the Nashua, NH college announced that it would sell itself to ITT Educational Services, a for-profit company that manages over 100 technology-oriented schools in 37 states. Legally, a judge has to approve moving the school out of a charitable trust before it can be sold. But considering that the school owes $23 [...]

It’s Not Easy Being Green

By | May 6th, 2009|

It's been said-though I've never tried it-that if you put a frog in a pan and heat the water gradually, he won't jump out. Is that what's happening with the "Stress Test" results? We've been hearing leaks and counter-leaks for days. First four banks need help. Then about ten. Bank of America needs $5 billion. Make that ten. What's going on? My guess is that [...]

Never Mind

By | May 6th, 2009|

So I guess it's all right. The Stress Testers say Bank of America has to raise $34 billion. But since they already have $45 billion of TARP money, it's okay, they can just convert the Feds' preferred shares to common. Presto, now their captial ratio is okay. Crisis over. But nothing's changed. They don't have any more cash. They just reclassified the government's investment on [...]

The Breakfast Club

By | May 5th, 2009|

Supply matters. That's what I thought when I read about the Chrysler deal. President Obama has criticized a minority of secured lenders who object to the government's deal with the banks, Fiat, and the UAW. These investors think that a bankruptcy judge will give them a better deal, since their claims are senior to the UAW's. Never mind that political meddling in judicial proceedings is [...]

Crossover Appeal

By | May 4th, 2009|

Question: what's contagious, mutates, and can harm its host? The Swine Flu? Or toxic financial assets? The answer is, both. Both depend upon networks, are highly adaptive, and respond to engineering solutions. We've learned a lot since the outbreak of the Spanish Flu some 90 years ago. And we've learned a lot about financial contagion. Some of the solutions are quite similar. Take, communication: by [...]