Saturday, August 22, 2009



OK my Firefox browser has accumulated far too many tabs. Time to clean house:

* Bill R. found another neat item in the WSJ from 1930. It seems that back then, they were comparing their slump to the 1920-1921 depression. But they recognized the important difference: "While the 1920-21 depression and stock market pattern has been cited as remarkably similar, some are pointing out that whereas now credit is cheap and market valuation still relatively high, in 1920-21 opposite conditions applied" (my emphasis). This is exactly the point I made in this essay.

* Tim Swanson sends along this very helpful New York Fed paper [.pdf] on excess reserves. The authors have a few numerical examples that are really good, if you want to truly understand the relation between balance sheets, loans, reserves, and excess reserves. However, I think the authors fail on their thesis. In particular, in both the intro and conclusion they say, "[W]hile the lending decisions and other activities of banks may result in small changes in the level of required reserves, the vast majority of the newly-created reserves will end up being held as excess reserves almost no matter what banks do." But this is only true if the central bank keeps ratcheting up the interest rate it pays on excess reserves; the authors' examples don't give any other reason (as far as I could tell) for a bank to refrain from lending out excess reserves. So their wording is a bit weird. They are making it sound as if banks can't really decrease excess reserves, just like banks can't decrease total reserves. But that's not right at all; the way you decrease excess reserves is by issuing more loans to bank customers. The authors' statement, quoted above, is incredibly misleading.

* For those of you who still think Abe Lincoln was a cool guy, let me ask: Did you know that in 1862 Union General Benjamin Butler issued an order to his men "decreeing that any New Orleans woman showing contempt for his occupying troops 'shall be regarded and held liable to be treated as a woman of the town plying her avocation' — i.e., the city's outspokenly Confederate belles were to be treated as prostitutes"? Honest Abe ignored calls to rescind the monstrous order. You do what you have to do, to save the Union.

* Orthopedic surgeon, free marketeer, and fellow Aquinas '94 alum Matthew DiPaola has started his own blog.

* I must confess, I like the way Mankiw deals with Krugman. And if you're a real punk, this is your treatment.

* I have been saying that rather than focus purely on theoretical issues, maybe the best way to anticipate what's coming is to see what the elites are up to. Well that's exactly what Daniel Estulin claims to have discovered, in his sleuthing around the Bilderberg meetings. Estulin reports that at the May 2009 meeting, the discussion involved a prediction of US unemployment hitting 14% by the end of the year. Unfortunately there were no clues in Estulin's article as to the direction of the dollar. (One interesting thing is that he talks about the Lisbon Treaty and the problem of my people, the Irish. I don't know whether to be reassured or horrified that the members of the Bilderberg group have a whole world full of malcontents that they need to knock into line.)

* And finally some comic relief: My wife passes along the following.


Did you know that song playing in the Indian "Cosby Show" intro is "Tunak Tunak Tun" by Daler Mehndi? My friends and I used to laugh at its music video back in college because it seemed so hokey and corny. We found the dancing very humorous, basically. Ahhh, that brings me back...
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