tempest in a teacup

the pointless musings of a strange recluse

Archive for the 'Economics/Politics' Category

Let’s get on with it

The less said about the trainwreck government of the last eight years, the better.

Obama will have his work cut out for him in his first term, trying to undo (or at least mitigate) the damage one man and his henchmen have managed to inflict on the US domestically and abroad. I’m glad he won the election, but I don’t envy him one bit. Just stopping the economy from sliding into a deflationary tailspin is going to be hard enough – I doubt he’s going to have time to tackle issues like healthcare which were important to many during the campaign.

The inauguration tomorrow is a little early for me (7am PST) but I might get up and watch it anyway, if only because of the momentousness of the occasion.

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20:08 PST – Obama 297 – McCain 145

I only have one thing to say:

That said, 2010 will be an interesting election to watch, given Obama’s lofty goals (as set out in his platform).

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That other thing that happened tonight…rhymes with rebate

I really want to know how Sarah Palin thinks John McCain is going to improve government regulation of Wall Street while simultaneously reducing taxes and the size of the federal government.

Then again I suppose self-contradiction is nothing new for the Republicans…

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The dominoes continue to fall

Things seem to have gotten considerably worse since the last time I wrote about the economy. In just a few short weeks, we’ve seen the following events:

  1. Fannie Mae and Freddie Mac (government mortgage institutions) get taken over by the government
  2. Lehman Brothers collapses and its assets are bought up by Barclays bank
  3. Merrill Lynch sells itself to Bank of America
  4. AIG Insurance gets bailed out by the US government

In response to this raft of bad news, stock markets all over the world predictably took a dive. The latest headline on the BBC news website is that the Bank of Japan has just pumped $14bn into the markets in order to improve stability. In Singapore, where my family still lives, people are apparently rushing to cancel their insurance policies with AIG – this crisis has had far-reaching effects.

If you want to know more about these issues there are far more authoritative sources than my blog to visit. Still, I felt like I had to say something about this, if only to leave a record of my own stand on the issue.

It occurs to me that we’ve seen this before. It bears a striking resemblance to what happened in the 1930s. Then, the recession was caused by the bursting of a bubble and the subsequent freezing up of the financial system (although in that case they were dealing with a stock bubble rather than a housing bubble). And the root causes are arguably very similar – the lack of regulations on banks (then) and non-bank financial institutions (now).

So yes, I’m in favour of extending existing financial regulations to cover these institutions, something which the people in charge (i.e. Republicans) seem very much opposed to doing – and this includes John McCain. Neither McCain nor his running mate/soccer mom seem to know anything about economics, and the people they rely on to know these things appear to think that everything is peachy and what we really need is even more deregulation. Remember Phil Gramm calling Americans a ‘nation of whiners?’

Barack Obama has a far more sensible and rational policy for addressing the root cause of the problem – why he isn’t leading significantly in the polls because of this one issue is a total mystery to me.

(Actually, it isn’t, really, given the kinds of ridiculous issues that people in this country tend to regard as important)

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Delicious words, I must eat them

Singapore reaches women’s table tennis finals

That pretty much means that they’re guaranteed a medal – the first medal won by Singapore since its silver in men’s weightlifting at the 1960 Olympics in Rome.

I could be cynical and joke about how the Singapore team is entirely composed of second-string players from China, but to be honest, I’d rather not. They’ve proven me wrong, and I think they deserve any accolades that come their way.

Kudos to them.

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LOLympics

The Beijing Olympics have been going on for about a week. As I’ve mentioned before, I’m not much of a sports fan, but I have been keeping track of the big news from the event, like the epic 4×100 swimming relay finals, and India’s first solo gold medallist in the history of their participation in the Games (as well as the reaction at home – the railway minister promised to give him a lifetime travel pass for his achievement, which I found rather amusing).

Oh, and of course, there’s the drama. Namely these little tidbits that have been making the rounds.

Windows XP BSOD makes an appearance at the Olympics

Apparently one of the computers that was projecting video onto the stadium walls met with the operating system error of yore. Bad drivers, perhaps.

A girl who performed at the opening ceremony was revealed to have been lipsyncing

And she wasn’t even lipsyncing to her own performance – it was the performance of another girl entirely, one who was deemed insufficiently representative of her home country. And of course…

The victorious Chinese women’s gymnastics team might be underage

The age threshold for taking part is 16 – I’m not sure any of the team members look that old. It certainly fits into my own perspective of the decisions that tend to come out of figures of authority in China and Japan – the focus is not so much on accountability as it is on preserving one’s image, and any blemishes are explained away or quickly hushed in order to save face.

I would express more indignation, but I really don’t care enough to, and on top of that, I suspect that indignation will be in abundant supply thanks to the drones in the mass media. In the meantime, I shall return to amusing myself with the Singapore contingent’s attempts to get a second medal through massive imports of “foreign talent.”

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Something for your eyes and ears

One of my favourite sites is Stephen Fry’s blog, where he often posts essays and podcasts about various interesting subjects. His most recent podcast is about the important role of public broadcasting in the media, and I found a lot to agree with in it, so I thought I’d link it here for everyone else to listen to.

http://stephenfry.com/podcasts/

You’ll need iTunes to listen to it. Alternatively, you can read it in written form here:

http://stephenfry.com/blog/?p=44

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Candidate of change, indeed

Looks like Barack Obama thinks change is a little overrated.

So we have a candidate who after winning the primary is veering off to the right rather than the centre, and his opponent who has for some reason decided that all the reasons that people decided to support him aren’t that important any more.

Happy 4th, everyone!

(And for the record, in spite of my inability to vote, in spite of my skepticism, I would much rather have Obama win in November than McCain, for reasons that should be hopefully obvious to many)

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In need of some Band-aid

Or, should I say, broadband-aid. :P

*gets things thrown at him*

Ars Technica has been doing a lot of articles about the state of US broadband lately (here’s their latest one). I’ve ranted before about how lame the so-called ‘broadband’ in the US is (the fastest connection I can get in my area is 1.5 Megabits per second, and I live in an urban area), but another thing that this problem has reminded me about is the importance of regulation in free markets.

After the stagflation of the 1970s, most of the Western nations spent the ’80s and ’90s in a fit of deregulation, ostensibly to improve market efficiency. Deregulation is good in certain cases (most people seem to point to the airline industry as one badly in need of it, and post-deregulation one could certainly make the case that – post-9/11 shenanigans notwithstanding – the budget airline space has really taken off).

However, claiming that deregulation is universally good is misguided. People who make such claims (I’m pretty sure we all know who they are) ignore one of the important lessons of basic economics: that markets are not infallible. Market failure is inevitable most of the time, and government regulation is needed to mitigate the effects of market failure. Some of these problems have market based solutions – the success of cap-and-trade initiatives in dealing with emissions certainly demonstrates this – but even these need to be regulated so that the supply of permits is kept in check.

Regular telecom companies are subject to this kind of regulation (which is why infrastructure owners are required to act as common carriers), but broadband companies aren’t, resulting in a de facto monopoly or duopoly for broadband services in most areas. Less competition almost always results in higher prices – and that is more or less the situation the US is in now compared with most other advanced industrial nations.

If you ever need to shoot down market fundamentalists, the situation of broadband is as good an argument as any.

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It's melting!

This article on the BBC website kind of jumped out at me today:
Starbucks to lay off staff in Seattle

When the coffee companies in Seattle start laying off people, you know we're in for some trouble.

Jokes aside, the US economy doesn't look too great right now. What started as the bursting of a housing bubble seemed to have locked the rest of the economy in a vise grip, causing other markets to freeze up and generally cause problems. Most worryingly it looks like the credit markets in general have tightened up, meaning money isn't as readily available – this will probably end up having a contractionary effect on the economy. A recession looks like an inevitability, not a possibility.

For those who have heard the word “subprime” tossed around by the talking heads on TV without a clue of what it meant, here's a quick summary. Subprime mortgages were housing loans (supposedly) offered to people who couldn't qualify for loans with better interest rates due to poor credit histories. Thanks to a perfect storm of low interest rates, weak financial regulation and “financial innovation,” many of these loans were offered to prospective homeowners, even those who could have qualified for loans with better terms. After this – and this is where the weirdness begins – the banks and financial institutions performed some financial wizardry on these loans and sold them to other parties, who then sold them to other people…and so on. In the meantime, people used the rising value of their properties (caused by the housing bubble) as collateral to fund a spending boom.

The bursting of the housing bubble ended up throwing a spanner into this mechanism. With the values of their properties falling, homeowners were faced with the prospect of losing their homes (Some statistics put the number at as high as a third of homeowners in the US). However, because of the financial engineering that had gone into this process, people and organizations who had bought mortgage backed financial instruments – like, say, the Michigan state board in charge of student loans, or the Florida state teachers' pension fund – found that their source of income had vanished in a puff of smoke. A major British lending institution, Northern Rock, was found to have invested heavily in such securities and needed to be bailed out by the British government. Here in the States, Countrywide Financial, one of the biggest subprime lenders, was devastated and eventually acquired by Bank of America. And the process still continues.

The government has been making all the wrong noises in the face of a recession; an economic stimulus package that does nothing for those who need it most (low-income households), and – this really made me laugh – persuading the private sector to provide relief. The last president who thought that was a good idea was Herbert Hoover.

This will probably be a major issue in the election campaign – for one, I'm hoping John McCain doesn't win, because he has openly admitted to not knowing anything about economics, which leads me to believe that he will continue to foist an economic policy that I can only describe as mistargeted, ineffective and self-serving on a beleaguered economy.

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