I just finished John Kenneth Galbraith's account of the 1929 stock market crash and I was amused to read the following passage, which really flies in the face of conventional wisdom nowadays:
The crash was also effective in bringing to an end the foreign lending by which the international accounts had been balanced. Now the accounts had, in the main, to be balanced by reduced exports. This put prompt and heavy pressure on export markets for wheat, cotton, and tobacco. Perhaps the foreign loans had only delayed an adjustment to the balance which had one day to come. The stock market crash served nonetheless to precipitate the adjustment with great suddenness at a most unpropitious time.
At the time the US was running a current account surplus, which meant that it had no choice but to act as a creditor to countries who desired to buy US exports. This was seen as a risk to the economic health of the US--exactly the opposite sentiment as is commonly expressed today. I'm not trying to suggest that our current account deficit is desirable or without risk, but I think it's helpful to think about the supposed threat from China in light of Galbraith's analysis. China has no choice but to finance its customers if it intends to prolong economic growth.
This passage was also very amusing:
There was also the bogey of "going off" the gold standard and, most surprisingly, of risking inflation. Until 1932 the United States added formidably to its gold reserves, and instead of inflation the country was experiencing the most violent deflation in the nation's history. Yet every sober adviser saw dangers here, including the danger of runaway price increases...The fear of inflation reinforced the demand for the balanced budget...The rejection of both fiscal (tax and expenditure) and monetary policy amounted precisely to a rejection of affirmative government economic policy. The economic advisers of the day had both unanimity and the authority to force the leaders of both parties to disavow all the available steps to check deflation and depression. In its own way this was a marked achievement--a triumph of dogma over thought. The consequences were profound.
It has been widely reported that Ben Bernanke is scholar of the Great Depression. In light of the above analysis, it's easy to see why the Fed is now divided between inflation hawks on one side and Bernanke on the other.
I've been using Twitter to broadcast my random self-important thoughts to the world lately, so my Vox blog has been rather empty. Here are some random updates:
- I found a great brand of hummus at Whole Foods. Why is it so hard to get right?
- My attention to detail is slowly (and alarmingly) deteriorating. I didn't realize the CFA Level I exam had a separate morning AND afternoon tests--so I left 1/3 of the morning questions unanswered figuring I had time to kill during the afternoon session. Also, I didn't study at all. I guess that's important for a 240 questions, 6 hour test given twice a year. They'll inform me of my failure in late January! It was a very expensive practice test, I suppose.
- No Country for Old Men was great. Before the Devil Knows You're Dead was just okay.
- I read a book about Thomas Jefferson. He's from history.
- My boss misused the word "fulsome" in an email this week. He was trying to praise our due diligence team's "fulsome report." Awesome.
- One of our lawyers accidentally emailed me a screen shot of his personal checking account. Lawyers are silly.
I really don't like baseball. I haven't watched a game in two years. I did attend a Diamondbacks came last year, but I spent more time acquiring or planing to acquire various ballpark delicacies than I did watching the game.
But I love reading about baseball. Well, not just anything, but a good piece of snarky or analytical baseball-related writing really gets me excited. Moneyball was the start of it and now FIRE JOE MORGAN is one of my favorite blogs.
Some examples of entries that cracked me up today: 1, 2, 3, 4.
And it doesn't even have to be snarky commentary. I really found these pitch diagrams fascinating (via SportsFilter).
Also, this is my first post to Vox in over a month. This thing is kinda dying off. I blame Twitter. And ARod.
For the third time now I've heard one of my favorite songs played in a Chipotle: Tom Waits' "Heartattack & Vine". At first, it makes me feel a little sick--the same feeling as when I heard the Buzzcocks in the AARP commercial (or in their SUV commercial, or Iggy Pop's car commercial, or the Ramones' Diet Pepsi commercial). But I suppose this is different than using a song in an advertisement. And it's sure better than the usual mainstream dreck they play in chain stores.
I saw David Cronenberg's new film Eastern Promises tonight--it was very good. I don't have a good sense of which films are or are not marketed heavily these days, but I hadn't heard anything about it until recently. No trailers at all, which surprises me as I'm in the theaters pretty often.
Eastern Promises is a gangster flick, but in that unique Cronenberg-style. The subtle plot and character development is punctuated by short bursts of intense action and graphic imagery. If you've seen A History of Violence, you'll know what I mean. But Eastern is much less gimmicky and a better movie overall. See the trailer here.
Cordless electric screwdrivers. Every time I want to use it, the battery is dead. By the time it's done charging, I've already finished the job with the standard screwdriver.
Perhaps I just need one of those bad-ass Makitas with a back-up battery pack.
Interesting article by Michael Lewis in the NYT Magazine on the catastrophic insurance market (known as super-cat insurance). If you enjoyed Nassim Taleb's work, this will be just as interesting. Some related discussion can be found in Warren Buffett's 2006 BRK shareholder letter. Berkshire Hathaway plays in both the super-cat insurance and other oddball risk markets (the Equitas asbestos reinsurance deal being the biggest).
(thx to needled from mefi for the lewis article.)
The most recent issue of the New Yorker featured this gem. The fables remind me of these non-jokes from Andy Richter. I've read those Andy Richter non-jokes dozens of times and I still get an immense amount of perverse pleasure from them.
So Barry Bonds is now the reigning home-run king of Major League Baseball. This fills my heart with warmy, gooey contrarian glee. But why? I've never cheered for his teams and I'm not even much of a baseball fan. Still, there's something about the way much of the sports world has moaned and groaned about this eventuality that really tickled me.
I trace it back to the last first big home-run record-breaking of my lifetime--Mark McGwire's chase of Roger Maris's single-season home-run record in 1998. Despite consistent rumors of steroid-abuse, the press and the fans were enamored with McGwire. A few baseball purists whined about cheating, the length of the season and other factors leading to an increase in home-runs league-wide. But McGwire was the media-friendly, family-friendly, white hero that was going to "save baseball," which had languishing for a few seasons after the ''94-95 strike. It transcended baseball and became a national, front-page news event. No curmudgeon talking about steroids was going to get in the way of the hype train called Mark McGwire, MLB least of all. So McGwire broke the record and the game was stopped for the most sickening display I've ever seen in sports. There was a red convertible. A grown man cried and hugged his 'bat-boy' son at home plate. I'm sure someone mentioned a trip to Disneyland. It was saccharine sweet, artificial and reeked of marketing. A 17-year old young man turned into a cynic that day (hint: it was me).
So when the monster that is Barry Bonds started gobbling up hallowed records, baseball had delivered to me its antidote to Mark McGwire. Bonds is possibly a cheater, but more importantly he's an asshole. An introverted, media-hating, selfish, black asshole. He does not sell trips to Disneyland. With McGwire, no one wanted to force that hype train to a halt--not the fans, not MLB, not Congress, not the media. Everyone was on board, so no one made too much noise about steroids. But Bonds is different. People hate him. Plenty of people want to see him hang for his 'cheating' (I'm not convinced he's actually cheating, or that the cheating he does actually has a material effect on his ability to hit homeruns). But MLB doesn't want to alienate Giants fans, the player's union, the owners or the significant population of black fans that aren't convinced of Bonds' guilt. On the other hand, the MLB has to placate Congress, which could pull baseball's antitrust exemption. Baseball doesn't know what to do. Actually testing for steroids is out of the question, but it can't let on that it's knowingly turning an eye to the problem either. Bud Selig can't even decide if he's going to attend Bonds' record-breaking games. It's hilarious.
This silly scenario is just a symptom of the larger problem in sports. The media and the public bizarrely demand that athletes live up to a puritanical ideal, while the business of sports creates an atmosphere of greed and materialism that undermines ethical behavior. Michael Vick and Pacman Jones are the easy examples to point out, but the truly insidious example is LeBron James. James has no public personality of his own--he's a creation of Nike marketing, aimed at giving the fans the puritanical ideal they desire. But Nike can't control everything James does, and oh, by the way, they're paying him the money he needs to engage in whatever materialistic fantasy he can dream up. So James builds a 35,000 square-foot mansion in Ohio, with a giant fucking bas-relief of his head on the outside. I've nothing against earning money, even a fucking ton of money, but it's rather easy to see what's going on here: James is being paid to pander to the sports fans' silly Platonic ideal of a family-friendly, platitude-spewing athlete. It's disgusting. That's why I like Bonds.
This is the point in my rant where I set forth my solution to the problem. The standard solution usually involves mandatory college degrees for players or an effective steroid testing regime. But those solutions tend to be racist and anti-labor. Here's my solution: eliminate the MLB's antitrust exemption and use antitrust and labor laws to severely restrict the ability of owners and leagues to monopolize the labor market. My grasp of the legal issues are weak, but I know of no other industry where employees can be traded from corporation to corporation or where an entire industry (that is, a league of teams) agrees to salary cap. With the pesky leagues out of the way, professional sports will devolve into a free-for-all. Teams made up of mercenary free agents built to compete in independently organized one-off tournaments (complete with customized rules and structures). Barnstorming all-star teams traveling the country taking on all comers. Sort of like the Harlem Globetrotters, but with real competition. Talk about purity. Maybe we won't have "home teams" to cheer for anymore, but those were anachronisms anyway. On the upside, now we'll really care about our national teams. And if New Yorkers simply demand a home-team. Guess what, they can buy the best players available and play nothing but home games. I get excited just thinking about it.
