Advice from the Thugs to the Treasury Secretary Geithner

This is the best part:

The unanimous opinion among The Thugz was that you must base your work around a time-tested law of ghetto capitalism: losers must die in full view. What? This doesn’t make sense. O.K., well, let me explain. Your first mistake (more accurately, your predecessor’s error) was to mix the bad apples (banks) with the good (banks).

By doing so, you forgot what makes capitalism so much fun: winners win at the losers’ expense, and everyone gets to watch and laugh. Sort of like public hangings, except reported on the financial pages. Otherwise, why read The Wall Street Journal? (my emphasisi in bold)

Bottom Line:

The moral is: don’t ever take the joy of death away from the public. Because if you don’t see losers in pain, you begin to think the game is rigged.


Read the whole thing here.

Books I Have Been Reading

1. Animal Spirits by Yale's Bob Shiller and Nobel Laurate George Akerlof.

2. The Science of Fear by Daniel Gardner. I am more and more interested in the behavioral aspects of economics, though I do not necessarily suscribe to their policy prescriptions.

3. Bernanke's Test by the same guy who wrote a book on Chicago School of Economics.

Clash of Economic Ideas

For those who are interested in the debate of the 1930s on the potency of different economic policies in fending of economic downturn, which of course is relevant to the current debate on how to react to the current economic crisis, Austrian economist Larry White at U of Missouri St. Louis, is in the process of writing a book on the topic.

Here is one of the chapters. (Scroll down the page and you will see it, Larry is presenting the paper at the NYU market process seminar)

Dr Doom

An interview of NYU's Nouriel Roubini, aka Dr Doom, in WSJ, more here.

Here are the best bits:

What exactly is Nouriel Roubini's economic philosophy? "I believe in market economics," he says, with some emphasis. "But to paraphrase Churchill -- who said this about democracy and political regimes -- a market economy might be the worst economic regime available, apart from the alternatives.

"I believe that people react to incentives, that incentives matter, and that prices reflect the way things should be allocated. But I also believe that market economies sometimes have market failures, and when these occur, there's a role for prudential -- not excessive -- regulation of the financial system. The two things that Greenspan got totally wrong were his beliefs that, one, markets self-regulate, and two, that there's no market failure."

How could Mr. Greenspan have been so naïve, I ask, hoping to get a rise. "Well," says Mr. Roubini, "at some level it's good to have a framework to think about the world, in which you emphasize the role of incentives and market economics . . . fair enough! But I think it led to an excessive ideological belief that there are no market failures, and no issues of distortions on incentives. Also, central banks were created to provide financial stability. Greenspan forgot this, and that was a mistake. I think there were ideological blinders, taking Ayn Rand's view of the world to an extreme.