• *Vortices


    VORTICES….Via Mark Kleiman, researchers at the University of Michigan have created a wave-based system for generating electricity called VIVACE, or “vortex-induced vibrations for aquatic clean energy”:

    The new device, which has been inspired by the way fish swim, consists of a system of cylinders positioned horizontal to the water flow and attached to springs. As water flows past, the cylinder creates vortices, which push and pull the cylinder up and down. The mechanical energy in the vibrations is then converted into electricity.

    ….A “field” of cylinders built on the sea bed over a 1km by 1.5km area, and the height of a two-storey house, with a flow of just three knots, could generate enough power for around 100,000 homes….The scientists behind the technology, which has been developed in research funded by the US government, say that generating power in this way would potentially cost only around 3.5p per kilowatt hour, compared to about 4.5p for wind energy and between 10p and 31p for solar power. They say the technology would require up to 50 times less ocean acreage than wave power generation.

    ….”If we could harness 0.1 per cent of the energy in the ocean, we could support the energy needs of 15 billion people. In the English Channel, for example, there is a very strong current, so you produce a lot of power.”

    Well, why not? Vortex-induced vibrations generated enough power to destroy the Tacoma Narrows Bridge in 1940, so why not get something useful out of it?

    Of course, claims like these pop up constantly, and there’s no telling how well VIVACE will work until there’s been a real-world test. That will happen next year, when the boffins plan to set up a small prototype in the Detroit River designed to generate 3 kilowatts of power. No word yet on an ocean floor test.

  • More War


    MORE WAR….Bill Kristol has another war he wants us to fight? Count me in! I mean, who wouldn’t want to stand on the sidelines and cheer on an invasion promoted by a guy who’s been so prescient about the use of American military force?

  • China’s Economy


    CHINA’S ECONOMY….The Chinese leadership is worried:

    Chinese President Hu Jintao warned at a weekend meeting of the Communist Party’s elite Politburo that China is losing its competitive edge as international demand for its products is reduced, according to official state media reports Sunday.

    China’s growth rate has been forecast to be about 9 percent in 2008, down from 11.9 percent the year before and close to the 8 percent that economists say China must maintain in order to keep the labor market stable.

    For more, see Brad Setser’s gloss on a recent World Bank report, which suggests that China’s actual problems have been domestic up until now (falling wages and tanking real estate investment) but will indeed start to become export based next year. Regardless, the end result is that China will be buying up even more Treasury debt than ever over the next few years. That’s probably a good thing in the short term, but not so good in the long term.

  • Cassandra Update


    CASSANDRA UPDATE….Yesterday I asked for names of people who had given early warning of the global financial meltdown. Not just people who foresaw the housing bubble, mind you, but people who figured out some of the other problems that made a bursting housing bubble into a worldwide catastrophe and were banging the drums about them. Unfortunately, nearly all the answers came in one of three buckets: (a) Nouriel Roubini, (b) people warning about the housing bubble, or (c) people writing in 2006 or 2007.

    However, there were a few plausible suggestions for analysts whose warnings went beyond the housing bubble and who did it earlier than 2006, including Peter Schiff, Tanta at Calculated Risk, Mish at Global Economic Analysis, Doug Noland at PrudentBear, and Brad Setser. Martin Wolf provides a few more possibilities here. I don’t know enough about their early work to say for sure that these folks were all early and accurate critics of more than just the housing bubble, but they seem to be likely suspects.

    On the other hand, commenter Commenterlein offers a counterpoint:

    Most of the people listed above recognized that there was some form of housing bubble (at least in some markets), but most of them (imho ex-ante correctly) focused on the U.S.’ external balance (i.e., current account deficit) as the main problem. Hence the crisis most economists predicted was a rapid depreciation of the dollar, associated with a massive and pain-full shift of employment from the non-tradeable sectors (i.e., housing) to the tradeable ones.

    Bottom line: I have not yet found anyone who predicted that a house price decline would lead to a complete loss of confidence in the financial sector and a massive credit crunch taking down institutions all over the world with essentially no (direct) exposure to the US housing market. And as much as I love Roubini, perpetually predicting the end of the world for ever changing reasons just isn’t that useful.

    The current account deficit was, of course, a routine topic of concern among economists, but as Commenterlein points out, a dollar depreciation crisis isn’t the crisis we actually got. In fact, just the opposite: we’re practically in a T-bill bubble right now. That may yet change, causing us even more problems, but so far lack of demand for U.S. debt from the Chinese or anyone else just hasn’t been a factor in the world’s financial problems.

    Tell you what, though: let me ask a much simpler question, since asking “who got it right?” is obviously a little tricky. Back in April 2004 the SEC voted to loosen the capital rules for the five biggest Wall Street investment banks. In retrospect, this was a very bad idea indeed, and it was a bad idea for precisely the reasons that have caused our financial problems to become so dire: it allowed leverage to skyrocket unsustainably and lending standards to deteriorate.

    So here’s my question: Did anyone object to this at the time? The New York Times identified one person who objected, an Indiana consultant named Leonard Bole, and one SEC commissioner who at least asked questions, Harvey Goldschmid, but that’s it. Anyone else? This may have been an obscure ruling to people like you and me, but I’ll bet it wasn’t all that obscure to people who follow Wall Street closely, and I figure anyone who truly knew what was coming would have sounded a warning about it in 2004 or 2005. Did anyone?

    UPDATE: In comments, Ole nominates fellow Dane Jakob Brøchner Madsen, who, according to a Google translation of epn.dk, “has been proclaimed the country’s most pessimistic economist.” However, even Madsen admits, “I knew well that the system was rotten. But not that it was so rotten.”

  • Outliers


    OUTLIERS….Should I pick up a copy of Malcolm Gladwell’s Outliers and give it a read? I’m sort of disinclined to for two reasons. First, I read Blink this year and was surprised at how bad a book it was. Even at a slim 200 pages, I’d say that a good half of it was unrelated to its putative subject. Second, I gather that the subject of Outliers is that there’s a considerable amount of luck involved in becoming successful. But is that something that really needs an entire popular book? It seems like one of those topics that’s so obviously true that it hardly bears a detailed dissection.

    But then again, maybe it’s not quite so obvious as I think. Has anybody read it? Do you recommend it, maybe as something to put on my Christmas list?

  • Searching for Cassandras


    SEARCHING FOR CASSANDRAS….Brad DeLong says he was keenly aware of the housing bubble and fully expected it to burst. Me too! But he didn’t expect any of the following:

    (3) the discovery that banks and mortgage companies had made no provision for how the loans they made would be renegotiated or serviced in the event of a housing-price downturn.

    (4) the discovery that the rating agencies had failed in their assessment of lower-tail risk to make the standard analytical judgment: that when things get really bad all correlations go to one.

    (5) the fact that highly-leveraged banks working on the originate-and-distribute model of mortgage securitization had originated but had not distributed: that they had held on to much too much of the risks that they were supposed to find other people to handle.

    (6) the panic flight from all risky assets — not just mortgages — upon the discovery of the problems in the mortgage market.

    (7) the engagement in regulatory arbitrage which had left major banks even more highly leveraged than I had thought possible.

    (8) the failure of highly-leveraged financial institutions to have backup plans for recapitalization in place in the case of a major financial crisis.

    (9) the Bush administration’s sticking to a private-sector solution for the crisis for months after it had become clear that such a solution was no longer viable.

    So then: who did expect any/all of this stuff? Commenter macheath offers a few heroes:

    Some people saw pieces of it, but were largely ignored or marginalized. Dean Baker was hammering on the house price bubble for years, and several people (including Gary Gensler at Treasury) called for stronger capitalization of Fannie and Freddie, saying their business model was not sustainable, and they were beaten up by Congress, Democrats and Republicans alike. Brooksley Born at the CFTC wanted to start investigating derivatives in the mid-1990s, and was slapped down by Greenspan, Rubin, and Summers, leading to legislation (backed by Summers) to prohibit the CFTC from regulating derivatives.

    Is that it? Was anyone else warning us about Brad’s seven points back in 2004? Or 2005?

  • Climate Change in the Himalayas


    CLIMATE CHANGE IN THE HIMALAYAS….Joe Romm passes along the news today that Himalayan glaciers are melting faster than anyone has previously predicted. You can add this to Romm’s list of other climate change impacts that are happening faster than most climate models predict, including the canonical IPCC models:

    This is why climate scientists have been running around with their hair on fire for the past couple of years. It would be nice to think that perhaps our current climate models are too pessimistic; or even that they’re right but maybe we’ll end up at the low end of the predicted warming ranges; or at worst that the models are right and we’ll end up right at the center. But that just doesn’t seem to be the case. What it really looks like is that our current models aren’t pessimistic enough and that the growth in greenhouse gas emissions is exceeding even the modelers’ highest estimates. We are fast approaching a point of no return that will likely kill hundreds of millions of people, destroy much of the world’s food supply, and spark resource wars that make Rwanda look like a mild family quarrel. More from Romm here and here on what’s happening and what to do about it.

  • Quote of the Day – 11.29.08


    QUOTE OF THE DAY….From Emile Earles, a Cadillac owner in West Point, Georgia, on buying American:

    “You can only be patriotic until you can’t afford it anymore.”

    And this riposte from Eddie Striblin, a salesman at the local GM dealership:

    “Let me ask you a question: You ever heard of anybody braggin’ on a ’57 Honda?”

    That’s the American car industry in a nutshell, isn’t it?

  • *Chart of the Day – 11.27.2008


    CHART OF THE DAY….Via Overcoming Bias, three French researchers surveyed 1,540 people and offered them the opportunity to play a game in which a coin is tossed ten times and they’ll win ten euros each time it comes up heads. “The participant is then asked for his/her own estimation, according to his/her experience and his/her luck, of the number of times heads will occur, i.e. how many times (out of ten) he/she thinks he/she is going to win (and get 10 euros).” What do you think is the most terrifying aspect of this survey?

    1. The mean answer was 3.9.

    2. About ten people thought they would win every single toss.

    3. The authors managed to produce a 21-page paper out of this.

    The full survey is here. The authors also note that women are more pessimistic than men; old people are more pessimistic than young; and that nearly everyone answers “five” if monetary gain is removed from the question. In other words, people seem to know the odds, they just think the universe is stacked against them. (Or that the researchers are going to cheat. Take your pick.)

    The exception, of course, is those ten respondents who think they’ll win every time. Here in America, we call those people “investment bankers.”

  • Patching Things Up


    PATCHING THINGS UP….Samantha Power, last heard from calling Hillary Clinton a “monster” and then apologizing fulsomely for it, is back:

    State Department officials said Friday that Samantha Power is among a group of foreign policy experts that the president-elect’s office selected to help the incoming administration prepare for Clinton’s anticipated nomination as secretary of state.

    ….Clinton’s office declined to comment on Power’s inclusion in the State Department transition, but an official close to the Obama transition team said Power had ”made a gesture to bury the hatchet” with Clinton and that it had been well-received.

    If we accept the conventional wisdom that Obama’s choice of Clinton as Secretary of State is a generous gesture meant to help unify the party, then there would be few more forthright ways for Clinton to reciprocate than by nominating Power for some kind of meaningful position at Foggy Bottom. It would be a good sign that those hatchets have been well and truly buried.

  • Super Senior


    SUPER SENIOR….Felix Salmon explains the synthetic CDO market:

    Let’s start with a simple single-credit synthetic bond….

    [Explanation follows, ending with a little bit about the size of the synthetic mortgage backed security market.]

    ….In fact, most of the synthetic MBS issued were issued by banks which kept the underlying mortgages on their own balance sheet. Rather than put the mortgages directly into a CDO and sell that to investors, they kept the mortgages themselves and bought protection from the CDO. Why did they do that? That’s the story of the super-senior tranche, and will have to wait for another day.

    What!?! For pity’s sake, man, don’t keep us in suspense. I want to hear about the super-senior tranche. It’s one of those things that I think I understand in a technical sense — sort of the way a blind man understands a sunset — but not in the real-world sense of what people were doing with them and how they got abused so badly. So let’s hear it!

  • Comments!


    COMMENTS!….Jacob Levy talks about evolution of the blogosphere:

    I’m one of the last of the oldline blogluddists who thinks that the decline of civility and decency the blogosphere can be traced to two events, one of which I won’t tell you but one of which was the creation of comments sections. In particular, I remember thinking that the opening of comments at Kevin Drum’s then-site, CalPundit, changed things rather a lot.

    This deserves explication. Does Jacob think that opening a comment section changed my actual blogging? Or did the blogging remain the same but the mere existence of raucous commenters changed things? If the latter, why not just ignore the comments? If the former, how?

    I’ve heard this general complaint many times, and I’ve never really understood it. My own view of comments is that they don’t exist mainly for my benefit, or even for my readers’ benefit, but for my commenters’ benefit. In the same way that blogging gave me a platform to mouth off in public that I otherwise wouldn’t have gotten, I figure that comment sections give an entirely different group of people the same opportunity. So I’m happy to provide it, even if it often gets out of hand. It’s not like anyone’s holding a gun to our heads and forcing us to read them, after all. (And anyway, the comment section here has improved considerably over the past couple of years thanks to my steely and implacable moderators. Thanks guys!)

    On a more general note, Jacob’s post reminds me that I’ve always been a little puzzled by the number of times readers have told me that I’ve “changed” thanks to something or other. When I opened comments. When I started accepting ads. When I moved to the Washington Monthly. When I moved to MoJo. Etc. For a variety of reasons, it’s unlikely in the extreme that any of these events changed anything about my writing at all, but people sure think they do with fair regularity. I don’t doubt that my writing has evolved since I started doing this six years ago, but I very much doubt that there was any particular event that’s been responsible for it. More likely it was just six years of writing and learning and getting progressively more annoyed with the modern Republican Party.

    But let’s combine both these topics into one. Old timers: what do you say? Has my blogging changed substantially since the early days? How? Naturally, I urge you to leave your observations in comments.

    UPDATE: Jacob responds.

  • Bagels!


    BAGELS!….One of these days I guess I’m going to have to try a bagel when I’m in New York City. My crappy taste buds being what they are, I suppose my reaction is going to be the usual (i.e., “they just taste like bagels to me”), but I’m still curious. It hardly seems plausible that transplanted New Yorkers can’t make good bagels elsewhere in the country, and insufficiently developed consumer taste doesn’t seem like a good explanation for this lack, as it often is for ethnic food of other varieties.

    (Can you order a New York City bagel over the internet? I mean, I’m sure you can, but do they survive the shipping process tasting as good as if they were bought locally? Or do I really have to get on a plane and head east to perform this experiment?)

    Anyway, this spate of bagel blogging was inspired by a David Bernstein post about bagels over at the Volokh Conspiracy, and what really amused me wasn’t the bagel stuff itself, but Bernstein’s being annoyed that the book he was reading, The Bagel: The Surprising History of a Modest Bread, “relies on union sources, the story is completely one-sided; the reader doesn’t get the perspective of any of the bagel bakery owners, just the workers.” We all have our pet peeves, so I guess I shouldn’t laugh, but Bernstein seems constitutionally incapable of ever letting a positive mention of unions pass unnoticed, insisting that every advance in worker rights would have happened anyway due solely to rising union standards. I say: tell it to the janitors, pal. Rising living standards don’t really seem to have helped their cause a helluva lot. In fact, tell it to the median worker in general, who’s made virtually no gains at all over the past three decades despite a near doubling in per capita GDP during the period.

    Eh. I guess that just shows that I have some pet peeves too. I still need to try a real NYC bagel one of these days, though. If and when I do, which shop should I try, O commenters?

  • Wingers and the Economy


    WINGERS AND THE ECONOMY….I read Charles Krauthammer’s column this morning — yet more proof, if more were needed, that people with very high IQs can also be very, very stupid — and I got to wondering. A developing meme on the right suggests that our recent economic meltdown isn’t really the fault of the free market having a heart attack at all, but rather the fault of the government performing triple bypass surgery in response to what was really no more than some free market heartburn. And so I wonder: Is this really going to be the National Review/WSJ editorial page/Grover Norquist line going forward? And if it is, what’s the right response? Sober op-eds explaining why they’re wrong? Or dismissive laughter? I’m thinking the latter.

  • Thanksgiving Catblogging


    THANKSGIVING CATBLOGGING….The stars of this year’s traditional Thanksgiving clipart extravaganza are Ditto and Tillamook, my mother’s two new kittens. I was over the other day visiting, and let me tell you: these are definitely not a shy pair of kittens. Ditto practically knocks down the furniture running over to greet visitors, and starts purring like a motorboat if you so much as look at him crosseyed. Tillie was in nap mode most of the time I was there, but is also friendly and adorable, as all kittens should be.

    The pod they’re sleeping in was a housewarming gift from me. Ten bucks at Walgreens. Isn’t it cute? When I got it home, though, it turned out that Domino and Inkblot both thought it was for them, with Domino eventually claiming it as her permanent nighttime bed. What could I do? Back to Walgreens for another one, that’s what. As you can see, the dynamic duo love it too when they’ve decided they’ve had enough dynamism for the time being.

    Like them, I’m dreaming of turkey right now. In fact, I can almost taste it already. Happy Thanksgiving, everyone!

  • SOFA Approved


    SOFA APPROVED….In the neverending soap opera that is Iraq, the SOFA agreement has finally passed. Sort of:

    Iraqi lawmakers today approved a pact allowing U.S. forces to stay in the country through 2011 after winning support from skeptics by promising a public referendum on the plan.

    Of the 198 parliamentarians attending today’s session, more than 140 held up their hands in favor of the Status of Forces Agreement, or SOFA….The lawmakers separately approved a resolution calling for a referendum in July 2009, during which the public will get to endorse, reject, or demand amendments to the SOFA. The referendum was the key demand of Sunni Muslim legislators who had refused to join the parliament’s ruling Shiite and Kurdish blocs in approving SOFA without the referendum promise.

    So, once again, we don’t have a firm approval for withdrawal. The Iraqi public has a longstanding desire for American troops to leave, which suggests the SOFA will be approved, but a lot can happen in six months. If I had to bet, I’d say it passes in July, but I sure wouldn’t bet the farm on it.

  • Georgia and Ukraine


    GEORGIA AND UKRAINE….This is just weird:

    The United States has started an unexpected diplomatic initiative in Europe, urging NATO allies to offer Georgia and Ukraine membership in the alliance without going through a lengthy process and fulfilling a long list of requirements, NATO diplomats said.

    Secretary of State Condoleezza Rice has had long telephone conversations with French, German and other senior European envoys, asking them to agree to bypass the formal application process, the diplomats said.

    Just a few months ago the U.S. couldn’t even persuade NATO to offer Georgia and Ukraine a roadmap for membership, let alone membership itself. Now, after a war in Georgia and a government collapse in Ukraine, and with the Bush administration on its last legs, Rice thinks she can somehow talk the rest of the alliance into offering them expedited entry? Am I missing something here?

  • The Mystery Man


    THE MYSTERY MAN….So who was the anonymous Republican senator who told Politico’s Roger Simon that McCain ran a lousy campaign, Bush has been a lousy president, the GOP needs to pay more attention to Hispanics and less to Sarah Palin, and the era of small government is over? The betting line here is Mel Martinez. Anybody have a better guess?

    Via Eric Alterman.

  • Holbrooke to Islamabad?


    HOLBROOKE TO ISLAMABAD?….Spencer Ackerman thinks Barack Obama ought to ask Richard Holbrooke to be his ambassador to Iraq:

    Is there any U.S. diplomat more qualified than Holbrooke — a former U.N. ambassador, among other things — to preside over and cajole the creation of a national sectarian political compact in Iraq? Unlike anyone else in the U.S. foreign policy community, Holbrooke actually did this before, in the middle of a Balkan shooting war, and he’s given a lot of thought to the ways in which his Balkan experience is relevant to Iraq. If we’re to take seriously the idea that the U.S. needs energetic diplomatic action to broker a political settlement in Iraq to accompany withdrawal, there isn’t really anyone else for the job.

    Sure, but here’s another thought. If he’s willing to stay on, why not keep Ryan Crocker in the job and ask Holbrooke to go to Pakistan? Crocker gets pretty good marks from everyone and he already knows the lay of the land in Baghdad, while Pakistan is really ground zero these days for a hard ass diplomat who can figure out a way to get people who hate each other’s guts to somehow work together. For my money, it’s the most important diplomatic post in the world right now.

  • How Bad Is It?


    HOW BAD IS IT?….Andy McCarthy asks:

    The Worst Economic Crisis Since the Great Depression?

    That’s the Obamanomics mantra. Should be we really be letting that slide by without a response? Going to high school in the Carter Seventies, I remember sitting in the gas lines. Toward the end of Carter’s tenure, interest rates were around 20%, inflation was at close to 14%, and unemployment was just over 7% (it soared over 10% before the Reagan recovery kicked in).

    I don’t mean to minimize the straits we’re in, and I appreciate that things are likely to get worse — maybe a lot worse — before they get better. But aren’t Democrats skipping over a pretty awful bit of history when they say this is as bad as it’s been in 75 years?

    Well, look: interest rates hit 20% because Paul Volcker put them there in order to fight inflation. But it’s not inflation that that’s the measure of a recession, it’s output growth and employment. And at least at the moment, the projections for output and employment over the next year are about as bad as they were in 1980-82 — and that’s even without an oil shock to kick things off. Add to that the fact that the financial system is collapsing worldwide, entire countries are going bankrupt, a couple of dozen really big banks have gone bust, and credit markets are still frozen despite trillions of dollar in various interventions from national governments, and yeah, I’d say this is the worst financial crisis since the Depression. Does anybody really want to take the other side of that debate?