Wilde's Preface to Dorian Gray

The artist is the creator of beautiful things. To reveal art and conceal the artist is art's aim. The critic is he who can translate into another manner or a new material his impression of beautiful things.

The highest as the lowest form of criticism is a mode of autobiography. Those who find ugly meanings in beautiful things are corrupt without being charming. This is a fault.

Those who find beautiful meanings in beautiful things are the cultivated. For these there is hope. They are the elect to whom beautiful things mean only beauty.

There is no such thing as a moral or an immoral book. Books are well written, or badly written. That is all.

The nineteenth century dislike of realism is the rage of Caliban seeing his own face in a glass.

The nineteenth century dislike of romanticism is the rage of Caliban not seeing his own face in a glass. The moral life of man forms part of the subject-matter of the artist, but the morality of art consists in the perfect use of an imperfect medium. No artist desires to prove anything. Even things that are true can be proved. No artist has ethical sympathies. An ethical sympathy in an artist is an unpardonable mannerism of style. No artist is ever morbid. The artist can express everything. Thought and language are to the artist instruments of an art. Vice and virtue are to the artist materials for an art. From the point of view of form, the type of all the arts is the art of the musician. From the point of view of feeling, the actor's craft is the type. All art is at once surface and symbol. Those who go beneath the surface do so at their peril. Those who read the symbol do so at their peril. It is the spectator, and not life, that art really mirrors. Diversity of opinion about a work of art shows that the work is new, complex, and vital. When critics disagree, the artist is in accord with himself. We can forgive a man for making a useful thing as long as he does not admire it. The only excuse for making a useless thing is that one admires it intensely.

All art is quite useless.

Buiter slags off Summers

There are several reasons why Summers would be an inappropriate choice as chairman of the Fed. Let’s start with Fed-relevant knowledge and expertise. Summers is not a monetary economist or macroeconomist. He has never shown any serious interest in researching and understanding the workings of the kind of complex, interdependent dynamic systems that represent the environment a central bank operates in. He is the arch-typical quick and dirty partial equilibrium man, full of clever isolated micro-insights, but incapable of grasping the whole. His macroeconomics stalled at the Keynesian cross. As a monetary economist he has never seen a Federal Funds rate target so low he did not want it just a bit lower.

As regards the regulatory and supervisory functions of the Fed, Summers would be a disaster. During his time in the Clinton administration, culminating in his stint as Treasury Secretary, he was, with Greenspan, the main official apostle of full-speed ahead financial sector deregulation. The same naive trust in self-regulation and market discipline that has tarnished Greenspan’s reputation has been a trademark of Summers in action, both at home and abroad. Summers remains cognitively captured by old Wall Street and a prisoner of its culture and views.

Even before Summers went to the US Treasury, his approach to financial crises (in emerging markets and developing countries) never got beyond the putting out of immediate fires. The impact of the bail-outs and rescue efforts advocated and promoted by Summers on the likelihood and severity of future crises was either not considered or not given any weight.

The only time Summers mentions moral hazard is when he asserts that now is not the time to worry about it. And of course, it is always now. Well, now is always the time to worry about moral hazard. There is always more than one way of skinning the cat, and different ways will have different implications for moral hazard. Just one example. Bank of America and Citigroup did have an effective special resolution regime (administered by the FDIC) throughout the crisis. Why was the tax payer called on to recapitalise the banks when it was perfectly feasible to make the unsecured creditors pay instead?

Once the immediate crisis is over, the highest priority should be attached to designing and creating institutional arrangements and incentive structures that will minimize the likelihood and severity of future systemic crises. Summers has never shown any interest in creating institutions that enable policy makers (in the Fed, in the Treasury and in the regulatory agencies) to make credible, long-term commitments. He invariable favours opportunistic discretion over rule-bound flexibility. The last thing the US needs today is a chairman of the Fed with the long-term perspective and attention span of a fruit fly.

Michael Lewis on AIG-FP

"I'm convinced that our input into the system led to a substantial portion of the increase in house prices in the US. We facilitated a trillion dollars in mortgages," says one trader. "Just us." Every firm on Wall Street was making fantastic sums of money from this machine, but for the machine to keep on running, the Wall Street firms needed someone to take the risk. When Gene Park informed them that AIG-FP would no longer do so - Hello, my name is Gene Park and I'm closing down your business - he became the most hated man on Wall Street. The big Wall Street firms solved the problem by taking the risk themselves. The hundreds of billions of dollars of sub-prime losses suffered by Morgan Stanley, Merrill Lynch, Lehman Brothers, Bear Stearns, and the others were hundreds of billions of dollars of losses that might otherwise have been suffered by AIG-FP.

What no-one realised is that Joe Cassano, in exchange for the privilege of selling credit default swaps to Goldman Sachs, Merrill Lynch and all the rest, had agreed to a change in the traditional terms of trading between AIG and Wall Street. In the beginning AIG had required its counter-parties simply to accept its AAA credit: it refused to post collateral. But in the case of the sub-prime mortgage credit default swaps, Cassano had agreed to several triggers, including AIG losing its AAA rating, that would require the firm to post collateral. The subsequent race by the big Wall Street banks to obtain billions in collateral from AIG was an upmarket version of a run on a bank. AIG couldn't afford to pay off Goldman Sachs in MArch 2008. But that was okay. The US Treasury, led by the former head of Goldman Sachs, Hank Paulson, agreed to make good on AIG's gambling debts. One hundred cents on the dollar.

Martin Wolf on Mervyn King versus the Government

"One of the results of this crisis is to imperil central bank independence, not just in the UK. This is so for three reasons: at close to zero official interest rates, the boundary between monetary and fiscal policy erodes; governments are running huge fiscal deficits, particularly in the UK and the US, which threaten monetary stability; and, finally, those in charge wish to divert blame for the disaster.

"Mr King has made four points, all critical of the government: first, contrary to the views of the Treasury, “if banks are thought too big to fail, then . . . they are too big”; second, the Bank of England has “a new statutory authority for financial stability ... [But] it is not entirely clear how the Bank will be able to discharge its new statutory responsibility if we can do no more than issue sermons or organise burials”; third, he has not been consulted on the forthcoming financial services white paper; and, last, as he told the Commons Treasury committee: “If the economy were to recover along the path assumed in the Budget projections of GDP then I think the time over which deficits need to be reduced is likely to have to be faster than was implied by [the Budget] projection.”

"Let us start with a simple question: is the governor correct on the substance? The answers are: yes, yes, yes and yes.

"True, the politicisation of the independent central bank is potentially very dangerous. The Bank’s still-limited independence may be compromised or even overturned. Moreover, at a time when co-operation among the authorities is essential, the appearance of disarray is itself damaging to confidence. Yet, against these powerful considerations, a responsible public official has to decide whether a particular issue has become so important that bringing his views into the open has become the only patriotic thing to do.

Guido Fawkes on Gordon Brown

After Labour was voted into fourth place in the European elections, a flock of ministers resigned, and 5 MPs called for him to resign at the PLP earlier this week....

Gordon has had a damascene conversion to democratic renewal since little over 5% of eligible voters supported him at the polls last week. The irony of a PM who avoided facing election to be leader of his own party and has no democratic public mandate wanting “democratic renewal” is striking. If he really wishes to reconnect with voters he could always call a general election.

1980s redux, part two

The trading gap shuffle, the trading gap shuffle,
We're in a heap of trouble,
Doin' the trading gap shuffle, yes sir!

1980s redux

The deficit rag, oh yeah, the deficit rag,
Those budget gaps can be a twelve-digit drag.
I'm telling, that's the deficit,
They really made a mess of it,
That's the deficit rag.