Jeffrey Friedman on Regulation

Clearly the regulators were predicting that steering banks' leverage into highly rated MBS would be prudent. This prediction proved disastrously wrong, but the Recourse Rule heavily tilted the field toward banks that went along with the regulators' prediction. Heterogeneous behavior among competing enterprises normally spreads society's bets among the different predictions (about profit and loss) made by various capitalists. Thus, the herd mentality is a danger under capitalism, as under every other system. Yet regulation produces the equivalent of a herd mentality by force of law. The whole point of regulation is to homogenize capitalists' behavior in a direction the regulators predict will be prudent or otherwise desirable. If the regulators are wrong, the result is a system-wide failure. "Systemic risk regulation" may be a contradiction in terms.

Neither capitalists nor regulators can use crystal balls to avoid making bad bets. That highly rated mortgage-backed securities would be prudent turned out to be a very bad bet. But we all suffered because this bet was imposed by financial regulators on the whole system.

Jeff Madrick's response: What made the commercial banks dangerous was that they nimbly skirted regulations rather than abiding by them; they were able to do so by the use of their relatively new structured investment vehicles and other off-balance-sheet transactions, including trading in derivatives. A main cause of the crisis was precisely those over-the-counter derivatives, which were not regulated, and led many bankers, hedge funds, and investment banks astray by thinking they had adequately insured their investments and could take on more risk. (As an aside, going back a few years, this is why Citi group and JPMorgan Chase lent so much money to the likes of Enron and WorldCom, soon after to become the largest bankruptcies in American history.)

Rory Stewart on Afghanistan

We armed militias in 2001, disarmed them through a demobilization program in 2003, and rearmed them again in 2006 as community defense forces. We allowed local autonomy in 2001, pushed for a strong central government in 2003, and returned to decentralization in 2006. First we tolerated opium crops; then we proposed to eradicate them through aerial spraying; now we expect to live with opium production for decades.

Jonathan Raban on Sarah Palin

Her nasal voice, pitched in the upper register, with the upsy-downsy, singsong delivery of a kindergarten teacher, became, rather improbably, a great electoral asset. Her diction and accent were shaped more by class than region, and spiced with faux-genteel cuss words like "dang," "heck," "darn," "geez," "bullcrap," and "bass-ackwards." It was a voice unspoiled by overmuch formal education and boldly unafraid of truisms and clichés; a perfect foil for Obama's polished law-school eloquence. In the narrative of the McCain campaign, she was the exemplary real American, Obama the phony one, and when people are now interviewed in the interminable lines for her book signings, by far their most common remark about her is "She's real."

Alaska, the particular reality from which Palin hails, is so little known by most Americans that she was able to freely mythicize her state as the utopian last refuge of the "hard work ethic," "unpretentious living," and proud self-sufficiency. Her anti-tax rhetoric (private citizens spend their money more wisely than government does) and disdain for "federal dollars" were unembarrassed by the fact that Alaska tops the tables of both per capita federal expenditure, on which one in three jobs in the state depends, and congressional earmarks, or "pork." So, too, she mythicized the straggling eyesore of Wasilla (described by a current councilwoman there as "like a big ugly strip mall from one end to the other") as the bucolic small town of sentimental American memory. Listening to Palin talk about it, one was invited to inspect not the string of oceanic parking lots attached to Fred Meyer, Lowe's, Target, Wal-Mart, and Home Depot, or the town's reputation among state troopers as the crystal meth capital of Alaska, but, rather, the imaginary barber shop, drugstore soda fountain, antique church, and raised boardwalks, seen in the rosy light of an Indian summer evening.

Commonsense Conservatism hinges on the not-so-tacit assumption that the average, hardworking churchgoer, like the ladies at the booth, equipped with the fundamental, God-given ability to distinguish right from wrong, is in a better position to judge, on "principle," the merits of an economic policy or the deployment of American troops abroad than "the 'experts'"—a term here unfailingly placed between derisive quotation marks. Desiccated expertise, of the kind possessed by economists, environmental scientists, and overinformed reporters from the lamestream media, clouds good judgment; Palin's life, by contrast, is presented as one of passion, sincerity, and principle. Going Rogue, in other words, is a four-hundred-page paean to virtuous ignorance.

Lex on The War on Greed

Some bankers, poor darlings, feel persecuted by the baying mob. And indeed an inflated sense of entitlement is a failing common to much of the public too. In the UK, interest rate cuts since the start of the crisis have delivered the average £103,000 floating rate mortgage holder an annual saving of £4,635. Against that, the government estimates the net cost of bailing out the financial system at £10bn – or £400 per household. For many Britons, the crisis has also handed them a windfall. Just like the bankers they love to loathe, few see it that way

Buiter on the Dubai default

I don’t see what the big deal is...If you earn a risk premium during good times, you should not moan when the borrower defaults from time to time when the going gets tough.

The debt of the Dubai World Group and of Nakheel was not Dubai sovereign debt or sovereign-guaranteed debt. The only way a bail out by the Dubai sovereign of the debt holders of Dubai World and Nakheel would enhance the sovereign’s reputation would be by enhancing its reputation as a sucker.

Fortunately, property companies don’t fall into the systemically important category. Their collapse is painful for their shareholders, creditors and, if the local labour markets are weak, their employees. They are not, however, systemically important. There collapse will not threaten the delicate fabric of financial intermediation. They are fit to fail. Creditors beware.

Adam Kirsch on Engels

Many of Engels' lurid details and damning statistics come from official reports like Edwin Chadwick's "Report on the Sanitary Conditions of the Labouring Population of Great Britain", which was commissioned by a Whig government and published under a Tory one. Indeed, while Engels insists that the workers cannot hope for redress from a bourgeois-aristocratic Parliament, he can't help but note that "although the middle classes at the moment are the main - indeed the only - power in Parliament, nevertheless the last session (1844) was in effect a continuous debate on working-class conditions. All this suggests that fare from being obdurate, England's ruling class were taking action - slowly and as yet inadequately - to solve the problems caused by the industrial revolution. These problems were, it is useful to remember, totally unprecedented, not just in English but in human history. The sudden eruption of vast polluted slums in the North of England baffled both the institutions of government and the prevailing theories of economics and society.

Hilary Mantel on Keith Thomas' The Ends of Life

Warfare was an aristocratic business, and young men trained for nothing else: then along came firearms, which made any low-class fool into a killing machine.