Hey banks — too big to fail? I’ve got your solution right here

 Posted by on 23 April 2009  Modern Life
Apr 232009
 

coins2

Trenchant interview over at Salon that I just read, with Simon Johnson. He was from 2007-08 the chief economist of the International Monetary Fund and is currently a professor at MIT. Salon calls him “one of the most cogent critics of how the Obama administration is addressing the banking crisis.” (He gives them “an incomplete, which is allowed at MIT. Come back and finish it in the summer.”

His takeaway point? If the banks are too big to fail, don’t let that happen again. Stimulate competition and creative destruction by trust-busting!

Johnson tells Salon:

What we are saying is very much in the spirit of the original antitrust movement. What Teddy Roosevelt and his cohorts were worried about was excessive power — political power for these oligarchs …. I am not saying throw capitalism out with the bath water. I’m saying big finance has just become too powerful and it needs to be reined in. There are some relatively straightforward technocratic steps that can be taken that will move us in the right direction.

There’s some interesting stuff later in the interview about innovation and finance and the leftovers from previous booms. I don’t agree with all of his points. He says that previous booms, like the railroad boom or the dot-com boom at least left us with usable infrastructure. But the Wall Street mess didn’t work like that:

What do we get out of the meta-financial crap? It’s not so clear that we got useful things. Did our ATM fees come down? No.

However, he does ignore that most of the “meta-financial” crap was at least partially predicated on the housing boom — and we do get to keep all those McMansions and other houses. Maybe we don’t want them, but they’re there.

…

(PS. The picture is from the Winnipeg Tribune archives at the University of Manitoba. I couldn’t resist using it — plus it has meaning because each of those bags are $1,000 broken down into quarters. Symbolism! The original caption says that it is from Jan. 10, 1974: “Jayne Weetkovich (age 21) who is a remittance teller for the Bank of Nova Scotia, holds money bags of dimes and quarters.” Photographer: Jeff Debooy.)

Newspaper Death Watch: Fat Lady Singing edition

 Posted by on 8 April 2009  Modern Life
Apr 082009
 
BREAKING: Computers may affect the future of the news business. This photo, and the others in this post, are from the Winnipeg Tribune Archives held at the University of Manitoba. Original caption, from 1977: "Winnipeg has entered the era of small, affordable computers which have turned sci-fi into kitchen counter reality and raised the possibility of a computer in every home."

BREAKING: Computers may affect the future of the news business. MORE TO COME. (This photo, and the others in this post, are from the Winnipeg Tribune archives held at the University of Manitoba. Original caption, from 1977: "Winnipeg has entered the era of small, affordable computers which have turned sci-fi into kitchen counter reality and raised the possibility of a computer in every home.")

A lot of other people are linking to this Jeff Jarvis rant, so when I got an email directing me to read it — stat! — I delved in.

Jarvis argues that the newspaper industry has had decades to see, recognize and react to the changes that were coming — from Craigslist to Google — and that since they failed to change, they deserve to fail.

My (lengthy) analysis, after the jump:

Continue reading »

Thinking about money changes how you think

 Posted by on 7 April 2009  Modern Life
Apr 072009
 

Surely it’s no surprise that we’re not perfect rational beings. And yet, that’s economists tend to treat us. As it turns out, though, not only are people not rational, but the very concept of money can change how you think. For instance, there’s a definite change in how people act when confronted with “social norms” as opposed to “market norms.”

I’d read some of this before, but there’s a good summary of recent research into human economic behaviour over at New Scientist. They’ve pegged it to the “credit crunch” which seems like a really quaint way of talking about the “global economic downtown.” Ah, how quickly language changes.

Check it out, it’s worth the read:

“Money seems to have symbolic power as a social resource,” says Vohs. “It enables people to manipulate the social system to give them what they want, regardless of whether they are liked.” Put bluntly, it looks as if money is acting as a surrogate friend. Could that explain why some people focus on extrinsic aspirations at the expense of real social relationships?

Why money messes with your mind – New Scientist

Public shame, community service for bailout beneficiaries?

 Posted by on 20 March 2009  Modern Life
Mar 202009
 

That’s the plan touted over at “Paper Economy” — a blog billing itself as “A US Real Estate Bubble Blog.” But this blogger isn’t going after the bigwigs and Wall Street bonus babies; he wants some accountability from the freewheeling homeowners who got us into this mess.

Homeowners? Yup. He says that if homeowners facing bankrupcy and foreclosure want to be rescued by the government, they’re going to have to pay the piper. After all, if they hadn’t irresponsilby fudged the numbers to qualify for an absurdly large mortgage, the bubble wouldn’t have happened:

The overwhelming majority of “homeowners” who are now experiencing financial stress did NOT act responsibly.

Although many current financially strapped “homeowners” acted illegally in securing the financing with which to purchase their dream homes, just having stayed within legal bounds does NOT mean you acted responsibly.

Stated simply… if you cannot now afford your home and are falling behind on your payments, you made some sort of irresponsible mistake.

Further, many millions of Americans who may not be guilty of any specific instance of legally defined financial fraud are still at fault for defrauding our nation by living above their means when times were booming and becoming a serious liability when things went bust.

In this way they damaged our society at both ends and deserve neither rescue nor respect.

Interesting … I’m not 100% sure that I agree with his premise, but his solution actually deserves some thought:

I’d like to propose that every person that receives a federal mortgage bailout be clearly and publicly identified through a searchable database hosted at the Obama administrations Recovery.gov website.

Details listed should include the person’s full name, state and town of residence and the cost to the taxpayers of their individual rescue.

Second, all bailed-out persons should be required to perform community service proportionate to the cost of their rescue.

It certainly seems to have some merit above and beyond the “money for nothing” that seems to be flowing out of Washington these days. Plus, a lot of these homeowners are probably jobless or in danger of losing their jobs, anyway.

Not to mention, I’ll bet plenty of them live in neighbourhoods that are rapidly vacating — why not put bailed-out homeowners to work mowing the lawns and doing upkeep at the vacant houses next door, instead of letting them rot and decay?

Upside to the downturn: less trash

 Posted by on 19 March 2009  Modern Life
Mar 192009
 

The Washington Post says that people are buying less, saving more — and throwing a lot less stuff out:

Landfill managers say they knew something was amiss in the economy when they saw trash levels start steadily dropping last year. Now, some are reporting declines as sharp as 30 percent.

“The trash man is the first one to know about a recession because we see it first,” said Richard S. Weber, manager of the Loudoun County landfill. “Circuit City’s closing, so people aren’t going there and buying those big boxes of stuff and throwing away all that Styrofoam and shrink-wrap . . . and whatever they were replacing.”

But then the article gets a little weird, when it veers away from numbers and statistics and tries to make it real to people by “finding someone affected by the trend.” This is formulaic journalism at its worst. Who do they find? A guy who drives 15 minutes — to another town!! — so he can replace the batteries in his electric toothbrush instead of throwing it out, and this woman:

More people are following Cathy Willis’s example. Willis had a trunk of old sweaters and chose to “update” them instead of tossing them, donating them or buying something new. She found Elinor Coleman, an expert “rebuttoner,” and on a recent day the two huddled over a pile of sweaters and scads of vintage buttons to reimagine her wardrobe.

Beware of news stories that use words like “more people” in this context, with nothing to back that assertion up. Because I would be shocked if there were more than a handful of people seeking out an “expert rebuttoner” to stretch a little more life out of their sweaters. And, by and large, they’re probably the types of people who would have done that in the good times (I can get away with unfounded assertions because I’m a blog).

Anyway, the article’s not all bad. They also note that manufacturers are redesigning packaging for lest waste — and that’s something that will pay dividends for the long term. And, some big-city landfills will gain years of extra use before they fill up. That’s a savings right there.

Plus, and the article doesn’t note this, but it’s got to be a good thing to just teach people — and kids — some basic thrift habits.

AIG bonuses are a classic case of PR biting you in the back

 Posted by on 17 March 2009  Modern Life
Mar 172009
 

After all the hullabaloo over the AIG bonuses — where a troubled insurance giant, having taken $170 billion of government money (the US gov’t now owns 80% of AIG) has decided that it needs to honour its employment contracts and pay out $165 million in executive bonuses — seems to be dying down.

A new article in the New York Times argues that the sanctity of contracts is more important than populist rage.

I ‘d like to point out that, while I wouldn’t turn down $165 million, it’s less than one-tenth of one percent of the amount that the government has invested in AIG. It sounds big to you and me, but it’s a tiny drop in that ocean of money.

But also, I don’t think there would be any hint of that “populist rage” if AIG hadn’t paid bonuses ever before.

Well, obviously, you say. But let me explain. In popular conception, a “bonus” is extra money — above and beyond your regular salary, and given because you’ve gone above and beyond your regular duties as an employee.

Sometimes, they’re tied to specific metrics — like if the stock price goes up a certain amount, you get a bonus. But in Wall Street culture, bonuses have started to become accepted methods of general compensation. Everyone gets them, and they’re just part of your paycheque — except you get them in one lump sum instead of every two weeks.

Despite that, the term “bonus” has persisted. And why not? It’s a jolly, feel-good word! Everyone likes getting a bonus! And people like paying them out, too — it makes them feel special. It’s so much nicer than a workaday “salary” or eep! “wage.”

But imagine if you will, a news article that screamed: “Congress demans AIG explain paying $165 million in wages.” Wouldn’t happen.

Maybe — just maybe — there would be a small investigation into whether “$165 million in executive salaries” was excessive and could be trimmed. But there wouldn’t be this anger about “bonuses.”

I think the bonus culture causes other problems — it’s much better to spread compensation out over the year, and paying it all out of the same pot makes it easier for auditors and investors to keep track of, too. I’m not against a small bonus of appreciation if an employee does something special, or a small gift near Christmas, say.

And if AIG had just done that, instead of wallowing in the idea of a “bonus” — same amount of money, just doled out more rationally — then they wouldn’t be in this PR pickle right now.

Shocking news: Men and housework

 Posted by on 15 March 2009  Modern Life
Mar 152009
 

spatula-guyA recent article in Slate magazine really rubs me the wrong way. Writer Emily Bazelon asks, “When men lose their jobs, could they be doing more around the house?”

Really? Even though the New York Times reports that 82 per cent of layoffs have affected men — so much so that women may surpass men in the labour market for the first time ever — the pressing question is, are they doing enough housework?

Reporting anecdotally (of course), Bazelon writes that her hunch is today’s enlightened man actually does do more around the house. But she, and none of the women she talks to, seem quite able to really believe it. In fact, I have a hard time reading the whole article and getting through their sense of slack-jawed astonishment that a man — a man, for godssakes! — could actually pick up a sock.

Of course, it’s awful for a man to lose his job because his fragile sense of self-worth is all tied up in working — at least according to Bazelon and the women that she interviews:

The phrase “fragile male ego” comes up a lot in these conversations. One woman wrote in from Minneapolis, where her husband lost his job ….  She hadn’t worked full-time in 10 years—she was writing a novel and taking care of their kids, ages 13, 8, and 5. Now she and her husband have switched. She’s at work, and he’s mostly at home. And she is still the grocery shopper, the haircut-getter, and the maestro conducting the household orchestra. When it came time to re-enroll the kids in school, her husband filled out the forms, but only after she told him to. They are both deliberately holding onto their past roles. “You’re right, we don’t want to shift things completely,” she said when I probed a bit over the phone. “When he first lost his job, he was so uncomfortable about being home in the middle of the day, and my friend said to me, ‘Don’t make him into a house husband. Don’t reinforce his upset that he’s not working.’ So I’m not.”

The one man she does talk to didn’t even lose his job, but still — shock! — likes spending time with his kids, and helps out around the house:

When I caught him by phone, he’d just picked the kids up from school. He juggled giving them a snack with talking to me. And, yes, they got fed.

“And yes, they got fed”???

I wonder what kind of ripping words Bazelon would have for a man who wrote an article about women entering the work force with a similarly condescending tone.

An interesting take on the stock market today

 Posted by on 2 March 2009  Modern Life
Mar 022009
 

The headlines are howling: “Dow Below 6,800; Lowest Close Since ’97” screams the New York Times in an across-the-front banner (as I write this — webpages are notorious for changing).

But elsewhere in the Times, there’s a blog post that makes you think about that. Lowest close since 1997, eh? So how bad was it in 1997?

That night Alan Greenspan uttered his legendary “irrational exuberance” comment.

Yes, the now-discredited Alan Greenspan was worried, back in 1997, that the stock market was climbing too high, too fast. (He kind of got over that worry.)

Another interesting tack to take is looking at individual stocks, rather than broad market indexes. Says Times blogger Floyd Norris:

There are five stocks now in the Dow that trade for more than twice their level when Mr. Greenspan spoke, and six that trade for less than half as much. (Prices are through about 11 a.m. today.)

The winners:

  • Wal-Mart, up 282%
  • Exxon Mobil, up 180%
  • United Technologies, up 136%
  • I.B.M., up 130%
  • McDonald’s, up 120%

The losers:

  • General Motors, down 95%
  • Citigroup, down 89%
  • Bank of America, down 86%
  • Alcoa, down 63%
  • DuPont, down 63%
  • General Electric, down 52%

I guess it’s kind of like when it’s -5 C in the fall, you think it’s cold, and when it’s -5 C in the spring, you get out the T-shirts.

Modern office space

 Posted by on 29 January 2009  Modern Life
Jan 292009
 
Where do you think I got the logo? Yahoo?

Where do you think I got the logo? Yahoo?

Grant posted not so long ago about office layouts.  I’ve never been one with an eye towards interior design of any sort, so I hesitantly admit to having only skimmed that post.

What I am currently interested in is how the current economic downturn (I refuse to use the word ‘recession’) is affecting the business world.  It is really quite scary:  Sprint-Nextel cutting 8,000 jobs; GM cutting 2,000 (no suprise there, though); Home Depot losing 7,000; and Caterpillar a whopping 20,000 job cuts (source).  The numbers are astounding and mesmerizing in a horrid car-crash sort of way.

Reading all of these numbers, I started to think about the tech boom of the 1990s and the extravagance that was said to have taken place in those offices.  (Maybe it was fact, but I never saw it firsthand…)  My idle thoughts led me to the wonder of the Internet where a few seconds of research brought me up short:  Google is cutting staff.

“But that can’t be right,” I said to myself.  “Not Google.”

Which brings me back to Grant’s office design post.  Here are some shots of Google’s offices.  While I admit it would be kick-ass to work in such an environment, how does a company justify such frivolity while laying people off work?

It is something I’ll never understand.

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