mattlantz

Wirtism

Isn't history great?!  Today we learn that there have always been some truly crazy people in this country and they can be exploited by the rich to hold down the not-rich.  From Michael Hiltzik at the LA Times:

What surprises me most about the summer of distemper now thankfully drawing to a close isn't its baroque conspiracy theories, extreme political opportunism and public displays of weepy hysteria, so much as the idea that these are somehow unprecedented.

To me they're merely the latest examples of a phenomenon that might be called Wirtism.

If you find the term unfamiliar, that's because I just coined it to honor the memory of William A. Wirt. Wirt's day in the sun came back in 1934, when the obscure Midwestern blowhard placed himself at the center of a political maelstrom by "discovering" a plot by members of Franklin Roosevelt's Brain Trust to launch a Bolshevik takeover of the United States.

Krugman on Why Reaganism Should Be Dead

Krugman had a great column today in the NY Times pointing out the obvious - that the past two decades have evidenced why Reaganism should be dead.  Of course, it was foolish to begin with.  But my favorite part of the column were two great quotes:

“We have always known that heedless self-interest was bad morals,” said Franklin Delano Roosevelt in 1937. “We know now that it is bad economics.”

“It is difficult to get a man to understand something,” said Upton Sinclair, “when his salary” — or, I would add, his campaign contributions — “depend upon his not understanding it.”

Six Impossible Things Before Breakfast

An interesting speech from James Montier on Ritholtz.com takes down the EMH.  He brings in Monty Python's Dead Parrot and multiple quotes from Keynes:

The obsession with benchmarking also gives rise to one of the biggest sources of bias in our industry - career risk. For a benchmarked investor, risk is measured as tracking error. This gives rise to Homo Ovinus - a species who are concerned purely with where they stand relative to the rest of the crowd. (For those who aren’t up in time to listen to Farming Today, Ovine is the proper name for sheep). This species is the living embodiment of Keynes’ edict that “it is better for reputation to fail conventionally than to succeed unconventionally”. More on this poor creature a little later.

The Price is Wrong, B****

Richard Thaler writes in FT on the Efficient Market Hypothesis:

What lessons should we draw from this? On the free lunch component there are two. The first is that many investments have risks that are more correlated than they appear. The second is that high returns based on high leverage may be a mirage. One would think rational investors would have learnt this from the fall of Long Term Capital Management, when both problems were evident, but the lure of seemingly high returns is hard to resist. On the price is right, if we include the earlier bubble in Japanese real estate, we have now had three enormous price distortions in recent memory. They led to misallocations of resources measured in the trillions and, in the latest bubble, a global credit meltdown. If asset prices could be relied upon to always be “right”, then these bubbles would not occur. But they have, so what are we to do?

Socialism for the Rich - Goldman Edition

This article from Mother Jones was written by a former Goldmanite:

As a recent New York Times article(and many other publications in different words) said, "For the most part, the worst of the financial crisis seems to be over." Sure, the crisis may appear to be over because the major banks of Wall Street are speculating well with government subsidies. But that's a dangerous conclusion. It doesn't mean that finance firms could thrive without the artificial, public-funded assistance. And it certainly doesn't mean that consumers are any better off than they were before the crisis emerged. It's just that they didn't get the same generous subsidies.