The Great Recession Explained

A few weeks ago I edited a paper "Understanding the Great Global Contagion and Recession" by Heritage Foundation analyst JD Foster that made a lot of sense to me, even though it was a bit above my head. I don't normally promote papers that I edit on this blog, but this one particularly impressed me and answered a few questions I have had about the current recession. I consider it well worth reading (and rereading).

Here's the abstract:

The Great Global Contagion and Recession was largely the result of a sustained global savings glut combined with excessive monetary accommodation by the Federal Reserve and other central banks. These two complementary and reinforcing forces artificially depressed the price of risk globally, leading to the widespread mis-pricing of assets and misallocation of investment. These effects were enhanced by rapid financial innovation and breathtaking arrogance of leading financial market participants in believing that they understood these innovations. It was also facilitated by a succession of policy failings, most importantly the failure of the United States and Europe to modernize their financial regulatory structures to keep pace with developments in financial markets.

Signs of the Fans

The fight between Redskins fans and Redskins owner Daniel Snyder is escalating, and it's crossed over from the blogosphere to the mainstream media.

Immediately after I started writing this evening, my Tivo unpaused causing me to catch the last few minutes of 11 o'clock news on WUSA Channel 9. They reported on signs confiscated from Redskins fans and announced a new feature to display "all the signs and messages the team won't let you bring into the stadium." The station also favorably mentioned the owner of the Cleveland Browns (1-6), who has expressed support for a fan protest against the team, saying "We deserve the protest." Such realism and humility (or at least the PR smarts to fake them) is refreshing.

The Dreadful Redskins

And now for something completely different.

The biggest dispute in Washington, DC, is not about health care reform, but about football. The Washington Redskins play a unique roll in the nation's capital. They give the residents, who come from every state in the country, something apolitical to talk and argue about—filling a desperate need in this overpoliticized city. There's a palpable change in mood of the city on the day after a Redskin's win.

This year Washingtonians have abundant reasons to complain about the Redskins, who are now 2-5 after a lackluster showing on Monday Night Football. As for myself, I'm a fair-weather Redskins fan, so as a marginally interested bystander I'm feeling no pain, but I sympathize with many friends and acquaintances who are suffering, especially since there's no end in sight.

Executing the Geese That Lay Golden Eggs

I was planning to write on something nonpolitical for a change, but life beyond the blog and the Obama administration intervened.

On Wednesday, the media reported that the Obama administration will issue a diktat sharply cutting executive pay at Citigroup, Bank of America, American International Group, General Motors, and Chrysler. Beyond the constitutional issues (Where exactly does the Constitution authorize the President or Congress to do this?) and legal issues (breach of contract etc.), this makes no economic or business sense. This leads me to the conclusion that either the Administration is more incompetent and ignorant than I already suspect—which is high hurdle for this administration—or that politics is driving this decision.

The Presidency About Nothing?

Friday morning, I was stunned as were most Americans including the President himself to hear that the Norwegian Nobel Committee had awarded the Noble Peace Prize to President Obama. One reporter neatly summarized my feelings: "He won! For what?"

The President's response so far has been appropriately low-key and humble. His best move would be to thank the committee for the honor, but decline to accept the award because he has not yet begun to lead. At the very least, he should decline to accept the award until he leaves office, following the precedent set by President Theodore Roosevelt.

The Saturday Night Live skit last week may have been a bit harsh in its critique of the President's record of accomplishments so far: "Nothing. Nada. Almost one year and nothing to show for it." But SNL's timing couldn't have been better, coming after the President's failed Copenhagen campaign to bring the 2012 Olympics to Chicago and setting the stage for him to receive an increasingly meaningless award. Tonight, I may actually have to watch SNL live for the first time in decades. They may be onto something.