Learning from Dogs

My rather slow response to my Versatile Blogger award!

Last Friday morning, the 16th, I turned on my PC to discover that lovely Kathryn Johnston of 4amWriter had nominated Learning from Dogs for the Versatile Blogger Award.  I was blown away especially as since then the connections I have made with other writers have been wonderful.

However, a more prompt acknowledgement on LfD seems to have escaped me until today.  I quickly learnt that there is a proper protocol associated with the response to the award.

1. Thank the award-giver and link back to them in your post.
2. Share 7 things about yourself.
3. Pass this award along to 15 blogs you enjoy reading.
4. Contact your chosen bloggers to let them know about the award.

So here goes!

Award logo

So first, a very big thank you to Kathryn of 4amWriter for including me in her list.  As she said on her post, “This title says it all! If you love dogs, this is a must-visit!”  That’s generous of Kathryn.  Dogs are a very powerful reminder of an uncomplicated way to live, as described on the Home Page.  The Vision behind the Blog is:

• Our children require a world that understands the importance of faith, integrity and honesty
• Learning from Dogs will  serve as a reminder of the values of life and the power of unconditional love – as so many, many dogs prove each and every day
• Constantly trying to get to the truth …
• The power of greater self-awareness and faith …

Seven things about me!

H’mm, what to say.

1. Born in London 6 months before the end of WWII,
2. Been a business-to-business salesman most of my life,
3. Started my own business in 1978 and remained in ‘self-employment’ until quite recently,
4. Lived on my own boat, based in Larnaca, Cyprus, for 5 years,
5. A keen glider pilot for many years at Rattlesden Gliding Club in Suffolk, later a private pilot,
6. Always wanted to write,
7. And, finally, happier than I have ever been being married to Jean, having met in Mexico in 2007, moving out there with Pharaoh, my GSD, in 2008 and subsequently arriving in Payson, Arizona in 2010 with 11 dogs and 6 cats!

So here are the 16 Blogs (I use that description loosely) that I wish to pass this award to:

• Yves Smith of Naked Capitalism.  How Yves finds the time to produce the huge volume of articles and website links every day is beyond me.
• James Kwak and Simon Johnson of Baseline Scenario.  James and Simon were, for me, an early source of openness about the key issues affecting the global economy that slammed into our collective faces in 2008.
• Patrice Ayme of the Blog of his own name.  Patrice’s sub-heading on his Blog reads, “Intelligence at the core of humanism.”  Again, a prolific writer with a huge intellect that he puts to wonderful use.  Just pick anything that he has written to see that proved in spades.
• Patrick Smith of Patrick Smith Photography. Just breath-taking photographs.  Do visit his website.
• Bill McKibben of 350.org.  The headline on the website says, “We’re building a global movement to solve the climate crisis.”  Say no more!
• Michelle of Dog Kisses’s blog.  Wonderful blog – just go there and enjoy it.
• Sue of Sue Dreamwalker. Again, just a wonderful Blog – do please visit.
• Vlatko, the owner of Top Documentary Films.  We do not subscribe to any television channels at home so Vlatko’s resource is so valuable for us.  Huge selection of free documentary films to watch.
• Deanna Raeke and Andrea Rosebrock of the Blog For The Love of a Dog.  Very active in fighting all corners on behalf of man’s oldest companion.
• Rob Hopkins and his team at Transition Network.  Rob is one of the leading voices for changing to a sustainable relationship with this planet.  He is based in Totnes, Devon, my local town for many years when I lived in the village of Harberton.  His books on Transition are masterpieces.
• Victoria Brown, Daniel Honan and team at Big Think.  As their headline says, “A forum where top experts explore the big ideas and core skills defining the 21st century.”  Fabulous resource.
• All the Directors and team at Sustainable Arizona.  As is described on their site, Sustainable Arizona is about, “Our nonprofit organization is made up of volunteers and professionals committed to making sustainable development possible. We accomplish this by encouraging businesses that add true value to our communities while preserving the environment.“
• Anthony Watts of Watt’s Up With That. With over 9,000 followers and over 98 million viewers this very reasonably can be regarded as the world’s most viewed climate website.  Anthony’s 3 million monthly visitors puts my 40,000 into perspective!
• The whole team at the US-based National Wildlife Federation.  Their Mission: As America’s largest conservation organization, National Wildlife Federation works with more than 4 million members, partners and supporters in communities across the country to inspire Americans to protect wildlife for our children’s future!
• Peter Russell of Spirit of Now.  Peter writes on his Blogsite, “There are many observations I make in daily life—some profound, some mundane—mostly concerning the natural world around, or the nature of the inner world of mind. Some incline us to wonder and awe. Others make us think, and question our assumptions.”  Never before have we needed so much to think about the way we think!
• Nakibul Hoq, blogging from Bangladesh in the city of Dhaka under the Blog name of Freedom to Survive.

I shall be passing on the ‘award’ to all bloggers today.

Let me close again by saying such a big thank you to Kathryn of 4amWriter and, from that, how quickly I came across Limebird Writers who, I know, will be a great source of support as I face 2012 and ‘the novel’!

Perhaps intuition is all we have to hear clearly.

John O’Donohue, in yesterday’s post, touched on the essence of today’s theme, “The greatest philosophers admit that to a large degree all knowledge comes through the senses. The senses are our bridge to the world.“

Dogs, of course, demonstrate powerfully how their senses provide a ‘bridge to the world’.

This odd collection of writings (ramblings?)  that comprise Learning from Dogs is based around the ‘i’ word – Integrity.  The banner on the home page proclaims Dogs are integrous animals. We have much to learn from them. Ergo, dogs offer a powerful metaphor for the pressing need for integrity among those that ‘manage’ our societies.

Thus my senses are more tuned, than otherwise, to the conversations in the world out there that support the premise that unless we, as in modern man, radically amend our attitudes and behaviours, then the species homo sapiens is going to hell in a hand-basket!

End of preamble!

Professor Bill Mitchell is one person who recently touched my senses.  As his Blog outlines he is an interesting fellow,

(Photo taken in August 2011 in Melbourne, Australia)

Bill Mitchell is the Research Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW Australia.

He is also a professional musician and plays guitar with the Melbourne Reggae-Dub band – Pressure Drop. The band was popular around the live music scene in Melbourne in the late 1970s and early 1980s. The band reformed in late 2010.

He also plays with a Newcastle swing blues band – The Blues Box. You can find music and other things on his Home Page.

Professor Mitchell’s Blog is not for the faint-hearted, it can be pretty technical at times.  Nevertheless, I have been a daily subscriber for a couple of months now.

On the 24th, Prof. Bill wrote a long article under the heading of ‘What if economists were personally liable for their advice‘.  I want to quote a little from that article.  Starting with,

Economists have a strange way of writing up briefing documents. There is an advanced capacity to dehumanise economic advice and ignore the most important economic and social problems (unemployment and poverty) in favour of promoting non-issues (like public debt ratios). It reminds me sometimes of how the Nazis who were brutal in the extreme in the execution of their ideology sat around getting portraits of themselves taken with their loving families etc. The training of economists creates an advanced state of separation from human issues and an absence of empathy.

In a sense, we all understand this, this use of language to separate us from our collective humanity.  A random Google search came up with this.  A statement by British Prime Minister, David Cameron, to Parliament on the 24th regarding Europe, as in,

Mr Speaker, let me turn to yesterday’s European Council.

This European Council was about three things.

Sorting out the problems of the Eurozone.

Promoting growth in the EU.

And ensuring that as the Eurozone develops new arrangements for governance, the interests of those outside the Eurozone are protected.

This latter point touches directly on the debate in this House later today, and I will say a word on this later in my statement.

Resolving the problems in the Eurozone is the urgent and over-riding priority facing not only the Eurozone members, but the EU as a whole – and indeed the rest of the world economy.

Britain is playing a positive role proposing the three vital steps needed to deal with this crisis – the establishment of a financial firewall big enough to contain any contagion; the credible recapitalisation of European banks; and a decisive solution to the problems in Greece.

Read the last paragraph.  Wonderful words that seem to make sense to the casual listener but picking up on Prof. Bill, an utter ‘separation from human issues and an absence of empathy‘.  There is no humanity in those words from the British Prime Minister.  We all know there are hundreds of other examples from mouthpieces all across our global society.  Back to Bill Mitchell’s article,

Linkiesta say:

Greece has failed. To say this is not another report of investment banks or research centers, but directly Troika officials who have just completed their review on Hellenic public finance. Linkiesta is in possession of the entire report of the troika, composed of officials from the International Monetary Fund (IMF), European Central Bank (ECB) and European Commission.

I have a rule of thumb that I use when considering documents such as these. The rule is to assess how strong the concern for unemployment is. How often is unemployment mentioned? The answer is zero. The document never mentions the word or concept.

So obsessed are the Troika and their bean counters about public debt stabilisation that they have completely lost sight of one of the worst problems an economy can encounter – the failure to generate work for all.

Read those last words again, “completely lost sight of one of the worst problems an economy can encounter – the failure to generate work for all“.  One last extract from the article,

There is absolutely no historical evidence which shows that when all nations are contracting or stagnant and private spending is flat (or contracting) that cutting public spending will create growth.

So why did these economists think that a nation would grow when all components of spending were strongly indicated to fall or were being actually cut? The answer lies in acknowledging that they operate in an ideologically blinkered world and are never taken to account for their policy mistakes. They are unaccountable and do not suffer income losses when the nations they dispense advice to and impose policies on behave contrary to the “expectation” which results in millions being unemployed.

In my view, my profession should be liable for the advice it gives and economists should be held personally liable for damages if their advice causes harm to other individuals. If the economists in the IMF and elsewhere were held personally responsible then the advice would quickly change because they would be “playing” with their own fortunes and not the fortunes of an amorphous group of Greeks that they have never met.

Very powerful words that strike at the heart of the matter, that of integrity. (If you want to read it in full, then the article is here.)

Let me move on a little.  The 24th also saw a powerful essay on Yves Smith’s Blog Naked Capitalism, from Philip Pilkington, a journalist and writer living in Dublin, Ireland.  Here’s a taste of what Mr. Pilkington wrote.

Every now and then a terrible thought enters my mind. It runs like this: what if the theatre of the Eurocrisis is really and truly a political power-game being cynically played by politicians from the core while the periphery burns?

Yes, of course, we can engage in polemic and say that such is the case. But in doing so we are trying to stoke emotion and generally allowing our rhetorical flourish to carry the argument. At least, that is what I thought. I had heard this rhetoric; I had engaged in it to some extent myself; but I had never really believed it. Only once or twice, in my nightmares, I had thought that, maybe, just maybe, it might have some truth.

Can you see the parallels between Prof. Mitchell and Philip Pilkington?  The latter wrote, “a political power-game being cynically played by politicians from the core while the periphery burns“, the former wrote, “If the economists in the IMF and elsewhere were held personally responsible then the advice would quickly change because they would be “playing” with their own fortunes and not the fortunes of an amorphous group of Greeks that they have never met.”

It’s clearly obvious to all those that have commented to both the Bill Mitchell and Philip Pilkington items.  That is, in my words, a complete lack of integrity, truth and a commitment to serve the people, from so many in places of influence and power.

We all sense this, hear it so clearly, a separation from human issues and an absence of empathy.

We have so much to learn, so much sense to learn, from dogs!

————–

Footnote.  Had just completed the above when I came across a piece by Patrick Cockburn in last Sunday’s Independent newspaper, that starts thus,

World View: A sense of injustice is growing. Elite politicians and notorious wrongdoers appear immune as ordinary Greeks reel from wage and job cuts

Up close, the most striking feature of the reforms being forced on Greece by its international creditors is their destructiveness and futility. The pay cuts, tax rises, cuts and job losses agreed to by parliament in Athens last week will serve only to send the economy into a steeper tailspin, even if it extracted a much-needed €8bn in bailout money from the EU leaders. “Nothing but a lost war could be worse than this situation,” one left-wing ex-minister tells me. “What is worse, no party or political group in Greece is offering real solutions to our crisis.

Say no more!

Acceptance of what has happened is the first step to overcoming the consequences of any misfortune. 

William James, January 11th, 1842 - August 26th, 1910

The above is a quotation attributed to the late American philosopher, William James, comprehensively written about on the Stanford Encyclopaedia of Philosophy.

When drafting this post last Wednesday, I used the quotation and reference to William James to soften, as it were, me reproducing an item on Yves Smith’s fabulous blog, Naked Capitalism.

I did have second thoughts about including the video below and the summary of what was written by Yves.  The second thoughts were around me not wanting Learning from Dogs to stray into sensationalism or hot pop topics.

The reason I did publish this post was that maybe, just maybe, young Mr. Alessio Rastani is saying it how it really is.  How we all have been lulled over the years into believing so much rubbish from so many movers and shakers in the world of power and politics.  Whereas, in truth, most people who stop and reflect on the world we are presently living in, intuitively sense, that something has broken.

The good news that may be interpreted from Mr. Rastani’s predictions is that we are now living through a period of change, the end of an era, and that the opportunity for a better, more caring world is wide open.

Introduced on the Naked Capitalism site, as follows,

This segment on BBC may not go viral, but it seems to be getting traction, based on the e-mails (hat tip readers Paul S and Marcus) and alerts in the comments section.

This is not an entertaining Rick Santelli-style rant, it’s a cool assessment of how the Euromarket crisis is likely to end, which he thinks is very badly. The flummoxed reaction of the BBC host suggests that the trader, Alessio Rastani, was a booking mistake.

But consider his second message: that Goldman and people rule the world and like him don’t care about what happens to the real economy. A depression is just a great investment opportunity if you see it coming and position yourself accordingly. Rastani is the bland, reasonable face of predatory capitalism.

But in the best interests of scepticism and balance, I also reproduce what was published in the UK’s Telegraph newspaper on the 27th September,

By Jonathan Russell

11:50PM BST 27 Sep 2011

The soundbites won Mr Rastani instant fame. He became a viral hit and was trending on Twitter. BBC business editor Robert Peston was among the fans. “A must watch if you want to understand the euro crisis and how markets work,” he told his army of 82,000 followers on Twitter on Tuesday.

The interview contained such gems as “Governments don’t rule the world, Goldman Sachs rules the world [and] Goldman Sachs does not care about the rescue package.”

But on Tuesday night the BBC was left facing questions about just how qualified Mr Rastani is to speak about the markets.

In the interview Mr Rastani described himself as an independent trader. Elsewhere he claims he’s an “investment speaker”. Instead of operating from a plush office in Canary Wharf Mr Rastani works and lives with his partner Anita Eader in a £200,000 semi in Bexleyheath, south London. The house, complete with a mortgage from Royal Bank of Scotland, belongs to her not him.

He is a business owner, a 99pc shareholder in public speaking venture Santoro Projects. Its most recent accounts show cash in the bank of £985. After four years trading net assets are £10,048 – in the red.

How a man who has never been authorised by the Financial Services Authority and has no discernible history working for a City institution ended up being interviewed by the BBC remains a mystery.

The incongruity led to some commentators speculating Mr Rastani was a professional hoaxer. The BBC denied the allegation: “We’ve carried out detailed investigations and can’t find any evidence to suggest that the interview with Alessio Rastani was a hoax.”

However, the BBC declined to comment on what checks, if any, it had done prior to the interview.

Mr Rastani was a little more forthcoming.

“They approached me,” he told The Telegraph. “I’m an attention seeker. That is the main reason I speak. That is the reason I agreed to go on the BBC. Trading is a like a hobby. It is not a business. I am a talker. I talk a lot. I love the whole idea of public speaking.”

So he’s more of a talker than a trader. A man who doesn’t own the house he lives in, but can sum up the financial crisis in just three minutes – a knack that escapes many financial commentators.

“I agreed to go on because I’m attention seeker,” he said on Tuesday. “But I meant every word I said.”

We shall see.

Reflections on these present times.

Want a brilliant idea for tomorrow? Stay in the present!

Dogs do this wonderfully.  I am told that followers of Zen Buddhism discover peace and grace from embracing the present. But is there more to this?  Is there some deeper psychology involved?  Does our species have an intrinsic challenge in terms of staying in the present?

My musings on this arise from a couple of recent conversations.

The first was with Peter McCarthy from the Bristol area of West England.  Peter and I go back a few years (at my age, everything goes back a few years!) and at one stage I did some work for Peter’s company, Telecom Potential.  Just a quick aside, Peter’s company was based in the magnificent Clevedon Hall, a mansion built in 1853 as a family home for Conrad William Finzel, a German-born businessman.  Here’s a picture of one of the rooms,

A room at Clevedon Hall

Peter, like me, is sure that the period in which the world now appears to be, is not some cyclical downturn, not some temporary departure from the national growth and employment ambitions promoted by so many countries.  No! This one is different.

Peter is sure that a major transition is under way, as big as any of the great societal upheavals of the past.  And, for me, a fascinating comment from Peter was his belief that the key attitude required for the next years would be innovation.  Peter reminded me that we tend to think of innovation as applying to things physical, scientific and technical.  But Peter sensed that it would be in the area of social innovation where key changes would arise and, from which, these large societal changes would flow.

Then a day later I was chatting with one of the founders of a brilliant new authentication process, Pin Plus. It is a very smart solution to a major global problem, the weaknesses of traditional password user-authentication systems.

On the face of it, Pin Plus is obviously a better and more secure way of authenticating users, and a number of key test customers have borne this out.  Jonathan C was speaking of the challenges of convincing companies to have faith in this new process.  This is what he said,

More than once, indeed many times, I am told by prospects something along the lines that the IT world has been looking so hard and so long for a password solution that a solution can’t possibly exist.

Let’s ponder that for a moment.  Are we saying that a far-sighted approach to the potential for change is not an easy place for some, probably many, human brains?

Indeed, Jonathan and I mused that here we were, both speaking via Skype, an internet telephony service, both of us looking at different web sites in support of many of the points that we were discussing and totally dependent, in terms of our mentoring relationship, on the technology of the internet, a multi-node packet-switched communications system that was a direct result of the American shock of seeing the Russians launch the world’s first artificial satellite, Sputnik 1, into low earth orbit on the 4th October, 1957.

Launch of Sputnik 1

At that time, it would have seemed impossible for anyone on the planet to see that the American response to Sputnik 1 would eventually lead to the vast packet-switched network that is now the modern Internet.

But why do we regard the ability to look into the future so utterly out of reach of the common man?  Look at this, the Internet Timeline here.  Look how quickly the response to Sputnik1 gathered pace.  See how Leonard Kleinrock of MIT way back in May, 1961, presented a paper on the theory of packet-switching in large communications networks.

So maybe there’s a blindness with humans.  A blindess that creates the following bizarre characteristics,

• Whatever is going on in our lives at present we assume will go on forever.  I.e. the boom times will never end, or the period of doom and gloom is endless.
• Our obsession with how things are now prevents us from reflecting on those signs that indicate changes are under way, even when the likely conclusions are unmistakeable.  The ecological and climatic changes being the most obvious example of this strange blindness that mankind possesses.
• Yet, unlike animals and some spiritual groups of humans, truly living in the present appears incredibly difficult for man.
• However, the history of mankind shows that our species is capable of huge change, practically living in constant change for the last few millennia, and that a very small proportion of a society, see yesterday’s article, is all that is required to create a ‘tipping point’.

I want to continue with this theme but conscious that there is still much to be written.  So, dear reader, I shall pause and pick this up tomorrow.

Just stay in the present for twenty-four hours!

“The nature and reach of social conversations in the investment arena.“

The above sub-heading is from a recent Post on Naked Capitalism that rather spookily comes hot on the heels of one of my recent musings.  Here’s what I published on the 12th January although I wrote it on the 9th.

In the past opinion and commentary has been in the hands, more or less, of the giant media moguls.  But technology has changed that.  Now more than ever a huge people have access to the Internet.  Indeed, a quick Google search reveals that of a world population of 6.85 billion people, just under 2 billion (29%) have internet access.  In North America that percentage is 77.4% (226 million) and in Europe the percentage is 58.4% (475 million).  I.e. nearly a billion people in just North America and Europe!

My point is that, in a manner never before experienced in human history, the vast majority of us have the ability to read, learn and muse about the critically important issues facing us today, coming to conclusions that carry political weight.  We have almost infinite choice as to where and how we form opinions.

Thus having access, via the internet, to the scribblings of so many wise people may end up giving democracy the boost it really needs in the face of overwhelming powerful plutocratic forces.

Coincidentally, also on the 12th Yves Smith of Naked Capitalism published an article entitled, The 20 most influential blogs in financial media.  You can find that article here.  Here’s a flavour of what was written.

Thanks to Minyanville for publicizing this study by MindfulMoney on the nature and reach of social conversations in the investment arena. But even bigger thanks go to loyal readers and contributors for their frequent comments, leads, and critiques. The success of a blog depends on its community and I am very grateful for all the input so many of you have generously provided.

Perhaps the most interesting finding (boldface ours):

The research confirms the existence of a network of investment super-connectors with extraordinary media influence and reach. These super-connected new influentials are, for the most part, not well established voices in the media but individual bloggers who fiercely champion their independence….In the US, the network functions as the unofficial voice of Wall Street & the US federal bank with no mainstream media players at the centre of the network.

Given how many of these top blogs are critical of the status quo, this map may be hopeful sign that the blogosphere is beginning to become a important channel of discourse outside the reach of the PR machinery of major corporations and government entities.

And rather than publish all the top 20 names, you can see that list here, the top 10 are as follows:

1. Naked Capitalism
2. Infectious Greed
3. The Big Picture
4. Jesse’s Cross Roads Cafe
5. Zerohedge
6. Mish’s Global Economic Analysis
7. Calculated Risk
8. Paul Krugman’s Blog
9. FT Alphaville
10. Ludwig von Mises Institute

Anyone interested in downloading the original report as published on the MindfulMoney website can go to the article here; the link to the pdf, requiring prior registration, is towards the end of the article.  The article opens thus:

Most investors would acknowledge that social media is playing an increasing role in their investment decisions. Yet no-one has mapped the emerging network of influence likely to be playing a crucial part in those decisions.

Until now that is.  MindfulMoney’s ‘Social Finance: The New Influentials” report is aiming to better understand what this network looks like and to see if a number of super connections, so beloved of writers like Malcolm Gladwell, exist.

The research indicates that they do.

As I said, to download the article you need to register first – that link is here.

It’s a very interesting new world that we are living in and one, I pray, that is returning real power to the electorates.

Yet another beauty from Naked Capitalism

Regular readers will have run out of counting the number of times that I applaud Yves Smith and her amazing blog, Naked Capitalism.  Not only is it a fantastic source of many stories of real public concern, her daily antidote du jour is often delightful.  Here’s the one that came from her Blog posting of the 19th September.

Clarence and Cindy

Cattle dog Clarence plays with an alpaca named Cindy in “Alpaca Land” in Goeming, Austria. The two have lived together on the farm since they were 3 months old. Eighty-seven alpacas, the largest flock in Austria, live on the farm.

By Paul Handover

Another Yves Smith special!

Many will know that Naked Capitalism is a wonderful Blog and what Yves does is truly amazing.  (And a big ‘thank you’

Yves Smith

to Richard Smith who so ably stood in for Yves on her recent European trip.)

On the 29th July this year, Yves reran an article that she posted on May 11th, 2007.  It’s spot on, in my opinion.

Here’s how Yves starts the Post:

I am beginning to suspect that many are reacting to the over-stimulation of the modern world – the accelerating pace of change, data overload, time pressure, work and relationship instability – by turning off their brains. The rise of fundamentalism and the “family values” push, both efforts to turn back the clock, is one set of responses.

Another is the rise of sound-biting, of using pithy communications to cut through the clutter of the daily information assault. But sound biting is inherently reductionist. It doesn’t permit nuanced argument, or pointing out fuzziness in data, or shades of grey. Sound bites are great for simple, emotional appeals, lousy for policy development (which is one reason why this country seems incapable of having an intelligent discussion on important topics like health care. The public has been trained out of having a long enough attention span to listen to alternatives).

That is so true. Just re-read the sentences, “But sound biting is inherently reductionist. It doesn’t permit nuanced argument, or pointing out fuzziness in data, or shades of grey.” (My italics.)

We live in such a complex world that reducing any important idea or concept to a headline or to an executive summary is, in its own way, significantly short on integrity.

That article from Yves concludes thus:

Most businesses operated in competitive environments far too complex for a terse phrase to be a useful guide to action. Yet a magic incantation, a talisman, a battle cry is terribly appealing. But those who can resist the temptation of relying on a simple playbook and face the complexity and uncertainty of their environment are likely to steer a better path. But understanding risk and adapting also demands far more courage that trusting simple ideas.

Ironically, if one reflects for a moment, that closing sentence is a pretty good executive summary! “…… understanding risk and adapting also demands far more courage that trusting simple ideas.“

Precisely!

By Paul Handover

Learning from Dogs muses the new book from Yves Smith

ECONned, by Yves Smith

In Econned, Yves Smith, founder of Naked Capitalism, argues that the economy was doing just fine in the regulated environment up to the 1970s.  Then began the work of the Chicago economists who challenged Keynesian economics and touted the benefits of deregulation which eventually led to the financial crisis we have today.

Yves argument is internally consistent and well researched, but ignores some factors that I think would change the conclusions drawn from her work.

Yves Smith, author and founder of Naked Capitalism

First, Yves notes that the primary reason that economists are not useful to the real world is that economic research presumes equilibrium.  Smith misses the point here, but it is understandable. It took me years of study and contemplation to fully appreciate that an equilibrium simply gives economists a point of reference, a common base, from which to study shocks and movements. In and of itself, equilibrium is not interesting or important.   But movements to and from equilibrium are of real interest because they enable us to study and try to predict how individuals will react to incentives and changes in market conditions.

Second, we have to put the contributions of the Chicago economists of the 1970s into context.  Up until that time, the only real school of thought in macroeconomics was based on Keynes, who presumed that markets fail and that the government must play an active and large role – primarily through government spending and taxes — for the economy to perform well.  Keynes’ work was a reaction to the Great Depression.

Friedman’s monetarism also sought to explain the Great Depression, but focused on the role of monetary policy on the economy. This work showed that the missteps of the Federal Reserve was the primary cause of the depth and length of the Great Depression, and that long-term accommodative monetary policy causes inflation.  This body of work did not stress deregulation, although it did lean more heavily on enabling private market solutions than on replacing them with government solutions.  Neither theory is complete; Keynes focused on the short run (“In the long run, we are all dead” is a rather famous Keynes quip) and Monetarism focused on the long run.

There was a second large body of work that came out of the University of Chicago during the late 1960s and 1970s.  This research documented the tremendous costs of regulation. I know this literature personally and believe that its conclusions are very sound:  it shows that any effective regulation limits either the quantity or price of a good or service away from what it would have been without the regulation.  In fact, in my view, it was the passage of regulations requiring certain lending behavior that set off the series of events that led to the crisis, which is the exact opposite argument from what Ms. Smith makes.

By Sherry Jarrell

Will this prove to be an accurate analysis of what happened?

Regular readers of Learning from Dogs will know that Yves Smith of Naked Capitalism is held in high regard by this author.  She was one of the authors mentioned in a recent Post titled Free Speech and then a little later on there was a Post from me specifically praising her.

Last Friday the US Business News Network, BNN, ran a piece which included Yves discussing her new book ECONNED.

Yves Smith - ECONNED

The reason for publishing this Post is that the video clip covering Yves contribution is a very clearly articulated account of how we got ourselves into this economic mess.  For those like this author who don’t really understand many of the sophisticated economic terms used widely elsewhere, this was a refreshing ‘tutorial’.

Do watch it – Yves is brought in around 3 min 45 secs.

By Paul Handover

Helping thousands better understand this crisis

Yves’ Blog Naked Capitalism has been mentioned many times on Learning from Dogs.  Indeed, she was one of the Blog authors highlighted recently in this Post.

Yves Smith

I fail to understand how she finds the hours in the day to write in such detail – but those of us interested in getting under the skin of our present economic situation are all the better for it.  Here’s a great example that was published on the 23rd February.  I quote the opening paragraphs and then link to the rest of her post. From here on is her piece:

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Martin Wolf, the Financial Times’ highly respected chief economics editor, weighs in with a pretty pessimistic piece tonight. This makes for a companion to Peter Boone and Simon Johnson’s Doomsday cycle post from yesterday.

Let us cut to the chase of Wolf’s argument:

Now, after the implosion, we witness the extraordinary rescue efforts. So what happens next? We can identify two alternatives: success and failure.

By “success”, I mean reignition of the credit engine in high-income deficit countries. So private sector spending surges anew, fiscal deficits shrink and the economy appears to being going back to normal, at last. By “failure” I mean that the deleveraging continues, private spending fails to pick up with any real vigour and fiscal deficits remain far bigger, for far longer, than almost anybody now dares to imagine. This would be post-bubble Japan on a far wider scale.

Yves here. Notice he associates success and failure with polar options. But how can you “reignite the credit engine” when the financial system is undercapitalized even before allowing for the need to take further writedowns? The IMF has found the converse in its study of 124 banking crises, that purging bad debt is a painful but necessary precursor to growth. So I fail to understand how Wolf envisages that “skip Go, collect $200″ of releveraging quickly comes about. And in fact, it turns out that Wolf’s “success” is a straw man:

[to read the rest click here, Ed]

By Paul Handover