Daily Office:
Thursday, 11 November 2010

{The next Daily Office entry will appear on Monday}


¶ We begin and end the day with Felix Salmon’s insights, first on Medicare, then on Ireland. What both entries have in common is a stubborn refusal on the part of conservative, “property-owner” officials and business leaders to learn a new way of thinking about oversized liabilities. With respect to Medicare, which liberals acknowledge to be disastrously over-extended going into the future, Kevin Drum’s analysis has been discredited simply because it is liberal. That’s because there isn’t anything more cogent to argue.

The point here is that the deficit commission chairmen are doing everything in their power to perpetuate the intellectually dishonest meme that if we just pare enough excess from the government’s discretionary budget, that can somehow solve the problem of the soaring deficit. It can’t. Liberals like Drum recognize the problem, and can work out the mathematics of Medicare in public. The deficit commission, it seems, can’t.


¶ The brouhaha about Cathy Black’s appointment as New York’s schools chancellor, we hasten to note, may be premature, because Mayor Bloomberg’s choice is subject to approval by Albany officials. All the more reason, then, to ask questions about the mayor’s fundamental premise, summed up (mockingly) by Alex Pareene. (Salon; via GOOD)

The New York public schools system serves more than a million students. Picking the woman responsible for keeping Cosmo profitable and publishing anti-literacy newspaper USA Today to run the whole thing is corporatism masquerading as benevolent rule by our wisest technocrats.

The fantasy of the superstar CEO who can parachute into any company — in any industry — and right the ship through time-tested management techniques is common in corporate circles, but so are books of New Yorker cartoons about golf. Only the sort of lucky billionaire convinced of the moral superiority of the financially successful would assume that a random executive with no education experience could manage the New York city public schools better than someone who… you know, has experience managing public schools.


¶ At Abnormal Returns, a thought experiment about ETFs, lately alleged to cause market pricing distortions. What if the performance of ETFs during the financial crisis were a better measure of their market effects than that during the “flash crash”?

As with all financial products the ETF industry seems to be living up to the old motto of MTV:  “Too much is never enough.”  We have written extensively** about the proclivity of the ETF industry to create me-too and poorly designed funds.  One could also argue that the rise of indexing has helped distort the pricing of individual securities.  There is little doubt that the rise of certain ETFs have changed the underlying dynamics of certain markets.  Further one cannot discount the possibility that additional market meltdowns could be exacerbated by ETFs.

All that being said, the rise of the ETF industry has been net-net a boon to investors.  The allocation of assets in ETFs reflect the collective decision of millions of professional and amateur investors alike.  If the underlying prices of those assets are ultimately proven incorrect, then those investors will pay the price.  In the meantime they provide many investors with the means to invest in a wide range of asset classes in a relatively cost efficient manner.  In that respect, the ETF experiment has to-date proven a success.


¶ What a fun story to read, just a week before we take off for vacation: “Advanced jets hitting technological turbulence.” (Short Sharp Science)

But last night’s Boeing 787 emergency landing raises more issues for the much delayed airplane – the first ever to have a carbon-fibre pressurised fuselage rather than an aluminium one.

The source of the smoke that billowed in the cabin is uncertain but if it’s an electrical source in the plane – rather than the test equipment it is stuffed with for the certification programme – that could be a particular headache for Boeing. The reason? Like the A380, the airplane is what is known as a “more electric” design – in which some of the previously hydraulic systems are switched for electronic ones.

The aircraft is in many respects a flying computer network, and a problem with the electrics at this late stage will be unwelcome. Happily, the solution may be electronically identified: Boeing is now beaming data back from the Texas airfield to its base near Seattle, Washington, to diagnose the problem.


¶ Regular readers know that we like to check in with the raucous outlook of Awl columnist Mary H K Choi from time to time. She can be one sharp-tongued lady! Now we know why: she’s making up for all the repression of her Korean background. In a sweet piece at the Times (you’d never know…), she describes a recent pedicure.

By now, I’ve already fessed up to speaking Korean, because I’d never want to dupe this woman into freely talking smack in the refuge of my perceived ignorance. But that sets in motion the rapid-fire interrogation that, unlike Monty Python and the Spanish Inquisition, you expect every time. Round after round about my education, my apartment, my job, my man, my decision-making skills.

When among acquaintances and casual friends, I am vigilant to string up white lies like police tape around my personal details. But a nod from any woman born earlier than 1970 on our Asian peninsula flanked by the Sea of Japan and the Yellow Sea, however, awakens pre-programmed behaviors I can’t control. I answer every question to the best of my ability, and make my own polite inquiries, always careful to employ deferential syntax, the doily-lined, dustier version of the language that rarely appears in pop songs or the revenge trilogies I stream from the Internet.


¶ Timothy Garton Ash calls upon EU members to respond en bloc to Chinese tempations to “splittism.” The Nobel Peace Prize controversy is a fine occasion for showing firmness, but already there are signs of wavering from France. (Guardian; via Real Clear World)

Thus, to take a small but richly symbolic example, China is currently trying to persuade everyone – including EU ambassadors – to boycott the Nobel peace prize ceremony for Liu Xiaobo in Oslo on December 10. When it comes to Tibet or Xinjiang, China insists on the importance of total respect for its sovereignty. Yet now it is telling Europeans they should not attend a European ceremony in Europe. So China’s sovereignty is absolute, other people’s sovereignty is negotiable. (The United States has a similar double standard.)

This should be an easy call for Europe. The EU’s 27 member states should simply announce that all their ambassadors to Norway will attend the ceremony. Basta. But in the runup to president Hu Jintao’s imperial visitation to Paris last week, I read that France’s foreign ministry “said it would announce before December 10 whether it intended to attend the Nobel prize-giving”. Europe splits again. More tittering into the teacups at Zhongnanhai.

In Brussels last week for the annual meeting of the European council on foreign relations, a think-and-advocacy tank (on whose board I serve) devoted to developing a European foreign policy, I caught up with some of those charged with pulling together the threads of the EU’s foreign policy. They observed with a mixture of irony and irritation that, in relation to China or Russia, EU member states almost invariably want the EU’s collective stance to be tougher than their own individual stances.


¶ Maria Bustillos is crazy about her new Kindle, but, if anything, it has determined her to keep on buying books — because she’d rather own physical objects than license digital ones. The latter leaves the door open to fascist abuse. We advise all purchasers of ebooks to read the fine print.

Keep in mind these are your books that you bought or collected. Can you imagine a bookseller or publisher asserting rights over the contents of your bookshelves in your house? That’s basically what we’re talking about, here.


After reading all this, I rang the (excellent, and very polite) Kindle customer service up to learn more, especially about privacy issues. One thing I wanted to know was exactly how much access Amazon has to my private, personal Kindle files (you can put your own files on a Kindle, .txt and .pdf files that you made yourself.) But after being bumped up through a couple of layers of supervisors, I didn’t get very clear answers to my questions. For instance, on the question of Amazon’s remote access to my personal stuff. “We don’t have access to your files,” I was first told. But can you see my personal files? And if you wanted to delete my personal files, as was done with the Orwell books, could you do it? “We don’t do that.”

Yeah, but could you?


¶ One of the most noxious developments in international finance has been the growth of big banks in small countries. It’s a kind of “globalization” that doesn’t make sense, as the good people of Iceland found out to their cost. Now it’s the turn of the Irish. Felix Salmon:

One of the key lessons we’ve learned in this crisis is that any time a small country takes pride in its large and profitable international banks, everything is liable to end in tears. Big banks are too big to fail, which means their national governments have to bail them out—but when the banks are as big or bigger than the government in question, such a bailout becomes politically and economically disastrous. My feeling is that no government should ever allow its banks to become too big to bail out, because no government can credibly promise not to bail out such banks should they run into difficulties.

If you look down the Financial Stability Board’s list of the top 30 systemically-important financial institutions, there are definitely a few on there which look like they’re too big for a national bailout. The two big Swiss banks certainly are, and possibly the two big Spanish banks, too; then there’s six insurers as well. I have no idea what can be done about this: no one’s going to blunder in and force UBS and Credit Suisse to break themselves up just because they happen to be based in a small Alpine nation. But the lessons of Iceland and Ireland should wear heavily on any government with an oversized financial sector.

Have a Look

¶ Tom Meglioranza sings Rückblick, from Schubert’s Winterreise.

¶ Manhattan: the underlying wilderness. (BLDGBLOB)


¶ Tyler Cowen: “Which works ought to be read in their original language?

¶ “How the Gas Tax is Like Keyser Soze.” (The Infrastructurist)

¶ Choire Sicha on corpses in public. (The Awl)