Chan Akya wrote:
What is interesting is that US media resembles "camps" - you watch Rupert Murdoch's stuff if you lean right, while much of the rest leans outright left.

Those who follow ATol closely will know my views on this. For those who don't, some points:

- It's not only the US media, it's almost all Western corporate media, though the US has taken this to an extreme.

- News is news. Political bias, cherry-picking facts, dishonesty about context, selective coverage, and opinion masquerading as "analysis" have no place in the news media. Nor does opinion itself, except in its rightful place - the oped-pages in the middle of the newspaper, for example, clearly designated as "opinion/editorial/commentary".

- These days the stars of the news media are no more than proselytizers - people with an agenda to push. Their "news" presentation crawls with misinformation, disinformation and outright propaganda - and mostly, it's not even subtle. It's there in the open and very easy to spot by those who are not yet completely brainwashed. While the oulandish Fox is the most obvious culprit, respected US publications - eg, New York Times, LA Times - are frequently guilty. [An example: all major US publications have referred to Iran's recently revealed uranium plant as having been "discovered", when in fact Iran revealed the plant's existence before Obama announced it. Another example: many refer blandly to "Iran's nuclear weapons program", without even hinting that such a program is not known to exist. The most shameful example: Saddam has WMds.]

- America, your mainstream news media have been hijacked by people who seek to influence you, not inform you. Worse, the media have hijacked political debate - to the extent that a self-righteous, substance-addled sermonizer like Rush Limbaugh, or that PR stunt from Alaska, can seriously be considered as political leaders.

Finally, I'd like to claim that ATol is entirely free of such media crimes, but I cannot.

End of sermon.

PS, "Outright left" - I love it, Chan, and will indulge in ... !

Laboring a point in my post above (for non-atimes.net readers):

"Our view is that you should never start wars you don't intend to win, and if Mr Obama recommits to Afghanistan only because he doesn't want to be seen to lose, he should tell everyone now and not waste another American life." - Wall Street Journal (Opinion Journal)

I don't need any fingers to count the number of wars Obama has started. Nor do I need any fingers to count the number of wars the US has started in the past half century and won. I would need 70 hands to count the number of American lives wasted in Afghanistan before Obama took office. Ten fingers are enough to measure the average mental age of the Journal's opinion writers, and one finger is all that's needed to dismiss this propaganda.

Sorry, I have nothing to say about toy dogs, except that if I had one, I'd name it Rupert and kick it.

After spending a few days at the mercy of the US media, I must say that your points are very well made, Allen. There is a clear problem in the sector, driven funnily enough by FALLING circulations and lower advertising revenues; that seem to be effectively INCREASING the parochial bent (more predictable readership, keeping the advertisers happy etc.).

The other development appears to be that people are increasingly turning to blogs to get informed opinions and discussions. That in turn may also be causing the media to choose between left and right (in order that those on either side of any discussion - say abortion - can present a specific article as 'proof' of their opinions).

In that respect, the model for atimes.net is more sustainable because the funding is from the readers, therefore you as the editor have the luxury of rejecting pieces that don't merit certain quality considerations.

CA

There is a very interesting sociological experiment going on in the US media, from what I as an outsider can see, just not sure that its worth examining all by itself.

Why reinvent the wheel? This experiment is being examined and the results are broadcast. Save yourself the time, tune in to the Daily Show with John Stewart and then to the Colbert Report for respective "left" and "right" views.

dread - the notion that the US government had effectively capitulated to the bank lobbies, and decided to hide behind the facade of market-based solutions to what is essentially a government-created problem.

That is what we want to hear! The power has shifted from Presidents and prime Ministers to money lending, interest charging financial institutes.

World leaders have evolved into public relations officers, rationalizing the actions committed by the owners of the financial institutions, and easing the public into accepting the outcome.

Yes indeed - but are they doing it because they want to, or simply because the Keynesians have taken charge of the asylum and told them they have to?

This is an interesting segue into the workings of fear and greed in the global marketplace .. governments allow something (say free market capitalism) but don't fully understand it. Along comes a crisis and the people who would have had some chlorine injected into their gene pools go running to the government .. and because they happen to be from the same 'school' (as in the case of the UK and France) or at least social circles (as in Germany, Japan and the US), a bailout is quickly arranged.

Instead of blaming the folks who couldn't deliver on their responsibilities (the bankers), governments have run to the Keynesians who pretend that the fault lay with the free markets in the first place.

Nice job if you can get it ...

CA

aquicke wrote:

Sorry, I have nothing to say about toy dogs, except that if I had one, I'd name it Rupert and kick it.


Well, better lace up your boots Allen; just read somewhere that the man plans to sue sundry publications and web search engines if they "lift" articles from his newspapers as a means to converting more loyal readers to paying readers ...


... me, I am so bearish on the quality of his newspapers that the more likely scenario of web engines not being allowed to pick up stories from the Murdoch stable will be akin to the old Zen question of

"If a tree falls in the forest and no one is around, does it still make a noise" ... who will care about his opinions if they don't know such 'news' exist?



CA

If we substitute your "free market capitalism" with "socialism/communism" there, you get exactly the apology for communism, which turned out to be utterly meaningless in view of the collapse of the Soviet empire. The observation is that USSR failed, but strangely (or not?) the conclusion is debatable, did it fail because Communism is fundamentally doomed or because the politburo elites did not understand Marx & Engels one iota?

Not making any apology for communism at all, but I'm trying to get a clarification what criteria should be used to determine something is fundamentally wrong (say Communism) vs. something is just suffering _temporarily_ external/misguided/ignorant sabotage/interference (say Capitalism).

For many people, any collapse/failure can and will be blamed on China, Islam, Mexicans, crack mothers, unions, liberals, big governments, UN, MTV, poor peoples, oil princes, and now: bankers. As long as there are someone or something to blame, the free market ideology is safe from attack.

Greenspan said (heavily paraphased) he was surprised (duh!) that CEOs do not act in the best interest of shareholders and that people (particularly players in the free market) take more risk than is rational which results in the failure of the market taking corrective action.

You yourself wrote about "Todd the baker" and "Chinese company" (with the "Chinese" part being just distraction, the speculation in oil is not driven by politics, western companies would behave in the same manner in similar situation). Aren't these behaviors the fundamental cause of our current crisis?

Ok let me come at it from a different angle. For several years before the 2007 meltdown, CCP had taken various action to "cool" the stock market, real estate market and construction industry. These are the exact kind of government interference in the free market you fundamentally oppose, right? What do you think about these government interference now?

IMHO, it's tempting to interpret the CCP elites were acting, quite unlike Greenspan's self-interested CEOs, for the good of the whole society. supposedly, a theoretical impossibility.

Another interesting post, thanks. Breaking it into a few bite-sized chunks for future reference ...

1. Causality of system in collapse - I guess the basic question is whether or not ANY country prospered under communism; the answer is rather negative (Cuba - no thanks; Albania - er, what? North Korea - sure, that's a success).

The sole reason that communism is even taken seriously today is China: but let's face it, the reforms unleashed by Deng in 1979 pretty much ended the Maoist version of communism, and took economic matters far away from the Marx model (and indeed, arguably turned it on its head wherein foreign capitalists were able to rent cheaper Chinese labour for their profits)

So the notion that communism is a system that merits serious consideration remains questionable.

That is not the case for market capitalism - after all, a number of societies today have prospered under the same system, not the least across Asia (Taiwan, South Korea, Hong Kong etc.). So the economic collapse of market capitalist countries like the US wasn't so much a function of the system as the effect of interventions: hence the focus on removing these impediments for the 'true' system to survive.

2. For all his supposed genius (?!?), Greenspan probably never understood option pricing. The value of a call option (how many CEOs were paid) is based not on the LEVEL of stock prices but the VOLATILITY associated with the same. That is why many CEOs of boring 'utility' type businesses went for aggressive expansions.

The best example was more than 10 years ago, when Hong Kong Gas, a stable provider of gas utility, decided to morph into a internet service provider (I guess you were meant to read your email in the wok; putting a new meaning to e-wok as in the Star Wars character). They did it because anything to do with the internet would attract massive stock market adulation at the time.

This was funded by falling credit standards, and securitization played a part too. As a central banker, Greenspan missed all that ... and expected people to be 'rational'. They actually WERE being rational, just not in the way HE imagined.

3. The last question you pose is extremely interesting - and there is a reason I said 'Chinese'; and not just because it was shorthand for anything. My belief is that frequent intervention in economic functioning is the mark of volatility in the underlying economy.

In general, the Chinese government intervened frequently to cool down the stock market, property etc., but all that was nothing compared to the biggest culprit of all namely the lack of sterilisation of the biggest pools of money roaring into the country i.e. the pegged US Dollar against an undervalued CNY. In other words, the price of keeping its exporters competitive was to import an asset bubble (and leveraged too in the case of the property market).

In this case, I would say that the CCP is the opposite of the American CEO i.e. that they FEAR higher volatility because legitimacy is derived from the iron rice bowl. So, they acted in exactly the opposite fashion to the American CEO (and Greenspan, who probably didn't have a clue anyway). Seems plausibly rational rather than altruistic to me ...

CA

Chan Akya wrote:
Another interesting post, thanks. Breaking it into a few bite-sized chunks for future reference ...

And thanks for your patience and grace.

1. So the notion that communism is a system that merits serious consideration remains questionable.

Well you won't be able to bait me into defending Communism

Anyway, even before Deng, Mao had path the way by abandoning classical Marx & Engels. So the death of Communism in China even predated Deng's reform. (and you see where this line of thinking could go)

a number of societies today have prospered under the same system, not the least across Asia (Taiwan, South Korea, Hong Kong etc.).

Crony capitalism. But anyway, let's accept this assertion for now. I challenge that the logic leading from your previous statement to the next statement is far from natural and convincing:

So the economic collapse of market capitalist countries like the US wasn't so much a function of the system as the effect of interventions:

The fact is many great countries had prospered under many kinds of Feudal states, Monarchy and centrally-planned economies. Some civilizations even prospered by making human sacrifices to volcanoes.

If MNC is your ideal of market capitalism, than market capitalism is truly the new kid on the block in the history of humanity. History showed that any other kind of "system", say making sacrifice to volcanoes, had a longer and more robust track record than MNC economy.

hence the focus on removing these impediments for the 'true' system to survive.

In order to survive, the 'true' system had to be born first. Has it, ever?

2. ... is based not on the LEVEL of stock prices but the VOLATILITY associated with the same. ...

Can't say I fully understand this, but it rings true. And that's why I disagree with your faith and still find your articles and conversations so rewarding.

Anyway... if we agree that CEO's compensation structure is an important contribution to the current free market crisis, then let me ask how this CEO pay structure came about. Seem to be government intervention has had zero influence and it has been entirely determined by market forces. So we have this logic:

Market forces -> CEO's pay scales with volatility -> volatility increases, fear and insecurity takes over -> demands for CEO's skills heat up -> CEO's are incentivized by volatility

Run-away chain reactions: Free market blows up like an atomic bomb. End of history, but not as Huntington's formulation.

... and expected people to be 'rational'. They actually WERE being rational, just not in the way HE imagined.

On this point we total agree, now what's the solution to this problem?

3. ... but all that was nothing compared to the biggest culprit of all namely the lack of sterilisation of the biggest pools of money roaring into the country i.e. the pegged US Dollar against an undervalued CNY. ...

... they FEAR higher volatility because legitimacy is derived from the iron rice bowl.

Yeah... pretty much, you said it more clearly than I...

Let me bring it down to a personal level (mine).

I am a 40 year old scientist working for a traditional (100+ year history) tech MNC. My pay scale is impressive in number but in NYC area it's just enough to get by. For years I have been thinking about moving back to Hong Kong area for cultural/sentimental reasons. But when push came to shove, the cold hard economics kept me from taking the plunge.

Now, post-2008, is there new writings on the wall? I have 20-odd years of productive life left in me, where should I invest myself? My children have their formative years ahead of them, where will they get the best preparation for the unpredictable 21st Century? I have to take a non-trivial pay-cut and give up my Green Card to move back to HK. But after taking a weighted average of Atimes articles, it seems a flawed China is at least no worse than a flawed USA. Yes I see CCP messing with free market all the time, yes yes I see corruption daily. But my question is very personal: where is my (and my family) self-interest optimized? If a corrupt Communist system give me and my children relatively attractive prospects compared to an imperfect democracy/capitalism environment, then well as a scientist, I don't have any faith-based preference for one system vs. another.

No one is expecting China to take over the #1 seat, but it seems inevitable the gap between US and China is going to shrink significantly. The two most likely scenarios are: (1) the US and almost-free market system spirals out of control (blame governments if you want) and collapse, China and Japan survive on government-managed stability measures; (2) as Obama/Brown wish, there's a "re-balancing" of trade and up-valuation of RMB, the West is saved, but China & Japan extract a pound of flesh each.

Either way, I can indulge my cultural/sentimental preference without compromising my responsibilities to my family.

In particular a re-valuation of RMB would wipe out a 30% pay cut fairly quickly , right?

Thanks

1. Going back to Hayek and Mises, the point is that mankind has always prospered under laissez faire all through history. The greatest civilizations were always trade-based, internal or external. The convergence of government into the world of business is a fairly recent phenomenon - something that the Keynesians do not tend to agree with.

Niall Ferguson's recent book on the history of the financial system *The Ascent of Money* touches upon the use of financial markets by governments - through the issue of bonds, and the creation of trading empires through the stock market starting with the Dutch East India Company. There is a wonderful sub-section on the role of the top European banking family (Rothschilds) in "starting" wars.

None of this is to suggest that I would want unelected financial markets to make political decisions ahead of elected governments, but the notion of 'there is no such thing as the free market in history' doesn't stand scrutiny.

2. Actually, CEO compensation was partly derived from government policies namely tax rates on income versus capital gains; which made deferred compensation more feasible. The second was in the tech bubble where entrepreneurs had to be get incentives but companies needed to go public.

What was the relevance of option pricing to a central banker's control mechanisms? The answer was in the world of Leveraged Buyouts where stock volatility met credit markets; failing to control the credit 'bubble' pushed up stock prices and almost forced through the behaviour I described in the previous post.

3. Thank you for the personal insight. It is not my place to provide personal advice, but I would encourage young people in situations similar to yours to go ahead and move to lower-tax jurisdictions; purely because the main reason why a 40 year old pays taxes is the expectation of pensions and social security not to mention health care in their dotage. As such, there is very little chance that savage cuts can be avoided in the US system, across the entire spectrum of government-funded services (Roads, hospitals, schools etc.). To wit, please see the warning from the governor of New York state about impending bankruptcy this year, and the need to cut back on spending before hand.

Once you remove the anchored expectations of a 'better' lifestyle, every other risk - financial, political, moral - comes into perspective (in my opinion).

Lastly, it is my consistent experience that bright individuals are successful whether in a capitalist or communist system; the differences on systems really only matter for the mediocre and poorly talented (Capitalism pushes them down, Communism reward them).

CA