May 2009

Jonathan Rauch has a review of what appears to be one of the early classics dealing with the global economic crisis: ‘A Failure of Capitalism – The Crisis of ’08 and the Descent Into Depression,’ by Richard A. Posner

This book is not socialist screed decrying capitalism, Richard Posner is “one of America’s leading conservative intellectuals, so his insights into this crisis deserve attention”.

If you read the newspapers, you will not see much in “A Failure of Capitalism” by way of unfamiliar particulars. Cheap money and an inrush of foreign capital fueled a lending boom, which poured credit into the housing market. As prices went up, up, up, even risky mortgages seemed safe and everyone piled in, including banks. Financiers relied on securitization and complicated financial instruments to dilute the attendant risk, but the result was to spread that risk through the financial system, making it impossible to locate. When the housing bubble popped, everyone was holding bad debt, but no one was sure how bad or even how much. With banks suddenly looking undercapitalized, lenders stopped lending and started selling assets to raise cash. The faster everyone ran for the exits, the faster asset prices fell, dragging banks’ balance sheets down with them. Credit markets seized up, depressing the economy, causing more mortgage defaults and asset-price deflation, further weakening banks, further paralyzing credit, depressing the economy still more. . . . Repeat ad nauseam.

You know that story, and Posner tells it well, with a particular flair for showing how dozens of moving parts interacted. Being Richard Posner, however, he is not content to be an amiable guide through the thicket. His real interest is in finding and detonating grenades in the underbrush.

One is right there on the title page, which flaunts the D-word. The current crisis, Posner maintains, is a depression. True, it is not (we hope) a great depression. But the typical postwar recession is a partly self-correcting disinflationary contraction that soon subsides, often leaving the economy healthier. The present downturn is a self-sustaining deflationary contraction whose costly aftereffects will linger for years. The Great Depression led to World War II. Today’s depression presumably won’t be that bad, but it may cause a huge loss of output, an immense increase in the national debt, a swing to excessive regulation, a nasty bout of inflation, a decline in America’s economic and geopolitical power, and increased political instability abroad.

A typical recession is a market correction, usually of inflation or other economic imbalances; a depression is a market failure. And it is a failure (here is grenade No. 2) that the market is powerless to prevent. “An interrelated system of financial intermediaries” — a banking system, broadly defined — “is inherently unstable,” Posner writes. Think of it as “a kind of epileptic, subject to unpredictable, strange seizures.”

…A perfect storm of irresponsibility? Hardly. The crisis came about precisely because intelligent businesses and consumers followed market signals. “The mistakes were systemic — the product of the nature of the banking business in an environment shaped by low interest rates and deregulation rather than the antics of crooks and fools.” Were a lot of people reckless and stupid? Of course! But that cannot explain why the whole system crashed, since a lot of people are always reckless and stupid. The problem, fundamentally, is that markets cannot, and rationally should not, anticipate their own collapse. “A depression is too remote an event to influence business behavior.” Any single business can rationally guard against its own bankruptcy, but not the simultaneous bankruptcy of everybody else. “The ­profit-maximizing businessman rationally ignores small probabilities that his conduct in conjunction with that of his competitors may bring down the entire economy.”

…markets, entirely of their own accord, will sometimes capsize and be unable to right themselves completely for years at a stretch. (See: Japan, “lost decade” of.) Nor can monetary policy be counted on to counteract markets’ tippy tendencies, as so many economists had come to believe.Alas, economists and policy makers got cocksure. They thought they had consigned depressions to history. As a result, they missed warning signs and failed to prepare for the worst. “We are learning,” Posner writes, “that we need a more active and intelligent government to keep our model of a capitalist economy from running off the rails.”

Other reviews:

How to Understand the Disaster By Robert M. Solow (New York Review of Books)

The Rational Crisis – Richard Posner takes on the financial meltdown by Guy Sorman (City Journal)

Richard Posner is blogging at The Atlantic.

(All of this was via Fabius Maximus)


The New Socialism

by Limbic on May 31, 2009

The New Socialism: Global Collectivist Society Is Coming Online By Kevin Kelly in Wired Magazine:

We’re not talking about your grandfather’s socialism. In fact, there is a long list of past movements this new socialism is not. It is not class warfare. It is not anti-American; indeed, digital socialism may be the newest American innovation. While old-school socialism was an arm of the state, digital socialism is socialism without the state. This new brand of socialism currently operates in the realm of culture and economics, rather than government—for now.

The type of communism with which Gates hoped to tar the creators of Linux was born in an era of enforced borders, centralized communications, and top-heavy industrial processes. Those constraints gave rise to a type of collective ownership that replaced the brilliant chaos of a free market with scientific five-year plans devised by an all-powerful politburo. This political operating system failed, to put it mildly. However, unlike those older strains of red-flag socialism, the new socialism runs over a borderless Internet, through a tightly integrated global economy. It is designed to heighten individual autonomy and thwart centralization. It is decentralization extreme.

Instead of gathering on collective farms, we gather in collective worlds. Instead of state factories, we have desktop factories connected to virtual co-ops. Instead of sharing drill bits, picks, and shovels, we share apps, scripts, and APIs. Instead of faceless politburos, we have faceless meritocracies, where the only thing that matters is getting things done. Instead of national production, we have peer production. Instead of government rations and subsidies, we have a bounty of free goods.

I recognize that the word socialism is bound to make many readers twitch. It carries tremendous cultural baggage, as do the related terms communal, communitarian, and collective. I use socialism because technically it is the best word to indicate a range of technologies that rely for their power on social interactions. Broadly, collective action is what Web sites and Net-connected apps generate when they harness input from the global audience. Of course, there’s rhetorical danger in lumping so many types of organization under such an inflammatory heading. But there are no unsoiled terms available, so we might as well redeem this one.



Rules of Thumb

by Limbic on May 31, 2009

Steve Roesler of All Things Workplace, one of the most dependable book recommenders I know of, gives “Rules of Thumb” a rave review in a recent post on his blog.

The subtitle lives up to its words: “52 Truths For Winning At Business Without Losing Your Self”.

don’t see many book reviews here even though we receive many
promotional copies. I do look hard at each one but, given my own
business and personal priorities, I only write a review when it’s a
raving recommendation, like: Rules of Thumb: 52 Truths for Winning at Business Without Losing Your Self

Get it over at:


The Nakagin Capsule Tower

by Limbic on May 31, 2009

“Once you arrive in Tokyo’s busy commercial district of Shimbashi, a short walk from the station brings you to a noisy highway overpass, and beside that the futuristic Nakagin Capsule Tower. The tower’s stunning design may strike passersby as something straight out of a science-fiction movie, but it stands as a unique architectural beacon amongst the common apartment high-rises and office buildings of Ginza. Designed by the late Japanese architect Kurokawa Kisho, the 14-story tower is composed of 140 individual capsules that function as apartments and business offices. The tower has also served as a prototype of sorts for uniquely Japanese urban accommodations, such as business and capsule hotels.”

PingMag – The Tokyo-based magazine about “Design and Making Things” » Archive » Nakagin Capsule Tower: Architecture of the Future


This looks like a parody headline form the Onion, but its true apparently. Some poor dog is still returning to the spot it was abandoned a year ago hoping to be reunited with their owner.

Read On:  Serbia: Abandoned Dog Loyally Waiting For a Year in Same Location for His Owner to Return to Him. « Serbian Animals Voice


Brazilian Turbofolk (No Joke)

by Limbic on May 30, 2009

This has to be seen to be believed. A Balkan subculture scene in Rio De Janeiro, Brazil replete with Kolo dancing, turbofolk and Balkan ethno-costumes.

Its ironic that Belgrade remains one of the most Brazilian Drum and Bass friendly town on Earth, with Dj Marky playing here frequently.

(Via Wish I could Reach you In Belgrade)


Time management madness

by Limbic on May 28, 2009

“Imposed time management systems make you miserable, and they don’t work…”

An excellent article from Anxiety Culture, Read on.


Astonishing 3D Murals

by Limbic on May 27, 2009

Off the wall: The astonishing 3D murals painted on the sides of buildings by a trompe l’oeil artist | Mail Online


Damien Walters Showreel 2009

by Limbic on May 27, 2009

Awsome displays of athleticism and physical mastery

YouTube – Damien Walters Showreel 2009


On the one hand we see from official statistics that crimes rates are apparently dropping fast. On the other the UK media is reporting more crime than ever before, tapping into a crime-fear Zeitgeist in the country.

“[T]he British government is strikingly at odds with both the
press and popular opinion. Supported by Britain’s most prominent
criminologists, the government insists that the country has, in fact,
been experiencing the longest period of falling crime since
record-keeping began. Indeed, it says, the rapid and sustained rise in
crime that began in Britain in the late 1950s has been entirely
reversed: crime reached a peak in 1995 but has since dropped by 48
percent. Home Secretary Jacqui Smith has declared herself “extremely
pleased” by the dramatic improvement in public safety.

in this story is wrong. But who? Have the British people succumbed to
mass hysteria? Or is the government’s methodology flawed?”

In a brilliant article in City Journal, Claire Berlinski tackles the issue. It would appear that the crime statistics are indeed wrong, and that far from the media being responsible for “fear-mongering”, they are merely expressing the widespread fear and anger ordinary Britons feel about the rapidly worsening crime situation in Britain.

Read on:  The Dark Figure of British Crime by Claire Berlinski, City Journal Spring 2009