Q&A: What is LIBOR anyways?

If you've been reading the papers over the past month, you have most likely read about LIBOR--and probably even seen a graph of it year-to-date. That's because it's the indicator that "credit markets are frozen"--you've probably read or heard that phrase more often that you thought you ever would. (See for instance this article from

So what in the heck does all this mean?

I could just redirect you to the wikipedia article (http://en.wikipedia.org/wiki/LIBOR), which begins as follow:

"The London Interbank Offered Rate (or LIBOR, pronounced /ˈlaɪbɔr/) is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the London wholesale money market (or interbank market)."

But let's break it down. First off, note that LIBOR is an acronym--London InterBank Offered Rate. Let's break that down letter by letter:

R for Rate: LIBOR is an interest rate, just like a mortgage rate or an interest rate on a CD you've got with a bank. With a mortgage rate, you've borrowed money, and you're paying that interest rate on the principal to whoever holds the mortgage (as we've learned over the past few months, that could in fact be holders of mortgage-backed securities all over the world, but let's not get into that now). With a CD, you've actually loaned your money to the bank, and they're paying you the interest rate on the amount you've invested (lent).

So who are the borrowers and lenders when it comes to LIBOR? It's an InterBank rate--it's an interest rate for interbank lending, i.e., for loans between banks. Why do banks lend to each other? Let's not get into that right now either.

What do we have left? An L and an O: L for London is something of an historical artifact--that the rate is set by the London wholesale money markets, i.e., the interbank lending market in London, b/c the British Banker's Association took the initiative to do so in 1984, and it subsequently became the benchmark rate for all kinds of finance-related stuff all over the world.

O for Offered means, as the wikipedia quote says, a measure of the rate at which banks *offer* to lend to the other banks. There is also LIBID, which is a bid rate instead of an offer rate--a measure of the rate at which banks are accepting deposits from other banks.

Why is it so important? LIBOR is a measure of banks' "cost of capital"--how much it costs them to raise funds to do business, or conversely how much they can earn on their excess cash. And it's also a measure of how much they trust that their fellow banks (their counterparties) will be able to repay these loans--when LIBOR spikes, as it has over the past month, it means that banks are very reluctant to lend to each other. It's clear why that is these days--banks are worried that any given bank that they lend to may not be around to repay the loan when it comes due (cf. Lehman, Bear, etc.)

That raises another point--how long are these loans for (more precisely, what is their maturity). There are actually multiple LIBOR rates--the most common ones are overnight, 1 month, 3 month, 6 month and 1 year. Currently bank are very reluctant to lend beyond the overnight maturity--they're worried about what could happen in the next month, the next 3 months, etc.

I'll close with one more reason why LIBOR is important, which is a bit more wonky. A striking feature of the Black-Scholes option pricing formula (that's for another day--see http://en.wikipedia.org/wiki/Black-Scholes) is that the interest rate that appears in it is the "risk-free rate," which is the rate at which the market participant can borrow and lend with no risk (of default). Sometimes this is assumed to be the US Treasury rate, but often banks who trade in derivatives markets use LIBOR as a proxy for the risk-free rate (see for example Section 4.1 of Hull, http://www.amazon.com/Options-Futures-Other-Derivatives-5th/dp/0130090565).

Hence, with LIBOR so crazy and volatile, trading desks have difficulty pricing and hedging their derivatives books..

Finally, here is the BBA's website, which has much more on LIBOR, including historical data: http://www.bba.org.uk/public/libor/

A couple newspaper notes: NYT/WSJ

I've saved a large number of newspaper articles over the past few months with the intention of blogging them, but very few have made it up. Esp with the finance-related ones, by the time I get around to going through the pile(s) of pulled-out pages I've stashed here and there around the apartment, the articles are too dated.

That said, I do still have a handful that I will get up..e.g., the good number references to Robert Moses that I've seen in the NYT over the past few months.

But for now wanted to do a short note with a couple observations about reading the paper (which is consuming a large proportion of my time these days, both in an absolute and relative sense (relative in the sense that it's "crowding out" book-reading..hence why I still have hundreds of pages left in "The Power Broker" and in "Death & Life of Great American Cities", even though I started both of them back at the beginning of the summer of Sam).

The two observations:

1) I am truly lamenting the demise of the stand-alone Metro and Sports sections in the print NYT. We had a system: Anj would take the front page, maybe Arts, maybe Business, which I'd catch up with in the following day. I'd start my day with the Sports and Metro--short and relatively non-heavy reading. And to tell the truth, I was spending more time with Metro over the past few months that Sports. A couple of the story lines that caught my attention over the summer:

(a) Brooklyn crime reports (e.g., the elevator assault in Crown Heights, the cabbie shot in the eye in Clinton Hill, the 9-year old shot and killed in the Weeksville Houses:
http://www.nytimes.com/2008/08/11/nyregion/11taxi.html
http://www.nytimes.com/2008/08/07/nyregion/07arrest.html
http://www.nytimes.com/2008/08/19/nyregion/19assaults.html )

(b) Transit-related coverage, ranging from newsy stuff like the proposed MTA fare hike, to features like the one on the Franklin Avenue shuttle, to stuff in between, like the article about "In Decade of Unlimited Rides, MetroCard Has Transformed How City Travels"--which included a distribution!
http://www.nytimes.com/2008/07/24/nyregion/24shuttle.html
http://cityroom.blogs.nytimes.com/2008/02/29/all-about-the-mta-fare-increase/
http://www.nytimes.com/2008/07/16/nyregion/16metrocard.html

As of Oct 6, the Times folded Metro into the A section (and renamed it New York), and Sports into Business. So although the Metro stories are there, they're buried deep within the A section, and I don't get my hands on them til the following day...

2) Over the past couple weeks we're once again getting not only the print NYT delivered, but also the print WSJ. We were barely keeping up with the NYT (esp since I have a hard time recycling w/o at least flipping through)..now we've got a veritable avalanche of paper. I doubt we'll keep the WSJ beyond a short trial period, but it has been useful, as I've sorted out what, for me, is worth reading out of the Journal: choose one or two relevant articles out of Money & Investing; skip most of the front page section, but take a look at the op-ed pages; see if anything interesting in the Personal Journal; I skip Marketplace altogether.

Ironically I've found the op-ed pages to be what I spend the most time on, and even though it's often not stuff I agree with, they've often got stuff worth reading. E.g., right now I've got a healthy pile of pulled pages containing: "A Short Banking History of the US"; Gary Becker saying "We're Not Headed for a Depression"; a couple by their write Crovitz, one on VAR ("The 1% Panic") and one on JP Morgan ("He was more effective than Bernanke and Paulson combined"); a conservative economist writing on "Krugman Helped Us Understand Trade"; just yesterday, Karl Rove claiming "Obama Hasn't Closed the Sale", and their writer Daniel Henninger on "McCain's Katrina"; and today, William Poole on "Treasury Has No Authority to Coerce the Banks":

http://online.wsj.com/article/SB122360636585322023.html
http://online.wsj.com/article/SB122333679431409639.html

http://online.wsj.com/article/SB122385689217827341.html
http://online.wsj.com/article/SB122264844037784117.html
http://online.wsj.com/article/SB122394373157731081.html
http://online.wsj.com/article/SB122411909182439021.html
http://online.wsj.com/article/SB122411036847938241.html
http://online.wsj.com/article/SB122420321632343101.html

As you can see..way too much to keep up with..

Finally, one joint WSJ/NYT note: one reason I used to like getting the print WSJ was to read breakingviews on a daily basis, which used to get carried on the back page of the Money & Investing. But the WSJ dropped them in favor of their in-house "heard on the street", which is decent; but I still prefer breakingviews--which got picked up by the NYT, page 2 of Business!

Grossman followup: S&P in 1970s

One more note regarding Grossman's talk: he closed by saying it's embarrassing to hear commentators say that what's happening in the markets is unprecedented. As a case in point, he referred to the drop in the S&P in the mid-70s. He could find the exact numbers during his talk, but seems like he may have been referring to the period from Jan 1973 to Oct 1974, when the S&P dropped from a peak ~120 to a trough of 62: a drop of nearly 50%. Another remarkable fact: it didn't reach 120 again til July 1980. That was near the start of an unprecedented nearly 3-decade bull market in US equities.

Play around with http://finance.google.com/finance?q=INDEXSP:.INX ; but instead of looking at 1d or 1w, take a longer historical view.

Sanford Grossman / Deleveraging society

Last night got to listen to Sanford Grossman (http://en.wikipedia.org/wiki/Sanford_J._Grossman)
speak on the current financial/economic situation. It wasn't anything
groundbreaking, if you've been reading the paper over the last 12
months, but nevertheless, it was good to hear it distilled into a
couple main themes. Namely, his distillation is that what's happening
is (1) deleveraging everywhere, and (2) the return of risk premia.

His concluding thought was that while deleveraging
is happening at the level of financial institutions and individuals,
"the last shoe to drop" is the leveraged US economy itself--we've been
relying on foreign investors buying our debt, in order to finance our
current account deficit (trade deficit + fiscal deficit)..I googled
"current account deficit deleveraging" for a writeup--first hit was
this article from last week which summarizes it pretty well:
http://www.huffingtonpost.com/david-paul/deleveraging-society_b_130628.html

(Incidentally, 2nd hit was this "naked capitalism" post from late July,
which I think I'd actually skimmed at the time (maybe Krops pointed it
out to me?)...the rather worrisome title there is "Has deleveraging
even begun?"..I'm not sure whether he was trying to make the same point
as Grossman, but seems of a piece: http://www.nakedcapitalism.com/2008/07/has-deleveraging-even-begun-not-for.html )

Grossman's point: while the Fed/Treasury can bailout overleveraged
financial institutions or homeowners, as they get squeezed in this
"systematic deleveraging" (a phrase I saw in another article this
morning), it can't grow the economy, which is what's necessary to
deleverage our whole society. That will take a real readjustment of
our savings & consumptions patters, reallocations of capital and
labor--the sign of the latter being high unemployment.

Alec Baldwin & "30 Rock"

Read this profile of Alec Baldwin in a recent New Yorker, which led me to this--it's brilliant:

Fw: Review-a-Day: Infinite Jest (96 Edition)

Amid all the chaos in the world of finance this week, I've still found myself thinking about David Foster Wallace quite a bit this week. I posted some links a couple days ago, which hopefully I'll incorporate into more of a post. In the meantime, this just landed in my inbox. It's not actually a review of "Infinite Jest", but rather a short account of DFW's literary career:

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Subject: Review-a-Day: Infinite Jest (96 Edition)

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Wednesday, September 17, 2008 Books Discussed in This Review Infinite Jest (96 Edition) by David Foster Wallace List Price $18.95 Your Price $10.00 (Used, Trade Paper) Add to Wish List Your Price $ (, ) Add to Wish List Your Price $ (, ) Add to Wish List Your Price $ (, ) Add to Wish List More reviews from Los Angeles Times Infinite Jest (96 Edition) by David Foster Wallace David Foster Wallace: Idealistic skeptic A Review by David L. Ulin Post a comment about this review on the Powells.com blog I didn't know David Foster Wallace all that well. We met a couple of times, and once, I interviewed him onstage at the Writers Guild Theater in Beverly Hills. I asked him on a few occasions if he'd review for the paper, but he said he'd had a bad experience and had sworn off reviewing for good. We shared a literary agent. In the lead-up to the 2004 presidential election, we spent an hour or so on the phone one afternoon discussing politics, which he followed with the rabid fascination of someone who, despite all better judgment, believed the process mattered, that somehow, somewhere, there was a candidate who might see us through. I never got a chance to discuss the current presidential race with Wallace; no one did. That's our loss, for Wallace, who reportedly hanged himself Friday night at age 46, was an astute observer, sharp and clear-eyed, idealistic and skeptical all at once. His 2000 Rolling Stone profile of John McCain -- reissued in June as the slim, stand-alone volume McCain's Promise: Aboard the Straight Talk Express With John McCain and a Whole Bunch of Actual Reporters, Thinking About Hope -- offers a vivid example of this perspective. Wallace sees the campaign mechanism for what it is while still recognizing something fundamentally different, real even, about the candidate, who eight years ago was in some sense the Barack Obama of his time. Here we have a hallmark of Wallace's writing, his unwillingness to take anything at face value, the penetrating focus of his thought. An auspicious debut Wallace emerged out of nowhere with the publication of his first novel, The Broom of the System, in 1987. He was 25, a graduate of Amherst and the master of fine arts program at the University of Arizona, and along with a handful of other then-emerging writers (William T. Vollmann, Jonathan Franzen), he helped transform American fiction in a fundamental way. The 1980s, after all, was the era of "Dirty Realism," of small-bore, naturalistic stories in the style of Raymond Carver and Richard Ford. For such writers, literature was essentially domestic, but Wallace blew that approach away. Exuberant, picaresque, cynical but also heartfelt, The Broom of the System hit the literary circulation system like a 450-page burst of amphetamine. It wasn't a perfect book; like much of Wallace's early fiction, it wore its inspirations -- especially that of Thomas Pynchon -- on its sleeve. But what The Broom of the System did was to offer up a set of possibilities, to remind us that the novel could be expansive, that it was possible to push the boundaries, to create a larger social landscape in fiction, that it wasn't wrong to be ambitious, to use literature to get at the unknowable heart of the world. This was a promise Wallace would bring to fruition with the 1996 novel Infinite Jest, which at 1,079 pages, including 100 pages of footnotes, was a clear bid to create that mythical monster, the Great American Novel, albeit entirely on his own terms. That he may or may not have believed in such a monster only added to the achievement; this was a writer who clearly saw through the elusiveness, the futility, of his own striving and yet continued to strive all the same. In the wake of Infinite Jest, the book's gimmicks -- the footnotes and acronyms, the arch tone and irony -- drew the most attention, not least because they were quickly popularized by writers such as Dave Eggers and Steve Almond, who adopted them as an aesthetic stance. But in fact, it was Wallace's odd sense of double vision that most defined his sensibility. He was a humanist who could not help but see both sides of the story, who imagined himself into the gray middle areas of his writing. This is the key to his McCain piece, or, for that matter, his best-known work of nonfiction, the novella-length A Supposedly Fun Thing I'll Never Do Again, originally published in Harper's as "Shipping Out. " Here, Wallace spent a week on a cruise ship, critiquing the infantilization of the journey, the way that, on board, every wish or demand was instantly fulfilled. Yet even as he pinpointed every idiotic detail, he found himself drawn in. The power of the piece lies in its explication of that process, although that has less to do with Wallace lowering his defenses than amping up his empathy. However contrived or phony the experience, he felt the longing of his fellow passengers, their need to step outside their own complacency, the complacency of daily life. The irony, of course, is that the cruise was all about complacency, but for Wallace, irony was not enough. His 1993 essay "E Unibus Pluram" makes that idea explicit, taking on the irony-izing effect of television on American culture, while rejecting irony as a literary force. That's an idea to which he would return in his writing, piercing the absurdities of contemporary culture yet also seeking something deeper, the core connection to which literature aspires. This is the ambiguity, the complexity, that transfigures his best writing, although clearly, these were issues he could not resolve. Thoughtful advice In 2005, Wallace gave a commencement address at Kenyon College in Ohio that has been widely circulated in classrooms and on the Internet. In that speech, he told the graduating seniors: "[I]t is extremely difficult to stay alert and attentive, instead of getting hypnotized by the constant monologue inside your own head." Up until this week, I would have said that those were words to live by, but in Wallace's case, perhaps, the opposite was true. Rather than a repudiation, this just makes his work seem all the more urgent, especially the promise that "learning how to think really means learning how to exercise some control over how and what you think. It means being conscious and aware enough to choose what you pay attention to and to choose how you construct meaning from experience. Because if you cannot exercise this kind of choice in adult life, you will be totally hosed. " David L. Ulin is book editor of The Times. Read more about this book Three Decades of Quality Writing and Criticism The National Book Critics Circle, founded in 1974, is a non-profit organization consisting of more than 850 active book reviewers who are interested in honoring quality writing and communicating with one another about common concerns. To learn about how to join, click here.

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David Foster Wallace - links

I'll have to compose a proper essay of some sort..but for now, some links that will go into that:

(if you don't know why:
http://www.nytimes.com/2008/09/14/books/14wallace.html)

his book on infinity:
http://www.amazon.com/Everything-More-Compact-Infinity-Discoveries/dp/0393326292

his book on hip hop:
http://www.amazon.com/McCains-Promise-Straight-Reporters-Thinking/dp/0316040533/

his book about McCain:
http://www.amazon.com/McCains-Promise-Straight-Reporters-Thinking/dp/0316040533/

An essay about him that includes the passage from "Infinite Jest" that has stuck w/ me for more than a decade:
http://everything2.com/title/David%2520Foster%2520Wallace

"It now lately sometimes seemed like a kind of black miracle to me that people could actually care deeply about a subject or pursuit, and could go on caring this way for years on end. Could dedicate their entire lives to it. It seemed admirable and at the same time pathetic. We are all dying to give our lives away to something, maybe. God or Satan, politics or grammar, topology or philately - the object seemed incidental to this will to give on self away, utterly. To games or needles, to some other person. Something pathetic about it. A flight-from in the form of a plunging-into. Flight from exactly what?"

On Wall St

That is where I am right now, sitting on the steps at the corner of Wall and Nassau, across from the imposing NYSE.

Glad that lunch got scheduled for today down here, as it got me to come through here today, on this singular day in the history of Wall St.

Though (and this too reminds me of Grant's "Trouble with Prosperity"), the epicenter of today's events aren't literally on Wall St, but across in WFC and in midtown.

Overheard a guy sitting next to me on the steps, remark to his friend, no doubt in the context of a conversation about current events, that things have changed--case in point, that there are many more tourists here on the actual Street than there are workers.

But this is why New York. To be here, where its happening, as its happening. Or where it happened. Last Thursday, seeing the two towers of light from our rooftop, and spontaneously taking the 4-5 into lower Manhattan, to walk around the WTC site, to walk underneath those towers of light.

At the tip of the island at the center of the world. Or at least it was, for the 20th century.

Now that I belatedly have mobile email, look for some mobile blogging such ad this. I think being away from a full desktop & browser might be good for actually writing.
Sent via BlackBerry from T-Mobile

new Lauryn Hill?

Up late, watching the US Open (Nadal v Mardy Fish, men's quarters) and on the web.

At some point while in SF, I came across the "group blog" Pop+Politics. And now that I look at the site, I vaguely remember how--I must have read or heard something about the founder.

I hadn't visited the website in a while, but have been still getting their e-mail newsletter/updates..and today happened to scroll through it and saw this reference to a new Lauryn track. It's one of those YouTube non-videos:

A few NYT articles about Velib

Following up on my previous post about Velib, here are a few NYT articles that I've saved with the intention to post:

(1) An Travel section article from Oct '07, soon after the system's debut:

TRAVEL | October 14, 2007
Journeys | Paris: Finding Liberte on Two Wheels
By ERIC RAYMAN
Paris’s self-service bicycle docking stations make it easy even for fresh-off-the-plane Americans to explore the city in a way that you can’t by foot, by Métro or by taxi.

(2) A news article that ran this summer, about the success of the first year of Velib:

INTERNATIONAL / EUROPE | July 13, 2008
A New Fashion Catches On in Paris: Cheap Bicycle Rentals
By STEVEN ERLANGER
A year after the introduction of the sturdy gray bicycles known as Vélib’s, other major cities, including American ones, are exploring similar projects.

(3) Another one that also ran in July, about how Paris is considering a similar program w/ electric cars!

INTERNATIONAL / EUROPE | July 29, 2008
After Bike-Sharing Success, Paris Considers Electric Cars
By THE ASSOCIATED PRESS
The new car-sharing program, expected to begin in late 2009 or early 2010, would bring a fleet of 4,000 electric cars and would be run by the city of Paris.

I will have to write up an account of our own (overwhelmingly positive) experience with Velib...perhaps I'll put it off until I finally upload our photos from that trip, since we've got a good number of Velib photos among those.

Fw: T.A. StreetBeat: "NYC Considers Paris Style Bike-Sharing"

About a year ago I joined NYC "Transportation Alternatives" (T.A.)--a group that promotes exactly that.  We got a nice T-shirt and the very useful NYC bike map out of the deal, and I also get their e-mail newsletter. 

I've been planning a post about Paris's Velib bike-rental system, which we sampled during our trip there in late May, and about how NYC and SF could use such systems (we did see a station of the DC system in Dupont Circle when we were there a few weeks ago).  

I'll eventually draft such a post; in the meantime, here's an entry from a recent T.A. newsletter with some encouraging news on that front:

NYC Considers Paris Style Bike-Sharing

In Paris, Vélib and other public transportation options connect seamlessly to expand and improve the city's larger transit network

On July 9th, the NYC DOT issued a Request for Expressions of Interest (RFEI) to bring a bike share program to New York City. The announcement came days before the one-year anniversary of Paris' Vélib bike share program, and amidst a bike-share craze spreading through cities as far reaching as Washington D.C., Chicago, Montreal and Barcelona. What all of these urban centers have in common is the realization that public-use bicycles can help municipalities reduce auto-use and switch many trips to more efficient modes.

When implemented correctly, bike share holds enormous potential to add a low-cost, sustainable and healthy transportation option, expand the reach and flexibility of the existing public transportation system, discourage the use of single occupancy vehicles, free up space on overcrowded subways and buses and enable a network of bicycle transit in a dense urban environment, all of which go hand-in-glove with Mayor Bloomberg's PlaNYC.

In fact, New York City is perfect for bike share because it has a rapidly expanding on-street bike network, the density and mixed land use necessary to generate sufficient ridership and relatively flat terrain. As the City collects expressions of interest from bike share operators around the world, Transportation Alternatives, along with the newly formed NYC Bike Share Coalition, will be working hard to advocate for bike share characteristics that have best predicted success in cities around the world:

• 1 bike per 200-400 residents
• A dense network of stations (1 every 1000 feet or a 5-10 minute walk)
• Connectivity to where people need to go
• Connectivity to other modes of public transportation
• Strong anti-theft technology
• Strong Mayoral leadership and inter-agency cooperation in planning and implementation

Please contact bike@transalt.org if you are interested in supporting T.A.'s advocacy efforts to bring a world-class bike share to NYC. And check out the Streetfilm about Vélib, arguably the world's most successful bike share program to date.

Two from the Sunday NYT Business section

Two articles from last Sunday's Business section which are worth reading:

First:

BUSINESS / YOUR MONEY | August 24, 2008
Economic View: Finding the Mess Behind the Mess
By TYLER COWEN
The fundamental problem in the American economy is that, for years, people treated rising asset prices as a substitute for personal savings.

This one repeats a lot of themes you may already be tired of reading about, regarding the current economic/financial mess we find ourselves in. But it brings to the fore an underlying reason for this mess--the tagline above, about how Americans have used rising asset prices (stocks and then houses) as a substitute for savings. In fact, let me quote the first part of this article at length:

A BURSTING real estate bubble set off the Japanese recession of the 1990s, which deepened as ailing banks languished. It took Japan’s economy more than a decade to resume steady, noticeable growth.

Will this happen to the United States? Probably not, but we may face a protracted process of recovery, stretching longer than the two or so years usually required to climb out of recession.

Behind every financial crisis there is usually a crisis in the real economy, based in some underlying structural deficiency. Even if the financial crisis is bottoming out, sooner or later the real crisis must be faced.

The fundamental problem in the American economy is that, for years, people treated rising asset prices as a substitute for personal savings. The thinking went something like this: As long as your home’s value rose every year, you didn’t have to set aside so much from your paycheck. If your stocks went up, too, so much the better; don’t forget that the Dow Jones industrial average stood in the 800 range in 1982 and seemed to rise almost nonstop for many years.

Of course, asset prices haven’t been rising much lately, so many people will need more savings for their retirement or for possible emergencies.

The need to save more sharpens a number of interrelated secondary problems. First, America is aging. More people than ever are entering the years when they stop saving and start spending their nest eggs. That means the transition to higher-than-expected savings may be drawn out and painful.

The second problem is that the American economy is enduring a credit crisis, with many banks trying to raise more capital and make fewer loans. Savings are good for the economy when they lead to investment, but there is no guarantee that financial institutions will be allocating capital efficiently.

The third problem is that lower consumer spending will require the American economy to make some shifts. That may mean fewer Starbucks and fewer new homes but more tractor production for export to foreign markets. In the long run, shifting some consumption to investment is probably beneficial to the economy; in the short run it means job losses and costly readjustments.

In addition, there are still excess homes on the market, and housing prices need to fall further. Of course, such price declines can make banks less solvent and thus worsen the credit crisis. And politicians would like to moderate this fall in prices, again prolonging the adjustment process.

And also a paragraph near the end:

Emerging from the current slowdown isn’t just a matter of political will or smart central banking. If the recipe for success requires smooth adjustment into new growth sectors, more savings from disposable income, cleaning up the housing mess, well-functioning energy markets, and more effective financial intermediation — all in the right combinations and in the right sequences — neither the government nor the Federal Reserve can control this process. The Fed can add regulatory and monetary clarity, but there isn’t any magic bullet. Beware of anyone who tells you there is.

The Japanese failed to break out of their recession quickly because they didn’t promptly close down or clean up their problem banks. So far, the Fed and other regulators show no signs of making this mistake; they have been vigilant in resolving crises as they occur. But that’s not enough to guarantee a successful transition. The American economy will be tested for its deftness — and the test will be difficult precisely because there isn’t a single enemy on which to focus.

Note that the essay begins with allusions to Japan's experience in the 1990s: a long, protracted recession which followed a real estate bubble. That is a comparison that a lot of people are making these days. It's unlikely that the US will also go through a "lost decade" of economic stagnation..but it's not impossible.

In fact, the second article I wanted to point out indicates we've got a ways to go, by looking at Merced, CA as a sort of "canary in the coal mine" for the rest of the nation's housing market:

BUSINESS | August 24, 2008
In the Central Valley, the Ruins of the Housing Bust
By DAVID STREITFELD
The experience of Merced, Calif., suggests that recovery from the national real estate debacle will be painful and protracted.

If you don't have the time, patience, or inclination to read that lengthy article, take a look at least at the accompanying graphics.

"Bird's Nest, in the Style of Cubism"

The title pretty much describes the painting, by an artist named Zhang Hongtu. It was featured in this WSJ article from last week. Take a look. Also, here is the artist's website (which, the article notes, is blocked in China): MoMAO (Museum of My Art Only!). The article notes that the Hongtu lives and works, oddly enough, in Woodside (Queens).

I'd saved that page of the WSJ not only for that article, but also for a short piece Nat Hentoff wrote, titled "These Little Kids Thing Coltrane is Cool"--a nice piece to read it you're a listener of jazz and/or an educator.

Amazing that Hentoff is still writing, but somewhat odd it's for the pages of the WSJ. But the latter has some decent culture coverage..I've seen insightful articles over the past couple weeks about the passings of Isaac Hayes and Jerry Wexler, as well as a review of a new James Brown concert documentary. May post those eventually..

A couple things to read about Georgia/Russia

On vacation for an extended holiday weekend (vs the extended staycation I've been on most of the summer :). One of the many things I'd planned to catch up on is the blog--I brought w/ me a pile of NYT pages with articles I'd saved to post.

Here are a few articles that appeared over the past couple weeks regarding the conflict in Georgia; or should we say, more precisely, the conflict in South Ossetia, since it's unclear which nation, Georgia or Russia, has sovereignty over that disputed region. After the events of the last couple weeks, probably the latter..

If you're only going to read one article, you could do worse than the following long but comprehensive account of the roots of the current conflict; well, comprehensive in the sense of recent history, going back to approx Jan 2004 with the rise of Saakashvili to the Georgian presidency:


WASHINGTON | August 18, 2008
U.S. Watched as a Squabble Turned Into a Showdown
By HELENE COOPER, C.J. CHIVERS and CLIFFORD J. LEVY
The U.S. seemed to have missed — or gambled it could manage — the depth of Russia's anger and the resolve of Georgia's leader to provoke the Russians.


If that's too many words, at least take a look at the following map of the region the NYT people put together:
http://www.nytimes.com/imagepages/2008/08/17/weekinreview/17keller-map.html

Here is one more, that also ran on Aug 18:

INTERNATIONAL / EUROPE | August 18, 2008
News Analysis: Europe Wonders if It Can Square Its Need for Russia With a Distaste for Putin
By STEVEN ERLANGER
Europe’s dilemma: How does it balance its ties to Russia with concerns over the country’s new aggressiveness.

Here are the concluding paragraphs, beginning with a key quote from Jacques Rupnik, "an Eastern Europe expert at the Paris Institute of Political Studies, known as Sciences-Po":

“Russia has never been a nation state, but always an empire, with Muskovy gradually expanding its borders since the 15th century,” Mr. Rupnik said. “Russia built a state as it built its empire; the two were inseparable.”

The Russian Federation was never a state in its current borders, and more than 25 million Russians live outside it, mostly in the former Soviet Union. “These new borders are new and somewhat artificial,” Mr. Rupnik said. “And we in the West never fully measured the effect of this loss of empire on the Russians, or how integral Ukraine is to the Russian sense of self.”

The Orange Revolution in Ukraine, which Russia failed to stop, “was the real wake-up call for Putin,” Mr. Rupnik said. “The Russian conclusion then, and it’s widely shared there, is that the limit has been reached — no more concessions, a push for rollback, and definitely no Georgia and no Ukraine in NATO.”

Ukraine has its own built-in ethnic Russian enclaves in the east and in Crimea — the home of the Russian Black Sea Fleet and handed to Ukraine in 1954 by Nikita S. Khrushchev, the Ukrainian-born Soviet leader. Like Ossetia, split by Stalin so that North Ossetia is in Russia and South Ossetia is in Georgia, Crimea is a kind of poison pill to keep Ukraine in line, one supported by nearly total energy dependency on Russia.

That is why, for those like Mr. Asmus, NATO’s response to Russia’s actions in Georgia should involve Ukraine. But that is also why many Europeans do not want to commit to defending another Russian neighbor when they have neither the will nor the means to enforce that commitment.

Since the fall of the Berlin Wall in 1989, there have been numerous border changes in Europe — mostly recently in Kosovo, the example Mr. Putin uses to defend Russia’s move in Georgia. “We are still in the process of building and making states,” Mr. Rupnik said. “The map is not finished.”

Gotta Love the 'Loin

Here's another one, this one from the SFGate.  I still skim their "Top O' the Bay" newsletter, to keep up with what's happening with our city by the Bay:

TOP O' THE BAY
SFGate.com -- Wednesday, August 20, 2008
Edited by Chad Rockwell
============================================
TODAY'S HEADLINES
For the latest updates, visit SFGate.

[...]

EYEING THE HIBERNIA
Landmark bank in the Tenderloin eyed as a potential cultural center.

This headline caught my eye, b/c the Hibernia bank building certainly caught my eye.  I thought that perhaps I'd even taken a snapshot of it during one of the handful of times I walked that sketchy stretch of Market, in between the Powell St cable car turnaround and the Civic Center.  The Hibernia is emblematic of that whole area--you wonder why this most central part of the city, of the entire Bay Area, is as sketched out as it is.  But that's partly why you gotta love SF.

(It doesn't seem that I did take such a photo.  At least it's not among my photos I tagged with "tenderloin.")

What really motivated me to post this link is what has to be the quote of the day:

David Jackson, executive director of the Bay Area Radio Museum, toured the building Tuesday with city officials, laying out his vision for a cultural arts center that would house music, sports and broadcasting museums, along with training facilities for dance, art and filmmaking.

Efforts to revitalize the distinctive building at the intersection of Jones and Market streets have stumbled in the past, though, often because of the owner's steep asking price for a property in an edgy neighborhood.

The Hibernia, with its soaring columns and domed entrance, has sat empty since 2000, when the San Francisco Police Department's Tenderloin Task Force left after nine years for a new $4.8 million station on Eddy Street, saying the Hibernia was ill-suited for police work and the rent too expensive.

That left the landmark to descend into a haven for public drinking, drug dealing and street urination four blocks from City Hall.

"That is an important part of the city," Jackson said, "and I saw a guy smoking crack out of another guy's shoe."

I can't claim the street cred of witnessing someone smoking crach out of another guy's shoe..but over the course of 3 years I certainly did see various drugs being dealt, smoked and injected--in the 'Loin, around 16th & Mission, on 6th St.

When it comes to that sort of "edginess", SF has NYC (or at least Manhattan) beat by a mile.  From today's vantage point, it's hard to imagine the East Village/Lower East Side with that kind of squalor, as it apparently had, in the not-too-distant past..

Fw: WSJ.com - Yoga Bears: It's No Stretch to Say Traders Are Taking Deep Breaths

Alright, I might go a little wild w/ this technique of posting newspaper articles: I've got a pile of such e-mails in a folder in my e-mail account that I'd planned to post sooner or later.  The WSJ links may not work if you're not a subscriber..but at least you got the reference if you want to track it down.

Here's a fluffy one that I don't have to comment much on, about how financiers are getting into yoga.  As Krops said when I forwarded him this link, traders (like most people) are trend-followers.  But as he also said that yoga is legitimately a good thing, so he wasn't going to get too negative.

Interesting that Bill Gross practices ashtanga.  That seems about right for a an intense guy.  We went to one Ashtanga session at Mission Yoga, and it was intense, as were the practicioners.

One of my goals for the summer (of Sammy) was to develop my yoga practice, and initiate a meditation practice.  Feel like I've been moderately successful in doing so..I haven't been to a studio as often as I thought (less than once a week--approx 6 or 7 times in 8 weeks), but I have been practicing almost daily at home.

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NYTimes.com: Serious Pleasures: Season's Sweet Spots

I doubt this will show up on the blog formatted correctly..but maybe. If so, it will make it easier for me to post NYT articles--I'll merely e-mail myself the article from the NYT website (as I often do anyways, as a way of reminding myself of an article I want to revisit)..and then forward that e-mail to the e-mail address that automatically posts to the blog.

This is one that was in the today's Friday Arts section (which I'm realizing is very important to read on Friday itself, if you're an NYC resident and looking for something to do over the weekend; e.g., two weeks I ago I had to scramble to find a jazz piano concert. The jazz listings yielded 3 good options, out of which we chose wisely--Michael Wolff in the really nice downstairs auditorium of the Rubin Museum, for only $20 a head--rel cheap for jazz in the city).

The blurb explains it all--it doubles as a list of movies I want to see, sooner or later.

MOVIES | August 22, 2008
Film: Serious Pleasures: Season's Sweet Spots
By STEPHEN HOLDEN
A look at 10 of the best art films this summer, several of which portray an unjust world in which ordinary people are at the mercy of the rich and powerful.

Badu bummer

I'll have to write up short account of the (free) shows we/I have gone to over the past 3 weeks: the Manhattans/O'Jays, Bahamadia, KRS-One, and Willie Colon. (See below for a video clip from the KRS-One show, shot by your truly--my first upload to YouTube!)

But right now I'm bummed we didn't get in to see Erykah Badu! She was the latest performer at Brooklyn's MLK concert series--the first of which was the Manhattans/O'Jays show I attended, 3 weeks ago.

For that show, I got there sometime around 8pm, and ended up sitting on the bleacher for at least an hour, listening to Marty Markowitz and assorted other personalities get on the mic, until finally the Manhattans came on ~9pm, and the O'Jays ~9:45pm.

So I was in no hurry for us to get down to Wingate Field this evening--we left home close to 8pm, and didn't emerge at Nostrand and Winthrop til 8:30ish...only to find that NYPD had set up a barricade on New York Ave, and were turning people away! Too packed on the field apparently... :(

So we got back on the train, got off at Eastern Parkway/Brooklyn Museum, got some ice cream on Underhill instead, and ended up walking all the way home, up Vanderbilt and down Fulton.

Can't believe we missed the opportunity to see Erykah for free! After having no problems w/ space for the Manhattans/O'Jays, I was very dense and somehow implicitly figured it wouldn't be that much larger a crowd for Erykah..even though I'd read some accounts of people lining up hours ahead of time last summer, for Lauryn Hill. (I am trying to let go of having regrets..but I'm having a hard time letting go of the regret of missing that show! Accounts of it made it all the way to RS!)

So you can guess where I'll be next Monday, late afternoon/early evening..getting in line early enough to make it in for Jill Scott!

PS: Here's that KRS-One clip I shot, Thursday Aug 24 @ the East River Park bandshell:

more living for the city: 2 quotes

I came across two great quotes about the city that I want to get up before they slip away into the ether.

The first was in a book I was flipping through at a friend's apartment last weekend, called"New York Vertical": "There is no hope for New Yorkers, for they glory in their skyscraping sins; but in Brooklyn there a wisdom of the lowly." Attributed to one Christoper Morley.

I was going to leave it at that, but couldn't resist Google-ing it. Here is the full passage, which I pulled from this account of teaching Whitman in Brooklyn Heights (which reminds me I need to finally read some Whitman this summer..esp since this summer is being spent largely in Brooklyn):

“ New York is Babylon ; Brooklyn is the true Holy City . New York is the city of envy, office work, and hustle; Brooklyn is the region of homes and happiness. It is extraordinary: poor, harassed New Yorkers presume to look down on low-lying, home-loving Brooklyn , when as a matter of fact it is the precious jewel their souls are thirsting for and they never know it. Broadway: think how symbolic the name is. Broad is the way that leadeth to destruction! But in Brooklyn the ways are narrow, and they lead to the Heavenly City of content. Central Park : there you are--the centre of things, hemmed in by walls of pride. Now how much better is Prospect Park , giving a fair view over the hills of humility! There is no hope for New Yorkers, for they glory in their skyscraping sins; but in Brooklyn there is the wisdom of the lowly.”

Turns out this is from a 1917 novel titled "Parnassus on Wheels."

The other quote is better really--this one I came across at the beginning of Part Two of Jane Jacob's "The Death and Life of Great American Cities," which I started reading a few weeks ago, and have been making slow but steady progress on.

More on "Death and Life", and my concurrent reading of "The Power Broker", in future posts. For now, here Jane Jacobs quoting James Boswell:

"I have often amused myself," wrote James Boswell in 1791, "with thinking how different a place London is to different people. They, whose narrow minds are contracted to the consideration of some one particular pursuit, view it only through that medium...But the intellectual man is struck with it, as comprehending the whole of human life in all its variety, the contemplation of which is inexhaustible."

I'll comment only that it's been liberating to be freed from the one particular pursuit which dominated by first 14 months in the city (partaking in those skyscraping sins); and that I don't claim to be an intellectual man, but I am struck with the city, with comprehending human life in all its variety; and that it does seem to be inexhaustible, contemplating life in this great city of New York.

Living for the city: City Parks programs

The City Parks Foundation is pretty amazing. Last summer I mainly marveled from afar at their music programs...though I did make it last August to the 2nd day of the Charlie Parker jazz festival in Tompkins Square park, which was one of the best days in NYC last year for me.

This year, I've started to actually attend some of the City Parks concerts. Last Wednesday we took the train out to Crown Heights to see Bahamadia at Brower Park, which was a good, intimate show--just 40 or so people there, very mellow, so we could get up close. Then Thursday I wandered through the LES and the E Village and finally found the bandshell in the E River Park, in time to see about 30 minutes of KRS-One. By contrast, there were lots of people (a thousand? more?), and they were amped.

I'm planning to make it back to the E River bandshell this Thursday to see Willie Colon. I might even venture over to Queensbridge to see the Delfonics this evening. Then there's Slick Rick, Big Daddy Kane, and Rashaan Patterson, all in August, all in Harlem.

All that I was aware of..but now just realized there's a whole CityParks Theater schedule I need to work in...3 different plays being performed at different parks over the next few weeks. Got to try to see at least one or two..

Though I already missed the showings in our borough, which were at Von King Park--which has become one of my favorite parks in the borough. Biked out there a couple weeks ago, which was my first visit this year. (I guess there were only 2 visits last summer, which means a grand total of 3 visits in my life..) That was at the beginning of my 2nd Brooklyn bikeabout, which I'll have to write up in detail sometime soon.