Los Repartimientos

The EYM writes an interesting piece on "los repartimientos" over at EE.  Check it out.

Business Headlines

Rising wages in China push jobs back to U.S. Look, we told you so. We did.

Amar Bhide: limit the rates banks can pay on deposits!

Lynn Sneary condescends to a venture capitalist who explains why jobs are caused by growth, not vice versa.

Hugo Chavez: doin' work

People, Hugo is getting it done down in Venezuela. It's only September (and he's taken some sick leave) but he's already "nationalized" 401 companies this year. Plus he's withdrawing from the World Bank's dispute settlement forum used to deal with claims by foreign investors.

He's also working to get Venezuelan assets in friendlier hands, transferring billions of dollars in deposits from US and Euro banks to banks in Russia, China, and Brazil (wow, Brazil, nice work to make Chavez associate you with Russia and China and not the "free world").

And of course there's his plan to airlift Venezuela's gold back to Caracas.

The idea is to make Venezuela's financial assets un-freezable.

I feel very sorry for the younger people of Venezuela. But the older ruling elites of the country brought Hurricane Hugo down on themselves and their descendants with their decades of incompetent, corrupt, short-sighted & elitist governance.

Markets in everything: Sovereign barter edition

The North Koreans want to pay the Czechs back in ginseng!

I am not making this up.

For their part, the Czechs are holding out for Zinc.

Is sunburn really a worse problem than lack of sexual vigor in the Czech republic?

Live and learn.

The wisdom of Tyler Cowen

He tweets:

"Some people hate me for this view, but TARP is looking better all the time."

I agree. Maybe it worsened moral hazard issues down the road, maybe some of the money has been spent beyond the intent of the program (GM anyone?), maybe it was bigger than it needed to be, but TARP and quantitative easing by the FED pretty clearly worked and worked well.

As a lagniappe, most of the money is actually getting paid back.

It's the Insolvency, stupid!

Yesterday was the day it seemed that everyone figured out the Greek crisis is not one of liquidity but rather of insolvency.

The situation in Southern Europe now seems more and more like the Latin American debt crisis, and to me, the central lesson of that crisis for the debtor countries was, if you are going to default, sooner is much better than later.

One of the main reasons the LA crisis morphed into the dreaded "lost decade" for the debtor countries was that they kept agreeing to refinance and re-borrow and thus dragged out the crises for years.

Today, capital markets are much larger and more open than they were in the early 80s so I don't think this crisis can be dragged out for years even if the countries involved were dumb enough to want to try.

Somehow though, I don't think that the capital markets are going to get thanked for providing this valuable service!

Markets in everything: Santeria edition

Looking for a great investment vehicle? Consider the human skull.

In 2007, UPI reported that, in Venezuela, practitioners of "black magic" were robbing graves for human bones and that skulls were selling for $300!

Two years later, the NY Times reports that the pace of Venezuelan grave robbing has accelerated and a skull now goes for $2000!

People, that is an average annual return of over 250%!

The Times has also upgraded the robbers from practitioners of "black magic" to adherents of a religion (transplanted from Cuba) called "Palo" (though this source perpetuates the "black magic" label)

The global savings glut re-visited

A new NBER working paper by Jagannathan, Kapoor and Schaumburg (ungated version here), argues that global imbalances + institutional failures caused the great recession and that the financial crisis was "just" a symptom.

The failures are:

"The inability of emerging economies to absorb savings through domestic investment and consumption due to inadequate national financial markets and difficulties in enforcing financial contracts through the legal system;

the currency controls motivated by immediate national objectives;

and the inability of the US economy to adjust to the perverse incentives caused by huge money inflows leading to a breakdown of checks and balances at various financial institutions.

The financial crisis in the US was but the first acute symptom that had to be treated. A sustainable recovery will only occur when the natural flow of capital from developed to developing nations is restored."


Interesting paper, not very technical. There is certainly something to the argument, but I am not sure this is anything like the major root cause of our current problems.

Financial Development uber alles?

In my 2007 JDE paper with Mrs. Angus, we documented that the only variables we could find who's temporal evolution was consistent with that of the world income distribution were measures of financial development and of research and development.

In a current project, my co-authors and I are finding that financial development is at least as important as any traditional factor of production in determining the production structure of an economy (no link yet due to picky co-authors! 8^) ).

And, in a current NBER working paper (ungated version here), Arellano, Bai and Zhang argue that financial development can explain a large amout of the variation in performances between firm of different sizes across countries. Here's their abstract:

"This paper studies the impact of cross-country variation in financial market development on firms' financing choices and growth rates using comprehensive firm-level datasets. We document that in less financially developed economies, small firms grow faster and have lower debt to asset ratios than large firms. We then develop a quantitative model where financial frictions drive firm growth and debt financing through the availability of credit and default risk. We parameterize the model to the firms' financial structure in the data and show that financial restrictions can account for the majority of the difference in growth rates between firms of different sizes across countries."

We are all Ross Levinians now!