A Political Economy

re-START: US-Russia Relations

2009-05-05T11:04:00.000-07:00

Click on the link to read an Interfax interview with U.S. Assistant Secretary of State Rose Gottemoeller. In the interview she discusses cooperative measures with Russia focused on reducing strategic arms.

China and Taiwan Continue on a Path towards Economic Integration

2009-04-30T16:32:00.000-07:00

Increasing the cost of a potential conflict...

Wall Street and Politics: Short-Term Gain for Long-Term Pain

2009-04-22T16:13:00.000-07:00

The new financial order must incentivize directors, officers, and regulators to incorporate enduring consequences into day-to-day decision making.

Below is another valuable excerpt from John Kenneth Galbraith's "The Great Crash: 1929":

"The instinct for self-preservation in Wall Street is [not] poorly developed. On the contrary, it is probably normal and may be above. But now, as throughout history, financial capacity and political perspicacity are inversely correlated. Long-run salvation by men of business has never been highly regarded if it means disturbance of orderly life and convenience in the present. So inaction will be advocated in the present even though it means deep trouble in the future. Here...lies the threat to capitalism. It is what causes men who know that things are going quite wrong to say that things are fundamentally sound."

Getting to Know the Next Leader of South Africa

2009-04-21T12:16:00.000-07:00

The Taliban in Pakistan: Integration or Consolidation?

2009-04-15T14:01:00.000-07:00

Click here to read Pakistani Taliban expand influence beyond Swat (CS Monitor).

As Rule of Law in South Africa Faces New Concerns, Zuma Puts Corruption Charges Behind Him

2009-04-06T10:50:00.000-07:00

Irrespective of whether the decision was correct, the reasoning behind it casts a cloud of new questions over Jacob Zuma's potential presidency and the South African legal system.

Follow the link to read South African prosecuters drop Zuma graft charges (Reuters).

Arms Control: The U.S. and Russia Return to Old Reliable Common Ground

2009-04-01T17:48:00.000-07:00

Long overdue...

Click on the link to read: U.S., Russia Say They Want to Reduce Nuclear Arms (The Moscow Times).

Next Stop, Latin America: China's Effort to Reduce its Hefty Exposure to the Dollar

2009-03-30T20:23:00.000-07:00

Though unlikely in the near-term, an alternative global reserve currency could greatly increase the cost of borrowing for the U.S. government forcing American debt into a zero-sum game.

Read more about a nascent, yet important trend noted in the the following article, China, Argentina Reach Agreement on Currency Swap (Bloomberg).

As America Spends, Investors Scale Back Their Appetite for U.S. Debt

2009-03-27T12:33:00.000-07:00

Borrowing becomes more expensive as the yield on a five-year note increases to 1.85% from an anticipated 1.8%.

Read more on how Weak Demand for Treasury Auction Gives Wall Street Pause (NY Times).

The Geithner Plan in so many words (and pictures)

2009-03-26T23:02:00.000-07:00

Click on the link to view an Interactive Graphic created by the Financial Times.

Step 1: Admitting There is A Problem (U.S. and Mexico Drug Trade)

2009-03-25T11:56:00.000-07:00

Preventing a failed state at America's southern doorstep.

Click on the link to read Clinton admits U.S. demand feeds Mexico drug trade (San Jose Mercury News).

Naked Short Selling and Lehman: A Failure-to-Deliver

2009-03-22T23:02:00.000-07:00

To put it simply (comments and clarifications welcome):

Short Sale

Borrowing and selling shares of a particular stock.
Then locating and delivering those shares at a later date (usually within 3 days).
If the price goes down, there is a profit -- price at time borrowed minus price at time delivered.
Moral: A short sale drives down the share price of the stock because it is a sale. Supply and demand -- a sale increases supply, down goes price.

Naked Short Sale

A short sale where the shares sold are never located and delivered.
Equivalent of selling shares that have not been authorized by the issuer.
Moral: Acts as a dividend, increases supply and further drives down the share price.

The following article is fairly comprehensive, but worthwhile: Naked Short Sales Hint Fraud in Bringing Down Lehman (Bloomberg).

Redeeming Charles Ponzi

2009-03-20T16:49:00.000-07:00

A rename may be in order.

Click on the link to read U.S. regulator probing "Ponzimonium" (Reuters).

1929: Embezzling The Past, Repeating the Future

2009-03-19T19:51:00.000-07:00

John Kenneth Galbraith's "The Great Crash: 1929" was first published in 1954. Below is a timely (or not so timely) excerpt...

In many ways the effect of the [1929] crash on embezzlement was more significant than on suicide. To the economist embezzlement is the most interesting of crimes. Alone among the various forms of larceny it has a time parameter. Weeks, months, or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. There is a net increase in psychic wealth.). At any given time there exists an inventory of undiscovered embezzlement in -- or more precisely not in -- the country's business and banks. This inventory -- it should perhaps be called the bezzle -- amounts at any moment to many millions of dollars.

It also varies in size with the business cycle. In good times people are relaxed, trusting, and money is plentiful. But even though money is plentiful, there are always many people who need more. Under these circumstances the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly.

In depression all this is reversed.

Money is watched with a narrow, suspicious eye. The man who handles it is assumed dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks.

...Just as the boom accelerated the rate of growth, so the crash [of 1929] enormously advanced the rate of discovery. Within a few days, something close to universal trust turned into something akin to universal suspicion. Audits were ordered. Strained or preoccupied behavior was noticed. Most important, the collapse in stock values made irredeemable the position of the employee who had embezzled to play the market.

He now confessed.