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My investing and writing are primarily focussed on macro areas such as currencies, commodities, global investing, and geopolitics. I also closely monitor technology. I generally have a medium to longer-term investment horizon. I encourage you to review the track record of my published articles... More
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  • Economic Newspeak: Has Yale's Robert Shiller Seen the Light?
     
    "To me...part of the process of pursuing the inexact aspects of economics is speaking honestly to the broader public, looking them in the eye...and then searching one’s soul to decide whether one’s favored theory is really close to the truth."
    -Robert Shiller, Project Syndicate Op-ed January 20, 2011 
    Yale Professor Robert Shiller
    The above words come from the same Professor Shiller who just a few months ago brazenly argued that our government, when engaging the broader voting public on the "complexities" of 'necessary' bailouts, should employ economic propaganda.

    Yves Smith over at Naked Capitalism also took exception when Shiller'sNovember op-ed came out, characterizing the Yale Professor's argument as a justification for Orwellian newspeak.

    Shiller previously argued that terms like 'bailout' should be recast as ‘orderly resolutions’ so as to make sure the voting public 'gets it'.

    From Shiller's November piece:
    "When life is smooth, people tend to remain complacent, reflecting confidence in the economy. In times of crisis, such confidence is also vital, even if government can’t absolutely guarantee that it’s justified. 
    ...well-thought-out framing packages can work. They can help sell crucial intervention packages to people who don’t fully understand the financial system’s complexities"
    As I noted in my November response:
    In other words, Shiller is making the argument that it's not only ok, but advisable for the government to be less than frank with voters. During a financial crisis, Shiller argues, this lack of candor is actually in the public's own good.
    Putting aside the subject of the ethical responsibilities of public officials for a moment, the first question is would Shiller's recommendation even work?
    To help answer that question we can turn to a recent example from early 2008, prior to the apex of the financial crisis. On March 28, 2008, Fed Chairman Ben Bernanke, testifying before Congress about the housing market, made the now infamous false assurance that the subprime real estate crisis was "contained".
    There are two possibilities here: either a) the Fed Chairman honestly believed that the Fed's actions had magically put the breaks on the real estate meltdown; or b) he was consciously using propaganda to reassure people, as Shiller advocates.
    Regardless of which of these two possibilites is correct, what we do know is that his reassurances did absolutely nothing to prevent the financial crisis, which hit full force later that year in September. Perhaps Bernanke's comment postponed the crisis, but postponement may in fact have made it worse by allowing the problem to further fester under a blanket of false Fed confidence. 
    What made Shiller's November words all the more disheartening is that they came from from one of America's most respected and credible academic economists. Professor Shiller hails from Yale University and is a widely read author and creator of the influential Case-Shiller Home Price Index. While Shiller was not one of the academic economists skewered by Charles Ferguson in his excellent documentary film Inside Job, his November remarks certainly made him a deserving target of popular criticism.

    Here's to hoping Shiller's comments in his recent Project Syndicate op-ed reflect an about face and commitment to speaking clearly and truthfully with the public on economic matters such as bailouts.


    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jan 23 6:24 AM | Link | Comment!
  • Video: On Why Becoming More Energy Efficient is Simply Not Good Enough
    "Like salt, we need to strip oil of its strategic importance."  
    -Gal Luft, Executive Director of the Institute for the Analysis of Global Security and a founder of the Set America Free Coalition

    As Luft points out in this brief video the buzzterm 'energy independence' cannot simply be achieved in the U.S. by more domestic drilling for oil in areas such as the ANWR.

    The word 'independence' implies choice, and when it comes to an energy source for automobiles the vast majority effectively have zero choice. 

    For a long time now oil has had a monopoly as THE energy source used in vehicle transportation, and we must find a way to put an end to oil's stranglehold.

    Luft's and coauthor Anne Korin's book, titled Turning Oil into Salt: Energy Independence Through Fuel Choice, argues for the importance of making oil as un-strategic a commodity as salt has become.

    Many have forgotten or never learned that wars used to be fought over salt. The 'primordial condiment' as some have called it was one of the most effective ways to preserve food, making it perhaps the world's most strategic commodity.

    Today we no longer fight wars over salt because it has been rendered non-strategic. We must do for oil what we did with salt. The good news is that for oil we have right now the technological equivalent of canning and refrigeration, which put an end to the strategic importance of salt. One of the keys to reducing oil's strategic importance is the wide adoption of 100% electric (not hybrid, fully electric) vehicles such as the Nissan Leaf.
    Jan 20 8:24 AM | Link | Comment!
  • Bravo Sir John Vickers, the 'Too Big to Fail'-Slaying Hero
    Sir John VickersAs so often has been the case Great Britain is once again leading the way.

    Sir John Vickers, head of the U.K.'s commission on banking reform, is making it clear thatToo Big to Fail's days are numbered.

    And the change can't come soon enough. Following Iceland's financial collapse, Britain's economy arguably became the world's most overbanked, and thereby vulnerable to an even greater systemic financial crisis than our most recent one.

    The City of London is home to three of the world's five largest banks by assets (Royal Bank of Scotland, HSBC, and Barclays), and the total assets of the U.K.'s banking sector are approximately 5X the size of the nation's GDP (Iceland's banks' were 10X before its banks collapsed).

    We wish Vickers luck with his efforts to put a stake through the heart of 'Too Bigger to Fail' as it won't be easy sailing. Encouragingly, Sir John has proven himself to be capable of driving controversial and difficult institutional change; previously he was responsible for eliminating the notorious three hour exam on a single word at Oxford's ultra traditional All Souls College.

    And we further hope that England's former compatriots across the Atlantic are taking note, for Britain can't do this alone. International cooperation and solidarity are crucial to solving this problem.


    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jan 18 7:20 PM | Link | 1 Comment
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