Random Links LVII

Captcha as a Turning Test: Most interesting anecdote:  the use of captchas to aid the digitization of archives.

Sovereign Debt Crisis:  Remember the “holy trinity”:  a country can have any two of these three:  an independent monetary/fiscal policy; an open capital account; and fixed exchange rates.  Note that dumping the second is (or should be) a policy option for dealing w/ a dollar crash.

Mother of All Carry Trades:



Hmmm…this is something to consider – the notion that monetary stimulus by the Fed could merely end up getting exported to foreign countries via the carry trade, and stimulating _them_ rather than stimulating the US economy here at home.  (Another argument in favor of capital controls?)

OTOH, note that 1) carry-trade-mediated exports of liquidity would tend to weaken the dollar, thus boosting US exports; and 2) if the economies importing “dollar carry trade” funds utilized said funds to ramp up their purchases of US exports, this carry-trade-mediated exportation of US monetary stimulus could still end up (indirectly) stimulating the US economy.

Note also:  if the carry trade does become popular hereabouts, we must ensure that it doesn’t end up posing a systemic risk to the financial system.  Eventually, a carry trade must unwind (often violently); and investors who fail to unwind fast enough could get stuck w/ major losses (as the foreign currencies in which they lent end up being worth far less in dollar terms, as those currencies crash while the dollar strengthens).  If we let major US financials play in this arena, we risk a repeat of the ’80s LDC crisis (with large US banks getting stuck w/ large losses from overseas lending).

Why a Two State Solution May Be Unworkable:



My solution remains “Give War a Chance”.

British Libel Laws:  They apparently have non-trivial externalities.  “Special relationship” indeed….

Heroes:  The Republic will always need them.

Auctions & Politicians: Why the latter don’t always like the former.

Inflation & Output Gap:  Why the latter may not prevent the former.

LIBOR & Bank Spreads:  “The difference between the highest and lowest interest rates banks say they pay for three-month dollar-denominated loans is near the widest this year…signal[ing] that lenders still lack confidence in each other.”

Small Zombie Banks:  Worrisome.  Not sure there’s much to be done about this, though, other than expand FDIC as fast as possible.  Perhaps “private bad banks” (i.e., selling off the best assets along w/ deposit accounts, to healthier banks, & handing over the rest to bondholders), by reducing the need for FDIC staff to monitor the leftover assets of dead banks.

History of the Seas: “Medieval fishermen first took to the open seas in about AD1,000 as a result of a sharp decline in large freshwater fish, scientists have suggested.”

Polaroid Revival: One wonders why this would be so difficult.  Perhaps they could consult/hire former Polaroid employees.  I wonder if Polaroid’s formulae, etc., are still protected by trade secrets laws.

Dollar Crash & Emerging Market Reserves

Human Capital Contracts Redux:






Palacios Working Paper:  http://www.darden.virginia.edu/batten/pdf/WP0014.pdf

Note that, except for the public vs. private sector distinction, Reich’s proposal (first link) is strikingly similar to the Cato-esque notion of “human capital contracts”.  Weird….

Orwell on Gandhi

Sino-American Monetary MAD

Why the Gun is Civilization

Conscription & Old Army Buddies

Gurkha Homecoming


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