The Greenback Effect -Till Debt Does its Part -" Going where the Joneses Go Arguments"

Op-Ed Contributor - The Greenback Effect - NYTimes.com


This piece by virtue of who its author is was bound to be interesting and of interest to many.
Likening the Greenback effect to the Greenhouse effect is indeed an expression of intense intellectual alertness and the case against runaway deficits just like the case against runaway toxic gas emissions is sensible enough.

The larger issue with the piece is that the wrong assumption that GDP equals assets on the government balance sheet. Absent a demonstration of that essential link, the entire case falls apart.

It also brings back to mind an equally short-sided line heard a lot in this crisis that it is a fall in savings and a high level of debt that have pushed the US on an unsustainable path. This is so WRONG. As Mr. Buffett rightly says, "I want to emphasize that there is nothing evil or destructive in an increase in debt that is proportional to an increase in income or assets. As the resources of individuals, corporations and countries grow, each can handle more debt." The same goes with individuals. The issue for individuals as with corporations or governments is HOW TO VALUE ASSETS OR LIABILITIES. It is not a simple question and there are a lot of ways to seem reasonable and be very wrong about it. It is an issue that requires deep analytical skills and an ability to creatively understand handle issues that far outstrip the intellectual arsenal of the winners of earlier generations. Those earlier winners are precisely those at the apex of their intellectual influence, yet they simply do not measure up to the scope of the issues. For example Paul Krugman’s recent Op-ed piece "Till Debt Does Its Part" while correctly making the argument that debt or the deficit are not the issue some seem to make it to be, still rely on the same fallacious debt or deficit to GDP ratios and uses historical and international comparisons for calibration purposes. To me this is still a going where the Joneses go argument.

This issue does is not limited to policy makers and analysts, but it extends to the most respected mathematicians of finance.


Because we currently use inefficient and unstable methods for these valuations (Buffett here equates GDP with the government balance sheet),there is a lot of instability in those valuations which results in unwieldy swings that bring us so often close to the abyss. This is where the robustness in the BICs valuation approach will in time be seen as providing the best framework for stable and dependable valuations of all types of assets thereby substantially eliminating volatility in assets valuations.

If government assets were properly valued, it could in fact responsibly borrow without ever minding the deficit, the size of the GDP, as long as the assets created with the monies borrowed could be reliably shown to be worth even more.

Reference:

http://www.nytimes.com/2009/08/19/opinion/19buffett.html?scp=1&sq=The%20greenback%20effect&st=Search

http://www.nytimes.com/2009/08/28/opinion/28krugman.html?em

Op-Ed Columnist - Genius - The Modern View - NYTimes.com

Op-Ed Columnist - Genius - The Modern View - NYTimes.com

I really like this type of anthropo-socio-cultural subjects David Brooks often covers.

This piece reporting recent research on genius confirms many of the things I have always suspected. The development of what is referred to here as "Genius" is simply the result of implementing the predictable steps that help make things appreciably better:

- To do things well you must spend the initial time to refine or break down a whole block into smaller units that are mastered with precision

-Once this process is mastered, executing other more creative sequences can be performed with superb flawlessness.

With respect to BICs,

-the effort is yet again to break a complex product into elementary units

-Once this process is mastered, handling other more complex or creative structures can be performed with superb flawlessness.

I wish Brooks would have also dealt or would deal in another piece with the forms of genius that society fails to appreciate in due time or that get altogether lost, those ultimate artists of Flaubertian imagery; the type of structural societal changes that may help unhindered expression or enjoyment of the various forms of genius. In the end a genius that is not duly recognized is a loss to society.

As Schopenhauer said: "talent hits a target no one else can hit, genius hits a target no one else can see". Using this lexicon, we'd say the article is more a discussion on talent rather then genius.