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Archive for November, 2009

I am enjoying the goings-on in Dubai tremendously.  It’s like the field mouse of an economics drug trial: take every extreme symptom, jam it into one place of absolutely no global consequence, and then try to figure out the cure.

Suppose you had a tiny country that decided it wanted to be important.  Playing on confusion with its oil-rich neighbors, it goes out and borrows a lot of money to build buildings.  Taking the Paris Hilton strategy that if you insist on your caricature long enough others will eventually believe it, the country makes a big show of people piling into the buildings.  Real estate developers, the ultimate momentum players, pile in.  The country goes the offshore tax haven route – no income taxes – and throws in absolutely no labor standards to ensure that construction can proceed on whatever blistering pace can be achieved by malnourished Thais and Pakistanis welding in 115F heat.  Eventually it hits the wall – for reasons completely beyond its control, at some point people look around and realize they have the world’s largest Potemkin village.  There is no market.  The locals are preposterously corrupt.  Islam is not compatible with the hedge fund lifestyle.  What then? (more…)

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I’m a little surprised to see this:

Wal-Mart, the mightiest retail giant in history, may have met its own worthy adversary: Amazon.com.  In what is emerging as one of the main story lines of the 2009 post-recession shopping season, the two heavyweight retailers are waging an online price war that is spreading through product areas like books, movies, toys and electronics. (more…)

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For years we have been subjected to odd debates about whether the government should permit, encourage, or attempt to prevent the reimportation of prescription drugs from Canada.  Seniors love it; they want to be able to drive across the border and save money.  The drug companies hate it; they want to charge American prices.

That the entire debate happens offends good sense.  Drugs that are researched, tested, trialed, and manufactured in central New Jersey do not magically become cheaper from a round-trip drive along the New York Thruway.  If we are to discuss prescription drugs, the only policy question should be whether the US should do something to use the purchasing power of its 300mm person market to drive down the cost of drugs, not whether scattered northern seniors should be left to try to free ride on the purchasing power of 30mm Canadians. (more…)

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Now here’s an interesting verdict that doesn’t seem to get much press:

In a ruling that could leave the government open to billions of dollars in claims from Hurricane Katrina victims, a federal judge said late Wednesday that the U.S. Army Corps of Engineers had displayed “gross negligence” in failing to maintain a navigation channel — resulting in levee breaches that flooded large swaths of greater New Orleans. (more…)

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Short post to follow up on two things that were on Baseline recently.

First of all, take James’ advice and check out this Interfluidity post:

An enduring truth about financial regulation is this: Given the discretion to do so, financial regulators will always do the wrong thing.

Steve touches on several of the themes I tried to articulate here, and he does a better job explaining the motivations of each of the players. (more…)

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I am a huge fan of going for it on fourth down.  The odds are typically on your side, and the main reason coaches don’t do it is that failure is so much more evident than success.  Well, here goes the second-guessing:

All sorts of things went wrong to get the Pats to this position – the offensive and defensive lines had Super Bowl-level fatigue issues down the stretch – but they were still winning by six points.  They had the advantage, and they gave it away trying for the knockout. (more…)

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If I may quote myself, from September 4:

When you find yourself in a hole, stop digging. Except the Bernanke/Summers/Geithner team, who seem to believe you try to dig your way through to the other side of the earth. Call it the Martingale Strategy of government finance.

Like every other problem gambler, this team is discovering that the law of large numbers does not work in favor of bad bets: (more…)

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