Why Did Lehman Brothers Fail?

The collapse of Lehman Brothers on September 15, 2008 was the primary trigger of the recent global financial crisis. There have been a lot of questions surrounding the decision to let Lehman Brothers fail. Here is a fascinating account of what transpired:

http://www.nytimes.com/2014/09/30/business/revisiting-the-lehman-brothers-bailout-that-never-was.html

Ultimate Purpose of Education

Professor Peter Augustine Lawler makes a convincing argument for broad based undergraduate education (‘general education’). He is critical of the modern day obsession with specialization (see his insightful piece in The American Interest magazine):

“From one point of view, the technological model of progress is very personal, insofar as it is oriented around the security and autonomy of particular persons, but that personal progress is achieved by surrendering the personal dimension in understanding and research. We see that in our colleges “general education” is shrinking and becoming more optional, in part to allow promising students get right down to specialized research. The principle of specialization, of course, is becoming a cog in a machine, making a small contribution to a whole process beyond one’s own comprehension and control. So often the choice of “research questions” doesn’t flow from one’s own informed curiosity and about nature and human nature, but from what scientific and technological progress seems to require at the moment. The important thing is to make some contribution.”

After reading the above noted piece by Prof. Lawler, I was reminded of the famous quote by the leading economist of the 20^th century John Maynard Keynes:

“The master-economist must possess a rare combination of gifts .... He must be mathematician, historian, statesman, philosopher -- in some degree. He must understand symbols and speak in words. He must contemplate the particular, in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man's nature or his institutions must be entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood, as aloof and incorruptible as an artist, yet sometimes as near to earth as a politician.”

Hayek and Spontaneous Order

An interesting post on the controversy surrounding the notion of 'spontaneous order':
http://www.economist.com/blogs/democracyinamerica/2014/09/hayek-and-libertarianism

Bradford De Long on Robots, Productivity and Wages

A thought-provoking piece from UC Berkeley economist Brad De Long:

http://www.project-syndicate.org/print/j--bradford-delong-questions-paypal-co-founder-peter-thiel-s-argument-that-robots-will-save-us-from-a-low-wage-future

An Ode to Procrastination

Anna Della Subin, writing in the NYTIMES, states:

“Why not view procrastination not as a defect, an illness or a sin, but as an act of resistance against the strictures of time and productivity imposed by higher powers?”

US Economic Update

GDP revisions:

http://www.nytimes.com/2014/09/27/upshot/gdp-report-emphasizes-the-problem-of-conflicting-economic-signals.html

Distribution of the gains from the recovery:

http://www.nytimes.com/2014/09/27/upshot/the-benefits-of-economic-expansions-are-increasingly-going-to-the-richest-americans.html

Laura Tyson on productivity, real wages and growth

http://www.project-syndicate.org/print/laura-tyson-worries-that-america-s-failure-to-share-growth-widely-threatens-its-long-term-prosperity

US Bond Market Update -

Changing of the guard at PIMCO as Bill Gross departs:

http://www.bloomberg.com/news/2014-09-26/pimco-could-see-withdrawals-up-to-30-as-managers-stunned.html

Economic Drivers Underlying India’s Mars Mission

Samanth Subramanian in his New Yorker piece notes:

“For the Mars orbiter, however, the journey was the thing. “I would say eighty-five per cent of our mission is for technology demonstration,” K. Radhakrishnan, the chairman of the Indian Space Research Organisation (ISRO), told the Indian Express. There are both tangible and intangible benefits to be found in this demonstration: better research capabilities, the glint of prestige, even a nation freshly inspired by science. But in tandem, a hard-nosed interest is at play. The success of the mission and its attendant publicity will drive more business towards Antrix, ISRO’s commercial arm, which sells spacecraft hardware and software, leases transponders, and—most spectacularly—builds and launches satellites for others.”

Related,

Getting to Mars (The Cheap Way)

http://graphics.thomsonreuters.com/RNGS/2013/NOV/INDIAMARS.jpg

http://theconversation.com/billion-people-hold-their-breath-as-india-becomes-the-first-asian-country-to-reach-mars-32071

An Economic Approach to Picking College Majors

An interesting analysis by Ben Casselman:

http://fivethirtyeight.com/features/the-economic-guide-to-picking-a-college-major/

Casselman notes:

“… These figures don’t necessarily mean that switching majors will bring a big financial boost. Economics majors, for example, earn $7,000 — 18 percent — more on average than “general business” majors, but economics is also generally considered a harder and more prestigious major, and therefore tends to draw more top students; it’s unlikely all those business majors could have gotten themselves a $7,000 raise just by switching to econ. Similarly, majoring in astrophysics won’t net a $62,000 salary for someone who flunks Calculus 101.”  

UPDATE:
College Majors and Earnings Potential

http://www.washingtonpost.com/news/storyline/wp/2014/09/29/want-proof-college-is-worth-it-look-at-this-list-of-the-highest-paying-majors/

(Pernicious) Influence of Wall Street

The Fed and Goldman Sachs

http://www.bloombergview.com/articles/2014-09-26/the-secret-goldman-sachs-tapes

Justin Fox on Regulatory Capture
http://blogs.hbr.org/2014/09/why-the-fed-is-so-wimpy/

UPDATE:

Brilliant stuff from Matt Levine at Bloomberg View:

http://www.bloombergview.com/articles/2014-09-26/secret-fed-tapes-recorded-goldman-s-capital-game

...

Michael Lewis – “Occupational Hazards of Working on Wall Street”

http://www.bloombergview.com/articles/2014-09-24/occupational-hazards-of-working-on-wall-street

Indian PM Modi Pushes for Manufacturing-Driven Growth

In his Wall Street Journal op-ed, Prime Minister Modi states:

“We will create world-class infrastructure that India badly needs to accelerate growth and meet people's basic needs. We will make our cities and towns habitable, sustainable and smart; and we will make our villages the new engines of economic transformation. "Make in India" is our commitment—and an invitation to all—to turn India into a new global manufacturing hub. We will do what it takes to make it a reality.”

US Dollar Rally - A Reality Check

Asian Financial Markets - Interesting News

CIS – Japan’s Extraordinary Day Trader

http://www.bloomberg.com/news/2014-09-25/mystery-man-moving-japan-made-more-than-1-million-trades.html

According to Bloomberg:

“During a decade of day trading, having started more or less from scratch, CIS has amassed a fortune that he says now exceeds 16 billion yen. In the process, he has become a cult figure among Japanese day traders, a tight circle of self-taught professionals who take pride in working one of the world’s toughest markets.”

China to Open Up its Stock Market to Foreigners

http://www.economist.com/news/finance-and-economics/21620233-new-tie-up-opens-shanghais-stockmarket-foreigners-rickety-rails

The Economist notes:

“That will begin to change in October when the Hong Kong and Shanghai stock markets launch a scheme called Shanghai-Hong Kong Stock Connect or “the through-train”. It will allow any foreign investor, from hedge funds to day traders, to buy and sell stocks listed in China directly for the first time.”

Thomson-Reuters List of Leading Researchers

Thomson-Reuters has put together a list of leading researchers in various fields (including Economics & Business):

http://sciencewatch.com/sites/sw/files/sw-article/media/worlds-most-influential-scientific-minds-2014.pdf

International Economic Issues

Australia appears to be experiencing a housing bubble:
http://www.bloombergview.com/articles/2014-09-22/irrational-exuberance-down-under

German Central Bank Chief Jens Weidmann on the Eurozone:
http://www.spiegel.de/international/business/interview-with-bundesbank-head-jens-weidmann-on-euro-crisis-and-ecb-a-993409.html

MARTINA LARKIN on Globalization

http://www.project-syndicate.org/print/martina-larkin-examines-what-needs-to-be-done-to-head-off-the-dangers-of-global-fragmentation

Downward Nominal Wage Rigidity

BusinessWeek has a nice short piece on downward nominal wage rigidity:

http://www.businessweek.com/articles/2014-09-18/cutting-wages-is-hard-to-do-why-thats-bad-for-unemployment

The article notes:

“Depending on your brand of economics, stickiness either makes no sense and therefore only happens because of bad policies, or it’s a significant, enduring problem that worsens unemployment”