Bloomberg has the latest on an interesting ruling by the French High Court rejecting a government-proposed carbon emissions tax. Notably, the Court's decision was based more on fairness concerns than any global warming theories, with socialist elements of the political spectrum supporting rejection of the law.
Damaging the bill's chances, and raising the ire of the masses, were numerous business-friendly exemptions which meant that nearly 93% of all carbon emissions in France would have been immune from taxation. The remaining burden would have fallen primarily on drivers and those using heating fuels. This conclusion, among others, is what lead to the Court's rejection of the legislation, as this burden on workers amounted to inequitable treatment under the tax code. It is important to note that the Court also mentioned that taxing only 7% of emissions meant that the bill did not meet the 'objective of fighting global warming.' Therefore, it stands to reason that if the bill were changed to include a broader spectrum of polluters, making it fairer under the tax code and better suited to reaching its stated goals, the Court would allow it to stand.
The Sarkozy government has pledged to change certain provisions and put the bill forward again as early as January. Though such things are unpredictable, and assuming a new bill does come forward, the four following outcomes have the greatest chance of occuring. First, the court could reject the renewed attempt based on entirely new factors. Second, the government could make sufficient changes to get the bill past judicial scrutiny and signed into law. Thirdly, the Court, despite some changes, could reject the bill on fairness grounds again. Finally, the government could change the bill so much that it becomes impalpable for business and the return/addition of provisions for the taxation of businesses becomes its downfall before it even arrives at the high court. Of course these options are based on a basic understanding that the Court will seek a certain threshold of fairness under the tax code before it will allow any legislation through as well as an acceptance of the notion that so many exceptions were granted to start with due to the lobbying efforts of the business community.
The first possibility does not seem to be likely as the government has guidance on what needs to be changed, and will therefore be unlikely to go too far astray of what the Court might allow. The second outcome also seems less than likely because of the Court's concerns for fairness and the low probability that cosmetic changes alone will make the critical difference. The last two outcomes therefore appear the most likely. A second rejection by the Court due to lack of meaningful change is self-explanatory, and would likely mean the demise of legislation for the time being as neither the court nor the business community would be willing to give much ground on their positions. The final option, business opposition, seems the most likely outcome. This is because in order for the government to make enough changes to pass judicial scrutiny, the very exceptions that made the bill palpable to the business community would evaporate and lead to widespread opposition, claims of economic collapse and the fear of rampant unemployment as business profits are cut and doors are shut. It is not worthwhile to suggest that wholesale changes would be made and brought to the court despite business opposition, because otherwise exemptions would not have existed in the first place.
This final outcome is the most interesting bit of this French story for lawmakers abroad, and the main reason why this site has advocated for making economic priorities the foundation for greenification in the past. Indeed China has taken this approach with great success. It is not very difficult to imagine big business and political grumbling about carbon taxes in the US, the UK or elsewhere, mostly because there are numerous examples of it. Many believe that this was at least in part the impetus behind President Obama's weak stance in Copenhagen recently. Perhaps the final lesson is, whether in the US or abroad, there will be no support of green solutions from business until the economic incentives are great enough. Until then, and with the failures of Kyoto and Copenhagen obvious for all to see, we can only hope that climate skeptics are on the right side of this current global debate.
12.30.2009
Above the Law's 2009 Top Ten
Although it is a slighly awkward admission for a blogger to make that he rarely visits other blogs, the time limitations of law school should make it at least understandable. However, I do try to make time when possible for Above the Law. I find ATL to be much like a Daily Show of legal issues, mixing humor and stories making us all feel better about ourselves with some of the hard news of the day.
For those of you like myself who managed to miss some of the best of 2009, the good folks at ATL have managed to put together what Google Analytics told them was a Top 10 of the year. I can say that it does not disappoint. In a recession year and in the midst of the perpetual job search, I will jump on the cyber bandwagon and point out Number 1 as my favorite. Although the story does not end well for the idealist and s/he was fired, that means that they were originally hired. And that is something.
For those of you like myself who managed to miss some of the best of 2009, the good folks at ATL have managed to put together what Google Analytics told them was a Top 10 of the year. I can say that it does not disappoint. In a recession year and in the midst of the perpetual job search, I will jump on the cyber bandwagon and point out Number 1 as my favorite. Although the story does not end well for the idealist and s/he was fired, that means that they were originally hired. And that is something.
Medical Malpractice Issue Conspicuously Absent from Health Care Reform
A piece from Bloomberg's legal section today highlighted an interested fact common to both the Senate and the House versions of health care reform. Among the thousands of pages of definitions, provisions, clauses and clutter, there is nothing about reforming the medical malpractice trial system or capping the awards that plaintiffs may receive as a result of successful malpractice claims. Perhaps this is not particularly surprising as President Obama has already threatened to put the veto pen to any legislation including caps. However, with all of the talk of medical malpractice reform going back to the latest primary season and election cycle, the topic is at least conspicuous by its absence.
Although trial lawyers will be satisfied with these fruits of consistent long-term lobbying, some experts estimate that a $250,000 cap would reduce health care costs by $54 billion over 10 years. Although that is only an estimated 0.5% of overall health care costs for the coming decade, it is still a lot of money where I come from. These statistics probably don't tell the whole story however. In fact, some injuries, though life-changing and traumatic for those who suffer them, are probably not worth the over $250,000 awards they sometimes result in. Conversely, some injuries occuring at the hands of negligent doctors are probably worth more than the $250,000 cap suggested by some. It is difficult enough to place a numerical value on a limb, vital function, or even a life. The task becomes more difficult when arbitrary numbers are assigned as caps, reducing the range of values available to juries, and perhaps leading to a system where every mistake is simply valued at the level of the cap. Therefore, the cap system is an imperfect solution that does very little to address the real issues in the system. The real trouble, in addition to negligent doctors of course, is not necessarily with large awards, it is with frivolous claims that succeed, taxing the system of assets and leading to higher systemic premiums for doctors.
One of the most interesting solutions to this problem is not a cap system, but a separate trial court system for medical malpractice claims. Some may claim that the resulting requirements for the infrastructure of the legal system would be too great and would create transaction costs of their own. While it is true that courts would be need to be created and judges would need to be trained, the resulting expertise would also lead to frivolous claims being dismissed or settled before even reaching a jury. It would also potentially lead to less mistrials or appeals due to mistakes of courts whose sole purpose is to hear such claims. Finally, the same cases that currently clog up general trial courts would end up in a place that would handle them more efficiently overall. Therefore, the net costs of a separate system may in fact be less than those of keeping the system as it is.
In any case, such a system would likely result in more sensible outcomes than either the current or a potential capped system, with some patients receiving high awards, and some low, but hopefully not much more or less than they deserve. The end result in savings would likely be less than the estimated $54 billion that would be saved by a cap, but it would also be a more just and efficient system, better representing the realities of the specific cases coming before courts. If in the end the goal is ensuring that wronged patients get what they deserve without bankrupting doctors and insurance companies, neither the current nor a capped system are sufficient means, representing poor ideas at far ends of a potential spectrum. A medical malpractice trial court would fall in the middle, would be efficient and would, most importantly, provide just results. It is far too late for such a system to be borne of health care legislation. Unfortunately, this merely highlights that many pages do not a good bill make, and that ignoring issues to provide compromise at the expense of common sense could lead to more problems than solutions.
Although trial lawyers will be satisfied with these fruits of consistent long-term lobbying, some experts estimate that a $250,000 cap would reduce health care costs by $54 billion over 10 years. Although that is only an estimated 0.5% of overall health care costs for the coming decade, it is still a lot of money where I come from. These statistics probably don't tell the whole story however. In fact, some injuries, though life-changing and traumatic for those who suffer them, are probably not worth the over $250,000 awards they sometimes result in. Conversely, some injuries occuring at the hands of negligent doctors are probably worth more than the $250,000 cap suggested by some. It is difficult enough to place a numerical value on a limb, vital function, or even a life. The task becomes more difficult when arbitrary numbers are assigned as caps, reducing the range of values available to juries, and perhaps leading to a system where every mistake is simply valued at the level of the cap. Therefore, the cap system is an imperfect solution that does very little to address the real issues in the system. The real trouble, in addition to negligent doctors of course, is not necessarily with large awards, it is with frivolous claims that succeed, taxing the system of assets and leading to higher systemic premiums for doctors.
One of the most interesting solutions to this problem is not a cap system, but a separate trial court system for medical malpractice claims. Some may claim that the resulting requirements for the infrastructure of the legal system would be too great and would create transaction costs of their own. While it is true that courts would be need to be created and judges would need to be trained, the resulting expertise would also lead to frivolous claims being dismissed or settled before even reaching a jury. It would also potentially lead to less mistrials or appeals due to mistakes of courts whose sole purpose is to hear such claims. Finally, the same cases that currently clog up general trial courts would end up in a place that would handle them more efficiently overall. Therefore, the net costs of a separate system may in fact be less than those of keeping the system as it is.
In any case, such a system would likely result in more sensible outcomes than either the current or a potential capped system, with some patients receiving high awards, and some low, but hopefully not much more or less than they deserve. The end result in savings would likely be less than the estimated $54 billion that would be saved by a cap, but it would also be a more just and efficient system, better representing the realities of the specific cases coming before courts. If in the end the goal is ensuring that wronged patients get what they deserve without bankrupting doctors and insurance companies, neither the current nor a capped system are sufficient means, representing poor ideas at far ends of a potential spectrum. A medical malpractice trial court would fall in the middle, would be efficient and would, most importantly, provide just results. It is far too late for such a system to be borne of health care legislation. Unfortunately, this merely highlights that many pages do not a good bill make, and that ignoring issues to provide compromise at the expense of common sense could lead to more problems than solutions.
12.23.2009
An Economic Solution to Complex Treasure Cases
As marine technology has improved, it has afforded treasure hunters the opportunity to locate and recover more of the forgotten wrecks of the past. Unfortunately for them, this has also meant increased litigation as the sovereign nations who can lay claim to their sunken assets have attempted to do some recovery work of their own. In the latest example of this type of suit, successive Florida judges have ruled that Nasdaq-listed Odyssey Marine is required to return nearly 17 tons of silver coins from the ship codenamed 'Black Swan' to the Spanish government. No word on whether the explorers are fans of Thom Yorke, World War II history, or esoteric mathematics theories, but the Spanish claim that the ship is in fact Nuestra Senora de las Mercedes, a frigate which was lost off of the Strait of Gibralter to the British around the turn of the 19th century.
The next step for the case is the federal circuit, where Odyssey's claim will be heard. The following can be found on Odyssey's website, and reflects optimism on the part of CEO Greg Stemm,
And the following comes from Melinda MacConnel, Odyssey Vice President and General Counsel,
For their part, Spain, as well as Peru, a Spanish colony at the time, are claiming that the treasure from the wreck is part of their shared cultural heritage, and therefore should be protected by law and treaties, including the UNESCO 2001 Convention on the Protection of Underwater Cultural Heritage.
There will undoubtedly be numerous legal theories, treaties, and previous rulings that will impact the final outcome of this case. However, putting aside what could happen based on maritime law, there is a very logical economic solution to the problem that would result in positive externalities and favorable results for all involved. Though it would clearly have been better for Odyssey to collaborate with the Spanish and come to agreements ex-ante, allowing for cultural exploration, sharing of profit, and reduction in legal risk and fees, the situation is unfortunately past that point. Therefore, until sovereign nations start to take on salvaging operations themselves, the most sensible thing to do in cases such as this that only arise ex-post is for courts to rule for the finders of treasure.
This does not mean that nations would lose their heritage. On the contrary, it would incentivize settlement deals where the salvor's legal leverage will allow it to bargain with the claimant nations, and lead to sovereigns obtaining cultural artifacts. After all, companies such as Odyssey are for-profit, and in Odyssey's case are publicly traded with shareholders to answer to. Its ultimate goal is not to display silver coins in the lobby of its headquarters, but to turn profit. Therefore it would likely be more than happy to sell its findings to the Spanish government at market price.
This profit motive, combined with the potential power of legal backing, would in turn incentivize further exploration and risk taking and ensure that the treasures that remain hidden in the unexplored corners of the oceans do not go forever unfound. Ultimately, this would allow for the most recovery while allowing nations to retain their cultural history, albeit at a fair price.
This case has been reported as: Odyssey Marine Exploration Inc. v. The Unidentified Shipwrecked Vessel, 07-cv-614, U.S. District Court, Middle District of Florida (Tampa).
The next step for the case is the federal circuit, where Odyssey's claim will be heard. The following can be found on Odyssey's website, and reflects optimism on the part of CEO Greg Stemm,
“We are moving ahead with our other current projects – and it is important for people to understand that the vast majority of our shipwreck projects don’t have the same potential legal issues that have surfaced in the “Black Swan” case. Our focus for 2010 is on projects that are either under specific permits with governments or commercial vessels. We take heart from cases like the shipwreck of the Atocha, which seemed lost at the district court level but was won during the appeals process, granting the salvor the majority of the coins and artifacts from that shipwreck. The Central America shipwreck case was also reversed on appeal and the salvor’s position in the case of the RMS Titanic was substantially vindicated by the Fourth Circuit court of appeals in 2006, so the three most famous shipwreck cases to date were reversed on appeal. ”
And the following comes from Melinda MacConnel, Odyssey Vice President and General Counsel,
“We do not believe the Magistrate applied the correct legal analysis to the discussion of commercial activity, so we look forward to presenting our case that even if the coins recovered were once part of the cargo of the Mercedes, that ship was not entitled to the sovereign immunity enjoyed by warships on strictly military service under U.S. law and policy as well as under applicable international law...The Mercedes was serving a well-documented commercial - not military - purpose when she sank.The Foreign Sovereign Immunities Act only applies to sovereign governments and their property and has been misapplied by this court.”
For their part, Spain, as well as Peru, a Spanish colony at the time, are claiming that the treasure from the wreck is part of their shared cultural heritage, and therefore should be protected by law and treaties, including the UNESCO 2001 Convention on the Protection of Underwater Cultural Heritage.
There will undoubtedly be numerous legal theories, treaties, and previous rulings that will impact the final outcome of this case. However, putting aside what could happen based on maritime law, there is a very logical economic solution to the problem that would result in positive externalities and favorable results for all involved. Though it would clearly have been better for Odyssey to collaborate with the Spanish and come to agreements ex-ante, allowing for cultural exploration, sharing of profit, and reduction in legal risk and fees, the situation is unfortunately past that point. Therefore, until sovereign nations start to take on salvaging operations themselves, the most sensible thing to do in cases such as this that only arise ex-post is for courts to rule for the finders of treasure.
This does not mean that nations would lose their heritage. On the contrary, it would incentivize settlement deals where the salvor's legal leverage will allow it to bargain with the claimant nations, and lead to sovereigns obtaining cultural artifacts. After all, companies such as Odyssey are for-profit, and in Odyssey's case are publicly traded with shareholders to answer to. Its ultimate goal is not to display silver coins in the lobby of its headquarters, but to turn profit. Therefore it would likely be more than happy to sell its findings to the Spanish government at market price.
This profit motive, combined with the potential power of legal backing, would in turn incentivize further exploration and risk taking and ensure that the treasures that remain hidden in the unexplored corners of the oceans do not go forever unfound. Ultimately, this would allow for the most recovery while allowing nations to retain their cultural history, albeit at a fair price.
This case has been reported as: Odyssey Marine Exploration Inc. v. The Unidentified Shipwrecked Vessel, 07-cv-614, U.S. District Court, Middle District of Florida (Tampa).
12.22.2009
Hollywood Sees Record Sales Despite Belt-Tightening Consumers
Maybe it is time to add movies to the lists of countercyclical goods that become so in vogue during recessionary times. Some countercyclicals include those goods whose sales remain steady during down times because they are inelastic. In other words, their demand is not impacted by economic conditions or price changes. To an extent, medicines, fuel, and cigarettes fall into this category, for various reasons. Another class of countercyclicals includes goods which replace others, and therefore increase in quantity, during down times because they are cheaper alternatives.
Though a parent with several children and hands full of sodas and popcorn might cringe at the characterization of a day at the movies as 'cheap,' it is true that such an outing would be less than a day at the amusement park, or certainly a weekend away. It is also certainly less money to bring a date to the movies than an expensive dinner, or a night at a martini bar, activities the likes of which are completely foreign to those on a student loan salary.
Combine this relatively small pecuniary hit with the fact that there have been some very popular movies this year, and even during a recession, Hollywood is staring a record year in the face. No word yet on whether or not Avatar alone cost more than even the record amount Tinseltown is bringing in this year, but presumably that is James Cameron's problem.
Though a parent with several children and hands full of sodas and popcorn might cringe at the characterization of a day at the movies as 'cheap,' it is true that such an outing would be less than a day at the amusement park, or certainly a weekend away. It is also certainly less money to bring a date to the movies than an expensive dinner, or a night at a martini bar, activities the likes of which are completely foreign to those on a student loan salary.
Combine this relatively small pecuniary hit with the fact that there have been some very popular movies this year, and even during a recession, Hollywood is staring a record year in the face. No word yet on whether or not Avatar alone cost more than even the record amount Tinseltown is bringing in this year, but presumably that is James Cameron's problem.
New Poll Highlights Lack of Trust in Leaders by American Public
The good folks over at Zogby have managed to put together a poll that is remarkable more for what it has accomplished than for what it has proven. It has managed to unite Americans of all social classes, ethnicities and geographic backgrounds, a state of affairs that is typically the result of a particularly honorable undertaking or a common celebration brought on by the holiday season, a famous sporting victory or great national achievement. Unfortunately, no such noble unifier exists here. What has brought together nearly 85% of Americans is a common mistrust of publicly elected officials. This lack of trust manifests itself here as a belief that legislators make bills long in order to hide pork and as an attempt by party leaders to push party faithful into the 'yea' camp without so much as a look at the convoluted language of the prospective law of the land.
While slightly disturbing, the negative feelings toward politicians are not surprising. Regardless of party affiliation, pols have been creating monstrous legislation since the expense of vellum was dispensed with. However, public ire has recently been stoked by bills whose controversial aspects and impacts have put them more in the spotlight than the run of the mill budget bill. Included in this category are the stimulus bill from earlier in the year and the truly mindboggling 2,000 page sister bills on health care currently at various stages of completion in the House and Senate. Stories that have been leaked to the press in recent days regarding the back-room dealing needed to get the Senate version of the bill as far as Democratic leadership has have certainly not helped either. Finally the admissions of many lawmakers on both sides of the aisle that they don't read bills because they are too long and complicated provide any nails in the coffin of public trust that other factors had not.
It would unfortunately be naive to think that the practice of purposefully making bills impossible to interpret for typical Americans, as well as lawmakers, will end any time soon. However, even politicians listen when issues get to a tipping point. Despite years of indifference, the nation recently showed that it still cares when voter turnout spiked in November of 2008. Other recent events, such as teaparties, have shown that, even in a non-election cycle, people can be motivated to seek action when their concerns are great enough. Hopefully the fact that nearly all Americans of every imaginable background have become fed up with the legislative process will signal lawmakers that change is needed. Otherwise, the likelihood that bad bills noone understands will be passed will remain higher than the alternative, a scary thought indeed.
While slightly disturbing, the negative feelings toward politicians are not surprising. Regardless of party affiliation, pols have been creating monstrous legislation since the expense of vellum was dispensed with. However, public ire has recently been stoked by bills whose controversial aspects and impacts have put them more in the spotlight than the run of the mill budget bill. Included in this category are the stimulus bill from earlier in the year and the truly mindboggling 2,000 page sister bills on health care currently at various stages of completion in the House and Senate. Stories that have been leaked to the press in recent days regarding the back-room dealing needed to get the Senate version of the bill as far as Democratic leadership has have certainly not helped either. Finally the admissions of many lawmakers on both sides of the aisle that they don't read bills because they are too long and complicated provide any nails in the coffin of public trust that other factors had not.
It would unfortunately be naive to think that the practice of purposefully making bills impossible to interpret for typical Americans, as well as lawmakers, will end any time soon. However, even politicians listen when issues get to a tipping point. Despite years of indifference, the nation recently showed that it still cares when voter turnout spiked in November of 2008. Other recent events, such as teaparties, have shown that, even in a non-election cycle, people can be motivated to seek action when their concerns are great enough. Hopefully the fact that nearly all Americans of every imaginable background have become fed up with the legislative process will signal lawmakers that change is needed. Otherwise, the likelihood that bad bills noone understands will be passed will remain higher than the alternative, a scary thought indeed.
Hedge Funds Still a Lucrative Business for Money Managers
Any concerned London or Paris-based money men fretting over steep taxes this holiday season should be reminded that abandoning the relative safety of the partner track with a bank for a hedge fund can still be a very lucrative endeavor. That's right; the billion dollar paycheck has returned to the hedge fund industry.
Despite some dismal performance numbers last year, many hedge funds have aggressively rebounded in 2009, meaning a windfall for managers who are typically paid based on assets under management and returns. Investors with the stomachs to stay on for the ride have benefitted as well. Indeed, such a scenario could nearly have been prophesied with the right set of tea leaves as most hedge funds try to outpace typical indices by gaining alpha, or risk-adjusted excess returns. Therefore, outsized gains after steep losses should have been anticipated by managers and investors alike. I suppose that 'easier said than done' should come to mind however when one recalls that many funds went out of business last year and fortunes were lost in devastatingly short order.
Despite all that, there could be a real risk that the 'smart people' who banks are afraid of losing due to the aforementioned tax situation will be on the move this spring. However, if so, it is likely that they will be more tempted by higher paychecks at rebounding hedge funds than repelled by any tax issues. If we were all so lucky to have such options...
Despite some dismal performance numbers last year, many hedge funds have aggressively rebounded in 2009, meaning a windfall for managers who are typically paid based on assets under management and returns. Investors with the stomachs to stay on for the ride have benefitted as well. Indeed, such a scenario could nearly have been prophesied with the right set of tea leaves as most hedge funds try to outpace typical indices by gaining alpha, or risk-adjusted excess returns. Therefore, outsized gains after steep losses should have been anticipated by managers and investors alike. I suppose that 'easier said than done' should come to mind however when one recalls that many funds went out of business last year and fortunes were lost in devastatingly short order.
Despite all that, there could be a real risk that the 'smart people' who banks are afraid of losing due to the aforementioned tax situation will be on the move this spring. However, if so, it is likely that they will be more tempted by higher paychecks at rebounding hedge funds than repelled by any tax issues. If we were all so lucky to have such options...
12.20.2009
French Decision in Google Case Highlights Tensions Between IP Rights, Heritage Protection and Technological Progress
Among its many other tentacles, Google has an arm dedicated to digitising the world's library into a searchable database. It does so, it claims, to democratize knowledge and to protect the intellectual and cultural heritages of the nations it has extended this ambitious project to. Predictably, there are publishers who are not fans of the practice, including several in France. This week, a few of the largest of these French publishers were able to convince a French court that the practice violates copyright laws, and the court, in turn punished Google with fines and injunctions.
This ruling puts Google in a sticky situation. Thus far, in building its over 1 million book library, it has depended on a combination of agreements with publishers, particularly in the US, books whose copyright protections have been lifted, and interpretations of fair use laws. The legal safety net that the company has come to rely upon has always been a tenuous one, a fact underscored by the observation that it is easier find legal Q&As and analysis of the project on Google's website than facts about the project. For example, the agreements it has come to in the US with publishers to avoid copyright law are being reviewed for antitrust violations, and fair use laws of the US do not apply abroad.
No one with a realistic worldview would imagine that Google embarked on this project for purely socially responsible purposes. However, profit motives and social benefit cannot always be neatly separated, one of those rare positive externalities that make economic analysis a little less dismal. Here, the end result of Google's efforts is making some titles more accessible to the masses, and legitimate protection of rare works. The French government itself would find it difficult to argue with these endgoals, as it has undertaken a similar project of its own.
It is true that the ruling in France this week underscores the hazards that arise from a look-before-you-leap strategy such as the one that Google has adopted in its project. However it also underscores the fact that Google would probably not have been able to get this project off of the ground if it had attempted to broker deals ahead of time, as well as the leverage that it has gained by moving headfirst into it. For example, everything is still in place in the US for now, and the ruling in France is more likely to serve as a bargaining chip for the publishers than the final word on this interesting question. There is also demand for technology and resources in this genre, as seen by the overwhelming success of e-readers such as the Amazon Kindle. And, despite novel and fascinating legal issues, consumer demand typically has a way of leading to legal evolution.
Google's book scanning project is ambitious, interesting, questionably illegal, and was rushed into at breakneck speed. It also serves a valid social purpose and has the backing of the public. Observers should expect additional suits, and even perhaps rulings against the internet giant. However, in the end, its current pole position in the area will likely produce fruitful results for both the company and the citizens of the world.
This ruling puts Google in a sticky situation. Thus far, in building its over 1 million book library, it has depended on a combination of agreements with publishers, particularly in the US, books whose copyright protections have been lifted, and interpretations of fair use laws. The legal safety net that the company has come to rely upon has always been a tenuous one, a fact underscored by the observation that it is easier find legal Q&As and analysis of the project on Google's website than facts about the project. For example, the agreements it has come to in the US with publishers to avoid copyright law are being reviewed for antitrust violations, and fair use laws of the US do not apply abroad.
No one with a realistic worldview would imagine that Google embarked on this project for purely socially responsible purposes. However, profit motives and social benefit cannot always be neatly separated, one of those rare positive externalities that make economic analysis a little less dismal. Here, the end result of Google's efforts is making some titles more accessible to the masses, and legitimate protection of rare works. The French government itself would find it difficult to argue with these endgoals, as it has undertaken a similar project of its own.
It is true that the ruling in France this week underscores the hazards that arise from a look-before-you-leap strategy such as the one that Google has adopted in its project. However it also underscores the fact that Google would probably not have been able to get this project off of the ground if it had attempted to broker deals ahead of time, as well as the leverage that it has gained by moving headfirst into it. For example, everything is still in place in the US for now, and the ruling in France is more likely to serve as a bargaining chip for the publishers than the final word on this interesting question. There is also demand for technology and resources in this genre, as seen by the overwhelming success of e-readers such as the Amazon Kindle. And, despite novel and fascinating legal issues, consumer demand typically has a way of leading to legal evolution.
Google's book scanning project is ambitious, interesting, questionably illegal, and was rushed into at breakneck speed. It also serves a valid social purpose and has the backing of the public. Observers should expect additional suits, and even perhaps rulings against the internet giant. However, in the end, its current pole position in the area will likely produce fruitful results for both the company and the citizens of the world.
12.19.2009
Senate Releases its Version of Healthcare Reform; Many Hurdles Still Remain
With the Senate finally piecing together its version of a healthcare reform bill, even procedural techniques by opponents will not stop the bill from being voted on before Christmas. Though a successfully passed version would still need to be reconciled with the House version before anything makes its way to President Obama's desk, Democratic leadership is touting the compromise as a giant leap forward in the process of restructuring the healthcare system of the US.
While the Senate version does not include the most controversial of discussed provisions, such as the public option or blanket funding for abortions, it is still likely to face steep opposition from Republicans on principle, as well as some Democrats who believe it is too weak, members of the House who don't agree with everything from specific phrasings to entire clauses, and, increasingly, a weary public. However, proponents of the legislation likely see this as a victory, particularly timeline wise, as many had predicted that a Senate version would not be voted on until after the new year.
However, as noted, many difficulties remain. And it is likely that, even with passage this week, and despite the tremendous amounts of blood sweat and tears that have already been invested in this bill, the toughest part is yet to come.
While the Senate version does not include the most controversial of discussed provisions, such as the public option or blanket funding for abortions, it is still likely to face steep opposition from Republicans on principle, as well as some Democrats who believe it is too weak, members of the House who don't agree with everything from specific phrasings to entire clauses, and, increasingly, a weary public. However, proponents of the legislation likely see this as a victory, particularly timeline wise, as many had predicted that a Senate version would not be voted on until after the new year.
However, as noted, many difficulties remain. And it is likely that, even with passage this week, and despite the tremendous amounts of blood sweat and tears that have already been invested in this bill, the toughest part is yet to come.
Dictators Make Mockery of Climate Summit
Even before Hugo Chavez, Robert Mugabe and Evo Morales took the stage in Copenhagen this week, it was clear that the summit was bordering on failure with watered-down language, lack of commitments and refusals to deal by many parties ensuring that what were once visions of glory had evaporated into thoughts of what could have been. However, appearances by the dictators sent the meetings into farcical territory and truly underscored what a sham the process has become.
Many people will point to a lack of a firm commitment by Barack Obama, outrageous demands by the Chinese, or the wait and see policy of Europe as the reasons behind the failure to accomplish anything of substance in Denmark. However, the enduring image of the meetings might very well be Chavez's comparison of Obama to the devil, and presumably George W. Bush, or Mugabe and his colorful descriptions of the evils of capitalism.
For those climate change sceptics who followed the deterioration of the Copenhagen Summit with glee, nothing could have been more welcome than seeing some of the worlds most notable human rights violators and stiflers of dissent marching in lockstep against the powers they rely upon for climate change funding and whose blessing will be required for any deal of substance to ever become a reality. As long as this type of coddling of those who make a mockery of the process continues, those proponents of a strong binding agreement will continue to fail in their endeavors.
Many people will point to a lack of a firm commitment by Barack Obama, outrageous demands by the Chinese, or the wait and see policy of Europe as the reasons behind the failure to accomplish anything of substance in Denmark. However, the enduring image of the meetings might very well be Chavez's comparison of Obama to the devil, and presumably George W. Bush, or Mugabe and his colorful descriptions of the evils of capitalism.
For those climate change sceptics who followed the deterioration of the Copenhagen Summit with glee, nothing could have been more welcome than seeing some of the worlds most notable human rights violators and stiflers of dissent marching in lockstep against the powers they rely upon for climate change funding and whose blessing will be required for any deal of substance to ever become a reality. As long as this type of coddling of those who make a mockery of the process continues, those proponents of a strong binding agreement will continue to fail in their endeavors.
Shrinking Dollar Supply Signals Trouble Ahead for Government Spending Plans
Zhu Min, the deputy governor of the People's Bank of China, made some comments recently that should put the US Treasury and the legislative branch on notice. In a discussion regarding the global dollar supply, Zhu noted that the decreasing availability of dollars in the world currency markets is going to make it increasingly difficult for other nations to continue purchasing dollar-denominated US treasury securities. This is logical and predictable, but is unfotunately still probably news to most of our elected representatives.
In a recessionary economy, spending declines as people save for potential future job losses, reduced commissions, lower bonuses and other unexpected circumstances. Companies also spend less on inputs and foreign investment, such as plant development and research. These factors, inter alia, lead to higher savings, decreased trade, and therefore, fewer dollars circulating in the global economy. These trade dollars provide the foundation for the pool of money that nations with trade surpluses over the US, such as China and Saudi Arabia, use to purchase billions of dollars in US treasuries. These asset purchases in turn fund much of the spending of the government, who can't balance the budget with tax dollars alone, particularly in a down economy and its resulting decrease to corporate taxes.
All of this is bad news for a President and legislature who plan on further expenditures in the new year, including a possible new stimulus plan and a health care plan, which will cost the government money. All one needs to do is note the recent increase in the debt ceiling to realize that, despite protestations to the contrary, those in charge realize that the plans being discussed are going to require serious funding. However, increasing the debt ceiling presupposes that there will be spare global demand for the debt being authorized. Based on the comments of the Chinese, who are always careful about discussing the dollar in light of their massive positions in the currency, this could be a dangerous assumption.
In a recessionary economy, spending declines as people save for potential future job losses, reduced commissions, lower bonuses and other unexpected circumstances. Companies also spend less on inputs and foreign investment, such as plant development and research. These factors, inter alia, lead to higher savings, decreased trade, and therefore, fewer dollars circulating in the global economy. These trade dollars provide the foundation for the pool of money that nations with trade surpluses over the US, such as China and Saudi Arabia, use to purchase billions of dollars in US treasuries. These asset purchases in turn fund much of the spending of the government, who can't balance the budget with tax dollars alone, particularly in a down economy and its resulting decrease to corporate taxes.
All of this is bad news for a President and legislature who plan on further expenditures in the new year, including a possible new stimulus plan and a health care plan, which will cost the government money. All one needs to do is note the recent increase in the debt ceiling to realize that, despite protestations to the contrary, those in charge realize that the plans being discussed are going to require serious funding. However, increasing the debt ceiling presupposes that there will be spare global demand for the debt being authorized. Based on the comments of the Chinese, who are always careful about discussing the dollar in light of their massive positions in the currency, this could be a dangerous assumption.
12.15.2009
China Puts Further Restrictions on the Internet
With China's latest clampdown on the internet, it is worth taking a look at the downside of internet regulation, a topic which has been discussed on this page in the past.
I have had the privilege since starting this blog just three months ago to be found by Google search engines, have my page linked to by prominent blogs and websites and be cited by a number of Twitter pages hosted around the world. This interconnectivity is an incredible phenomenon which results in an outlet for creativity which would not have been viable a relatively short 15 years ago in the US due to technology limitations. This outlet for creativity and opinion remains unavailable in many of the world's nations, including China. However, it is not limitations to technology which are stifling the voice of the Chinese people, it is the current state of the nation's regulatory regime. This clampdown on creativity and dissent leads only to negative results, including the bottling of innovation and progress.
There are of course some things that should be regulated on the internet, such as libel. However, in many nations, including China and Cuba, the internet is regulated for everything, including 'harmful ideas,' which, under those regimes, includes 'anti-state content.' However, there are incredible societal and economic benefits that stem from the free-flow of well considered ideas that should not be stifled. I understand that this view may be seen as self-serving as my thoughts reach you courtesy of the blogosphere. However, I do not believe that impeaches their validity or truth.
Over the past two decades, Americans have increasingly received even everyday news via the internet. This activity has grown exponentially in the current decade with the advent of blogs, twitter and handhelds with realtime capabilities. It has come to a point where some of the biggest news stories of the day appear on a website or a blog before they can be found on NBC or ABC. Aside from these societal benefits, idea sharing via chat rooms and the posting of research including vital scientific study results increases the capacity for learning and innovation in our economy. However, none of this is currently possible in China, where the internet is increasingly being seen as a tool for the government to control and utilize rather than one that serves the people.
The current crackdown on the internet in China is a step backwards for a society which is otherwise being liberalized in so many ways. Great progress in the human rights area was made in the country leading up to the Summer Olympics in Beijing, a development which was rightly praised by the developed world. Hopefully the positive pressure put on the current leadership leading up to the Olympics will be replicated in support of the Chinese people after the most recent developments, because further internet regulation can only be seen as three steps back from recent single steps forward.
I have had the privilege since starting this blog just three months ago to be found by Google search engines, have my page linked to by prominent blogs and websites and be cited by a number of Twitter pages hosted around the world. This interconnectivity is an incredible phenomenon which results in an outlet for creativity which would not have been viable a relatively short 15 years ago in the US due to technology limitations. This outlet for creativity and opinion remains unavailable in many of the world's nations, including China. However, it is not limitations to technology which are stifling the voice of the Chinese people, it is the current state of the nation's regulatory regime. This clampdown on creativity and dissent leads only to negative results, including the bottling of innovation and progress.
There are of course some things that should be regulated on the internet, such as libel. However, in many nations, including China and Cuba, the internet is regulated for everything, including 'harmful ideas,' which, under those regimes, includes 'anti-state content.' However, there are incredible societal and economic benefits that stem from the free-flow of well considered ideas that should not be stifled. I understand that this view may be seen as self-serving as my thoughts reach you courtesy of the blogosphere. However, I do not believe that impeaches their validity or truth.
Over the past two decades, Americans have increasingly received even everyday news via the internet. This activity has grown exponentially in the current decade with the advent of blogs, twitter and handhelds with realtime capabilities. It has come to a point where some of the biggest news stories of the day appear on a website or a blog before they can be found on NBC or ABC. Aside from these societal benefits, idea sharing via chat rooms and the posting of research including vital scientific study results increases the capacity for learning and innovation in our economy. However, none of this is currently possible in China, where the internet is increasingly being seen as a tool for the government to control and utilize rather than one that serves the people.
The current crackdown on the internet in China is a step backwards for a society which is otherwise being liberalized in so many ways. Great progress in the human rights area was made in the country leading up to the Summer Olympics in Beijing, a development which was rightly praised by the developed world. Hopefully the positive pressure put on the current leadership leading up to the Olympics will be replicated in support of the Chinese people after the most recent developments, because further internet regulation can only be seen as three steps back from recent single steps forward.
12.13.2009
Comparing the Economic Impact of the Two Biggest Celebrity Stories of the Year
Blawgconomics has spent a not insignificant amount of time ignoring 'TigerGate' the past few weeks, if for no other reason than privacy. True, there are interesting legal aspects to the situation, but the site believed that the position of many of Wood's peers that it was a personal matter for Woods and his family was the correct one to take. Frankly, there is an element of 'he who is without sin' that keeps coming to mind as well. However, as the story has escalated and claims have become more outrageous, an inescapable economic angle has developed that is quite fascinating; namely the impact that Tiger's actions are having not only on his own purse at the moment, but their potential to impact a whole sport.
One would be hard pressed to deliver any comparable example of one athlete's actions impacting the state of an entire sport in modern times. Perhaps the first name that comes to mind is Michael Jordan, but even during his 'retirements,' the NBA still thrived. However, it is not difficult to imagine the management of the PGA tour or the organizers of individual tournaments losing some sleep right now, haunted by the specter of declining viewership and attendance, and therefore sponsorships, at even the most prestigious events while Tiger's self-imposed hiatus is in force. I am sure everyone with as even cursory relationship to the Woods family throughout the golf world is hoping for the best, and would not begrudge the young family a chance at reconciliation. However, it is inescapable that the actions of one are impacting all.
The juxtaposition of the Woods Scandal with what was arguably the other biggest celebrity story of the year could not provide a more stark contrast. While Woods stands to lose hundreds of millions of sponsorship and winnings dollars and negatively impact an entire sport, Michael Jackson's death earlier this year kick-started a renaissance of the Cult of MJ. Despite years of Wacko Jacko headlines, erratic behavior, changing appearances, and allegations of crimes that, if substantiated, would have been far worse than anything Woods has done, personal pain to his family notwithstanding, Jackson's death is easily the best thing that could have happened to his image. In addition to image reparation, Jackson's death provided a windfall for his estate, with movies, re-releases and downloads all benefitting from the icon's passing.
What is the lesson here? I, for one, cannot claim to have either the wisdom or moral authority to have the answer to that question. However, it is interesting to note how these two stories and their resulting media frenzies have impacting the legacies and the wallets of the two icons involved. Looking back, there were certainly days, weeks, months and years where Michael Jackson was more vilified than Tiger Woods currently is; it is impossible to overstate how reviled Jackson was when allegations of molestation were in the air. However, the man's image, though he didn't live to see it, has been redeemed to the extent in the public consciousness that it has reclaimed a place as a very marketable commodity. Perhaps with time, and most certainly victories, Tiger Woods will be able to recoup lost reputation, and ultimately earnings. For one thing, he is young, and almost certainly has some very good golf ahead of him. For another, situations like the Kobe Bryant scandal have proven that marketability can be regained. For his sake, and for the sake of countless others involved in a sport that depends on him for visibility, popularity and marketability, I certainly hope so.
One would be hard pressed to deliver any comparable example of one athlete's actions impacting the state of an entire sport in modern times. Perhaps the first name that comes to mind is Michael Jordan, but even during his 'retirements,' the NBA still thrived. However, it is not difficult to imagine the management of the PGA tour or the organizers of individual tournaments losing some sleep right now, haunted by the specter of declining viewership and attendance, and therefore sponsorships, at even the most prestigious events while Tiger's self-imposed hiatus is in force. I am sure everyone with as even cursory relationship to the Woods family throughout the golf world is hoping for the best, and would not begrudge the young family a chance at reconciliation. However, it is inescapable that the actions of one are impacting all.
The juxtaposition of the Woods Scandal with what was arguably the other biggest celebrity story of the year could not provide a more stark contrast. While Woods stands to lose hundreds of millions of sponsorship and winnings dollars and negatively impact an entire sport, Michael Jackson's death earlier this year kick-started a renaissance of the Cult of MJ. Despite years of Wacko Jacko headlines, erratic behavior, changing appearances, and allegations of crimes that, if substantiated, would have been far worse than anything Woods has done, personal pain to his family notwithstanding, Jackson's death is easily the best thing that could have happened to his image. In addition to image reparation, Jackson's death provided a windfall for his estate, with movies, re-releases and downloads all benefitting from the icon's passing.
What is the lesson here? I, for one, cannot claim to have either the wisdom or moral authority to have the answer to that question. However, it is interesting to note how these two stories and their resulting media frenzies have impacting the legacies and the wallets of the two icons involved. Looking back, there were certainly days, weeks, months and years where Michael Jackson was more vilified than Tiger Woods currently is; it is impossible to overstate how reviled Jackson was when allegations of molestation were in the air. However, the man's image, though he didn't live to see it, has been redeemed to the extent in the public consciousness that it has reclaimed a place as a very marketable commodity. Perhaps with time, and most certainly victories, Tiger Woods will be able to recoup lost reputation, and ultimately earnings. For one thing, he is young, and almost certainly has some very good golf ahead of him. For another, situations like the Kobe Bryant scandal have proven that marketability can be regained. For his sake, and for the sake of countless others involved in a sport that depends on him for visibility, popularity and marketability, I certainly hope so.
12.12.2009
Chinese Calls for More Climate Aid Highlight Fading Hope for Copenhagen Deal
This week in Copenhagen, China repeated its oft-stated ultimatum that it would not be bound to a climate agreement that didn't include substantial monetary incentives being provided to it by the US and the EU. Chinese negotiators also declared that pledges by the US to cut emissions by 17% by 2020 were not substantial enough. In addition to the unwillingness of any particular nation to be the first to take the plunge on substantial cuts, typically due to political pressure domestically, the hardball negotiating techniques of the Chinese are the biggest threat to a deal being done in Copenhagen, or anywhere else, for the forseeable future.
It has been noted on this page several times previously that emphasizing economic incentives is the only way that climate-related legislation would be politically feasible, both in the US and to a lesser extent, the EU. However, every other consideration is rendered moot when the language of diplomacy is replaced by the language of ultimatums. There is no way that the US can or will capitulate to Chinese demands.
However, it would be naive to think that this is solely a ploy by the Chinese to gain more concessions on climate issues. More likely, it is an attempt to scuttle an agreement altogether. China is growing, and growing very quickly. It invests substantially in green technology, but does so for economic, not social, purposes. It has a growing middle class who will eventially provide demand for the fruits of its factories. The same middle class will very rapidly approach the same car to citizen ratios of the US, and increased leisure time will increase the desire and ability to travel. The last thing China wants is to be bound to an agreement limiting its ability to make these current visions a future reality. Therefore, for now and the forseeable future, it is very likely that any deal global leaders try to make on climate change that requires the participation of the Chinese will be a deal left unmade.
It has been noted on this page several times previously that emphasizing economic incentives is the only way that climate-related legislation would be politically feasible, both in the US and to a lesser extent, the EU. However, every other consideration is rendered moot when the language of diplomacy is replaced by the language of ultimatums. There is no way that the US can or will capitulate to Chinese demands.
However, it would be naive to think that this is solely a ploy by the Chinese to gain more concessions on climate issues. More likely, it is an attempt to scuttle an agreement altogether. China is growing, and growing very quickly. It invests substantially in green technology, but does so for economic, not social, purposes. It has a growing middle class who will eventially provide demand for the fruits of its factories. The same middle class will very rapidly approach the same car to citizen ratios of the US, and increased leisure time will increase the desire and ability to travel. The last thing China wants is to be bound to an agreement limiting its ability to make these current visions a future reality. Therefore, for now and the forseeable future, it is very likely that any deal global leaders try to make on climate change that requires the participation of the Chinese will be a deal left unmade.
Iraq's Shell Deal: Spoils of War or Good Business?
Royal Dutch Shell's successful bid for the potentially highly lucrative Majnoon oil field in relatively stable southern Iraq is bound to be viewed with scepticism. Going back to the 2003 invasion of Iraq, opponents of the war painted Iraqi Freedom as a simple asset grab of a limited and declining resource by America and its coalition of allies. It is true that Shell probably wouldn't have gained access to Majnoon under the Hussein regime, though French firm Total had been in talks with Iraqi leaders about it's development in the past. It is also true that the partially British firm stands to earn a high return on its investment; otherwise it, and nearly 30 other oil companies would not have bid on the field. Finally, some followers of the process have been less than impressed with what they describe as a secretive bidding process.
However, oil is Iraq's main asset, and a valuable one at that. Many of the fields being auctioned off were not being properly developed by Iraq prior to the invasion. Additionally, technological improvements over the past decade have increased the likelihood that yields of the fields in question can be maximized. The end result of this is that Iraq will not only be able to meet its own energy needs, but also that it will produce enough surplus to become an export powerhouse to rival Russia for status as the world's second largest producer. The resulting proceeds will be critical if Iraq is to ever to develop a self-sufficient security force and viable economy and ultimately, gain control of its own affairs.
America's problem in Iraq, insurgency issues notwithstanding, has never been the military operation in and of itself, but rather the subsequent rebuilding process. Proper development of oil assets is a critical component of any plan for Iraqi reconstruction that has a chance for success. Therefore, despite faults, recent developments in the country's oil sector should be viewed positively by a nation rightly trying to regain control of its own destiny.
However, oil is Iraq's main asset, and a valuable one at that. Many of the fields being auctioned off were not being properly developed by Iraq prior to the invasion. Additionally, technological improvements over the past decade have increased the likelihood that yields of the fields in question can be maximized. The end result of this is that Iraq will not only be able to meet its own energy needs, but also that it will produce enough surplus to become an export powerhouse to rival Russia for status as the world's second largest producer. The resulting proceeds will be critical if Iraq is to ever to develop a self-sufficient security force and viable economy and ultimately, gain control of its own affairs.
America's problem in Iraq, insurgency issues notwithstanding, has never been the military operation in and of itself, but rather the subsequent rebuilding process. Proper development of oil assets is a critical component of any plan for Iraqi reconstruction that has a chance for success. Therefore, despite faults, recent developments in the country's oil sector should be viewed positively by a nation rightly trying to regain control of its own destiny.
IEA December Oil Market Report
The latest International Energy Agency oil market snapshot is available.
Previous month's reports can be found at the following links:
October
November
Previous month's reports can be found at the following links:
October
November
12.11.2009
Review of Libel Standards in England Long Overdue
Apparently embarrassed by the ease at which complainants can win suits, or at least provoke settlements, England is reviewing it's libel laws. According to The New York Times, the standards for winning a libel suit in England are considerably different from what Americans are used to, a state of affairs that has lead to some very questionable results in libel claims.
In England, jurisdictional rules are very loose in libel cases, allowing, for example, authors selling less than two dozen books, or a cardiologist who made critical remarks about clinical trials on a website that could be seen in England, to be sued. Secondly, the legal standards used in libel cases in England are much lower than in America. In the States, the plaintiff has the burden of proof to show that a statement that was made by the defendant was false. Public officials have the additional burden of proving that the statement was made maliciously, with reckless disregard for the truth. These can potentially be a high set of standards to meet, but are necessary ones when so much is stake and settlements are so prevalent. In England, however, the defendant has the burden to prove that their statements are true, and complainants are not currently required to even show actual harm against them.
Such low standards for suits have several negative results. One is the aforementioned provoking of settlements regardless of defendant liability as the accused party chooses to avoid the time, cost, and embarrassment of trial. Another is the chilling of the media. These alone are worthy reasons to change the current standards. However, there are more. Though not necessarily noted in The Times piece, the additional suits that are attracted to Britain due to its low standards potentially clog up already crowded courts. Also, the current status of libel standards is woefully inadequate to handle the needs of the internet age, with websites, blogs, and twitter pages being updated constantly. This is not to say that the powerful, famous, or controversial should not be protected from malicious lies, but making the complainants show at the least actual harm would be a strong signal that England's legal system is flexible enough to evolve along with the technological world.
Reviewing libel laws in England is the right decision. American law was formed in a cradle of English common law, and the greatest of American jurists continued to borrow unabashedly from British court rulings long after independence was gained. Maybe this is a situation where America can return the favor, for if the British do indeed borrow from US standards for libel suits, it will create a much more favorable, and fair, environment for the press, academics and humble bloggers alike to operate in.
In England, jurisdictional rules are very loose in libel cases, allowing, for example, authors selling less than two dozen books, or a cardiologist who made critical remarks about clinical trials on a website that could be seen in England, to be sued. Secondly, the legal standards used in libel cases in England are much lower than in America. In the States, the plaintiff has the burden of proof to show that a statement that was made by the defendant was false. Public officials have the additional burden of proving that the statement was made maliciously, with reckless disregard for the truth. These can potentially be a high set of standards to meet, but are necessary ones when so much is stake and settlements are so prevalent. In England, however, the defendant has the burden to prove that their statements are true, and complainants are not currently required to even show actual harm against them.
Such low standards for suits have several negative results. One is the aforementioned provoking of settlements regardless of defendant liability as the accused party chooses to avoid the time, cost, and embarrassment of trial. Another is the chilling of the media. These alone are worthy reasons to change the current standards. However, there are more. Though not necessarily noted in The Times piece, the additional suits that are attracted to Britain due to its low standards potentially clog up already crowded courts. Also, the current status of libel standards is woefully inadequate to handle the needs of the internet age, with websites, blogs, and twitter pages being updated constantly. This is not to say that the powerful, famous, or controversial should not be protected from malicious lies, but making the complainants show at the least actual harm would be a strong signal that England's legal system is flexible enough to evolve along with the technological world.
Reviewing libel laws in England is the right decision. American law was formed in a cradle of English common law, and the greatest of American jurists continued to borrow unabashedly from British court rulings long after independence was gained. Maybe this is a situation where America can return the favor, for if the British do indeed borrow from US standards for libel suits, it will create a much more favorable, and fair, environment for the press, academics and humble bloggers alike to operate in.
12.10.2009
Insider Trading Case Can Serve as a Model for Market Regulation
In a story that could serve as the plotline for a sequel to Oliver Stone's Wall Street (which is, incidentally forthcoming) a former Ropes & Gray associate became the sixth person to plead guilty in what prosecutors are calling the largest ever hedge fund-related insider trading scheme. With everything from secret code names to computer hacking and cash payoffs, the case is certainly entertaining. However, what of the claim that this is the largest ever insider trading scheme? At an estimated $53 million, the resulting profits are certainly not inconsequential. However, I think it is more likely that this is merely the largest scheme which has been uncovered. Despite this, I believe that it is a great example of how financial industry regulation could ideally work.
I know people who work in money management, and despite the bad press the industry has received recently, not everyone in the business is an unscrupulous real-life Gordon Gekko. However, the hedge fund industry has been estimated to be a trillion dollar business, and recent events highlight what greed can do to previously revered members of the financial community. Hedge funds, with their 2 and 20 compensation schemes and nearly continuous performance assessment, create great pressure on managers to gain an edge. Because of this, it is actually surprising that more insider trading cases do not materialize.
Some say that the solution to this is to regulate compensation schemes, or more broadly, the industry itself. However, the fact that there is a marketplace for the services of hedge fund managers under the current compensation standards indicates that people are willing to pay money for specialized expertise in specialized markets. Addtionally, ex-ante regulation can be tremendously expensive, a fact which can't be ignored during a period of record deficits. That is why big cases like this are so important. More impactful than the punitive effects on the perpetrators of the schemes themselves are the deterrent effects on potential rulebreakers.
The stock market is too often an insider's only club in what should be the most populist of markets. Realistically, cases like this are more than likely just the tip of the iceberg, a fact that prosecutors and regulators should remember before patting themselves too generously on their respective backs. However, it is a start, and could also serve as a model for financial regulation. Instead of putting further systems in place to regulate the financial markets, more cases like this could be just the fix for unfair play, creating a disincentive to cheat, and ultimately an equal playing field for all.
I know people who work in money management, and despite the bad press the industry has received recently, not everyone in the business is an unscrupulous real-life Gordon Gekko. However, the hedge fund industry has been estimated to be a trillion dollar business, and recent events highlight what greed can do to previously revered members of the financial community. Hedge funds, with their 2 and 20 compensation schemes and nearly continuous performance assessment, create great pressure on managers to gain an edge. Because of this, it is actually surprising that more insider trading cases do not materialize.
Some say that the solution to this is to regulate compensation schemes, or more broadly, the industry itself. However, the fact that there is a marketplace for the services of hedge fund managers under the current compensation standards indicates that people are willing to pay money for specialized expertise in specialized markets. Addtionally, ex-ante regulation can be tremendously expensive, a fact which can't be ignored during a period of record deficits. That is why big cases like this are so important. More impactful than the punitive effects on the perpetrators of the schemes themselves are the deterrent effects on potential rulebreakers.
The stock market is too often an insider's only club in what should be the most populist of markets. Realistically, cases like this are more than likely just the tip of the iceberg, a fact that prosecutors and regulators should remember before patting themselves too generously on their respective backs. However, it is a start, and could also serve as a model for financial regulation. Instead of putting further systems in place to regulate the financial markets, more cases like this could be just the fix for unfair play, creating a disincentive to cheat, and ultimately an equal playing field for all.
12.09.2009
Short-term Political Gain Increases Potential for Labour Pain in UK
With today's announcement that a one-time tax of 50% would be levied on both citizen and ex-pat bankers in the UK, Gordon Brown's Labour Party made a strong statement to Britons that it intends to punish financiers for their greed and past failures. However, despite a populist short-term boost to flagging poll numbers, Labour may come to regret this move heading into next year's general election. This is because the revenue impact of this purposely punitive tax will be far less beneficial to society than the economic benefit that would otherwise be gained by increased spending both in the short and medium-runs.
The City of London is one of the great financial centers of the world, neck and neck with New York in terms of transactions and IPOs over the past few years. It is not likely that it will lose its competitiveness when it comes to attracting top talent overnight, even with the potential of a big tax bill attached to employment contracts. Smart people will continue to seek jobs there, and it is unlikely that a mass exodus of talent will occur now that the announcement has been made as some fear. However, in an economic environment where unemployment numbers are obsessed over, contracting growth numbers are the norm, and there are legitimate fears that even the holiday season will not provide enough stimulus to carry retailers into the black this year, surprise taxes on top-earners should not be viewed as one of the keys to recovery.
This should not be viewed as an endorsement of the mess banks have gotten themselves into recently. In fact, it is my opinion that this bonus situation could have been avoided entirely if government had kept its hand out of the mess and allowed the weak to fall prey to the whims of creative destruction. However, whatever one may think about the trickle-down effect of the spending of the wealthy in general terms, surprise cuts to relied-upon income for top-earners will certainly have a negative impact on the broader economy. This is especially true with the timing of the announcement. Spending is likely to be curtailed even further than it might have been as bankers change spending plans on a dime.
Historically, end of year bonuses go to everything from down payments on homes to holiday presents and playthings. They impact spending on both necessities and discretionary items. Because of multiplier effects, the resulting impact of this spending is far greater than the boost to Her Majesty's Revenue and Customs coffers via tax could ever be.
Any taxing and subsequent spending by Labour is bound to have a shadow of the impact that top-earners could have by simply spending during the holiday season. Ultimately, if the same retail workers, travel agents, hoteliers and real estate agents who Labour is courting by making these moves are still feeling economic pain next year, it could very well be David Cameron who is responsible for the next round of budget announcements.
The City of London is one of the great financial centers of the world, neck and neck with New York in terms of transactions and IPOs over the past few years. It is not likely that it will lose its competitiveness when it comes to attracting top talent overnight, even with the potential of a big tax bill attached to employment contracts. Smart people will continue to seek jobs there, and it is unlikely that a mass exodus of talent will occur now that the announcement has been made as some fear. However, in an economic environment where unemployment numbers are obsessed over, contracting growth numbers are the norm, and there are legitimate fears that even the holiday season will not provide enough stimulus to carry retailers into the black this year, surprise taxes on top-earners should not be viewed as one of the keys to recovery.
This should not be viewed as an endorsement of the mess banks have gotten themselves into recently. In fact, it is my opinion that this bonus situation could have been avoided entirely if government had kept its hand out of the mess and allowed the weak to fall prey to the whims of creative destruction. However, whatever one may think about the trickle-down effect of the spending of the wealthy in general terms, surprise cuts to relied-upon income for top-earners will certainly have a negative impact on the broader economy. This is especially true with the timing of the announcement. Spending is likely to be curtailed even further than it might have been as bankers change spending plans on a dime.
Historically, end of year bonuses go to everything from down payments on homes to holiday presents and playthings. They impact spending on both necessities and discretionary items. Because of multiplier effects, the resulting impact of this spending is far greater than the boost to Her Majesty's Revenue and Customs coffers via tax could ever be.
Any taxing and subsequent spending by Labour is bound to have a shadow of the impact that top-earners could have by simply spending during the holiday season. Ultimately, if the same retail workers, travel agents, hoteliers and real estate agents who Labour is courting by making these moves are still feeling economic pain next year, it could very well be David Cameron who is responsible for the next round of budget announcements.
Thanks for Tackling the BCS Congress, Maybe Now You Have Time for the Economy!
At a time when there are two wars being fought on the other side of the world, unemployment is over 10% and there is vicious congressional infighting over the almost unfathomably expensive issues of healthcare and stimulus, I was more than a little surprised to see that a House Energy and Commerce Subcommittee chaired by Rep. Joe Barton (R- TX) passed a vote to endorse a bill banning the promotion of a postseason NCAA game as a national championship unless it resulted from a playoff. Thankfully, one representative, John Barrow (D- GA) had the sense to note that 'we have more important things to spend our time on,' before the vote was held. I couldn't agree more.
Congress has taken flak in the recent past for involving itself in sports-related issues such as steroids in baseball. However, congressional meddling in topics such steroids can at least arguably be linked to safety concerns, the influence professional players have on America's youth, and not least of all the fact that steroids are a regulated drug. However, no such argument can be made about the state of the BCS.
You won't get an argument from me that the BCS doesn't always work. On the contrary, I think that its a shame that there are three undefeated teams going into bowl season this year that will not have a chance to play their way into a trophy ceremony on January 7th. I do sympathize with those young men, their coaches, and the programs that they represent. The way the system works may indeed be unfair and biased against teams like Boise State who have shown that they will take on all comers, yet lack a magical acronym like SEC on their team's letterhead. However, it is the system that everyone in the old Division 1 signed up for, and usually when the dust settles, the National Champion is a worthy team. Additionally, university presidents have control over the system, and if it truly was the largest issue facing the nation, it is likely that the system would be changed. As it is, pesky things like the academic schedule always seem to get in the way of a month-long playoff system.
Once again, however, the main issue here is not the adequacy, or inadequacy, of the BCS. Indeed, if the universities involved with the Bowl Championship Series announced a plus-1 game pitting the undefeated winners of the Fiesta Bowl and the National Championship, you would certainly hear no complaint from me. The issue is that lawmakers are spending time on items that have nothing to do with Iraqi and Afghani reconstruction, the safety of our service men and women, the economy, or the predicted $30 billion loss on the automaker bailouts. While it is true that every year or two, there is a controversy over who makes it to the high-profile, big money BCS games, Congress should keep in mind the fact that there are bigger issues to tackle at this time.
Congress has taken flak in the recent past for involving itself in sports-related issues such as steroids in baseball. However, congressional meddling in topics such steroids can at least arguably be linked to safety concerns, the influence professional players have on America's youth, and not least of all the fact that steroids are a regulated drug. However, no such argument can be made about the state of the BCS.
You won't get an argument from me that the BCS doesn't always work. On the contrary, I think that its a shame that there are three undefeated teams going into bowl season this year that will not have a chance to play their way into a trophy ceremony on January 7th. I do sympathize with those young men, their coaches, and the programs that they represent. The way the system works may indeed be unfair and biased against teams like Boise State who have shown that they will take on all comers, yet lack a magical acronym like SEC on their team's letterhead. However, it is the system that everyone in the old Division 1 signed up for, and usually when the dust settles, the National Champion is a worthy team. Additionally, university presidents have control over the system, and if it truly was the largest issue facing the nation, it is likely that the system would be changed. As it is, pesky things like the academic schedule always seem to get in the way of a month-long playoff system.
Once again, however, the main issue here is not the adequacy, or inadequacy, of the BCS. Indeed, if the universities involved with the Bowl Championship Series announced a plus-1 game pitting the undefeated winners of the Fiesta Bowl and the National Championship, you would certainly hear no complaint from me. The issue is that lawmakers are spending time on items that have nothing to do with Iraqi and Afghani reconstruction, the safety of our service men and women, the economy, or the predicted $30 billion loss on the automaker bailouts. While it is true that every year or two, there is a controversy over who makes it to the high-profile, big money BCS games, Congress should keep in mind the fact that there are bigger issues to tackle at this time.
12.07.2009
Bernanke Sees Rocky Times Ahead
If this post gave anyone hope that the worst of the economic crisis was behind us, the following paragraph might serve to bring everyone back down to earth. Despite better job numbers and positive outlooks from a number of economists recently, Fed Chairman Ben Bernanke's view is that there are still rocky times ahead for the economy. In comments to the Economic Club of Washington, Bernanke explained his view that 'formidable headwinds' will lead to no better than a moderate growth rate going forward. On the bright side, he noted that inflationary forces remain under control for the time being.
Any time a Fed Chair comments on the future, it is valuable for market and economic observers. However it is the Chairman's comments about the Fed's role in the recent financial crisis that are the most interesting to analyze. As it has been noted on this page previously, Bernanke has a fight on his hands with respect to the independance of the central bank he leads. It seems that every time he has had a speaking engagement recently, he has trumpeted the moves that the Fed made in the wake of recent financial turmoil and emphasized the fact that it is independance that has made these reactions possible. This is undoubtedly all part of a strategy to keep the Fed's ability to react quickly and creatively to problems firmly in lawmaker's minds.
Assuming arguendo that Bernanke is indeed playing a political game when he reminds everyone of the value of an independant Fed leads to the question of how this strategy tempers the Chairman's outlook as long as his reconfirmation is in the air. It also perhaps highlights the problems that can occur when political appointees are fighting for their lives. Could it be possible that Bernanke wants everyone to remember the worst of times and the fact that the Fed had the ability to counter them? It is certainly possible. Who wouldn't want to remind their bosses of how valuable they were when given the opportunity? Though the Fed, for now, remains much more independant than most other government entities, observers should be at least consider Bernanke's current position when analyzing his comments. They should also be cognizant of the fact that he may be, even if subconsciously, making sure that Congress remembers that it could do worse than a Great Depression historian if further bad times are ahead.
Any time a Fed Chair comments on the future, it is valuable for market and economic observers. However it is the Chairman's comments about the Fed's role in the recent financial crisis that are the most interesting to analyze. As it has been noted on this page previously, Bernanke has a fight on his hands with respect to the independance of the central bank he leads. It seems that every time he has had a speaking engagement recently, he has trumpeted the moves that the Fed made in the wake of recent financial turmoil and emphasized the fact that it is independance that has made these reactions possible. This is undoubtedly all part of a strategy to keep the Fed's ability to react quickly and creatively to problems firmly in lawmaker's minds.
Assuming arguendo that Bernanke is indeed playing a political game when he reminds everyone of the value of an independant Fed leads to the question of how this strategy tempers the Chairman's outlook as long as his reconfirmation is in the air. It also perhaps highlights the problems that can occur when political appointees are fighting for their lives. Could it be possible that Bernanke wants everyone to remember the worst of times and the fact that the Fed had the ability to counter them? It is certainly possible. Who wouldn't want to remind their bosses of how valuable they were when given the opportunity? Though the Fed, for now, remains much more independant than most other government entities, observers should be at least consider Bernanke's current position when analyzing his comments. They should also be cognizant of the fact that he may be, even if subconsciously, making sure that Congress remembers that it could do worse than a Great Depression historian if further bad times are ahead.
Job Market Showing Signs of Life Heading into the New Year
Some economists believe that the worst of the current recession may be behind us as recent job numbers came out rosier than expected. Though jobs were not added to the economy, less jobs than expected were lost, and many of the economists polled expect a positive increase when the next round of data is released. These positive projections are being made based on a few factors, including the decline in inventories as long-term demand catches up to supply, and increasing corporate profits. Both of these serve as precursors to a slowdown in layoffs and eventually, new hiring.
There are clearly positive signs in the air, and they should be viewed even more favorably than this month's slight decline in the unemployment rate if projections come to fruition. This is because job numbers are more concrete than the unemployment rate, which can be misleading due to the impact of frustrated workers on data. The old mantra that a recession is when your neighbor loses his job, and that a depression is when you lose yours has been repeated too often over the past few years. If the tide is indeed turning, it would be a welcome change to put some of these cliches on the shelf for a while and look ahead to positive developments as we enter a new year.
There are clearly positive signs in the air, and they should be viewed even more favorably than this month's slight decline in the unemployment rate if projections come to fruition. This is because job numbers are more concrete than the unemployment rate, which can be misleading due to the impact of frustrated workers on data. The old mantra that a recession is when your neighbor loses his job, and that a depression is when you lose yours has been repeated too often over the past few years. If the tide is indeed turning, it would be a welcome change to put some of these cliches on the shelf for a while and look ahead to positive developments as we enter a new year.
12.06.2009
The Economic Motive for Developing Green Technology
Considering the developments of the past month or so, the ambitions of the upcoming Copenhagen Climate Summit have no doubt been dampened. However, I felt that it would nonetheless be interesting to take another look at the IEA's World Energy Outlook. Following is a summary of the report with an additional analysis of the economic benefits that nations may be able to achieve by embracing the development of green technology. Whatever side of the climate change debate one finds themselves, the promotion of economic growth is one area everyone in a recessionary environment should be able to agree upon. If the result is a healthier world, I am sure no one will complain.
In what is essentially a teaser to its full report due early to mid-November, but is in and of itself a useful document, the International Energy Agency (IEA) recently released an excerpt from its World Energy Outlook for 2009. 1 The IEA is an autonomous body developed within the framework of the Organisation for Economic Co-operation and Development (OECD) and is the main forum for energy discussion and cooperation between many of the OECD nations. As a point of reference, the US, UK, and many EU nations in addition to Japan and Australia inter alia are included in the group. Therefore, it represents most of the large, developed nations in the world and any agreements reached by the group have an impact on a majority of the world’s GDP. With that backdrop in mind, a few other items should be noted. First and foremost, the IEA meetings are not the forum for climate change skeptics. Many of the assumptions in the report, and indeed the report itself, presuppose the idea that if some of its proposed changes do not occur, the result to the global environment would be disastrous. Although this viewpoint was not shared by previous US administrations, the current White House has, at least in rhetoric, shared this idea, which has, of course, been a foregone assumption throughout Europe for much longer.
Any holdout climate change skeptics, perhaps emboldened by a historically chilly 2009 and the specter of October snowfalls in the Midwest and Northeast can still find value in this report however, as it focuses on the economic impact of green development in addtion to the downside environmental factors of the current state of the world. For example, though the report is very realistic about the dollar costs projections of some of its ideas, it also points out the long-term cost savings that would occur if some of its measures were adopted. For example, as it has been noted on these pages previously, it may cost consumers an initial outlay to purchase an automobile with hybrid or electric technology. However, cost savings on gasoline over the long term tend to even these costs out. Additionally, long-sighted supporters of green technology would be able to point to the future potential of electric cars functioning as storage units for excess capacity and the potential for consumers to become suppliers of energy, whether on a net or supplemental basis, releasing their extra energy back into the grid for a cost. With the report’s view toward reducing automobile emissions among all nations, even those developing ones it grants overall Co2 increases to, this type of technology could be pushed to the forefront. So too could more domestic technologies, such as roof top photovoltaic cells, which could afford consumers the same potential to profit on production rather than purely spend on consumption.
In what is essentially a teaser to its full report due early to mid-November, but is in and of itself a useful document, the International Energy Agency (IEA) recently released an excerpt from its World Energy Outlook for 2009. 1 The IEA is an autonomous body developed within the framework of the Organisation for Economic Co-operation and Development (OECD) and is the main forum for energy discussion and cooperation between many of the OECD nations. As a point of reference, the US, UK, and many EU nations in addition to Japan and Australia inter alia are included in the group. Therefore, it represents most of the large, developed nations in the world and any agreements reached by the group have an impact on a majority of the world’s GDP. With that backdrop in mind, a few other items should be noted. First and foremost, the IEA meetings are not the forum for climate change skeptics. Many of the assumptions in the report, and indeed the report itself, presuppose the idea that if some of its proposed changes do not occur, the result to the global environment would be disastrous. Although this viewpoint was not shared by previous US administrations, the current White House has, at least in rhetoric, shared this idea, which has, of course, been a foregone assumption throughout Europe for much longer.
Any holdout climate change skeptics, perhaps emboldened by a historically chilly 2009 and the specter of October snowfalls in the Midwest and Northeast can still find value in this report however, as it focuses on the economic impact of green development in addtion to the downside environmental factors of the current state of the world. For example, though the report is very realistic about the dollar costs projections of some of its ideas, it also points out the long-term cost savings that would occur if some of its measures were adopted. For example, as it has been noted on these pages previously, it may cost consumers an initial outlay to purchase an automobile with hybrid or electric technology. However, cost savings on gasoline over the long term tend to even these costs out. Additionally, long-sighted supporters of green technology would be able to point to the future potential of electric cars functioning as storage units for excess capacity and the potential for consumers to become suppliers of energy, whether on a net or supplemental basis, releasing their extra energy back into the grid for a cost. With the report’s view toward reducing automobile emissions among all nations, even those developing ones it grants overall Co2 increases to, this type of technology could be pushed to the forefront. So too could more domestic technologies, such as roof top photovoltaic cells, which could afford consumers the same potential to profit on production rather than purely spend on consumption.
12.04.2009
Indian Declaration Latest Blow to Potential Climate Agreement
When India's Environment Minister declared definitively Thursday that his country would not be signing any binding agreements at the upcoming Copenhagen talks, it was just the most recent in a series of blows to those who harbored hopes of a wide-ranging and comprehensive deal. A non-inclusive list would include the dramatic Climategate, the dampening of hope by President Obama, and the humorously ironic recent declaration by Denmark's own Parliamentary Speaker that climate change may yet be a scientific creation rather than a scientific proof.
While this will be seen as a disaster by some and a positive development by others, both sides of the contentious debate would agree that it underscores how difficult it is to develop binding international agreements. This is particularly true with topics as controversial as climate change, and even truer with proposals which include the slowdown of economic growth as a solution to problems.
What may be most interesting going forward is observing how organizers of the talks structure meetings now. In other words, will there still be a push for a dramatic and binding deal, or will expectations be dampened to match the rhetoric of many of the world's powers? It remains to be seen. However, that it will continue to be a hot topic as talks rapidly approach is a certainty.
While this will be seen as a disaster by some and a positive development by others, both sides of the contentious debate would agree that it underscores how difficult it is to develop binding international agreements. This is particularly true with topics as controversial as climate change, and even truer with proposals which include the slowdown of economic growth as a solution to problems.
What may be most interesting going forward is observing how organizers of the talks structure meetings now. In other words, will there still be a push for a dramatic and binding deal, or will expectations be dampened to match the rhetoric of many of the world's powers? It remains to be seen. However, that it will continue to be a hot topic as talks rapidly approach is a certainty.
12.02.2009
How will History Remember Bernanke?
Earlier today, Rasmussen released the results of its latest opinion poll regarding Fed Chair Ben Bernanke. Aside from highlighting the average American's apathy and/or ignorance of the Fed's role in the economy (39% of respondents didn't have enough information to even have an opinion on whether or not Bernanke should be replaced), the numbers emphasize that Bernanke never had even a fighter's chance to reach the popularity levels of his predecessor.
While sometimes applauded for his creative thinking, Bernanke is more often maligned for everything from inaction to overreaction. However, the former Princeton professor and expert on the Great Depression inherited an economy that was already showing signs of the bubbles that are now all the more apparent with the gift of hindsight. Once the housing market, and subsequently the financial markets, began their downward spiral, Bernanke at least reacted quickly. Though it is impossible to know what impact his moves made, or what would have happened if Bernanke, the Treasury Department and successive administrations had reacted to the troubles differently, one has to credit the Fed with developing creative solutions to issues on a real time basis as the system neared the precipice.
It is also worth mentioning that previous Fed Chair Alan Greenspan, still viewed as one of the best if the results in the poll are any indication, fuelled many of the current fires with very loose monetary policy and a look-the-other-way approach to exotic mortgage securities. Whatever one thinks of Bernanke's reactions to issues, one has to accept that they weren't issues of his own creation. However, for better or worse, Greenspan will always have the benefit of having presided over a tech-fuelled boom, while Bernanke was handed the thankless job of holding together a crippled financial system with chewing gum and prayers.
It is possible that political pressures and the potential to start fresh will lead to Bernanke not being reconfirmed. If so, few Americans will lose sleep over the change. It is also possible that the 'Bernanke put' and current loose monetary policies are creating a whole new set of problems for the next Fed Chair or indeed Bernanke himself. However, Bernanke was probably never as bad as these poll numbers indicate, and it will be interesting to see if the ultimate lens of history is kinder to the economic historian who tried to mop up the biggest financial woes in two generations, or the 'maestro' who, in large part, created them. Unfortunately it seems that it is the latter who will continue to be seen as the wizard while the former may cosider himself lucky to be, at best, remembered as a casualty of his times.
While sometimes applauded for his creative thinking, Bernanke is more often maligned for everything from inaction to overreaction. However, the former Princeton professor and expert on the Great Depression inherited an economy that was already showing signs of the bubbles that are now all the more apparent with the gift of hindsight. Once the housing market, and subsequently the financial markets, began their downward spiral, Bernanke at least reacted quickly. Though it is impossible to know what impact his moves made, or what would have happened if Bernanke, the Treasury Department and successive administrations had reacted to the troubles differently, one has to credit the Fed with developing creative solutions to issues on a real time basis as the system neared the precipice.
It is also worth mentioning that previous Fed Chair Alan Greenspan, still viewed as one of the best if the results in the poll are any indication, fuelled many of the current fires with very loose monetary policy and a look-the-other-way approach to exotic mortgage securities. Whatever one thinks of Bernanke's reactions to issues, one has to accept that they weren't issues of his own creation. However, for better or worse, Greenspan will always have the benefit of having presided over a tech-fuelled boom, while Bernanke was handed the thankless job of holding together a crippled financial system with chewing gum and prayers.
It is possible that political pressures and the potential to start fresh will lead to Bernanke not being reconfirmed. If so, few Americans will lose sleep over the change. It is also possible that the 'Bernanke put' and current loose monetary policies are creating a whole new set of problems for the next Fed Chair or indeed Bernanke himself. However, Bernanke was probably never as bad as these poll numbers indicate, and it will be interesting to see if the ultimate lens of history is kinder to the economic historian who tried to mop up the biggest financial woes in two generations, or the 'maestro' who, in large part, created them. Unfortunately it seems that it is the latter who will continue to be seen as the wizard while the former may cosider himself lucky to be, at best, remembered as a casualty of his times.
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