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At the New York Times, Paul Krugman turns his attention to China. Simply put, the Middle Kingdom could be the next domino to fall — after the U.S. financial crisis an the ongoing eurozone crisis — in what now looks like a pitched global battle between regulated finance and finance that, if not purely criminal, isn't exactly above-board.
Krugman zeroes in on the big difference between limited consumer spending in China, surging investment spending, and our old friend, real estate:
Do we actually know that [Chinese] real estate was a bubble? It exhibited all the signs: not just rising prices, but also the kind of speculative fever all too familiar from our own experiences just a few years back — think coastal Florida.
And there was another parallel with U.S. experience: as credit boomed, much of it came not from banks but from an unsupervised, unprotected shadow banking system. There were huge differences in detail: shadow banking American style tended to involve prestigious Wall Street firms and complex financial instruments, while the Chinese version tends to run through underground banks and even pawnshops. Yet the consequences were similar: in China as in America a few years ago, the financial system may be much more vulnerable than data on conventional banking reveal.
I guess I just reflexively assume that nobody likes egg nog. But I'm wrong. The subject of nog came up with a co-worker today when she enthused over the classic holiday libation. I was immediately reminded of this egg nog column I wrote in 2002, when I worked at Wine Spectator magazine and occasionally offered thoughts on cocktails and mixology:
Egg nog isn't exactly a cocktail--not in the modern sense, anyway--but it is a fairly old mixed drink. Actually more of a punch. The origins of the name are slightly mysterious, so in order to sort it all out, I asked a friend of mine, Jesse Sheidlower, an editor of the Oxford English Dictionary, to give me an authoritative definition.
"Nog," he explained, "is an East Anglian dialect word for a type of strong ale brewed chiefly in Norfolk. Egg-nog is almost exclusively an American word for a drink of eggs mixed with alcohol. Originally rum, as one might expect in eighteenth-century America. The first known example of the word is from 1775."
There you have it. A pre-Declaration of Independence quaff. Older than America itself, the land of the cocktail. Venerable. George Washington probably enjoyed nog all the time.
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10. JAPANESE EARTHQUAKE/TSUNAMI. The Japanese earthquake and tsunami, as well as the subsequent nuclear crisis, rocked the global manufacturing supply chain, affecting everyone from consumer electronics companies to carmakers. The tragedy caused great suffering and significant loss of life. As far as the business world goes, it also crippled the Japanese auto industry and allowed both General Motors and Ford to stage big comebacks.
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9. AMERICAN GETS DOWNGRADED! Will America always be triple-A? Standard and Poor's didn't think so when, in August, it downgraded the USA from its long-held AAA credit rating to a mere AA+. Wait! Wasn't that the same S&P that gave AAA ratings to the subprime bonds that were backed by "toxic" housing assets during the financial crisis? Um, yeah. But no matter. The rating agency was reacting to the fight over the U.S. debt ceiling, evidence to many that Congress had become totally dysfunctional.
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8. THE iPAD KILLER ARRIVES! There was no tablet market until earlier this year — there was an Apple iPad market. But a worthy competitor to Apple's runaway success finally arrived in the form of the Amazon Kindle Fire. And at $199, the price was certainly right. Let the Great Tablet Battle begin!
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7. SOCIAL MEDIA GOES PUBLIC. The tech IPO market had been moribund until LinkedIn, the business-oriented social networking site, led the charge back in May. It rose as high as $122 per share before settling to earth. But it still looks to end the year with a market cap above $6 billion.
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6. CORZINE GOES DOWN. After being defeated for re-election as governor of New Jersey, Jon Corzine, formerly of Goldman Sachs, decided to try for one last big Wall Street score. He went to work for a sleepy brokerage, MF Global, and placed a big bet on European debt — just in time for the European debt crisis! Bankruptcy followed. Client money disappeared, Corzine was last seen testifying before Congress. The disgraced CEO may next been seen heading for jail.
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5. FORECLOSURES FOREVER. In 2011, the housing crisis continued to grind on. But the big banks began to once again more forward on foreclosures, after sorting out the legal implications of the robo-signing scandal. The year ends with lenders attempting to move more than 2 million homes through the foreclosure process.
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4. STEVE JOBS, RIP. October 5, 2011: the day America's greatest business and technology visionary since...Thomas Edison? Walt Disney? died after a battle with various types of cancer. Millions of people — probably billions — worldwide were affected by the news. In a testament to how convincingly Jobs had brought Apple back from the brink — from near-bankruptcy to, briefly, the world's biggest company — many learned of his death on a device he had effectively created.
3. THE EURO CLINGS TO LIFE. For years, the eurozone had been struggling with a debt crisis that seemed localized to Greece. But 2011 was the year it all fell apart, with the crisis spreading to Italy, Spain, and even roiling the economies of France, Germany, Great Britain, and the United States. German Chancellor Angela Merket and French President Nicholas Sarkozy formed a strange sort of marriage as they worked on a solution. For every victory there was a defeat. And at year's end, it was still unclear whether the single currency would survive.
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2. THE JOBLESS RECOVERY. By November, U.S. unemployment at last fell below 9 percent. It was the worst recovery in employment from a recession since the Great Depression. And there was really no end in sight, as economist continued to predict slow growth in 2012. Some prospective workers, members of the long-term unemployment, simply gave up and quit looking.
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1. OCCUPY WALL STREET. What began as a little-noticed protest in a park in lower Manhattan exploded into a national movement in less than two months. It was the 99% versus the 1%, with the 99%er claiming that inequality in American could no longer be tolerated. By December, protesters had been ousted from public and private locations in major U.S. cities and the movement had begun to occupy college campuses. Will the movement have a future? 2012 will tell. But Occupy Wall Street was, hands down, the biggest business story of the year.
It may have been the most crazy, crazy, crazy year in business and economics since...well, since the Financial Crisis in 2008. In fact, it may have topped that surreal episode. We began the year with some economists expecting better than 3 percent GDP growth in the U.S. and ended it with anti-Wall Street protests from coast to coast, the eurozone on the ropes, and unemployment still hovering above 8 percent.
Click through the slide show to get the blow-by-blow, from the Japanese earthquake and tsunami to the ongoing foreclosure crisis. May you live in interesting times? For everyone's sake, let's hope 2012 is rather less interesting.
Oh, wait...it's an election year!
Methinks we're going to need helmets in 2012.
A street child looks out from his classroom during studies conducted by the Salaam Baalak Trust at the New Delhi railway station in September 2004. Salaam Baalak Trust is an Indian charity for homeless children.
Silicon Valley naturally believes that it can change the world. This is at times a pathetic delusion, but also equally a chance for tech startup country to show off what it's got. Consider the case of Laura Arrillaga-Andreessen, wife of Mark Andreesen, who co-founded Netscape and is now a venture capitalist. This is from the New York Times Bits blog:
Laura Arrillaga-Andreessen is on a mission.
[She] thinks tech titans should be more philanthropic. And she is encouraging the youngest billionaires to give away their money now, not wait until after they retire or die.
But her mission extends beyond the tech world. She wants to expand the definition of the philanthropist, to include people who give time or expertise, not just money. She also argues that philanthropy should be more professional, by borrowing strategies like research and evaluation from Silicon Valley’s for-profit businesses. These strategies include using technology to make things more efficient, inventing new ways to do business and financing nimble upstarts.
It's time for my first annual DeBord Report Awards for business books. The winners for 2011 are:
I wrote a Rather Short Review of this book, by a former Goldman Sachs "quant," earlier this year. Here's what I had to say:
"It's an incredibly erudite and humane book. Maybe not the most informative, blow-by-blow account of how Wall Street nearly ruined the world. But an impressive effort in soul-searching combined with real thinking. Derman is what I now think of as an "old-school human": widely versed in the various troves of human expression and inquiry, from philosophy to literature to science, and not afraid to show us what he's got."
Since then, I haven't been able to get the book out of my head. It isn't just one of the best business books I've read in a long while — it's one of the best self-help books! By which I mean it's a business book that I can imagine reading and re-reading many times.
"Lost Decades: The Making of America's Debt Crisis and the Long Recovery" by Menzie D. Chinn and Jeffry A. Frieden
Emanuel Derman may not have produced the most informative blow-by-blow of the financial crisis, but Chinn and Frieden certainly have. Highly readable but not at all a pop history of the Wall Street meltdown, "Lost Decades" explains in alarmingly clear language what went wrong, why, and what we can do to prevent it from happening again.
The best book I've ever read about options pricing, which is the unified field theory of finance. The Black-Scholes equation solved a problem that everyone thought was fundamentally unsolvable. The story of how the equation came about is lively intellectual history, involving centuries of slow and steady lock-picking until the code was finally cracked. In a sense, Szpiro's storytelling is a kind of narrative Black-Scholes equation: it makes something very hard both easy to follow and exciting if not downright fun to read about.