Merkel the Marathoner

Pheidippides

First Marathon Runner

Wikipedia

Angela Merkel has compared the euro crisis as a "marathon," according to a report by Nicholas Kulish and Alan Cowell: "No quick fix for crisis in euro zone, Merkel says" (International Herald Tribune, December 3-4, 2011):

Chancellor Angela Merkel of Germany, a central player in efforts to rescue Europe's single currency, on Friday ruled out a rapid solution to the euro zone's debt crisis, comparing the process to a runners' marathon and saying it could take years . . . . "Resolving the sovereign debt crisis is a process and this process will take years," Mrs. Merkel said . . . . Marathon runners, she said, believe that their efforts become particularly difficult after the "35 kilometer mark . . . . But they also say that you can get to the finish if you are conscious of the magnitude of the task from the very start."

I'm not going to hazard a suggestion on how the European Union should resolve its euro zone crisis, but I will say that a "marathon" is not the most useful analogy. Merkel takes the analogy rather literally, too. She speaks of its "magnitude" and apparantly means 42.195 kilometers, for she refers to the "35 kilometer mark." Merkel's view of this economic crisis is too static. She imagines a fixed timeline for the crisis, with a clear beginning and a clear end and precisely 42.195 kilometers from the former to the latter. But this crisis is not static; it is dynamic, and if the EU does not run more quickly, then the race could extend indefinitely . . . until the euro's collapse, of course.

We might also want to remember that Pheidippides, the first marathon runner, died upon finishing his run . . .

Expat Living: "Broke bankers: move to Kansas"

Small Change?

Unneeded in Kansas. . .

And You Can Bank on That!

(Image from Wikipedia)

At last, another "Expat Living" article by yours truly has appeared in this morning's edition of the Korea Herald. I fear that today's column will therefore look rather familiar:

Broke bankers: move to Kansas

Despite the world's recent economic downturn, I have no wish to traffic in the dismal science. Mine is the sunny science of loquacious economics, and this being a language column, I offer manifold words of advice. These might not amount to verbal economy, but I do truly desire to help those who have suffered the most in the current economic crisis: New York bankers.

Therefore, in the disinterested interest of helping this select few of those rendered unemployed or at least insolvent by the recession that has accompanied the ongoing financial mess, I offer as free advice the following tip: Move to Kansas and take up farming.

"But," you may well protest, "I'm a New York banker who knows nothing about running a farm."

No problem. You knew nothing about running a bank either, but that ignorance never kept your confidence in check. If you can simply regain that level of ignorant arrogance, you will be well-qualified for the farm "job" that I suggest.

Here is the deal, which I shall elaborate in my ramshackle style. My "Cousin Bill," a Kansas native, was recently on one of his "Weekly Ramblings" through Kansas and vicinity, taking in the broad vistas that stretch from one grain elevator to the very next one 20 kilometers off in the majestic distance. Up close, these elevators can be quite elevating. Cousin Bill, for instance, had an elevated conversation with a local grain-elevator farmer in the town of Offerle and offers us this synopsis in his "Weekly Ramblings" newsletter:

"At an Offerle service station, I briefly talked farming awhile with a tall, lean, elderly, baseball-hatted grain-elevator farmer obviously in need of communication with someone other than a prairie dog. He advised that his farming now consisted of collecting a monthly check from the state of Kansas, that entity paying him more to idle his ground than he was making with his corn and alfalfa crops. He did tell us that the main reason Kansas did that was 'cause they found he was pumping out way too much ground water for irrigation, and said if he'd shut off the pumps they'd just pay him not to grow. He was a nice guy, interesting and would have talked for several hours if we'd had the time."

This nice, interesting farming kind of guy would undoubtedly have had a lot more fascinating things to reveal to Cousin Bill, but the important point to note here is that you need only threaten to pump ground water to irrigate your Kansas farm, and the Great State of Kansas will pay you a good money not to pump that water.

"Hold on," you may well say. "I'm already not pumping ground water in Kansas, but I haven't received any money."

Yes, that happens, so I have to ask a personal question. Have you actually threatened to pump water? I thought not. Moreover, and this is the sticking part, you need to actually have some land in Kansas, else the threat will not work. Allow me to anticipate your next objection, that you own no land in Kansas and have no money to purchase any. Well, do not let your New York state of penurious repose shut you out from your Kansas state of pecuniary reward. According to the website "Kansas Free Land" (www.kansasfreeland.com), there's free land in Kansas:

"Several communities in Kansas are offering free land and other incentives. Our goal is to help our rural areas sustain and grow economically. We welcome you to take a look at the various communities."

Just visit "Kansas Free Land," choose your preferred isolation, settle down to the modern farming way of life, and covertly but unmistakably threaten to pump some of that precious Kansas ground water. I guarantee you that this will work if you just have the right degree of ignorant arrogance. Of course, you may have learned something about basic economics from your recent debacle, so you might need to forget some of that. You need only learn to not ask too many questions about whether this all makes any sense and just wait for the money to start rolling in to your account in a local bank (if there is one) in return for your not farming.

Technically, you will still be unemployed, but at least you'll have land, home, and cash . . . a bit like what you had before. Not quite as much money, of course, but beggars can't be choosers.

Jeffery is a professor at Ewha Womans University and can be reached through his blog Gypsy Scholar at gypsyscholarship.blogspot.com -- Ed.

As I warned, this one will have sounded familiar. Faithful readers will also recall my more serious entry concerning Professor Jasper Kim's informative column on the forces that precipitated our current financial crisis.

I'd chat more this fine morning, but I have student debates to judge . . . and grade.

Professor Jasper Kim on the Financial Crisis

Professor Jasper Kim

Ewha Womans University

Department of International Studies

(Image from Ewha GSIS)

Professor Jasper Kim, of Ewha's International Studies Department, published a column, "The global financial crisis 101," in last Thursday's Korea Herald that helped clarify for me our current financial crisis, so I'll provide a synopsis of his article.

Professor Kim presents a number of factors contributing to the perfect economic storm.

As the first factor, Kim identifies "the extremely low interest rates following the 9/11 attacks." The Federal Reserve cut rates to about 1 percent for some time, which resulted in very low interest rates on loans, including mortgages, and led to "cheap money."

As the second factor, the low mortgage rates were "coupled with relatively complex mortgage terms and conditions that were often hard to understand for the typical homebuyer." Significant for this point was that mortgages that required "only a 1 percent down payment . . . to buy a home" often had variable interest rates that would result in "lower interest payments . . . first, followed by larger principal payments later." These generous-sounding terms "induced many relatively unqualified borrowers to buy homes they in reality could not afford," and the loans were what have been called "subprime."

As the third factor, Professor Kim identifies "complex financial products that had a direct link to the U.S. mortgage market." On this complex factor, I need to quote the professor directly:

These products, known as mortgage-backed securities, or MBS -- one type of collateralized debt obligations, or CDOs -- were effectively represented by a high-yielding note or bond that entitled the MBS investor to principal and interest payments. These MBS products were also collateralized by money received from pooled mortgages (mortgage receivables). As part of the MBS structure, created by sophisticated financial institutions, investors who bought these MBS products effectively also bought "insurance" against payment default in the form of credit-default swaps, or CDS. So as long as mortgage borrowers continued to make their mortgage payments on time, no problem would exist.

I won't pretend to understand this very well, but I do understand enough to recognize that a lot of people had put their money into investments that depended upon mortgage borrowers continuing to make payments. Unfortunately, the US housing market was a bubble that burst as interest rates began to rise, requiring those who had taken out loans, especially subprime loans, to make higher payments that they could not make.

As the fourth factor, Professor Kim identifies "the fall of many of the major investment banks, such as Bear Stearns and Merrill Lynch," which had incurred enormous losses from the large number of bad mortgages on their books. The psychological breaking point was the fall of Lehman Brothers, which put global financial markets into a tailspin. Interestingly, the professor blames "the laissez-faire ideological stance that existed at this time," which prevented "a Lehman bailout of even a few hundred million dollars" that "would have . . . proved a much better policy move compared to a plethora of bailouts and stimulus packages that . . . looks to be in the trillions . . . of dollars."

Well, that's Professor Kim's analysis. Doubtless, the factors are both more numerous and more complex than these four, but the professor does call his article "The global financial crisis 101," thereby acknowledging an oversimplification of the issues. Moreover, as "a former banker with Lehman Brothers, Barclays Capital, and Credit Suisse," Professor Kim would appear to be a person who knows what he's talking about . . . though I must confess to a nagging doubt about precisely what bankers really do know, given their failure in this crisis.

Comments from those more knowledgeable than I are very welcome . . . and that category would include the majority of my readers.