Wednesday, May 18, 2011

Quickly, on DSK, BHL, etc.

I will, maybe, write a longer post on this, but I just want to make a couple of points:

Even Jon Stewart made a joke on DSK, imlying that France might allow a sex offender to run for the presidency (see video here at 6.00.). It was probably not said seriously, but the delivery was quite bad if it was meant as a joke. Stewart also used to defend France against american boycotts with a strange argument: France is not an important country?(here it is, you have the only bad thing I can say on Jon Stewart!)
I said "Even" Jon Stewart, because I have heard a LOT of commentaries on how the US was different from France or Europe on sexual proximity, etc...(no time, no links, sorry). If France is far from gender equality(say, in politics for instance) and that some people seem to say that touching boobs is fine as long as you are in Paris, French people are also against rape, because rape is bad.

Update: Christopher Hitchens and Liberation have more

On a second point, Bernard-Henry Levy seems to be the point of reference when Americans think about french thinkers, so it is worth pointing out that BHL is not representative of what French people think. Actually, when in doubt, go on the opposite direction of BHL

Reputation

Tim Geithner is upset on the debt ceiling issues
In the linked article, one interesting point made by the Treasury Secretary was about reputation and credibility.
"At the worst moments in the crisis…you saw people basically say they want to be in dollars, in Treasurys, and we need to preserve that. We want to act to earn that confidence over time, and not take advantage of it."
I don't exactly know what he was meaning by that, but one reason to build reputation is to be able to use it when it is worth it. Building "confidence over time" is supposedly costly and there are a couple of reason to incur the cost, like signaling your type, or being able to use it for, say, vote on the debt ceiling on the last day before the deadline. But you build confidence over time to take advantage of it, at some point, otherwise it seems to be useless.

Relatedly(i.e. there is Tim Geithner in it), Geithner offered nice facts reported by Real Time Economics. For instance:


  • If you are born today in hard-pressed communities in many American cities, like St. Louis or Baltimore, you are more likely to die before your first birthday than if you were born in Sri Lanka or Belarus.
  • We spend $700 billion a year on national security… about two-thirds of what we spent as a share of our economy during the Cold War.
  • The effective income tax rate for the wealthiest Americans—those earning more than $250,000 a year—is at its lowest level in 50 years. And the effective rate for the very rich—those earning over $10 million per year— has declined much further and is now around 21%.

Saturday, May 7, 2011

Portuguese tidbits

An awesome PSA directed towards, it seems, Finland
Quite interesting things(that I haven't checked):
20% of Luxemburg's population is Portuguese
"Arigato" is a Portuguese word
Portugal was the first country in the world to abolish the death penalty
Portugal took chili to India
Portugal is the only European country which has not won a Eurovision song contest
Portugal has the most world titles in hockey on roller-blades
The idea for James Bond was generated in Estoril

And don't miss the last 10 seconds

Interesting Links

The Blog of Unecessary "Quotes"
Talibans are fleeing some part of North Afghanistan, allegedly following Bin Laden's death
 Pajhwok News Agency is reporting that in the wake of the death of Usama bin Laden at the hands of US Navy SEALs, Taliban guerrillas in the northeastern Afghan province of Qunduz are fleeing the province.
The difference between Canada and Belgium
Au sein des dix provinces et des trois territoires qui forment la fédération canadienne, il est possible de voter, lors des élections fédérales, soit pour des partis nationaux, soit pour des partis provinciaux.
Why It Matters That Bin Laden Was Behind Recent Terrorist Plots
 the documents reveal that Al Qaeda remains predictable in several ways(...) Knowing that “important dates” matter the most also helps intelligence analysts(...)the documents show that bin Laden’s Al Qaeda remains faithful to one of its trademarks—which is to strike mass transit during the morning hours.

The FT editorial has no clue on what's going on with commodity prices...

Predicting short-term swings in commodity prices is, therefore, a fool’s game (if no doubt one for which many fools are handsomely paid).

...but provide interesting information
 Bankers and traders say a large proportion of the long positions were held by momentum following funds that trade using computer algorithms aiming to exploit market trends. Man Group’s trend following fund AHL, one of the world’s largest, was down 3.5 per cent on Thursday, adding to a 2.6 per cent loss since the start of the week.
“I think the scale and speed is 100 per cent reflective of the type of participant,” says Kamal Naqvi, head of commodity investor sales at Credit Suisse. “What it demonstrated is the emergent dominance of CTAs [algorithmic traders] in commodities. It has become so much easier for all clients to access commodities – but particularly technically – or quant-driven investors.” 

Friday, May 6, 2011

The cost of giving a media-friendly story

In a previous post, I referred to a post by Vaughan Bell at Mind Hacks seemingly arguing that the administration might have recounted the assault on Osama Ben Laden's compound in a media-friendly way at first because they knew that even if they had to correct some major details after the initial reports, people will mostly remember the first account.
However, it is clear that the strategy has a cost in terms of credibility. From the New York Times this morning:

But the shifting narrative may have distracted from the accomplishments of the Seal team and raised suspicions, particularly in the Arab world, that the United States might be trying to conceal some of the facts of the operation, including that Bin Laden was unarmed.
“It’s had a hugely negative impact,” said Ahmed Rashid, a journalist and author who is an expert on the Taliban and radical Islamism. (...)
“Liberal Muslims who are very sympathetic to the death of Bin Laden really don’t know what to think,” he said. “The American story is very confused.”
From Europe, even the archbishop of Canterbury weighed in. At a news briefing on Thursday, the Most Rev. Rowan Williams said that the killing of an unarmed man left him “uncomfortable” and that “the different versions of events that have emerged in recent days have not done a great deal to help.”

So the strategy depends, in part, on the relative benefit and cost at stakes(ok, that's obvious). What is interesting for me here is that the credibility costs seem to be huge: the domestic audience is prone to believe in conspiracy theories, and the US suffers a huge credibility deficit, notably in Pakistan, where the legitimacy of cross-border strikes from Afghanistan is a matter of debate, and each drone strike leads to some damage containment by the Pakistani government.

Thursday, May 5, 2011

Oil prices and 9/11 and the Fed and Middle East revolutions

Joe Stiglitz made an argument on Rachel Maddow yesterday that I have trouble believing, but that is definitely worth investigating. From his book  The Three Trillion Dollar War, he seemed to have found that 9/11 implied the Iraq War that created a rise in oil prices, which caused an accomodative policy from the Fed which lower interest rates, then you can see in the video that he jumps to a relaxing of regulations(which seemed to have been caused, again, by the rise in oil prices), that led to the bubble, and well, the bubble popped. Then, Yves Smith points us to a Telegraph article arguing that the Fed accomodative policy was one important cause of the revolutions in the Middle East and North Africa, because it caused inflation in emerging markets, commodity prices rose and the increase in commodity prices was one factor of the revolutions.

There are a couple of things there, that I'll try to understand. First, Stiglitz's claim on the impact of the Iraq war on oil prices. I want to check that. Here is what he said to Ezra Klein two months ago:
Lots of things are always going on, but it was not coincidental that the price started going up very strongly after the war. And corroborating our view was that prior to the war, the futures markets had expected the price to remain around $23 a gallon.
One of the other things we argued in the book — remember, this was before the financial crisis — was that one of the reasons for our lax monetary policy, which we thought was distorting the economy and contributing to a bubble, was that purchasing power was being taken out of the economy to buy oil and the Federal Reserve had to compensate for that and it did it through looser monetary policy.

 Second, there is the explanation for the relaxing of regulations, which seems to come from the political world and not the Fed.

Third, there is the impact of Fed policy on commodity prices. My first belief was that the rise in commodity prices was due to a surge in demand from emerging economies, in particular the BRICS, and weather patterns causing supply disruptions (e.g. droughts in Russia and China).

Fourth, there is the link between high commodity prices and the revolutions. Once again, my first feeling is that commodity prices were more of an indirect cause of the revolutions, because they accentuated the saliency of the inequalities that had been rising in the last decade or so in some autocracies.

In any case, if you look at those two things by Stiglitz and Yves Smith, should we consider that Osama Bin Laden succeeded quite well in his objectives but also caused the revolutions that are making Al Qaeda irrelevant?

More on all of this later

Wednesday, May 4, 2011

Confirmation Bias and Permanence of Beliefs

Vaughan Bell at Mind Hacks is quite cynical on the potential strategical value for the american administration to start with a media-friendly story on the assault of Osama Bin Laden's compound and then tweak the story a little bit, because they are aware that the first story is the one that remains in people's mind
Research shows that even when news reports have been retracted, and we are aware of the retraction, our beliefs are largely based on the initial erroneous version of the story. This is particularly true when we are motivated to approve of the initial account.
I don't have any strong opinion on whether the Obama administration used this strategy willingly for the current story, but I think those psychological findings have interesting implications.

I mentioned here some research showing the permanence of political beliefs and talked about the media's role in a vicious circle: an exogenous event(9/11) changes partisanship, the politicians need to be more partisan, this leads imperfectly informed voters(i.e. everybody) to be more partisan, etc... Now, a second story is simply that we suffer from confirmation bias where it is less costly for us to hear stuff with which we agree. This seems to be what is important in Bell's theory. I think there is a thin line here, the effect is not all that positive. The administration's retractions, say on the identity of the woman killed in the assault on the Abbottabad compound, also create suspicions in a country where a birth certificate creates conspiracy theories(people in this celebrated awesome photo recounted the events differently, even if they probably were watching the same TV). So here is the question: when is it better to use the strategy Vaughan mentions and when is it risky?

Also, this story reminded me of this paper by Dal Bo, Foster and Putterman(2009) where the authors looked at the impact of "democracy" on the compliance with decisions. In their experiment, a binary decision has to be made. In a first stage, participants vote, Yes or No. Then a computer decides whether the votes are actually taken into account. If they are taken into account, the Yes or No wins according to the number of votes, and the computer breaks the ties. If the computer decides that the votes don't matter, it decides whether the Yes or No wins. After the decision is implemented, the voters are told whether their votes have been taken into account, and they then play a prisoners' dilemma game which payoffs depend on the outcome of the voting stage. Interestingly, the individual level of cooperation is significantly higher when  voters know that their votes has been taken into account. The simple conclusion is that you are more likely to comply with a decision when you've taken a part in making the decision. The conclusion for the story at the beginning is that the permanence of your actions might also come from the fact that you made a decision previously and it will take some convincing to go away from it. The difference with the permanence of political beliefs, or the story of Vaughan Bell, is that in the initial stage, you're the active person(you make the decision), while you can consider the administration's media strategy or 9/11 as exogenous event from the point of view of the individual.

The UK has a special debt maturity profile

Paul Krugman directs us to Martin Wolf who directs us to Paul De Grauwe who shows that gross government debt as a percentage of GDP has had a similar trend in the past 5 years for Spain and Britain, but that the ten-year government bond rates have diverged dramatically.


One problem with using Britain as a Benchmark is that Britain is known to have a very long debt maturity profile which is less skewed than other countries towards short-term financing. Alphaville looked at what would happen if Britain had the same profile as the US via a BofA analyst.

Last year, Stephanie Flanders wrote about the difference between Britain and anybody else


According to the Debt Management Office, the average maturity of UK sovereign debt is 14 years. In the US, it's about four years. In France and Germany it's six or seven. Greek debt has an average maturity of just under 8 years. (...) For Greece, debt servicing costs now account for just under 12% of GDP. In the UK, it's costing less than 3% of GDP.(...)Take Germany as an example: its budget deficit in 2010 will be about 140 billion euros, whereas ours will be about 190 billion. But because of the amount of debt it has coming to redemption, Fitch, the ratings agency, reckons that Germany will be looking to issue about 386 billon euros in new sovereign debt this year. The estimate for France is 454 billion. Whereas the UK will be issuing a "mere" 279 billion. That is one reason why French CDS spreads have crept up a bit as well.

It appears that Spain has constantly increased the average maturity of ts debt holding in the past 20 years to reach 6/7 years at the beginning of 2010 . Interestingly, it is one of the only Euro-area country with a downward trend of short-term outstanding amount of debts as a percentage of total issues(also interesting: this is the case of Italy and Greece!).

Now, here is what I got on the spanish debt maturity profile from the Spain Treasury(every bar is a year)


If you look at the table for the UK via Duncan's economic blog, the Debt Management Office shows that in 2010, or if you steal the picture from AlphaVille on UK's outstanding debt


You can guess another reason why Britain and Spain do not fact the same reaction from the bond market.

I haven't read the De Grauwe paper, but a search for the word "maturity" found no match. There is mention of "liquidity", but it is mentioned relative to the fact that the money supply shrinks for a country perceived as a default risk in a monetary union(the euros can go to Germany), while this is not a case for a country with its own currency.

Anyway, I thought that the difference in debt maturity profiles are likely to be one strong factor for the divergence between the two countries.

Tuesday, May 3, 2011

Osama Bin Laden's "hidden compound"

It is hard to know what really happened yesterday. The NYT was reporting that 79 american commandos went on the compound, but other news outlets spoke of two dozens, or forty. Also, the number of helicopters vary across newspapers.
It is hard to knowwhat is going to happen in the next couple of months or even in the long-run(it doesn't matter, it matters).

So, basically, I have nothing to say. However, there was something interesting related to what I mentioned a couple of days ago about the choice of the day to kill people or announce unpopular changes in market regulations. Basically, the story is:
- you want to kill someone because she's going to say something you don't like
- you don't want people to know you did: it must appear as a natural death
- If you do it the day before she says the thing you don't like, the death looks suspicious
- So you would kill her earlier
- But if the police anticipates that, you might look less suspicious if you do the killing the day before.

Now, the story about Osama bin Laden's compound is maybe something similar. Abbottabad is inside Pakistan, and the compound was meters away from a military academy(pictures from here)
Region

The descriptions of the city make it sound as a touristic place:
Surrounded by green hills, it is renowned for its trees and parks. It's a popular retirement place for officers in the Pakistani army, partly because of its military academy, but also because of its agreeable climate. During British rule, the Imperial Gazeteer of India described it as "picturesquely situated," 4,120 feet above sea level.
Now, obviously, everybody discusses the implication of the Pakistani secret service an the knowledge they had of OBL's location.
John O. Brennan, the top White House counterterrorism adviser, said there were many questions about how the sprawling compound “was able to be there for so many years with Bin Laden resident there and it didn’t come to the attention of the local authorities.”
There are reasons to doubt that(and probably more reasons to believe that). One reason is that the compound was not an outlier in Abbottabad's landscape:
number 25 is not much different from the largish houses across the potato fields opposite
Also, imagine that you're the man in charge of the army in Pakistan, and you are considered by some to be the man actually in charge of the country.
Most embarrassing for Pakistan's most powerful man, General Ashfaq Kayani, the chief of staff, is that he was just across the field from number 25 just last week, boasting at the military academy that Pakistan had broken the back of terrorism. 
Another simple possibility for the location of the compound in plain sight, and near a military academy, is just that nobody would think of looking for Osama Bin Laden there, when he was supposed to be in Afghanistan, in a cave. From what I understood, he might have been there for 6 years(of course, there is a lot of uncertainty on the details, as I said in the introduction//UPDATE: From the twitter thing:  @RobertMackey: ISI official told the BBC that Bin Laden's wife said they had only been in the compound a few months, not 5 years.), so that might have been a good idea. The general question is: where do you hide if you're a guy that some really organized people are looking for? An interesting interview of Malcolm Nance by Rachel, a former US Navy Senior Chief, by Rachel Maddow, was referring to the tactic as something we've often seen: Khaled Sheik Mohammed, one of the architect of the 9/11 attacks, had an apartment in Rawalpindi next to a military center(by the way, Rawalpindi is quite close to Islamabad and Abbottabad. And by quite, I mean quite). You'll notice on the map, if you click through, the city of Faisalabad, where Abu Zubaydah was arrested in 2002(the case against Zubaydah is quite controversial). This city is also densely populated(with almost 3 million people). The interview:


Another "fancy" data point comes from some Auschwitz escapees,

[O]ne day, Fred Wetzler approached Rudi Vrba with a plan that seemed plausible.
Fred described a pile of wooden planks stacked outside the camp perimeter waiting to be used for construction of a new facility. Fred said he knew of four prisoners planning to hide in a cavity in the middle of the wood pile.

This choice of location, as the choice of time for political assassinations or unpopular announcements, is quite interesting, IMHO.
Also, you want to watch the first sequence of the Daily Show yesterday:

Sunday, May 1, 2011

Osama Bin Laden is dead

Last thing on prices

Note that, via Calculated Risk, commodity prices(one of the driver of headline inflation) are going down:
Goods from cotton to zinc that were highfliers late last year have turned into laggards in recent weeks. Several have logged double-digit-percentage declines in futures markets

Again on inflation

Ryan Avent at the Economist points us to a NY Fed report and an IMF working paper showing why headline inflation is likely to have no impact on core inflation, and so inflation in the long run. But first of all, I thought that would be interesting to recap the arguments on inflation, deflation, etc...

Why do we care about deflation? Krugman here
Why does deflation have a depressing effect on the economy? Two reasons. First, it reduces money incomes while debt stays the same, so it worsens balance sheet problems, reducing spending. Second, expectations of future deflation mean that any borrowing now will have to be repaid out of smaller wages (if the borrower is a household) or smaller profits (if the borrower is a firm.) So expected future deflation also reduces spending.

Why do we care about inflation? The SF Fed helps us:
What's so bad about higher inflation?
High inflation is bad because it can hinder economic growth, and for a lot of reasons. For one thing, it makes it harder to tell what a change in the price of a particular product means. For example, a firm that is offered higher prices for its products can have trouble telling how much of the price change is due to stronger demand for its products and how much reflects the economy-wide rise in prices.
Moreover, when inflation is high, it also tends to vary a lot, and that makes people uncertain about what inflation will be in the future. That uncertainty can hinder economic growth in a couple of ways—it adds an inflation risk premium to long-term interest rates, and it complicates further the planning and contracting by businesses and households that are so essential to capital formation.
That's not all. Because many aspects of the tax system are not indexed to inflation, high inflation distorts economic decisions by arbitrarily increasing or decreasing after-tax rates of return to different kinds of economic activities. In addition, it leads people to spend time and resources hedging against inflation instead of pursuing more productive activities.
Another problem is that a surprise inflation tends to redistribute wealth. For example, when loans have fixed rates, a surprise inflation redistributes wealth from lenders to borrowers, because inflation lowers the real burden of making a stream of payments whose nominal value is fixed. 
Basically, what you want is small and stable expectations of inflation. And the main issue with that is the wage-price spiral. As a consumer, if you expect more inflation, you'll ask for a higher wage. If you're a firm, a higher wage means that you'll raise prices. That's why you want to anchor inflation expectations.

The main worry today, as I mentioned in previous posts, in the rise in headline inflation. The issue would be if the headline inflation feeds into the core inflation. The way this can happen is if the expected rise in headline inflation leads to a rise in wages. This is not happening.

The NY Fed explains that
 [Y]ear-ahead median wage growth expectations have remained muted since February 2009.
Interestingly, their research indicates that the expectation of high inflation is some surveys like the Michigan Survey of Consumers is due to the actual wording of the question. Basically, the responses you get when asking consumers about their expectations of inflation are different if you ask about prices in general and the rate of inflation. They provide an interesting table:
Table1 
This is exactly what you see in the graphs showing core and headline inflation, that I mentioned here and there. The correlation with cyclical factors is just not there. This is one reason why wages are not growing at the rate of headline inflation right now. The second reason is that unemployment is still high: workers have no bargaining power. The IMF paper explains that

Overall, the historical patterns suggest little upside inflation risk in  advanced economies facing the prospect of persistent large output gaps. 

 This is what you see, meanwhile, in Germany, and this is what is driving the ECB decision to rise interest rates(this is the only one that makes sense). Have fun and google "Germany Labor Shortage". Germany's unemployment rate is at its lowest in 20 years. It lacks skilled labor. It opened its borders to Eastern European workers today. I am looking for data on the output gap in Europe(can't find it), but the WSJ is quoting a Goldman Sachs report suggesting that the US has double the output gap of European countries.I am not sure of what that entails, but consider that the average Euro output gap is "between 3% and 4%" and that Germany is at full employment, and you can think that some other European countries are far from suffering from an inflation spiral.

The policy of the ECB is only linked to Germany's situation. This probably makes sense, since it shows signs of over-heating. What it means is that the solution to this problem(no, it's not quitting the Euro) is probably with more fiscal and economic integration in the Euro-zone. Note that even in Germany, you have full employment in the West but the unemployment rate is still 10% in the East. It is quite unlikely that the structural employment in Spain is 20%.  A greater mobility within the Euro Area, and an harmonization of fiscal policies(say, corporate taxes), is desirable, but, apparently, not desired.

Killing people and regulating OTC forex swaps

France Inter had a two-part podcast on the death of the Pope John-Paul I, who was a pope for a total of 30 days. One of the commentators was comparing his death to the death of Pius XI, because both of them died the day before historical speeches: John Paul I was going to announce some reforms to alter the potential connections between the Vatican and the mafia while Pius XI was going to attack fascism and racism. This was one of the argument for conspiracy theories: those two deaths have been officially considered to be natural deaths, but a lot of conspiracy theories are floating around.

Likewise, in their editorial on the Obama's administration lobbying to exclude foreign currency swaps for over-the-counter regulation in the Dodd-Frank bill, the NYT made it clear that the administration is deliberately trying to do it under the counter:
In an announcement on Friday afternoon — the time slot favored by officials eager to avoid scrutiny(...)
Now, here is the link between the two stories. If I want to kill a guy because he's going to make a speech that I don't like, killing him on the day before is suspicious. So I should probably do it earlier, and the coincidence in the popes' story is meaningless.  However, if the police is seeing it this way, I actually have an incentive to kill the guy the day before the speech, since the police would say "meh. If it had been intentional, the guy would never have killed him/her the day before". Then again, the police could take this into account, etc... This is where a model would be useful: what day should I kill the pope(and how that day is informative for the police).

Same thing for the administration's announcement. If everybody knows that fancy stuff is going to happen on Friday afternoons, how comes it is still used? Journalists should be ready on Friday afternoons, so that it is not optimal for the administration to make announcement at this time...

On both counts, the administration's and the killer's best strategy seems to be complete randomization so as not to convey any information. 

The french intervention in Cote d'Ivoire

An editorial of the French newspaper Liberation has been quoted a lot recently(here in the New York Times for instance), but makes quite an unfounded statement:
Mais, même encadrée par une résolution de l’ONU et soutenue par les pays de la région, cette mission de la France s’apparente aux interventions d’antan et risque d’être vue comme telle par les jeunes Africains entrés dans l’histoire.
 I do not think there is debate on the second part ("risks" shows that there is some uncertainty, but the perception of a French imperialist intervention is a possibility). The first part is simply not true. Not only was there a resolution, as it is mentioned, but France intervened directly in response to the letter sent by the UN Secretary General using this resolution to ask for French intervention. Not that this letter was ambiguous:
Je vous ecris en reference au paragraphe 6 de la resolution 1975(2011)(...) [I]l est pour moi urgent de lancer les operations militaires necessaires pour mettre hors d'etat de nuire les armes lourdes qui sont utilisees contre les populations civiles et les casques bleus.
So it might be perceived as a similar operation as in the past, but I am not sure that it is like past interventions, which I think is part of the statement in the editorial.

The Middle East revolutions

I am planning to work on a general model of revolution(BOOM) with a friend later, and I am trying to get some stylized facts on what happened in the different countries. Of course, it's a mess, and it's quite complicated, but there are several interesting things:

- The economies have often grew along with a rise in inequalities. This created resentment, and as simple as it sounds, it is probably a big deal. Consider today's article in the NYT about the focal point provided by Rami Makhlouf, the owner of Syria's largest mobile phone company:
Egypt had Ahmed Ezz, the steel magnate who favored tight Italian suits (and now faces trial in white prison garb). In Tunisia, it was Leila Traboulsi, the hairdresser who became the president’s wife, then a symbol of the extravagance of the ruling family. Mr. Makhlouf, 41, is Syria’s version, a man at the intersection of family privilege, clan loyalty, growing avarice and, perhaps most dangerously, the yawning disconnect between ruler and ruled that already reshaped authoritarian Syria even before the protests.  
You could add to that the fact that the families of the ruler in Egypt, Syria, and Libya, have been seen as huge beneficiaries of the regime, and often have positions of power(Seif al-Gaddafi is seen as the man in charge in Libya, Gamal Mubarak was likely to succeed his father, the mayor of Dara'a, where the Syrian uprising re-started, is Atef Najib, a relative of Bashar al-Assad, and the list goes on and on).


- There were some relatively trivial sparks at the origin of the protests. In Tunisia, Mohammed Bouazizi set himself on fire after an altercation with a policewoman. In Syria, some young men writing graffitis in Dera'a seemed to have been the fuel of the revolution. From the NYT:
March 15 was set as the date for the beginning of Syria’s protest movement, but the demonstrations that were held that day were a disappointment.
“They were very small, in the Hamidiya market in Damascus,” Mr. Ziadeh said. Coincidentally, a group of young boys from Dara’a had been arrested for writing antigovernment graffiti on a wall and on March 18, their parents and other relatives marched to the political security building in Dara’a to protest their children’s treatment. The activists suddenly realized that they had been given their Rosa Parks moment, the grievance that they could build a campaign around.
In Egypt, the emotional interview of Wael Gonhim broadcast on February 7th seemed to have revived the protest movement which had been weakened by the propaganda of the Mubarak regime.


- Probably the most striking thing is the back and forth between concessions and crackdowns by the people in charge. Some concessions were always made, but always too late. Consider the night of February 1st when Mubarak announced he would not run for another term, or his nomination of a vice-president early on. Consider the repeal of the emergency law in Syria on April 16th, or the dissolution of governments or firing of unpopular ministers. Consider the deal Ali Abdullah Saleh is agreeing to in Yemen: he said first he was quitting at the end of his term and his son wouldn't replace him, then that he would quit by the end of the year, and now he's supposed to quit in 30 days(though that is not quite sure). All those leaders, while doing those concessions, organized huge crackdowns operations.

There are more(I talked about the interviews given to foreign media as an interesting feature here), but I thought those are the three things I can think of right now.

Polarization on the deficit

Related to the post below, Greg Sargent and Jonathan Bernstein make the case for the strategic complementarities between politicians and the electorate implied by the media, that I evoked here. Sargent:
we’re increasing caught in a “Beltway Deficit Feedback Loop,” in which the relentless bipartisan focus on that one topic to the exclusion of others is leading more and more people to tell pollsters they’re worried about it. That in turn reinforces a sense among public officials that it should continue to be their number one focus.
Yes, a feedback loop. Now, that's where the media comes to play. In my opinion, they're in charge of breaking the loop. But if the media is pandering to consumers, then the feedback loop will go all the way. If you want practical consequences of an uninformative media, you just have to look(again, in my opinion) at the impact that polarization has on the debt ceiling debate, or more generally on the economic policies in the US. Standard and Poors' review of the US credit-worthiness was based on political factors, not on economic factors. And if you look at The Economist of this week, which asks "What's wrong with America's economy", well you have it. The leader says
The real worry for Americans should be that their politicians, not least their president, are doing so little to tackle these underlying problems.
On the public debt:
The good news is that politicians are at last paying attention: deficit reduction is just about all anybody talks about in Washington, DC, these days. The bad news—and the second reason for gloom about what the politicians are up to
On the weakness of infrastructure in the US:
The question in Washington, apart from how to escape the city on traffic-choked Friday afternoons, is whether political leaders are capable of building on these ideas. The early signs are not encouraging.
On innovation
The real problem for America is not its innovative capacity, but the fact that its benefits go to relatively few. This is illustrated by a recent paper by Michael Spence and Sandile Hlatshwayo, both of New York University.(...)
These findings present a dilemma for America’s policymakers. Raising federal R&D spending and easing immigration for foreign-born PhDs would boost innovation and company successes, but would not produce many jobs. Mr Spence and Mr Atkinson would like to see government incentives aimed at strategic manufacturing sectors. But such policies have a poor track record. And in any case Congress is in no mood to pay for them, no matter what Mr Obama says.
On the evolution of the labor force
politicians are ignoring much of the problem. Congressmen have fought bitterly over whether to extend unemployment benefits, with Republicans arguing that it would blunt incentives to work, yet no one has paid attention to the costly rise in disability rolls.

First rant against "the media"

Barack Obama made a great speech at the White House correspondents' dinner(WHCD, while Seth Meyers was a bit weaker, even if the delivery of "Donald Trump says he was running as a Republican, which is surprising since I just assume he was running as a joke" was quite great. It was a lot about Donald Trump, actually.

The first thing about the release of Obama's birth certificate, is to try to understand, as Seth Meyers said: Why now? Obama got a lot of pounding from his supporters because it looked as he caved in to some fringe-group controversy, even if the polls are actually showing that more than a third of Americans are not sure he's born in the US:
A New York Times survey taken two weeks ago found that nearly 25 percent of Americans believed Mr. Obama was born in another country; 45 percent of Republicans said they believed that.
Fom the detractors,  there were calls for the release of school transcripts. In an interview to Fox News, Sarah Palin  suggested that the President was trying to deflect attention from the real issues. My 1.5 cents view on this is that it's highly likely that there was a strategical calculation going on: the release of the birth certificate at a moment where the topic was dominated by Donald Trump makes the guy looks "good" and powerful, in the sense that he got results quite quickly after having asked the question. And a more popular Donald Trump is all benefit for the Democrats: the guy is simply not electable, and will make Republicans debate about topics they're not interested in in the primaries. There are a couple of counter-arguments to that:

  • The Republicans actually like to have Donald Trump there, to have some guy pounding on Obama, i.e. doing the dirty job for them.
  • The WHCD was a roast on Trump, so the story is a bit contradictory. I don't buy this one, because I don't think that the WHCD is followed by a lot of people.
In any case, there was a problem in the WHCD, as funny as it was. Obama and, at a lesser degree, Meyers, had a perfect platform to criticize some of the work the media has done in spreading irrelevant stories. As Obama mentioned in his closing, the treatment of journalists covering the revolutions in the middle east.
  The Committee to Protect Journalists reports that 852 journalists have been killed since 1992 when the committee began keeping records. Most recently, in Libya, an online journalist and an Al Jazeera reporter were killed covering fighting near Benghazi.
However, the stories those journalists are covering are sometimes shadowed by stories that are not informative at all. From the recent news, think about the birth certificate story and the entire Donald Trump saga, the royal wedding. It's not like nothing is going on, like, say, tornadoes or wars. The traditional CNN screen capture here. TV coverage of the royal wedding was higher in the US than in the UK. The Daily Show had a nice sequence on Wednesday showing all the main news networks calling the release of the long form birth certificate of Barack Obama as a "bombshell". Today, on Meet The Press, Axelrod mentioned the obsession of the media with the birth certificate story. We've seen a rise in stories criticizing the media this week, and I was quite happy to see Ezra Klein, the Justin Timberlake of politics, hitting on it on Wednesday

Either the media make something into a story or they don’t. Donald Trump’s birtherism was a story not because Donald Trump paid for advertisements or yelled really loud while standing at the top of a tall building. It became a story because the media chose to give Trump lots of airtime, and then his comments were endlessly repeated and dissected on other shows and in other outlets, which meant they got more airtime and attention. The media cannot pretend to be a passive player in all this. They are the central player. No media coverage, no story. And that’s why the question isn’t whether the media should play the role of gatekeeper, but how they will play the role of gatekeeper.(emphasis mine)

That's why the exchange between Jon Stewart and Rachel Maddow was really interesting. Both of them have a strong view on the problems with the 24-hour news networks. I think in general, the debate is about the role of the media. If some uninformative stories come above informative stories, the only reason is that the networks/newspapers considered that it was going to provide bigger ratings. Note that it is not clear that talking about Middle East revolutions does not  interest people. For instance, CNN ratings went up thanks to their coverage of the Egyptian revolution. In any case, the question is whether the media should look for the stories people want to hear, or provide information where it is actually needed(say, is a war good or bad, is Syria good or bad, is China emprisoning artists good or bad, etc).
There is first a problem of defining what is the informative and uninformative news. I have been quite careful in the previous paragraphs not to make any judgment of "stupid information" versus "clever information". It's hard for me to say that one piece of information is more worthy of being reported than another one. However, one thing is clear. People make decisions at the polling booth. They are going to provide a vision on their opinion of foreign policy, of economic policy, of social policy. Now, the royal wedding is useless for that. The birth certificate story could be used for political decision(and that is far-fetched), but this is not what happened: the coverage was about how some people were questioning Obama's place of birth, which has no relevance for any political decision. Likewise, on the Donald Trump coverage, this might be important: the guy is a likely Republican candidate. However, the coverage is not on his ideas, but on his character. What appears to happen is that the "entertainment" media and the "information" media are overlapping. I am not sure that should be the case.
The second problem is, then, what is the role of the media. Should it respond to consumers' desires, and be passive, or should it be active in shaping consumers' desires? My feeling is that the "informative" part of the media has an incredible role, which is to solve the imperfect information problem between decision-makers and those who hold them accountable. The main problem is that this goal is, maybe, philosophically rewarding, but that might not provide the best ratings, and thus the most money.  Now, I think that this is a short-term problem: you need to build reputation before people trust your information and thus initially it is costly to shift from entertainment to information; and that this is a prisoners' dilemma problem: the best outcome for media networks is, probably, to be informative, but unless there is cooperation, there will be the short-run profitable deviation to cover the royal wedding.

This is my first rant about the media, and as you see, I consider it a HUGE problem, but my thoughts are quite random on it. I feel the media is an incredibly important actor, and I don't think most of the news outlets are doing their job. And this is all the more frustrating when you see the incredible coverage done by some journalists on the revolutions in the Middle East, the wars in Iraq or Afghanistan, or all the investigative books on the financial crisis. It's not like being informative is not doable, so there's a deliberate choice in not being informative. Don't get me wrong, that might be for "good" reasons(you need money to survive), but it is clear that there is a problem here and that some change is desirable. Now, for what change, well... Yes, that was an uninformative post. Sorry!