Age of Turbulence

Words of the Wise
Words of the Wise

I read the review of Alan Greenspan’s book 2 years back in The Economist, but didn’t buy it until late last year when I went on a book-shopping spree. The book gone on to stay on my book table (yes, I seriously need a bookshelf) for another year or so before I dusted it two weeks ago and began reading it. In any case, I bought an updated version, which features an epilogue detailing Alan Greenspan’s take on the Subprime Financial Crisis and his prescriptions.

I was immediately surprised by Alan Greenspan’s clear writing and simple style so contrary to his famous inscrutable public announcements about the Fed. It is this that earned The Economist’s rare praise:

Sub-heading of the book review: “Not many surprises in this memoir-cum-essay except that it is an unexpectedly enjoyable read.”

Book Review Quote: “[D]espite everything, the book turns out to be first-rate. It engages on different levels: it is intelligent in a way that few popular books on economics manage or even try to be; and, wonder of wonders, it is a good read.”

The book begins as a memoir, detailing Greenspan’s childhood, interest in music, schooling, economic/technical inclinations and his long career in the Federal Reserve Bank where he was Mr Chairman. His memoir ends somewhat abruptly in retrospect at the eleventh chapter, The Nation Challenged. Beginning with the chapter, The Universals of Economic Growth, he went on with his economy essays and analysis of various economies, industries and trends. Like what The Economist says, Age of Turbulence is a good read, his memoir was very neutral and he was very humble about his work at the Fed. His accounts of the workings of the Fed provides non-American readers a good starting point to learn about their system. Greenspan’s essays on the world economy and economics stays faithful to his belief in the power of free markets and respect for the freedoms and rights that the American Founding Fathers have sought and preserved.

He defends his views that no one can possibly identify a bubble and actively sought to burst it before it gets too big and cause a crisis in its subsequent burst. As a matter of fact, this is the case because anyone who can confidently identify the bubble can profit from it by going against the flow and thus end up defusing it before it builds up. At times, when the so-called ‘irrational exuberance’ exerts too powerful a market force then regulators wouldn’t actually be able to defuse it anyways. He seem to sigh at the voter’s expectations that the government is almighty and is disappointed by typical politicians who doesn’t seem to understand the meaning of ‘trade-offs’. These are typical economist’s perennial concerns about the world in democracies that never seem they’ll ever go away.

As a pragmatist, Greenspan shows great appreciation for the rule of law that has maintained the workings of the market and fostered a culture of trust so essential to capitalism. And reflecting on that, Greenspan gives suggestions on how the emerging economies need to improve their governance and legal systems to catch up with their prosperity and march towards developed status. These are valuable insights gained from Greenspan’s 19 years of being the Chairman of the Federal Reserve Bank. Indeed, Greenspan confesses that he knows little about international economics until he took on this role since his work at Townsend-Greenspan & Company (which closed following his nomination to that post) deals little with the economies of other nations.

Overall, Age of Turbulence provides wonderful insights into workings of the capitalist system of America and great ideas about emerging economies, the direction the world economy is heading to – knowledge significant to any economics students and economist-wannabe.

Package for the Week

Hidden from sight
Hidden from sight

Reads for this weekend are here. Farhad Manjoo muses whether anyone would be able to stop facebook. From expanding, that is. The site has really amassed a huge group of user in a short time and people have been wondering if it would be able to generate revenue and such. Truth is, Facebook has really changed the stuff we do online quite very much and helped the Internet leap ahead as a tool for social networking.

Daniel Gross wrote about his tour to China’s most important dam and muses over his inability to find a chocolate bar there. He got Slate.com readers to send in excuses for not being able to find a chocolate bar in China. Examples included:

“Your quest for chocolate at the Three Gorges would be like me looking for Chinese dumplings at the Hoover Dam,” wrote one Beijing resident.

Jokes aside, for your watching pleasure, check out Shashi Tharoor’s recent talk on TED.com about soft power, with particular reference to India.

Rising Yuan, But not now

Give Me a minute, will rise soon...
Give Me a minute, will rise soon...

In one of the economics essay I’ve written for A Levels Practice, I argued that the appreciation of Yuan is unlikely to solve the trade surplus problem that they have and thus reality will not play out as the Americans choose to believe – trade imbalance will continue to mount and China may risk deflation, following the fate of Japan in the past. I was very lucky because during A Levels a somewhat similar question came out and I made the same sort of argument with points already in my mind.

Most journals and publications I read insist on the need for Yuan to be revalued, giving little credit for the fact that China already allowed it to appreciate against the dollar substantially compared to the past. Without the unpegging of Yuan to the Dollar in 2005, trade imbalance could have been worst. That doesn’t mean that it was the appreciation of Yuan that naturally lend its hand at achieving balance; it was mainly the gradual appreciation and the timing it was allowed to appreciate. The Economist analysed China’s side of the Yuan policy. It gives a balanced account of how political forces and potential economic problems makes China hesitant about revaluing its Yuan.

It is unfair that America always seem to put China into bad light by hinting that China could make a difference (since its central government wield a whole lot of power) but don’t want to. The fact is that there are way too many instances where Americans had the power too, but then they’d exclaim that all sorts of lobbying and market forces are in the way. If China were to give in to this sort of pressure, it would make them way too weak. Besides, America isn’t always right (in fact, most of the time it isn’t); China has done too well in their transition from central planning to market economy so far and will continue to create their own path.

The Becker-Posner Blog also features Becker and Posner’s individual views on the need for China to revalue the Yuan and when so.

Careful Bots

Steady...
Steady...

It’s a long time since I last directed readers to a lengthy prose penned at The New Yorker; while some of those long-winded stuff are reserved for pure entertainment when one is really bored in front of the computer, Jeremy Groopman wrote an interesting narrative report about robots that cares for patients. If you’ve some time to spare, it’d be good to go through some of these technology stuff that is more elaborate and human in reporting than those featured in The Economist.

The same magazine reports about another kind of careful technology. Seymour M. Hersh explores a more remote topic that less people would really bother about seriously despite its implications on many.

Honest Abe

The Political Genius
The Political Genius

Team of Rivals is one of the rare books I left at camp to be read consistently and then finished within plan. I brought it into camp two weeks ago and planned to have it finish exactly today; I knew that if I was reading it consistently I would finish about 2 chapters per day, which means it’ll take me 13 days for the 26 chapters that Doris Kearns Goodwin penned. I initially thought I might bring home to read over the weekends but resolved to leave it in camp as a material to be read in camp.

The book turned out to be incredibly entertaining and while I could put it down for a drink, a chat or some other minor distractions, I’d be happy to resume reading wherever I left. The prose flows smoothly and easily for me and I love Goodwin’s narration. She makes history seem alive and playing in front of you with the thoughtfully embedded quotes in the narration that is carefully credited at the end notes. The pictures, diagrams and maps included made the experience even more wonderful.

The most important part about Team of Rivals that I enjoyed was the little bits scattered all over the book where Abraham Lincoln related his little anecdotes and jokes to others. From our frame of reference, these all are anecdotes themselves demonstrating the character and personality of Lincoln. One that I liked in particular involves Lincoln telling someone about his dream:

In his dream, Lincoln was at a party where he overheard a guest commenting on him, “He is a very common-looking man.” Lincoln joined the conversation immediately, suggesting “The Lord must prefer common-looking men, that is the reason He made so many of them”. Lincoln was positively amused by the response he gave in his dream.

And having read the book and gotten to know more about Abraham Lincoln, I came to realised that the response in his dream was very real; it was something so characteristically Father Abe. I was naturally drawn to the many other jokes and stories he shared – some I understood, others were perhaps closer to the hearts and minds of those who were audience of his time.

Months ago I bought a little selection of speeches by Abraham Lincoln and I haven’t gone beyond reading his Gettysburg Address and wondering what so great about it. Now that I’m more familiar with the course of his political life and the circumstances in which he made those speeches, I shall revisit the book and appreciate the wonders and influence of his oratory prowess as well as his ability to weave issues into stories for the layman. And perhaps, I’d learn something out of all that.