Michael Mussa: "There are three types of financial crises: crises of liquidity, crises of solvency, and crises of stupidity…"
Liveblogging World War II: March 24, 1943

Noted for March 24, 2013: Lisa Blaydes and Eric Chaney on the Shaky Thrones of Classical Islamic Rulers, etc.

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  • Chris Blattman sends us to Lisa Blaydes and Eric Chaney: Why did the Glorious Revolution happen in England, not Egypt? Slaves-on-Horses Weblogging: "What was it about feudalism that promoted both ruler stability and economic growth? And how did feudal institutions compare to methods of social control and organization in the Islamic world? European monarchs lacked the financial resources to outsource their military needs to foreign mercenaries following the fall of the Roman Empire. The feudal relationships which evolved served as the foundation for military human resources as the landed nobility of Europe emerged as a “warrior class.” When monarchical abuses took place, barons were able to impose forms of executive constraint on European kings that formed the basis for more secure property rights. Sultans in the Muslim world, by contrast, inherited more capable bureaucracies from conquered Byzantine and Sassanid lands and introduced mamlukism—or the use of slave soldiers imported from non-Muslim lands—as the primary means of elite military recruitment. Mamluks—segregated from the local population—swore their allegiance to the sultan. Local elites in the Muslim world did not serve as the source of elite military recruitment and, thus, were poorly positioned to impose the types of constraints on the executive that became evident in Europe…. This pattern suggests a “reversal of fortune”… where fiscal and administrative capacity actually hindered long-term economic prosperity by providing Islamic dynasties with the means to avoid bargaining with their own elite populations."

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  • Paul Krugman: Ireland Recovers, and Recovers, and Recovers: "March 2010: 'Greece has a role model, and that model is Ireland' — Jean-Claude Trichet. December 2011: 'As European leaders scramble to overcome the Continent’s debt crisis, many are pointing to Ireland as a model for how to get out of the troubles.' March 2012: 'Confidence is returning to Ireland and to Europe. The Irish economy is turning the corner.' — Jose Manuel Barroso. The latest GDP figures. Feel the boom! OK, maybe a bit more exegesis: Ireland embraced austerity early and forcefully, and has been a good soldier all along; so according to the austerians, it should be a success story. And they keep on seizing on any bit of good news as proof that austerity is working. Now, sooner or later Ireland will recover. But guys, we’re already four years into this story…"

David J. Lynch: Economists See No Crisis With U.S. Debt as Economy Gains | Pawel Morski: Cyprus, Fight Club & Capital Controls | Nicolas Véron: Europe’s Cyprus Blunder and Its Consequences | Ewald-Heinrich von Kleist-Schmenzin | An Open Letter to Google: Google Alerts Broken, Now Useless | Brad DeLong (1996): Why Not the Gold Standard? Talking Points on the Likely Consequences of Re-Establishment of a Gold Standard | Lisa Pollack: “I thought, I thought that was, that was not realistic, you know, what we were doing” – The London Whale |

  • Haley Sweetland Edwards: He Who Makes the Rules: "Barack Obama’s biggest second-term challenge isn’t guns or immigration. It’s saving his biggest first-term achievements, like the Dodd-Frank law, from being dismembered by lobbyists and conservative jurists in the shadowy, Byzantine 'rule-making' process."

  • Lisa Pollack: This is the CIO! Take your silly market-making prices and [redacted] — Part 2: "In Part 1, we outlined how the marks on credit derivatives in JPMorgan’s chief investment office (CIO) were allowed to go to the nether regions of bid-offer spreads because the unit was more like a buyside institution than a market-maker like, well, JPMorgan’s own investment bank. This made about half a billion dollars worth of difference at the end of the first quarter of 2012. One can imagine that management would have perhaps been a bit more aggressive in dealing with the outsized synthetic credit portfolio (SCP) if the losses had tripped one billion sooner. The accounting policies allowing aggressive marking were condoned by the bank’s controller — who issued an assessment to that effect on May 10th — and the auditor PWC. It was only in the process of investigating the losses that the bank decided that the marks over which the traders had so much discretion were not made 'in good faith'. This ultimately led to the July restatement of first quarter earnings. Before that, there were some pretty massive collateral disputes with counterparties that should have themselves set alarm bells ringing."

On March 23, 2013: