economics

New York City's Bronx Zoo, the largest metropolitan wildlife preserve in the United States, is being hit hard by the economy. To prevent a $15 million budget shortfall, zoo officials are closing four exhibits and evicting all their occupants, estimated to number in the hundreds of animals.

Zoo officials admitted in a New York City Cultural Affairs Committee meeting today that they are forced to relocate the suddenly homeless deer, bats, foxes, antelopes and other animals to zoos around the country.

This is sad. Allie and I are going next week, I'll be sure to donate extra (not that it will help).

2. An anonymous poster at Free Exchange (hi, Ryan) berates me for not taking on the question of how many losses to foist on band debt holders, "because if the government cannot risk foisting losses on to debtholders, then it's difficult to see how America benefits from nationalisation."

OK, I disagree totally with that premise. The benefits from nationalization come from (a) giving taxpayers a share of the upside rather than just a share of the downside, which is where we are now (b) ending the gaming of the system, even looting, that is encouraged by the current system of implicit guarantees (Simon Johnson has been very good on that) (c) making it politically and fiscally feasible to put in enough capital to revitalize the system. These advantages are there whatever you decide to do with junior bank debt.

That said, some decision must be reached on bank liabilities. Sweden guaranteed all of them. If forced to say, I would go the Swedish route; but of course we can't do that unless we're prepared to put all troubled banks in receivership. And I'm ready to be persuaded that some debts should not be honored -- this is a deeply technical question.

Sticking the taxpayers with just the downside in a nationalization plan is just lemon socialism.

IN 1993, Rush Limbaugh was invited to address CPAC, but had to take a pass. "I wasn't able to broom my schedule and get down there," he told the audience of his short-lived television show on February 22nd, 1993. Mr Limbaugh did, however, send a reporter to ask attendees a question.

Rush Limbaugh has challenged the Democratic National Committee a million dollars that [President Bill] Clinton's economic plan will not work if it's implemented. Do you think that's a good bet?

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Mr Clinton presided over eight years of economic growth.

Funny thing, my entire family (mom's side, but my dad was joining them) were all talking this weekend about how bad Obama is handling the economy and how he was going to screw everything up. Oddly, no one could tell me how things got this bad.

I rise to introduce the Federal Reserve Transparency Act. Throughout its nearly 100-year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar. Since 1913 the dollar has lost over 95% of its purchasing power, aided and abetted by the Federal Reserve's loose monetary policy. How long will we as a Congress stand idly by while hard-working Americans see their savings eaten away by inflation? Only big-spending politicians and politically favored bankers benefit from inflation.

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Since its inception, the Federal Reserve has always operated in the shadows, without sufficient scrutiny or oversight of its operations. While the conventional excuse is that this is intended to reduce the Fed's susceptibility to political pressures, the reality is that the Fed acts as a foil for the government. Whenever you question the Fed about the strength of the dollar, they will refer you to the Treasury, and vice versa. The Federal Reserve has, on the one hand, many of the privileges of government agencies, while retaining benefits of private organizations, such as being insulated from Freedom of Information Act requests.

For his first annual budget next week, President Obama has banned four accounting gimmicks that President George W. Bush used to make deficit projections look smaller. The price of more honest bookkeeping: A budget that is $2.7 trillion deeper in the red over the next decade than it would otherwise appear, according to administration officials.

Who does their accounting? How do we know this number is "right"?

At his press conference on Monday, President Barack Obama had to remind Mara Liasson of Fox News and NPR that it was the Republicans who doubled the national debt over the past eight years and it's a little strange to be hearing lectures from them now about how to be fiscally responsible. That interchange was my favorite part of the press conference. A savvy inside-the-Beltway reporter of Ms. Liasson's caliber shouldn't have to be reminded that George W. Bush and the Republican Congress were among the most fiscally reckless politicians in U.S. history.

The most inexcusable action the Republican Congress and the Bush administration took vis-à-vis the federal budget was to launch two wars and two open-ended occupations without raising one dime in revenues to pay for them. Never in the history of this country has an administration and Congress cut taxes while launching open-ended wars.

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The posturing of the Washington Republicans since Obama was elected proves correct the French philosopher Jean Baudrillard when he outlined his understanding of "simulacrum" in advanced capitalist societies where ideologies and images are copies of copies without originals. It's the kind of Reaganism mass produced on T-shirts and coffee mugs, not the real record of Reagan's actions when he was president like his "cutting and running" in Lebanon, or his raising taxes 13 times to ward off an even worse fiscal crisis, or his negotiating in an atmosphere of detente with the Soviet Union he once called an "evil empire." The Republicans today are conforming to an ideology based on a myth that other Republicans created in 1997, a copy of a copy without an original.

Bush and the Republican Congress didn't think twice before throwing the entire $850 billion price tag for the Iraq and Afghanistan wars right onto the national debt. Not only did they refuse to pass new "revenue enhancements" to pay for the wars, but they also fought tooth and nail to block any legislation that would raise revenues.

The Stimulus Wiki was built to dissect and discuss the Stimulus Bill.

In each section or page you will find how much is going to where. Not sure how that is going to work out, its a ton of cash so we might need to break it down into other pages. Use the discussion pages to discuss each portion.

Adolf Merckle, one of the world's richest men, committed suicide yesterday by throwing himself under a train, Bloomberg reports. Financial difficulties, and particularly great losses he suffered on Volkswagen stock, are being cited as the key reason he ended his life:

[Merckle's company] VEM was caught in a so-called short squeeze after betting Wolfsburg, Germany-based Volkswagen's stock would fall. Merckle lost at least 500 million euros on the bets on VW stock, people familiar said on Nov. 18. VEM lost "low three-digit million euros" on VW stock, the company said in November.

A "short squeeze" sounds inconspicuous enough; you wouldn't tell it by Bloomberg's language, but Merckle's Volkswagen bet lost out to one of the most masterful hacks of the financial system in history.

For those of us who don't live and breathe finance, this is that story.

Concise and extremely easy to follow.

AMERICANS enter the New Year in a strange new role: financial lunatics. We've been viewed by the wider world with mistrust and suspicion on other matters, but on the subject of money even our harshest critics have been inclined to believe that we knew what we were doing. They watched our investment bankers and emulated them: for a long time now half the planet's college graduates seemed to want nothing more out of life than a job on Wall Street.

This is one reason the collapse of our financial system has inspired not merely a national but a global crisis of confidence. Good God, the world seems to be saying, if they don't know what they are doing with money, who does?

Incredibly, intelligent people the world over remain willing to lend us money and even listen to our advice; they appear not to have realized the full extent of our madness. We have at least a brief chance to cure ourselves. But first we need to ask: of what?

To that end consider the strange story of Harry Markopolos. Mr. Markopolos is the former investment officer with Rampart Investment Management in Boston who, for nine years, tried to explain to the Securities and Exchange Commission that Bernard L. Madoff couldn't be anything other than a fraud. Mr. Madoff's investment performance, given his stated strategy, was not merely improbable but mathematically impossible. And so, Mr. Markopolos reasoned, Bernard Madoff must be doing something other than what he said he was doing.

In his devastatingly persuasive 17-page letter to the S.E.C., Mr. Markopolos saw two possible scenarios. In the "Unlikely" scenario: Mr. Madoff, who acted as a broker as well as an investor, was "front-running" his brokerage customers. A customer might submit an order to Madoff Securities to buy shares in I.B.M. at a certain price, for example, and Madoff Securities instantly would buy I.B.M. shares for its own portfolio ahead of the customer order. If I.B.M.'s shares rose, Mr. Madoff kept them; if they fell he fobbed them off onto the poor customer.

In the "Highly Likely" scenario, wrote Mr. Markopolos, "Madoff Securities is the world's largest Ponzi Scheme." Which, as we now know, it was.

Harry Markopolos sent his report to the S.E.C. on Nov. 7, 2005 -- more than three years before Mr. Madoff was finally exposed -- but he had been trying to explain the fraud to them since 1999. He had no direct financial interest in exposing Mr. Madoff -- he wasn't an unhappy investor or a disgruntled employee. There was no way to short shares in Madoff Securities, and so Mr. Markopolos could not have made money directly from Mr. Madoff's failure. To judge from his letter, Harry Markopolos anticipated mainly downsides for himself: he declined to put his name on it for fear of what might happen to him and his family if anyone found out he had written it. And yet the S.E.C.'s cursory investigation of Mr. Madoff pronounced him free of fraud.

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How does this happen? How can the person in charge of assessing Wall Street firms not have the tools to understand them? Is the S.E.C. that inept? Perhaps, but the problem inside the commission is far worse -- because inept people can be replaced. The problem is systemic. The new director of risk assessment was no more likely to grasp the risk of Bernard Madoff than the old director of risk assessment because the new guy's thoughts and beliefs were guided by the same incentives: the need to curry favor with the politically influential and the desire to keep sweet the Wall Street elite.

And here's the most incredible thing of all: 18 months into the most spectacular man-made financial calamity in modern experience, nothing has been done to change that, or any of the other bad incentives that led us here in the first place.

Say what you will about our government's approach to the financial crisis, you cannot accuse it of wasting its energy being consistent or trying to win over the masses. In the past year there have been at least seven different bailouts, and six different strategies. And none of them seem to have pleased anyone except a handful of financiers.

In Sunday's Boston Globe Drake Bennett describes new thinking from George Washington University professor Charles Karelis, who suggests that there is an inflection point in the income spectrum, below which normal economic rules do not apply. Once an individual has crossed that threshold, the burden of accumulated problems is such that it is no longer rational to address any of them.

Yeah, it's called hopeless.