Digest: 3 December 2013




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In National Suspicions Undermine Global Financial Cooperation, Douglas J. Elliott (for the Brookings Institution) discusses how with the passing of the pressure of crisis efforts to develop necessary cooperation in international financial markets have faltered. In the aftermath of the financial crisis, international bodies moved quickly to address the systemic weaknesses in the system, but they only got part way there. In both the US and EU, national interest based distrust is hindering the development of true multilateral coordination of financial markets and regulation. Reforms in this area are important, they should not be neglected.



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In Why We Need a New Macroeconomics, Jeffrey Sachs (for The Huffington Post) discusses the shortcomings of the Keynesian views upheld by Larry Summers and Paul Krugman. He argues that reestablishing the same pattern of consumption that gave rise to the financial crisis will only produce another. Instead we need to address the underlying issue, a lack of investment in modernized infrastructure, advanced science and technology, and job skills appropriate for the 21st century. The US lacks a clear strategy in each of these areas. A new macroeconomics must be established that takes the long-term properly into account.

In If You Build It, They Will Fund, Buttonwood (for The Economist) discusses the potential for pension funds to finance infrastructure projects in Britain.  They are a good match because infrastructure projects deliver cash flows over long periods, just as pension funds have liabilities that stretch over long periods. But there are obstacles to greater pension fund investment such as a lack of the quality data required to adequately measure risk, the complexity of the projects, and the lack of  certainty regarding continued political interest in the development. There are solutions to these problems that should be considered.

In A New Solar Material Shows Its Potential, Kevin Bullis (for MIT Technology Review) discusses new perovskite materials that have the potential to double the efficiency of solar cells. If successful this means that half the number of cells will be required to produce the same amount of energy, thus reducing the costs not only of panels but also of the currently expensive installation process.  There is more work to be done before the material can be employed as viable cells, but the initial findings are promising.



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In Why Banking Systems Succeed – And Fail, Charles W. Calomiris and Stephen H. Haber (for Foreign Affairs) discuss the role of political power in banking systems. Through comparative consideration of the histories of the English, Scottish, US, and Canadian banking systems, they argue that certain deeply rooted historical and political traits inherent in the English and US systems exposed them to a greater risk of failure.  The authors refer to the relationship between financial and political interests as the Game of Bank Bargains – the actors are those with a stake, the rules are set out by political institutions, coalitions are formed as the game is played, the prize is influence over the distribution of the benefits. Reform is not possible without an informed understanding of the game, and the unreasonableness necessary to refuse to accept the flaws of the systems as they stand.

In $13 Billion, Yes, But What Took So Long?, Gretchen Morgenson (for The New York Times) discusses the settlement made between the Justice Department and JPMorgan Chase. While she commends the Justice Department for acting, she calls into question the rigorousness of its investigation. Looking into the facts on which it based its case, she notes that despite five years of investigation they do not go beyond what was generally available knowledge. By way of contrast, looking at the facts cited in private suits against banks by investors, she notes their great detail, including “facts, figures and telling accounts from former bank insiders turned confidential witnesses.” The Justice Department doesn’t seem to have put in quite the same effort, and while $13 billion is not bad, Morgenson cannot but ask what might it have been if they had investigated with vigor.

In Obama’s War on Pot, Mike Riggs (for The Nation) discusses the unclear intentions of the Obama administration in regards to the prosecution of federal marijuana laws. While the administration initially gave rise to optimism that it would treat the nation’s drug problem as a health issue as opposed to a criminal issue, in practice it has continued to treat it as a war. Despite increasing support for liberalization of marijuana laws the administration has carried out medical marijuana raids on an unprecedented scale, giving rise to cases of militant unnecessary force used by the police in carrying out the raids.



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In Memories Pass Between Generations, James Gallagher (for BBC) discusses how recent animal studies show that experience alters genetics, causing responses to the experience to be passed on between generations. Experiments in which animals have been trained to be averse to a particular smell have shown that the aversion arises also in the offspring of the animals despite the offspring having no prior direct experience of the smell. This finding may have strong repercussions for our understanding of phobias, anxiety, and post-traumatic stress disorders.