I don’t have time for blogging, but I read widely and often come across writing that stimulates my thinking, inspires me or – sometimes – bewilders me.  I’ll share occasional excerpts here. I hope to keep this section fresh, so visit often.

Michael J. Parks

. . . the regulatory failure is now a bigger issue than the massive swindle [Madoff Ponzi scheme] itself. It seems that in Europe there was a sense of trust in the Securities and Exchange Commission. There was a view that the US was the most reliable of the capital markets. Everyone knows that markets are not perfect, but the perception was that the United States was more honest or more transparent than the others.

Reports of the Markopoulos memo [warning the SEC that Madoff was running a Ponzi scheme] and other elements that show the SEC ignored warnings over a period of years are, perhaps, the most damaging. Europeans cannot trust US capital market functionality to the degree they could in the past. This structural issue is very serious and not well understood in the United States.

David R. Kotok, Cumberland Advisors, in a "report from Paris"
reprinted in the blog the Big Picture, January 8, 2009

What happened since the collapse of Lehman on Sept. 15 was a global, synchronous cessation of all but nondiscretionary economic activity in the wake of the near-collapse of global credit markets. And it happened over the course of weeks, not years...

And yet, if things came to a halt more quickly than ever before, they could also restart more quickly than ever before. This is not to say they will, only that the possibility is more than marginal...

The last months of 2008 will go down as one of the most severe economic reversals to date, and on a global scale. But it is foolish to assume that this period provides a viable guide to what lies ahead.

The rush to declare the future bleak has obscured the fact that no one knows the outcome of an unprecedented event.

Zachary Karabell of River Twice Research under the headline
"The Economic News Isn't All Bleak"
in the Wall Street Journal, Dec. 26, 2008

Trust itself entered a bear market in 2008, complementing and perhaps surpassing the selloffs in stocks, mortgages and commodities. Never to be confused with angels, we humans seem to outdo ourselves when money is on the line. So it is that Bernard Madoff, supposed pillar of the community, stands accused of perpetrating one of the greatest hoaxes since John Law discovered the inflationary possibilities of paper money in the early 18th century.

Barely nudging Mr. Madoff out of the top of the news was the Federal Reserve's announcement . . . that it intends to debase its own paper money. The year just ending has been a time of confusion as much as it has been of loss. But here, at least, was the bright beam of clarity. Specifically, the Fed pledged to print dollars in unlimited volume and to trim its funds rate, if necessary, all the way to zero.

James Grant in the Wall Street Journal Dec. 20, 2008

This crisis . . .is about much more than just the stock market. It needs to be understood as a fundamental breakdown of the entire financial system, extending from the monetary-and-banking system through the bond market, the stock market, the insurance market, and the real-estate market. It affects not only established financial institutions such as investment banks but also relatively novel ones such as hedge funds. It is global in scope and unfathomable in scale....

It remains unclear whether this crisis will have economic and social effects as disastrous as those of the Great Depression, or whether the monetary and fiscal authorities will succeed in achieving a Great Repression, averting a 1930s-style “great contraction” of credit and output by transferring the as yet unquantifiable losses from banks to taxpayers.

Either way, Planet Finance has now returned to Planet Earth with a bang. The key figures of the Age of Leverage—the lax central bankers, the reckless investment bankers, the hubristic quants—are now feeling the full force of this planet’s gravity.

Niall Ferguson in Vanity Fair, December 2008

Nothing I have read, heard or seen will dissuade me from my view that China has made more economic progress in the last 30 years than any country in history.

Byron Wien of Pequot Capital Management,
quoted in The New York Times by Joe Nocera, April 26, 2008

We're suffering the aftereffects of the collapse of a Tinker Bell financial market, one that depended heavily on borrowed money that has now vanished like pixie dust. Like Tink, the famous fairy from Peter Pan, this market could exist only as long as everyone agreed to believe in it.

Allan Sloan in Fortune, March 2008

Remember Friday March 14 2008: it was the day the dream of global free- market capitalism died. For three decades we have moved towards market-driven financial systems. By its decision to rescue Bear Sterns, the Federal Reserve, the institution responsible for monetary policy in the US, chief protagonist of free-market capitalism, declared this era over.

Martin Wolf in the Financial Times, March 26, 2008

We are amidst the worst financial crisis since the 1930s. The large complex financial institutions at the center of the global financial system need more capital. Until they get that capital, those firms will keep their risk-taking operations shuttered.

Vincent Reinhart in The Wall Street Journal, March 26, 2008

Possibly, one lender and one borrower could do business together without harm to themselves or to the economy… But masses of lenders and borrowers invariably seem to come to grief… First, they overdo it until the signs of excess become too obvious to ignore. Then, with contrite and fearful hearts, they proceed to underdo it. Such is the ''credit cycle,'' the eternal migration of lenders and borrowers between the extreme points of accommodation and stringency.

—James Grant of Grant's Interest Rate Observer in an op-ed in The New York Times, Aug. 26, 2007

The ultimate result of shielding men from the effects of folly is to fill the world with fools.

—Herbert Spencer, English philosopher (1820-1903)

Quoted by my friend Robert Frey, a Seattle
money manager, in a memo to clients on 8/10/2007

The fact that wrongly labelled foods ... have routinely sickened and even killed people en masse in China has been largely overlooked. In this respect, powerless consumers in China should be thankful for pampered pets in the west. Without the outrage generated on the animals’ behalf, the Chinese authorities would not have acted with such alacrity to promise stricter regulation.

Richard McGregor in the Financial Times, August 2, 2007

The inveterate spending habits of rich American households are financed by the thrift of poor Chinese peasants … [T]he contribution of financial market deregulation is a paradox… The more highly developed a country’s retail financial services, the less that country saves.

Scottish economist John Kay in the Financial Times, July 17, 2007

A fascinating Web site called "strange maps" compares the Gross Domestic Product of each U.S. state with a foreign country. Texas produces more than Canada, California matches France, Illinois is on a par with Mexico and little New Jersey equals the output of huge Russia.

George Melloan in the Wall Street Journal, July 27, 2007, Page A13

If America were a stock, it would be a “buy”: an undervalued market leader, in need of new management. But that points to its last great strength. More than any rival, America corrects itself. . . . Next year's presidential election offers a chance for renewal. Such corrections are not automatic: something (a misadventure in Iran?) may yet compound the misery of Iraq in the same way Watergate followed Vietnam. But America recovered from the 1970s. It will bounce back stronger again.

Leader (editorial) in The Economist, June 28, 2007.

The smart money knows today's liquidity-inflated financial markets are full of risk. . . Yet private-equity firms, hedge funds and investment banks are acting as if the good times will continue. Skewed incentives, which pump up greed and damp fear, explain the discrepancy. Fortunes will be made if the good times roll on; but the insiders won't lose much if there is a crash because they are mostly playing with other people's money.

On the 'Greed-Fear Imbalance,' Wall Street Journal, January 29, 2007

If current growth rates [more than 10% annually, compounded] continue, China could overtake Germany as the world's third-largest national economy, with annual output of more than $3 trillion, as early as 2008. China passed the $2 trillion mark in 2005, when it replaced the United Kingdom as the fourth-largest economy.

The Wall Street Journal, January 24, 2007, Page A5

The prospects for developing countries are . . . probably more favorable now than they have been since World War II. International trade is growing faster than global GDP. . . .. Information and technology continues to lower transactions costs . . . [T]he leaders in emerging economies [responsible for] policies that support private sector entrepreneurship and that lead to sustained inclusive growth have a wealth of experience to rely on. No one is in the dark.

Michael Spence, 2001 Nobel laureate in economics,
in The Wall Street Journal, January 24, 2007.

My dream is for Seattle to collect all of the yard waste in the city ... process it into pellets ... (and) put these pellets in steam-powered metro buses that I would make. ... I am very serious. I have done the math. It works.

Entrepreneur Peter Janicki of Janicki Industries, Sedro Woolley,
Wash., maker of "soft" (composite plastic) tooling for the Boeing 787.
Quoted in The Seattle Times Dec. 17, 2006.

[A]ll those doomsayers predicting a recession will get their wish if taxes are suddenly raised, new productivity-strangling regulations are enacted, the U.S. turns against free trade, or some combination thereof. Otherwise, we should expect 3% real growth, based on 2% increases in productivity and 1% population growth. This economy is fundamentally sound.

Nobel laureate and economist Edward C. Prescott in
The Wall Street Journal, Dec. 11, 2006.

Anyone who after the twentieth century still thinks that thoroughgoing socialism, nationalism, imperialism, mobilization, central planning, regulation, zoning, price controls, tax policy, labor unions, business cartels, government spending, intrusive policing, adventurism in foreign policy, faith in entangling religion and politics, or most of the other thoroughgoing nineteenth-century proposals for government action are still neat, harmless ideas for improving our lives is not paying attention… Capitalism has not currupted our soulds. It has improved them.

Dierdre N. McCloskey in the book The Bourgeois Virtues

(quoted in the Wall Street Journal, July 22, 2006)

Bill Gates knows how to compete with anyone who charges money for products, but his head explodes whenever he has to go up against anyone who gives away products for free.

George F. Colony, chairman, Forrester Resarch
(on the threat to Microsoft posed by open-source software,

as quoted in the March 30 2006 issue of The Economist)

Alaska [is] producing less than half the oil we used to pump, and still the state treasury is rolling in petro-cash, thanks to oil prices well above $50 a barrel -- a range once imagined only by crackpot doomsayers. In Juneau, the party hats are out and the spending money is flowing like Dom Perignon at a Ken Lay birthday party.

Anchorage Daily News editorial, Feb. 26, 2006

"I think I'm going to sell out and buy a winery. It's getting warm enough now to grow grapes."

– Alaskan Ken Ford on the cancellation – for the third year in 7 and fourth year in 11 – of the Open World Championship Sled Dog Race, the signature event of Fur Rendezvous, Alaska's mid-winter festival. 
Quoted in The Anchorage Daily News, Feb. 22, 2006.

Some economists think Bernanke will have to raise the Fed funds rate more than Greenspan just because he's new. On the other hand, if he raises rates too much, he might trigger a recession. Greenspan's successor is in a delicate spot, and how well Bernanke does will affect both their reputations.

– Robert J. Samuelson, Washington Post, Feb. 1, 2006

In a knowledge-based world, the traditional measures don't tell the whole story. . . . The government's decades-old system of number collection and crunching captures investments in equipment, buildings, and software, but for the most part misses the growing portion of GDP that is generating the cool, game-changing ideas.

Business Week cover article, February 13 2006 issue

Larry Summers, [formerly] president of Harvard and former US treasury secretary, argued at Davos that the world is going through a transformation as profound as the Renaissance or the Industrial Revolution.  The claim is not absurd. . . . A world in which the marginal cost of collecting, storing, accessing and transmitting information is falling towards zero is unprecedented.

– Martin Wolf, The Financial Times, Feb. 1, 2006

The Greenspan era will not end on January 31st.  Instead, his legacy will linger in the shape of the biggest economic imbalances in American history:  a negative household saving rate and a record current-account deficit.  Until these imbalances unwind – a process that could prove painful – it is too soon to applaud Mr Greenspan's record.

– The Economist, January 14, 2006

World economic growth has been unusually stable and predictable for several years.  The U.S. economy grew at a 3.8% annual rate in the third quarter, the eighth straight quarter at about that pace – the least volatile two-year stretch of growth on record.

– The Wall Street Journal, November 3, 2005

As millions [in China, India and elsewhere in Asia] who have never flown before start taking to the air . . . just the annual increase in air traffic will, in about a decade, be as great as the total number of flyers in 1969, the year Boeing introduced the jumbo jet.

– The Economist, November 12, 2005

Whereas 40 years ago, demographers worried about a “population explosion,” today the proper concern is population decline. Native-born populations are shrinking in most of the advanced nations, which means they will need more immigrants...to maintain their present living standards.

– The Wall Street Journal, Jan. 11, 2005

Last year health care for GM's 1.1 million employees and retirees and their dependents added $1,525 to the cost of every car and truck GM produced in North America. GM now buys more from Michigan Blue Cross than it does from any steel or rubber producer.

– Fortune, Feb. 7, 2005

Many working people equate labor market flexibility with job insecurity. Despite that perception, flexible labor policies appear to promote job creation.  An increased capacity of management to discharge workers without excessive cost, for example, apparently increases companies' willingness to hire without fear of...mistakes. The net effect, to the surprise of most, has been what appears to be a decline in the structural unemployment rate in the United States.

– Then-Fed Chairman Alan Greenspan, Sept. 27, 2005