People, especially Americans, started believing that they can live on other people's money. And more and more so. First other people's money in your own country. And then the savings rate comes down, and you start living on other people's money from outside. At first it was the Japanese. Now the Chinese and the Middle Easterners.

We--the Chinese, the Middle Easterners, the Japanese--we can see this too. Okay, we'd love to support you guys--if it's sustainable. But if it's not, why should we be doing this? After we are gone, you cannot just go to the moon to get more money. So, forget it. Let's change the way of living. [By which he meant: less debt, lower rewards for financial wizardry, more attention to the "real economy," etc.]

(...)

So I wondered, How do I explain derivatives?, and I used the model of mirrors.

First of all, you have this book to sell. [He picks up a leather-bound book.] This is worth something, because of all the labor and so on you put in it. But then someone says, "I don't have to sell the book itself! I have a mirror, and I can sell the mirror image of the book!" Okay. That's a stock certificate. And then someone else says, "I have another mirror--I can sell a mirror image of that mirror." Derivatives. That's fine too, for a while. Then you have 10,000 mirrors, and the image is almost perfect. People start to believe that these mirrors are almost the real thing. But at some point, the image is interrupted. And all the rest will go.

When I told the State Council about the mirrors, they all started laughing. "How can you sell a mirror image! Won't there be distortion?" But this is what happened with the American economy, and it will be a long and painful process to come down.

(...)

Many of the brightest youngsters come to me and say, "Okay, I want to go to the U.S. and get into business school, or law school." I say, "Why? Why not science and engineering?" They say, "Look at some of my primary-school classmates. Their IQ is half of mine, but they're in finance and now they're making all this money." So you have all these clever people going into financial engineering, where they come up with all these complicated products to sell to people.

But please read this one in full: The End of the Financial World as We Know It (continued as How to Repair a Broken Financial World): it's written gy Michael Lewis (of Liar Poker's fame), who has an amazing capacity to write clearly on the topic of finance and is, once again, spot on:

OUR financial catastrophe, like Bernard Madoff's pyramid scheme, required all sorts of important, plugged-in people to sacrifice our collective long-term interests for short-term gain. The pressure to do this in today's financial markets is immense. Obviously the greater the market pressure to excel in the short term, the greater the need for pressure from outside the market to consider the longer term. But that's the problem: there is no longer any serious pressure from outside the market. The tyranny of the short term has extended itself with frightening ease into the entities that were meant to, one way or another, discipline Wall Street, and force it to consider its enlightened self-interest.

(...)

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.

(...)

Rather than tackle the source of the problem, the people running the bailout desperately want to reinflate the credit bubble, prop up the stock market and head off a recession. Their efforts are clearly failing: 2008 was a historically bad year for the stock market, and we'll be in recession for some time to come. Our leaders have framed the problem as a "crisis of confidence" but what they actually seem to mean is "please pay no attention to the problems we are failing to address."

Do read the whole thing.

In the long run, we're all dead. John Maynard Keynes

And decided to look at my other mobile, where i discovered that both J and Anya had sent New Year's greetings.  Danke.  (J, i wished you and all here greetings in the OT.)

All the while drinking Mimosas with Crèmant.  That should set me up well to finally see Bonjour Sagan.  I have respect for Diane Kurys, but we'll see.

I hope Helen's doing well, and Drew survived Manhattan.  I hope Doc Triloqvist is feeling better and more mobile, and Melancthon's still waiting patiently for my writing.  The world remains insane, so i won't comment, knowing linca's on the case.  I still wish there were more Germans here.

It's nice to know the rain is cleaning the glass ceiling.  Prost all, let you know what it's like to be an 18 year old girl driving an Aston Martin later.  (I have a date!)

Skennah Kowa

Getting rich quick - and having much more money than you ever need - will look as pointless as taking bodybuilding too seriously, says Clive James.

This is my last broadcast until my next spell and I'm in a summing up mood. I have no New Year resolutions apart from the usual one about tidying my office in case the body of my missing cleaner is lying mummified under that pile of magazines.

But I do feel like making a New Year prediction. I want to put down a marker that proves I have a grip on world events. The best way to prove this is to make a prediction that everybody knows has already come true, but that few people are yet ready to admit.

I hereby predict that from now on, starting today, nobody will look good who gets rich quick. I can predict more than that, in fact. Even getting rich slowly is going to look silly, if getting rich is the only aim in mind.

We decided to climb down the rocks from the cliff to the beach at the back of the island and I managed to wedge my bag (with tripod strapped to it) in the V of some rocks and found myself stuck, hanging over a ledge and kept in place by my bag.  We then had a full workout scrambling around the island on the rocks to get back to the causeway before the tide cut us off.  The only damage was muddy jeans.

Here's my friend's son playing by the rock pool.

I have also done all of my washing, tidied up, and done the supermarket shop AND got all of my loose coppers and silvers turned into a cash voucher which paid for the shopping and then some.

Ad astra per aspera

I have completely fallen in love with the Village in New York.  Marek, what's the matter with you, living in Brooklyn?

Be nice to America. Or we'll bring democracy to your country.

New Mexico Governor Bill Richardson has withdrawn as US President-elect Barack Obama's nominee for commerce secretary, US media reports say.
Mr Richardson's decision was linked to a pending investigation into a company which has done business with his state, NBC news reported.

Now, some background.

Ante Gotovina is on trial for war crimes as the commanding officer of Operation Storm, which retook the Krajina in 1995. The Krajina is the border region between Croatia and Bosnia and, together with Slavonija (along the border between Croatia and Serbia), it made up the self-proclaimed Serb Republic of Krajina (1991-95).

The "diaries" are artillery diaries of the Croatian army, presumably to establish  the shelling of civilian targets.

I find the following stories in English: one from Radio Serbia (3 January 2009)

Hague Tribunal Chief Prosecutor Serge Brammertz has stated that it is not very probable that the key evidence about the Croatian "Storm" operation from 1995 have simply gone missing. He said there is reason to believe that someone is hiding intentionally the evidence against three Croatian generals - Ante Gotovina, Mladen Markac and Ivan Cermak. Brammertz has told the Zagreb VECERNJI LIST daily that the Tribunal has been asking for those documents from Croatia for the last 18 months and that it has been discussed in all meetings with the Croatian authorities. As a reminder, during the "Storm" action in August 1995, more than 250 thousand Serbs were expelled and more than 2,500 were killed or went missing.

... Croatian officials had answered most Former Yugoslavia Tribunal requests, but they had given partial responses on the case involving former General Ante Gotovina and had yet to hand over key military documents. (webnewswire.com 12/13/2008)

Allegedly the Netherlands is pressuring Croatia on these diaries by threatening to block the EU accesion negotiations over this issue. Croatia's accession was blocked in the past over the failure to produce Gotovina, who was finally arrested in Spain in December 2005. (See ET diaries on the arrest by soj - with extensive background - and IdiotSavant)

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

you are the media you consume.