Daily Archives: November 16, 2010

Video of the Day: “Quantitative Easing Explained”

Need to know: Quantitative easing.

Matt Taibbi elaborates on the explanation.

A sample:

This video went up on Zero Hedge yesterday, I believe. In the first minute you will want to throw both of these little bears in a sack and drown them, but by the end they win you over. There are so many things about QE that are crazy, but there’s one thing that I’d like to point out in particular. Yes, this is a huge money-printing program with potentially disastrous inflationary consequences. And yes, the influx of all this money could easily distort markets and prices far beyond the extreme distortions we’ve already been dealing with (commodities prices shot through the roof after this latest QE round was announced). But the thing I want to focus on is the subsidy aspect of QE, pointed out in the video. QE is designed to buy Treasuries and other assets, but the Fed does not simply go out and buy Treasuries itself; it does it through its primary dealers, who include of course banks like Goldman, Sachs. The Fed all but announces when it’s going to be doing this buying and in what quantity, which allows the banks to buy up this stuff at lower prices ahead of time and then sell it to the Fed at inflated cost.

Even forgetting about the obvious insider trading aspect to all of this, the official middleman status of the banks is a direct government subsidy and it is little remarked upon, even by the Tea Party crowd, which is otherwise so opposed to “welfare.” But these sorts of subsidies exist all throughout the financial services industry.

Fyodor Dostoevsky

The famous scene in Crime and Punishment in which Raskolnikov is questioned by detective Porfiry Petrovich.  (From the excellent 2002 BBC adaptation of the novel.)

On this date in 1849 a Russian court sentenced Fyodor Dostoevsky to death for anti-government activities linked to a radical intellectual group; his sentence was later commuted to hard labor.

Frye puts Dostoevsky in very good company in this illuminating moment from Creation and Recreation:

Recently a collection of early reviews of mine was published, and on looking over it I was amused to see how preoccupied I had been then with two writers, Spengler and Frazer, who haunted me contantly, though I was well aware all the time I was studying them that they were rather stupid men and often slovenly scholars.  But I found them, or rather their central visions, unforgettable, while there are hundreds of books by more intelligent and scrupulous people which I have forgotten having read.  Some of them are people who have utterly refuted the claims of Spengler and Frazer to be taken seriously.  But the thinker who was annihilated on Tuesday has to be annihilated all over again on Wednesday: the fortress of thought is a Valhalla, not an abattoir.

This is not merely my own perversity: we all find that it is not only, perhaps not even primarily, the balanced and judicious people that we turn to for insight.  It is also such people as Baudelaire, Rimbaud, Holderlin, Kierkegaard, Dostoevsky, Nietzsche, all of them liars in Wilde’s sense of the word, as Wilde was himself.  They were people whose lives got smashed up in various ways, but who rescued fragments from the smash of an intensity that the steady-state people seldom get to hear about.  Their vision is penetrating because it is partial and distorted: it is truthful because it is falsified.  To the Old Testament’s question, “Where shall wisdom be found?’ [Job 28-12] there is often only the New Testament’s answer: “Well, not among the wise, at any rate” [cf. 1 Corinthians 1:19-20].  (CW 4, 39-40)