Sunday, October 26, 2008

Mindless Speculation

I. Geopolitics

The fellow with the fufu usually moves over to the man with the soup, never the other way around.

Elechi Amadi, The Great Ponds
This delightful Nigerian saying distills a lot of economic insight - and it translates quite well even if you've never had the pleasure of eating fufu and light soup. It's a folk lesson that is learned very early in human life and certainly ingrained by the time you master the hard knocks of school playgrounds - or streets as the case may be. Gil Scot-Heron once phrased the sentiment as "all consumers know that when the producer names the tune the consumer has got to dance".

In times of crisis, economists talk about the "flight to quality" or deleveraging; political scientists, in turn, form models about the calculus of power relations. It's not quite a matter of rats and sinking ships but it surely comes down to the perception that the pepper soup would greatly enhance a depleted stock of pounded yams, cassava or plantain fufu.

Anecdotally, we then start reading articles about Americans (belatedly) trying to find jobs in the Middle East
Europeans in investment banking and other financial fields already have been flocking to the oil-flush Persian Gulf for months, propelled by the hope that emerging economies of the East will ride out any global recession better than New York or London. In a phrase often cited by British brokers and bankers, "it's Shanghai, Mumbai, Dubai, or goodbye."
This is at the level of the individual response but presumably this phenomenon extends to the societal scale. Tribes, companies, and countries the world over are now searching for soup.

These days, the men with the soup - or capital, or cash, or credit, or liquidity, or savings, or solvency if you prefer, ostensibly live in places where phrases like "sovereign wealth", "nation of savers", "oligarchy" or "oil producers" are bandied around. If they are called to finance bailouts, they might well extract their pounds of flesh - to continue on the metaphorical route. And yet that is the crux of the matter: who is going to finance bailouts and on what terms?

Warren Buffet is a happy shopper and is very exacting with the terms he demands before deploying his checkbook. Japan's Mitsubishi banking group almost caused Henry Paulson to go into cardiac arrest when it started renegotiating the terms of its proposed bailout of Morgan Stanley. Iceland, to take the other obvious example, was even negotiating with Russia for its bailout before others finally stepped in - the price of Russian army bases on the soil of a NATO member is too high apparently.

Negotiations are always tricky things of course, but when you have the soup you have the benefit of knowing that others will come to you. In this respect the most poignant geopolitical maneuvering has been pointed out by Bernhard of Moon of Alabama and it concerns China and Taiwan.

Item: Selling Out Taiwan To Finance The Bailout
"The Chinese president also praised the good momentum of the development of the Sino-U.S. ties in recent years in various areas.

He said China is ready to work with the U.S. side to intensify dialogue, exchanges and cooperation, and properly handle issues concerning mutual interests and of major concern, particularly the Taiwan question, in a bid to push forward the sustained and steady development of the Sino-U.S. constructive and cooperative ties."

Translated from diplo-speech: "Give us Taiwan and you'll get the loan."
Dig: the reaction was swift
Regulators in Taiwan ordered insurers to limit their holdings of Freddie, Fannie, and Ginnie Mae paper...
The Taiwanese also have some soup they can withhold it appears. These are fascinating times for geopolitics, everything is being laid bare.

fufu


When confronted with empty bowls and covered pots, you really start to wonder if indeed there is any soup available. More to the point: who's got the soup?

II. Estate Planning


Apropos the notion of death and taxes I was thinking recently about the sad and tragic death of Kenneth Lay, former CEO and erstwhile looter of Enron. I was reminded of the mindless speculation about its timing, for indeed, from some points of view, it was a very convenient death for his estate, coming as it did after his fraud conviction but, and this is crucial, before his sentencing, which meant that said conviction was abated - and the prospect of punitive damages and restitution to those who suffered at his hands disappeared in a coronary heartbeat - or lack thereof. Of course one shouldn't begrudge his family in their time of loss for the consequent beneficial preservation of capital. Still it would have been good to be able to hear his expert opinion on the current "global financial crisis" (as the BBC have branded the current mood - sidenote: the Motley Fool term it Panic 2008) and speculate as to its causes...

The mind is a funny thing and I then remembered the part of The Godfather II where Robert Duvall's Tom Hagen pays a visit to Michael Gazzo's weary Frank Pentangel on a military base and reminisces about the old school Roman solution for unsuccessful conspirators. The good soldier subsequently took those musings to heart. That scenario is the kind of thing that only happens in fictional movies - even if these days people worryingly encourage it in their anger. Moving right along...

Along the same lines, the always astute Floyd Norris was indulging in some mindless speculation himself recently
If Congress takes no action in 2009, the estate tax will fall to zero in 2010, and then bounce back to 2001 levels in 2011. That would create what the Tax Policy Center report, written by Leonard E. Burman, Katherine Lim and Jeffrey Rohaly, delicately calls "grotesque tax planning initiatives." What they mean is that there would be a great temptation to do in dear old (very rich) dad before midnight on Dec. 31, 2010.
There hasn't been much remorse among those who have made out like bandits in the bubble years, it seems however that the gig is up - or at least, pace the observation about who now has the soup, that the shell game will have different winners in the near term.

One starts to wonder what will get in the head of the dissolute offspring of modern day aristocrats when they contemplate the prospect of ill-gotten gains disappearing by fiat as the mandated clawback (albeit a quite lenient clawback) begins. It is quite fitting that those who thrived on moral hazard might find themselves targets of the ineluctable financial logic of perverse incentives. Time will tell, I suppose, if this idle speculation has any grounding.

the rhinoceros


On a slightly related note I was reminded of the following poem

Lord Finchley


Lord Finchley tried to mend the Electric light
Himself.
It struck him dead: and serve him
right!
It is the business of the wealthy man
To give employment to the artisan.


Hilaire Belloc's Cautionary Verses
Periodically the social compact that Belloc identified a century ago is forgotten - that is the realm of trickle down economics. When The Masters receive their comeuppance, the reaction is not necessarily one of class warfare - everybody knows their place in society, but rather it is a distinct lack of sympathy for those who fall from grace. A debacle prompted by overblown real estate leads, as it were, to some furious estate planning.

III. A Pepper Soup Soundtrack

  • DJ Palm Butta - Fufu N Soup
    The message delivered in this cheeky Liberian hiplife reworking of the Chicken Noodle Soup fad is clear: "with some okro on the side... that fufu and soup is sweet". True enough, we live in an era of microwave fufu, but even with such modern conveniences, we also need some soup. It goes without saying that Palm Butta also has the follow up track Cook My Pepper Soup which dives into the heart of the matter.
  • Eastern Ministers Guitar Band - Uwa Tuto Uwa Fufu
    As discussed at the indispensible Likembe, the literal translation of the title is "The World is Sweet and Painful", the fufu of the the title is perhaps the pain, the soup is the sweet.
  • Digable Planets - The Art of Easing
    You had to be there perhaps, but if you flowed with the vibe that was the Blowout Comb album, you'd know all about the art of easing, of laying back in the cut.
  • James Brown - Escape-ism
    Some hot sauce to go with some hot pants, JB delivered wisdom in spades
    You know when you forget that grits is... when you forget that grits is groceries and that eggs is poultry, you lose your thing. Now, you can lose your thing out there wandering around.
    Fred Wesley's horns and the various incarnations of the JBs band were the soup to James Brown's fufu.
  • Donald Byrd - Fufu
    Donald Byrd's 1973 album Kofi is one of my favourite in the jazz funk canon. Perhaps the excursions trips to Elmina and the consequent African-inflected rhythms place this music on the funky jazz side of the spectrum. Whether it is the driving soul jazz of The Loud Minority or the intricate interplay of title track or the blowing session that is Fufu, this is simply inspired.



    I could listen to this for hours on end and indeed, to harken to another song on the album, I do have Perpetual Love for Byrd's music.
The received wisdom is that it was mindless speculation that got much of the world into our present belt-tightening. As things take on serious notes, one hopes that we can at least comfort ourselves with some mindless speculation. I've made my opening contribution, I await yours.

Let's place this note as part of an occasional series, observers are worried.

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1 comment:

Here, There, Elsewhere... and more said...

Extremely thought provoking - thanks for the beautiful reminder of one of my favourite all time dishes - fufu + pepper soup (either palm or groundnut soup) and the the excellent musical references..!
Je reviendrai - j'aime beaucoup ce blog..:)
India J (Ghanaian day name Ekua)