Bandarlog


	To Start Off a New Month of Bandarlog ... here is one of the more disturbing internet sites I've seen -- seen and heard -- recently. (You have to let the soundtrack run for at least thirty or forty cycles as you read through the biography pages.) [Doug: 5/1/06 18:41]


	Name That Country Its chief diplomat speaks not a single foreign language, confuses Taiwan with Thailand, calls off a condolence flight to a far-off disaster-struck island when he learns it's actually the territory of his own country, is surprised that no Jews were killed in England during WWII. Hint: it's not the USA. [Doug: 4/30/06 07:05]


	Ben H's Culturally Sensitive Travel Observation of the Day Portuguese is just like Spanish, if Buckwheat spoke Spanish. OOOOO-tay!! [Ben H.: 4/29/06 22:20]


	Windfall Tax The oil "windfall tax" is pure, unashamed demogoguery. No reason to repeat the many good arguments made against it. Having worked on investments in oil properties and also having traded the futures market, I can attest to one subtelty that I have not seen addressed in any of the articles I have seen. Transitorily high oil prices will not provoke additional investment in exploration or production optimization. To make significant, long-term investments, producers must believe that oil prices will stay high for a prolonged period. Better than belief, though, is the ability to actually lock in high oil prices for the life of the project. The oil futures market is now pricing in the persistence of today's price environment for the coming decade. Producers should be able to take on projects with high lifting costs and sell the oil forward at high prices. Unfortunately, windfall taxes interfere with the arbitrage mechanism for calling forth additional oil supply. A producer can't sell forward oil if his upside beyond a certain price is likely to be taxed away. Under a scenario of oil prices further spiking, the producer would face losses on his oil hedge, but no additional net profits from selling oil. The theoretically correct hedge therefore becomes buying puts on oil, struck above a project's break-even oil price. But options are expensive and the options market is nowhere near as liquid as the oil futures market. Of course, Congress could try to pass a windfall oil profits tax that defines profits as net of hedging costs... but demogogues probably won't think that far ahead. [Ben H.: 4/29/06 22:17]


	Neocon Defeats Neoliberal Mike Kinsely's political humor is superb, but when he tries to address substantive policy he invariably botches it and gets schooled Churchill Defeats Utilitarianism "It is not given to the cleverest and most calculating of mortals to know with certainty what is their interest. Yet it is given to quite a lot of simple folk to know every day what is their duty." The Internet Defeats My Ability to Focus Don't even ask where I found this [Ben A.: 4/29/06 09:46]


	Checkin' Out Heading down to Sao Paulo for meetings Sunday and Monday (which day is actually a holiday there). I don't hope for much out of this visit; in fact, I'd consider managing not to get kidnapped a success. [Ben H.: 4/28/06 18:58]


	Busted For the whole time I've worked in this office building, I have had a somewhat contentious relationship with the front desk security people. The security here is ultimately quite lax, though they inconsistently enforce certain pointless rituals. One of these consists of the requirement for anyone leaving after 7pm to sign out. The front-desk guys never appear to give even the most cursory glance at the sign-out sheet. No one has ever been able to explain to me what purpose signing out serves. For past 18 months or so, partly as a test of my hypothesis of the bureaucratic absurdity of this daily task, partly as a protest against it, and partly as a way to amuse the midnight-oil burners in my office who leave later than I do, I have signed out under a series of false names. I started out using stock silly names: Mike Hunt, I.P. Daly, etc. Then I moved on to historical figures, ones that to a front-desk jockey would surely count as obscure: Tojo Hideki, Charles M. Talleyrand, Gustavus Adolphus. Then I escalated the brazenness and sharpened the challenge to the sign-out sheets protective function, by signing out as notorious criminals: Ted Bundy, John Wayne Gacy, and even "Son of Sam." Finally, I decided to go all the way: signing out every single night, in block letters, as Osama bin Laden and putting down my company as "Al Qaeda." Yesterday morning, the office manager approached me and told me that she had received a call from building management. They told her than someone had signed out as Osama bin Laden. Perhaps alarmed at the possibility that the world's #1 most wanted terrorist works in their building, they pulled out old sign-out sheets and discovered, to their horror, that Osama bin Laden has been putting in late nights at the building for several months. The management was calling all tenants to stress that the sign-out sheet is serious business and demanded that our office manager tell everyone in our office to sign with their real names. Somehow, our office manager deduced that of all the people in the building, I had to be the person perpetrating this imposture on the vigilant security staff. Am I that obvious? It is indicative of the idiocy of our building management that, having by some chance discovered "Osama bin Laden" on the sign-out sheet and having further investigated and discovered that this had been going on for months without ever attracting notice, they broadcast this fact to the very tenants they charge for so-called security. You would think they would feel some embarassment that they missed it for several months. Anyway, I left once again after 7pm last night and, suitably chastened, I did not sign out as Osama bin Laden. No, instead, I signed out as "007". That should make the guys feel safer, at least. [Ben H.: 4/28/06 14:36]


	Diseases Phimosis is a great word and it's valid in Scrabble. As is phimoses. Rare diseases are among the nouns that I sometimes think shouldn't be pluralizable in Scrabble. I mean, when is anyone going to say "phimoses"? For multiple cases -- "Sure, I've had six or seven phimoses, it's no big deal" ?? For multiple variants -- "As an expert, I can distinguish among no less than ten distinct phimoses" ?? Unlikely. But this worry doesn't stop me from playing things like ATONIES, which is one of the most commonly playable bingoes. (I played it last night, on Dao's computer -- I deleted the game from mine. I also munged my hostfile so that nytimes.com, aldaily.com, and slate.com no longer resolve -- all part of an anti-time-wasting program.) [Doug: 4/26/06 11:23]


	Harvard, Covering Itself In Glory Celebrated Harvard kid-novelist turns out to more scribe than writer. Stop snickering, Bulldogs: she may be a plagiarist, but at least she isn't a Talib! This opens the way for the girl's sequel: "How Opal Mehta Got Caught, Got Sued, and Learned The Art of the Harvard Non-denial Denial." [Ben H.: 4/25/06 06:58]


	GDP per capita GDP per capital stats, in my experience, can be quite unreliable. I remember in 1998 going to Skopje, Macedonia. The place wasn't Biarritz, but the people were well-dressed and (not unlike your Ferrari account) I passed by a cycle shop with a $2,000 Italian racing bike in the window. At the time, official GDP per capita hovered around $1,500. In this case, both Macedonia and her western supporters had an interest in keeping quoted GDP per capita low because it left Macedonia eligible for concessional World Bank credits. One of the biggest issues in measuring "crap country" GDP is the "grey" economy. The level of "informality" in the service sector, for instance, runs at very high levels. The government statistical service needs to pretty much stick its finger in the wind on this, and GDP series revisions of 10-20% are not unheard of (China just had one of around 15%; Turkey will revise later this year and some people say it could be as high as 25%). A final little fillip of complexity -- particularly with respect to relating, as you did, Ben, visible well-being to quoted GDP per capital -- comes in countries which like the DR send lots of workers overseas. The DR community in the U.S. sends scads of money back to the DR. My latest notes say something like $3.5bio per year. Remittances do NOT count as part of DR's GDP, but in size they are equivalent to about 20% of GDP. To go back to the Macedonia example, at the time of my visit, the Finance Ministry told me that 30% of working age Macedonian males had gone abroad for jobs. Presumably, they were sending back much of what they earned. Rural DR is also ridiculously poor. Our ag company looked at some sugar projects there and ultimately passed. Most of the cane fields still get harvested by hand, those hands belonging to people who live pretty much like slaves. [Ben H.: 4/25/06 06:19]


	Ben H's Job is Harder Than it Looks From (admittedly brief) recent exposure to Bridgetown, Barbados and Santa Domingo in the DR, I would never have imagined that Barbados' GDP per capita was over twice that of the Dominican. Indeed, I disbelieve it so fully that I am inclined to doubt the official statistics. Ben H, what is the story here? Is GDP per capita just an unreliable statistic for a country as small as Barbados? Is rural poverty in the DR just really, really, bad beyond what one would project from Santa Domingo, a city, I should add, which boasts a Ferrari dealership, for heaven's sake! Ben H, you have even more of my respect. My comparison to country analysis, the evaluation of discovery stage pharmaceuticals(and the testicular atrophy they may or may not cause) seems a snap. Addendum: trying to deduce (as of course I would) which class of drug your Dr. S was looking at made me realize: there are really a lot of drug types that cause testicular atrophy. One of them, a sodium channel stabilizer for epilepsy, also causes my new favorite pharmaceutical side effect: hearing pitches a semitone off true. [Ben A.: 4/24/06 23:27]


	The Downside of Having Doctor/Portfolio Manager on the Desk Sleepy Friday afternoon silence settles on the desk, punctuated by one side of a telephonic conversation between colleague Dr. S. and a consultant: Yeah, yeah, I know. But I keep hearing about this drug, you know, ooh, testicular atrophy! Phimosis, phooey. You can't circumcise testicular atrophy away! [Ben H.: 4/22/06 00:16]


	Freezepop Speaks the Truth When asked by a fan about how to cope with existential angst, their suggestions include: Don't ever watch the local evening news. While keeping up with world events is important, knowing about the dead baby found in the dumpster behind Denny's doesn't do anyone any good. [Ben A.: 4/20/06 01:34]


	Married to a Doctor: The Benefits I start typing in the url for dictionary.com, and find this in the browser history. Bummer, dude! [Ben A.: 4/19/06 23:28]


	That I Would Not Have Predicted Jared Paul Stern of Page 6 is good friends with Whit Stillman? [Ben A.: 4/19/06 22:55]


	Even the Nerds are Decadent Now You know those conservatives who say standards of behavior are eroding? They are totally in the grip of a moral panic. Totally [Ben A.: 4/17/06 23:44]


	The Coalition of the Vendors... Is my father's excellent coinage for the Russia-France-China triplet by whose aid we are allegedly to contain Iranian nuclear ambitions. Here's Brent Scowcroft: To deter Tehran, it is essential that there be a united front between the US, the European Union, Russia and China to prevent Iran from exploiting any differences or finding any sort of wiggle room that would allow it to continue with its program. So this is "realism" now? If so, my hard-boiled plan involves a leprachaun army. But of course, it's not like I, or anyone, has a good option to recommend. Mark Steyn, much as I love the man, is off talking invasion talk. That's a seriously bad idea. This seems like a time to kick the can down the road a bit and see what happens. [Ben A.: 4/17/06 23:03]


	Yale Taliban Cop Out Opinion Journal picks up Crimson article about Yale's story about how that lost a "similar student" to the Yale Talib to Harvard some years ago, and how Yale is full of crap. Now... who tipped off the Crimson? Ahem... I still help 'em out from time to time... [Ben H.: 4/17/06 21:31]


	Red Hook Reawakens Saturday, I decided to take a walk across the BQE into usually-forlorn Red Hook, Brooklyn, to check out the docking of the Queen Mary at the new Brooklyn Cruise Ship Terminal. On a typical Saturday afternoon, you could safely shoot a canon down Imlay Street. For all I know, somebody has done it, for all the 76th Precinct would care. It did not take long for me to observe that the cruise ship terminal is going to change Red Hook -- I saw one, then two, then three yellow taxis heading down Columbia Street, a thoroughfare that may well have spent the last 30 years free of medallion-bearing transportation. I didn't set out knowing exactly where the terminal lies, but all I had to do was follow the gradient of traffic density. Sometimes walking in Red Hook I see cars, but rarely formations of cars in close enough proximity to constitute a traffic pattern. Today -- actual traffic, vehicles forced to slow down by the presence of other vehicles! It remains to be seen whether this will become a constant feature, or whether, rather, bustling Red Hook will only emerge, Brigadoon-like, at long intervals, when a cruise ship arrives (I read that the terminal expects something like 30 dockings per year). Many people shared my idea of spending a sunny afternoon gawking a the big ship. And the ship is big. That said, I wasn't as overwhelmed by its length (over 1000 feet stem to stern) as I thought I would be. Against the backdrop of Red Hook's vast desolation -- half-empty, low-slung warehouses stretching for blocks on end -- it is hard for anything to look truly huge. Manhattan has size, no doubt, but it is the size of sheer verticality. Manhattan does tall. But with sliver-like lot sizes, it doesn't do long. Red Hook does long. In fact, tied up in the Buttermilk Channel, the Queen Mary impressed more with its height (23 stories) than its length. Impressive, yes, but I am still glad I don't actually have to go on it. However big the cruise ship, an actual cruise seems to me sort of like getting sentenced to house arrest at a hotel. [Ben H.: 4/16/06 18:53]


	Back And well rested [Ben A.: 4/16/06 11:41]


	Sometimes You Have to Prove the Obvious We've all observed at one time or another that whereas once workers at the bottom of the industrial pyramid had to fight to get a shorter work-week, these days it is precisely the people at the top who tend to suffer (or is subject themselves?) to grueling hours. Two economists have now released a rather exhaustive empirical study that, among other things, grounds this observation in hard data. The authors make the related point that the shift in work-hour inequality mirrors the contemporaneous shift in income inequality. It woulc seem that overall "utility inequality" probably has not increased as much as income distribution tables alone would suggest. [Ben H.: 4/14/06 08:57]


	CPE Just got back from mini-vacation sans internet in Normandy to see the fate of the CPE. Villepin is coming on TV in a few minutes to explain; we're going to watch him since it's the last time anyone will hear from him, ever. [Doug: 4/10/06 14:01]


	Rewarding the Mob Not that any of us expected CPE controversy would end any other way... [Ben H.: 4/10/06 06:19]


	Immigration The immigration reform bill may have died in the Senate, but the topic I'm sure will remain quite live, at least until the next election. What has struck me about the debate is that several strands of argument about immigration have gotten inappropriately tangled. Tom Tancredo says that "illegal immigration is destroying America"; the Wall Street Journal editorial page retorts that his position is absurd, since these illegal immigrants do not for the most part rely on the public fisc to sustain them, but rather do productive work. They address different questions. The way I see it, immigration, whether legal or illegal, involves four distinct questions, three broadly financial and one cultural. 1) The Fiscal Question: Does immigration under the current policy on balance contribute to the public fisc or drain from it. This question can be asked on a flow basis (what is the impact at present) and on an NPV basis. 2) The Economy-wide Question: Does immigration under the current policy lead to better economy-wide performance or worse? Better meaning some combination of a higher level of economic output (aggregate and per head), higher economic growth, lower inflation, and higher productivity, worse meaning the reverse. 3) The Distributional Question: To the extent immigration under the current policy has economy-wide effects, it is not to be expected that these effects fall equally upon all citizens. Who, therefore, are the winners and who are the losers? 4) The Cultural Question: Does immigration under the current policy lead to a change in our culture and what is the nature of that change? I'd be curious to know what you guys think. My impressions, very quickly (just in order to kick off the discussion): 1) Not much effect one way or the other right now; probably slightly positive on an NPV basis. 2) Almost certainly better, with the most impact on restraining non-tradeables inflation in the face of high rates of economic growth and flexibilizing the labor market. 3) Great for people like me, who work in already highly globalized industries (immigration does not affect income) and who have a high weighting for personal services in their consumption basket. 4) Here I have sympathy for the Samuel Huntington thesis. High levels of immigration, a multiculturalist consensus that hinders integration, high geographic concentration of both source and destination of immigrants, and location of that source in an adjacent region means that immigration will change the culture more than in the past, and in ways that will prove deleterious (look at what sort of outcomes the immigrants' culture has generated in their home countries). The Wall Street Journal editorial page looks at questions 1,2 and especially (though perhaps not consciously) 3. Tom Tancredo looks at question 4. No wonder the come to very different answers. [Ben H.: 4/8/06 17:00]


	Ira de Ruta U.S. Ambassador to Venezuela William Brownfield this week went a Venezuelan little league facility to distribute donated athletic equipment. Apparently, it is now a tenet of chavismo that only the chavistas themselves can play the role of patron in the squalid clientelist state they have created. A chavista gang on motorcycles chased his departing motorcade and pelted it with eggs and vegetables. Poor Hugo... when it comes time for Brownfield's employer to pelt him, he'll find it in possession of more devastating materiel to lob than eggs and vegetables. [Ben H.: 4/8/06 11:08]


	Rage de Route I have always marvelled that stuff like this doesn't happen more often when demonstrators block roads. In Argentina, for example, piqueteros shut down one of the main bridges in BA quite frequently. And yet, in spite of the culture of impunity, no one ever tries to run over the demonstrators. It is surprising to me that the first instance of this I can recall should occur in France. Are the French ever in a hurry? OK, maybe to get to their vacations... ah, well, perhaps that explains it: it is Friday, after all. [Ben H.: 4/7/06 11:03]


	I Am Going to Miss Berlusconi His critics complain of a political career bought with his media fortune. They ought to admit that self-financed outsider campaigns have certain advantages for the polity as compared to contests between patiently-rising professional politicians. Who but a Berlusconi-type could rise to his country's highest office while allowing this sort of sense of humor to shine through? Hat tip: MK [Ben H.: 4/7/06 07:02]


	Give The Guy a Break I have some sympathy with the emir in question. Chocolate cannot be taken lightly. Since I've been in France, I think somewhere between 15 and 25 percent of my daily caloric intake has been dark chocolate, and I've been moving up from 75% to 85% cocoa bars. If they disappeared from Monoprix I think I would go ape-shit too. [Doug: 4/6/06 17:14]


	Islam Means (A) Piece (of Chocolate) A funny primary source, from a London-based reader. The reader's sister-in-law runs a small European chocolate producer. Here is an email she received from a customer in the Gulf: -----Original Message----- From: [redacted] Sent: dinsdag 28 maart 2006 19:13 To: Ann [redacted] Subject: Re: Cavalier order Dear Ann Thank you so much for your kind understanding.Believe Mrs Ann , Your products is well know not to ordinary people ,but Yesterday One Representative from the royal family came to the shop and requested the mocca bar , and we told him it is coming , and he got angry and brook the glasses at the shop. Then a call came from the royal palace instructed me to get the chocolate or they will close my shop. Please send me the order , and I promise to manage the payment by 15 of April. Thanks once again for your kind and prompt action.(n Copy of the wire transfer will be attached tomorrow ). Khalid Giving new meaning to the phrase "The Customer Is King". Bonus colorful detail: the company specializes in low-sugar chocolates for diabetics. No wonder it has fans among Gulf royals! [Ben H.: 4/6/06 08:11]


	Last Lazy Blog Post Before I Leave We are accustomed to repeating the cliche, and to believing, that “our most precious resource is our children.” But we have plenty of children to go around, God knows, and as with Doritos, we can always make more. The true scarcity we face is of practicing adults... --Michael Chabon, of all people [Ben A.: 4/4/06 03:52]


	That Clip is Unhinged Are livestock in the background a usual feature of this program? [Ben A.: 4/4/06 00:06]


	A Little Caribbean Culture For You A Venezuelan acquiantance once gave me a very important hint for understanding his country's political culture: Venezuelan culture is more Caribbean than South American. So, in preparation for your Caribbean vacation, Ben A., I recommend you watch this fantastic excerpt from Alo, Presidente. Caribbean culture is fundamentally unserious. Chavez blusters and we laugh. Che and Castro are icons of pop irony because they are just too Caribbeanishly silly to come off as threatening. [Ben H.: 4/3/06 21:14]


	The Rebirth of Tiki... ...was well underway when I lived in LA. SoCal is so great. By tomorrow at this time I hope to be drinking rum out of a coconut, a conch shell, or a under the shade of an enormous pink parasol! [Ben A.: 4/3/06 18:11]


	Drink umbrellage Hipsters have revived many anachronistic bits of culture, such as bowling shirts and swing dancing. I keep alive the hope that one day the hipsters will rediscover the Polynesian fad of the 50s and 60s. Then you'd see some serious drink umbrellage... [Ben H.: 4/3/06 17:59]


	I'm off too ... General strike tomorrow. Ben, have a great time in the tropics; wherever you're going I hope they have festive cocktail glasses. I was disappointed recently at a semitropical resort that served me a pina colada in a disposable plastic cup. I'm not asking for phosphorescent cocktails or anything, just an umbrella or a jauntily curved glass-stem or something. [Doug: 4/3/06 17:05]


	Shut My Mouth Carrol's first statement was coerced: During my last night in captivity, my captors forced me to participate in a propaganda video. They told me they would let me go if I cooperated. I was living in a threatening environment, under their control, and wanted to go home alive. I agreed. Things that I was forced to say while captive are now being taken by some as an accurate reflection of my personal views. They are not. The people who kidnapped me and murdered Alan Enwiya are criminals, at best. They robbed Alan of his life and devastated his family. They put me, my family and my friends -- and all those around the world, who have prayed so fervently for my release -- through a horrific experience. I was, and remain, deeply angry with the people who did this. Source Shut My Mouth II I will be off the blog and basking on a rum-producing island for the next week. Although given the collapse of the currency, perhaps we should have planned a vacation on a Brennivin and hardfiskur-producing island... Quote of the Day All conditions are more calculable, all obstacles more surmountable, than those of human resistance. B.H. Liddell Hart [Ben A.: 4/3/06 09:39]


	Iceland's Savior Doug, you mentioned that Bjork might have to be pressed into service to save Iceland. It happens that she is about to release a movie, one made with her husband, the irrepressibly weird Matthew Barney. Can Iceland resort to the same strategy that has saved another "carry currency", i.e. Lord of the Rings and NZD? Unfortunately for Iceland, the number of people willing to pay to watch the pair shave each other's eyebrows doesn't reach the level required to ensure a blockbuster. [Ben H.: 4/3/06 06:01]


	Iceland My biggest money maker year to date. We sold all our long positions last year and started getting short in February. Brought a few guys along with me... so maybe you can say that I had a hand in it? The situation has an interesting origin. In the last year, the financial world has "discovered" Iceland in a big way. Due to the simultaneous construction of several large aluminum smelters, the economy is very much in overheating territory. At the same time, innovations in the local mortgage system (basically a war for share between the state housing fund and the three main local banks) have led to an intensified housing boom. This has in turn fed through to consumption, causing further widening in the current account deficit. The Central Bank started to hike rates very aggressively. Here's where the "discovery" comes into play. A few international banks (Toronto Dominion foremost among them, strangely enough) figured out they could market ISK-denominated bonds to retail investors in Europe, Canada and the U.S.. THe pitch: 9% yield for 12-18 month paper... in a AAA jurisdiction! What could be better? But Iceland, you see, is tiny. With the space of six months, this retail interest led to the printing of so-called "eurocod" bonds equal to 35% of Iceland's GDP. That figure may mean nothing to the layman, but trust me it is astounding. To understand the significance of this issuance, you need to know what happens when TD issues a Eurocod bond. TD sells a 1yr ISK-denominated bond to Bob McKenzie against Bob's CAD account at TD, leaving TD short ISK and short rates. To cover, TD needs to go into the Icelandic market, buy ISK and use that ISK to buy an ISK fixed income instrument roughly matching the maturity of the eurocod bond it sold. This means 1) an inflow that strengthens ISK and 2) downward pressure on ISK rates. This ISK found its way into the hands of local banks, who massively expanded their balance sheets with the incoming liquidity and it also meant that the 12-24 month part of the ISK curve pretty much ceased responding to Central Bank moves. The Central Bank published some positively unhinged minutes, basically trumpeting that they were going to have to keep raising rates dramatically, and the curve did not budge from inverted territory. The ISK rallied, expanding the current account deficit more and the downward pressure on rates kept the asset and consumption bubble going. The immediate trigger for the sell-off was a note from Fitch Ratings noting the risk of instability in the local financial system. THe local banks have taken a ton of risk, both onshore and offshore. They look a lot more like hedge funds than banks. This led to a cut-off in their short-term funding, drops in the Icelandic equity market, and, perhaps most importantly, bad press that kept TD from being able to sell more Eurocod garbage to Bob McKenzie and Rolf the German Dentist. As a result, three things happened: 1) the poor fundamental position of the currency asserted itself and ISK weakened considerably; 2) support for the ISK curve evaporated and the local banks, now squeezed for liquidity, started paying rates (borrowing) aggressively, leading to a steep (rather than inverted) curve; 3) local bank valuations (trading at 4-5x book value) looked quite obviously stretched and got sold aggressively** Where does it end? Hard to tell. Certainly, it is unfair to point to %age of GDP numbers (credit, C/A deficit) in reference to such a small country. What do you think New York City's merchandise trade deficit as %age of GDP is? These sorts of numbers start to lose meaning as the unit of analysis gets very small. On the other hand, there is still 35% of GDP of eurocods coming due in the next 12 months (with a large concentration this summer). If these aren't rolled over, the outflow will be brutal and the currency could weaken quite sharply. Now, given my experience in the Iceland "crisis" of 2000-1, I can say with some confidence that the huge currenct account deficit can evaporate very, very quickly. Buoyant confidence turns leaden, Icelanders stop buying new Range Rovers and in a few months, the current account can swing into surplus. That's the nature of a very small, open economy. The government's fiscal position is also quite strong. The question that will determine whether ICeland suffers a mere hard landing as opposed to a true crisis is how the banking system fares. The Icelandic banks are not very transparent. The bull case is that the banks, while domiciled in Iceland, have made their operations more or less international, and therefore remain relatively immune to problems in Iceland. The bear case is that the Icelandic banks have a terrible liquidity profile, excessive exposure to each other, and have relied almost entirely on non-repeatable gains on equity investments for profits. A crisis in Iceland will turn their virtuous circle into a vicious cycle and the government will have to step in to save them, sacrificing its own credit in the balance. leading to high-fives on the Ben H trading desk gleeful cries of "ka-chingo!" result **members of the Ben H team heard calling local dealership to price new Ferraris [Ben H.: 4/1/06 13:32]


	Iceland's GDP to Drop 10%? Bjork Might Have to Release Another Album Ben H, do you have any thoughts on this apparent mini-currency crisis in Iceland? I remember you had bought or sold a lot of their debt at some point. [Doug: 4/1/06 13:02]


	15% of our oil... ...flows at the mercy of this guy. The heretofore creeping Chavista revolution has advanced to a gallop, but you won't hear much about it in the American press. I bring up Chavez in connection with Doug's suggestion that an early Sarko victory could actually doom France. It is particularly true for France that utter paralysis plays midwife to quantum change. In fact, I recall this as the central argument of this Michel Crozier book. But I wonder what sort of a savior France would today turn to if six years of Segolene Royale bring the country to an indubitable precipice. If the experience of paralyzed emerging markets can serve as any guide, the French might not blame one party or ideology for their plight, but rather the system as a whole. What you end up with is not a new leader who represents the opposite of the current regime in the frame of the existing political system, but rather an explicitly "anti-system" candidate. Chavez is an excellent example of this. Two decades of progressive immiseration in Venezuela came mostly under the rule of the center-left Accion Democratica; but the fruit of its ultimate failure was not the election of a neoliberal. Literally. The National Assembly recently passed a law changing the seal of the country. Chavez's young daughter supposedly asked her father why the horse on the Venezuelan seal is depicting as galloping to the right. The horse should, she said, like Venezuela under Chavez, gallop the the left. Shit like this makes calling french fries "freedom fries" look postively statesmanlike by comparison. [Ben H.: 4/1/06 12:56]