EconAir

Thucydides A friend of mine recently said that the most “useless” course he took in college was history. Let’s start with Thucydides, The History of the Peloponnesian War . This was a war that took place over 2,400 years ago. What possible relevance could it have? In this war, Athens and Sparta, the two “superpowers” of Greece, were locked into a long war for the dominance of Greece. The climax to the story in Thucydides was that Athens decided to send its formidable fleet and much of its army to attack Syracuse, an ally of Sparta, far away across the Mediterranean Sea in Sicily (still there). The campaign was a disaster, leading to political instability at home and weakening Athens’ military position in Greece. Sound familiar? Remind you of our involvement in Vietnam? This is not a direct analogy but suggestive of some of the consequences of the Vietnam War. These potential consequences were not factored into the decision to make a major commitment in Vietnam. For...

Presidential elections are now a billion dollar business, with massive marketing campaigns run by specialists. Bestsellers minutely analyze winning and losing strategies and tactics. Yet an important factor in successful campaigns is usually ignored. It was formally called “the common touch” but with the increased political influence of the South and Southwest I call it “the good ole boy” factor. It goes like this. The American voter is having a beer in a bar. The two presidential candidates walk in. Which candidate would the voter prefer to have a beer with? Let’s look at some of the choices: Franklin Roosevelt or Herbert Hoover? Harry Truman or Thomas Dewey? John Kennedy or Richard Nixon? Jimmy Carter or Gerald Ford? Ronald Reagan or Jimmy Carter? Bill Clinton or George Bush? George W. Bush or Al Gore? (Granted, Al Gore won the popular vote but George W. Bush’s political persona made it a lot closer than it should have been.) Barack Obama or John McCain? The...

I've been asked to define some financial terms and comment on the current financial crisis and coming recession. -Financial institution (is it any bank or stock broker?) -Investment bank ( I never understood why Goldman Sachs was considered a kind of bank) -Systemic risk -Counter party risk -Mortgage backed securities vs. mortgages (does a mortgage become a security when it's bunched up with a lot of other mortgages so a person can invest in the whole bunch?) -Hedgefund -Relationship between hedge funds, short selling and credit default swaps. Financial Institution - any company that deals in finance - money, credit, stocks, insurance. It could be a bank, stockbroker, insurance company, hedge fund, credit card company, mutual fund company, etc. Even half of GE is a financial company. Investment bank. In 1934, the U.S. government passed a law dividing banks into commercial banks and investment banks. That law has since been repealed so there is a lot of overlap...