In the greatest sea battle of World War I, British Admiral David Beatty watched with uncomprehending dismay as his battlecruisers got blown out of the water, and famously remarked that: “… there seems to be something wrong with our bloody ships today.” Ninety years after Jutland, there seems to be something wrong with our bloody financial system. A big reputable investment bank like Bear, Stearns wasn’t supposed to get into such trouble that it had to be bailed out by the Federal Reserve before it blew up. One of the legacies of the last systemic American financial crisis, in the 1930s, was a regulatory system intended to ensure greater transparency for investors, some measure of confidence for bank depositors, and prudential requirements for financial institutions. Recent events suggest that this system is no longer adequate to the task. The savings-and-loan crisis of the 1980s could have slowed down the push to deregulate, but in the 1990s the Asian Financial Crisis provided a moment for self-congratulatory triumphalism about the superiority of Anglo-Saxon finance and the perils of crony capitalism. With rigorous accounting standards, regulatory oversight, and a quantitatively-based credit culture that kept lenders honest, surely the U.S. wouldn’t be vulnerable to the real estate bubbles that plagued Indonesian, Thai and South Korean banks. Or so we fervently hoped. Thus, financial deregulation and innovation proceeded apace. Today’s sub-prime mortgage crisis wasn’t supposed to happen, and now investors are haunted by the fear that financial portfolios are filled with near-worthless paper. And the baleful effects of the credit crunch are now felt widely by both individuals and firms.
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This post is to announce that “Bruce Carruthers”:http://www.sociology.northwestern.edu/faculty/carruthers/home.html has very kindly agreed to join _Crooked Timber_ as a guestblogger for a week. Bruce is professor of sociology at Northwestern; while both Eszter and Kieran have known him for a while, I first got to know him at a Russell Sage workshop last May, where he presented some of his work on risk and financial markets. I was fascinated by the paper that he gave – it looked at the different ways in which US financial markets have tried to deal with uncertainty over the last century – and more to the point, it turned out to be in some respects prophetic of the kinds of trouble that US financial markets are finding themselves in today. Bruce will be posting on whatever he wants as do all our guest bloggers, but I imagine that he’ll have a lot to say about the current situation of markets, how we got to where we are, and, perhaps, where it is likely to end up.
The pro-war blogosphere is full of the news of Sadr’s defeat in the battle for Basra, manifested in his call for a truce, an end to government raids and the release of all prisoners. Here’s a roundup of the links from Glenn Reynolds. Reynolds, who has chronicled Sadr’s decline into irrelevance from 2004 to the present, is a bit more circumspect than he has been in the past, saying “it’s likely a blink, not a major defeat.”, but most of the bloggers he links to are unrestrained in their triumph.
Among the points I’ve picked up, illustrating the magnitude of the victory
* The number of Iraqi police and military who have defected to Sadr has been much exaggerated, and most of them were bad lots anyway
* The body count ratio looks really good
* Attacks on the Green Zone are a desperate fling, easily countered by staying indoors and wearing full body armor at all times
* The proportion of Basra controlled by the Mehdi Army has not increased much since the conflict began
* The proportion of Basra controlled by militias and criminal gangs (approximately 100 per cent) has not increased at all since the conflict began
* Much of the ground lost by the government elsewhere in Iraq in the first few days of the conflict has been recaptured
* The fact that the purported basis of the government’s action (an attack on criminal elements peripherally associated with various militias), endorsed by the US, is a transparent fiction, covering an attempt by one set of militias to weaken another, hasn’t worried anyone too much
* Allowing for the necessity of air attacks on densely populated areas, civilian casualties have been modest, ensuring that the popularity of the US and British forces will increase still further
* Maliki is still in Basra, proving the failure of Sadr’s attempts to oust him
But the crucial point underlying all of the argument is, that, simply by offering a truce, Sadr has proved he isn’t winning. After all, peace offers are for losers.