Happy Saturday. You've earned it.

* On the Yankee payroll. Via Barking Up the Wrong Tree.

In 2002, the Yankees spent $17 million more in payroll than any other team.

In 2003, the Yankees spent $35 million more in payroll than any other team.

In 2004, the Yankees spent $57 million more in payroll than any other team. I mean, it’s ridiculous from the start but this is pure absurdity. Basically, this is like the Yankees saying: “OK, let’s spend exactly as much as the second-highest payroll in baseball. OK, we’re spending exactly as much. And now … let’s add the Oakland A’s. No, I mean let’s add their whole team, the whole payroll, add it on top and let’s play some ball!”

In 2005, the Yankees spent $85 million more than any other team. Not a misprint. Eight five.

In 2006, the Yankees spent $74 million more than any other team.

In 2007, the Yankees spent $40 million more than any other team — cutbacks, you know.

In 2008, the Yankees spent $72 million more than any other team.

In 2009, the Yankees spent $52 million more than any other team.

Congrats again on that World Series.

* Ryan recommends Paul Fry's literary theory course from Yale Open Courses. I've downloaded all the lectures and they'll be joining me on my run tomorrow.

* First, Let’s Kill All the Credit Default Swaps. Related: an NPR interview on The Greatest Trade Ever, which tells the story of how a middle-of-the-road hedge fund manager made billions during the financial collapse.

* Al Gore, revolutionary.

When making his Oscar-winning 2006 documentary, An Inconvenient Truth, Gore arguably had it easy: it's fairly straightforward to grip an audience when you're portraying scenes of apocalyptic destruction. The new book pulls off a considerably more impressive feat. It focuses on solving the crisis, yet manages to be absorbing on a topic that is all too often – can we just come clean about this, please? – crushingly boring. Importantly, it seeks to enlist readers as political advocates for the cause, rather than just urging them to turn down the heating. "It's important to change lightbulbs," he says, in a well-burnished soundbite, "but more important to change policies and laws." Or perhaps to break laws instead: peaceful occupations of the kind witnessed recently in the UK, he predicts, are only going to become more widespread. "Civil disobedience has an honourable history, and when the urgency and moral clarity cross a certain threshold, then I think that civil disobedience is quite understandable, and it has a role to play. And I expect that it will increase, no question about it." People sometimes express incredulity that Gore, who was groomed for the presidency almost since birth, seems so resolved that he'll never return to electoral politics. But here's a vivid example of the benefits of life on the outside: how many serving politicians would feel able to come so close to urging people to commit trespass?

A friend reminds me that Al Gore was elected President of the United States 9 years ago today.

* And Barbara Ehrenreich's new book argues that positive thinking is destroying America.

The news from the economy remains pretty grim.

Tuesday night.

* First on the Threatdown: coyotes!

* Winooski, Vermont: Great Domed City of the North.

* "How Health Care Reform Won."

* Is Metroid Prime the Citizen Kane of video games? Hard to pick Metroid Prime over, say, Ocarina of Time, just in the GameCube category alone.

* CNN, always three weeks behind the story, asks whether Obama has lost his mojo in the very moment it becomes apparent that his polls numbers are again rising.

* Also in poll news: contrary to Nate Silver's recent NJ-GOV analysis it does seem clear that Corzine is moving sharply upward in the polls.



* "Wall Street’s Near-Death Experience."

* And Life celebrates dumb inventions of the 1950s and '60s.

Naked Capitalism has a somewhat speculative but persuasive take (via Vu) on why the government still isn't breaking up the too-big-to-fail banks.

...the government’s failure to break up the insolvent giants – even though virtually all independent experts say that is the only way to save the economy, and even though there is no good reason not to break them up – is nothing new.

William K. Black’s statement that the government’s entire strategy now – as in the S&L crisis – is to cover up how bad things are ("the entire strategy is to keep people from getting the facts") makes a lot more sense.

Wall Street has apparently learned nothing from nearly toppling the global economy last year.

The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.

Awesome. See you in a few years for the next crash.

Friday!

* Can't-miss upcoming events at Duke: a Sun Ra talk and accompanying art exhibit.

* Glenn Beck, art critic. Olbermann critiques the critic.

* This morning John Hodgman accidentally tweeted his cell phone number to all 82,000 of his Twiter followers.

* Ten sci-fi ways to change the climate.

* Turns out the White House drafting its own health-care reform bill. Steve Benen speculates as to what might be in it.

* Krugman on the causes of the Great Recession. Discussion at MetaFilter.

* MetaFilter also has your police brutality outrage of the day.

Over the past generation — ever since the banking deregulation of the Reagan years — the U.S. economy has been “financialized.” The business of moving money around, of slicing, dicing and repackaging financial claims, has soared in importance compared with the actual production of useful stuff. The sector officially labeled “securities, commodity contracts and investments” has grown especially fast, from only 0.3 percent of G.D.P. in the late 1970s to 1.7 percent of G.D.P. in 2007.

Such growth would be fine if financialization really delivered on its promises — if financial firms made money by directing capital to its most productive uses, by developing innovative ways to spread and reduce risk. But can anyone, at this point, make those claims with a straight face? Financial firms, we now know, directed vast quantities of capital into the construction of unsellable houses and empty shopping malls. They increased risk rather than reducing it, and concentrated risk rather than spreading it. In effect, the industry was selling dangerous patent medicine to gullible consumers.

Read Paul Krugman.

Out of college , money spent / see no future , pay no rent / all the money's gone, nowhere to go. I wrote a little bit about hard times at Harvard in that review of How the University Works for Polygraph; now here's a whole piece in Vanity Fair on the subject. Via Infectious Greed.

Incensed, one member of the board of Harvard Management Company, the fund that manages Harvard’s endowment, told me, “This story is about leadership. It isn’t about money.” He may be right. At some point in the last five years, the men and women who run Harvard convinced themselves that the endowment would grow at double-digit rates forever. If Harvard were a publicly traded company, those people would have been fired by now.

“Apparently nobody in our financial office has read the story in Genesis about Joseph interpreting Pharaoh’s dream—you know, during the seven good years you save for the seven lean years,” remarked Alan Dershowitz, a professor at Harvard Law School since 1967. “And now they’re coming hat in hand, pleading to the faculty and students to bear the burden of cutbacks. It’s a scandal! It’s an absolute scandal, the way Harvard has handled this financial crisis.”

The blog Infinite Thought beat me to the punch in announcing the publication of Polygraph 21: Study, Students, Universities, which contains a short book review by me of the indispensable Marc Bousquet's indispensable How the University Works that concerns in part university endowments in the wake of the financial crisis. Here's a bit from the beginning of my review:

Bousquet begins with a pointed rejection of the Lapsarian myth-making that typically characterizes discussions about what has happened to the University in recent decades, a notion that due to pernicious external influence or betrayal from within the purity of the University has somehow been corrupted. Bousquet’s University is not the victim of late capitalism; it is its agent. As Bousquet puts it: “Late capitalism doesn’t just happen to the university; the university makes late capitalism happen.” An analysis of the student as already a worker forms an important part of this picture, as we will see—but it is worth taking a moment to simply peruse Bousquet’s prodigious list of intersections between university capital and late capitalism writ large:

apparel sales; sports marketing; corporate-financed research, curriculum, endowment, and building; job training; direct financial investment via portfolios, pensions, and cooperative venture; the production and enclosure of intellectual property; the selection of vendors for books, information technology, soda pop, and construction; the purchase and provision of nonstandard labor; and so forth.

That’s an awful lot being monetized at “not-for-profit” institutions. And most of these functions have little or nothing to do with humanistic paeans to the “value” of a liberal education or the fantasy of the pure pursuit of knowledge for its own sake; in fact, the intellectual mission of the University rapidly recedes into the background as a type of side business, if not, indeed, a kind of hobby. There’s more truth than we might at first admit to the truistic assertion that NYU (to pick for a moment on the corporate entity responsible, among other things, for the publication and distribution of Bousquet’s critique) is a real-estate trust running a college for tax purposes.

'The Man Who Crashed the World': Michael Lewis on Joe Cassano, former head of AIG's disastrous Financial Products Unit.

The New York Times Magazine covers the ruins of the Second Gilded Age. Love the caption for this one at MetaFilter's DU: "Even Aperture Science is feeling the pinch."

UPDATE: MetaFilter ruins everything.

That the Internet and housing hyperinflations transpired within a period of ten years, each creating trillions of dollars in fake wealth, is, I believe, only the beginning. There will and must be many more such booms, for without them the economy of the United States can no longer function. The bubble cycle has replaced the business cycle.

More on bubble economies, this time from Harper's, via the same MeFi thread. Special attention is paid to the forthcoming alt-energy bubble Taibbi also describes at the end of his article:

There are a number of plausible candidates for the next bubble, but only a few meet all the criteria. Health care must expand to meet the needs of the aging baby boomers, but there is as yet no enabling government legislation to make way for a health-care bubble; the same holds true of the pharmaceutical industry, which could hyperinflate only if the Food and Drug Administration was gutted of its power. A second technology boom—under the rubric “Web 2.0”—is based on improvements to existing technology rather than any new discovery. The capital-intensive biotechnology industry will not inflate, as it requires too much specialized intelligence.

There is one industry that fits the bill: alternative energy, the development of more energy-efficient products, along with viable alternatives to oil, including wind, solar, and geothermal power, along with the use of nuclear energy to produce sustainable oil substitutes, such as liquefied hydrogen from water. Indeed, the next bubble is already being branded. Wired magazine, returning to its roots in boosterism, put ethanol on the cover of its October 2007 issue, advising its readers to forget oil; NBC had a “Green Week” in November 2007, with themed shows beating away at an ecological message and Al Gore making a guest appearance on the sitcom 30 Rock. Improbably, Gore threatens to become the poster boy for the new new new economy: he has joined the legendary venture-capital firm Kleiner Perkins Caufield & Byers, which assisted at the births of Amazon.com and Google, to oversee the “climate change solutions group,” thus providing a massive dose of Nobel Prize–winning credibility that will be most useful when its first alternative-energy investments are taken public before a credulous mob. Other ventures—Lazard Capital Markets, Generation Investment Management, Nth Power, EnerTech Capital, and Battery Ventures—are funding an array of startups working on improvements to solar cells, to biofuels production, to batteries, to “energy management” software, and so on.



Total market value: Alternative energy and infrastructure. Estimated fictitious value of next bubble compared with previous bubbles

Friday links 3. [UPDATE: Comments closed on this post due to harassment from a banned commenter. Looking into solutions. Reopened.]

* How long will the MSM cover up the heroics of time-traveling Ronald Reagan?

* Another take on Mark McGurl’s The Program Era: Postwar Fiction and the Rise of Creative Writing, this time from the Valve, about transnationalism and the American university.

* More on yesterday's unjust Supreme Court decision on the right to DNA evidence from Matt Yglesias, including a link to this striking observation from Jeffrey Toobin on John Roberts's governing judicial philosophy:

The kind of humility that Roberts favors reflects a view that the Court should almost always defer to the existing power relationships in society. In every major case since he became the nation’s seventeenth Chief Justice, Roberts has sided with the prosecution over the defendant, the state over the condemned, the executive branch over the legislative, and the corporate defendant over the individual plaintiff. Even more than Scalia, who has embodied judicial conservatism during a generation of service on the Supreme Court, Roberts has served the interests, and reflected the values, of the contemporary Republican Party.

* Peak Oil, risk, and the financial collapse: some speculative economics from Dmitry Orlov. Via MeFi.

* Mark Penn's superscience proves pessimism is the new microtrend. Via Gawker.

* Freakonomics considers vegetarianism-sharing.

* Possible outcomes in Iran from Gerry Seib in The Wall Street Journal. Via the Plank.

* People power prevails. After some period of extended protest, President Mahmoud Ahmadinejad is shown to be a fraud, his re-election rigged, and Mir Hossein Mousavi and his forces of moderation win a runoff. A long process of changing Iran's system in which real power lies in the hands of clerics operating behind the scenes begins, and the voices demanding an end to Iran's international isolation move to the fore. Such a simple and straightforward outcome seems unlikely, but that's what happened in Ukraine.

* Mr. Ahmadinejad survives, but only by moderating his position in order to steal the thunder of the reformers and beat them at their own game. U.S. officials think it's at least possible the erratic leader decides to survive by showing his critics that he actually is capable of what they claim he isn't, which is reducing Iran's isolation. He stays in power and regains his standing with internal critics by, among other things, showing new openness to discuss Iran's nuclear program with the rest of the world.

* The forces of repression win within Iran, but international disdain compounds, deepening world resolve to stop Iran's nuclear program and its sponsorship of extremists. In other words, Iran doesn't change, but the rest of the world does.

* The protests are simply crushed by security forces operating under the control of spiritual leader Ali Khamenei, the election results stand untouched, and Iran's veneer of democracy ultimately is shown to be totally fraudulent. That makes it clear that the only power that matters at all is the one the U.S. can't reach or reason with, the clerical establishment. There is no recount, no runoff, and the idea that "moderates" and "reformers" can change Iran from within dies forever.

* There is some legitimate recount or runoff, but Iran emerges with Mr. Ahmadinejad nominally in charge anyway. He emerges beleaguered, tense and defensive, knowing he sits atop a society with deep internal divides and knowing the whole world knows as well. His control is in constant doubt. What's the classic resort of such embattled leaders? Distract attention from internal problems with foreign mischief, and use a military buildup (in this case, a nuclear one) to create a kind of legitimacy that's been shown to be missing on the domestic front.

* Mr. Mousavi somehow prevails, perhaps through a runoff, and becomes president, but he operates as a ruler deeply at odds with the clerical establishment that controls the military and security forces, and deeply mistrusted by it. As a result, he's only partly in charge, and in no position to take chances with a real opening to the West. He has always supported Iran's nuclear program anyway and now has to do so with a vengeance to show that, while a reformer, he isn't a front for the West.

Monday night.

* This American Life has another of their must-listen episodes this week on the decades of governmental and private-sector regulatory corruption that made last year's financial collapse possible.

* Infrastructurist debunks the story I linked earlier claiming that trains can be less green than planes when the entire production process is taken into account.

After all, in the realm of pure possibilities, of course planes can be greener than trains. So can an SUV with 7 passengers. The real question is not about exceptional cases, but about averages.

...

What the headline writers did was cherry pick the trains with the highest calculated c02 emissions–the Green Line in Boston–were a bit higher than the emissions for some aircraft. And therefore planes can be greener.

* Swedish Pirate Party enters European Parliament.

The party advocates shortening the duration of copyright protection and allowing noncommercial file-sharing.

Engstrom said the court verdict in April against four men behind the popular Pirate Bay file-sharing site had boosted the party's support.

"Our membership tripled within a week of the Pirate Bay verdict," added Engstrom, "I think it just made people think that it had gone too far both in Sweden and the rest of Europe."

* Yikes. An Israeli couple are preparing to divorce after the man summoned a prostitute to his hotel room only to discover she was his daughter. In his email, Neil calls this "bad luck." I'd say that's putting it mildly.

Iceland after the crash.

Friday.

* How to score 1830 points in a single turn of Scrabble.

* A recent study has proved scientifically that we're all dicks.

You might expect that being prompted (primed) to think of yourself as a good person would make you more altruistic or moral — but, in fact, the exact opposite appears to be the case. Primed to think about what a good person you are, your most likely reaction is to think you’ve paid your morality dues and go on about your business.

* Universities during the meltdown.

Since most American colleges have an endowment less than 1 percent the size of Harvard's, most do not have Harvard's problem. But they have other problems. The sources of income on which they depend—tuition revenue (at private colleges) and state appropriations (at public colleges), as well as annual alumni contributions (at both)—are under pressure too. Everyone knows about the competitive frenzy to get into a few highly ranked colleges, but in fact most of the 1,500 private colleges in the United States do not attract significantly more applicants than they can enroll. On the contrary, they struggle to meet enrollment targets, especially now that families in economic distress are turning to public institutions, which tend to be cheaper.[2]

* Glenn Greenwald's three laws of actually existing media bias.

(1) Any policy that Beltway elites dislike is demonized as coming from "the Left" or -- in this case (following Karl Rove) -- the "hard Left."

(2) Nobody is more opposed to transparency and disclosure of government secrets than establishment "journalists."

(3) The single most sacred Beltway belief is that elites are exempt from the rule of law.

I was going to follow up that Kal Penn post with a more substantive post, but I decided to take a nap instead. Advantage: Canavan!

* The U.S. dollar as Ponzi scheme. Via Alex Greenberg. See also: The Investment Delusion and Money and the Crisis of Civilization.

* Paging Superman: Barack Obama calls for a world without nuclear weapons. More at Attackerman.

* Things more likely to kill you than terrorist attacks.

* Two visits to the Mets' new Citi Field. I still miss Shea.

Sunday linkdump #2, our ruined economy edition.

* Matt Taibi has today's must-read AIG article in Rolling Stone, "The Big Takeover." Discussion at MeFi with more links.

* The article in this month's Harper's ("Infinite Debt") is good too, but unfortunately it's not available to non-subscribers online yet.

* Rachel Maddow on how deregulation helped get us into this mess.

* John Gray reviews Margaret Atwood's new book on debt for The New York Review of Books.

* And Paul Krugman is very unhappy about the Geithner toxic assets plan. He's not the only one.

I guess I'm doing some AIG blogging today. A few more links for people looking for background and commentary on this.

* Good background on the collapse of Wall Street and the shady and/or illegal practices that have characterized the behavior of these large firms over the last few years can be found in Michael Lewis's piece for Vanity Fair from December.

That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. “They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?”

Here's an interview with Lewis.

* Eliot Spitzer, hilarious national joke though he may be, says the real scandal is "that AIG's counterparties are getting paid back in full."

But wait a moment, aren't we in the midst of reopening contracts all over the place to share the burden of this crisis? From raising taxes—income taxes to sales taxes—to properly reopening labor contracts, we are all being asked to pitch in and carry our share of the burden. Workers around the country are being asked to take pay cuts and accept shorter work weeks so that colleagues won't be laid off. Why can't Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn't we already give Goldman a $25 billion capital infusion, and aren't they sitting on more than $100 billion in cash? Haven't we been told recently that they are beginning to come back to fiscal stability? If that is so, couldn't they have accepted a discount, and couldn't they have agreed to certain conditions before the AIG dollars—that is, our dollars—flowed?

The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.

(Via Vu.) Spitzer also speaks about the (misdirected) "populist rage that is metastasizing very quickly," which is a topic I just finished writing an email about. My interlocutor had a good line I'll just go ahead and quote:

Every problem we have is met with demands for a kind of vengeful series of recriminations instead of a focus on what public policy should focus on - the institutional framework that allows/encourages people to behave in a certain way and that leads to disastrous results.

Obama needs to channel this rage into a movement for systemic reform of capitalism, not just pump capital into institutions that have been broken for not years but decades. Otherwise, he and we will find ourselves in this same place soon enough, with all same players crying "Oops!" again.

* Dan Hind has a somewhat similar take, via Lenin's Tomb, though it must be said that both links are instructive examples of how difficult it can be to divide justice from vengeance in times like these. What I like about Hind in particular is the way he traces the crisis to what I agree is a major point of origin, the explosion of public and consumer debt beginning in the early 1970s, which didn't "just happen" but which was, again, the result of a system of incentives instituted by those in power. The credit crisis is a symptom of a much larger disease; Obama needs to think much bigger than he seems to be.

* Dr. Bluman has some thoughts about legality and fraudulent conveyance in the comments to a post I keep pushing down the page.

The company claims any failure by the government to [back all of AIG's obligations] would have catastrophic consequences. This claim is exaggerated. Serious consideration should be given to forcing AIG's partners in derivative transactions -- which are mainly buyers of credit default swaps from the company -- to take a substantial haircut.

More on AIG: "AIG Still Isn't Too Big to Fail," by Harvard Law's Lucian Bebchuck. Via Josh Marshall, who provocatively writes:

These are derivatives, in many cases high-stakes bets on underlying assets the purchasers did not themselves own. So, you insure your house for fire damage. And I insure it too, even though it's not my house. Your house burns down and you get the policy payout to rebuild your house. But I just want my money because a deal's a deal. I have no problem with old-fashioned gambling. And if people want to play with their money this way, I've got no problem with that. But if the casino itself goes bust, don't come to me and talk about having moral claim on your winnings that I need to cover.