Shadow banking—the intricate web of financial arrangements and techniques that developed symbiotically with the traditional, regulated banking system over the past 30 or so years—is territory Gorton has studied for decades, but it (and he) have been largely on the periphery of mainstream economics and policy.

That all changed in mid-2007, when panic broke out in the subprime mortgage market and financial institutions that support it. Expressions like “collateralized debt obligation” and “repo haircut” escaped the confines of Wall Street and business schools, and began to fill the airwaves. We’re still struggling to come to terms—and few are in a better position to help than Gorton.

Gary Gorton: The term shadow banking has acquired a pejorative connotation, and I’m not sure that’s really deserved. So let me provide some context for banking in general.

Banking evolves, and it evolves because the economy changes. There’s innovation and growth, and shadow banking is only the latest natural development of banking. It happened over a 30-year period. It’s part of a number of other changes in the economy. And let me give even a little more context, historical context. I want to convince you that shadow banking is not a new phenomenon, in a sense—that we have had previous “shadow banking” systems in the past—and that there is an important structure to bank debt that makes it vulnerable to panic. So, the crisis is not a special, one-time event, but something that has been repeated throughout U.S. history.

Before the Civil War, banking involved issuing private money—that is, banks issued their own currency or bank notes. And this system worked in the way economists would expect it to work. The private bank money did not trade at par when it circulated any significant distance from the issuing bank. Instead, it was subject to a discount, so that a bank note issued by a New Haven bank as a $10 note might only be worth $9.50 at a store in New York City, for example.

Such discounts from par reflected the risk that the issuing bank might not have the $10—redeemable in gold or silver coins—by the time the holder took the note back to New Haven from New York. The discounts from par were established in local markets. But you can see the problem of trying to buy your lunch when the cook has to figure out the discount. It was simply hard to buy and sell things in such a world.

A big innovation in that period was to back the money by collateral, by state bonds. It turned out that this didn’t always work very well because the bonds themselves were risky. The National Banking Act then corrects this by having the government take over money and issue greenbacks, or federal government notes backed by Treasuries. That was the first time in American history that money traded at par. That was 1863.

The National Banking Acts (there were two of them) are arguably the most important legislation in the financial sector in U.S. history. But what’s interesting, and the reason I bring this up, is that as that was going on, a shadow banking sector was developing. And this shadow banking sector first really makes itself felt in the Panic of 1857 when depositors run and demand currency from their checking accounts.

So, after the Civil War, there’s no problem with currency [because greenbacks were backed by the federal government], but we have this other form of bank money: checking accounts—which appears to be shadow banking.

It develops into something very large and repeatedly has crises. In the late 19th century, academics were literally writing articles with titles like “Are Checks Money?” in top economics journals. And in 1910, the National Monetary Commission, which is the precursor to the Federal Reserve System, commissions 30-some books, one of which is about the extent to which checks are used as currency for transactions. So they’re still studying it in 1910.

Eventually, as you know, we get deposit insurance, which then makes checks safe, so to speak. (…)

In the last 30 or 40 years, there have been a number of fundamental changes in our economy. One of the most fundamental of these has been the rise of institutional investing. The amount of money under management of institutional investors has just been exponentially increasing. These include pension funds, mutual funds, large money managers. And these institutions basically have a need for a checking account, if you will. So if you’re a large institutional money manager, you may need a place to put $200 million, and you want it to earn interest and to be safe and accessible. That led to the metamorphosis of a very old security: the sale and repurchase (or “repo”) market. Like a check, repo had been around for perhaps 100 years, but it was never very large.

{ Interview with Gary Gorton | The Federal Reserve Bank of Minneapolis | Continue reading }

{ Michelangelo Antonioni, Eclipse, 1962 }

{ Production stills. Michelangelo Antonioni shooting Eclipse }

Recent psychological research suggests that people from Western, educated, industrialized, rich, and democratic societies — WEIRD, for short — not only live differently from the vast majority of the world’s population, but think differently too.

The unsettling realization for psychologists — the vast majority of whom are WEIRD themselves — is that they don’t actually know much about how the rest of the world thinks. A recent study by Joseph Henrich, Steven Heine, and Ara Norenzayan at the University of British Columbia notes that in the top international journals in six fields of psychology from 2003 to 2007, 68 percent of subjects came from the United States — and a whopping 96 percent from Western, industrialized countries. In one journal, 67 percent of American subjects and 80 percent of non-American subjects were undergraduates in psychology courses.

Does this really matter? Aren’t we all the same, after all? Not really, it turns out. WEIRDos tend to be more individualistic and more competitive than people from non-industrialized Asian and African societies. In tests measuring how groups of people work together, Westerners — and Americans in particular — are far more likely to look out for themselves. They even perceive space differently. When viewing the classic Müller-Lyer illusion (>–< vs. <-->), Americans are far more often and more easily fooled than Africans, possibly as a consequence of living in a world of concrete square angles rather than natural shapes.

{ Foreign Policy | Continue reading }

Vaginal steam baths, called chai-yok, are said to reduce stress, fight infections, clear hemorrhoids, regulate menstrual cycles and aid infertility, among many other health benefits. In Korea, many women steam regularly after their monthly periods.

There is folk wisdom — and even some logic — to support the idea that the carefully targeted steam may provide some physiological benefits for women. But there are no studies to document its effectiveness, and few American doctors have even heard of it.

Niki Han Schwarz believes it worked for her. After five steams, she found she had fewer body aches and more energy. She also became pregnant eight months ago at the age of 45 after attempting to conceive for three years.

Han Schwarz and her husband, orthopedic surgeon Charles Schwarz, are determined to introduce vaginal steam baths to Southern California women. Their Santa Monica spa, Tikkun Holistic Spa, offers a 30-minute V-Steam treatment for $50. (…)

Across the country, chai-yok treatments are not easy to find. (…) The flashy Juvenex Spa in Manhattan offers its 30-minute Gyno Spa Cure for $75.

{ LA Times | Continue reading }

photo { Man Ray }

{ Woman eats entire cutlery set | Thanks Kaleigh }

related { Pica is the craving or ingestion of nonfood items. The cravings found in patients diagnosed with pica may be associated with a nutritional deficiency state, such as iron-deficiency anemia; with pregnancy; or with mental retardation or mental illness. The word pica is derived from the Latin word for magpie, a species of bird that feeds on whatever it encounters. | Encyclopedia of Mental Disorders }

No one in the naming world has generated more envy than a boutique firm called Lexicon. You may not recognize the name. But Lexicon has created 15 billion-dollar brand names, including BlackBerry, Dasani, Febreze, OnStar, Pentium, Scion, and Swiffer.

Lexicon’s steady success shows that great names do not come from lightning-bolt moments. (Nobody gets struck 15 times.) Rather, Lexicon’s magic is its creative process.

Consider its recent work for Colgate, which was preparing to launch a disposable mini toothbrush. The center of the brush holds a dab of special toothpaste, which is designed to make rinsing unnecessary. So you can carry the toothbrush with you, use it in a cab or an airplane lavatory, and then toss it out.

Lexicon founder and CEO David Placek’s first insight came early. When you first see the toothbrush, Placek says, what stands out is its small size. “You’d be tempted to start thinking about names that highlight the size, like Petite Brush or Porta-Brush,” he says. As his team began to use the brush, what struck them was how unnatural it was, at first, not to spit out the toothpaste. But this new brush doesn’t create a big mass of minty lather — the mouthfeel is lighter and more pleasant, more like a breath strip. So it dawned on them that the name of the brush should not signal smallness. It should signal lightness, softness, gentleness.

Armed with that insight, Placek asked his network of linguists — 70 of them in 50 countries — to start brainstorming about metaphors, sounds, and word parts that connote lightness. Meanwhile, he asked another two colleagues within Lexicon to help. But he kept these two in the dark about the client and the product. Instead, he gave this team — let’s call them the excursion team — a fictional mission. He told them that the cosmetics brand Olay wanted to introduce a line of oral-care products and it was their job to help it brainstorm about product ideas.

Placek chose Olay because he believed that beauty was an implicit selling point for the new brush. “Good oral care means white teeth, and white teeth are better looking,” Placek says. So the excursion team began to come up with intriguing ideas. For instance, they proposed an Olay Sparkling Rinse, a mouthwash that would make your teeth gleam.

In the end, it was the insight about lightness, rather than beauty, that prevailed. The team of linguists produced a long list of possible words and phrases, and when Placek reviewed it, a word jumped out at him: wisp. It was the perfect association for the new brushing experience and it tested well; it’s not something heavy and foamy, it’s barely there. It’s a wisp. Thus was born the Colgate Wisp.

Notice what’s missing from the Lexicon process: the part when everyone sits around a conference table, staring at the toothbrush and brainstorming names together. (”Hey, how about ToofBrutch — the URL is available!”) Instead, Lexicon’s leaders often create three teams of two, with each group pursuing a different angle.

{ Fast Company | Continue reading }

Last week scientists at Harvard medical school reversed the ageing process in elderly mice. Please don’t get excited, unless you’re a mouse that is. The application to humans is a long way off and even if it will one day be possible, there are many issues attendant on a population that has the means to live forever. (…)

Medical intervention once seemed limited to curing us of diseases that kill. In my childhood, diphtheria and scarlet fever still carried people off, I had friends crippled by polio and aunts deformed by rickets. All this seemed the proper field for medical intervention.

We all know what happened next, a great swathe of advances in hygiene and medicine drove the major killers on to the back foot. From a combination of better lifestyle, cleaner cities and the benefits of a free health service, people began living longer.

We hear regularly of the latest treatments for coronary heart disease, breast cancer, kidney failure, and we live in the belief that when we have an unwelcome diagnosis the full force of medical knowledge will be marshalled for our benefit. We have come to expect better. Now we want life to go on forever. (…)

While most of us don’t want to live forever, many of us would enjoy living longer. At the same time we would like the planet to survive as we know it. There is a contradiction in contemplating a world where everyone lives much longer and where the planet’s resources are finite.

Unless we can learn to eat sand we should bear in mind the fates of places like Angkor Wat and Easter Island, places once dense with people and culture now empty ruins.

{ BBC | Continue reading }

Remember that billion heartbeat limit that seems to confine all mammals, from shrews to giraffes? It’s a pretty neat correlation, until you ponder the chief exception: Us.

Most mammals our size and weight are already fading away by age twenty or so, when humans are just hitting their stride. By eighty, we’ve had about three billion heartbeats! That’s quite a bonus.

How did we get so lucky?

Biologists figure that our evolving ancestors needed drastically extended lifespans, because humans came to rely on learning rather than instinct to create sophisticated, tool-using societies. That meant children needed a long time to develop. A mere two decades weren’t long enough for a man or woman to amass the knowledge needed for complex culture, let alone pass that wisdom on to new generations. (In fact, chimps and other apes share some of this lifespan bonus, getting about half as many extra heartbeats.)

So evolution rewarded those who found ways to slow the aging process. Almost any trick would have been enlisted, including all the chemical effects that researchers have recently stimulated in mice, through caloric restriction. In other words, we’ve probably already incorporated all the easy stuff! We’re the mammalian Methuselahs and little more will be achieved by asceticism or other drastic life-style adjustments. Good diet and exercise will help you get your eighty years. But to gain a whole lot more lifespan, we’re going to have to get technical.

So what about intervention and repair?

Are your organs failing? Grow new ones, using a culture of your own cells!

Are your arteries clogged? Send tiny nano-robots coursing through your bloodstream, scouring away plaque! Use tuned masers to break the excess intercell linkages that make flesh less flexible over time.

Install little chemical factories to synthesize and secrete the chemicals that your own glands no longer adequately produce. Brace brittle bones with ceramic coatings, stronger than the real thing!

In fact, we are already doing many of these things, in early-primitive versions. So there is no argument over whether such techniques will appear in coming decades, only how far they will take us.

Might enough breakthroughs coalesce at the same time to let us routinely offer everybody triple-digit spans of vigorous health? Or will these complicated interventions only add more digits to the cost of medical care, while struggling vainly against the same age-barrier in a frustrating war of diminishing returns?

I’m sure it will seem that way for the first few decades of the next century… until, perhaps, everything comes together in a rush.

If that happens — if we suddenly find ourselves able to fix old age — there will surely be countless unforeseen consequences… and one outcome that’s absolutely predictable: We’ll start taking that miracle for granted, too.

On the other hand, it may not work as planned. Many scientists suggest that attempts at intervention and repair will ultimately prove futile, because senescence and death are integral parts of our genetic nature. (…)

So far, our sole hope for such a voyage to the far-off future — and a slim one, at that — is something called cryonics, the practice of freezing a terminal patient’s body, after he or she has been declared legally dead. Some of those who sign up for this service take the cheap route of having only their heads prepared and stored in liquid nitrogen, under the assumption that folks in the Thirtieth Century will simply grow fresh bodies on demand. Their logic is expressed with chilling rationality. “The real essence of who I am is the software contained in my brain. My old body — the hardware — is just meat.” (…)

According to some techno-transcendentalists, “growing new bodies” will seem like child’s play in the future. (..)

All right, what if one of them finally works? All too often, we find that solving one problem only leads to others, sometimes even more vexing.

A number of eminent writers like Robert Heinlein, Greg Bear, Kim Stanley Robinson and Gregory Benford have speculated on possible consequences, should Mister G. Reaper ever be forced to hang up his scythe and seek other employment. For example, if the Death Barrier comes crashing down, will we be able to keep shoehorning new humans into a world already crowded with earlier generations? Or else, as envisioned by author John Varley, might such a breakthrough demand draconian population-control measures, limiting each person to one direct heir per lifespan?

{ David Brin | Continue reading }

I think we have a 50% chance of achieving medicine capable of getting people to 200 in the decade 2030-2040. Presuming we do indeed do that, the actual achievement of 200 will probably be in the decade 2140-2150 - it will be someone who was about 85-90 at the time that the relevant therapies were developed.

There will be no one technological breakthrough that achieves this. It will be achieved by a combination of regenerative therapies that repair all the different molecular and cellular degenerative components of aging.

{ When Will Life Expectancy Reach 200 Years? Aubrey de Grey and David Brin Disagree in Interview }

To see how far back the immortality fantasy goes, read about Gilgamesh, or the Chinese First Emperor who drank mercury in order to live forever — and died in his forties.

{ David Brin/IEET | Continue reading }

Let’s say you transfer your mind into a computer—not all at once but gradually…

{ Carl Zimmer/Scientific American | Continue reading }

Oxytocin has been described as the hormone of love. This tiny chemical, released from the hypothalamus region of the brain, gives rat mothers the urge to nurse their pups, keeps male prairie voles monogamous and, even more remarkable, makes people trust each other more.

Yes, you knew there had to be a catch. As oxytocin comes into sharper focus, its social radius of action turns out to have definite limits. The love and trust it promotes are not toward the world in general, just toward a person’s in-group. Oxytocin turns out to be the hormone of the clan, not of universal brotherhood. Psychologists trying to specify its role have now concluded it is the agent of ethnocentrism.

{ NY Times | Continue reading }

photo { Glynnis McDaris | Interview }

For centuries people living in the Middle East have dreamed of turning the sandy desert into land fit for growing crops with fresh water on tap.

Now that holy grail is a step closer after scientists employed by the ruler of Abu Dhabi claim to have generated a series of downpours.

Fifty rainstorms were created last year in the state’s eastern Al Ain region using technology designed to control the weather.

{ Daily Mail | Continue reading }

The Wikileaks Files, Volume whatever

(…)

1. North Korea, complete arseholes–even the Chinese have outgrown them.

2. Russia, a whole country run like The Sopranos only with less charm and public spiritedness.

3. Iran, such manifest dips***s that even their neigbhours want them dead.

(…)

Assange, in my opinion, has always been a stalking horse for anti-Americanism (not that that’s particularly surprising, America-haters are cheap as chips). But what’s helpful about this situation, from an American public relations perspective, is the sight of the likes of Michael Moore, Ken Loach and John Pilger rushing to this cretin’s defence claiming that the CIA has put these two women up to it in order to smear Assange. Yeah, right, I’d sooner believe the CIA had recruited Bin Laden’s beard-trimmer than these two Swedish lefties. It wasn’t his looks these women admired it was his politics; they don’t appear to bear any ideological grudge against him, it’s just that he’s the ‘worst screw ever‘ (which apparently is against the law in Sweden).

{ Kings of war | Continue reading }

related { What Psychology Could Add to the Wikileaks Debate | Big Think }

{ Banksy Directs Opening For The Simpsons }

There are now roughly 2 billion Internet users worldwide. Five billion earthlings have cell phones. That scale of connectivity offers staggering power: In a few seconds, we can summon almost any fact, purchase a replacement hubcap or locate a cabin mate from those halcyon days at Camp Tewonga. We can call, email, text or chat online with our colleagues, friends and family just about anywhere.

Yet, along with the power has come the feeling that digital devices have invaded our every waking moment. We’ve had to pass laws to get people off their cell phones while driving. Backlit iPads slither into our beds for midnight Words With Friends trysts. Sitcoms poke fun at breakfast tables where siblings text each other to ask that the butter be passed. (According to a Nielsen study, the average 13- to 17-year-old now deals with 3,339 texts a month.)

We even buy new technology to cure new problems created by new technology: There’s an iPhone app that uses the device’s built-in camera to show the ground in front of a user as a backdrop on the keypad. “Have you ever tried calling someone while walking with your phone only to run into something because you can’t see where you’re going?” goes the sales pitch. (…)

A growing number of researchers here and elsewhere are exploring the social and psychological consequences of virtual experience and digital incursion. Researchers observe the blurring boundaries between real and virtual life, challenge the vaunted claims of multitasking, and ponder whether people need to establish technology-free zones.

{ Stanford magazine | Continue reading }

Myth number one is that economics is a science. It goes back quite a way. Economists, at least since Marshall, have mistakenly sought to dignify their calling by describing it as a science, and increasingly chosen to add verisimilitude to this pretence by clothing their propositions in the language of science, that is to say, mathematics. But economics is not a science. On scientific matters we rightly expect a high degree of certainty, and are ready to leave many important decisions to properly educated experts. By contrast, economic policy is more like foreign policy than it is like science, consisting as it does in seeking a rational course of action in a world of endemic uncertainty.

{ Five Myths and a Menace | Standpoint magazine | Continue reading }

photo { Stephen Shore }

In attempting to be more like photography, the poems actually become less. (…)

Loydell makes the reader do all the work, rarely offering his own interpretation, or even a helpful signpost to meaning.

Which wouldn’t be so bad, if he didn’t keep asserting that there is some sort of deeper meaning to be found here. Every poem of the collection ends with the refrain “the condition of our lives”, tantalisingly hinting at revelations about the human condition, and all that poetry at its best strives to encapsulate. But merely stating it, in amidst such a hap-hazard stream of language does not elucidate anything, does not paint a picture for the reader, or delineate shades of meaning, or even hint at a conclusion which we can draw for ourselves. This isn’t so much Pointillism as join-the-dots. Without the numbers.

Loydell also doesn’t seem to understand the concept of a ballad.

{ Sabotage Reviews | Continue reading }

photo { Luke Stephenson }

It has been a year since I drove a cab, but the old garage still looks the same. (…)

Shape-up time at Dover Taxi Garage #2 still happens every afternoon, rain or shine, winter or summer, from two to six. That’s when the night-line drivers stumble into the red-brick garage on Hudson Street in Greenwich Village and wait for the day liners, old-timers with backsides contoured to the crease in the seat of a Checker cab, to bring in the taxis. The day guys are supposed to have the cabs in by four, but if the streets are hopping they cheat a little bit, maybe by two hours. That gives the night liners plenty of time to stand around in the puddles on the floor, inhale the carbon monoxide, and listen to the cab stories.

Cab stories are tales of survived disasters. They are the major source of conversation during shape-up. (…)

A year ago or so, any woman hanging out at shape-up was either waiting to report a driver for stealing her pocketbook, a Dover stiff’s girl friend, or some sort of crazy cabdriver groupie. In those days, the two or three women who were driving were banned from the night line, which is notably unfair because you can make a lot more money with a lot less traffic driving at night. Claire, a long-time Dover driver, challenged the rule and won; now fifteen women drive for Dover, most on the night line. (…)

It doesn’t take a cabdriver too long to realize that once you leave the joy of shape-up and start uptown on Hudson Street, you’re fair game. You’re at the mercy of the Fear Variables, which are (not necessarily in order): the traffic, which will be in your way; the other cabdrivers, who want to take your business; the police, who want to give you tickets; the people in your cab, lunatics who will peck you with nudges and dent you with knives; and your car, which is capable of killing you at any time. Throw in your bosses and the back inspectors and you begin to realize that a good night is not when you make a living wage. That’s a great night. A good night is when you survive to tell your stories at tomorrow’s shape-up. But all the Fear Variables are garbage compared with the Big Fear. The Big Fear is that times will get so hard that you’ll have to drive five or six nights a week instead of three.

{ NY mag | Continue reading }

Of the many thousands of events canceled by the snow, it might have been convenient if Friday’s scheduled rollout of the great New York share-a-taxicab-with-a-stranger experiment of 2010 were not among them.

Alas.

Communal rides in the city’s yellow cab fleet will now start Wednesday, the Taxi and Limousine Commission said.

The share-a-cab program will allow up to four passengers to ride carpool-style along three preset routes in Manhattan, at a flat fare of $3 or $4 a head. Drop-offs will be allowed along Park Avenue down to Grand Central Terminal. For now, shared rides will only be allowed between 6 and 10 a.m. on weekdays.

{ NY Times | Continue reading }

photo { David Stewart }

I acquired Vivian’s negatives while at a furniture and antique auction. From what I know, the auction house acquired her belongings from her storage locker that was sold off due to delinquent payments. (…)

I have only little information about Vivian. (…) Out of the more than 100,000 negatives I have in the collection, about 20-30,000 negatives were still in rolls, undeveloped from the 1960’s-1970’s. I have been successfully developing these rolls. (…)

I found her name written with pencil on a photo-lab envelope. I decided to ‘Google’ her about a year after I purchased these only to find her obituary placed the day before my search. She passed only a couple of days before that inquiry on her.

{ John Maloof | Continue reading | Photos: Vivian Maier | more }

I’ve been dating this guy and the other night we finally took our clothes off. To make a long humiliating story short, he ended up admitting to me that I was too hairy. I’m okay with it, why can’t he be?

Now, as much as I would love to tell you that you are right, listen to me when I say, “You wanna be right or you wanna get laid? (…)

Also, remember, there is the “fun” part where you can pick your own design. The two most popular are the “landing strip” and the “Bermuda Triangle.”

Comments

Posted by Melsy
This is the WORST excuse for “advice” I have ever read! Go find a real man who doesn’t want a little girl’s vajayjay.

Posted by Giz
Horrible column. (…) Moreover, removing all hair is painful, doesn’t last long and leaves the area more open to infection. Nothing about it is attractive.

Posted by J
Please get rid of it, the area in question is the most beautiful landscape on the planet, and I would like to see it.

{ Shine/Yahoo | Continue reading }

image { imp kerr, study after courbet’s l’origine du monde, 2008 }

Our brains appear to have an intrinsic response to “art for art’s sake,” researchers at Emory University School of Medicine have found.

Imaging research has revealed that the ventral striatum, a region of the brain involved in experiencing pleasure, decision-making and risk-taking, is activated more when someone views a painting than when someone views a plain photograph.

The images viewed by study participants included paintings from both unknown and well-known artists. (…)

The idea for the study was based on work by marketing experts Henrik Hagtvedt (now at Boston College) and Vanessa Patrick (now at the University of Houston). Hagtvedt and Patrick had investigated the “art infusion” effect, where the presence of a painting on a product’s advertising or packaging makes it more appealing.

{ Emory University | Continue reading }

Bob spoke about how people tend to walk faster in larger cities, with this relationship surprisingly consistent. (…)

The early movers in this area of research were Bornstein and Bornstein, who between 1972 and 1974 went to 15 countries across Europe, North America and Asia and measured the speed of pedestrians. They took a 50 feet stretch in similar downtown areas of each city and measured the speed of single, unencumbered walkers traversing that distance.

The slowest walkers were from Itea, Greece (population 2,500), who took an average of 22 seconds to cover the 50 feet. In Prague, a city of over 1 million, the pedestrians covered the distance in a flying average of 8.5 seconds.

{ Jason Collins | Continue reading }

related { Peter Jacques Band, Walking on music, 1979 }