America Loves a Bubble
Justin Fox is the business and economics columnist for Time magazine. He also writes the "Curious Capitalist" blog at Time.com.
Before joining Time in January 2007, Fox spent more than a decade at sister publication, Fortune. At Fortune, he covered a wide variety of topics related to economics, finance, and international business. In 2000 and 2001, he was the magazine's Europe editor, based in London.
Earlier in his career, Justin worked at several newspapers, including American Banker and the Birmingham News. He has a B.A. in international affairs from Princeton.
Fox is a Young Global Leader of the World Economic Forum. His first book, The Myth of the Rational Market, will be published by Collins in 2008.
Question: Could a crash like this happen again?
Justin Fox: Financial markets get nutty. They have bubbles, they crash. That’s part of capitalism. It’s been there from the very beginnings: since financial capitalism started. And sometimes bubbles and crashes are big economic disasters. Sometimes they’re not, and we look back at them somewhat fondly—like the dotcom bubble. It left some in infrastructure in place. It left a lot of people with skills, and startup companies in place. Definitely, there was a hangover, but it wasn’t an economic disaster. When you think about it, the real reason why is because that was not a bubble built on debt—it was a bubble built on people’s expectation and fantasies, or what this companies would be worth—but they were putting equity into it, putting cash into it [when] there was no promise that they’d get it back. And so when they didn’t get it back, they didn’t get it back.
When you build a bubble upon debt, like we did in housing, it leads to this much more difficult situation, where suddenly all these people thought they’d given money to somebody who is promising to pay them back. And suddenly, a huge percentage of those people can’t pay back because their assets weren’t worth what they paid—anywhere near what they paid—anymore and the economy is struggling. So it’s some link between debt and markets, that’s the problem. So it seems like the most important thing is going for some sort of structure that reduces leverage, especially in boom times.
Question: What foreign countries have better economic regulation than the U.S.?
Justin Fox: Well, it’s been interesting in this crisis. A lot of people have looked at both Canada and, to a large extent, India, and to a lesser extent at countries that just kept their banks from getting in too deep. It’s hard to identify whether there are some structures that made that happen, or if there just happened to be the right regulators in place at the right time. Because one of the things that’s interesting—in the US there’s a lot of talk now like, “We need to break down financial institutions, make them smaller. So it’s okay if they fail.” But you look at Canada, which has been very successful at navigating this financial crisis, there they’ve got basically four or five banks that matter. They’re all too big to fail from a Canadian perspective. And yet things worked fine.
Economically speaking, I would say the Scandinavian countries have this wonderful balance of providing a safety net, but at the same time understanding that they are competing in the global economy: you need to have a tax system and other things that are competitive. So at that level, I’d say those are great examples. In terms of financial regulation, I just don’t know. I mean, one of the things all of us funded to the US complain about is how we got a zillion different banking regulatory agencies and they are all sometimes cross-purposed and things fall between the cracks. But then, the UK has a universal regulator that is in charge of every financial system. And they’re the other country that did the worst in this crisis along with us. So I don’t see any obvious model other than people doing their job better, as they did in the few countries like Canada and India.
Question: How will banking in the U.S. change as a result of the crisis?
Justin Fox: A lot of people say that we seem to be moving in the direction of having a smaller group of even bigger banks dominating our financial system. And maybe a couple of years down the road, that will start to change, and [we’ll] decide that it’s too unwieldy to have Bank of America and Merrill Lynch, and start breaking [them] up, and that would partly solve the problem.
I think part of it has been remembering a lesson that was learned in the 30’s and since have been forgotten, which is that if you want to have a banking system that doesn’t collapse every few years, you need to have a government role in it. People have looked nostalgically back to the 19th century where there were rashes of bank failures all the time. On the flip side of that, you [had] far less finance and a much less developed financial system, and [it was] much harder to get financing to start companies to buy houses, to do whatever else. So you could have that kind of system where everybody is just used to failure every few years, but then you probably have a smaller economy [with] much less lending over all.
So I think there has been this understanding by a lot of interesting people on the conservative side. Richard Posner, the federal judge in Chicago and law professor, is the most obvious example. We realize that there’s a reason for bank regulation. There’s a reason why we have it. There’s a reason why we keep banks from taking certain risks. So I think that’s back, and people understands that’s what we’ve got to see looking forward, because what happened over the past 20 years is that banks per se were still restricted from taking risk.
Then, even before Glass Stengal was repealed in 1999, subsidiaries of bank holding companies were allowed to engage in all these really risky behaviors. And I think now there’s this understanding that, “Okay, [what] all these other people were doing is—if it involves lending, it’s basically banking, and it should probably subject to the same set of rules that we had before.” So I guess the big difference is there’s been a reaffirmation that there is a reason for banking regulation, and there has been this realization that all these things that didn’t call themselves banks actually were banks and are subject to the same risks and runs that banks were and therefore we need to think differently how to regulate them.
Recorded on: June 30, 2009
Are booms and busts simply part of American life? Justin Fox of Time says that may be the case, but explains how the U.S. can learn from other countries to reform banking.
Nazi supporters held huge rallies and summer camps for kids throughout the United States in the 1930s.
- During the 1930s, thousands of Americans sympathized with the Nazis, holding huge rallies.
- The rallies were organized by the American German Bund, which wanted to spread Nazi ideology.
- Nazi supporters also organized summer camps for kids to teach them their values.
A Bund parade in New York, October 30, 1939.
Credit: Library of Congress
1930s AMERICAN FASCIST BUND CAMP HOME MOVIE BERGWALD NEW JERSEY<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="69d54b175b0d317cf9bfd688e4fa04f3"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/gOPeDaDcw3w?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span>
Tea and coffee have known health benefits, but now we know they can work together.
Credit: NIKOLAY OSMACHKO from Pexels
- A new study finds drinking large amounts of coffee and tea lowers the risk of death in some adults by nearly two thirds.
- This is the first study to suggest the known benefits of these drinks are additive.
- The findings are great, but only directly apply to certain people.
Maybe you should enjoy this article with a cup of coffee or tea.<p> The <a href="https://drc.bmj.com/content/8/1/e001252?T=AU" target="_blank" rel="noopener noreferrer">study</a> involved 4,923 type 2 diabetics living in Japan. The average participant was 66 years old. All of the participants were taken from the rolls of the Fukuoka Diabetes Registry, a study geared at learning about the effects of new treatments and lifestyle changes on the health of diabetics. <br> <br> The participants filled out questionnaires concerning their health, diet, habits, and other factors. Among the questions were two focused on determining how much green tea or coffee, if any, the participants consumed over the course of a week. The health of the participants was recorded for five years. During this time, 309 of the test subjects died from a variety of causes. <br> <br> Subjects who drank more than one cup of tea or coffee per day demonstrated lower odds of dying than those who had none. Those who consumed the most tea and coffee, more than four and two cups a day, respectively, enjoyed the most significant reductions in their risk of death. This level of consumption was associated with a 40 percent lower risk of <a href="https://www.sciencedaily.com/releases/2020/10/201020190129.htm" target="_blank" rel="noopener noreferrer">death</a>. </p><p>Most interestingly, the effects of drinking tea and coffee appear to combine to reduce risk even further. Those who reported drinking two or three cups of tea a day and two or more cups of coffee were 51 percent less likely to die during the study, while those who drank a whopping four or more cups of tea and two or more cups of coffee had a 63 percent lower risk of <a href="https://www.medicalnewstoday.com/articles/diabetes-coffee-and-green-tea-might-reduce-death-risk" target="_blank" rel="noopener noreferrer">death</a>. </p>
So, should I start swimming in a vat of coffee and green tea?<iframe width="730" height="430" src="https://www.youtube.com/embed/LY0E-JQxeoY" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe><p> Not quite. </p><p> The primary takeaway from this study is that Japanese adults with type 2 diabetes who drink a lot of green tea and/or coffee die less often than similar people who do not. If this effect is caused by something in the drink, lifestyle choices people who drink that much tea all make, or something else remains unknown. The finding must be considered an association at this point. <br> <br> The eye-popping reductions in mortality rates are compared to the risk of death of others in the study. The people who died reported drinking less tea and coffee than those who lived. Unless you have several demographic and conditional similarities to the subjects of this study, you probably won't suddenly be at a two-thirds lower risk of death than your peers because you drink green tea. </p><p> Like all studies that depend on self-reporting, it is also possible that people misstated how much they consumed any one item. The study also did not look into other factors like socioeconomic status or education level, also known to impact death rates and potentially linked to coffee and tea consumption. </p><p> However, it is yet another study in the pile that suggests that <a href="https://www.healthline.com/nutrition/top-13-evidence-based-health-benefits-of-coffee" target="_blank" rel="noopener noreferrer">coffee</a> and <a href="https://www.healthline.com/nutrition/top-10-evidence-based-health-benefits-of-green-tea" target="_blank" rel="noopener noreferrer">green tea</a> are good for you. That much is increasingly <a href="https://www.health.harvard.edu/press_releases/health-benefits-linked-to-drinking-tea" target="_blank" rel="noopener noreferrer">agreed</a><a href="https://www.rush.edu/health-wellness/discover-health/health-benefits-coffee" target="_blank" rel="noopener noreferrer"> upon</a>. This study also suggests the benefits are additive, which is a new development.</p><p><br> So, while it isn't time to start the IV drip of green tea, a cup or two probably won't <a href="https://www.webmd.com/diabetes/news/20201022/coffee-green-tea-might-extend-life-for-folks-with-type-2-diabetes" target="_blank" rel="noopener noreferrer">hurt</a>. </p>
Logic puzzles can teach reasoning in a fun way that doesn't feel like work.
- Logician Raymond Smullyan devised tons of logic puzzles, but one was declared by another philosopher to be the hardest of all time.
- The problem, also known as the Three Gods Problem, is solvable, even if it doesn't seem to be.
- It depends on using complex questions to assure that any answer given is useful.
The Three Gods Problem<iframe width="730" height="430" src="https://www.youtube.com/embed/UyOGZk7WbIk" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe><p> One of the more popular wordings of the problem, which MIT logic professor George Boolos <a href="https://www.readersdigest.ca/culture/hardest-logic-puzzle-ever/" target="_blank">said</a> was the hardest ever, is:<br> <br> "Three gods A, B, and C are called, in no particular order, True, False, and Random. True always speaks truly, False always speaks falsely, but whether Random speaks truly or falsely is a completely random matter. Your task is to determine the identities of A, B, and C by asking three yes-no questions; each question must be put to exactly one god. The gods understand English, but will answer all questions in their own language, in which the words for <em>yes</em> and <em>no</em> are <em>da</em> and <em>ja</em>, in some order. You do not know which word means which."<br> <br> Boolos adds that you are allowed to ask a particular god more than one question and that Random switches between answering as if they are a truth-teller or a liar, not merely between answering "da" and "ja." <br> <br> Give yourself a minute to ponder this; we'll look at a few answers below. Ready? Okay. <strong><br> <br></strong>George Boolos' <a href="https://www.pdcnet.org/8525737F00588A37/file/31B21D0580E8B125852577CA0060ABC9/$FILE/harvardreview_1996_0006_0001_0060_0063.pdf" target="_blank" rel="noopener noreferrer">solution</a> focuses on finding either True or False through complex questions. </p><p> In logic, there is a commonly used function often written as "iff," which means "if, and only if." It would be used to say something like "The sky is blue if and only if Des Moines is in Iowa." It is a powerful tool, as it gives a true statement only when both of its components are true or both are false. If one is true and the other is false, you have a false statement. </p><p> So, if you make a statement such as "the moon is made of Gorgonzola if, and only if, Rome is in Russia," then you have made a true statement, as both parts of it are false. The statement "The moon has no air if, and only if, Rome is in Italy," is also true, as both parts of it are true. However, "The moon is made of Gorgonzola if, and only if, Albany is the capitol of New York," is false, because one of the parts of that statement is true, and the other part is not (The fact that these items don't rely on each other is immaterial for now).</p><p> In this puzzle, iff can be used here to control for the unknown value of "da" and "ja." As the answers we get can be compared with what we know they would be if the parts of our question are all true, all false, or if they differ. </p><p> Boolos would have us begin by asking god A, "Does "da" mean yes if and only if you are True if and only if B is Random?" No matter what A says, the answer you get is extremely useful. As he explains: <br> </p><p> "If A is True or False and you get the answer da, then as we have seen, B is Random, and therefore C is either True or False; but if A is True or False and you get the answer ja, then B is not Random, therefore B is either True or False… if A is Random and you get the answer da, C is not Random (neither is B, but that's irrelevant), and therefore C is either True or False; and if A is Random...and you get the answer ja, B is not random (neither is C, irrelevantly), and therefore B is either True or False."<br> <br> No matter which god A is, an answer of "da" assures that C isn't Random, and a response of "ja" means the same for B. </p><p> From here, it is a simple matter of asking whichever one you know isn't Random questions to determine if they are telling the truth, and then one on who the last god is. Boolos suggests starting with "Does da mean yes if, and only if, Rome is in Italy?" Since one part of this is accurate, we know that True will say "da," and False will say "ja," if faced with this question. </p><p> After that, you can ask the same god something like, "Does da mean yes if, and only if, A is Random?" and know exactly who is who by how they answer and the process of elimination. </p><p> If you're confused about how this works, try going over it again slowly. Remember that the essential parts are knowing what the answer will be if two positives or two negatives always come out as a positive and that two of the gods can be relied on to act consistently. </p><p> Smullyan wrote several books with other logic puzzles in them. If you liked this one and would like to learn more about the philosophical issues they investigate, or perhaps if you'd like to try a few that are a little easier to solve, you should consider reading them. A few of his puzzles can be found with explanations in this <a href="https://www.nytimes.com/interactive/2017/02/11/obituaries/smullyan-logic-puzzles.html" target="_blank" rel="noopener noreferrer">interactive</a>. </p>
But most city dwellers weren't seeing the science — they were seeing something out of Blade Runner.
On Sept. 9, many West Coast residents looked out their windows and witnessed a post-apocalyptic landscape: silhouetted cars, buildings and people bathed in an overpowering orange light that looked like a jacked-up sunset.