John Cassidy's Blog, page 122

Hung Parliament: the Horse-Trading Begins

At about 3 A.M. today (London time), David Dimbleby, the BBC's urbane election presenter scratched his head. "This is a very confusing election," he said. Twelve hours later, following carefully worded public statements by Nick Clegg, Gordon Brown, and David Cameron, things weren't much clearer. For now but probably not for much longer, Brown remains in 10 Downing Street, and the Labour government is continuing to function. (Later on today, Alistair Darling, the chancellor of the exchequer...

An Election Well Worth Winning

As the U.K. goes to the polls, the front page of this morning's Times regurgitates the conventional wisdom that the party that loses the election could turn out to be the real winner, and vice versa. The British economy is in such bad shape, the argument goes, and the coming budget cuts are going to be so large, that the governing party will face a deadly backlash. The Times cites a widely-reported claim by David Hale, an American economist, that the governor of the Bank of England, Mervyn...

What's Wrong with Risk Models?

First up, sincere apologies to the organizers and attendees of the Milken Global Forum, in Los Angeles, where I was due to appear this afternoon at a session about economic models of risk. I was looking forward to engaging the other panelists, who included Nobel laureate Myron Scholes, of "Black Scholes" fame; Colin Camerer, a Cal-Tech behavioral economist I've written about in the past; and Aaron Brown, a former Wall Street risk modeler. Unfortunately, my early morning flight from Ottawa...

Goldman Sachs and Rational Irrationality

Writing a Comment for this week's magazine about the S.E.C.'s lawsuit against Goldman Sachs got me thinking again about the underlying reasons for the subprime crisis. Was it primarily driven by Wall Street greed? Stupidity? Mendacity? Overoptimism? All of these things?

As I explained in my book "How Markets Fail: The Logic of Economic Calamities," my quick answer is none of the above. Of course, these things were all present during the housing boom, but, to some extent, they are always...

Clegg Bandwagon Rolls On...

As far as this viewer was concerned, there was no clear winner in the second U.K. election debate, which took place last night. (The Guardian site has lengthy extracts.) All three participants—Gordon Brown (Labour), David Cameron (Conservative), and Nick Clegg (Liberal Democrat)—performed pretty well, and none of them made any major gaffes. Consequently, the basic dynamic of the campaign remains unchanged: Clegg's party, which hasn't formed a government since the First World War, is...

Volcanic Ash Buries Gordon Brown

As the U.K. completes its sixth day as a virtual no-fly zone, Gordon Brown's embattled Labour government, which faces an election in two weeks, has issued some helpful advice to hundreds of thousands of British citizens stranded abroad: head for Calais, in northern France, and we'll take you back to England on a battleship, a car ferry, or perhaps a rubber dinghy!

No, I am not joking. Earlier today, Foreign Secretary David Miliband adopted the Churchillian mantle and told reporters that the R...

U.K. Election Race Tightens

In today's London Times, there is a new opinion poll showing the Conservative Party's lead down to three points—the lowest in several years. For what it's worth, in a brief visit to the U.K. over the weekend, I found little enthusiasm for any of the parties, which is probably good news for Prime Minister Gordon Brown. Although many Britons are mightily sick of him, they seem to be having second thoughts about turfing him out in favor of the untested Conservative leader, David Cameron, who...

Pulitzer Prize: Close but No Cigar!

My thanks to the organizers of this year's Pulitzers for picking my book about the financial crisis, "How Markets Fail: The Logic of Economic Calamities," as a finalist in the category of general nonfiction. In its citation, the prize committee said "How Markets Fail" combined "solid research and precise documentation to reveal not only a gripping human drama but also a tense clash of ideas."

I would like to extend my congratulations to David E. Hoffman, whose book "The Dead Hand: The Untold...

Tiger Tip Pays Off

For those of you following my fledgling career as a financial adviser/Las Vegas high roller, my advice to wager on Tiger Woods to come in the top five of the Masters generated a positive return of 12.5 per cent in less than a week. (For those of you who can't do exponential sums in your head, that equates to an annualized return of about 450 per cent.)

This time last week, Tiger's odds to win the Masters were 5/1. As I pointed out, bookmakers in Britain and Las Vegas were offering a quarter...

Who Pays Federal Income Tax?

With the tax deadline of April 15th fast approaching, the A.P. reports that almost half of American households—forty-seven per cent of them—will not be liable for any federal income tax in 2009. The main reason: a series of tax cuts and tax credits for low and middle income groups, which both parties have introduced over the past few decades.

Citing an analysis by the Tax Reform Center, a non-partisan research group based in Washington, the A.P. reports that a family of four with two children ...