What to Read on June 28-29, 2009

• Panics ‘R’ Us -- Robert J. Samuelson - The overall conclusion of this column is pretty useless: Regulation can be good, but be careful not to overdo it. Duh. The summary of Gorton's paper is useful, though. Anyone who has worked at an investment bank or has read, say, House of Cards (the story of Bear Stearns's fall) or has read my columns, for that matter, knows that the repo market is how the big banks fund their daily activities and was the final shoe to drop. When lenders are afraid to lend to you in the repo market, you don't have enough money to get through the day. That's how banks fail. As to Samuelson's overall point, he is correct that we cannot prevent all panics forever, but he fails to point out the conclusion that should be obvious from his very first paragraph: We can make them less frequent and less painful, and that is an immensely important obligation.
• Priestly Believed in Randomness and Side Projects -- Ben Casnocha - Some tips for a full life. The more we learn about economics and evolutionary biology, the more we understand that this algorithm of natural selection governs most of our lives and, if employed as Priestly did, leads to long-term success more often than not. Reminds me of the fox in Isaiah Berlin's famous essay on the fox and the hedgehog.
• 11 Health Myths That May Surprise You -- Tara Parker-Pope - We're all guilty of some of these, so read up! #7 is going to be a problem for comedians...
• BIS: Toxic Assets Still a Threat -- Calculated Risk - Whenever people ask me whether I think this recovery will be sustainable or whether we will dip back into recession, I plead the fifth. Too many variables make such predictions a fool's game, but even with all those variables, a good economist can tell you what is most likely to be the best path. It's all a game of probability, and the more information and understanding you have about the economy, the better odds you will make the right decisions. That said, I always add that the one thing that could send the economy down again, the one thing that scares investors enough that they are only slowly getting back into the market, is all the toxic assets still on the banks' books. This is the X-factor that we must keep a close eye on. (Of course, if we had nationalized the most compromised banks, we wouldn't have this problem.)
• Health Care Is Not a Bowl of Cherries -- Paul Krugman - Amen. Anyone who has never read Arrow's paper, or at least digested his argument, isn't ready to debate health care seriously.
• Do Not Forget Burma -- Laura Bush - Beautiful, tragic plea. Bravo to the former First Lady! And her recommendation is an excellent idea: "A new report from Harvard Law School asks the U.N. Security Council to establish a 'commission of inquiry' into crimes against humanity and war crimes in Burma." [Insert joke here about George W. Bush's wife calling for multilateralism and international law. Also, does she realize what the U.N. would find if it convened such a commission to investigate her husband's actions over the past eight years?] Parenthetical matters aside, this op-ed is so good that I am moved to ask the following question: Did we elect the wrong Bush?
• A Regrettable 'Fix' on Health Care -- George F. Will - Even when he's wrong, George Will is good at explaining the virtue of conservatism, as he does near the end of this article in his tangent about the Bill of Rights; that is a paragraph worth remembering. But his understanding of health economics leaves a lot to be desired. We pay more for health care than we used to, he says, because we get better health care than we used to. Then riddle me this, Batman: (1) Other countries pay less and get better health care; and (2) parts of the United States that pay more usually have worse (or, at the least, not better) health care than regions that pay less. "Every product from a jelly doughnut to a jumbo jet, is rationed -- by price or by politics. The conservative's task is to explain why price is preferable." Couldn't have said it better myself. "The answer is that prices produce a rational allocation of scarce resources." In most cases, yes. In health care, not so much.
• U.S. Grants Support Iranian Dissidents -- USA Today - "The grants enable Iran's rulers to paint opponents as tools of the United States..." Indeed. What would we say if the Iranian government was funding groups in the United States who were planning to overthrow our government? Just curious.
• Interest Rate Policy, Leverage and the Financial Crisis -- Yves Smith - This is not written for someone who hates economics, but for everyone else it's a good overview of the reasons the Fed screwed up in keeping interest rates so low during the housing bubble. Even more important, it ties this factor with our international imbalances, which have been ignored by most pundits except for Martin Wolf. If we do not address those imbalances, we are only setting ourselves up to repeat this mess in short order. That big picture will all be explained, of course, in my forthcoming book.
• Troops Arrest Honduran President -- BBC News (via truthout) - This will be worth watching. The good news is near the end of the article: Apparently, the United States refused to back a coup to remove the President from power, even though he is an ally of Hugo Chavez. Let's hope that tidbit spreads throughout South America to reduce the animosity with which most citizens view us there.
• White House Denies Indefinite Detention Order -- Agence-France Presse (via truthout) - Whew, that is a relief. Let's hope they stick to their word.