Felix Salmon

EU bank stress tests will be getting a bit more stressful — Reuters

A bond market indicator suggests a 60% chance of another recession — Bloomberg

The Super Committee has six weeks left to cut $1.2 trillion; it now meets in private — NYT

Unemployment benefits for six million looks dicey next year without a new jobs bill — CNNMoney

Only 10 people work at an institute Rick Perry says created 12,000 jobs — WSJ

Investment banks are doing badly, while some retail banks are up — Bloomberg

Nouriel Roubini’s research firm is for sale, claims 40% revenue growth in 2013 — CNBC

Are ETFs responsible for all the late-day selloffs and rallies we’ve been seeing? — Dealbook

Elizabeth Warren’s great sin: “she knew what she was talking about” — Vanity Fair

Please stop sending t-shirts to Haiti — Foreign Policy

You can find many more stories, just as good as these, at Counterparties.com

Ryan Chittum has taken a look at the length of the stories on the front page of the WSJ.

Here’s what’s happened to the number of stories under 1,500 words:

Here’s the stories over 1,500 words:

And here’s the stories over 2,500 words:

Ryan is dismayed at these trends. “Without going long,” he writes, “it’s hard to achieve greatness”:

Certainly, the Journal still does lots of top-flight work, and most stories don’t need 2,500 words. But many do, and how does going short as a policy help readers understand the really important stuff like systemic problems, corporate misbehavior, business innovation, or sweeping economic change?

I, on the other hand, am much more sympathetic to what Murdoch is doing here. WSJ readers are busy: they don’t have time to wade through lots of overstuffed stories in the morning. They want to know what’s going on, and why, and they want their news-delivery mechanism to be as efficient as possible.

If you look at the chart of stories over 1,500 words, it peaked at 800 per year in 2006. That’s more than 2.5 such stories per day, every day including Saturdays. And that’s just on the front page! If you look at the paper as a whole, the 1,500-word stories were appearing at a pace of six per day before Murdoch came along and brought some sense to proceedings.

I read long business and finance stories for a living — that’s my job — and I don’t read six per day, let alone six per day from a single publication. The job of the WSJ is not to overload its readers with many hours’ worth of reading every day. And the current pace, of roughly one long-form front-page story per day, seems much more reasonable to me. (Most readers, of course, won’t even read that — but at least they won’t be completely overwhelmed.)

At the same time, it’s great that the WSJ is putting lots of important information on its front page in sub-1,500-word form — on top of the “What’s News” briefs. As a news consumer, I don’t even want anything nearly that long — I’m looking to get what I need within a few hundred words at most. US newspaper stories have a lot of water weight, and nearly all of them could stand to lose a few pounds.

And what of the dramatic fall-off in the really long-form stuff, over 2,500 words? Up until 2007, those managed to make the front page roughly every other day. Then they all but disappeared, and you’ll find maybe one a month at this point.

I can easily see why that should be the case. Very long stories are often highly self-indulgent, and they take a huge amount of time, effort, and money to put together. Sometimes, they’re incredibly important, and well worth both writing and reading. Often, however, they seem to be aimed at other journalists more than at the WSJ’s core business audience — most of which simply doesn’t have the time to read such things. In a good news organization, I think, the bar should be high before any such story is inflicted on millions of blameless readers. And keeping the output of long-form stories low is one great way of doing that.

The Columbia Journalism Review is naturally going to want to encourage “greatness” in American newspapers, and for decades now “greatness” in journalism has been synonymous with Very Long Stories. But I don’t think, frankly, that the WSJ’s readers have any particular interest in getting a serving of greatness alongside their breakfast cereal in the morning. They’re much more interested in news. And that, to its credit, is what the WSJ is giving them.

On Saturday, two NYT columnists — Ron Lieber and Joe Nocera — attacked the sorry state of bank checking accounts. And their conclusions were almost identical. Here’s Ron:

If you’re trying to figure out your own next move amid all of this uncertainty, well, good luck. As Adam Levitin, a Georgetown law professor, noted in a blog post on creditslips.org this week, it’s hard to make apples to apples comparisons between one checking account and another, and harder still to move your money once you do decide to switch banks. This might be a good place for the Consumer Financial Protection Bureau to set standards.

And here’s Joe:

The government will never force Bank of America — or any other bank — to reduce or eliminate its fees; it doesn’t have the nerve. But, at the least, it could insist that banks display their fees in a uniform way so that customers can compare how they’re being gouged and make banking decisions on that basis. That kind of reform could stir competition and bring down fees.

This, of course, is precisely what the new Consumer Financial Protection Bureau is supposed to do — and would do if the Senate Republicans would ever allow a director to be approved.

I couldn’t agree more, and I’ve been pushing this move quite hard, both on my blog and whenever I’ve had the opportunity to talk to someone from the CFPB. I’m pretty sure this does not require a director to be approved — it just needs the CFPB to collate checking-account details into one big database, and then publish an API allowing people to interrogate that database any way they like.

As it happened, I’d spent most of the previous afternoon at the big Citibank hub in Long Island City, talking about their checking accounts, savings accounts, and, most of all, the new Citibank website, which they unveiled last week with great fanfare.

We didn’t get into the fraught question of the level of fees. But I did ask to see how easy it was, on the new site, to bring up the details of your checking account — what kind of account it is, what the fees are, what the minimum balance is to avoid those fees, and the like.

At this point, we were in the large, sun-drenched office of Tracey Weber, the head of internet and mobile for North America consumer banking. We’d started in a windowless conference room, where Tracey had attempted to show me the website by running through a series of PowerPoint slides. When I said that I’d rather see the website by seeing the website, there was a flurry of confusion, which ended up with Weber having to log in to her own personal Citibank account on her work computer.

Weber, it turns out, gets the same underpowered Dell setup, with a single small monitor, as anybody else. But I could still see what was going on: information about fees and the like are in an entirely separate section of the website. You don’t need to log out to see them, but you certainly can’t get personalized information about them. Even something as simple as savings accounts are — still — very hard to understand: when the screen presenting the two different choices came up, we had to call up a product guru to explain why anybody might prefer the first to the second. And even he couldn’t really manage that. What’s more, the single most salient feature of a savings account — its interest rate — was nowhere to be seen.

Bits of the site look slick — especially the animated expense-analysis pie chart, where you’re able, for some reason, to drag pieces of the pie out to isolate them. But once you’ve done that, you can’t actually delve into that piece and see what spending went into it: for that, again, you need to go to an entirely different transactions screen.

After spending a good couple of hours with Weber, I came away convinced that I couldn’t reasonably blame her for any of the weaknesses with the website: she was just clearly caught up in the middle of an enormous bureaucracy where it was basically impossible to get anything done. Citibank has business relationships with vendors like Yodlee and Popmoney, so it’s possible to use Citi’s website to see the details of your non-Citi bank accounts or to send money to other people armed with nothing but their email address.

But beyond that kind of bought-in functionality, Citi.com is still at heart a vast list of products and services, which you need to be incredibly financially literate to navigate. I defy anybody, for instance, to be able to tell me the difference between, say, an Inter Institution External Transfer to an account in the US, versus a Wire Transfer to an account in the US. (The answer, by the way, is to use neither a lot of the time: if you’re sending money to someone else in the US, Popmoney is the way to go.)

Weber has no control of Citibank’s product suite — her job is to present everything that Citi offers, and that’s always going to be a bit messy. And she’s no technologist, either — when I asked why there were separate downloads for Citi’s iPhone and iPad apps, rather than simply having a universal version, she had no idea what I was talking about.

I’m sure that at the margin some of the language on the new site is easier to understand than some of the language on the old site. But you just need to look at the language of Weber’s announcement to see how far Citi has to go on that front. “Citibank formulated the personal finance management experience with the tools most important to its clients,” we’re told; she adds for good measure that “Citibank continues to strengthen its standing by delivering modern solutions”.

Even the login screen is ridiculously confusing: before you can even enter your username, you have to choose between one of nine different Citi websites to log into. If you have a Citi bank account, and a Citi credit card, and a Citi mortgage, and Citi ThankYou rewards, which of those sites are you meant to log in to? Why can’t Citi just make sure that each username is unique, and log you in to whatever your account is automatically?

None of this is ever going to be fixed internally, by Weber or anybody else. In order to understand what’s going on at Citi, Lieber and Nocera are right: we need a trusted third party — the Consumer Financial Protection Bureau — to tell us. Some banks — probably smaller ones, with flatter management structures — will have transparent fee structures, be a pleasure to use, and will generally count as best-in-class. Those banks should get some kind of gold star from the CFPB. And big banks like Citi will steam on regardless, with every cosmetic change to their website accompanied by a massive increase in fees somewhere else.

This is just a sample of the curation available today on Counterparties.com. Please give it a look, if you haven’t already.

The mystery of US banks’ huge second lien mortgage problem — FT Alphaville

Facing a recovery with little investment, innovation, or business growth — NYT

Paulson’s gold fund is down 16.4% in September alone — WSJ

Short-selling is at its highest rate in five years, despite the very low equity valuations — Bloomberg

Some at pension funds admit that their return assumptions might be a bit unrealistic — WSJ

The debt ceiling standoff might have had the highest policy uncertainty in the last 25 years — Modeled Behavior

Here’s Nobel economics laureate Chris Sims’s web page — Princeton

Tyler Cowen on the other Nobel laureate, NYU’s Tom Sargent — Marginal Revolution

How Tom Sargent was lured to NYU nine years ago — NYT Magazine

Groupon’s being “transparent about our lack of transparency” — Groupon Blog

Apple has sold more than one million iPhones 4S in one day — AllThingsD

“I’m the only working class person you’ll see on Sunday news… maybe ever” — NY Observer

And an Italian Cabinet member thinks market volatility could be the result of stock traders’ cocaine use — Businessweek

Last week, Chao Deng published her “memoirs of a market reporter” at CJR.

Critics say markets reporters must suffer from A.D.D., because short-term fluctuations in stock indices really don’t matter much in the long run. They say it’s absurd to pin a single narrative on spot news involving countless individual decisions, many of them made by robots. Too often, coverage favors one slant if stocks are up and another if stocks are down when, in fact, nobody really knows.

And yet, the bigger the swing in the Dow, the more urgent the need to chase down an explanation, even if it’s a short-term one. Indeed, larger swings actually predict greater reader interest, which, in turn, validates the coverage.

She’s half right. It is absurd to tie narratives to intraday market moves. On the other hand, it’s even more absurd to chase down an explanation, especially when most of the time there is no explanation. Yes, readers demand such things. But they only harm themselves by doing so.

Here’s Chao criticizing one of her own headlines:

In response to one of my pre-market stories headlined “Futures Gain on Obama Jobs Plan,” for example, a reader had commented:

Can you prove that Obama’s $300b plan which has no chance of passage is the reason for futures being up today. There have been many days where futures rebounded after 300+ points of losses. Pretty sloppy reporting.

In retrospect, I wish the headline had been that futures were gaining “ahead” of the President’s jobs speech. Then I would have been laying out a possible reason for the gains in futures but not definitively pinning down on one. It’s a word game, sure, but words matter, and a small tweak would have resulted in a more accurate headline.

This kind of ridiculous Clintonian language-parsing helps no one, except insofar as it applies a wafer-thin layer of CYA to a practice which is fundamentally absurd. “I never said that stocks rose because of the jobs plan, I said they rose ahead of the jobs plan! So, I’m not saying that there is a causal relationship there, just that there might be! And you can’t deny that!”

Chao does try another tack, which is closer to David Gaffen’s argument in the video above:

All this might lead you to conclude that the market moves randomly most of the time, and we shouldn’t even try to find out why. But wait. Throwing our hands up is just as extreme an overreaction as pinning a day’s move on a single event. For one thing, it’s a sure way to lose readers, who are grasping for an explanation. For another thing, there are ways to do it reasonably without falling into the over-simplification trap.

Actually, faced with inexplicable moves in the stock market — and the vast majority of intraday moves are inexplicable, in that no one really has a clue why they happen, or whether there’s a reason for them at all — throwing our hands up is an entirely rational reaction, and not an overreaction at all.

There will always be readers who want some ersatz explanation of what the market did today; there will always be news organizations pandering to those readers. But if you’re a media organization which stands for reporting the truth in a high-quality manner, then market reports are a dangerous place to go, because they’re all built on quicksand.

Is it possible to do market reports “reasonably, without falling into the over-simplification trap”? I think it probably is, if you report on what the markets have been doing over the course of a few weeks or months, and you do a lot of reporting and thinking. But if you’re writing a dozen market reports a day? No. None of those are going to have real value.

Market reports should not be an everyday staple of news coverage. Sometimes, occasionally, there are stories in the markets. And then those stories can be reported. But when there aren’t any stories, there’s no point in trying to invent them. And so the daily report — let alone the intra-day report — is at heart a stupid piece of journalism. Some are better than others, to be sure. But none of them are any good.

I love the way that The New Yorker is using the iPad to construct a whole new revenue stream from its back issues.

It started* with “At the Ballpark”, an iPad-only collection of New Yorker baseball writing from 1929 to 2011, featuring the likes of John Updike, David Grann, and of course Roger Angell. That was sponsored by United Airlines.

The baseball collection was followed by a golf collection (Ogden Nash, Larry David, United Airlines again), and now by a “sustainability” collection sponsored by BMW and featuring the likes of John McPhee and Michel Specter.

Nearly all of these pieces are timeless, just waiting to be rediscovered. And the New Yorker’s archives are so deep, and are of such high quality, that there’s really no limit to how many of these things it can produce. Each one is very cheap to put out — just cobble together a bunch of articles under a theme, and get a TNY writer to pen a short introduction. Meanwhile, the advertisers get to align themselves with popular or trendy subjects (golf, “sustainability”), and reach an audience which is affluent even by New Yorker standards.

I’m in the process right now of helping to put together a printed anthology of business writing, from many different sources; such compilations can be very good, but they’re also a lot of work to put together, in terms of securing permissions and going through the laborious process of collating, printing, and distributing physical books. The New Yorker’s special iPad editions piggyback on the existing New Yorker iPad app, and are therefore very lightweight, with a marginal cost which is tiny in comparison to TNY’s printed compliations. What’s more, instead of persuading thousands of individual book buyers to shell out cash for books, the sales job on the iPad editions is much easier: you just need to persuade a single corporation to buy a single sponsorship.

TNY has experimented with selling digital compilations, too — its 9/11 e-book is $7.99. And the more different models and revenue streams, the better. But the small sponsored collections are for me the most exciting, from a business-model perspective. It’s hard to sell old content — but it’s much easier to repackage it and get a sponsor to pay you to do so.

*Update: The first of these, it turns out, wasn’t the baseball one, it was “The Digital Revolution“, sponsored by American Express. It came out on June 6.

When the financial crisis hit, the smart money went to cash. Literally, in the case of Mohamed El-Erian:

On the Wednesday and Thursday after Lehman filed for Chapter 11, I asked my wife to please go to the ATM and take as much cash as she could. When she asked why, I said it was because I didn’t know whether there was a chance that banks might not open. I remember my wife sort of pausing and saying, “Are you serious?” And I said, “Yes, I am.”

It turns out that this was a worldwide phenomenon. Here’s Ravi Menon, the managing director of the Monetary Authority of Singapore, in a speech last week (HT IK):

Physical cash commands a premium during times of uncertainty. We saw this during the 2008 global financial crisis. Within the first month of the collapse of Lehman Brothers, there was an exceptionally large withdrawal of high denomination notes by banks in Singapore. Typically, 90 per cent or more of the high-denomination notes withdrawn from banks are re- deposited within the month. During the initial months of the 2008 crisis, only 70 per cent of the $100, $1,000 and $10,000 notes withdrawn were returned.

This is understandable. But the fact is that cash is a very expensive payments mechanism:

Handling cash is costly. According to a 2010 study by Retail Banking Research, the cost of distributing, managing, handling, processing and recycling cash in Europe is estimated at €84 billion. This is equal to 0.6 per cent of Europe’s GDP.

For individuals, cash clears at par: if you give me a $100 bill, then I’m $100 richer and you’re $100 poorer. No one’s going to jump in and charge a fee for facilitating the transaction. And if I then deposit the $100 bill into my checking account, once again I see the full amount appear on my statement.

But the fact that most people never get charged for cash transactions is corrosive, in its own way: it helps to impede the inevitable-yet-glacial move away from cash and towards more secure, easier, and cheaper forms of payments.

Which is one reason why Bank of America’s $5 charge for debit transactions is so mindblowingly stupid. The more that people use their debit cards, the less they’ll use cash. And Bank of America spends billions of dollars every year processing heavy, dirty cash flowing in and out of its branches. If banks can persuade people to move to weightless forms of payment like debit, it will save them enormous amounts of money. After all, most of that 0.6%-of-GDP cost of processing cash is borne by retail banks.

And much of the rest is borne by the government. Minting physical currency is expensive! And wasteful! (Menon reveals, in his speech, that those charity-donation buckets in airports are placed there largely at the behest of the monetary authority, to try to stop local coins from leaving the country and having to be re-minted.)

Which means there’s a massive public-interest argument in favor of slowly phasing out cash in favor of other kind of payments. That’s never going to be easy, but it’s going to be pretty much impossible if the alternative payment mechanisms don’t clear at par.

I don’t know what kind of payment mechanism the world will ultimately alight on; I suspect however that it will use NFC technology in cellphones, and that it will be owned and run by a consortium of large retail banks. In the meantime, however, it behooves everybody, from the government to the banks, to do everything they can to wean people slowly off cash. If cash transactions cost the US 0.5% of GDP each year, that’s $70 billion a year at stake — significantly more than all credit and debit interchange fees combined. Don’t any of our greedy banks see the opportunity here?

Why has no one thought to do this before? Every month, the Current Population Survey goes out to a nationally representative sample of more than 50,000 interviewed households and their members. And in one of the questions, those households — or at least the households who didn’t answer the same question the previous month — are asked how much money they made, in total, over the past 12 months. That question has now been asked in 138 successive months, since January 2000. Which means that with a bit of clever analysis, it’s possible to put together an apples-to-apples comparison of what has happened to household income every month.

And when you do that, the results are very scary indeed.

The red line, here, is median real household income, as gleaned from the CPS, indexed to January 2000=100. It’s now at 89.4, which means that real incomes are more than 10% lower today than they were over a decade ago.

More striking still is the huge erosion in incomes over the course of the supposed “recovery” — the most recent two years, since the Great Recession ended. From January 2000 through the end of the recession, household incomes fluctuated, but basically stayed in a band within 2 percentage points either side of the 98 level. Once it had fallen to 96 when the recession ended, it would have been reasonable to assume some mean reversion at that point — that with the recovery it would fight its way back up towards 98 or even 100.

Instead, it fell off a cliff, and is now below 90.

In dollar terms, median household income is now $49,909, down $3,609 — or 6.7% — in the two years since the recession ended. It was as high as $55,309 in December 2007, when the recession began.

Some of this decline has been hard to see because nominal incomes have been holding very steady: before taking inflation into account, median household income was $51,465 in December 2007, and $51,140 in June 2009. But even then, over the past two years, nominal incomes have shrunk significantly to the current level of $49,909.

All of these numbers come from Gordon Green and John Coder, economists who both worked at the Census Bureau for more than 25 years. They’ve now set up a private company, Sentier Research, to collate these household income figures every month; the full report costs a reasonable $20.

Why is this work being outsourced to private-sector economists, rather than being done by the Bureau of Labor Statistics and published officially? I’m having dinner with a government statistics wonk on Wednesday, and will be sure to ask him.

But in the absence of any good reason to discount the reliability of these numbers, it’s definitely worth taking them seriously, and asking why incomes have eroded so quickly and dramatically over the past two years. We’ve known for years that America has a huge unemployment problem. But I had no idea that the plight of the employed was this bad.

You can find all these stories, with witty tags and amusing pictures, on Counterparties.com

The ECB has picked a really bad time to have an existential crisis — Washington Post

Canadian job growth is surging; U.S. job growth: not so much — Business Insider

Here’s why they’re doing so well — Reuters Canada

Three simple policy steps to restore “macroeconomic resilience” — Macro Resilience

Nassim Taleb is a big believer in his own “influence as an intellectual” — Bloomberg

The leaked Volcker Rule memo — American Banker

Lehman sues Goldman over the collapse of a Virginia real estate deal — WSJ

Companies that spend a lot on lobbying outperform the S&P 500 by 11% — The Economist

British Energy Minister Chris Huhne made a “marginal” (if Machiavellian) Twitter error — BBC

The ECB announced yesterday that it’s going to be throwing a bunch more cash at European banks. No one knows how much it’ll end up being, exactly, but it’ll almost certainly be in the hundreds of billions of euros.

The commentary on the decision, some of it very good, can get extremely technical extremely quickly. And so, at the request of Nick Rizzo, here’s a quick English-language explanation of what’s going on.

At heart, what the ECB is doing is very simple: it’s lending money to European banks for 12 or 13 months at low interest rates.

If you’re a European bank, that money is attractive, because many banks, especially ones on the European periphery, are finding it hard to borrow money these days.

This is not a bank recapitalization plan — it injects no new capital into Europe’s banks. If those banks are facing solvency issues, then this program — known as LTRO — is not going to help on that front. And right now, in the wake of Dexia’s fall, markets are worried again about bank solvency. (And as Intesa Sanpaolo unhelpfully pointed out in its own defense, Dexia aced the Eurozone stress tests.)

But it’s a great relief to banks facing funding difficulties to be able to lock in one-year money at low rates. For 12 months from October 25, or 13 months from December 21, they’ll be able to have a large sum of money without having to worry about rolling it over.

But there’s the rub — there’s no indication from the ECB that it will offer to roll over these funds at all. On November 1 2012, or January 31 2013, all the borrowed money has to be repaid to the ECB, with interest.

So the banks borrowing this money are unlikely to turn around and lend it to small businesses on a five-year term, or otherwise use it to increase lending and boost the real economy. Instead, they’re much more likely to invest it in bonds which carry a decent yield, especially from Spain and Italy. Because those bonds yield somewhere between 2.3% and 4.4% — significantly more than the cost of the ECB funds — the banks should be able to take their ECB money, invest it in short-dated Spanish and Italian debt, and get a comfortable yield pickup along the way. For instance, suppose you buy an Italian bond yielding 3.9% which matures in December 2012, while borrowing money from the ECB at 1%. Put €1 billion into that trade, and you make a profit of €29 million.

The ECB is happy about this, because it helps to support the price of Italian and Spanish debt. But there are definitely risks here, too. For one thing, especially since the Moody’s downgrade, Italian and Spanish debt ain’t what it used to be. Once upon a time, short-dated bonds from Italy and Spain were pretty much as good as cash, for European banks: any time they needed immediate liquidity, they could just swap their bonds for cash in the repo market. But no longer — counterparties are increasingly wary of accepting that paper as collateral, especially given how volatile it can be in price terms.

And of course if the banks step in to buy lots of Spanish and Italian debt now, maturing at the end of 2012, there’s a huge question as to what happens then. Neither Spain nor Italy will default next year. But in a year’s time, people might well start worrying about where those countries are headed, if the Eurozone continues with its muddle-through approach to the crisis.

The ECB, then, is kicking the can down the road — which is exactly what it should be doing, if the problem in the European financial sector is mainly a liquidity problem. Liquidity problems go away over time.

But if you think there’s a huge solvency problem in Europe, can-kicking has a tendency to cause more harm than good.

There’s no particularly good news in these numbers. For every glimmer of good news, like the upward revisions to previous reports totaling 100,000 new jobs or so, there’s an offsetting piece of bad news, like the broad U6 unemployment rate jumping up to 16.5% from 16.2%.

And the number of people unemployed for more than six months is now 6.24 million — up by 208,000. The long-term unemployed — the least employable of the unemployed, and the most intractable problem in terms of getting America back to work — are now 44.6% of the total, up from 42.9% last month, and 41.8% a year ago.

It’s always a bit dangerous to try to meld the two surveys which make up the payrolls report, but I’m detecting a trend here: insofar as employers are hiring new people, they’re hiring new entrants into the labor force, rather than people making up the ranks of the unemployed. Maybe it’s recent graduates, maybe it’s former stay-at-home moms who were never claiming unemployment but who are now getting jobs. Maybe it’s immigrants. But the big picture is that employment growth is more or less keeping track with population growth, leaving no new jobs for the 14 million unemployed Americans.

It’s worth asking, in this context, whether Obama’s jobs bill would actually change that dynamic at all. It might help at the margin — if you’re working hard enough to burn through the fat reserves of highly-qualified graduates and moms and immigrants, you might eventually start cutting into the hard muscle mass of the long-term unemployed. But my gut feeling is that the effect of the jobs bill will be much bigger on employment figures than on unemployment figures.

Is there anything the government can do to bring unemployment down? Or is it now too late? If we are indeed in the early months of a double-dip recession, than I think it is too late: unemployment is more likely to go up than it is down from here. And even if the economy’s still managing to eke out modest growth, I don’t see much hope that the unemployment rate will come down to a remotely acceptable level any time soon. Realistically, America’s unemployed are here to stay. And we’re only just beginning to understand how that’s going to affect the political economy of the nation.

What the death of Steve Jobs says about America’s decline — The Economist

After Steve Jobs died, Time magazine re-did their issue in 3 hours — TIME Tumblr

The EU is planning to make a plan to recapitalize banks it declared sound in July – Reuters

“The most important piece of paper in US banking right now” — Alphaville

Even a truly massive EU rescue package might not do the trick — NYT Economix

The IMF could become a very large purchaser of European bonds — WSJ

Dexia is still causing trouble in the US municipal bond market — Alphaville

This cheat sheat for the new Volcker Rule draft is really handy — American Banker

One Florida lawmaker’s solution to unemployment: re-legalize dwarf tossing — BusinessWeek

Many thanks to the wonderful Silvio DaSilva for putting this chart together; I think it explains a lot of what happened with Apple over the years.

During Steve Jobs’s first stint at Apple, before he was fired in 1985, he was making consumer products which were far out of the reach of most consumers. The Apple II cost $1,298 in 1977, and that was the bare-bones version with 4K of RAM; if you wanted a more powerful version with a whopping 48K of RAM, that would cost you $2,638. Or $9,862 in today’s dollars.

The Macintosh, when it came out in 1984, was even more expensive. $2,495 was a lot of money, back then. (And never mind the LaserWriter: that had a list price of $6,995.)

When Jobs was fired, then, Apple was trying to sell consumer products to people who simply couldn’t afford them.

But when Jobs returned, in 1996, it was a different story. His first big product launch, the iMac, was priced at $1,300 — or just about $1,800 in today’s dollars. Not cheap, but at least somewhere in the ballpark of mass-market. Today, the entry-level MacBook Air — arguably the most gorgeous computer Apple has ever produced — is $999, just 55% of the real price of 1998′s iMac. And you can get a Mac Mini for $600.

And the non-Macintosh products are cheaper still. Here’s what you see when you visit the Apple Store online today:

This is a range of hugely powerful computers — the iPad 2 has the same computing power as a 1980s Cray supercomputer — at prices which are accessible to hundreds of millions of people around the world. The iPhone 4S — the first computer in the world to be able to have some approximation of a natural-language conversation — starts at just $199. And the iPhone I’m using right now is being given away for free. (With a two-year contract, but still.)

Jobs, of course, can’t take credit for the fact that technology becomes steadily cheaper over time. In fact, his technology has always sold at a premium; given the choice between making the entry-level Apple computer cheaper and making it better, Jobs always chose the latter option.

But Jobs can take credit for always being a step or two ahead of the technology curve, for seeing where the technology puck was going, and skating to that point before anybody else. Both in terms of what was possible, and in terms of what wasn’t needed any more. He saw, when he returned to Apple in 1996, that technology had improved to the point at which he could basically put his NeXT workstation ($6,500 in 1990, or $11,267 in 2011 dollars) on the desks of millions of people in the US and around the world. There was a basic level of quality he had to have, in any computer. And by the time that he launched OS X in 2001, he had built a company capable of delivering that quality at a price accessible to the broad non-geek middle classes.

The rest is history.

Update: I forgot the Lisa! $10,000 in 1983. That’s $22,745 in today’s dollars.

Negative equity has reached epidemic status across the united states — and especially in the sand states of Arizona and Nevada, where more than half of all homes with mortgages are  underwater. But give the state of Arizona, at least, a lot of credit for biting the bullet and trying to do what needs to be done:

If banks would forgive some of a homeowners’ mortgage debt, the state said it would pay half, up to $50,000 of a $100,000 loan reduction.

But you know where this story is going to go, don’t you. Since the program was launched in September 2010, it has helped three homeowners. Three. And a big reason is Frannie’s blanket refusal to even think about participating.

The two largest mortgage guarantors, Fannie Mae and Freddie Mac, will not participate — in Arizona or elsewhere. No loans are eligible for the state’s program if they were bought and held or securitized by the two companies, which are now under government control and guarantee more than 70 percent of the country’s home loans.

Seems to me like it’s time for Frannie’s regulator, the Federal Housing Finance Agency, to step in and bash a few heads together. Or, not so much:

Edward J. DeMarco, as acting director of the Federal Housing Finance Agency, oversees Fannie and Freddie. Even though he recently signaled that he might make it easier for homeowners to refinance into more favorable loans, he has held his ground on debt relief. Fannie and Freddie say reducing the principal is bad for business, and as a result bad for taxpayers.

OK, if the FHFA doesn’t want to cooperate, let’s make them cooperate! Principal reduction is part of the US government’s stated policy tools, after all. Let’s just tell DeMarco that he has to play ball! No? No.

White House officials say that although taxpayers essentially own Fannie and Freddie, the administration lacks authority to require Mr. DeMarco to comply with its policies, which encourage principal reduction through a handful of programs. The Federal Housing Administration and the Veterans Administration do not allow principal reduction on their loans either.

This despite the fact that the private sector, which has no control over Frannie at all, has managed to implement de facto principal reductions on Frannie-backed loans:

In the latest sign that debt forgiveness might make financial sense to some on the lender side, the nation’s second-largest mortgage insurance company, PMI Group, has found a way around Fannie and Freddie’s policy. PMI, which shares the credit risk in many Fannie and Freddie loans, will pay some underwater homeowners, those who owe more than their home is worth, if they make prompt payments for several years, a de facto principal reduction.

While the company would not disclose what percentage of the principal was covered, a spokesman for the Loan Value Group, which administers the program for PMI, said that on average it was 5 to 7 percent of the loan amount but could be as much as 30 percent.

Does it matter whether you get your principal reduction up-front, or whether you get it five years down the line, in the form of  a check from PMI? Yes, at the margin — but the principle is the same, that people are much more likely to continue to make payments on their mortgage if they have a good chance of owning equity in their homes at the end of it. And if Frannie is OK with the PMI program, then it should be fine with Arizona’s program too.

Of course the big difference between the PMI program and the Arizona program is that the PMI program is paid for by PMI: Frannie needs to take no write-down. While the Arizona program involves Frannie taking pain now to avoid bigger pain further down the road.

It’s worth remembering that it’s not just insurers like PMI — even banks like Chase are doing principal reductions. But they only ever do so when they don’t need to take any up-front charges. If you bought the mortgage at a discount, then it’s fine to do a principal reduction, since it doesn’t reduce the value of the mortgage on your books. Accounting is destiny.

Maybe the thing for the US government to do, then, is not to force Frannie to accept principal reductions outright — but rather just to force Frannie to mark their current underwater mortgages to some semblance of sanity, rather than doing their see-no-evil act and insisting on holding them at par. If Frannie has to take writedowns anyway, then maybe they’ll do so in a homeowner-friendly way.

Why has the death of Steve Jobs caused such a huge outpouring of grief? Mainly, I think, because Jobs had an ability to make very human connections with people. He could do it in a commencement speech which barely mentions technology — but his greatest achievement was to do it with technology itself.

In the speech, Jobs talks about how and why the Macintosh shipped with multiple proportionally spaced fonts. From his perspective, that was a matter of good design — part and parcel with his obsession over power buttons and USB ports. But something unprecedented happened when Apple’s beautifully-designed technology fell into the hands of humans: the humans loved it. Literally.

Other companies, once in a blue moon, make a much-admired piece of technology — the HP 12c, say, or the Nokia 3310. But from the day that Apple decided to literally put a smiley face on its computers every time they booted up, real people started treating its products as they would loved ones.

If you look at Steve’s introduction of the iMac, in 1998, he quite explicitly compares the sultry curves of his gorgeous new computer to the unlovable beige boxes being sold by the competition. In many ways, the original iMac and the original iPod are the true iconic Apple products — built at human scale, with human curves, and displaying what can only be called personality.

These products came out after Steve Jobs returned to Apple, to take the helm as CEO for the second time. In the interim, he founded Pixar — probably the ultimate marriage of technology, humanity, and emotion. And I can’t help but look at the iMac and the iPhone and see something very Pixar in both of them.

In recent years, Apple products have become silvery, and harder-edged; the colorful logo has given way to a simple white one, and the iPhone 4, in particular, is quite a forbidding slab. I don’t think anybody loves their iPhone 4 in the way that people loved that original iPod; Apple is more successful than ever, but I do fear that it has lost some of its humanity along the way. In any event, it was Steve Jobs who, almost single-handedly, turned personal technology into personal technology. Which is a truly astonishing legacy to leave.