The Fed's First 100 Years

I spent today at the NBER's conference celebrating the 100th anniversary of the Federal Reserve. Among the conferences I have attended over the years, this was among the best. You can find the papers presented here.

Forcing Argentines to Accept Evita Peron Bank Notes

It won't be easy--you'll think it strange--when I try to explain why so many Argentinians refuse to honour Evita Peron bank notes issued a year ago. Over half a century after her early death, she remains a polarizing figure in Argentina. Peronists including the present leader of Argentina (and the person largely responsible for these bank notes), Cristina Fernandez, style Evita as a champion of the poor and women's rights besides. Others think she was simply an opportunist who was at the right place at the right time. Obviously, being associated with General Juan Peron is tough. American media labelled him a dictator; others played up his fascist sympathies.

Regardless, can you imagine what sort of controversy would occur if, say, George W. Bush's image graced the $500 bill sixty years from now? While he has his admirers--he was voted US president twice, was he not--his detractors are legion. People have long memories, and many have still not gotten over Evita in Argentina it seems:

Argentina's central bank has warned businesses to stop rejecting commemorative bank notes bearing the image of Eva Peron to mark the 60th anniversary of the iconic former first lady's death. President Cristina Fernandez, whose fiery speaking style often prompts comparisons with that of “Evita”, unveiled the 100 peso bills emblazoned with her profile a year ago.

But publicity surrounding the newly-minted notes was not wide enough to overcome doubts from small businesses where cashiers have rejected the bills for being unfamiliar. So the central bank this week launched a hotline for people to report those who refuse to accept the bills, threatening to fine those who keep turning them away.

The yuck factor remains strong after all these years among some:

Some cashiers have snubbed the Evita notes because they did not recognize them as legal tender. Others turned their backs on the bills for political reasons. “There are always people who don't like Fernandez and Evita and just don't want to touch them,” said a cash register worker in Buenos Aires, declining to give his name.

And no, I would probably not take your George W. Bush bank notes if I'm still around sixty years from now.

Who should the next Fed chair be?

A friend points out to me that the monkeys over at Economics Job Market Rumors are voting whether they would prefer Janet Yellen or Larry Summers as the next Fed chair.  Right now, it is close to a tie.

The Futility of Democracy, Egypt Edition

The miserable plight of Egypt post-Mubarak points out shortfalls of mindlessly championing the virtues of "democracy." Americans, already despised in the Middle East for their "elections are great...unless you elect Hamas" hypocrisy, are particularly guilty in this latest fiasco. Worthy of especially harsh condemnation is equating electoral democracy as the be-all and end-all of it.

For Western observers, the heart of the matter is that Islamic fundamentalism remains the most organized and potent political force in Egypt. While Mubarak's suppression of the Muslim Brotherhood and Salafists may not have been "democratic," the source of his brand of "extremism" was in keeping secularism in place as per Western desires. Without such restraints, it was only natural that fundamentalists would make their influence felt. After a short period of military-appointed caretaker rule, they won parliamentary elections. They won the presidential elections. They led in drafting an Islamic-tinged constitution.

Meanwhile, the military--previous guarantor of secularism--has demonstrated in the past week that it retains an itchy trigger finger when fundamentalists are in sight--whether they were isolated from politics in the Mubarak era or its central players during the current era. I thus remain wary of the prescribed cure this time around: After a short period of military-appointed caretaker rule, hold parliamentary elections. Hold presidential elections. Draft a new constitution. Is this the new spin cycle?

Egypt's interim rulers issued a faster than expected timetable for elections to try to drag the country out of crisis, a day after 51 people were killed when troops fired on a crowd supporting ousted President Mohamed Mursi. The streets of Cairo were quiet on Tuesday but Mursi's Muslim Brotherhood movement called for more protests later in the day, raising the risk of further violence. Under pressure to restore democracy quickly, Adli Mansour, the judge named head of state by the army when it brought down Mursi last week, decreed overnight that a parliamentary vote would be held in about six months. That would be followed by a presidential election.

I needn't point out the obvious: Short of banning Islamic fundamentalists from participating in yet more elections, the results of such exercises will likely resemble previous ones insofar as the opposition (if you can even speak of one) remains disorganized and fragmented. With the Muslim Brotherhood so aggrieved, will it not redouble its efforts at the ballot box? Or, won't the more politically astute Salafists pick up the slack that the Brothers may leave? Either way, the end result should look the same: Islamic fundamentalism leaving its mark on Egyptian government.

Truly, it is a lose-lose situation: Banning Islamic fundamentalists hardly seems a democratic option, but it's the best one if the intent is to shield Egypt from further ravages of their brand of politics. Meanwhile, allowing fundamentalists to run unimpeded will most likely result in yet another reality-challenged leadership configuration. It certainly makes any number of white people wish those Egyptian youths hadn't bothered with protesting against Mubarak in the first place since many of the things they desired that he provided for a long time--political stability, secularism, and a willing ally--no longer are there.

In closing, I have some pointed questions for the democratic fundamentalists in America and elsewhere:

1. Why advocate holding elections when you do not recognize the legitimate winners--regardless of their identities?
2. If the military simply carried out the "will of the people" protesting in the millions on Egyptian streets by overthrowing the democratically-elected Morsi regime, then why bother with elections and just have mob rule through selection processes determined by the thronging masses?  [Call it the "Free Barabbas!" school of democracy.]

Egyptian democracy is a joke. I honestly do not think that doing the same things over and over again--quickie elections and the rest of it--until you finally end up with a suitably pliant and passably palatable regime is the answer. Egyptians have tired of being pawns in regional power politics when it is they who suffer the most in this shambolic process.

UPDATE: Is Saudi Arabia giving these bankrupts $5 B really to demonstrate how overthrowing authoritarian regimes (like Saudi's own) doesn't necessarily promote better outcomes? Perhaps I didn't need convincing.

Summers on the Corporate Tax

On the issue of corporate tax reform, Larry Summers tries to forge a compromise:

The United States should eliminate the distinction between repatriated and unrepatriated foreign corporate profits for U.S. companies and tax all foreign income (after allowances for taxes paid to other governments) at a fixed rate well below its current corporate rate, perhaps in the range of 15 percent.

Tennis Diplomacy? ROC-PRC Wimbledon Doubles Champs

 As a casual tennis fan, I usually don't watch the doubles matches at Wimbledon. I guess it was by luck that I caught the women's doubles final after watching France's Marion Bartoli maul Germany's Sabine Lisicki. As with most doubles events--even the finals--the crowd at Centre Court was sparse. However, the result was remarkable from an International Relations standpoint insofar as the identities of the winning players went: Hsieh-Hsu Wei of Taiwan and Peng Shuai of China soundly defeated Australian duo Ashleigh Barty and Casey Dellacqua 7-6 6-1.  Despite it being 3 AM in Taipei and Beijing, you can rest assured that hordes of tennis fans there burnt the midnight oil!

How many times have you seen the ROC and PRC laud their joint achievements? Few and far between since cooperation is sparse. Remember that regular flights between the two did not exist until 2003. The officials news agencies are ecstatic. The only difference is that China Daily (Xinhua) names Peng before Hsieh, while Focus Taiwan (Central News Agency or CNA) names Hsieh before Peng!

Unlike most top women's players, neither is a product of the Nick Bolletieri's tennis academy in Florida. The TV commentator--American champion Tracy Austin--kept mentioning their "unorthodox" style of play. As a former doubles champion at Wilmbledon, she should know a thing or two about the subject. I particularly enjoyed it when she singled out a shot made by Hsieh that resembled her fanning out the racket. Austin implied that she'd never seen tennis pros make such a shot, but any table tennis fan would have recognized it as a topspin drive!

There's even a reunification story to match that concerning their non-Western ("unorthodox") approach to playing doubles tennis:

The pair, who are both 27, played a few tournaments together as amateurs but ended their partnership after turning pro. After a seven-year hiatus, Hsieh asked Peng at the 2008 US Open if she would be up for a renewed association. The duo reunited by the end of that year 2008 and won their first 11 matches, claiming titles in Bali and Sydney.

Both Peng and Hsieh play two-handed shots on both sides, like Marion Bartoli, who won the Wimbledon singles title on Saturday.

"It's probably the first time (two-handed players) win the singles and the doubles," Peng said. Peng and Hsieh said they opted for this unorthodox style of play because they were too small to hold their rackets with one hand when they were kids.

Yes, it's largely a non-story in the rest of the world since few watch doubles. But in Taiwan and China, it's big news that's been splashed on the front pages of either country. From sporting events, thawing of international relations may spring forth: Four decades ago ping-pong diplomacy heralded normalization of China-US ties when an American athlete mistakenly boarded the bus of Chinese players What more the symbolism of an ROC-PRC partnership to win one of the world's most prestigious sporting events?

After all, a doubles champion at Wimbledon is every much a winner of the event as that of the singles titles. That both China's won it is, well, unprecedented and laden with symbolism for what may lie ahead.

WSJ: What Egypt Needs is Its Pinochet

I do not need convincing that Hosni Mubarak was a better compromise for an Egyptian leader than any of the buffoons that followed him. Witness the total bankruptcy of ideas demonstrated by the Muslim Brotherhood "leadership." While I was amused by their total lack of political sophistication and economic understanding--remember those interest- and conditionality-free IMF loans--things have been quite miserable for the Egyptian people.

What remedy, then, do the WSJ op-ed pages offer post-Mursi? Assuming that military rule is inevitable in such a tumultuous nation, they are looking for [gasp!] an Egyptian General Augusto Pinochet:

Egyptians would be lucky if their new ruling generals turn out to be in the mold of Chile's Augusto Pinochet, who took power amid chaos but hired free-market reformers and midwifed a transition to democracy. If General Sisi merely tries to restore the old Mubarak order, he will eventually suffer Mr. Morsi's fate.

I cannot make up something so distasteful or positively portray such an appalling figure: Isn't Pinochet the same guy who divided a nation over extrajudicial executions, disappearances and torture?

A Chilean commission investigating human rights abuses under the former military leader Gen Augusto Pinochet says there are many more victims than previously documented. Commission director Maria Luisa Sepulveda said they had identified another 9,800 people who had been held as political prisoners and tortured. The new figures bring the total of recognised victims to 40,018.

I fail to see what's so "democratic" about these practices, but then again, the WSJ op-ed folks--erstwhile champions of democracy--have been longstanding fans of Guantanamo Bay as a shining American example of it.

By drawing a comparison with Pinochet, what we can deduce is that the WSJ op-ed writers believe Mubarak didn't kill and maim enough to be a successful leader. What further "insights" can be gleaned I cannot fathom since those pages remain one of America's few remaining bastions of neoconservatism--an obscure faith if there ever was one.