This is Alice in Wonderland looking through the looking glass at debt management

Rep. Greg Walden (R., Ore.), quoted in WSJ

Walden fears the trillion dollar coin solution to Republican obstruction. Mint a coin with a trillion-dollar denomination, deposit it at the treasury, and use it to buy back treasuries. No more debt-ceiling crisis. If anyone has passed through the looking glass, though, Walden and his GOP peers have led the way.

Despite having run up a terrible tab for the many programs he and his colleagues voted through. Despite having voted Nay for the Pay as You Go rule, which would have blocked any tax cuts without any off-setting tax increases or spending cuts. Walden and his peers in the Republican-led House have decided that the nation’s debt-payment should be optional.

Walden and his peers have combined a commitment to spending with a insidious refusal to pay the bills. It’s a world set in reverse, out of kilter with our expectations: where text reads backwards, chess-pieces come to life, and the White Queen can remember events before they have happened. It’s the world through the looking glass.

A trillion-dollar coin may sound far-fetched, but we didn’t arrive at it by accident.

So, Alice, what will it be?


When a court confronts an unconstitutional statute, its endeavor must be to conserve, not destroy, the legislation.

Justice Roberts, National Federation of Independent Business v. Sebelius – the healthcare bill

David Brooks tells a nice story about oligarchy in his recent column – Why our Elites Stink. It’s hopeful to think about an ethical elite. I find it appealing – like we’ll be looked after by munificent masters. He paints the WASPy elite with the same brush, but he describes a false choice – one between an ethical and unethical oligarchy.

Oligarchy and ethics, however, are independent concepts. Oligarchy just reflects a leadership structure, and ethics reflects a mode of conduct. You can have an oligarchy with no consistent set of ethics. You can have ethical structures without an oligarchy.

Brooks confounds the two. He assumes that the choice is between an unethical or an ethical oligarchy. But it’s not. Oligarchy is not the only leadership structure that can be ethical or unethical. The real question is whether you want an oligarchy at all.

That Brooks’ oligarchy is ethical is moot. What matters is that he proposes an oligarchy, period. That’s a bold suggestion and one that begs an answer.

Why, in a modern society, do we have markets, and why do we have organizations, and what determines the boundary between these two mechanisms for social organization? These questions go to the heart of the roles of our diverse political and administrative institutions, public and private, in contemporary society.

Herbert Simon, Last Public Lecture


It’s here! BlackRock launched the much-discussed fixed income crossing network.

BlackRock Solutions will operate the network for the benefit of it’s own managers and a network of forty-six external clients. BlackRock, alone, manages $3.5t in assets across ten thousand portfolios, but the Aladdin Trading Network –the network’s working title– will also include sovereign-wealth funds, insurance companies and other money managers. For a small fee, participants can cross trades for corporate bonds, mortgage securities and other assets through the platform.

Fixed income trading has been a profitable mainstay of investment banks. The prospect of electronic trading through a crossing network is simultaneously laughable and terrifying. Given the vast investable universe of fixed income instruments, trading these instruments presents a far more complex problem than equities. GE has only one ticker, but it may have a dozen or more credit instruments associated with it, each with its own maturities, rates, claims, etc. Nonetheless, BlackRock is not moving forward on the basis of charity. They want to cut costs, and that means cutting into investment banking profits.

BlackRock’s magical, mystery service has many miles to go before we see the disruption people have predicted. They currently cross 3% of trades internally, and they hope to raise that number to 6-8% with Aladdin. What’s exciting is that they’re bringing forty-six external clients along for the ride.

Ted’s growing up.

What is most curious about this doctrine is that neither the decisions that have applied it for nearly 300 years, nor its eventual statutory formulation, undertook to define or explain its contours or objectives….Curiously, judges generally have neither complained of the absence of guidance, nor made substantial efforts to fill the void.

Pierre Leval, noting the obvious lack of specific standards for fair use in the Copyright Act of 1976 – § 107 · Limitations on exclusive rights: Fair use.

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
(4) the effect of the use upon the potential market for or value of the copyrighted work.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.

%d bloggers like this: