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Global Crisis/Innovation Blog

“Beware of Greeks Bearing Gifts”:  Michael Lewis’ Insights”

By Shlomo Maital

    Michael Lewis is perhaps the leading writer able to expose the deepest darkest inner secrets of the financial services world, dating from his book Liar’s Poker.  New York Times columnist David Brooks, in his annual “Sidney Awards” column, draws our attention to Lewis’ essay in Vanity Fair (Oct. 1), titled “Beware of Greeks Bearing Gifts”.

     To show how financial bungling leads to moral rot, Lewis takes us to a 1,000 year old monastery, cut off from the world, in remote northern Greece near Mount Athos, accessible only by boat.   

      Greece’s banks and government conspired to plunder the public treasury.  The Greek national railroad, lewis notes, earned 100 m. euros in revenues, but had a wage bill of 400 m. euros (!) plus 300 m. euros in other expenses.  The country reported a budget deficit of 3.7 per cent of GDP, to gain EU entry, but in fact its deficit was really 14 per cent of GDP.   But the real cause of Greece’s crisis was the remote monastery known as  Vatopaidi.

“In late 2008, news broke that Vatopaidi had somehow acquired a fairly worthless lake and swapped it for far more valuable government-owned land. How the monks did this was unclear—paid some enormous bribe to some government official, it was assumed. No bribe could be found, however. It didn’t matter: the furor that followed drove Greek politics for the next year. The Vatopaidi scandal registered in Greek public opinion like nothing in memory. “We’ve never seen a movement in the polls like we saw after the scandal broke,” the editor of one of Greece’s leading newspapers told me. Without Vatopaidi, Karamanlis is still the prime minister, and everything is still going on as it was before.”  *

The Vatopaidi scandal brought a Socialist government to power, headed by George Papandreou, son of an eminent economist and former Prime Minister. Papandreou’s government squandered money, in ways Karamanlis would never have dreamed.  Had it not been for the moral rot that touched Vatopaidi’s monastery, Lewis explains, Greece would have avoided its virtual bankruptcy. 

    Remember the parable of how “a butterfly’s wings flap in a remote forest, and the result changes the world totally”?   There is a strong similarity.

 *   Source:  http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010?printable=true#ixzz19OUDR5T7

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Global Crisis/Innovation Blog

Handling Freak Weather: The Wisdom of a New York Cabbie

By Shlomo Maital

  An enterprising BBC reporter covered New York City’s blizzard, which dumped 75 cms. of snow (30 inches) on the city, by chatting with a New York cabbie (taxi driver).   I’ve found that if you want to really know what is going on in a country, regarding its business energy and economic performance, ask a taxi driver.  The same appears to be true about snow removal.

  Former New York Mayor John Lindsay lost his job after the Feb. 15, 1969, snowstorm dumped 15 inches of snow on New York City and paralyzed it; Lindsay was widely perceived as incompetent.   Today, twice as much snow fell on New York City and within a day the city was back to normal. 

    Cabbie Peter Franklin told BBC that Mayor Michael Blumberg reflected the spirit of New Yorkers.  “The cost of snow clearance,” Franklin said, is “$1 m. per inch of snow”, or $30 m. for the 30 inches.  But, he noted, “Mayor Bloomberg said,  so what? So what if it costs $30 m.?  Let’s just do it.”  Bloomberg realized that you cannot shut down a city, and the cost of doing so, as Mayor Lindsay learned, is a thousand times more than the cost of clearing the snow.

    New York City simply has a method – it takes all its thousands of garbage trucks, and puts snow shovels on the front, and sends them out to clear the snow, then hires day laborers at $14/hr. and has them shovel the snow from intersections.  These two simple ideas together put New York City back into commission after a very short shutdown. 

    “To deal with problems,” cabbie Franklin says, “you need two things:  Will and money.  We in New York have both.  So we did it.”   He expressed price in the resilience of New Yorkers, and likened the snow removal to a “war” – enlisting money and energy, defining the goal (keep things functioning), and then…as the Nike mantra goes, Just Do It! 

     Other cities would do well to benchmark New York City. Meanwhile, cities in snowy climates treat blizzards as ho-hum – Helsinki, and Toronto, and Winnipeg, Canada, for example, while a few inches in London shuts everything down and sows panic.    

Global Crisis/Innovation Blog

If We Have Global Warming, Why Do We Have Global Cooling?

By Shlomo Maital

  Count on the global warming deniers to ask:  if we have global warming, why do we have global cooling (freezing snowy winters in America and in Europe, closing airports, stranding travellers, and causing chaos)?  And count on journalists to cover the results of the blizzards, but never to ask the core question, how are global cooling and global warming related?

    Fortunately, Judah Cohen, a meteorologist who works for a weather forecasting company, has written a short essay answering this question.   Here is a short summary of Cohen’s explanation.

1.  Even as frozen areas like the polar caps shrink, seasonal snow cover has increased,  across the high latitudes of the northern Hemisphere, especially in Siberia, and the Himalayas.  As global temperatures warm, Arctic sea ice melts, creating more moisture available to fall as snow. 

2.  The sun’s energy reflects off the snow and escapes back to space, cooling the air; this creates an “unusually large dome of cold air next to the mountains”, amplifying the standing waves in the atmosphere.

3. The increased wave energy disturbs the jet stream, which, instead of flowing mainly west to east, as it does normally, meanders more north and south.  In winter, this change in snow sends warm air north, but also pushes cold air south from the arctic and from Siberia. 

4.  “This is why Eastern US, Northern Europe and East Asia have experienced extraordinarily snowy and cold winters since the year 2000.” 

Why did forecasts fail to predict them?  “Because the primary drivers in meteorological models are the oceans, which have been warming…. They have ignored the snow in Siberia!”.

  It’s all a “snow job”, concludes Cohen.  We’re freezing not in spite of climate change but because of it.  Looks like the meteorologists’ forecast models were as wrong as the financial experts’ models. 

* Judah Cohen, Global New York Times, Dec. 25, 2010

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
December 2010
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