Years of Poems and Spirits

1. The iPad-hype

I think the iPad will flop. If some recent reports on WSJ are to be believed, Apple is trying to use iPad to change the media landscape altogether, I think it is a tail-wags-dog scenario.

• At least the book pricing model (e.g. on par with hardcover price) won’t fly
• Having an iPod to listen to music and an iPhone to make calls is quite a different user experience from using an iPad primarily for stationary use
• Holding a Kindle is not the best feeling for my hands (after a long reading). Holding something even bigger and stiffer is out of question
• I don’t have a whole lot use for my NetBook already. The super thin MacBook Air didn’t fly either

IN short, depends on how much Apple has invested in this, not only the device will flop, it may even backfire. Love to see how this prediction pans out in a year.

2. Reading  Failure of Capitalism

Feels like reading my car’s owner’s manual – too many things are already clear to me, the interesting parts are so disparate that I can hardly piece them up into a larger narrative. Some thoughts and things learned:

Can we use the spread b/w returns from diversified assets over that from non-diversified assets to gauge whether we are in a bubble or crash?

In other words, I am still mesmerized by the transition from a stable system to an unstable one (e.g. need major correction) I don’t think I will be at peace until the transition can be modeled mathematically. Posner suggested using Chaos Theory. But I am not sure. C.T. is that random events may cause unexpected, large impact, but you can’t tell that from the “last-straw-breaks-camel-back” syndrome. For example, a large commercial real estate project failed in Houston caused commercial paper market to freeze, they seem to be unrelated, but which model do you use?

What I am looking for is a model that can describe how/when, triggered by an endogenous change, diversification suddenly fails across the board.

3. Innovation, Expectation, and Bubble

One thing I thought of, and is confirmed by Posner, is that financial bubble almost always follows a sustained burst of productivity gain, either as a result of technological innovation or factor injection. The former is easy – railroad, electricity, automobile and the Great Depression; Computer, Internet and the dot-com boom. The latter is China opening and globalization before this bubble.

This can be explained perfectly well if we consider “liquidity”, in its most general sense, as an indicator of market participant’s confidence in profitability. And it is positively correlated to credit boom and ease of financing. In other words, the bubble is the result of a heightened expectation that is gradually decoupled from real productivity growth. Naturally, crash is the result of a over-shot correction.

This may also help to explain the global glut theory forwarded by Bernanke. By the way, it is clear to me, he is the Rudy Giuliani in the financial world – the right guy at the right moment. But a so-so manager otherwise. Saw a picture of CYC with him in a ballpark. She is a fan of him, I am a fan of her but definitely not a fan of him.

4. Somehow, I find myself back to 1993: suddenly finding the computing world not so boring after all. It was quite an intense experience dealing with the WordNet stuff. But it somehow led to a deeper understanding of linguistics and knowledge. Good stuff.

A really wonderful book. As enlightening as E.P. Thompson’s classic.

I remember Kent G asked us during class – what is “class consciousness”? It was then I suddenly realized, oh, it is not something that is always there!

Perry’s book really helped me to complete the intellectual journey started with this question. In my mind at least, there is no longer such a structural being called “class consciousness”. It is more organic, something grows out of a complex makeup of social soil.

Note, this is a second try. It failed last time when I tried to write a comprehensive review. It just didn’t work out. This book took me several month to finish on the 3rd try (ever since recommended by DS a year ago), it is not like while I was in school when I had to finish a couple of books a week. The memory faded by the time I started writing review but thoughts and inductions abound. It is really hard to write something concise that way.

I also thought about book reviews like those in the New Yorker. But they are more like literature reviews, each comes with broad references and, more importantly, a clear narrative of how a certain subject evolved. I am nowhere near being able to discuss Labor Study (or even Labor History in China) in that way. So I gave up writing last time.

I am grateful for this book because it helped me to recalibrate my view on Marxism. Its Historical Materialism still wield a heavy influence on my world view but at the same time I know it is just another theory among many. The difficulty is to escape my own myopia and put what brought me here in a proper lineup. I have been trying to do so for years. Finally, with help from this book, I found some kind of closure.

In the book, Perry developed two themes: First, different workers protest differently. Second, they become different as a result of their social relationship with each other. In general, Perry argues, the more skilled workers are more likely to engage in class struggle. The less skilled are more likely to be thugs (aka Lumpenproletariat in Marxist lexicon). In Shanghai’s example, it is the printing press mechanics, the managers in Postal service and so on, are the CCP-affiliated activists. The tobacco rollers and textile workers, on the other hand, are easy recruits of the GMD-controlled Green Gang members.

However, her second point is more subtle. Paraphrasing Charles Tilly’s words, “A worker’s skill is a type of social relationship”, Perry used the first half of the book to develop a narrative on how a worker’s native place can determine his political awareness. It makes total sense in the Chinese context where I grew up – people from Jiangnan are generally considered smarter, are quicker learners. They tend to get better jobs, which heightened their self-consciousness and political demand. All of this development was further nurtured by a strong native-place bondage, apprenticeship training and the existence of Habermas-ian public space.

There it is: class consciousness is not a uniformed, structural being. It is not the same in every culture, at different times, or even within the same “working class”. It is very much a product of socio-cultural environment–as much as that of the material-production relationship that Karl Marx thought was the defining character. In other words, class consciousness, like religion, it is not something everyone is born with, but rather a gift one may or may not receive somewhere in one’s life. No wonder Perry uses terms like “rise above” to describe the formation of class-consciousness. Here you go, Migdal, this is you exegesis.

Just some random thoughts on the financial crisis. Actually, there is a lot. Not sure if I can link them altogether. Otherwise, I would be doing something else for a living.

1. A very good article on WaPo about the different reform ideas advanced by Geithner and Volcker.  The core of Geithner’s theme is to put a requirement on reserves. Volcker’s is stiffer by shifting back to Glass-Steagall.

2. The article also says,

government guarantees designed to spur lending by letting banks borrow cheaply were instead funding banks’ speculative investments and fueling soaring profits

I was amused while reading this part. I can imagine how maddening this must be to Geithner: on the one hand, he’s taking the flak for protecting the status quo on Wall Street. On the other hand, the very people he’s protecting just can’t stop undermining his position.

3. I have my own doubts on whether it is possible to go back to Glass-Steagall. The input I received was very mixed. I still remember the momentum behind the drive to repeal it in the 1990s. The way it was portrayed in the media was that it was out-dated. The repeal itself seemed like just a formal recognition of what “everyone on Wall Street” already knows. Then I heard Chris Dodd saying voting for it was one of his biggest regrets, which implies he had other choices or repealing G-S wasn’t that inevitable.

4. I don’t know enough about Volcker. But I really liked his idea of nationalizing the big banks during the crisis (early last year). It seemed fair and reasonable. But Volcker doesn’t have many supporters in the establishment. Yet there has to be some balance between being the best solution and being a likely solution.

5. Another source of doubt (about going back to Glass-Steagall) comes from my earlier thoughts on adding a tax to all financial transactions so that the public has a control nub to turn. After some thoughts, now I am not sure that is workable solution. There are so many types of “financial transactions” that it is really hard to demarcate what is speculative transaction and what is not. In a way, it comes back to the difficulty of defining Mark-to-Market rule in GAAP guidelines.

6. If it is hard to discriminate “speculative” from “non-speculative”, isn’t it equally hard to separate commercial banking from investment banking? Like what do you with the deposit in a commercial bank? You have to invest it somewhere. Do you allow a commercial bank to buy financial products or to use a middleman to manage the capital? And how do you define a “financial product?”

7. I may not be asking the right questions. But at the same time, I am not convinced either that putting the firewall back up is a proactive way to stop speculation once for all. After all, we tried it before.

8. The GOP’s idea–don’t intervene on the means, but set an clear boundary on the outcome, then the market will correct itself, doesn’t fly either. Garrett from NJ was saying, if you tell the banks that there is not a public safety net, they will behave. That is a pretty lame presupposition. Not even Greenspan is on board this time.

9. So it becomes somewhat an intellectual challenge, kind of like, how do you treat cancer? Cancer cells are normal cells gone rogue. Credit/market liquidity is kind of like that: you need a vibrant source of credit for the economy. But some times, the source (i.e. Wall Street) produces so much liquidity that causes bubble (tumor).

10. Maybe that is why financial reform appears so appealing but so difficult to carry out. It is like when people see cancer, they think it is a disease. But it is not (at least not in the sense that the body is attacked by external organisms). It is part of us, like aging.