Why do I write

Came across this from Frank Partnoy (yes, I am not done with Partnoy, yet!)’s twitter handle.

This is by George Orwell on why he writes.

He lists four purposes for writing:

Putting aside the need to earn a living, I think there are four great motives for writing, at any rate for writing prose. They exist in different degrees in every writer, and in any one writer the proportions will vary from time to time, according to the atmosphere in which he is living. They are:

  1. Sheer egoism. Desire to seem clever, to be talked about, to be remembered after death, to get your own back on the grown-ups who snubbed you in childhood, etc., etc. It is humbug to pretend this is not a motive, and a strong one. Writers share this characteristic with scientists, artists, politicians, lawyers, soldiers, successful businessmen — in short, with the whole top crust of humanity. The great mass of human beings are not acutely selfish. After the age of about thirty they almost abandon the sense of being individuals at all — and live chiefly for others, or are simply smothered under drudgery. But there is also the minority of gifted, willful people who are determined to live their own lives to the end, and writers belong in this class. Serious writers, I should say, are on the whole more vain and self-centered than journalists, though less interested in money .

  2. Aesthetic enthusiasm. Perception of beauty in the external world, or, on the other hand, in words and their right arrangement. Pleasure in the impact of one sound on another, in the firmness of good prose or the rhythm of a good story. Desire to share an experience which one feels is valuable and ought not to be missed. The aesthetic motive is very feeble in a lot of writers, but even a pamphleteer or writer of textbooks will have pet words and phrases which appeal to him for non-utilitarian reasons; or he may feel strongly about typography, width of margins, etc. Above the level of a railway guide, no book is quite free from aesthetic considerations.

  3. Historical impulse. Desire to see things as they are, to find out true facts and store them up for the use of posterity.

  4. Political purpose — using the word “political” in the widest possible sense. Desire to push the world in a certain direction, to alter other peoples’ idea of the kind of society that they should strive after. Once again, no book is genuinely free from political bias. The opinion that art should have nothing to do with politics is itself a political attitude.

He goes on to conclude like this:

Writing a book is a horrible, exhausting struggle, like a long bout of some painful illness. One would never undertake such a thing if one were not driven on by some demon whom one can neither resist nor understand. For all one knows that demon is simply the same instinct that makes a baby squall for attention. And yet it is also true that one can write nothing readable unless one constantly struggles to efface one’s own personality. Good prose is like a windowpane. I cannot say with certainty which of my motives are the strongest, but I know which of them deserve to be followed. And looking back through my work, I see that it is invariably where I lacked a political purpose that I wrote lifeless books and was betrayed into purple passages, sentences without meaning, decorative adjectives and humbug generally.

Das Activist Manifesto

I cannot fathom why I did not blog on Frank Partnoy (with Rupert Younger)’s article on ‘The Activist Manifesto’ (‘What would Karl Marx write today’ was the title of their article in FT in March 2018). By chance, I stumbled upon it again, today.

I was writing to my friend Gulzar about some of the books written by Wall Street insiders. ‘F.I.A.S.C.O’ came to mind. Frank Partnoy was the author. He wrote it after he worked for Morgan Stanley. I had read the book long ago. I liked it. He practised law after that and joined University of San Diego in 1997. I understand that he is now shifting to University of Berkeley as tenured law professor. I had used his article in ‘The Atlantic’ on Wells Fargo (‘What’s inside American banks?’) in the courses that I teach.

I decided to check and see if he had a Twitter handle. Thankfully, he had one and even more thankfully, he was not an inveterate Tweeter! In the process, I chanced upon the FT article again on the rewriting of ‘Das Manifesto’. They had a website for the manifesto.

I spent time reading Professor Alan Morrison’s great introduction to the manifesto of Partnoy and Younger. Worth reading. I am yet to download their new manifesto and the original. Intend to do so.

In the process, from Partnoy’s Twitter handle, I read the wonderful review of Adam Winkler’s book, ‘We, the Corporations’ by Zephyr Teachout. Sample this comment:

Beginning in the 1970s, a group of activist lawyers associated with the University of Chicago persuaded courts to gut well-established principles designed to protect open markets and decentralized power, and to replace them with an ideology of efficiency that has contributed to our current crisis of monopoly capitalism and inequality. Winkler mentions the Chicago school in passing, but he doesn’t address the post-1980 antitrust cases, a striking oversight because they fit neatly into his theory: Corporate monopolies gained rights by asserting that they benefited the rights of others (in this case, consumers). [Link]

Teachout says that Winkler missed out on this but writes a nice tribute to his work.

Also, read the review of ‘The Chain of Title’ by David Dayen, reviewed by Frank Partnoy himself. It is the kind of stuff that one sees in developing economies. Nobody knew who had the titles to the properties that were foreclosed. Yet, they foreclosed! This happened in America. Heart-rending, actually:

Lisa Epstein, a nurse, learns that the bank foreclosing on her, the one at the end of
the securitization daisy chain, could not prove that it had legally obtained her loan. When she challenges the bank in court, its lawyers present a document dated three months after she was served with foreclosure papers — a “poorly drafted cover-up,” Dayen writes. She meets Michael Redman, a car salesman who had a similar experience, and persuades him to publish an online guide to uncovering mortgage fraud. The two of them connect with Lynn Szymoniak, a lawyer, who investigates the signatures in her own foreclosure action and finds one with a date when the signer was actually in state prison.

Exposing those lies becomes a moral crusade. The homeowners’ stories are emotional roller coasters, which Dayen meticulously reports. He and his characters find the banks’ behavior not just indefensible but criminal. Prepare to be surprised, and angry.

Partnoy also reviewed Anita Raghavan’s Billionaire’s Apprentice.

So, an evening in ‘partnership’ with Partnoy!


On Adam Smith

There is a nice article in ‘Aeon’ magazine on Adam Smith. The article is better than the review prof. John Kay wrote of a new book on Adam Smith which, I think, is similar to the article above.

But, the book itself might be richer in content than the review suggests. So, my comment on the review is not a comment on the book. Perhaps, the article in Aeon and the book might be convergent.

The important message from the article above is that Smith was not so much against state intervention as he was about ‘State capture’.

Further, there is the unnecessary obligatory reference to Donald Trump in Prof. John Kay’s article. Not needed at all, in the context of the article. John Kay too does not need to conform. If so, he would not have written ‘Other people’s money’ and authored the report on UK Equity Market Reforms. Just shows how powerful the tendency to conform to conventional wisdom is.

China banks top the list and other links

China banks are leading the world in assets rankings just as Japanese banks did in 1988 and American and European banks did in 2007. Ahem. [Link]

China – US trade spat is the start of the cold war, says Conor Sen. I agree.

There is loan fatigue on the part of lenders and borrowers in China. That is something to watch for. That spells trouble.

China underestimated Trump and also over-read the trans-Atlantic fissures. Well, not just China made that mistake. Many did and very few are willing to admit to it and correct themselves. They are digging deeper.

David Fickling compares the OBOR infrastructure spending (or loans to other countries) with the Soviet Union’s Siberia infrastructure buildout that strained their finances.

Deleveraging with Chinese characteristics

Short-term lending rates in China have dropped to their lowest since July 2015, as the government stimulates the economy….This appears to have been engineered by the People’s Bank of China, which made a particularly large 502 billion yuan ($73.44 billion) loan to commercial banks through its medium-term lending facility in late July….

…Last week the Politburo, the decision-making body of China’s ruling Communist Party, called for pro-growth fiscal measures as well as “reasonable and adequate” liquidity conditions, interpreted as code for easier credit….

“The monetary setting has now almost entirely reversed the financial crackdown that began in 2017,” said Marko Papic, chief geopolitical strategist at BCA Research, in a note to clients. [Link]

Surprised, surprised.

How much more recklessness?

Just yesterday, I wrote that the argument by Martin Sandbu that central bankers missed a trick by not being more reckless in the years following 2008 than they already were was monstrous non-sense.

See these blog posts by Jesse Felder. How can one argue, even after seeing these posts, that central bankers were not responsible for this recklessness on the part of investors? How much more reckless would investors have been, had central banks become been even more reckless?

Callous arguments such as those are simply astounding and mind-boggling.

One more sample of bond market ‘efficiency’

Despite tight restrictions on foreign exchange, Chinese investors have spent $30.4bn on US residential real estate in the past year, according to the US National Association of Realtors, while our monthly consumer survey shows that household demand for foreign exchange has only increased since the turmoil of early 2016.

Outflows have been balanced by record inflows from foreign investors, particularly into the onshore bond market. June data suggested these investors took the depreciation at the end of that month in their stride, but growing signs of currency risk could convince them to sell. [Link]

Why would anyone with a good awareness of risk and return buy Chinese onshore bonds? The yield pickup is not great and the risks are high. Unless, they were so confident that China would not really deleverage and would not allow defaults. Otherwise, it makes no sense investing in China bonds when the country’s non-financial debt to GDP ratio is already too high, when growth is slowing and trade tensions are escalating.

So much for investors’ ability to balance return considerations with risk.

That extract was from an article on RMB risk published by FT Confidential Research. Against America, China is indeed very keen to retaliate with RMB depreciation. But, they know very well that it is a double-edged sword. Capital outflows will accelerate. Same problem with their holding of US Treasuries. If they dump it, they face capital losses. The dollar will weaken, everything else being equal.  Rising US interest rates will push up Chinese cost of capital too. Yields on China bonds will rise too. It will be a self-defeating exercise too.