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The havoc on Wall Street following the collapse of the subprime-mortgage market boils down to a simple truth: for years, lots of very smart people took lots of very foolish risks, betting borrowed billions on dubious mortgage derivatives, and eventually the odds caught up with them. But behind that simple truth is a more surprising one: the financial whizzes made bad decisions in part because that’s what they were paid to do. Not literally, of course. The way that hedge-fund managers and investment-bank C.E.O.s get paid is supposed to make them perform better for the investors they serve. Hedge-fund managers, for instance, typically are paid “2 and 20”: they get two per cent of total assets as a management fee, and they keep twenty per cent of their investment gains (above some agreed-upon benchmark). Letting hedge-fund managers keep a chunk of their winnings gives them an incentive to do well for their clients: in theory, they get rich only if their clients do.

Mute finance After running on a mixed economy of barter, grant and private monies since its inception in 1994, Mute started receiving revenue funding from the Arts Council of England in 1999. The grant is now set at £65,000 per annum, having significantly increased in the past couple of years, and goes towards the core costs of staff, premises and production. ACE's 'core funding' is supplemented by project funds allocated to new initiatives; in recent years Mute has received nearly £100,000 from ACE for such projects. Grants were awarded for White Cube, Blue Sky (a book now renamed Proud to be Flesh: a Mute Anthology on network cultures); web tools resource OpenMute; business development, FLOSS migration and new online art commissions as well as an OpenMute national workshop tour, UserLand. Approximately £40,000 has also been received from creative-industries agencies London Innovations and CIDA for technology projects centred on wireless networking (YouAreHere) and software development (TNS).

This is year two of the Knight News Challenge, a contest awarding as much as $5 million for innovative ideas using digital experiments to transform community news. 

Economists distinguish between “Risk” and “Uncertainty”: the former can be priced by financial markets while the latter cannot. The distinction between the two was made by the famous economist Frank H. Knight in his seminal book, Risk, Uncertainty, and Profit (1921). In brief, “Risk is present when future events occur with measurable probability” while “Uncertainty is present when the likelihood of future events is indefinite or incalculable”.    This distinction between risk and uncertainty helps to explain the recent market panic and turmoil. Today, the FT cites a market economist at Lehman who said: “We are in a minefield. No one knows where the mines are planted and we are just trying to stumble through it”. A few days ago another market participant put it this way: “It is not the corpses at the surface that are scary; it is the unknown corpses below the surface that may pop up unexpectedly”.   Unknown minefield; unexpected corpses: this is “uncertainty” rather than “risk”. Risk can be measured and priced because it depends on know distributions of events to which investors can assign probabilities. Uncertainty cannot be priced by markets because it relates to “fat tail” distributions and extreme events that cannot be easily predicted or measured.

A few days ago the CFO of Goldman Sachs justified the massive – 30% plus  - losses of the two Goldman Sachs hedge funds by arguing that these were unpredictable “25 standard deviation events” that should occur only once in a million years. The same thing was said by the LTCM “masters of the universe” when their highly leveraged hedge fund went belly up in 1998.

The proliferation of such products, as I have often noted before, carries many benefits for the financial system (most notably that they disperse risk across a much wider pool of investors). But this trend also carries at least one downside; it is adding to the opacity of the financial world. For although many corners of the structured credit universe are becoming more transparent, almost as soon as one chink of light emerges, another shadowy wave of activity emerges that is far more opaque.

There is a second reason that the hands-off approach has been shown to be wanting. During the past few years, a significant part of liquidity and credit creation has occurred outside the banking system. Hedge funds and special conduits have been borrowing short and lending long and, as a result, have created credit and liquidity on a massive scale. As long as this liquidity creation was not affecting banks, it was not a source of concern for the central bank. However, banks were heavily implicated. Thus, the central bank was implicitly extending its liquidity insurance to institutions outside the regulatory framework. It is unreasonable for a central bank to insure activities of agents over which it has no super­vision, just as it would be unreasonable for an insurance company selling fire insurance not to check whether the insured persons take sufficient precautions against the outbreak of fire.

The questions addressed included: can a world of 9-10 billion people vote its way to a sustainable future - or are new forms of leadership (even forms of authoritarian rule) going to be necessary? Are the rising global powers (China, India and Brazil among them) best placed to move towards more sustainable forms of development?

What of the link between democracy and sustainable development? Most respondents held that voter pressure meant that democracy was of benefit to sustainable development. Yet consultation with a more specialised group of experts found that only 28% believed that capitalism (often paired with democracy in its liberal variant) aided sustainable development, against 36% who said that capitalism inhibited it. Overall, Doug Miller saw in the figures an activation of people's survival instinct: as the planet "speaks" through extreme weather events, citizens are starting to listen.

Many of the issues the roundtable addressed had been highlighted in a keynote paper commissioned ahead of the meeting from Ian Christie. This made four basic propositions about democracy, ecologically sustainable development, and environmental/sustainability campaign organisations (SD-NGOs). He argued that together, these phenomena offer a paradox about the relationship between democracy, civil society and sustainability; and that resolving it is now an urgent and complex task - for the west, for newly industrialised democracies, and for emergent democratic civil society in the global south.

Goldman Sees Subprime Cutting $2 Trillion in Lending (Update5) By Kabir Chibber Nov. 16 (Bloomberg) -- The slump in global credit markets may force banks, brokerages and hedge funds to cut lending by $2 trillion and trigger a ``substantial recession'' in the U.S., according to Goldman Sachs Group Inc.

US household assets are $54,000bn. Liquid net worth (cash, mutual funds, bonds etc) is $27,500bn. Household debt is $13,000bn. In other words, the US household balance sheet is looking great: $54,000bn in assets ($27,500bn liquid) to cover $13,000bn in debt. Heck, we're under-leveraged as a country right now and should probably take on more debt. …But what about the subprime mess? Isn't that going to bring the net worth of the US to $0 or even negative? Right now the entire subprime market is about $800bn and let's give full credit to the traders and media and say 50 per cent of that is at risk. So $400bn. Will $400bn worth of homes go into foreclosure? Of course not. Defaults are good for nobody. Things will and are getting restructured.

Prime Time for SubprimeWho is doing the best reporting on this scary story?

To be sure, the desire to live in a modern society and to be free of tyranny is universal, or nearly so. This is demonstrated by the efforts of millions of people each year to move from the developing to the developed world, where they hope to find the political stability, job opportunities, health care, and education that they lack at home. But this is different from saying that there is a universal desire to live in a liberal society – that is, a political order characterized by a sphere of individual rights and the rule of law. The desire to live in a liberal democracy is, indeed, something acquired over time, often as a byproduct of successful modernization.

The EU’s attempt to transcend sovereignty and traditional power politics by establishing a transnational rule of law is much more in line with a “post-historical” world than the Americans’ continuing belief in God, national sovereignty, and their military.

Outside powers like the US can often help in this process by the example they set as politically and economically successful societies. They can also provide funding, advice, technical assistance, and yes, occasionally military force to help the process along.

The blogs also serve as watchdogs over more traditional civil rights groups. When the NAACP first began featuring the Jena case on its Web site and claimed to be soliciting contributions for the teens' legal defense, it was a black blogger who quickly pointed out that the donation link directed visitors to the generic NAACP fundraising page, with no way for donors to direct their funds to the Jena defendants.

The Energy Department's Office of Energy Efficiency and Renewable Energy funds research at national labs and private companies, and recently offered $4 billion in loan guarantees to 16 clean-tech companies, including three in or near Silicon Valley. It also helps sponsor trade missions to China and India that have included energy start-ups, such as MiaSole, a Santa Clara solar-cell maker.

The global imbalances created by this dynamic of American borrowing and foreign lending appear stable for now, but if they slip suddenly, that could pose serious dangers for middle- and working-class Americans through soaring interest rates, a crash in the housing market, and sharply higher prices for anything no longer made domestically.

was a run on the pound sterling and he blocked the International Monetary Fund (IMF) from stabilizing the currency. With sterling on the verge of collapse, says Frankel, “Eisenhower told them, ‘We are not going to bail out the pound unless you pull out of Suez.’” Facing bankruptcy, the British withdrew. This incident, notes Frankel, “marked the end of Great Britain’s ability to conduct an independent foreign policy.”

US-funded Radio Free Europe/Radio Liberty have said that Web-based propaganda from Iraq is far more complex and sophisticated than Western media give insurgents credit for. Very "fast-paced and clearly aimed at the video game generation", there is a vast myriad - primarily Sunni - of perspectives from the other side of the Iraq War available on the Web, catering to a wide variety of media consumption habits.   

productivity, wealth, and national incomes have advanced sufficiently far to support an adequate UBI. And if enacted, a basic income would serve as a powerful instrument of social justice: it would promote real freedom for all by providing the material resources that people need to pursue their aims. At the same time, it would help to solve the policy dilemmas of poverty and unemployment, and serve ideals associated with both the feminist and green movements.

in 1999, the Alaska Permanent Fund paid each person of whatever age who had been living in Alaska for at least one year an annual UBI of $1,680.

By universal basic income I mean an income paid by a government, at a uniform level and at regular intervals, to each adult member of society. The grant is paid, and its level is fixed, irrespective of whether the person is rich or poor, lives alone or with others, is willing to work or not. In most versions–certainly in mine–it is granted not only to citizens, but to all permanent residents.