To The Point

America's unequal strata,
As confirmed by definitive data,
Have made it quite plain,
On Wall Street and Main,
That something is deeply the matta.

Insider Trading: Is It Bad?

If A buys a company share
From B, who remains unaware
Of the info that A
May not give away,
Well then, this is rather unfair.

The sentencing of hedge fund manager Raj Rajaratnam to 11 years in prison for his insider trading conviction highlights once again the seriousness of this offense in the US legal system and, for some, revives the debate over whether it should be so.  Mr. Rajaratnam, who will soon rub shoulders with Bernie Madoff in the Butner, NC federal prison, used a network of experts in selected industries to "find an edge" in his investments.  Such experts really comprised a network of well-placed tipsters, US Attorney Preet Bharara convinced a Manhattan jury.  To those who would argue that insider trading is a victimless crime, one could point out that every inside trade has a counterparty unaware of the underlying material, non-public information, who is thus cheated out of the full value of the traded stock; in Mr. Rajaratnam's case, the defrauded values were in the millions.

Taxed to the Nines

Said Cain: "With this tax plan of mine,
Your taxation is fair, flat and fine!"
(But it opens the door
For a VAT on the poor);
Said the Right and the Left: "Nein, nein, nein!"

With Herman Cain's rise in polls of Republican Presidential primary voters, his "9-9-9" tax plan is getting a closer look. The early findings have both progressive and conservative analysts sounding like hordes of angry Germans. Anti-tax groups such as Freedom Works point out that Cain's 9% national sales tax (and elements of his 9% corporate tax) could act as a Trojan Horse for a larger and much less transparent value-added tax. Meanwhile, the Think Progress blog concludes that Cain's 9% flat income tax, combined with the sales tax and the elimination of taxes on capital gains and inheritances, would dramatically shift the tax burden downward to the poor and the middle class.

Message From Slovakia

"'Ere a bailout our nation commits to,
Some cold perspiration befits you,
As this saga has shown
That our currency zone
Is prone to financial jiu jitsu."

Well played, Slovakia. This tiny outpost of New Europe now holds the fate of the €440 billion European Financial Stability Facility (EFSF) in its hands. As the last of the 17-member euro zone to take up the ratification of the EFSF, Slovakia roiled the waters Tuesday when its divided parliament voted No. Even though a majority of the Slovak parties support the stability framework in principle, the question is caught up in parliamentary maneuvering, with the government evidently headed for a no-confidence vote. In the meantime, France and Germany can only sweat it out, as they test the limits of their persuasive powers.

And the Nobel Goes To...

The committee bestowed some respect
On the science of cause and effect
With a new Nobel prize
For a couple of guys
Who proved that it's hard to project.

The 2011 Sveriges Riksbank Economics Prize in Memory of Alfred Nobel has been awarded to two Americans who have done pioneering work on the effects of government policy on the macroeconomy. Thomas Sargent of NYU and Christopher Sims of Princeton (pictured right above and below respectively), who were classmates at Harvard and now teach a course together at Princeton, have worked mostly separately and often disagree; the Nobel committee felt that their different approaches were complementary. Mr. Sargent developed complex models to predict the behavior of the economy, while Mr. Sims is skeptical of such models and has focused on direct analysis of economic data.

European Financial Stability Negotiations

Said Merkel, "On this I agree
With Monsieur Président Sarkozy:
There's a pretty good chance
Of a downgrade for France
And political fallout for me."

Against the backdrop of the failure of the French-Belgian bank Dexia, French President Nicholas Sarkozy met with German Chancellor Angela Merkel on Sunday to resolve their differences over the path to European financial stability. The two announced to the press that a deal would be struck by the end of the month, meaning that agreement is still a long way off. France would like its banks to have access to the European Financial Stability Facility for capital support, but Germany - the biggest contributor to the EFSF - would face domestic political unrest. The Germans, for their part, would like troubled banks to draw on private or national capital sources, but France might face a downgrade if it tried to shore up its banks on its own. A Franco-German agreement is key to resolving the Greco-Italo-Hispano debt crisis that grips Europe.

Harvard Nobel Prize in Economics Prediction Pool

A man of conviction who needs
To declare which economist leads
May wager a bet
On the one who will get
That prize given out by the Swedes.

Nobel Prize season is upon us: on Monday, October 10, the winner(s) of the 2011 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel will be announced in Stockholm. That means that once again it's time for the Nobel Prize in Economics Pool, sponsored by Harvard University. The self-described "world's most accurate prediction market" invites economists far and wide to wager a dollar on the name of each predicted winner. Although practitioners of the Dismal Science failed to predict last year's winners, Thomson Reuters has stepped in with a handy handicapping sheet. Don't delay - entries must be received in Cambridge MA before 11:59 PM this Sunday night!

Oktobernomics

Said a sturdy Oktoberfest waiter,
Dressed up in his Hosen of Leder:
"Is this best-ever year
For consumption of beer
A good or a bad indicator?"

Organizers of the Munich Oktoberfest reported that 6.9 million visitors drank a record 7.5 million liters (2 million gallons) of beer this year.  (Many readers may not be aware that the annual festival actually runs from September 17 to October 3.)  Hungry quaffers ate hundreds of thousands of roast chickens, 118 oxen and miles of sausage as well.   Is all this record-breaking revelry a positive indicator for Europe, or are crisis-weary Germans simply drowning their sorrows in Löwenbräu? One sign of a new frugality amidst the excess: the Münchener Polizei reported fewer brawls in which beer steins (or Maßkrüge, in the local vernacular) were broken over someone's head.

It's Your Turn

Said Bernanke, recounting the facts,
While deflecting some Red-State attacks:
"The Fed did our part;
It's on Congress to start
To simplify filing one's tax."

Fed Chairman Ben Bernanke addressed the Congressional Joint Economic Committee on Tuesday, and told them that they and their colleagues must work together with the White House to renew the "close to faltering" American economy. His suggested Congressional to-do list includes finding a permanent solution for Fannie Mae and Freddie Mac; easing mortgage refinancing while enabling banks to rent out foreclosed properties; and simplifying the US tax code. At the same time, he dismissed the ever-more-frequently heard Republican criticism that, by keeping interest rates low, the Fed is enabling federal budget deficits. "I don't think that's a valid point," retorted the Chairman.