Too good to be true, but not too bad to be true

I am pleased - no, make that proud - to say that I had never heard of Bernard Madoff until last weekend. Maybe I had come across his name when he was Chairman of the Nasdaq, or in the context of Nasdaq trading, the arena in which his company was one of the biggest players. But, in common with a surprising number of other people supposedly 'plugged-in' to the investment scene, I had never heard of him in the context of asset management.

That lacuna has now been compensated for, by reading hundreds of pages about 'the Madoff scandal' or 'affair'. Yet I still have no idea how he managed to do what he himself claims he did, let alone answers to the endless list of questions about this mess.

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Obama's kinda town?

Almost two weeks after the US presidential election, I'm still looking for one of the pundits to make a fairly obvious point: Obama's from Chicago. He is the first president to emerge from the mid-West since Harry S. Truman, and that was so long ago as not to be relevant anymore.

What difference does it make? Especially in the case of Obama, who seems to hail from anywhere and everywhere simultaneously - Kansas or Kenya, Indonesia or Illinois, Hawaii or Harvard: you name it, he's been there, done that, and probably sent a postcard as well.

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Save and go to hell

The key government response to the crisis - by all governments, everywhere - has been to throw money at whatever was perceived to be the problem. This solution was pursued via the two main tools of economic policy, namely monetary policy and fiscal policy.

Monetary policy centers on interest rates, with the central bank of each country reducing rates to make money cheaper. Reducing rates is done by pumping money into the money markets and buying short-term bonds and bills, until their rates come down to the level the central bank wants. Fiscal policy means using taxation and the government budget; when you want an expansionary fiscal policy, to boost the economy, you either cut taxes or give tax breaks, or you spend extra money - or both.

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Bye-Bye 'Buy-Buy'

For over a year now, since the financial crisis really took off, I have kept a crude, hand-written slogan over my desk which says 'An economy based on people buying things they don't need with money they don't have'. It is my way of summarizing what went wrong with the US economy (and, indeed, that of the entire Anglo-Saxon world) and why and how we got into this extraordinary mess. It is also a much-needed lifeline to simple ideas and clear thinking, in the face of reams of pseudo-sophisticated garbage that I receive in the guise of research and plough through on a daily basis.

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