In praise of blogging: Hoist from 2009 archives

I’m pleased to see Jason Potts tweeting “Blogs are still a thing. This one I just came across is the thingest. It’s like @slatestarcodex, but for econ & tech artir.wordpress.com”. As a result of tweeting back my 2009 post on Blogging the crisis, I re-read it. Sometimes I’m surprised at how badly I’ve written, sometimes how well. This time I was pleased. So I though it’d re-post it – below the fold. All I can say is that if our institutions weren’t asleep at the wheel, we’d have wrapped up most peer reviewed journals into some open system of blog posts which were reviewed and revised in real-time online.

 Blogging the Crisis: Enter the bright world ushered in by 2008

George Soros called 2008 the end of an era the bursting of a super-bubble. It also the beginning of an era: The era in which an unlikely cast of characters assembled themselves to crowdsource answers to the global financial crisis.

In late 2006 a former academic in English with decades of experience in Americas mortgage industry, off work ill, began posting at finance industry blog Calculated Risk, anatomising her industry and prophesying doom with encyclopedic knowledge and wry hilarity.

Why were things going off the rails?  “Because God hates us” she suggested beginning a paragraph that explained yet another attenuation of the relationship between borrower and ultimate lender in the (by then) stupefyingly complex chain of mortgage securitisation.

To retain her good name in the industry she wrote pseudonymously using only her family nickname Tanta. But in the intellectual hothouse of the blogosphere she rapidly gained the authority she deserved even being cited in Federal Reserve research.

Welcome to the turbocharged ecology of cyber-opinion where intellectual esteem matters rather than notoriety or media budgets: Where towering figures usually, but not exclusively, top academics direct the traffic, and literally hundreds of high quality contributors weigh in with posts and comments like a set of strategically placed cameras around a sports ground. Blogs like Naked Capitalism, Angry Bear, Follow the Money and Grasping Reality bring you the action from every angle.

One of my favourites is Steve Randy Waldman whose searching posts on Interfluidity rethink issues from first principles with bracing originality and perspicacity.

A doctoral student in Kentucky he admits “I’m not the brightest bulb on the tree”. But dont be fooled. In an introductory post in March 2006 he’s willing himself to articulate his thoughts. “I am not a humble person. There are things I have to contribute that could really matter, that could be revolutionary even”. I wont be surprised if he pulls it off.

As the crisis unfolded, from one bailout to the next, we’d see the wisdom of this crowd at work within hours, pouring over the detail and the theory, sharing inside stories, and proposing or refining alternative policies, orthodox and otherwise.

The crowd’s influence had been kept at bay whilst bailouts were agreed behind closed doors and presented as a fait accompli, but those doors got prized open when the scale of the next bailout US$700 billion required Congressional approval. Treasury Secretary Hank Paulson put his case in a skimpy (three page) proposal.

Within hours the blogosphere was crawling over the plan like a swarm of angry ants. Tanta hated it. Waldman pronounced it breathtakingly awful. If troubled assets were purchased at market prices as Paulson was publicly suggesting, this could help liquidity concerns which arise when creditors seek payment before banks loans fall due. But the real problem had become banks’ solvency – their liabilities swamping their assets. And to tackle solvency, the troubled assets would have to be purchased at inflated prices.

If so, then the plan simply slipped money to the banks (like Goldman Sachs whose immediate previous CEO had been Hank Paulson) with no quid pro quo such as requirements to maintain lending, constraints on executive salaries or some share in the upside of the governments investment (for instance by way of equity in the banks).

Yves Smith of Naked Capitalism duly turned up evidence that, behind those closed doors, Paulson had conceded his intention to pay inflated prices, something US Fed Governor Ben Bernanke publicly conceded soon afterwards.

Already the best known economic commentator since Keynes, New York Times columnist Professor Paul Krugman had recently taken to blogging making him even more of a focal point. He denounced the plan as Cash for Trash. He documented how Hank Paulson’s self-justifications kept changing in contradictory ways, and likened Paulson’s proposal that his execution of the $700 billion plan be immune from all legal scrutiny to Louis XIV: L’etat, c’est Hank.

Heavyweight academic and former chairman of President Bush’s Council of Economic Advisors and now regular blogger Greg Mankiw weighed in against Paulson’s preference for debate behind closed doors. “If the Washington crowd cannot bring along the intellectual elite as a first step toward convincing a broader audience, they will end up pretty much alone.”

And so it was that Congress insisted on improving Paulson’s plan to make it more like what the bloggers were calling for. Indeed Paulson has used the plan to acquire equity from the firms it’s bailed out, though on remarkably, (though still somehow unsurprisingly) favourable terms for Wall St. Of course the bloggers and columnists weren’t the only voices. Gordon Brown’s decisive temporary nationalisation of several British banks set an obvious example (though the blogosphere immediately broadcast its significance). And people like Steve Waldman and Tanta got a real voice, and made a real difference.

Then things were capped off by two events. Paul Krugman won the Nobel Prize, though not for his work on financial crises (his immediate reaction was I don’t have time for this).

And Tanta’s identity was revealed as 47 year old Doris Dungey.

The illness that had driven her from the workforce was ovarian cancer which had now claimed her. Of course the family that called her Tanta had grown by then through a process beautifully laid out by Steve Waldman on Interfluidity.

I am struck . . . by the odd intimacy of this medium. . . .

When Paul Krugman won his Nobel, I was oddly euphoric. I’ve never met the man, or even corresponded with him, but he felt like somebody I know . . . because he participates so actively in this endless sprawled-out conversation . . . . When Krugman won a Nobel, it felt like a kid from my neighborhood had hit the big time . . . .

I’ve never met or corresponded with Tanta, though Ive long been a fan. But this doesn’t feel like the death of a distant celebrity. . . . Tanta came out of nowhere and contributed greatly . . . . She described the mortgage industry in amazing detail, without ever being dry or dull. (Is that even possible?) A quirky, brilliant voice has disappeared.

Her silence will be loud in the cacophony.

Indeed it will. She died a pioneer of a medium that was just coming into its own and that was already doing us a power of good.

 

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4 Responses to In praise of blogging: Hoist from 2009 archives

  1. I am and will always be Not Trampis says:

    Yes,

    Calculated risk was my entry to how blogs are wonderful for getting to understand an issue well. Tanta was very good.

    I remember being at the leading funds Manger at the time when the GFC was about to hit and introduced the head of research to Calculated risk and he thought it a Revelation.

    Now there are truly wonderful blogs around as I show every friday.

    I think it reads pretty well today nick but then I thought it would !

    Well done

  2. Nicholas Gruen says:

    Thanks Homer, and yes, blogs were a revelation. I remember coming across John Quiggin’s blog in 2005 I think, thinking to myself “Wow, so we can just look up all John’s notes on any subject he’s opined on since 2002. Very cool.” And then of course I discovered so much more.

  3. I am and will always be Not Trampis says:

    I think Mark Thoma is another who deserves mention. His daily links were fantastic.

    now both links and other blogs are easy to get to and at some time I will blog on blogs who have great links or blogs on their sidebar like Troppo.

    We also have great debates. The current one on helicopter money is a good example that we plebs can read and understand with glee.

    And Nick we need more writing from you.

    As well as being the nicest person in the blogosphere you are one of the most thoughtful!!

    P.S.

    what we haven’t seen in a long time anywhere is a thread of doom. Why I ask

  4. Nicholas Gruen says:

    Flattery is not permitted here at Club Pony Homer – you know that.

    I have written quite a bit lately, and am quite proud of the longish piece I published in two parts at the Mandarin recently – hosted here. Sadly I think a lot of economists will think it’s not quite economics – no models or simple principles like making something more or less ‘market friendly’. Suggests it’s a subtler problem than that.

    As for nice, you should ask my kids. They call me “Grinchy”.

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