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Jonathan Tobin: Defending the Right to a Jewish State

Heather Hale: Compliment your kids without giving them big heads

Megan Shauri: 10 ways you are ruining your own happiness

Carolyn Bigda: 8 Best Dividend Stocks for 2015

Kiplinger's Personal Finance editors: 7 Things You Didn't Know About Paying Off Student Loans

Samantha Olson: The Crucial Mistake 55% Of Parents Are Making At Their Baby's Bedtime

Densie Well, Ph.D., R.D. Open your eyes to yellow vegetables

The Kosher Gourmet by Megan Gordon With its colorful cache of purples and oranges and reds, COLLARD GREEN SLAW is a marvelous mood booster --- not to mention just downright delish
April 18, 2014

Rabbi Yonason Goldson: Clarifying one of the greatest philosophical conundrums in theology

Caroline B. Glick: The disappearance of US will

Megan Wallgren: 10 things I've learned from my teenagers

Lizette Borreli: Green Tea Boosts Brain Power, May Help Treat Dementia

John Ericson: Trying hard to be 'positive' but never succeeding? Blame Your Brain

The Kosher Gourmet by Julie Rothman Almondy, flourless torta del re (Italian king's cake), has royal roots, is simple to make, . . . but devour it because it's simply delicious

April 14, 2014

Rabbi Dr Naftali Brawer: Passover frees us from the tyranny of time

Greg Crosby: Passing Over Religion

Eric Schulzke: First degree: How America really recovered from a murder epidemic

Georgia Lee: When love is not enough: Teaching your kids about the realities of adult relationships

Cameron Huddleston: Freebies for Your Lawn and Garden

Gordon Pape: How you can tell if your financial adviser is setting you up for potential ruin

Dana Dovey: Up to 500,000 people die each year from hepatitis C-related liver disease. New Treatment Has Over 90% Success Rate

Justin Caba: Eating Watermelon Can Help Control High Blood Pressure

The Kosher Gourmet by Joshua E. London and Lou Marmon Don't dare pass over these Pesach picks for Manischewitz!

April 11, 2014

Rabbi Hillel Goldberg: Silence is much more than golden

Caroline B. Glick: Forgetting freedom at Passover

Susan Swann: How to value a child for who he is, not just what he does

Cameron Huddleston: 7 Financial Tasks You Should Tackle Right Now

Sandra Block and Lisa Gerstner: How to Profit From Your Passion

Susan Scutti: A Simple Blood Test Might Soon Diagnose Cancer

Chris Weller: Have A Slow Metabolism? Let Science Speed It Up For You

The Kosher Gourmet by Diane Rossen Worthington Whitefish Terrine: A French take on gefilte fish

April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review May 23, 2006 / 25 Iyar, 5766

World markets' wild ride: Economic volatility is back with a vengeance

By Niall Ferguson


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http://www.JewishWorldReview.com | I think I have finally caught the Oxford English Dictionary. Look up "volatility" in the online dictionary (it's addictive, I warn you). Among the definitions you'll find are, "readiness to vaporize or evaporate," "tendency to lightness" and "capacity for … rapid movement."


Time for an update, guys. You're missing a definition of volatility that has been in daily use in the world's stock markets for years. And this kind of volatility — the financial sort — is giving the global economy a fright.


First, let's define volatility in a way the dictionary omits. It's a statistical measure of the frequency and amount of movement in the price of a security. If, for example, you buy a share and, during the next 12 months, its price scarcely changes, then it has low volatility. But if it jumps 5% on day one, falls 10% on day two and so on, then it has high volatility.


Last week, after years of drifting downward, financial volatility came back with a vengeance. Stock markets dived at the very moment they were approaching their pre-dot-com-bust highs. U.S. equities are down close to 4% from a month ago. In London, the drop has been just under 6%. Some emerging markets have been hit with cumulative four-week declines of 9% or 10%.


And it's not just stock markets that are suffering. Commodity prices have been on a roller coaster — especially copper and gold — soaring to records and then falling sharply back.


As usual, financial analysts have an explanation. The latest inflation data in the U.S. "surprised on the upside," as they say on Wall Street. Core inflation, excluding food and energy costs, is running at an annual rate of 3.2%. Surveys suggest that people expect inflation to rise higher. This puts the relatively untested chairman of the Federal Reserve, Ben S. Bernanke, in a quandary. Should he set interest rates higher, to dampen inflationary expectations? Or could that spark a crisis in the already slowing U.S. housing market and a spasm of pessimism on the part of highly indebted consumers?


Such short-run explanations are characteristic of both Wall Street and London, where vast significance is often attached to a single indicator or word uttered by the Fed chairman. Question: Why, only a year ago, were so many of these same analysts happily heralding "the death of volatility"? The answer is that they were indulging in what a financier of an earlier generation, Siegmund Warburg, would have called "wishful non-thinking." Measures of volatility had declined since about 2002. The happy non-thought was that these trends could continue indefinitely.


Here's what was happening. Fears that the dot-com bust (or 9/11) might cause a 1929-style Wall Street crash were dispelled as former Federal Reserve Chairman Alan Greenspan pumped low-interest liquidity from the Fed to the markets. American consumption soared as asset-price inflation moved from the stock market to the property market. Meanwhile, the possibility of a 1997-style Asian crisis receded as Greenspan's counterparts in Tokyo and Beijing accumulated huge reserves of dollars. The world's financial markets trended smoothly upward in unison, and down went volatility.

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But all this was based on a manifestly unsustainable process. The booming U.S. was importing vast quantities of Asian goods, paying for them with IOUs in dollars. Driving the boom was the readiness of Americans to remortgage their houses and save not a cent of their incomes. Most economists could see roughly how — but not when — this spiral of international and domestic debt accumulation would end. The dollar would start to weaken. Inflation would start to creep up. The Fed would raise rates. Consumers would tighten their belts. And if any of this happened with a jolt, then volatility would be back. Textbook stuff.


Nevertheless, as often happens in financial upswings, academic theories were formulated to give the appearance of rationality to the wishful non-thinking. A new international monetary system had come into being, we were told, modeled on the postwar Bretton Woods system, in which Asians pegged their currencies to the U.S. dollar and enjoyed rapid and risk-free export growth. It was a "stable disequilibrium," others suggested, oxymoronically. The U.S. wasn't really running a huge deficit; it was exporting some magical "dark matter" not captured by the official statistics.


I, too, had a go at rationalizing the prevailing exuberance, suggesting that foreign investors might not mind lending vast sums to the U.S. at trivially low rates of return if this was a kind of tribute to the American empire, paid in return for the benefits of the Pax Americana. My point, however, was precisely that this could not go on for very long. After all, the empire can continue to collect its tribute only if the pax it provides is real and has legitimacy.


Unfortunately, the American project of transforming the greater Middle East has run into increasingly obvious trouble since the invasions of Afghanistan and Iraq. Indeed, mounting political risk in the region has been one of the drivers of higher oil prices — yet another source of renewed volatility.


Come to think of it, perhaps "readiness to vaporize or evaporate" isn't such a bad definition of volatility after all.

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Niall Ferguson is a professor of history at Harvard University. He is the author of "Empire" (Basic Books, 2003) and "Colossus" (Penguin, 2004). Comment by clicking here.


05/16/06: The Cold Wars are coming
05/09/06: Many commentators are missing dangerous political shift
05/02/06: Put some sugar in your tank
04/25/06: Hu and the dog that didn't bark
04/18/06: Should Americans be less optimistic?
04/11/06: Globalization's second death?
04/04/06: So many ‘special’ friends
03/28/06: Let's get it right about what has gone wrong
03/21/06: Congress is trying to give the world a globotomy
03/14/06: Lame ducks can still bite back
03/07/06: A 19th Century critique of a 21st Century president
02/28/06: The crash of civilizations
02/21/06: Not the president, but close
02/14/06: Want historic trouble? Look south
02/07/06: Greenspan advising Britain? It's housing bubbles, deficits and potential meltdowns all over again
01/31/06: Missing the Cold War
01/24/06: It's a sick, Thick World
01/17/06: Tomorrow's world war today
01/03/06: Scotland, it's over, but keep the accents
12/20/05: History, democracy and Iraq
12/20/05: History, democracy and Iraq
11/22/05: Ghost of Napoleon haunts Tony Blair
11/22/05: Can it happen in Britain too?
11/15/05: Red plus blue equals purple
11/10/05: The fires of disintegration
11/01/05: Triumph of an über-wonk

© 2006, Los Angeles Times Distributed by Los Angeles Times Syndicate

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