Things I'm reading that you should read too

Woke up this morning to a VERY large snowstorm blasting outside my window. I may make the attempt to visit the Royal Ontario Art Museum I was planning but then again maybe not.

Regardless of the weather, the internet is full of interesting and useful things, two of which I'll pass on:

1. There's a great article about Samuel "Dictionary" Johnson in the New Yorker this month. What a deeply interesting and strange and lonely person. Sample:

The dictionary’s ostensible purpose of settling and “fixing” the language was a chimera. Its real, implicit purpose was to reassure a growing new world of middle-class readers that there were rules, and someone who could give them. Young men on the street, people in boats on the Thames, bluestockings at dinner parties would stop him, gather up their courage, and ask him how to pronounce “irreparable.” Johnson was sometimes annoyed by the constant demands on him to be the No. 1 Word Man, full of wise definings. As he said once, “we all know what light is; but it is not easy to tell what it is.”

2.) The Atlantic scores an interview with Gao Xiqing, head of China's dollar investments. Very interesting. Also, brilliantly titled. And scary.

I was predicting this many years ago. In 1999 or 2000, I gave a talk to the State Council [China’s main ruling body], with Premier Zhu Rongji. They wanted me to explain about capital markets and how they worked. These were all ministers and mostly not from a financial background. So I wondered, How do I explain derivatives?, and I used the model of mirrors.

First of all, you have this book to sell. [He picks up a leather-bound book.] This is worth something, because of all the labor and so on you put in it. But then someone says, “I don’t have to sell the book itself! I have a mirror, and I can sell the mirror image of the book!” Okay. That’s a stock certificate. And then someone else says, “I have another mirror—I can sell a mirror image of that mirror.” Derivatives. That’s fine too, for a while. Then you have 10,000 mirrors, and the image is almost perfect. People start to believe that these mirrors are almost the real thing. But at some point, the image is interrupted. And all the rest will go.

When I told the State Council about the mirrors, they all started laughing. “How can you sell a mirror image! Won’t there be distortion?” But this is what happened with the American economy, and it will be a long and painful process to come down.

I think we should do an overhaul and say, “Let’s get rid of 90 percent of the derivatives.” Of course, that’s going to be very unpopular, because many people will lose jobs.