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The Slum Dwelling of European Elites

A ripped election poster shows a smiling Silvio Berlusconi on Feb. 25 in Livorno, Italy

Photograph by Laura Lezza/Getty Images

A ripped election poster shows a smiling Silvio Berlusconi on Feb. 25 in Livorno, Italy

“I don’t think the economy looks like it did in 1929. The most violent and urgent of factors in the great crash was the collapse of the banking system. That can’t happen anymore because of the Federal Deposit Insurance Corporation” and other safeguards. He explained that deposit insurance and limits on leverage meant “you won’t get the pyramiding effect” that cracked the financial system in 1929.

— George Stigler, University of Chicago and Nobel laureate, Wall Street Journal, Oct. 20, 1987 (as quoted by Floyd Norris, “A Computer Lesson Still Unlearned,” New York Times, Oct. 18, 2012)

One should hardly have to tell academicians that information is a valuable resource: Knowledge is power. And yet it occupies a slum dwelling in the town of economics.

— Wikipedia, “George Stigler”

Any day you can quote George Stigler and Floyd Norris is a good day. (Stigler is our distillate of Frank Knight on to Milton Friedman by way of Jacob Viner. Go, White Sox!)

Yesterday was not a good day for Italy. It was not a good day for European elites. The key phrase, above, is “pyramiding effect.”

Norris applies vintage Stigler to our present deficiency in computer humility.

Europe enjoys a different deficiency and is frozen by its own potential pyramiding effect.


The grand deception, and I was dismayed this morning by the same-old-same-old from said elites, is that Italy is about a pyramiding of finance.

The brute reality is what happened across Italy was a primal political scream. The only “pyramiding” that matters now is how other peoples adjust, adapt, and replicate what occurred in Italy.

It’s time to break out the Stigler, the Spence, and the Stiglitz.

This financial crisis just became a political crisis via the power of the vote … democracy. For now in Italy, information is a valuable resource. Just possibly, before it is too late, they’ll get it in the slum dwelling of European elites. Discuss.

Keene hosts Bloomberg Surveillance 7-10 a.m. ET on 1130 AM in the New York metro area and nationally on SiriusXM 113.

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