"European CDS Spreads Widen" is the headline on a Wall Street Journal article this morning about the cost of insuring against a default on bonds issued by Portugal, Ireland, Greece, and Spain. At the end of the article is this explanation: "CDS are tradable, over-the-counter derivatives that function like a default insurance contract for debt. If a borrower defaults, the protection buyer is paid compensation by the protection seller. Swap buyers may be protecting investments they own or simply making bearish bets against companies or countries." It's one thing to buy protection on bonds that you hold. But it's another thing to buy it on bonds that you don't hold; that's kind of like buying fire insurance on a house you don't own. There's a big incentive to commit arson. It's similar in some ways to naked shorting, or selling stock that you don't own.

The great Michael Barone has a great column on what he calls "crony capitalism," which includes, but is not limited to, the investment banks whose executives President Obama praised the other day. Mr. Barone writes:

Goldman employee contributions to Democrats in 2008 ranked second only to those employed by the University of California. JPMorgan Chase's employees ranked No. 7. The stereotype of Wall Street being Republican is decades out of date.

A Nobel laureate economist who is not Paul Krugman had a piece in the Wall Street Journal back in 2006 about health care finance that is worth re-reading. It suggests the solution to controlling costs lies in "empowering the consumer by channeling third-party payment allowances through the patients." There's even an Amish angle.

Michelle Obama's campaign against childhood obesity was the subject of a post here last week. Now Christopher Caldwell has a take in the Financial Times that is worth a read:

An intriguing possibility that Mrs Obama brings up, surely unintentionally, is that the root cause of poor child nutrition is feminism – or at least the two-earner family. Mrs Obama said that, before she came to the White House, "juggling a full-time job with the round-the clock role of being a mom" left her "unable to cook a good meal for my kids, going to fast food a little more than I'd like, [and] ordering pizza, and I started to see the effects on my family, particularly my kids"

Mr. Caldwell concludes: "the budget is the place for such programmes, not some pseudo-democratic 'initiative' that relies for its effectiveness on exhortation and scapegoating."

"Arrogance of the elites" is a phrase with which readers of this site will be familiar; see, for example, posts with that headline here and here. Now Paul Krugman gets into the game with a column today asserting, "the real story behind the euromess lies not in the profligacy of politicians but in the arrogance of elites — specifically, the policy elites who pushed Europe into adopting a single currency well before the continent was ready for such an experiment." Mr. Krugman, a Yale graduate who teaches economics at Princeton, won the Nobel prize in economics, and has a column in the New York Times, might strikes some people as an elite himself. When even the elite are complaining about the arrogance of elites, it may be a sign that there is something to the problem.

President Obama snubbed Europe by deciding to skip a European summit in Madrid that is set for May, and by letting the Europeans find out about his decision by reading it in the newspapers. Now the EU is set to insult him back by rejecting his proposed "Volcker rule" restrictions on banks. We're waiting for the New York Times editorials and Democratic National Committee press releases faulting Mr. Obama for alienating our allies through his unilateralist policies.

Thomas Eddlem writes that Presidents Day, "is the most ridiculous and anti-liberty holiday of the year. Americans are asked to revere the office of president today when they should be fearing it and opposing it with every fiber of their being. The U.S. presidency is by far the greatest threat to liberty for Americans today." The article is totally over the top and I disagree with much of it. But sometimes reading extreme views can be useful in provoking people to examine their unexamined assumptions. Mr. Eddlem neglects that the presidents that Presidents Day honors -- Washington and Lincoln -- both sometimes infringed on individual liberty, but they did so in the service of greatly expanding liberty overall by winning independence from Britain and ending slavery.

The Mail on Sunday, a British tabloid, has an editorial condemning a climate change scientist for keeping a messy desk, which seems a weak argument, no matter where one comes down on the matter of climate change. The editorial, which is skeptical of man-made climate change, nonetheless cedes quite a bit of ground: "There is no doubt that careless and greedy exploitation has done much damage to the planet." This "greedy exploitation" language is right out of Karl Marx. Is it greedy exploitation to cut down trees and then use chemicals to turn the trees into paper on which to print the Mail on Sunday? Is it greedy exploitation to drill for oil with which to make gasoline to fuel the trucks to deliver the Mail on Sunday? Is it greedy exploitation for the newspaper's readers to cut down trees and destroy wilderness habitat to build houses for themselves and their families to live in? There are a lot of unstated ideological assumptions in the phrase "greedy exploitation" that the paper doesn't really explain. I don't deny that greed exists or that greedy, short-sighted individuals can pollute the environment or use it in a way that isn't sustainable over the long or even medium term. But a lot of what gets chalked up as greedy exploitation may just be self-interested decisions by humans who value their newspapers, or their houses, more than they value pristine animal and plant habitat. That even the global warming skeptics are using this "greedy exploitation" language is a testament to just how deep are the ideological inroads that have been made by the the environmental movement and the critics of capitalism. They've got even their opponents buying into their basic framework.

The New York Times waddled in over the weekend with its own review of Jerry Muller's Capitalism and the Jews. FutureOfCapitalism.com reviewed the book back on February 1.

A draft of the agenda (pdf) for the inaugural conference of the Institute for New Economic Thinking has been obtained by FutureOfCapitalism.com, and it's pretty interesting stuff for anyone who had imagined that something funded with $50 million from George Soros would just be a bunch of left-wing propaganda from someone who thinks the big problem is that university economics departments are doing too much indoctrination of students in the virtues of unfettered free markets. We reported yesterday that Bruce Caldwell, a biographer of F.A. Hayek, will be speaking at the opening night dinner. Other scheduled speakers include Edmund "Ned' Phelps, of Columbia University's Center on Capitalism and Society. When Professor Phelps won the Nobel prize a few years back the New York Sun devoted an entire editorial to kvelling about it. Also speaking will be Edward Prescott, another Nobel laureate whose views were generally lauded in a New York Sun editorial written after Professor Prescott appeared at a lunch in New York of the Manhattan Institute. University of Chicago's Eugene Fama, whose comments we've reported on here and here, is also a scheduled speaker.

The Hong Kong Economic Journal has published a version of FutureOfCapitalism.com's review of Henry Paulson's book On The Brink.

Heritage Foundation does some fine work, funded in part by direct mail campaigns that we've criticized here in the past. The latest direct mail letter arrived at my house the other day and complains about the left's "demonizing of grassrots Americans who protest government policies as Nazis." This is strange, considering that there are plenty of those on the right demonizing President Obama as a Nazi; it seems like I get emailed one of those YouTube videos once a day ("Hitler Reacts to Failure of ObamaCare," "Hitler Reacts to Loss of Massachusetts Senate Seat") and they all have hundreds of thousands of views. The best part, though, is the closing page of the letter: "The leftist groups I've described are supported mainly by limousine liberals, Hollywood moguls, billionaires like Soros's friends and the like. In sharp contrast, Heritage is supported by over 570,000 Americans, some on fixed incomes, mostly middle-class citizens who have to think carefully about where they spend their money. I know you are not a billionaire like George Soros or a wealthy Hollywood ideologue like Barbra Streisand." The kicker is the signature on the letter — Steve Forbes. I've voted for Steve Forbes, I agree with him a lot, and I occasionally write for his magazine's Web site. I've got nothing against the guy. He once sent me a green silk "Capitalist Tool" necktie as a gift, which I wear proudly, including while riding the subway in Brooklyn. But if Heritage is looking for someone to fire up middle-class fixed-income Americans against "limousine liberals, Hollywood moguls, billionaires like Soros's friends and the like," might they have wanted to find someone without a 151-foot yacht that serves 18 14-oz. tins of Beluga caviar each season?

In response to last night's item here picking up Jonathan Weil's Bloomberg News column faulting Treasury Secretary Paulson for not notifying the Department of Justice or the Securities and Exchange Commission or the public when he knew that Lehman Brothers and Merrill Lynch had overstated the value of their assets, a FutureOfCapitalism.com reader writes in to make the point that it is more likely that Paulson had no idea what any of the securities were worth at Lehman, Merrill or other places. The real value of these assets, such as mortgage-backed securities, was volatile and dependent to some significant degree on the actions and statements of Mr. Paulson, Timothy Geithner, and Ben Bernanke. At the time, people in and out of government were describing these as "toxic assets" over and over again. But in the past year, as the forced selling brought on by government policy and general hysteria has subsided, the value of many of these assets has rebounded. In other words, had Mr. Paulson called the SEC or the Justice Department in on Lehman Brothers executives, as Mr. Weil suggests he should have at least considered doing, he would have been prosecuting Lehman's executives for valuing assets on the basis of what they were worth before the Paulson-induced panic or after such a panic, rather than their value during the panic. Not much consolation there to Lehman or Merrill shareholders who would have liked to have known what Mr. Paulson did at the time about the value of what they owned. But a point worth mentioning nonetheless.

PBS's "NewsHour" with Jim Lehrer program last evening aired a piece with some sensational allegations about Goldman Sachs. The segment, by NewsHour's veteran economics reporter Paul Solman, was funded by the Alfred P. Sloan Foundation. Here's a highlight, with Mr. Solman interviewing David Stockman, identified in the piece as "President Reagan's budget director" and a "longtime Wall Street insider." They are discussing how Goldman Sachs makes its money.

PAUL SOLMAN: But isn't this front-running, trading ahead of your clients to profit from the price changes that will come from the clients' trades, but for your own firm's benefit? And isn't that, strictly speaking, illegal?

DAVID STOCKMAN: The long and ancient secret of Wall Street is, they have always been front-running their clients. In other words, when you're in the customer trading business, and then you're in the proprietary business, which trade are you making first? I don't know. And, if it's in milliseconds, how's anybody going to figure it out?

We remarked yesterday on the comment by the "chairman and editor-in-chief" of the Slate Group, Jacob Weisberg about "the childishness, ignorance, and growing incoherence" of the American public. Today the Wall Street Journal has an op-ed piece by Peter Wehner on the point.