Since 1959 the banking system essentially didn't hold excess reserves. That changed in

In view of the mortgage meltdown that led to the current financial crisis, we couldn't resist rerunning this 2004 photo from the Associated Press that appeared in this spot April 3. It was taken after Bank of America agreed to a $6 billion affordable housing program pushed by the Neighborhood Assistance Corp. of America (NACA). The program was designed to provide mortgages to low-income homebuyers without requiring a down payment or charging closing costs and fees. The expressions on the faces of CEOs Kenneth Lewis of BofA, left, and Chad Gifford of FleetBoston as they listen to NACA's Bruce Marks say it all.

The official price for a liter of gasoline in Iraq is the equivalent of about 38 cents, or about $1.44 a gallon. But the black market price, which has risen significantly in recent days, can be almost three times that amount.

As Thomas Sowell famously put it: "As an economist, whenever I hear the word 'shortage' I wait for the other shoe to drop. That other shoe is usually 'price control.' "

For more on price controls click here. For an unpublished letter to the editor on the the effect of price controls in Iraq click here.

Things We Could Do to Help Make Cuba Libre

We do not know if Raul Castro's recent liberalization moves are the beginning, middle or end of the Cuban reform process o("The Meaning of Raul's 'Reforms,' " by Mary Anastasia O'Grady, Americas, April 21). We do know, however, that U.S. policy toward Cuba is not helping.

Cubans are openly discussing alternatives to almost 50 years of communism while the U.S. continues to block any possible interchange of people and ideas.

Why not start by lifting the travel ban to Cuba for family members as long as Cuba lifts travel restrictions for its own citizens? The latter is likely to happen anyway, so why doesn't the U.S. join the reform process?

Perhaps we can also negotiate lifting restrictions on family remittances to the island. This will have the desirous effect of making Cubans less dependent on their government and thus more likely to speak up.

Relaxing restrictions on Cuba will provide greater oxygen to those on the island demanding change. It's time to end our failed Cuba policies and help Cubans build a better society

Ignacio Sosa

Globalis Investments LLC
Boston

Loss of power in Southern China has stranded millions of Chinese workers trying to return to their villages for their yearly trip home. While the crisis in Guangzhou is being blamed for the most part on bad weather, there is another cause: price controls.

Here are the details from the Finanical Times:

The widespread price controls instituted by Beijing to combat inflation, the number one economic priority of the central government at the moment, have in fact helped worsen the present crisis. On top of the snow storms, the root of the coal and power shortages is a partially deregulated pricing system that has pitted the two industries against each other in a game of chicken.

Coal prices have been largely deregulated in recent years. Power prices remain controlled. As coal prices have soared in recent months and weeks, mines have held back supplies to try to cash in, while the generators have reduced their power output rather than pay up.

The WSJ this past weekend had a truly inspiring front-page article profiling Yoani Sánchez, a 32 year old blogger from Cuba (click here for her website). It's well worth the read. Below is a video summary of the article as well as a few quotes:

From the article:

On a recent morning, Yoani Sánchez took a deep breath and gathered her nerve for an undercover mission: posting an Internet chronicle about life in Fidel Castro's Cuba.

To get around Cuba's restrictions on Web access, the waif-like 32-year-old posed as a tourist to slip into an Internet cafe in one of the city's luxury hotels, which normally bar Cubans. Dressed in gray surf shorts, T-shirt and lime-green espadrilles, she strode toward a guard at the hotel's threshold and flashed a wide smile. The guard, a towering man with a shaved head, stepped aside.

"I think I'm able to do this because I look so harmless," says Ms. Sánchez, who says she is sometimes mistaken for a teenager. Once inside the cafe, she attached a flash memory drive to the hotel computer and, in quick, intense movements, uploaded her material. Time matters: The $3 she paid for a half-hour is nearly a week's wage for many Cubans....

...The problem is, saying what you think in Cuba can be dangerous. In 2002, Cuba imprisoned dozens of journalists who declared themselves dissidents and published criticisms of the regime -- many are still there. Most Cubans are so afraid of being labeled a critic that they are reluctant to utter the words "Fidel Castro" in public. Instead, they silently pantomime stroking a beard when referring to their leader...

...A recurring feature is her 12-year-old son's school. Recently, he participated in a military shooting exercise there. Her son enjoyed playing soldier, but she was outraged. In another entry, she described how parents congregate at the schoolyard at lunchtime to secretly pass food to their children who don't get enough to eat. She described her sadness at seeing children whose parents who don't turn up and will go hungry.

An Oct. 22 entry talked about how her son's teacher told the class that one student had been secretly designated an informer -- charged with keeping a list of good and bad kids that the teacher could use to mete out punishment.

"So young, and these children experience the paralysis generated by the feeling of being watched," she wrote. "I look around me and confirm that the successive irrigations of paranoia have worked. Our fears are populated by CIA agents and members of the secret police."

...In addition to publishing her blog, she talks freely about taboo subjects. She tells neighbors that she doesn't vote, a shocking admission in Cuba. She isn't a member of any of Cuba's quasi-compulsory political organizations.

"There are many ways to pretend in Cuba: you can say things that you don't believe, or you can stay quiet about the things you don't like," she says. "I have the tranquility of being able to look at my son and he knows that I don't fake it."

Still, there is no guarantee that Ms. Sánchez's activities won't land her in legal trouble. Even if jailed, Ms. Sánchez says she would find ways to publish her blog. "You have to believe that you are free and try to act like it," she says. "Little by little, acting as though you are free can be contagious."

21:37 PST Venezuelan Voters Reject Chavez's Constitutional Reform

By Raul Gallegos and Darcy Crowe

Of DOW JONES NEWSWIRES

CARACAS (Dow Jones)--Venezuelans voted to reject President Hugo Chavez's constitutional reform proposal by a slim margin Sunday, marking the first electoral defeat in the president's nine years in office.

Venezuelans who opposed Chavez's reform, which he had said was a cornerstone for his plans to guide the Andean country towards socialism, managed to block the measure by a narrow margin.

The National Electoral Council president, Tibisay Lucena, said in televised remarks that although the total vote tally was not finished "the trend was irreversible."

President Hugo Chavez accepted defeat in televised remarks shortly after the electoral authority announced the results.

The 69 articles included in the reform were divided in two blocs that Venezuelans voted on. In the first bloc, which encompassed the majority of the proposed economic reforms, opponents of changing the country's charter won with 50.7% of the vote, while supporters only obtained 49.29%.

In the second bloc, which granted the executive branch the power to suspend basic legal rights under a state of emergency among other changes, opponents to the reform won with 51.01% of the vote, while supporters obtained 48.94%.

Reforms would have let Chavez run for office indefinitely, control foreign reserves, censor the media in times he deemed were an emergency, appoint cronies over locally elected officials, and the list goes on.

I'm still in shock both Chavez and the CNE have admitted defeat. What a victory for liberty in Venezuela.

More on Chavez here, here, and here.

Update: Well, I guess this should have been expected. More headlines:

Venezuela's President Says Reform Plan Defeated `For Now'

Venezuela's Chavez: Opposition Groups Still A Minority

Venezuela's Chavez: Country Still Building `Socialism'
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Venezuela's Chavez: Constitutional Proposal `Still Alive'

Your article "In Little Havana, Cuba Si, Obama No" (Politics & Economics, Sept. 10) captures the generational conflict between older Cuban-Americans who oppose any change in U.S. policy toward Cuba and younger Cuban-Americans who have a more realistic approach. The demographics are in favor of those Cuban-Americans who seek a new Cuba policy that is more consistent with American values of freedom and openness.

It's good that Barack Obama gets it. However, as a Cuban-American and a Republican, I would like to see my party align itself with the younger generation of Cuban-Americans. As the Republican Party becomes increasingly associated with perceived anti-immigrant policies and an outmoded U.S. policy toward Cuba, the party will lose the Cuban-American vote. That could easily tip the electoral calculus in 2008 and 2012 in favor of the Democrats. Wake up Republicans, it's not just the liberals who want to see a different approach to Cuba.

Ignacio Sosa

Principal, OneWorld Investments LP, Boston

Cuban Migrants Confront Harsher U.S. Tactics at Sea

KEY WEST, Fla. -- Agustin Uralde could barely hear his wife above the roar of the smuggler's speedboat last summer as it tried to outrun two U.S. Coast Guard vessels and a helicopter, bearing down with sirens wailing. Huddled around the couple were 27 other wet and frightened Cubans. "She said, 'Pray for me, my love, because I am praying for you,'" Mr. Uralde recalls.

Moments later, a Coast Guard gunner shot two copper slugs into one of the boat's engines, forcing it into a hard left turn before it groaned to a stop. Mr. Uralde says the abrupt motion threw his wife headfirst into the side of the boat. By the time the Coast Guard had brought her ashore for treatment two hours later, following a long debate over whether she was really badly hurt, Anay Machado Gonzalez, 24 years old, was dead. She was the third Cuban migrant in just over a year to die of traumatic head injuries after a high-speed ocean chase.

For nearly 13 years, Coast Guard and Border Protection agents have been chasing human smugglers around Florida. In 1994, President Clinton changed U.S. policy to allow only Cubans who physically made it to U.S. soil to stay in the country, while those caught at sea were returned to their Communist island. Before that the Coast Guard simply plucked Cuban migrants off homemade rafts and brought them to Miami as refugees.