Monday, January 31, 2011

We Can Turn This Recovery Around, Right Now, Young Man

I try not to read the political news but some economic/political news has filtered down to me by necessity.

I believe, if I read between the lines correctly, the Republicans are threatening to default on our national debt by not raising the debt ceiling. And Speaker of the House Boehner thinks cutting government spending will create jobs, and believes he has hundreds of economists that agree with him.

First, let's have the President publicly call the bluff and ask which hundreds of economists think cutting government jobs will increase jobs. I personally would like them on record. Which economists think that government spending did not save us from a far worse depression?

And the blackmail? When President Obama called Senator McCain's bluff during the election, Senator McCain blinked and came to the debate he had just said he would not attend. It proved the stunt was a bluff. If the Republicans want to internationally bankrupt us, it is awfully tempting to give them the rope they need and see if they use it. Take a play from their own playbook, don't give them one single concession. It is all or nothing, no need for thought, work, or compromise

Speaker Bohner seems to make things up out of the same rarefied thin air that Fox News uses, and, in this case, the Tea Party also, if I'm not mistaken. Bankruptcy by defaulting on our debt, hmmmm, perhaps that one stone would kill a whole lot of birds.

Friday, January 28, 2011

Alan Greenspan's Loyal Posse

Oh for gosh sake, the Financial Crises Inquiry Commission is split down party lines, with the Republicans apparently believing government, businesses, nor individuals hold any personal responsibility for mistakes leading to the "downturn." Who ever does have personal responsibility in their world except the unfortunate victims of their policies? This logic is seemingly only for the purposes of disagreeing for the sake of disagreeing, defending the indefensible ideas that this is some kind of freak event, the likes of which no one has ever seen in any history or economics class. Recently a nonpolitical stance was forced upon me by very reasonable theories I have read, and the logic that economic problems have their beginnings in both parties. However, events like this commission report do point out that some people seem more correct than others, now and then. I understand the seductive power of the idea that businesses and individuals are responsible for their own actions and some kind of unseen force will regulate everything to the platitudinal tune of "everything will work out." But I really have some trouble with the concept that all of our financial problems were the result of the whim of nature, a black swan, unforeseeable.

Maybe if I read deeper I'll find out that the dessenters to this report have specific reasons that are compelling enough to cause them to vote against it. But I expect at least a modicum of logical reasoning that Alan Greenspan's laisez faire capitalism had just a little something to do with this awful thing. Even the man himself seems lost in a cloud of regret.

About Alan Greenspan not so many years ago: "He almost has rock star status," Mark Zandi, chief economist at wrote. "He has everything but the groupies." Perhaps if we can launch a letter writing campaign on facebook we can get him uncanceled and renewed for another season of Laisez Faire Knows Best. :)

Wednesday, January 26, 2011

Aimlessness Reconsidered

Hmmm.... Ok.  Done.  I'm still going to strive for aimlessness.

However, I might expand a little on my decision making process if you want to bear with me, (which you shouldn't, but I warned you.) I started this blog with Tristram Shandy in mind, as I have said before, but I'm not sure I was so specific about what that meant. Tristram Shandy was a highly irreverent book of the 18th century that parodied established popular views and indeed parodied the form of the novel itself. Lawrence Sterne, the author, puts the fly leaf some where in the middle of the book as an example. Also, the preface is buried in one of the early chapters as I remember it. The book was a fictional autobiography and many chapters of some of the strangest tangents imaginable come before the birth of the subject of the autobiography even takes place. Come to think of it, the actual conception doesn't occur for many chapters either. I was enchanted by the book then and always will be by a chapter here and there read every few years, but certainly never the whole book again. I had to digest it in an 18th century novel class in one Godforsaken week. Every week was a new 500 plus page book. Every spare moment was taken up with reading. I saw this student coming out of the bookstore with a stack of thick paperbacks and I shouted at him "18th century novel?" He answered "Worse, The Literature of James Clavell." It wasn't worse, I'm positive. All this is to say and self illustrate that tangential thinking became a way of writing for me, perhaps as a form of amusement, but more because of my boredom with staying on topic.

Particularly, I remember one defining moment in a college writing course that solidified my antiauthoritarian stance and my belief in aimlessness as a virtue. After having taking Creative Writing at AUM, and even auditing the class a second time because it was so fun, and auditing a class was free with a full load of classes. I had done pretty darned well, thank you. My instructor liked me, twice even. Then I switched schools and found myself in a literature class with one of the most classically educated and overly proper instructors I have ever had.  The first thing I had to write was an essay about something important to me in literature ( I think it was James Baldwin) and got a "C" on my essay. How could this possibly be? I included a nice hook at the beginning. I developed themes that I thought were deep and meaningful, and I put much thought into to weaving them all together into an absolute masterpiece, at least in my mind. I asked the teacher why I had gotten a "C" and she said "No outline. Your essay was disorganized." Nothing about my themes or attempts at interpretation were even in her mind.

Outlines to me were things you do after you complete the product. I guess my grade school teachers taught me outlining backwards because I remember providing outlines for things already written, as our practice. When I studied computers, I usually got the program working and then created a flowchart, a sort of outline of the program. Oh I outlined the major structure in my head and sometimes on paper, but details would always change as one progressed and started encountering the inevitable complications not originally envisioned. In my way of thinking flowcharts were documentation for the next guy who might have to figure out your program to make changes after you had gone on to a better job. Instructors would come up with programming assignments they thought were impossible to organize without substantial preliminary flowcharting. I would tediously chip away at the task until I had the program working, and then, make my flowchart to turn in to the teacher.

Anyway, back to this moment of awakening in the writing of literary essays -- having spent boatloads of time on this James Baldwin essay and appreciating the quality ever so much myself, I was unappreciated for my writing skills for the first time in my life and, worse, by a teacher. They had always loved my creativity before. Of course, just being grammatically correct was often important before college; but I usually had that sheep sheared correctly. I also prided myself in my ability to be creative in my writing. I remember in grade school that I would sometimes be given a test that required using vocabulary words in sentences. I would look over all the words. Write them down and weave them together into a story. I would edit and erase and edit some more (having a great fondness for erasers then, which is replaced now by the "undo" option)  and finally have it done in time to copy onto the test paper to turn in just as the slowest were finishing up. So from question 1 to question 20, my teacher would be reading an entire story. It wasn't O'Henry but it was fun to read, I'm sure. Needless to say my test papers would stand out and I would bask in the glory of attention. If I missed the meaning of the vocabulary word by a bit in an example, I'm sure the total extra effort made up for the small error. All was well. I was a great writer, admired as anyone could be in grade school with "Number 2" pencils with short erasers.

When you're young, things seem so dramatic and patterns which aren't there are so much easier to see. I took this "C" harder than any grade imaginable. But, the painful part was that I had no idea how I could write a better essay for this woman with her hair rolled into a bun. I did not connect with her. My next assignment was on Madame Bovary by Gustave Flaubert. This book was a far cry from Tristram Shandy, James Baldwin or anything else I could remember reading. It was simply the most boring thing I had ever read, or started to read. I decided early on that this book and the instructor and the class were not for me. So, I read a summary of the book in the university library where I worked. While I never have finished Madame Bovary I still count it as one I have read because of what followed.

These summaries were in a little known and fairly secretive collection of books called Masterplots which I learned about in the reference department in my first job in a library. I remember being instructed not to suggest Masterplots to students looking for Cliff's Notes. Our job was to encourage reading rather than provide alternatives. I found this instruction conflicted with my other duty to encourage people to use the library by providing materials requested, but I always was such a rebellious kid.

Actually, come to think about it, I believe the University of Montevallo library, where I of course worked while at that college, had not only Masterplots but also the usual sets of literary criticisms which I also used to boldly skip reading Madame Bovary. At any rate, I studied all the main characters and memorized the summaries. It was like studying for a math exam as far as I was concerned. I no longer cared about the book, it's literary value, or my instructor's opinion. It took a surprisingly short time to do the job of creating Diet Madame Bovary and then I started the essay late the night before the essay was due. My first task? Write an outline. I wrote the usual outline (1's and 2's, and a's and b's). I made sure every "a" had a "b" and followed all the rules I knew from grade school about outlining. If I didn't have a "b" topic, I just made it up. If I didn't have an "a" or "b" topic, I made both of them up. I used nonspecific ideas gleaned from the summaries, and tried to use vague words and ideas.

I wrote the essay sentence by sentence, following the exact wording of the sentences in my outline. If I came across some topic I could add another vagary to, I just added it to my outline. Job done in no time. Very little thought and almost no insight went into the paper. I was probably finished in a few hours or so. The next day I turned in my essay only to find out that a pop quiz of multiple choice questions had been added to find out if we had read the book. The teacher must have known Madame Bovary truly needed all the help it could get in the form of persuasion because of it's awesomely boring nature. I thought I was doomed because I had only read at most the first few chapters. Days later, when I got the results, I had an A on the exam and an A on the essay with the note: "shows great improvement." I was stunned and unforgiving of reality. THIS crap mattered and my thoughtful work didn't? My mind was made up about organizing my thoughts before writing, I wasn't going to prechew my gum anymore, unless I was forced to. I was going to enjoy each and every flavor burst and when that gum was stale, move on to the next piece.

And so dear reader, I beseech you to forgive your humble blogging servant of his sloppiness, lack of direction and general playfulness concerning structure. Forgive him as he meanders through economics, politics, and any other subject that fortuitously pops into his mind. Please understand that in reality things aren't actually organized into a hierarchical outline, at least in this poor writer's mind. Life is, to him, more like a fractal of unlimited pathways that repeat once in a while in slightly different form, to greater or lesser degree, going nowhere but somehow defining a whole. Seeing the structure is important but it's much more complicated than this writer can possibly organize with his limited talents and incessantly digressing mind which seems to get worse with age.

To more illustrate the point that my writings may not be worth a groat, I give you a piece of my education, still intact, still begging for someone to pay attention to it, and receiving such loving exposure only from me. How can you, most esteemed and honored reader, blame this disaster of a blog on me? Nay, I ask you to blame it on my education, the piece of which that follows, should adequately prepare any sane mind for my future dissemblance and make amends for my past ramblings, if only you understood the lack of wherewithal I bring to the archery tournament. I humbly bow before you and offer, because of the previous lack of my own, the preface of a better writer:

The Author's Preface 
No, I'll not say a word about it—here it is;—in publishing it—I have appealed to the world—and to the world I leave it;—it must speak for itself.
All I know of the matter is—when I sat down, my intent was to write a good book; and as far as the tenuity of my understanding would hold out—a wise, aye, and a discreet—taking care only, as I went along, to put into it all the wit and the judgment (be it more or less) which the great Author and Bestower of them had thought fit originally to give me—so that, as your worships see—'tis just as God pleases. Now, Agalastes (speaking dispraisingly) sayeth, That there may be some wit in it, for aught he knows—but no judgment at all. And Triptolemus and Phutatorius agreeing thereto, ask, How is it possible there should? for that wit and judgment in this world never go together; inasmuch as they are two operations differing from each other as wide as east from west—So, says Locke—so are farting and hickuping, say I. But in answer to this, Didius the great church lawyer, in his code de fartendi et illustrandi fallaciis, doth maintain and make fully appear, That an illustration is no argument—nor do I maintain the wiping of a looking-glass clean to be a syllogism;—but you all, may it please your worships, see the better for it—so that the main good these things do is only to clarify the understanding, previous to the application of the argument itself, in order to free it from any little motes, or specks of opacular matter, which, if left swimming therein, might hinder a conception and spoil all. Now, my dear anti-Shandeans, and thrice able criticks, and fellow-labourers (for to you I write this Preface)—and to you, most subtle statesmen and discreet doctors (do—pull off your beards) renowned for gravity and wisdom;—Monopolus, my politician—Didius, my counsel; Kysarcius, my friend;—Phutatorius, my guide;—Gastripheres, the preserver of my life; Somnolentius, the balm and repose of it—not forgetting all others, as well sleeping as waking, ecclesiastical as civil, whom for brevity, but out of no resentment to you, I lump all together.—Believe me, right worthy, My most zealous wish and fervent prayer in your behalf, and in my own too, in case the thing is not done already for us—is, that the great gifts and endowments both of wit and judgment, with every thing which usually goes along with them—such as memory, fancy, genius, eloquence, quick parts, and what not, may this precious moment, without stint or measure, let or hindrance, be poured down warm as each of us could bear it—scum and sediment and all (for I would not have a drop lost) into the several receptacles, cells, cellules, domiciles, dormitories, refectories, and spare places of our brains—in such sort, that they might continue to be injected and tunn'd into, according to the true intent and meaning of my wish, until every vessel of them, both great and small, be so replenish'd, saturated, and filled up therewith, that no more, would it save a man's life, could possibly be got either in or out. Bless us!—what noble work we should make!—how should I tickle it off!—and what spirits should I find myself in, to be writing away for such readers!—and you—just heaven!—with what raptures would you sit and read—but oh!—'tis too much—I am sick—I faint away deliciously at the thoughts of it—'tis more than nature can bear!—lay hold of me—I am giddy—I am stone blind—I'm dying—I am gone.—Help! Help! Help!—But hold—I grow something better again, for I am beginning to foresee, when this is over, that as we shall all of us continue to be great wits—we should never agree amongst ourselves, one day to an end:—there would be so much satire and sarcasm—scoffing and flouting, with raillying and reparteeing of it—thrusting and parrying in one corner or another—there would be nothing but mischief among us—Chaste stars! what biting and scratching, and what a racket and a clatter we should make, what with breaking of heads, rapping of knuckles, and hitting of sore places—there would be no such thing as living for us. But then again, as we should all of us be men of great judgment, we should make up matters as fast as ever they went wrong; and though we should abominate each other ten times worse than so many devils or devilesses, we should nevertheless, my dear creatures, be all courtesy and kindness, milk and honey—'twould be a second land of promise—a paradise upon earth, if there was such a thing to be had—so that upon the whole we should have done well enough. All I fret and fume at, and what most distresses my invention at present, is how to bring the point itself to bear; for as your worships well know, that of these heavenly emanations of wit and judgment, which I have so bountifully wished both for your worships and myself—there is but a certain quantum stored up for us all, for the use and behoof of the whole race of mankind; and such small modicums of 'em are only sent forth into this wide world, circulating here and there in one bye corner or another—and in such narrow streams, and at such prodigious intervals from each other, that one would wonder how it holds out, or could be sufficient for the wants and emergencies of so many great estates, and populous empires. Indeed there is one thing to be considered, that in Nova Zembla, North Lapland, and in all those cold and dreary tracks of the globe, which lie more directly under the arctick and antartick circles, where the whole province of a man's concernments lies for near nine months together within the narrow compass of his cave—where the spirits are compressed almost to nothing—and where the passions of a man, with every thing which belongs to them, are as frigid as the zone itself—there the least quantity of judgment imaginable does the business—and of wit—there is a total and an absolute saving—for as not one spark is wanted—so not one spark is given. Angels and ministers of grace defend us! what a dismal thing would it have been to have governed a kingdom, to have fought a battle, or made a treaty, or run a match, or wrote a book, or got a child, or held a provincial chapter there, with so plentiful a lack of wit and judgment about us! For mercy's sake, let us think no more about it, but travel on as fast as we can southwards into Norway—crossing over Swedeland, if you please, through the small triangular province of Angermania to the lake of Bothmia; coasting along it through east and west Bothnia, down to Carelia, and so on, through all those states and provinces which border upon the far side of the Gulf of Finland, and the north-east of the Baltick, up to Petersbourg, and just stepping into Ingria;—then stretching over directly from thence through the north parts of the Russian empire—leaving Siberia a little upon the left hand, till we got into the very heart of Russian and Asiatick Tartary. Now through this long tour which I have led you, you observe the good people are better off by far, than in the polar countries which we have just left:—for if you hold your hand over your eyes, and look very attentively, you may perceive some small glimmerings (as it were) of wit, with a comfortable provision of good plain houshold judgment, which, taking the quality and quantity of it together, they make a very good shift with—and had they more of either the one or the other, it would destroy the proper balance betwixt them, and I am satisfied moreover they would want occasions to put them to use. Now, Sir, if I conduct you home again into this warmer and more luxuriant island, where you perceive the spring-tide of our blood and humours runs high—where we have more ambition, and pride, and envy, and lechery, and other whoreson passions upon our hands to govern and subject to reason—the height of our wit, and the depth of our judgment, you see, are exactly proportioned to the length and breadth of our necessities—and accordingly we have them sent down amongst us in such a flowing kind of decent and creditable plenty, that no one thinks he has any cause to complain. It must however be confessed on this head, that, as our air blows hot and cold—wet and dry, ten times in a day, we have them in no regular and settled way;—so that sometimes for near half a century together, there shall be very little wit or judgment either to be seen or heard of amongst us:—the small channels of them shall seem quite dried up—then all of a sudden the sluices shall break out, and take a fit of running again like fury—you would think they would never stop:—and then it is, that in writing, and fighting, and twenty other gallant things, we drive all the world before us. It is by these observations, and a wary reasoning by analogy in that kind of argumentative process, which Suidas calls dialectick induction—that I draw and set up this position as most true and veritable; That of these two luminaries so much of their irradiations are suffered from time to time to shine down upon us, as he, whose infinite wisdom which dispenses every thing in exact weight and measure, knows will just serve to light us on our way in this night of our obscurity; so that your reverences and worships now find out, nor is it a moment longer in my power to conceal it from you, That the fervent wish in your behalf with which I set out, was no more than the first insinuating How d'ye of a caressing prefacer, stifling his reader, as a lover sometimes does a coy mistress, into silence. For alas! could this effusion of light have been as easily procured, as the exordium wished it—I tremble to think how many thousands for it, of benighted travellers (in the learned sciences at least) must have groped and blundered on in the dark, all the nights of their lives—running their heads against posts, and knocking out their brains without ever getting to their journies end;—some falling with their noses perpendicularly into sinks—others horizontally with their tails into kennels. Here one half of a learned profession tilting full but against the other half of it, and then tumbling and rolling one over the other in the dirt like hogs.—Here the brethren of another profession, who should have run in opposition to each other, flying on the contrary like a flock of wild geese, all in a row the same way.—What confusion!—what mistakes!—fiddlers and painters judging by their eyes and ears—admirable!—trusting to the passions excited—in an air sung, or a story painted to the heart—instead of measuring them by a quadrant. In the fore-ground of this picture, a statesman turning the political wheel, like a brute, the wrong way round—against the stream of corruption—by Heaven!—instead of with it.

In this corner, a son of the divine Esculapius, writing a book against predestination; perhaps worse—feeling his patient's pulse, instead of his apothecary's—a brother of the Faculty in the back-ground upon his knees in tears—drawing the curtains of a mangled victim to beg his forgiveness;—offering a fee—instead of taking one. In that spacious Hall, a coalition of the gown, from all the bars of it, driving a damn'd, dirty, vexatious cause before them, with all their might and main, the wrong way!—kicking it out of the great doors, instead of, in—and with such fury in their looks, and such a degree of inveteracy in their manner of kicking it, as if the laws had been originally made for the peace and preservation of mankind:—perhaps a more enormous mistake committed by them still—a litigated point fairly hung up;—for instance, Whether John o'Nokes his nose could stand in Tom o'Stiles his face, without a trespass, or not—rashly determined by them in five-and-twenty minutes, which, with the cautious pros and cons required in so intricate a proceeding, might have taken up as many months—and if carried on upon a military plan, as your honours know an Action should be, with all the stratagems practicable therein,—such as feints,—forced marches,—surprizes—ambuscades—mask-batteries, and a thousand other strokes of generalship, which consist in catching at all advantages on both sides—might reasonably have lasted them as many years, finding food and raiment all that term for a centumvirate of the profession. As for the Clergy—No—if I say a word against them, I'll be shot.—I have no desire; and besides, if I had—I durst not for my soul touch upon the subject—with such weak nerves and spirits, and in the condition I am in at present, 'twould be as much as my life was worth, to deject and contrist myself with so bad and melancholy an account—and therefore 'tis safer to draw a curtain across, and hasten from it, as fast as I can, to the main and principal point I have undertaken to clear up—and that is, How it comes to pass, that your men of least wit are reported to be men of most judgment.—But mark—I say, reported to be—for it is no more, my dear Sirs, than a report, and which, like twenty others taken up every day upon trust, I maintain to be a vile and a malicious report into the bargain. This by the help of the observation already premised, and I hope already weighed and perpended by your reverences and worships, I shall forthwith make appear. I hate set dissertations—and above all things in the world, 'tis one of the silliest things in one of them, to darken your hypothesis by placing a number of tall, opake words, one before another, in a right line, betwixt your own and your reader's conception—when in all likelihood, if you had looked about, you might have seen something standing, or hanging up, which would have cleared the point at once—'for what hindrance, hurt, or harm doth the laudable desire of knowledge bring to any man, if even from a sot, a pot, a fool, a stool, a winter-mittain, a truckle for a pully, the lid of a goldsmith's crucible, an oil bottle, an old slipper, or a cane chair?'—I am this moment sitting upon one. Will you give me leave to illustrate this affair of wit and judgment, by the two knobs on the top of the back of it?—they are fastened on, you see, with two pegs stuck slightly into two gimlet-holes, and will place what I have to say in so clear a light, as to let you see through the drift and meaning of my whole preface, as plainly as if every point and particle of it was made up of sun-beams. I enter now directly upon the point. —Here stands wit—and there stands judgment, close beside it, just like the two knobs I'm speaking of, upon the back of this self-same chair on which I am sitting. —You see, they are the highest and most ornamental parts of its frame—as wit and judgment are of ours—and like them too, indubitably both made and fitted to go together, in order, as we say in all such cases of duplicated embellishments—to answer one another. Now for the sake of an experiment, and for the clearer illustrating this matter—let us for a moment take off one of these two curious ornaments (I care not which) from the point or pinnacle of the chair it now stands on—nay, don't laugh at it,—but did you ever see, in the whole course of your lives, such a ridiculous business as this has made of it?—Why, 'tis as miserable a sight as a sow with one ear; and there is just as much sense and symmetry in the one as in the other:—do—pray, get off your seats only to take a view of it,—Now would any man who valued his character a straw, have turned a piece of work out of his hand in such a condition?—nay, lay your hands upon your hearts, and answer this plain question, Whether this one single knob, which now stands here like a blockhead by itself, can serve any purpose upon earth, but to put one in mind of the want of the other?—and let me farther ask, in case the chair was your own, if you would not in your consciences think, rather than be as it is, that it would be ten times better without any knob at all? Now these two knobs—or top ornaments of the mind of man, which crown the whole entablature—being, as I said, wit and judgment, which of all others, as I have proved it, are the most needful—the most priz'd—the most calamitous to be without, and consequently the hardest to come at—for all these reasons put together, there is not a mortal among us, so destitute of a love of good fame or feeding—or so ignorant of what will do him good therein—who does not wish and stedfastly resolve in his own mind, to be, or to be thought at least, master of the one or the other, and indeed of both of them, if the thing seems any way feasible, or likely to be brought to pass. Now your graver gentry having little or no kind of chance in aiming at the one—unless they laid hold of the other,—pray what do you think would become of them?—Why, Sirs, in spite of all their gravities, they must e'en have been contented to have gone with their insides naked—this was not to be borne, but by an effort of philosophy not to be supposed in the case we are upon—so that no one could well have been angry with them, had they been satisfied with what little they could have snatched up and secreted under their cloaks and great perriwigs, had they not raised a hue and cry at the same time against the lawful owners. I need not tell your worships, that this was done with so much cunning and artifice—that the great Locke, who was seldom outwitted by false sounds—was nevertheless bubbled here. The cry, it seems, was so deep and solemn a one, and what with the help of great wigs, grave faces, and other implements of deceit, was rendered so general a one against the poor wits in this matter, that the philosopher himself was deceived by it—it was his glory to free the world from the lumber of a thousand vulgar errors;—but this was not of the number; so that instead of sitting down coolly, as such a philosopher should have done, to have examined the matter of fact before he philosophised upon it—on the contrary he took the fact for granted, and so joined in with the cry, and halloo'd it as boisterously as the rest. This has been made the Magna Charta of stupidity ever since—but your reverences plainly see, it has been obtained in such a manner, that the title to it is not worth a groat:—which by-the-bye is one of the many and vile impositions which gravity and grave folks have to answer for hereafter. As for great wigs, upon which I may be thought to have spoken my mind too freely—I beg leave to qualify whatever has been unguardedly said to their dispraise or prejudice, by one general declaration—That I have no abhorrence whatever, nor do I detest and abjure either great wigs or long beards, any farther than when I see they are bespoke and let grow on purpose to carry on this self-same imposture—for any purpose—peace be with them!—> mark only—I write not for them.   
- Lawrence Sterne Tristram Shandy

I once again implore you to an understanding that should you come across a long entry in this blog that seems at first to be a mess of engineering, any structure that  the reader might initially extract and expect to carry forward throughout the entry (or the blog as a whole) is not by design nor is it the blogger's original intent. The blog is a truly an intentional mess caused mostly from the past educational experiences of the blogger that seemed to reward structure at the peril of thought thus rendering meandering as the next most promising course of action. However, I do submit to you that life is the same and in the educational establishment's attempts to unarrange my meandering understanding of the world, they have unwittingly brought me closer to the very fractal nature of things they wished me to avoid, and thus by accidental encouragement they perfectly educated me. Knowing as I do that you have not read this entire entry because if it's length, I still oddly know you will find it comforting that it is unlikely that any writer could ever reach the standard of this entry twice (especially with the inclusion of a lengthy dose of the great Lawrence Sterne as part of it's content) and so future entries by me will by degrees, necessarily, logically, and in all probability be shorter and less self illustrative.

Tuesday, January 25, 2011

Evolving Aimlessness

When I started this blog, I knew there would come a day when I changed some position I held or found some mistake I had made earlier. In real life most people don't listen to me, I suppose, so few people can point out my contradictions. :)

At any rate, I have been reading economics so much it has changed a number of my political opinions. As far as economics and moral principles are concerned, the experience has generally sharpened my already existing belief structure. At least I wasn't wrong there, phew. But my political beliefs have degenerated into a morass of uncertainty. This is not to say that I have changed parties or my unflagging support of Barrack Obama. I'll believe in the hope and changey thing until the history thingy resolves the matter. Mostly I'm confused about historical things I always assumed I understood but did not.

While I have been on the right track in my economic thought, I find that I have been mistaken in political ideas. I could give many examples of where I now believe I have been incorrect, but I'll spare you, umm, myself. Let me give you the first concrete belief that developed a crack that put my mind into an Alan Greenspan type senior moment. In political discussions, I would sometimes point to the seemingly startling economic numbers of the Clinton administration. Left dangling in the back of my brain twisting in the breeze that often blows through, was the correct notion that economic cycles do not necessarily correspond with election cycles.

It's not that President Bill Clinton's economic numbers aren't terribly impressive but that they occured during a partictularly favorable confluence of events. Then President Clinton hired some Wall Steet guys and reappointed Alan Greenspan to the Fed. Pragmatism seemed fairly safe. And perhaps, just, perhaps, had his boys been guided in the right direction when it came to the need for regulation of a certain new and growing sector of Wall Street, some outlined fully to them by Brooksley Born, the numbers would have been less impressive but safer. However, the problems of America's losses in the new wave international capitalism weren't addressed or solved. Free trade policies like NAFTA would have some effect, both positive effects (luckily in the short term through efficiencies of trade) but problematic ones (in the long run as Mexico became a new place for jobs to escape to.)

I guess my first inklings of trouble for my unwavering support of President Clinton may have began with the Lewinski scandal. I still maintain that he was set up completely and meticulously by the Republicans. But there was the flaw in character in the form of an exagerated "I am not a crook" type lie. Still firmly behind him I road out the storm that did irreperable harm to our country created just so the Republicans could take the White House in what turned out to be more of a coop than an election.

President Clinton's intelligent speech during the next dark 8 years, though often with a flavor of rewritten history, seemed so refreshing when compared to President Bush's gynocologists showing love to their patients. But as Hillary ran for President and racism seeped out of her go to guy, my love affair was damaged beyond repair.

Still, I had the undisputable economic numbers to wave around in political arguments. When I look at the overall picture of the decline of American economic strength since Nixon's abandonment of the gold standard and reliance on price controls, I am shaken enough to realize Clinton's numbers were small potatoes harvested in an endlessly worstening potato famine.

Monday, January 24, 2011

My Instant Hero Worship of Brooksley Born

I watched Frontline's: "The Warning" last night. Although I had read much about Ms. Born and her experience, nothing comes close to actually watching this documentary to get the full flavor of Brooksley Born.

Ms. Brooksley Born should be regarded as one of the great American women of our time and "as far as history goes" as well. Although she ultimately and unfortunately failed to protect us, she stood up against some of the strongest men from Washington and Wall Street trying to steer us from the financial disaster to come.

Ten years before the financial collapse, she took notice of the problem of derivatives, the regulation of which fell under her authority as chair of the Commodities Futures Trading Commission. While Ms. Born had been on the short list for Attorney General of the Clinton administration, here she landed. Taking notice of a lawsuit filed by Proctor & Gamble against a bank that essentially defrauded P&G using the complications of derivatives, Ms. Born wisely focused on the fact that the Over the Counter Derivatives market was surprisingly dark to the government and surprisingly unregulated as well. These were "swaps", or just agreements between two parties with no government involvement, causing no problems until the amounts of money in play become economy threatening or there is someone defrauded. She began the process of putting regulations into place and immediately had to fight a Fed Chairman, two Treasury Secretaries, a former head of the FTC, and anyone from Wall Street who wanted to testify that money making and "innovation" were far more important than regulation. Basically they said there was no need to worry about fraud, that things would iron themselves out. Another victory for non-thinking.

There is nothing I can add to the documentary except for the suggestions to watch carefully for a few compelling moments. Watch for the exchange between Greenspan and Waxman when Greenspan is kind of backed into a corner and forced to admit that the "flaw" he has just mentioned is actually his entire ideology. I'm still not sure whether this represents an actual newly found conviction or just a contrite forced confession. I'll wait for the book. :) But until then, this is still remarkable television. Watch for the moment former SEC Chairman Arthur Levitt feels the full guilt of his mistake. It's subtle but you'll know when it happens. Rewind and watch his face, the picture of regret. Watch for that moment when Ms. Born gets up from the table after her testimony before congress, as she puts a purse on her arm, not a briefcase. It is an awesome moment of gender identity. Ignore her at your peril, gentlemen. This important failure in her personal and our common struggle against sexism has some mighty strong repercussions.

When I think of the two women who play such huge roles in this documentary, Ayn Rand and Brooksley Born, I can't help but juxtapose the bombastic wild look of Ms. Rand as she outlines her philosophy of unfettered greed and the modest appearance of Ms. Born as she tries not to take credit for being right. As is always the case in our popular media, those with extreme views seem to get the most attention. Those who are right, much less so.

Who warrants the big Hollywood production and who the small documentary on PBS?

Ayn Rand and Laize Faire Capitalism: a "Conceptual Framework" of Lazy Thinking

"I'm opposed to all forms of control. I am for an absolute laissez-faire, free, unregulated economy. Let me put it briefly, I'm for the separation of state and economics."  - Ayn Rand from the famous Mike Wallace Interview,  1959 
"It did not go without notice that Ayn Rand stood beside me as I took the oath of office in the presence of President Ford in the Oval Office. Ayn Rand and I remained close until she died in 1982, and I'm grateful for the influence she had on my life. I was intellectually limited until I met her."  - Alan Greenspan, former Federal Reserve Board Chariman, The Age of Turbulence, (Greenspan's ironically entitled book published just before the panic) published September 17, 2007.
"I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms." - Alan Greenspan, testimony before The House Oversight and Government Reform Committee, October 2008
Exchange from the same committee:

REP. HENRY WAXMAN: The question I have for you is, you had an ideology, you had a belief that free, competitive -- and this is your statement -- "I do have an ideology. My judgment is that free, competitive markets are by far the unrivaled way to organize economies. We've tried regulation. None meaningfully worked." That was your quote.

You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others. And now our whole economy is paying its price.
Do you feel that your ideology pushed you to make decisions that you wish you had not made?

ALAN GREENSPAN: Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to -- to exist, you need an ideology. The question is whether it is accurate or not.

And what I'm saying to you is, yes, I found a flaw. I don't know how significant or permanent it is, but I've been very distressed by that fact.

REP. HENRY WAXMAN: You found a flaw in the reality...

ALAN GREENSPAN: Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

REP. HENRY WAXMAN: In other words, you found that your view of the world, your ideology, was not right, it was not working?

ALAN GREENSPAN: That is -- precisely. No, that's precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.

"Forty years or more" ago:
President Ford, Alan Greenspan, and Ayn Rand;
2nd, 3rd, and 4th from the left

What I have always believed is that it's much easier to disagree with the way things are than to govern effectively. It's much easier to support easy world views that involve no action like "no government intervention in the marketplace" than to act and build a regulatory framework that works. When the influential and powerful among us use this lazy ideology it inevitably results in large bubbles followed large busts that carry everyone, especially those without influence or power, in a tidal wave of destruction. Sometimes the timing of the booms in our economy, can make some presidents or parties look better than others; and people vote accordingly. Yet the timing of economic cycles doesn't simplistically follow election cycles.

To me, it makes sense that philosophical ideas that seem perfect in their simplicity, would necessarily be flawed because of a world that is much more complicated.

Soon Ayn Rand's influential novel, Atlas Shrugged, will be in a more simple movie form (no doubt carefully tailored with our recent crises in mind to avoid redicule), for those with even lazier thinking. :)

Those dingbat liberals in Hollywood ! :)

Thursday, January 20, 2011

The Price of Free Speech *

Questions put to me recently:
Corporations and PACS spend huge amounts on political campaigns.
A)  Should corporations and PACS be allowed to do so?
B)  Should all political contributions be from registered voters [and be limited]? **
In early 2010, the Supreme Court decided that political contributions from corporations could not be limited by law because of a corporation's right to free speech, speech apparently costing money in today's society. Thankfully, the Supreme Court decided that disclosure of a corporation's identity to the public was still necessary. By creating an intermediary presence, PACs seem to be a way around this disclosure of a corporation's identity as I do not remember many commercials saying things like "BP supports John Doe for Congress."

The question of whether corporations should have the ability to spend huge amounts of money on campaigns, and in the process speak louder than any ordinary individual with more limited resources is a tricky one. Corporations have always  been given special status under the law and are a non-human entity with limited liability for their actions. Corporations were safer places to invest money this way, they would continue through many hardships. Usually crimes that would put ordinary citizens in jail are punished with fines. (Bernard Madoff might disagree a bit being a substantial crook taking advantage of the lax regulation that has been in place for a while now. I guess a corporation which is a Ponzi scheme is different than say a tobacco company which lied about known facts about products resulting in many deaths.) While corporations may represent stockholders when they exercise their free speech rights, employees would probably not be spoken for in many cases. Perhaps an argument could be made that their speech represents customers, though I am unsure that customers really shop on the basis of political views. Even stockholders have a greater profit motive than they do a political one. Whatever laws enrich their portfolio would be to their own best interest.

So, freedom of speech? While human rights are often granted corporations, I would certainly disagree on a personal basis as to whether the right to free speech needs unlimited spending as a necessity.

One thing that often bothers me about the stereotypical classic liberal stance is the portrayal of corporations as villains. Corporations have become necessary entities in America and around the world. The concept of a corporation provides a financial way to pool money to take on big nongovernmental projects. Corporations are responsible for most of the jobs, exports, and wealth of America. Allowing corporations special privileges and rights seems justified to some extent. After all, America is competing head on with other countries who do not hamper their corporations with minimum wage laws, environmental regulations, or regulations about the safety or working conditions of their employees. It seems to me that citizens should support corporations who have these extra burdens and should allow special treatment that is not detrimental to our country or the world. The extra burdens, though morally necessary, put our companies at risk of losing the purely capitalistic battle they have to wage. When corporations lose or find it cheaper to export jobs, we all lose.

While it is true that this international problem for America has gotten completely out of control with our own determination to spread capitalism around the world, this is not to say that corporations in America should have the right to regulate themselves. And self regulation is exactly what their political contributions are aimed at getting.

After losing so many of our manufacturing jobs to other countries, the idea that floated around during the Clinton and Bush administrations seemed to be that the financial sector was the way out of our problems. Indeed the financial companies were pulling in most of the big bucks as the first increments of deregulation took place. Further deregulation appeared to be the answer to expanding our national wealth (wealth that was privately controlled and incidentally readily available for political contributions, or to do things like pay for jobs for ex-politicians.) Deregulation seemed to work well at first. Historic regulations that had been put into place to avoid a second Great Depression were being repealed one after another. Investment "banks" were becoming free to be "creative." Laws were enacted (both parties had a hand) that encouraged the lending of money to riskier and riskier people. The unregulated astronomical salaries of the top executives were dependent on profits made in the short term rather than the long term. Percentage-wise, bonuses were just so much better with higher amounts of money in play. Risk therefore was the order of the day. Should the investment company fail, well, no one would be taking away the executives' money already earned. Executives could just move on. Besides, the federal government was unlikely to allow investment companies to fail when they were "too big to fail." There was strength in expanding risk and therefore size. Unwise practices seemed to be wiser than they were in 1929.

Investment companies had a right to free speech in the form of campaign contributions (in addition to the ability to pay off good behavior of former regulators in the form of jobs after retirement from regulatory duties.) I think free speech was a currency that bought investment companies way too much but I guess the Supreme Court disagrees.

While I have cherry picked  an example of how regulation of companies by our government was needed in spades, most companies would like a tip of the hat from government in one form or another. Influence in the form of political contributions is extremely profitable. While it is time to listen to companies and what they need to survive, it is not time to allow them to buy off candidates to push through whatever government actions financially suit their specific company in the short term. That is just not an efficient way for them to spend their money, for one thing; nor is it particularly good when regulations beneficial to our society and the well being of our citizens are influenced by lawmakers who owe blind allegiance to the corporations which financially lifted them up the ladder of political success (and that would be loyally cash friendly for the next campaign.)

What we actually need is:  Note this move has almost been universally panned by the liberal community. There are unnecessary regulations that stick around long after they are useful or were misguided in the first place. For the right wing, check out some of the proposals being made to take some unnecessary stuff out of recently passed health care regulation. As I see it politically, Republicans need to propose and do real things rather than making symbolic moves to "repeal" the entirety of health care reform, for instance. As usual, little work or thought is necessary to oppose something in it's entirety. Why not offer suggestions to improve on parts? I honestly don't know. This shows much less willingness to compromise than President Obama's olive branches that have been held out for almost two years with little or actually no success.

As to whether we should only allow registered voters to contribute to political campaigns, I won't question the Supreme Court's definition of our constitutional right to free speech on that one. Every citizen has the right to free speech, if political contributions equate to free speech. I would consider that any citizen of the United States, registered voter or not, would be far more relevant than foreign shareholders in our multinational companies, or foreign customers for that matter, who apparently enjoy freedom of speech to influence American elections just from the companies they associate with. If money buys free speech, American citizens all have that right, registered voters or not.

Limits on contributions are trickier. Arbitrary numbers surely must leave someone out. Lower amounts of money would not give anyone much influence, and higher amounts would give more wealthy people the most influence. And I hope we do not strive to be a plutocratic any more than we already are. This same concept of limits should apply to corporations, of course. A company can grow larger through laws favoring deregulation or favoring regulations that limit their competition's well being. So following this growth there is more money or more influence. Just as monopolies grow larger, the regulations against monopolies become more remote as the monopolies have more political influence. Again arbitrary dollar limits have been the law in the past, but no more. The interesting thing to me is the fact that the price of my corn flakes should be directly affected by the political tenacity of my corn flake provider's executives. Or think of it from the perspective of my corn flake company's ability to compete in the world wide capitalistic system, wasting tons of money to influence a government which should already be trying to help an American business. (In my own personal experience the point of pure evil was reached when my Blue Cross / Blue Shield fees, umm contributions, were used in unlimited amounts to fight the health care bill I favored, or just muss it up as much as possible. I had no voice at all in my employer's choice of health care insurance and therefore the free speeches given with my money that to me might be better used to help the sick and dying.)

Similarly, the rich could influence politicians with high political contributions. Politicians could pay them back by, say, tax cuts where the highest percentage of the money goes to those rich, perhaps enough to make giving to politicians so much easier and profitable. It is similar to the growth of monopolies in a way.

Because of the undemocratic nature of our election process, the only vote for President that I felt was significant was my monetary contributions to the Obama campaign and those of other representatives that were not in my state. Here is why: the President is elected by a state by state winner-take-all process. My vote is forever meaningless as is everyone else's in my state because we are not a "swing state." In the primaries, I very seldom have a voice because it is often decided well before my state gets to vote. In the Senate race, I have a variable influence depending on which state I live in. In Wyoming, the few people there have 2 votes in the Senate, the great many people in California have the same 2 votes as well. And to top it off, it's much easier for a company's or citizen's monetary contributions to influence Wyoming because the television commercials are far cheaper than in California. The selection of the Supreme Court depends entirely on my nonexistent vote in the Presidential elections. And the House, while the most democratically selected, uses gerrymandering of districts to keep hold of seats once they have hold of them and a make up a majority with the ability to redraw districts.

Suffice it to say a better solution can be found here:
"Voting with dollars," is a truly terrible name under which to market a a very good idea that gives everyone equal influence. The best part of this plan isn't the public financing part, although this would insure everyone had an equal vote. The dynamic game changer is that corporations would have to donate their money without quid pro quo for donations. No politician could be sure where the money was coming from because of the anonymity in respect to politicians, rather than to citizens. Ingenious, I think. What do you think?

*for Dianne and Randy

**Specific examples of limits also  posed in this paragraph: "Suppose item B is true, and everyone has a $1000 political limit. A registered voter could spend $500 for candidate #1 (say for President), $250 for candidate #2 (say a Senator), $200 for candidate #3 (say a Representative), and that would be ALL that a person could donate for that election."

[The extra $50? Pocket it for coffee money for staying up all night to watch the election coverage from actual deciders in Florida where I'm personally sending my first $500 .] -Mike :)

Friday, January 14, 2011

As far as history goes... Part 2

"The decadent international but individualistic capitalism, in the hands of which we found ourselves after the war, [WWI] is not a success. It is not intelligent, it is not beautiful, it is not just, it is not virtuous - and it does not deliver the goods. In short we dislike it and are beginning to despise it. But when we wonder what to put in it's place we are extremely perplexed."  - John Maynard Keynes, 1933
Once, long ago, without relying on unborn future historians to do the work, I believe John Maynard Keynes had it right. The fact that in very recent times we have moved so much closer to this "international" (now termed as globalism) "individualistic" (now unabashedly and often even fondly termed as greed and self interest) capitalism would be astounding to those in 1933's bleak world. My parents often talked of the Great Depression and what it was like to live through it. More and more people do not have parents to impart this wisdom to them, that our system failed even the virtuous. Our Bush Depression doesn't resemble the Great Depression only because of the safeguards left standing after years of deregulation. Can you begin to imagine how bad the outcome had the Social Security money been folded into the stock market like many tried to do in the name of deregulation? Perhaps it would have taken longer for deregulation's inevitable bubbles to burst, but the consequences would have made the panic so very much worse. Not only would we have been in danger of losing our 401k's but also Social Security. Thank the heavens no one thought of deregulating unemployment insurance as well.

The last part of the Keynes quote took me by surprise. Nothing has changed. Even the great Keynes could think of nothing better than tweaking the system we have. Was Keynes "perplexed" because he couldn't figure out a better system? Was he hogtied by the values of capitalism he knew would never go down no matter how deep our suffering was? I don't know. But I still have not grown up enough to lose my ideals that anything can be made better, that anything is possible. If tweaking the system is the way, then by all means let's tweak it. But we all need to be clear about why we are tweaking it, and teach our children some other economic values than greed and self interest, leading them to the inevitable non humanistic unchristian "animal deals" * that eventually hurt virtuous people who haven't played the game ruthlessly enough, or were just unlucky.

*Thick as a Brick - Ian Anderson (Jethro Tull)  I listened to this on my walk this morning. Somehow I made sense of this economic/political song when I was in my early teens. Anything was possible as a teen... From the song: "See there, a child is born, and we pronounce him fit to fight. ... We'll make a man of him put him to a trade. Teach him to play monopoly and how to sing in the rain."  "So you ride yourself over the fields, and you make all your animal deals..."  Very rebellious, but you get the point. The unspoken wisdom gained is that there must be a better way than playing monopoly and singing in the rain as a distraction when we inevitably lose to those wth the least humanistic values, who play by the animal rules.

Tuesday, January 11, 2011

As far as history goes...

“As far as history goes and all of these quotes about people trying to guess what the history of the Bush administration is going to be, you know, I take great comfort in knowing that they don’t know what they are talking about, because history takes a long time for us to reach.”— President George W. Bush, Fox News Sunday, 2/10/2008
I think the President meant "by people" or "from people" rather than "about people." But in the uncertainty of the moment, I certainly must say he was right, I think. It is decidedly uncertain at any given moment of exactly what is happening around us. In school I remember learning about Heisenberg's uncertainty principle. In computers and psychology we had the "observer effect." All point to some kind of effect that we have on our surroundings to the point that we cannot ever be sure what our surroundings specifically or scientifically are.

I have spent a lifetime noticing the causes and effects of my actions, with moderate levels of observational success. I can say that I developed some skills in positioning myself away from bad things and influences. However, the bad things that happened to me in my life were the ones that gave me the most experience. Paradoxes are plentiful in life.

When I studied eastern religions for quite some time, I learned of many of these paradoxes. One of the things that has always bothered me is the insistence of some people that they are absolutely correct, when there are so many facets of any given argument. In playing the devil's advocate, I can too sound like I feel I am absolutely correct. When proven wrong, I shrink though, and admit a good argument when I hear it.

Politicians by nature never admit their mistakes. I think the main reason is that everything they say is on record for all time as if it was said yesterday. It is to their best interest to allow others to reveal mistakes while never revealing that they too know they made mistakes. An admission would be on record for all time, while accusations tend to fade.

Ideologies never let politicians down. They can always explain their decisions in terms of the reason's why they were made. Regardless of whether something turned out terribly, history may well prove them right if they follow an ideology that remains through time. The why can make up for almost any mistake.

I too have relied on some principles in my understanding of life, if ideologies can be equated with principles. I think I have always had a bad memory, from early days, and had to rely on unifying concepts more than others. Things had to be organized up there or all this knowledge I was learning and forgetting would be useless. It makes sense, from a librarian's perspective as well. However, a librarian doesn't have much of a need to distinguish between the worth or importance of information. The unifying principle is simply in how to find it. The Internet has turned us all into librarians to a certain degree. But the question still remains as to what is important enough to focus on.

Some time after President Bush started relying on future, possibly yet to be born, historians to come to his defence, there was some study that quantified that 61 percent of historians thought that the Bush presidency was the worst of all time. As I have said, I'm not finished with President Bush's book so I can't really make a judgement yet. :)   But there is a reason I rely on this humorous backpedaling. I'm always uncertain.

The reason I have become fascinated with economics is that I still don't have a unifying principle or ideology that answers the questions in a coherent way that I can fully understand. I know a bunch of things I dislike about our system, but I'm not sure what the next step is. No one asks this question. Even in the midst of a massive system failure that must have shaken every one's core beliefs just a little, we still adhere to old ideas that seem completely unworkable except when we step in and take serious and massive governmental action to get back to our core ideology, which will inevitably fail yet again.

Capitalism has destroyed our manufacturing companies and export figures. Other countries do this capitalism thing much better and in a much more ruthlessly pure form than we are now capable of. Worse, we seem to have little hope of catching them.We have exported our capitalistic ideas quite successfully but exported none of the underpinnings that make it a gentleman's game. None of our morals or highly paid skilled labor or environmental laws seem to be catching on in the internationally pure form of capitalism. These aren't capitalistic concepts and we will continue living with them no matter who we elect to office. Why are we so surprised that outsourcing of jobs and cheap labor, and environmental catastrophes are a clear result of the capitalistic development coupled with a lack of economic morals?

What I keep hearing is how we need to get back to a pure form of this capitalistic system to cure all our ills. But what we have done in the past, has affected what we can do in the future. Like the uncertainty principle, we have observed the problems, changed the system to correct them, then thought we were observing the same system as before. We describe the system today as if we have made no changes to moderate it. When we loosen the regulations of the system we put into place, we see the original system in all its glory.

Booms and busts did not begin with capitalism. But capitalism does nothing at all to moderate them, in fact it makes them much more liable to happen due to the emphasis on self interest as a value. In fact any extra freedom capitalism gives us is most often used to organize people to act in concert. Competition being an important part of capitalism, seems to be antithetical to the value of self interest. It is seldom in my best interest to go against people who can help me. Both ideas of competition and self interest are necessary to success in terms of the sole measurement of success, profit. But competition is undermined by self interest. If you and I buy the same stock, we both profit. If we don't act in concert, we don't gain as much. If you sell yours, I had better sell mine, too, because the price will be going down.

All is uncertain when we consider how it might look through history's perspective, but we act as if all is very certain in the now. If we look back into history at the certainty of the financial experts before 1929 and those before our more recent panic, we will see that certainty has nothing to do with reality. We effect the reality by expressing our certainty about it. We influence others to think the same way en masse, and we doom ourselves to the booms and busts that are inevitably the result. All would be well if booms and busts efficiently used resources by some magical invisible hand, but alas, there is a human toll to our expressions of certainty.

Sunday, January 9, 2011


The impact on the broader economy and the financial markets of the problems in the subprime markets seems likely to be contained.  - Ben Bernanke, Fed Chairman, March 2007 [emphasis mine]
Was Bernanke expressing incompetent truthful optimism or competently untruthful optimism? What our system really hinges on is how people perceive events and vote with their money and ballet. The moderating "invisible hand" of the markets portrayed as some kind of supernatural force* is really a myth.

I caught a few segments of a public radio show as I did errands this morning. The show was on what the Fed really does. It was interesting to note how much of the economy is based on perception. Our whole economic system rests on the peoples trust in our money supply. Invisible hand or not, people are the ones who vote with their money. They decide whether or not to buy the latest slicing gadget on the boardwalk. They also decide whether to take their money out of the stock market and banks based on what might be whispered in their ears by the media.

Oddly, after missing most of this radio show, which I would have enjoyed very much had I not wanted to finish all my errands, the next show was on the biggest media fiascoes of the decade. Blame President George W. Bush all you want for the "mission accomplished" banner, but it seems as if he was sort of duped by the press like we all were. While I don't believe his generals were duped, I think, the president may have just wanted to bask in the glory the press had created. I don't know, I haven't gotten to that part of his book yet. :)  (I have so many books to read and Perry Mason is quite a draw over Decision Points.)

This second public radio show began with an account of the biggest press mistake the show's creators could think of and that was the sensationalistic coverage of the toppling of the statue of Saddam Hussein. Apparently, the square with the famous statue was very close to the reporters' hotel.  The reporters gathered here in this square because the American military was containing this small area and it seemed much safer than their hotel which had been bombed the night before. Most were just going to a safe place. Some very good reporters were calling in to argue that there was a bigger overall picture to see and they were heading that way. After CNN's coverage of the square with the statue these veteran reporters were told from their home offices that they were just not "getting it." The journalists were citing their years of experience in covering wars and trying to show they knew what they were doing in trying to cover the overall picture. However, they were told by the guys in the suits that the story was in that square; the money shot, so to speak.

And the story? It went something like this: when the military vehicles started arriving, a soldier radioed in that we ought to pull down that statue. His commanding officer thought he was not concentrating on the main objective of securing the area and denied the request. Soon some Iraqis started climbing the statue. Noticing this, and the fact that the square seemed secure, a soldier radioed and asked if he could at least give them some rope and a sledge hammer. Yes, the answer came, go ahead, but DON'T use military vehicles to assist. As the small number of Iraqis started to hit the statue, it became obvious that they could not bring it down. And soon it became obvious to the commanding officer that with CNN covering this one shot wall to wall, if that statue did not come down it would symbolize failure. Soon the military helped pull the statue down, symbolizing and portrayed by the press as a microcosm of our total victory. A wider shot of the square would have shown basically an empty square except for a few Iraqis and a bunch of journalists filming and standing around in an outer circle. In no way did this small secured area symbolize anything important.

Again, we can blame President Bush for the banner or we can blame the media for the coverage of "victory."  Honestly, it doesn't matter why the people were misinformed about the extent of the problems we were facing in Iraq, nor how they would soon be compounded. What the press wanted was to put things in terms of something simple that Americans were familiar with.  They totally lost me as lawlessness and looters reigned. I remember the ideas expressed that Iraqis were now free, as if that freedom was an answer to all their problems. and as a consequence the resources needed here in Iraq compounded the problems in Afghanistan and eventually in our economy. The important thing to me is that most of us were wrong minded. Where I am now once more lost is the result of recent elections showing we cannot remember back just two years. Certainly we have no clue about the 1930's when the same kind of panic caused problems that decades could not fix. Without the trillions the Fed and the Federal government has used to moderate the Bush Depression, we certainly would be a lot more knowledgeable about the problems we are facing. Things would look much more like a free and open capitalistic system. So, why not trust the invisible hand a little more than we have?

God may be perfect, but we are not. And He doesn't make up the "invisible hand" as the phrase subtly implies; we the people, make up the "invisible hand" that coordinates markets and government policy. And often guided by greed and not God or real values, we, like even financial geniuses like Ben Bernanke, are often sadly ignorant at many key junctures in history, likely as not.

* In my mind, the "invisible hand" concept is the basic underlying principle of our way of life and economics. It has an almost religious significance. I'm sorry to keep repeating the phrase, but much of my later arguments will be in regard to how this simple phrase and the man who inadvertently created such a powerful phrase have led us into a simplistic way of thinking that does not take into account many factors that that are extremely important but might be harder to understand.

Tuesday, January 4, 2011


The empty and interminably unsold lots next to our house have been empty long enough that pine trees are starting to grow to a considerable size. Soon we won't be able to see many neighboring houses. Evergreening the neighborhood is what I like to call it... no wait a minute.  Evergreening....

In the drug industry if a drug is about to go generic, the company making the drug will make a small change to it. Like.... add vitamin D to a bone strengthening drug. That way, when the generic drug drops in price the drug company will have a new nongeneric drug ready to go and they can charge the insurance companies and unwitting consumers a higher nongeneric price for the same thing plus the inconsequential addition. All this for just the cost of a few well dressed reps armed with free lunches for the doctor and staff.  They call this "evergreening." linky   I wonder if it's called the same thing in the college textbook field when they add inconsequential stuff to keep the textbooks "fresh" and keep the reselling of old ones at bay on Ebay...

Actually, I just read the term used in yet another context and that is what I was going to write about. Evergreening, in finance, is when a loan is continually renewed rather than repaid. Apparently, according to Financial Times: linky or linky evergreening is the way banks have been handling Commercial Real Estate problems. As Financial Times puts it: Commercial Real Estate "has not generally grabbed attention" because this was not as "dramatic" as subprime and sovereign debt problems (sovereign debt was problematic in the EU this last year.).

Again, apparently, if I am understanding this, the banks decided that Commercial Real Estate loans could be extended when their borrowers encountered problems but the "drama" of the sub-prime loans needed a whole bunch of what has been described as "robosigners" to foreclose on homeowners fast enough. And Financial Times thinks that rising interest rates will cause this whole structure a bit of trouble; more problematic subprime loans added to the amounts the banks have extended to businesses who just couldn't make their payments. The rising interest rates mean more foreclosures on homeowners and more defaults on the evergreened loans which tend to need the evergreen treatment just about now coincidentally as interest rates rise. George W. Bush can rest a little easier as historians focus more and more attention on Greenspan and his easy credit of days gone by so those terrorists would not win.

Thankfully the trees growing around my house are generically cheap and not very dramatic just yet although they may be quite tall next year. The way that banks are handling our future, those trees may be enjoyable for a long time. Hopefully, my evergreened drugs will keep me alive long enough to enjoy them at tremendous heights.