Saturday, January 31, 2009

Non-Solipsists of the World Unite! Throw off your Blinders!

Here is a sensible post by Matthew Iglesias addressing a peculiar cultural blindness in the U.S... what he calls "policy solipsism".
If you ask me, one of the most disturbing trends in American public discourse is the incredibly provincialism and solipsism of a lot of our policy debate. The idea that other countries are doing better than we are in various ways is totally off the radar. ...

I was reminded of that by this post from Tim Lee pointing out that broadband internet access in the United States is a lot better and cheaper than it was nine years ago so he “can’t get too upset about the possibility that in 2018 Americans might be limping along with 2 gbps broadband connections while the average Japanese family has a 20 gbps connection.” I, for one, am pretty upset about that possibility. The United States isn’t a poor country dealing with some objective shortfall of national resources. And yet across a whole variety of dimensions—from broadband speed to train quality to the cleanliness of streets to life expectancy to the crime rate—we fall far short of standards that are reached elsewhere. What we do have, on the other hand, is the richest multi-millionaires in the world. And an awful lot of people’s first instinct is to try to explain these things away or explain why it would be impossible to bring some of these quality of life features to the United States.

I bolded the key bit in the above. The U.S. has built a system that worships wealth and the country is willing to let the wheels fall off rather than admit that they have skewed things to the interest of the ultra-rich.

Hitting The Fat Cats with a Good Solid Dowd

I love Maureen Dowd. She is cheeky and plays with language.

Here's her takedown of the fat cat bankers...
The president’s disgust at Wall Street looters was good. But we need more. We need disgorgement.

Disgorgement is when courts force wrongdoers to repay ill-gotten gains. And I’m ill at the gains gotten by scummy executives acting all Gordon Gekko while they’re getting bailed out by us.

With the equally laconic Tim Geithner beside him, Mr. Obama called it “shameful” and “the height of irresponsibility” for Wall Street bankers to give themselves $18.4 billion worth of bonuses for last year.

They should know better, he coolly chided. But big shots — even Mr. Obama’s — seem impervious to knowing better. (Following fast on Geithner’s tax lacunae, Tom Daschle’s nomination hit a pothole when he had to pay $140,000 in back taxes he owed mostly for three years’ use of a car and a driver provided by a private equity firm.)

At least the old robber barons made great products. When you make money out of money, unmoored from morality and regulators, it must unhinge you. How else to explain corporate welfare queens partridge hunting in England, buying French jets and shopping for Lamborghinis?
That's just the start. Go read the rest of the article!

Til Debt Us Do Part

Here is an interesting article by Martin Wolf in the Financial Times. What surprises me is that debt peaked in the Great Depression and it has peaked again. The key difference? The greatest increase in debt was by financial institutions!
How much debt is too much? Nobody knows. But the governments of highly indebted high-income economies – such as the US and UK – think they know the answer: more than today. They want even more credit to flow to their struggling private sectors. Is that an attainable ambition and, if so, how might it be achieved?

Let us start with some facts. The ratio of US public and private debt to gross domestic product reached 358 per cent in the third quarter of 2008. This was much the highest in US history (see charts). The previous peak of 300 per cent was reached in 1933, during the Great Depression.

Nearly all of this debt is private. That reached an all-time high of 294 per cent of GDP in 2007, a rise of 105 percentage points over the previous decade. The same thing happened to the UK, on a yet more impressive scale. This has been a gigantic debt and credit expansion.

Particularly remarkable is the composition of the increased debt. In the early 1930s, most US private debt was owed by non-financial companies: so balance-sheet deflation occurred in companies, as was also the case in Japan in the 1990s. This time, however, the big increase in debt was in the financial and household sectors.

Over the past three decades the debt of the US financial sector grew six times faster than nominal GDP. The consequent increases in its scale and leverage explain why, at the peak, the financial sector allegedly generated 40 per cent of US corporate profits. Something decidedly unhealthy was going on: instead of being a servant, finance had become the economy’s master. ...

What do such rises in indebtedness portend? The answer might be: nothing. After all, over the world, debt nets to zero. In principle, the ability to transfer purchasing power from lenders to borrowers is highly desirable: as a British advertising campaign once claimed, credit “takes the waiting out of wanting”. Yet people can also make big mistakes, particularly if they confuse bubbles with permanently high prices. The financial sector is particularly prone to such blunders. As Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard comment: “Systemic banking crises are typically preceded by asset price bubbles, large capital inflows and credit booms, in rich and poor countries alike”.

Once such asset bubbles burst, it becomes hard to find borrowers and lenders who are either willing or creditworthy. The over-indebted start paying down their debts, instead, as now. Desired savings also soar. Realised savings may not rise, however: incomes may collapse, instead. This is what John Maynard Keynes called “the paradox of thrift”. The result will be a slump caused by balance sheet collapse rather than attempts to control high inflation.

What then might be done?

Some recommend a “liquidation”. A chain of bankruptcy would indeed eliminate a debt overhang, as happened in the 1930s. But, with much of the economy enmeshed in bankruptcy and the financial sector imploding, a depression would result. To choose that option must be insane.
Go read the full article and look at the graphs which lets you see for yourself the facts behind this story.

You Are There!

In the spirit of the old TV series You Are There, ere are some nice simulations at the level of DNA in the cell:

The guy behind this is Drew Berry and apparantly was funded for this Australian TV producer.

The World According to Brad DeLong

Brad DeLong has written a short article looking at the current recession/depression and noting that it is a blip in history. The Industrial Revolution and antecedent revolutions have given us a world of lots (not plenty to the point of satiation, but lots that we get to enjoy)...
The current recession may turn into a small depression, and may push global living standards down by five percent for one or two or (we hope not) five years, but that does not erase the gulf between those of us in the globe's middle and upper classes and all human existence prior to the Industrial Revolution. We have reached the frontier of mass material comfort—where we have enough food that we are not painfully hungry, enough clothing that we are not shiveringly cold, enough shelter that we are not distressingly wet, even enough entertainment that we are not bored. We—at least those lucky enough to be in the global middle and upper classes who still cluster around the North Atlantic—have lots and lots of stuff. Our machines and factories have given us the power to get more and more stuff by getting more and more stuff—a self-perpetuating cycle of consumption.

Our goods are not only plentiful but cheap. I am a book addict. Yet even I am fighting hard to spend as great a share of my income on books as Adam Smith did in his day. Back on March 9, 1776 Adam Smith's Inquiry into the Nature and Causes of the Wealth of Nations went on sale for the price of 1.8 pounds sterling at a time when the median family made perhaps 30 pounds a year. That one book (admittedly a big book and an expensive one) cost six percent of the median family's annual income. In the United States today, median family income is $50,000 a year and Smith's Wealth of Nations costs $7.95 at Amazon (in the Bantam Classics edition). The 18th Century British family could buy 17 copies of the Wealth of Nations out of its annual income. The American family in 2009 can buy 6,000 copies: a multiplication factor of 350.

Books are not an exceptional category. Today, buttermilk-fried petrale sole with pickled vegetables and parsley mayonnaise, served at Chez Panisse Café, costs the same share of a day-laborer's earnings as the raw ingredients for two big bowls of oatmeal did in the 18th Century. Then there are all the commodities we consume that were essentially priceless in the past. If in 1786 you had wanted to listen to Mozart's The Marriage of Figaro in your house, you probably had to be the Holy Roman Emperor, Archduke of Austria, with a theater in your house—the Palace of Laxenberg. Today, the DVD costs $17.99 at (The multiplication factor for enjoying The Marriage of Figaro in your home is effectively infinite for those not named Josef von Habsburg.)

Today we still spend about one dollar in five on food—down from the half of income that Americans spent in 1776. The share hasn't fallen more because some of us buy buttermilk-fried petrale sole with pickled vegetables and parsley mayonnaise cooked, served, and cleaned up by others rather than (or in addition to) oats in the gunnysack. One reason is that the oats-for-five-meals-out-of-six-diet of 18th Century Scots was monotonous, and we are glad to escape it. Another is we play status games: oats taste worse when you know somebody else is tasting petrale sole and, conversely, the fish tastes better to those of us with money and luck enough to dine at Chez Panisse.

Thursday, January 29, 2009

Back at the Trough

Robert Reich points out that Wall Street is back at the Washington trough using money obtained from the bailout to buy legislation that favours Wall Street's interest. It is crazy that taxpayers are paying to have their pockets picked!
The new administration and Congress are busy preparing the second tranche of bailout money for Wall Street -- TARP II -- at the same time they're developing a new set of regulations to make sure Wall Street doesn't get into this kind of mess again. But will the old politics intrude? ...

Yet what's happened to the Wall Street campaign contributions and to the lobbyists? They're still going strong. We now know that many of the financial giants that have been bailed out by taxpayers continue to finance a platoon of Washington lobbyists, who are at this moment trying to influence TARP II and the next attempt to regulate Wall Street. In effect, your money and mine, and that of all other taxpayers, is paying these lobbyists to push Congress in a direction we have every reason to believe is not in our interests but in the continued interests of Wall Street. Citigroup, the recipient of $45 billion of taxpayer money so far, is still fielding "an army" of Washington lobbyists, according to the New York Times. Its lobbyists are working on a host of issues, including the bailout. In the fourth quarter of 2008, when it got its first infusion of bailout money, Citi spent $1.77million on lobbying fees. During the last three months of 2008, at least seven other firms receiving bailout funds (American Express, Capital One, Goldman Sachs, KeyCorp, Morgan Stanley, PNC and Bank of New York Mellon) lobbied the government about the bailout.

Would it not be a reasonable condition for receiving additional bailout funds -- from TARP II -- that a firm cease its lobbying activities and campaign contributions (as well as any contributions it makes indirectly through its executives) at least until it fully compensates taxpayers what we have provided it?


Paul Krugman shows a bit of humour on his blog today:
As the Obama administration apparently prepares to launch Hankie Pankie II — buying troubled assets from banks at prices higher than they will fetch on the open market — it occurred to me that an updated version of an old Communist-era joke may be appropriate: under Bush, financial policy consisted of Wall Street types cutting sweet deals, at taxpayer expense, for Wall Street types. Under Obama, it’s precisely the reverse.
The sorrow is that ultimately the joke is on the taxpayer.

Faint Praise for Bush

I'm generally down on Bush and his 8 year reign of disaster. But here is an example where Bush was a paragon of virtue compared to the UK:
UK fingerprints foreign six-year-old children at the border

from Boing Boing by Cory Doctorow

If you bring a child to Britain from outside the EU, be prepared to have her fingerprinted, even if she's only six years old. That's because the British government now leads the world in undermining the civil liberties of children, beating the US-VISIT program by eight years (visitors to America are only fingerprinted if they're over 14). Most of the British government seems not to have realized that this was going on -- even though the UK's Members of European Parliament have been pushing to make this a requirement across the EU.

Remember when the head of Scotland Yard proposed taking DNA samples from five-year-olds who displayed criminal tendencies so that they could be rounded up for arrest later in life? Here again, we see the British government mistaking Nineteen Eighty-Four as a manual for statecraft.

In fact, no one has called the Borders Agency to account. Home Office officials I have talked to outside the agency were shocked that official government policy is now to fingerprint children.

When asked why (question 226407), the Home Office itself offers a much more solid defence: that the EU requires it. What it does not admit is that the British government is almost alone in pushing the EU to ensure that the age when fingerprinting can start is so low. Home Office officials pushed the EU to establish a standard age of six, despite opposition within other European governments. The next time you hear a government official support the EU, it is not just because it is a vehicle for "peace, prosperity and freedom", but also because it is a vehicle to push through policies that the UK government would prefer not to pursue through the legislature at home.

The Bush administration rejected the contemplation of fingerprinting children, even within the controversial US-VISIT program that fingerprints visitors to the United States. The Department of Homeland Security is prohibited from fingerprinting children under 14, though it may well consider lowering it.

Wednesday, January 28, 2009

Nuclear Annihilation

When I was a kid the air defense siren just beyond my backyard fence would go off every Saturday afternoon at 1:00 PM to remind me that I lived in a bull's eye... the center of a ring of Titan II missiles that the Russians would attack immediately when nuclear war broke out.

I knew war was close many times. Personally my scariest time was when the intelligence ship Pueblo was seized. At that point all the planes at the local US Air Force station were put on high alert and sent to circle the valley fully armed. All day and night and probably well into the next day flights of planes would come in for refueling but kept their weapons airborne to strike. It was a very visible signal of how close humanity was to destroying itself.

I knew about the gaffs and mistakes like the time that a nuclear strike practice tape was mistakenly loaded at SAC headquarters and decision-makers had to make a life-and-death decision whether to launch an all out nuclear attack. I knew about the early SAGE system where radar signals bouncing off the moon was mistaken for a Russian attack and humans-in-the-loop made the right decision and prevented a nuclear strike. But I didn't know about the stories from the other side.

Today I learned of one from reading Brad DeLong's website that then sent me off to read the Wikipedia article on Stanislav Petrov. Here is the relevant bit:
Stanislav Petrov, an Air Defence lieutenant colonel, was the officer on duty at the Serpukhov-15 bunker near Moscow on September 26, 1983. Petrov's responsibilities included observing the satellite early warning network and notifying his superiors of any impending nuclear missile attack against the Soviet Union. If notification was received from the early-warning systems that inbound missiles had been detected, the Soviet Union's strategy was an immediate nuclear counter-attack against the United States (launch on warning), specified in the doctrine of mutual assured destruction.

Shortly after midnight, the bunker's computers reported that an intercontinental ballistic missile was heading toward the Soviet Union from the US. Petrov considered the detection a computer error, since a United States first-strike nuclear attack would hypothetically involve hundreds of simultaneous missile launches to disable any Soviet means for a counterattack. Furthermore, the satellite system's reliability had been questioned in the past. Petrov dismissed the warning as a false alarm, though accounts of the event differ as to whether he notified his superiors or not after he concluded that the computer detections were false and that no missile had been launched. Later, the computers identified four additional missiles in the air, all directed towards the Soviet Union. Petrov again suspected that the computer system was malfunctioning, despite having no other source of information to confirm his suspicions. The Soviet Union's land radar was incapable of detecting missiles beyond the horizon, and waiting for it to positively identify the threat would limit the Soviet Union's response time to minutes.

Had Petrov reported incoming American missiles, his superiors might have launched an assault against the United States, precipitating a corresponding nuclear response from the United States. Petrov declared the system's indications a false alarm. Later, it was apparent that he was right: no missiles were approaching and the computer detection system was malfunctioning. It was subsequently determined that the false alarms had been created by a rare alignment of sunlight on high-altitude clouds and the satellites' Molniya orbits, an error later corrected with cross-reference to a geostationary satellite.
The sad fact is that most people today think that nuclear war is "not possible". In reality it is even more likely now because there are so many more nuclear armed states. Humanity is incredibly lucky that we haven't annihilated ourselves. George Bush's presidency increased the likelihood of nuclear armageddon many-fold over. Hopefully with Obama in office governments will re-start negotiations and move us away from the precipice of nuclear war before some accident causes the unthinkable to happen.

Bert Hölldobler & E.O. Wilson's "The Superorganism"

I've been reading E.O. Wilson's books for the last 30 years and enjoyed them. This one was OK but not great. The Hölldobler influence probably accounts for it being a bit more of a dry academic read that it would if Wilson was the primary author.

So, while the text is a bit dense and the details beyond the general reader, the pictures are excellent and the accessible information is excellent. I just wish they had cut the book to 2/3 the length and made it more popular and less directed at the academic specialist.

Tuesday, January 27, 2009

Bring on the Shackles!

I love Maureen Dowd's over-the-top articles at the NY Times. Here's one where she excoriates the Wall Street plutocrats who have destroyed the world's economy...
New York’s attorney general, Andrew Cuomo, always gratifying on the issue of clawing back money from the greedy creeps on Wall Street, on Tuesday subpoenaed Thain, the former Merrill Lynch chief executive, over $4 billion in bonuses he handed out as the failing firm was bought by Bank of America. (Bonuses we helped pay.)

In an interview with Maria Bartiromo on CNBC, Thain used the specious, contemptible reasoning that other executives use to rationalize why they’re keeping their bonuses as profits are plunging.

“If you don’t pay your best people, you will destroy your franchise” and they’ll go elsewhere, he said.

Hello? They destroyed the franchise. Let’s call their bluff. Let’s see what a great job market it is for the geniuses of capitalism who lost $15 billion in three months and helped usher in socialism.

Bartiromo also asked Thain to explain, when jobs and salaries were being cut at his firm, how he could justify spending $1 million to renovate his office. As The Daily Beast and CNBC reported, big-ticket items included curtains for $28,000, a pair of chairs for $87,000, fabric for a “Roman Shade” for $11,000, Regency chairs for $24,000, six wall sconces for $2,700, a $13,000 chandelier in the private dining room and six dining chairs for $37,000, a “custom coffee table” for $16,000, an antique commode “on legs” for $35,000, and a $1,400 “parchment waste can.”

Does that mean you can only throw used parchment in it or is it made of parchment? It’s psychopathic to spend a million redoing your office when the folks outside it are losing jobs, homes, pensions and savings.

Thain should never rise above the level of stocking the money in A.T.M.’s again. Just think: This guy could have been Treasury secretary if John McCain had won.

Bartiromo pressed: What was wrong with the office of his predecessor, Stanley O’Neal?

“Well — his office was very different — than — the — the general décor of — Merrill’s offices,” Thain replied. “It really would have been — very difficult — for — me to use it in the form that it was in.”

Did it have a desk and a phone?

How are these ruthless, careless ghouls who murdered the economy still walking around (not to mention that sociopathic sadist Bernie Madoff?) — and not as perps?

Bring on the shackles. Let the show trials begin.

Buffett Interview

There is a nice interview of Warren Buffet on the Nightly Business Report. Lots of pearls of wisdom. You can watch it here.

These are the bits I really enjoyed (read the transcript):
SG: This financial crisis has been extraordinary in so many ways, how has it changed your approach to investing?

WB: Doesn't change my approach at all. My approach to investing I learned in 1949 or '50 from a book by Ben Graham and it's never changed.

SG: So many people I have talked to this past year say this was unprecedented... the unthinkable happened. And that hasn't at all impacted your philosophy on this?

WB: No and if I were buying a farm, I wouldn't change my ideas about how to buy a farm or an apartment house or a business and that's all a stock is. It's part of a business so if I were going to buy stock in a private business here in Omaha, I'd look at it just like I would have looked at it two years ago and I'll look at it the same way two years from now. I look at how much I am getting for my money, how good the management is, how the competitive position of that business compares to others, how durable it is and just fundamental questions. The stock market is... you can forget about that. Any stock I buy I will be happy owning it if they close the stock market for five years tomorrow. In other words I am buying a business. I'm not buying a stock. I'm buying a little piece of a business, just like I buy a farm. And that doesn't change. And all the newspapers headlines of the world don't change that. It doesn't mean you can't buy it cheaper tomorrow. It may turn out that way. But the real question is did I get my money's worth when I bought it?
And this...
SG: What about Berkshire Hathaway stock? Were you surprised that it took such a hit last year, given that Berkshire shareholders are such buy and hold investors?

WB: Well most of them are. But in the end our price is figured relative to everything else so the whole stock market goes down 50 percent we ought to go down a lot because you can buy other things cheaper. I've had three times in my lifetime since I took over Berkshire when Berkshire stock's gone down 50 percent. In 1974 it went from $90 to $40. Did I feel badly? No I loved it! I bought more stock. So I don't judge how Berkshire is doing by its market price, I judge it by how our businesses are doing.
And this...
SG: As you know it's the 30th anniversary of Nightly Business Report. As you look back on the past three decades, what would you say is the most important lesson that you've learned about investing?

WB: Well I've learned my lessons before that. I read a book what is it, almost 60 years ago roughly, called The Intelligent Investor and I really learned all I needed to know about investing from that book, in particular chapters 8 and 20 so I haven't changed anything since.

SG: Graham and Dodd?

WB: Well that was Ben Grahams' book The Intelligent Investor. Graham and Dodd goes back even before that which was important, very important. But you know you don't change your philosophy assuming you think have a sound one and I picked up I didn't figure it out myself, I learned it from Ben Graham, but I got a framework for investing that I put in place back in 1950 roughly and that framework is the framework I use now. I see different ways to apply it from time to time but that is the framework.

SG: Can you describe what it is? I mean what is your most important investment lesson?

WB: The most important investment lesson is to look at a stock as a piece of business not just some thing that jiggles up and down or that people recommend or people talk about earnings being up next quarter, something like that, but to look at it as a business and evaluate it as a business. If you don't know enough to evaluate it as a business you don't know enough to buy it. And if you do know enough to evaluate it as a business and its selling cheap, you buy it and don't worry about what its doing next week, next month or next year.

The Lowdown on Previous Recessions

Here's a wonderful interactive piece by the NY Times that lets you see the last 50 years of the US economy and listen to short clips of economists explaining the various recessions during this period. This is well worth taking the time to click and learn:

Dr. Doom

This is an interview with Nouriel Roubini, an academic who has gotten a reputation as accurately foretelling the current economic mess. I wonder whether a guy like this drinks his own bath water, i.e. becomes so addicted to fame that he feels a pressure to constantly up the ante with his pessimism to keep in the public's eye. Usually a guy like this finally busts when his prognostications of doom finally fail as the economy recovers. It is hard to tell right now if his interviews are honest economic assessments or whether he has started shading his predictions to stay in the limelight. I sure hope it is the latter.

Monday, January 26, 2009


Paul Krugman in his latest op-ed in the NY Times provides ammunition for those dealing with those right wing nut Republicans who argue for tax cuts and against "spending" as the way to get the US economy out of the recession/depression it is in:
As the debate over President Obama’s economic stimulus plan gets under way, one thing is certain: many of the plan’s opponents aren’t arguing in good faith. Conservatives really, really don’t want to see a second New Deal, and they certainly don’t want to see government activism vindicated. So they are reaching for any stick they can find with which to beat proposals for increased government spending. ...

But the obvious cheap shots don’t pose as much danger to the Obama administration’s efforts to get a plan through as arguments and assertions that are equally fraudulent but can seem superficially plausible to those who don’t know their way around economic concepts and numbers. So as a public service, let me try to debunk some of the major antistimulus arguments that have already surfaced. Any time you hear someone reciting one of these arguments, write him or her off as a dishonest flack.
He then goes on to examine specific arguments and shows why they are fraudulent. This is excellent ammunition to deal with the ideologues who not only created the current mess but keep pushing policies that will only make the current problems worse.

Seeing is Believing, or So They Say

Take and look and you judge whether this is real...

My problem with this animation to simulate T. Rex is that it looks "front heavy" to me. It is as if you took a chicken and had them bend their head down and "run". I think it would fall flat on its face.

The above is from an interesting blog entry by Carl Zimmer on animal motion. It is an excellent blog. Go read it.

Doublespeak: Funny How Hot Means Cold

I have a really hard time taking the Global Warming crowd seriously. Sure, I know the basic science. Greenhouse gases mean you trap radiation and heat the earth. I believe in that. But I don't believe the hysteria of the Chicken Littles who keep screaming "the sky is falling!".

I keep noticing that as we are told that we are on a hockey stick escalator of runaway global warming odd facts fly in the face of this politically correct message. Here is a report in an English Language newspaper in Abu Dhabi:

Short life expectancy for RAK snowman

Anna Zacharias

Last Updated: January 25. 2009 5:59PM UAE / GMT

RAS AL KHAIMAH // Snow covered the Jebel Jais area for only the second time in recorded history yesterday.

So rare was the event that one lifelong resident said the local dialect had no word for it.

According to the RAK Government, temperatures on Jebel Jais dropped to -3°C on Friday night. On Saturday, the area had reached 1°C.

Major Saeed Rashid al Yamahi, a helicopter pilot and the manager of the Air Wing of RAK Police, said the snow covered an area of five kilometres and was 10cm deep.

“The sight up there this morning was totally unbelievable, with the snow-capped mountain and the entire area covered with fresh, dazzling white snow,” Major al Yamahi said.

“The snowfall started at 3pm Friday, and heavy snowing began at 8pm and continued till midnight, covering the entire area in a thick blanket of snow. Much of the snow was still there even when we flew back from the mountain this afternoon. It is still freezing cold up there and there are chances that it might snow again tonight.”

Aisha al Hebsy, a woman in her 50s who has lived in the mountains near Jebel Jais all her life, said snowfall in the area was so unheard of the local dialect does not even have a word for it. Hail is known as bared, which literally translates as cold. “Twenty years ago we had lots of hail,” said Ms al Hebsy. “Last night was like this. At four in the morning we came out and the ground was white.”

Jebel Jais was dusted in snow on Dec 28, 2004, the first snowfall in living memory for Ras al Khaimah residents.

“I had flown there in 2004 when it snowed, but this time it was much bigger and the snowing lasted longer as well,” said Major al Yamahi.

At the base of the mountains, residents also reported severe hail on Friday night. “We had hail. Last night was very cold, but there can only be snow on Jebel Jais because it’s the tallest,” said Fatima al Ali, 30, a resident of a village beneath the mountains.

In Ras al Khaimah City, 25km from Jebel Jais, sheet lightning and thunder shook houses.

Friday, January 23, 2009

Human Behaviour

The "bystander effect" is an insight into human psychology. If there is only one person at the scene of a disaster, that person will take responsibility and give assistance. But if there are many people, the people hang back expecting somebody else to "take charge".

The following is from an interview with an author about surviving air disasters. In the interview they touch on the recent ditching of USAir 1549 into the Hudson river in which all 155 passengers survived. I've put in bold italic the key bit:

Question: A misconception you write about in the book is that in a plane crash, people become panicky and animalistic and pandemonium ensues. What can people actually expect in such a situation?

Answer: Panic is one of the biggest myths of disasters and emergencies. We’re accustomed to seeing pandemonium and chaos in disaster movies, but experts say that kind of unreasoning fear and hysteria almost never happens in real life.

In fact, one of the most surprising things you’ll encounter in a disaster is inaction. Believe it or not, but most people do nothing. They’re bewildered. In a stupor, they wait for instructions.

Experts say that 80 percent of us are likely to respond this way with so-called “behavioral inaction.” Only 10 percent act quickly and decisively. Fortunately, just 10 percent of us act dangerously or counterproductively.

We also shouldn’t forget that 150 ordinary people without any evacuation training managed to get off USAir 1549 without serious incident. It was “organized chaos,” they reported, which shouldn’t come as any surprise. Pushing and shoving should be expected in a narrow aluminum cylinder that was supposed to land in North Carolina instead of a frigid river.
You can read the entire interview from the Freakonomics blog.

Is a Pell Grant a Stimulus?

I love to watch US politics. There ideological lines are nuttier than what I'm used to in Canada. (Sure we have wingbats here, but they get less coverage.)

Here is Dean Baker, an economist who tirelessly points out the errors in the US media, pointing out how Arlen Specter, a Republican, just "doesn't get it" with respect to Pell Grants. This is funny because Specter is a smart guy. He just doesn't get it because his ideology won't get him "get it"...
Washington Post reporters should have the time and expertise to evaluate the assertions on economic issues made by politicians. This is important, because readers almost certainly do not.

The Post was seriously negligent in reporting Senator Arlen Spector's complaint about the inclusion of an expansion of Pell Grants in the stimulus. According to the Post, Spector is opposed to the inclusion of expanded grants in the stimulus, "because it would do little to spur short-term economic growth."

The grants, which help to pay for college for people with low and moderate income families, actually would provide stimulus in roughly the same way as tax cuts to these families would. They provide them with more disposable income, which is likely to lead them to spend more. The Post should have told readers that Mr. Spector's assertion was wrong.

The article also notes the opposition of Republicans and the banking industry to a measure that would allow bankruptcy judges to rewrite the terms of mortgages in a bankruptcy proceeding. The articles tells readers that they oppose the measure because, "it might cause mortgage interest rates to rise."

This is the stated reason given by Republicans and the banking industry for their opposition, but it may not be the true reason. It is also possible that they oppose the measure because it would likely reduce the profit of the banking industry. It is virtually certain that lower bank profits would result if the measure is approved. It is far from obvious that higher mortgage interests rise, since the measure is likely to only apply to past mortgages not new ones. It is also not clear that Republicans and the banking industry would necessarily care much if mortgage rates did rise, especially since the plausible size of any increase would be in the neighborhood of 0.1 percentage point.

Thursday, January 22, 2009

A Quick Romp Through the Bush Years

Here's Keith Olbermann helping us to remember what the Bush years really meant...

Liquidity Trap

Here is material by Bruce Bartlett on Brad DeLong's blog that is a pretty good economics primer. Reading this will help you understand what is unique about the current recession and it is an excellent presentation of why the US economy is in a "liquidity trap". I've bolded key bits:
... A study by Obama administration economists Christina Romer and Jared Bernstein predicts that the stimulus plan being debated in Congress will raise the gross domestic product by $1.57 for every $1 spent.

Such a multiplier effect has been heavily criticized by a number of top economists, including John Taylor of Stanford, Gary Becker and Eugene Fama of the University of Chicago and Greg Mankiw and Robert Barro of Harvard. The gist of their argument is that the government cannot expand the economy through deficit spending because it has to borrow the funds in the first place, thus displacing other economic activities. In the end, the government has simply moved around economic activity without increasing it in the aggregate. Other reputable economists have criticized this position as being no different from the pre-Keynesian view that helped make the Great Depression so long and deep....

I think the critics of an activist fiscal policy are forgetting the essential role of monetary policy as it relates to fiscal policy. As Keynes was very clear about, the whole point of fiscal stimulus is to mobilize monetary policy and inject liquidity into the economy. This is necessary when nominal interest rates get very low, as they are now, because Fed policy becomes impotent. Keynes called this a liquidity trap, and I think there is strong evidence that we are in one right now. The problem is that fiscal stimulus needs to be injected right now to counter the liquidity trap. If that were the case, I think we might well get a very high multiplier effect this year. But if much of the stimulus doesn't come online until next year, when we are likely to be past the worst of the slowdown, then crowding out will greatly diminish the effectiveness of the stimulus.... Thus the argument really boils down to a question of timing. In the short run, the case for stimulus is overwhelming. But in the longer run, we can't enrich ourselves by borrowing and printing money. That just causes inflation...

Let the Criticism Begin

My favourite economist, Paul Krugman, is fast out the gate with a criticism of Barack Obama in his NY Times op-ed piece today:
But my real problem with the speech, on matters economic, was its conventionality. In response to an unprecedented economic crisis — or, more accurately, a crisis whose only real precedent is the Great Depression — Mr. Obama did what people in Washington do when they want to sound serious: he spoke, more or less in the abstract, of the need to make hard choices and stand up to special interests.

That’s not enough. In fact, it’s not even right.

Thus, in his speech Mr. Obama attributed the economic crisis in part to “our collective failure to make hard choices and prepare the nation for a new age” — but I have no idea what he meant. This is, first and foremost, a crisis brought on by a runaway financial industry. And if we failed to rein in that industry, it wasn’t because Americans “collectively” refused to make hard choices; the American public had no idea what was going on, and the people who did know what was going on mostly thought deregulation was a great idea.

A Little History Lesson

Brad DeLong recounts the errant ways of yesteryear before sanity descended and the US public elected Barack Obama. This is an excellent history lesson for those who have failed to remember the past:
The Possibility of the First Normal Policy-Making and Politics since...

The inauguration of Barack Hussein Obama as the 44th president of the United States of America offers the possibility of the first episode of normal politics and policy-making since... since... since...

Well, from 2001-2008 we have been ruled by cruel and incompetent wingnuts. From 1995-2001 the congress was dominated by cruel and maladjusted wingnuts. From 1993-1995 the congress was dominated by old dinosaurs who wanted to teach the hick from Arkansas a lesson. From 1989-1993 we were ruled by reasonable people who thought they had to pretend to be cruel and maladjusted wingnuts. 1981-1989 was the Age of Reagan--when we had to pray for George Shultz and Nancy Reagan's astrologer to outmaneuver the wingnuts in the White House and make good policy. Before then was another four years 1977-1981 when the barons of congress's highest priority was to teach the hick from Georgia a lesson. Before then we lived in Nixonland--in which the twin centers of American politics were the successful attempt to tell all Americans who did not like Black people that they had a home in the Republican Party, and "anticommunism"--in the form of denunciations of Helen Gahagan Douglas was a spy for Stalin (besides being married to a Jew) and denunciations of Harry S Truman for being soft in communism in settling for "containment" rather than "rollback" (and, of course, when the Hungarians in 1956 dared take the rhetoric of John Foster Dulles, Richard Nixon, and Dwight Eisenhower seriously...). Before then were the denunciations of Franklin Delano Roosevelt ("the communist in the White House..." "that cripple in the White House...").

And before then...

The inauguration of Barack Hussein Obama as the 44th president of the United States of America offers the possibility of the first episode of normal politics and policy-making since the Radical Republicans puzzled over how to use the North's victory in the Civil War to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.

What to Read

Here is a wonderful article from the Washington Monthly entitled "What Obama Should Read".
A president who is a serious reader is of course likely to be shaped by what he reads, and we know a bit about what has been on Obama’s list so far. From interviews, we know that Ernest Hemingway’s For Whom the Bell Tolls made an impression on him as a young man. His campaign reading list—or at least the books he chose to be seen with on the trail—included Jonathan Alter’s The Defining Moment, Larry Bartels’s Unequal Democracy, Steve Coll’s Ghost Wars, Fareed Zakaria’s The Post-American World, and Doris Kearns Goodwin’s Team of Rivals. And we know that, at least in the case of the latter book, Obama’s choice of reading has already had some impact on his governing choices (or at least on how pundits frame them on the Sunday-morning talk shows).

So in the hope that he’s willing to take a few more reading assignments, we asked a few of our favorite writers and thinkers to offer their suggestions on what the new president should have by his bedside.

Go read the article to discover the wonderful reading suggestions!

The Truth is Now Leaking Out

Here is a nice video from MSNBC of a Keith Olbermann piece on how the Bush admin spied illegally on everybody, and as Russell Tice, an NSA analyst, reveals, Bush targeted US news organizations and reporters and journalists specifically:

What Went Wrong

Here is a review of the Bush "accomplishments". This is a NY Times article by Justin Fox. This is obviously a short list, the "highlights", in what could be a much longer list. But Fox has generally hit the right "high" points of the Bush presidency:

George Bush is leaving the White House with a dismal economic record. By almost every measure — GDP growth, jobs, median incomes, financial-market performance — he stacks up as probably the least-successful President on the economic front since Herbert Hoover. ...

As the decider in the White House for the past eight years, George Bush made some economic calls that don't look smart today. Here are eight of them.

1. The Return to Deficits: Bush’s tax cuts and spending increases — and clear disdain for the pay-as-you-go approach that had brought deficits down in the 1990s — brought a return to permanent deficits.

2. Iraq: Even if you think the war did bring benefits to the U.S., they would have to be pretty gigantic to justify the costs of $1-3 trillion dollars;

3. Tax Cuts for the Rich: Bush came to Washington facing almost diametrically opposing economic conditions, yet he offered up the same solutions as Reagan.

4. Financial Regulation: What is true is that most Bush-era financial regulators were less than enthusiastic about the very act of regulating, and that Bush’s “ownership society” push glossed over a lot of potential dangers.

5. Telling Us to Go Shopping: After the 9/11 terrorist attacks, President Bush didn’t call for sacrifice. He called for shopping.

6. Energy Policy: Not much to say here, except that there wasn’t an energy policy.

7. A State of Denial: Every Administration spins and sugarcoats the economic truth. But the Bush White House took this disingenuousness to new levels.

8. The Muddled Bailout: The main problem has been the ambivalence with which both Paulson and the White House have approached the financial rescue.

Monday, January 19, 2009

Lost in Space... i.e. Spatial Transformations

Here's a fun video of playing with blocks, cubes, stars, you name it...

Details about Obama

Here is a very nice discussion of Barack Obama and his formative early years. Click to listen to the 22 minute radio broadcast:
Obama: Professor President explores the intellectual influences and ideas which shaped Obama the scholar, teacher and academic.

We go into the windy quads and tree-lined streets of the campus in Hyde Park on Chicago's South Side, in search of the elemental Obama and ask those who worked with him, his mentors, academic peers and students, what shaped his ideas and how he thinks.

First broadcast on BBC Radio 4, on the 6th January 2009.

Kwame Anthony Appiah is one of America's leading public intellectuals. In this investigative feature he is on a mission to find out what Barack Obama is like as an intellectual.

Warren Buffett Praising Obama

Here's a nice interview of Warren Buffett by Tom Brokaw on Dateline. The part I like best -- besides the praise of Obama as the right man for the current crisis -- is this simple philosophy of life as stated by Buffett:
"Success is getting what you want.
Happiness is wanting what you get."

Sunday, January 18, 2009

Voices on the Left

Here is a bit of video from this recent meeting:
On Sunday January 18th a panel of nationally syndicated progressive talk hosts will gather at George Washington University’s Lisner Auditorium for a three-hour live national radio broadcast to celebrate the inauguration of Mr. Obama as the nations 44th President. Hosted by veteran radio and TV talker Bill Press, the dais will include progressive talkers Joe Madison, Stephanie Miller, Randi Rhodes, Ed Schultz, Rev. Al Sharpton and Mario Solis-Marich.

Moral Blindness

I really enjoy Dean Baker's blog. He has a few themes and he keeps repeating them even though the mainstream media ignores him. One theme is that the US Social Security system if well funded for the next 40 years, but right wing ideologues keep hammering the idea that it somehow can't be afforded.

Here is another of his bugaboos: Some big media seem to have a crusade to lower workers' wages, e.g. the Washington Post editorializing in supposedly "news" pieces about the need to reduce auto workers' wages. Baker points out the oddity that this same paper seems blind to the fact that the bailed out financial institutions have workers at the top -- called "CEOs" -- who are pigs at the trough feasting on public monies but nobody seem concerned about reducing their "wages":
More Bank Bailouts: Who Gets the Money?

The Washington Post made reducing the pay of autoworkers by $4.00 an hour a central theme of its coverage (both news and editorial) of the auto industry bailout. For this reason it is especially noteworthy that its discussion of new plans for bailing out banks has no mention whatsoever of executive compensation at the banks.

In good years, the highest paid bank executives could make more money in an hour than a UAW autoworker earns in a year. For this reason, readers may find restrictions on the compensation of bank executives to be an important part of what could be another trillion dollar bailout package for Wall Street. The omission of any discussion of executive compensation is quite striking.

Matt Taibbi's "The Great Derangement"

I started this book with high hopes of a smart but insightful view of US culture/politics. The author writes for Rolling Stone magazine. I expected something good.

The writing style left me cool. He does take a know-it-all, cocky view of things. And he does show some real knowledge of people & things. But I don't come away from this book with a feeling that I learned anything deep. I feel kind of "icky" in that his view of people is that they are stepping stones to his career. He sneaks into a fundamentalist Christian group through lies and then writes condescendingly of their pathetic lives. I don't need this. He comes off as a holier-than-thou know-it-all with no heart. There is no "there" there.

His view of society and government is far to jaundiced for my taste. Here is his put-down of the 9/11 conspiracy crowd:
You don't elect politicians to commit crimes; you elect politicians to make your crimes legal. That is the whole purpose of the racket of government. Another use of it would be a terrible investment and the financial class in this country didn't get to where it is by betting on the ability of a president whose lips move when he reads to blow up two Manhatten skyscrappers in broad daylight without getting caught. (p. 190)
Here is one of his put-downs of religion:
This was a sort of Church of America, where the religious and political orthodoxies were inextricable. You could no more protest on behalf of Nancy Pelosi here than you could question the wisdom of God. It was groupthink in the classic sense of the word, with the rants against Pelosi and against Libby's "enemies" an essentially exactly parallel version of the Two Minutes' Hate. But I couldn't find a way to get off on it the same way they did. Like Orwell's protagonist Winston, I was in trouble because to be a convincing hater you really have to feel it. And when you don't feel it, you give of a kind of stink.
I have no love for fundamentalist religion. But after wading through a couple hundred pages of Taibbi's "personal experience" I don't learn anything authentic or useful. I learn about his ability to manipulate and to make fun of other people. But I don't get any useful insights. Sadly, this book was a waste of my time. I had high hopes. I was recommended to me. But I'm sorry I spent the time trying to get something useful out of this book.

A Thoughtful Question

I enjoy Brad DeLong's blog because he has wide interests and will go out on a limb with his opinion. Oh, and I enjoy his pseudo-Socratic dialogs. Here's a thoughtful bit he writes of the Greeks. Supposedly these thoughts are inspired by his brother watching the movie Troy in 2004, but in reality this is him thinking about the upcoming change of leadership in Washington. I've left out the preamble, here's the key bit...
The Greeks view Agamemnon as glorious because he is a good king: at key moments, he listens to good counsel from his advisors; and when the chips are down he values victory in the common enterprise as more important than his own pride. By contrast, Priam's pride is overweening: he doesn't send Helen back--no Achaean is going to tell him what to do!--even though in a pre-feminist world it is a grave moral offense that puts you in the wrong for your wastrel younger son to steal a queen from a fellow monarch.

The Greeks view Achilles as glorious because he is preeminent in a crucial--the Greeks, at least the Greek aristocrats who paid Homer, would have called it the crucial--field of human endeavor: war. Without preeminence in war, no other form of human excellence can matter (for your cities are sacked, you fields burned, your people enslaved). And, on the battlefield, Achilles is the best of the Achaeans.

We can see how the Greeks viewed Agamemnon and Achilles by looking at the history of the Macedonian conquest. Alexander set out to consciously emulate Achilles. And his father Philip--After the battle of Chaeronea, he refused to allow the defeated Athenians to bury their dead. One of the Athenian prisoners then said: "Lord King, the Gods have cast you in the role of Agamemnon. But you are playing it as if you were Thersites." And Philip laughed and relented: to compare someone to Agamemnon in fourth-century Greece was high praise.

Now I think that the filmmakers' decision was conscious: that we cannot today--that nobody can, since World War I--see war as glorious, and see the skill of the warrior as as source of glory. We admire the honor of Hector. We admire the strategic genius of Odysseus. But we do not see sheer excellence in the techniques of war as glorious in itself. And an earlier generation would. An earlier generation would see the march of the 3rd Infantry Division from Kuwait to Baghdad as glorious, even though the strategic fruits of that operational victory were thrown away by the incompetence of Bush, Cheney, Rumsfeld, Franks, Bremer, and company. We do not.

And so, for us, it is Hector fighting to defend his home and family (even though the war waged by the Achaeans against Troy does, by their lights, have a just cause) who is the hero of the Illiad.

Is it a good thing that we modern American liberals have the mindset that we do--that we cannot even suspend our disbelief for long enough to enter into a frame of mind in which Achilles is glorious? For example, Armed Liberal wants to call Achilles a hero, but immediately steps back: "do we respond to Achilles as a hero, or as a kind of glorious monster?"

I am not sure whether our mindset is a good thing or not...

Let me put it this way: who would you rather have standing beside you when spear meets shield--Achilles, Hector, or Odysseus? With Hector, the man of honor, you will wage war when you should--but you may well lose. With Achilles, the man of skill, you will win--but you will wage war all the time, whether or not you should.

With Odysseus, the man of strategy, you will wage war only when you can win--but will you always be happy with your victories?

I think I would take my place beside Odysseus. But who should I take my place beside? It is an interesting question...

Saturday, January 17, 2009

Krugman's Letter to Obama

Here's an article in Rolling Stone magazine where Paul Krugman lays out what Obama has to do to save the economy.

First, he points out how the ideological illusion created a pseudo-economy:
The economic growth of the Bush years, such as it was, was fueled by an explosion of private debt; now credit markets are in disarray, businesses and consumers are pulling back and the economy is in free-fall. What we're facing, in essence, is a yawning job gap. The U.S. economy needs to add more than a million jobs a year just to keep up with a growing population. Even before the crisis, job growth under Bush averaged only 800,000 a year — and over the past year, instead of gaining a million-plus jobs, we lost 2 million. Today we're continuing to lose jobs at the rate of a half million a month.

There's nothing in either the data or the underlying situation to suggest that the plunge in employment will slow anytime soon, which means that by late this year we could be 10 million or more jobs short of where we should be.


Compare the situation right now with the one back in the 1980s, when Volcker turned the economy around. All the Fed had to do back then was print a bunch of dollars (OK, it actually credited the money to the accounts of private banks, but it amounts to the same thing) and then use those dollars to buy up U.S. government debt. This drove interest rates down: When Volcker decided that the economy needed a pick-me-up, he was quickly able to drive the interest rate on Treasury bills from 13 percent down to eight percent. Lower interest rates on government debt, in turn, quickly drove down rates on mortgages and business borrowing. People started spending again, and within a few months the economy had gone from slump to boom. Economists call this process — from the Fed's decision to print more money to the resulting pickup in spending, jobs and incomes — the "monetary transmission mechanism." And in the 1980s that mechanism worked just fine.

This time, however, the transmission mechanism is broken.

First of all, while the Fed can still print money, it can't drive interest rates down. Why? Because those interest rates are already about as low as they can go. As I write this letter, the interest rate on Treasury bills is 0.005 percent — that is, zero. And you can't push rates lower than that. Now, you might think that zero interest rates would lead to an orgy of borrowing. But while the U.S. government can borrow money for free, the rest of us can't. Fear rules the financial markets, so over the past year and a half, as the interest rates on government debt have plunged, the interest rates that Main Street has to pay have mostly gone up. In particular, many businesses are paying much higher interest rates now than they were a year and a half ago, before the Fed started cutting. And they're lucky compared to the many businesses that can't get credit at all.
Then he spells out what needs to be done...
The last president to face a similar mess was Franklin Delano Roosevelt, and you can learn a lot from his example. That doesn't mean, however, that you should do everything FDR did. On the contrary, you have to take care to emulate his successes, but avoid repeating his mistakes.

About those successes: The way FDR dealt with his own era's financial mess offers a very good model. Then, as now, the government had to deploy taxpayer money in order to rescue the financial system. In particular, the Reconstruction Finance Corporation initially played a role similar to that of the Bush administration's Troubled Assets Relief Program (the $700 billion program everyone knows about). Like the TARP, the RFC bulked up the cash position of troubled banks by using public funds to buy up stock in those banks.

There was, however, a big difference between FDR's approach to taxpayer-subsidized financial rescue and that of the Bush administration: Namely, FDR wasn't shy about demanding that the public's money be used to serve the public good. By 1935 the U.S. government owned about a third of the banking system, and the Roosevelt administration used that ownership stake to insist that banks actually help the economy, pressuring them to lend out the money they were getting from Washington. Beyond that, the New Deal went out and lent a lot of money directly to businesses, to home buyers and to people who already owned homes, helping them restructure their mortgages so they could stay in their houses.

Can you do anything like that today? Yes, you can. The Bush administration may have refused to attach any strings to the aid it has provided to financial firms, but you can change all that. If banks need federal funds to survive, provide them — but demand that the banks do their part by lending those funds out to the rest of the economy. Provide more help to homeowners. Use Fannie Mae and Freddie Mac, the home-lending agencies, to pass the government's low borrowing costs on to qualified home buyers. (Fannie and Freddie were seized by federal regulators in September, but the Bush administration, bizarrely, has kept their borrowing costs high by refusing to declare that their bonds are backed by the full faith and credit of the taxpayer.)


The lesson from FDR's limited success on the employment front, then, is that you have to be really bold in your job-creation plans. Basically, businesses and consumers are cutting way back on spending, leaving the economy with a huge shortfall in demand, which will lead to a huge fall in employment — unless you stop it. To stop it, however, you have to spend enough to fill the hole left by the private sector's retrenchment.

How much spending are we talking about? You might want to be seated before you read this. OK, here goes: "Full employment" means a jobless rate of five percent at most, and probably less. Meanwhile, we're currently on a trajectory that will push the unemployment rate to nine percent or more. Even the most optimistic estimates suggest that it takes at least $200 billion a year in government spending to cut the unemployment rate by one percentage point. Do the math: You probably have to spend $800 billion a year to achieve a full economic recovery. Anything less than $500 billion a year will be much too little to produce an economic turnaround.

Spending on that scale, at a time when the weakening economy is driving down tax collection, will produce some really scary deficit numbers. But the consequences of too much caution — of a failure on your part to do enough to stop the economy's nose dive — will be even scarier than the coming ocean of red ink.
And here's the real zinger...
Crisis management is one thing, but America needs much more than that. FDR rebuilt America not just by getting us through depression and war, but by making us a more just and secure society. On one side, he created social-insurance programs, above all Social Security, that protect working Americans to this day. On the other, he oversaw the creation of a much more equal economy, creating a middle-class society that lasted for decades, until conservative economic policies ushered in the new age of inequality that prevails today. You have a chance to emulate FDR's achievements, and the ultimate judgment on your presidency will rest on whether you seize that chance.
And here is where he makes a moral/political point:
There is, however, one area where I feel the need to break discipline. I'm an economist, but I'm also an American citizen — and like many citizens, I spent the past eight years watching in horror as the Bush administration betrayed the nation's ideals. And I don't believe we can put those terrible years behind us unless we have a full accounting of what really happened. I know that most of the inside-the-Beltway crowd is urging you to let bygones be bygones, just as they urged Bill Clinton to let the truth about scandals from the Reagan-Bush years, in particular the Iran-Contra affair, remain hidden. But we know how that turned out: The same people who abused power in the name of national security 20 years ago returned as part of the team that, under the second George Bush, did it all over again, on a much larger scale. It was an object lesson in the truth of George Santayana's dictum: Those who refuse to learn from the past are condemned to repeat it.

That's why this time we need a full accounting. Not a witch hunt, maybe not even prosecutions, but something like the Truth and Reconciliation Commission that helped South Africa come to terms with what happened under apartheid. We need to know how America ended up fighting a war to eliminate nonexistent weapons, how torture became a routine instrument of U.S. policy, how the Justice Department became an instrument of political persecution, how brazen corruption flourished not only in Iraq, but throughout Congress and the administration. We know that these evils were not, whatever the apologists say, the result of honest error or a few bad apples: The White House created a climate in which abuse became commonplace, and in many cases probably took the lead in instigating these abuses. But it's not enough to leave this reality in the realm of things "everybody knows" — because soon enough they'll be denied or forgotten, and the cycle of abuse will begin again. The whole sordid tale needs to be brought out into the sunlight.
There's lots more. Read the whole article!

Krugman on the Crash: What is to Be Done?

Just what is the problem with the economy? Obviously things are in crisis and collapsing. So the job of a government is to step in and save us from ourselves (as individuals, our impulse is to hunker down to survive the howling winds of economic carnage, but that is exactly the opposite of what is needed). The government has two tools:
  1. Fiddle the monetary system (the Federal Reserve can push interest rates up or down, or do "quantitative easing" by printing money)
  2. Fiddle the fiscal system (replace the missing private consumption with public consumption through "make work" projects)
Here's Paul Krugman's basic picture:
The Taylor rule, familiar to macroeconomists, is both a prescription and description of the Fed’s behavior. It says that the Fed should “lean against” both the business cycle and deviations of the inflation rate from a target of roughly 2%, raising interest rates when actual GDP exceeds potential GDP or inflation exceeds the target, cutting rates when the reverse is true. As the figure above shows, the GS version of the Taylor rule tracks actual Fed behavior very well — up to now.

But looking forward, the Taylor rule says that the Fed should cut rates a lot from here — in fact, to negative 6%. That’s not surprising: we’re clearly opening up a huge output gap, inflation is turning into deflation.

The problem, of course, is that you can’t cut interest rates below zero (if you try, lenders will just hoard cash.) So the Fed simply can’t do what the rule says it should.

This is why we need a huge fiscal stimulus, unconventional monetary policy, and anything else you can think of to fight this slump. Quite literally, the usual rules no longer apply.
Here's a video of a talk Paul Krugman gave in New York on Friday January 16, 2009. This is a very plain talk presentation of the problem by a Nobel Prize winner (2008) in Economics. As he points out: we are now living in a Wiley Coyote moment when we look down and realize that there is no support in the private sector to keep this crash from becoming The Great Crash. So the government has to step in and save us. Notice how Krugman is very, very worried that Obama isn't talking about doing enough: "[Obama's] talking Churchill defending the beaches on the economy, but he's proposing something that, although it is big by any normal standards, does not look adequate to the scale of the crisis we are now facing".

The Frog Prince Departs

Somehow I can't help thinking that this is what Bush has done to the American people...
Two minor girls married off to frogs
17 Jan 2009

PUDUCHERRY: In a bizarre ritual, two minor girls, both seven, from the remote Pallipudupet village in Tamil Nadu's Villupuram district were married off to frogs on Friday night. The ceremony, an annual feature during the Pongal (harvest) festival, is conducted "to prevent the outbreak of mysterious diseases in the village''.

The girls, Vigneswari and Masiakanni, dressed up in traditional bridal finery -- gilded sarees and gold jewellery -- married the frog 'princes' in separate, elaborate ceremonies at two different temples in the presence of hundreds of villagers.
The picture in my mind of Bush standing on the rubble of the World Trade Center on 9/11 with his arm around the fire chief has the same sense of irreality as the above picture of two little girls being dolled up and married off to frogs as an incantation to deal with "evil spirits".

In my mind, the following is comingled with pictures of Bush announcing the invasion of Iraq:
Amidst chanting of vedic hymns, the temple priests garlanded the brides and tied the magalsutras on behalf of the frogs pronouncing the two as wives of the amphibians before the sacred fire at the auspicious hour.

The villagers threw themselves into the ceremonies with gusto. While residents living in the western part of the village acted as relatives of the brides and those from the eastern part play-acted as relatives of the grooms. The ceremonies had all the usual elements of a traditional marriage including a sumptuous feast.
In two days the long national nightmare for the US will hopefully be over. The frogs will go back to being frogs. The little girls will be handed back their future. The people will stop their celebrations of Washington-concocted myths and illusions. ... well, at least let me dream!

The Bush Rosy Tint and the Economy

If you want to see how disengaged the Bush admin is from the reality on the ground -- and the fine art of doublespeak -- take a look at the just released 2009 Economic Report to the President:
The American economy has consistently proven its strength and resilience in the face of shocks such as natural disasters, high energy prices, and the terrorist attacks of September 11. The economy experienced 6 years of uninterrupted expansion, which included a record stretch of 52 consecutive months of job creation. The past year saw this growth cease as several forces that developed over many years in the credit and housing markets converged. ...

Under ordinary circumstances, it would be preferable to allow the free market to take its course and correct over time. But the Government has a responsibility to safeguard the broader health and stability of our economy. Under the extraordinary circumstances created by the financial crisis, the potential damage to American households and businesses was so severe that a systemic, aggressive, and unprecedented Government response was the only responsible policy option.
Notice a few things:
  • Even as the ship sinks the captain gives a salute to the "free market" and its glories.
  • The captain stretches his arm way around his back and gives himself a solid pat on the back for "heckova job there Georgie!"
The reality is that the Bush admin was late in responding to the housing market problem. Back in early 2007 it was a subprime mess that could have been "contained" if the government had responded quickly. By the fall of 2007 it was a credit crunch which could have been "contained" if the government had recognized that the collapsing housing market was undermining the financial industry. Instead, Bush responded with a pathetic non-starter of a "program" to aid homeowners threatened with foreclosure. A program that "aided" so few that it was negligible, and of course the problem grew until the fall of 2008 when the entire financial market collapsed after the inept "now we intervene" and "now we don't" peek-a-book game that the Bush admin played with the trembling house of cards of Wall Street investment houses and the broader financial industry sitting on rapidly collapsing house prices.

As you wade through this self congratulatory drivel you find things such as:
Sound economic policy begins with keeping taxes low. The tax relief enacted by my Administration was the largest in a generation.
This from an administration which has wiped out 40% of the wealth of the country and left every household roughly $10,000 poorer.

Here is the typical obfuscation and lies:
The Government also has a responsibility to spend the taxpayers’ money wisely. Over the course of my Administration, the rate of growth in nonsecurity discretionary spending has steadily decreased from more than 16 percent in 2001 to below the rate of inflation today. While the financial crisis has required significant taxpayer investments that will increase the budget deficit, we expect that most or all of those investments will be paid back to taxpayers over time.
Translation: The Bush admin cut spending on people so more money could be directed at the military-industrial complex (think Halliburton) to keep the fat cats rolling in dough. And even though the spending was cut, the sudden dam burst of spending forced by the collapse of the economic system will make that look like small potatoes. Bush is like the Cheshire cat with an eternal grin as the world as we knew it fades all around us in the grim horror of the wreck and ruin that he has left behind.

As the report puts it:
Despite the risk that recent events may overshadow the many positive developments of the past 8 years, there have been major policy advances that have improved the long-term prospects of our economy and strengthened its foundation.
So much for the glories of the ideological right. As Pogo said: We have met the enemy and he is us! In short, Bush is the right wing ideologues wet dream of "staying on message" right to the deadly end. The horror is that the ideological right took the country down rather than give up its deadly ideological dreams. And even standing in the smoldering ruins, these fanatics wear rose-tinted glasses that lets them interpret all that remains in a surreal manner. This must be how those poor souls who drank Jim Jones' Kool-Aid must have felt. Right to the end they were being preached the "message" as they could see bodies writhing in pain all around them and Jim Jones kept prattling on about God's love. In Bush's case, this is the glory of "free enterprise" and "free markets" and "deregulation".

End of Globalization

Here's what a collapse in the world's financial markets will do to you...

This is from a NY Times article by Floyd Norris entitled "Sharp Trade Contraction Knows No Borders". Here is the money quote:
The decline in trade, which began last summer, accelerated after mid-September, when Lehman Brothers failed. In the aftermath, credit became harder to obtain for importers and confidence waned among would-be buyers of many products.

The fact that exports are down in almost every country shows both the international nature of the recession and the fact that it has been impossible for any country to export its way out of trouble. Nonetheless, there may be protectionist efforts in a number of countries this year, aimed at improving each country’s trade position at the expense of others.
This is scary. The 1930s was a decade of trade that dried up with barriers thrown up and with the global economy shut down. It sure looks like a bad Hollywood sequel to me. Let's just hope that the script writers have a change of heart and put in a real Hollywood ending where some guy in a white hat steps up to save us all. Who could fill that role?

Here's a bit from an assessment of the "legacy" of the Bush era from the cornerstone of high finance, Barron's, written by Alan Abelson:
No argument that he [Bush] is leaving an economy in absolutely awful shape. Our budget deficit is ballooning toward the trillion-dollar mark and isn't likely to stop there. We are mired in the worst recession since the grandaddy of them all in the '30s; its end is by no means in sight. The stock market after crashing 35% to 40% last year (depending on which bourse you follow) has started off '09 on the wrong foot, not an auspicious omen for the year as a whole.

Unemployment is pressing remorselessly higher, housing is a wreck, industrial production is contracting at the wickedest rate in 35 years, the retail business is in the dumps almost across the board. Detroit is about as near to running on empty as you can get without grinding to a halt. There is a whiff of deflation in the air.

Not all of this, obviously, is Mr. Bush's fault. But it happened on his watch. Not the kind of stuff, we are afraid, that shining legacies are made of.
Here's a nice summary of the grim reality:
It is the norm in our politics for the winners to celebrate electoral triumph by taking a victory lap. However, Messrs. Bush and Cheney, donning entirely new personas, set precedent on its head -- and more power to them for doing so, we say -- by taking what can only be called a defeat lap.
The financial abyss that the reckless indifference of Bush to the real economy and the need for regulation, the fact that Bush remained ideological to radical laissez-faire capitalism to the very end is summarized by:
Whatever contraption is devised to relieve the banks' balance sheets of the burden of their mistakes and transfer that burden to the government's broad shoulders, we are talking humongous sums. The knowledgeable folks at ISI Group, who sedulously strive to err on the side of conservatism in their assays, reckon that the top four banks alone have something like $1.2 trillion in bad assets, a fearsome figure that swells to perhaps $2.4 trillion for the industry as a whole.
The whole article is well worth reading. It is sobering. It is sad. It is the reality that the rabid right wing Republicans have created for the US (and unfortunately passed on to the rest of the world). It will take decades to recover from the eight year nightmare of the Bush admin.

Friday, January 16, 2009

Decider -in-Chief Exposed

There is an excellent "oral history" of the Bush administration in an article in Vanity Fair by Cullen Murphy and Todd S. Purdum. Lots of insights.

Here is a good summary of the muddle of the "Decider" and the way he ran his government's decision-making:
Jay Garner, retired army general and first overseer of the U.S. administration and reconstruction of Iraq: My plan was to not disband the Iraqi Army but to keep the majority of it and use them. And the reason for that is we needed them, because, number one, there were never enough people there for security. I mean, I’ll give you an example. My first day in Baghdad, I went to see Scott Wallace, who was the corps commander, the V Corps commander, and I said, Scott, I need a lot of help here on security. And he said, Let me show you my map. I walked over to the map. And he had 256 sites that day he was guarding that he had never planned on. He just didn’t have the force structure to do it.

So we said, O.K., we’ll bring the army back. Our plan was to bring back about 250,000 of them. And I briefed Rumsfeld. He agreed. Wolfowitz agreed. Condoleezza Rice agreed. George [Tenet] agreed. Briefed the president on it. He agreed. Everybody agreed.

So when that decision [to disband] was made, I was stunned.

The Mind's "I"

Here's an interesting piece by Carl Zimmer.
Eleven years ago, the philosophers Andy Clark and David Chalmers made a bizarre claim: our minds were not limited to our brains, but extended out of our heads to encompass many things beyond us, from notebooks to hammers to language. I have been vaguely aware of their “Extended Mind Hypothesis” for a while now, but it wasn’t until I got a copy of Clark’s latest book, Supersizing the Mind: Embodiment, Action, and Cognitive Extension, that I spent some time getting to know it better. And as counterintuitive as it may be at first, it makes a fair amount of sense when you take a look at the results of recent experiments on real minds.
I don't find this all that surprising. I read Ludwig Wittgenstein's Philosophical Investigations in the late 1960s and accepted his solution to the Cartesian dualism: language is a shared experience so we are not in fact isolated minds. Your pain is not an "internal" phenomenon. I read your mind through your signs of pain and your use of language. In a sense, our minds are in fact extended as a social entity in the community of humans. So Clark and Chalmers are not turning over virgin soil.

Zimmer goes into more detail in his article in Discover magazine:
This concept of the extended mind was first raised in 1998, right around the time Google was born, by two philosophers, Andy Clark, now at the University of Edinburgh, and David Chalmers, now at the Australian National University. In the journal Analysis, they published a short essay called “The Extended Mind” in which they asked a simple question: “Where does the mind stop and the rest of the world begin?” Most people might answer, “At the skull.” But Clark and Chalmers set out to convince their readers that the mind is not simply the product of the neurons in our brains, locked away behind a wall of bone. Rather, they argued that the mind is something more: a system made up of the brain plus parts of its environment.


What’s even more remarkable about our brains is that they actually search for new things to make part of this feedback system. Imagine you are poking a stick into an animal’s burrow. As you poke away, you are aware of what the far end of the stick is touching, not the end you’re holding in your hand. This kind of extended sensation appears to be the result of a reorganization of the brain. Scientists have found that when test monkeys spent five minutes learning how to use a rake, some of the neurons in their hands began behaving in a new way. They began to fire in response to stimuli at the end of the rake, not on the monkey’s hand. Other neurons, in the brain, respond to things that appear to lie within arm’s reach. Training the monkeys to use the rakes caused these neurons to change—reacting to objects lying within rake’s reach rather than arm’s reach.

The eagerness with which the brain merges with tools has made it possible to create some stunning mind-machine interfaces. For instance, Miguel Nicolelis of Duke University and his colleagues put electrodes in the brains of monkeys to link them to a robot arm. The monkeys quickly learned how to move the arm around with pure thought; their neurons reorganized, establishing a new feedback loop between brain and robot arm.

Humans are proving just as good at this merger of mind and machine. The U.S. Navy has developed a flight suit for helicopter pilots that delivers little puffs of air on the side of the pilot’s body as his helicopter tilts in that direction. The pilot responds to the puffs by tilting away from them, and the suit passes those signals on to the helicopter’s steering controls. Pilots who train with this system can learn to fly blindfolded or to carry out complex maneuvers, such as holding the helicopter in a stationary hover. The helicopter becomes, in effect, part of the pilot’s body, linked back to his or her mind.

Results like these, Clark argues, reveal a mind that is constantly seeking to extend itself, to grab on to new tools it has never experienced before and merge with them. Some people may be horrified by how passionately people are taking to their laptops and GPS trackers. But to Clark it would be surprising if we didn’t. We are, in Clark’s words, “natural-born cyborgs.”

An "Honest" Guide to Investment

This is a Saturday Night Live skit that nails the financial industry and how they treat their victims... uh... I mean "customers":

An Object of Meditation

I love to observe things and technology gives us such wonderful tools to extend our ability to observe and absorb.

Here is a zen meditation on the meaning of life:

Crimes in High Places

Paul Krugman has another excellent op-ed in the NY Times. This one deals with the "advice" that Obama has gotten to not pursue crimes in the Bush admin...
Forgive and Forget?

Last Sunday President-elect Barack Obama was asked whether he would seek an investigation of possible crimes by the Bush administration. “I don’t believe that anybody is above the law,” he responded, but “we need to look forward as opposed to looking backwards.”

I’m sorry, but if we don’t have an inquest into what happened during the Bush years — and nearly everyone has taken Mr. Obama’s remarks to mean that we won’t — this means that those who hold power are indeed above the law because they don’t face any consequences if they abuse their power.

Let’s be clear what we’re talking about here. It’s not just torture and illegal wiretapping, whose perpetrators claim, however implausibly, that they were patriots acting to defend the nation’s security. The fact is that the Bush administration’s abuses extended from environmental policy to voting rights. And most of the abuses involved using the power of government to reward political friends and punish political enemies.

At the Justice Department, for example, political appointees illegally reserved nonpolitical positions for “right-thinking Americans” — their term, not mine — and there’s strong evidence that officials used their positions both to undermine the protection of minority voting rights and to persecute Democratic politicians.


we’re told that we don’t have to dwell on past abuses, because we won’t repeat them. But no important figure in the Bush administration, or among that administration’s political allies, has expressed remorse for breaking the law. What makes anyone think that they or their political heirs won’t do it all over again, given the chance?

In fact, we’ve already seen this movie. During the Reagan years, the Iran-contra conspirators violated the Constitution in the name of national security. But the first President Bush pardoned the major malefactors, and when the White House finally changed hands the political and media establishment gave Bill Clinton the same advice it’s giving Mr. Obama: let sleeping scandals lie. Sure enough, the second Bush administration picked up right where the Iran-contra conspirators left off — which isn’t too surprising when you bear in mind that Mr. Bush actually hired some of those conspirators.

Slate has published a piece that carries this one step further:
... Susan J. Crawford, convening authority of the military commissions at Guantanamo Bay. Crawford, a retired judge who served as general counsel for the Army during the Reagan administration and as Pentagon inspector general, is hardly the kind of hippie moonbat Cheney would like to poke fun at. And that's why everything changed this morning when the Washington Post published a front-page interview by Bob Woodward, in which Crawford stated without equivocation that the treatment of alleged 20th Sept. 11 hijacker Mohammed al-Qahtani at Guantanamo Bay was "torture."


It's also not an accident that Crawford is a military lawyer. From the very outset of the Bush torture regime, it was the military attorneys who warned him—if they were given a chance—that his program was illegal.


Under the 1984 Torture Convention, its 146 state parties (including the United States) are under an obligation to "ensure that all acts of torture are offences under its criminal law." These states must take any person alleged to have committed torture (or been complicit or participated in an act of torture) who is present in their territories into custody. The convention allows no exceptions, as Sen. Pinochet discovered in 1998. The state party to the Torture Convention must then submit the case to its competent authorities for prosecution or extradition for prosecution in another country.

The former chief judge of the United States Court of Appeals for the Armed Forces and general counsel for the Department of the Army has spoken. Her clear words have been picked up around the world. And that takes the prospects of accountability and criminal investigation onto another level. For the Obama administration, the door to the do-nothing option is now closed. That is why today may come to be seen as the turning point.