Synthetic Biology to the Rescue!

Carl Zimmer has written a wonderful book on E. Coli and the advances in genetics. Here is a snippet from an article he wrote about how these new genetic advances are being harnessed to (hopefully) solve the energy crisis. The key part of this article focuses on Craig Venter and his approach to building artificial "cells" that can be tailored to produce molecular products for us:

Now Venter says he wants to help save the environment. For some time, he has speculated that genetically engineered microbes could help wean the world off oil and reduce greenhouse gases at the same time. In 2005 Venter set up a company, Synthetic Genomics, to pursue that goal. And now, according to Venter, the company is seeking the capital to move forward. “We’re ready to build a pilot plant right now,” he says.

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Synthetic biology, its backers claim, will change the rules of the energy game. There’s no need for building expensive rigs for drilling deep into the earth, or lopping off the tops of mountains to get coal. Every microbe is its own miniature refinery, carrying out complex chemical reactions that would be expensive to carry out in a man-made factory. Synthetic biology fuels promise to be competitive with ordinary fuels when they hit the market in a few years.

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Instead of waiting for plants to make hydrocarbons, Venter wants to cut out the middleman and head straight for their original source of carbon: the air. Researchers at Synthetic Genomics have been experimenting with photosynthetic bacteria, which (like plants) use the energy in sunlight to combine water and carbon dioxide. Using some of the genes Venter’s team has discovered, the researchers have altered the bacteria. Now the microbes can rapidly build molecules known as lipids. Lipids come in a range of forms and serve many functions in cells, storing energy, for example, and forming membranes. But instead of using lipids for such purposes, Venter’s bacteria secrete them. Researchers at Synthetic Genomics have drawn up plans for gathering those lipids.

“They can go right into an existing refinery,” says Venter. Not only would these microbes not create any extra pressure to cultivate more land, but they would actually take greenhouse gases out of the air.

The American Economic Mess

Robert Reich has a blog where he posts his musings. His latest looks at the US economy and he estimates what it will take to get the US out of the current slump. It is well worth your time to read the whole thing, but here are the key bits:

The core problem lies on the demand side. American consumers, whose purchases represent 70 percent of the economy, do not have the purchasing power to maintain overall demand for American goods and services. Businesses will not invest unless consumers are able to buy. Exports cannot possibly fill the gap. Inadequate demand is forcing the private sector to lay off large numbers of workers, which, in turn, is further reducing the buying power of consumers. In 2008, 1.9 million jobs vanished -- the biggest drop in non-farm payrolls in thirty-four years. We are caught in a vicious cycle.

As the buyer of last resort, the federal government must respond if that cycle is to be reversed. In my judgment, this will require a stimulus of about 6 and a half percent of gross domestic product, or a total of some $900 billion, spread over two years. That’s my estimate for the shortfall in private demand.

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Overall, the federal government’s responsibility for restoring aggregate demand is at least as great – arguably, far greater – than its responsibility for rescuing the financial system and helping U.S. automakers restructure. Without adequate demand, credit markets will continue to be frozen and major American industries will languish. Yet there is no ready formula for how the federal government should proceed because we have not been here before.

This largest and most serious economic downturn in more than sixty years will require both a willingness to try new policies and to change course if those policies appear to be ineffective relative to their costs. The danger is not that the federal government will do too much but, rather, that it will do too little.

Bruce Chilton's "Abraham's Curse"

I found Bruce Chilton's Rabbi Jesus and Rabbi Paul to be fascinating. I loved the historical scholarship.

However, this book, while deeply scholarly, just didn't hold my attention. The winding narrative about how Abraham's sacrifice of Isaac and how the three Semitic religions (Judaism, Christianity, and Islam) have adopted and bend and re-shaped again and again the "moral" of the story left me cold. I just have a hard time "appreciating" stories of butchery and "sacrifice" no matter how fascinating the historical details. Instead of enjoying Chilton's finesse of tying these themes together across time and religions, I kept picturing all the horrors of religious persecution. Sure, Chilton argues that secular horrors outweigh religious horrors. I'm not so sure. For me, the reason why the numbers are higher for killings in the 20th century secular horrors is simply the luck of the draw. If the 20th century had put religions into the catbird seat they would have produced the big numbers and if you look at secular horrors of hundreds of years ago they are smaller scale than the 20th century horrors. For me the difference is one of technology and communication.

I continue to be impressed by Chilton's mastery of his religious material. But in this book he picked up a theme which just doesn't hold my interest. For scholars, this book is probably of great interest. For the general reader, it is a tough slog for a poorly defined "reward". What did I learn? A lot of historical detail, but no great insights.

Krugman See Great Depression II Coming

I greatly admire Paul Krugman. He is brilliant (just got a Nobel Prize in economics). But even better, he can write economics in a style accessible to non-economists. And best of all, he is a liberal with a caring heart and wants a better future for all people, not just the upper crust or political cronies.

Here is a big snippet from his latest op-ed in the NY Times. Read the whole thing. This snippet shows you the depth of his concern. You need to go read the whole thing to get the details of why he sees the Congress holding back and allowing Great Depression II to happen:

“If we don’t act swiftly and boldly,” declared President-elect Barack Obama in his latest weekly address, “we could see a much deeper economic downturn that could lead to double-digit unemployment.” If you ask me, he was understating the case.

The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren’t lending; businesses and consumers aren’t spending. Let’s not mince words: This looks an awful lot like the beginning of a second Great Depression.

So will we “act swiftly and boldly” enough to stop that from happening? We’ll soon find out.

We weren’t supposed to find ourselves in this situation. For many years most economists believed that preventing another Great Depression would be easy. In 2003, Robert Lucas of the University of Chicago, in his presidential address to the American Economic Association, declared that the “central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades.”

Milton Friedman, in particular, persuaded many economists that the Federal Reserve could have stopped the Depression in its tracks simply by providing banks with more liquidity, which would have prevented a sharp fall in the money supply. Ben Bernanke, the Federal Reserve chairman, famously apologized to Friedman on his institution’s behalf: “You’re right. We did it. We’re very sorry. But thanks to you, we won’t do it again.”

It turns out, however, that preventing depressions isn’t that easy after all. Under Mr. Bernanke’s leadership, the Fed has been supplying liquidity like an engine crew trying to put out a five-alarm fire, and the money supply has been rising rapidly. Yet credit remains scarce, and the economy is still in free fall.

Friedman’s claim that monetary policy could have prevented the Great Depression was an attempt to refute the analysis of John Maynard Keynes, who argued that monetary policy is ineffective under depression conditions and that fiscal policy — large-scale deficit spending by the government — is needed to fight mass unemployment. The failure of monetary policy in the current crisis shows that Keynes had it right the first time. And Keynesian thinking lies behind Mr. Obama’s plans to rescue the economy.

But these plans may turn out to be a hard sell.

News reports say that Democrats hope to pass an economic plan with broad bipartisan support. Good luck with that.

In reality, the political posturing has already started, with Republican leaders setting up roadblocks to stimulus legislation while posing as the champions of careful Congressional deliberation — which is pretty rich considering their party’s behavior over the past eight years.

More broadly, after decades of declaring that government is the problem, not the solution, not to mention reviling both Keynesian economics and the New Deal, most Republicans aren’t going to accept the need for a big-spending, F.D.R.-type solution to the economic crisis.

The biggest problem facing the Obama plan, however, is likely to be the demand of many politicians for proof that the benefits of the proposed public spending justify its costs — a burden of proof never imposed on proposals for tax cuts.

This is a problem with which Keynes was familiar: giving money away, he pointed out, tends to be met with fewer objections than plans for public investment “which, because they are not wholly wasteful, tend to be judged on strict ‘business’ principles.” What gets lost in such discussions is the key argument for economic stimulus — namely, that under current conditions, a surge in public spending would employ Americans who would otherwise be unemployed and money that would otherwise be sitting idle, and put both to work producing something useful.

2008 Review in Song

News is now entertainment, so why not review the big stories of 2008 in song, Christmas songs?



The lyrics and melodies are inspired, but that voice and pitch... Ouch!

Corruption at the Heart of US Finance, part 2

The NY Times article by Michael Lewis and David Einhorn continues with a part two. The whole thing is well worth reading. Here are some teaser bits that hopefully get you interested in reading the article. The real reason you need to read the full article is captured by the title of the article "How to Repair a Broken Financial World". The article lays out some very explicit actions to deal with the corruption. But, since sex sells, here's the sexy bit:

... All we know for sure, however, is that the Treasury’s heroic deal-making has had little effect on what it claims is the problem at hand: the collapse of confidence in the companies atop our financial system.

Weeks after receiving its first $25 billion taxpayer investment, Citigroup returned to the Treasury to confess that — lo! — the markets still didn’t trust Citigroup to survive. In response, on Nov. 24, the Treasury handed Citigroup another $20 billion from the Troubled Assets Relief Program, and then simply guaranteed $306 billion of Citigroup’s assets. The Treasury didn’t ask for its fair share of the action, or management changes, or for that matter anything much at all beyond a teaspoon of warrants and a sliver of preferred stock. The $306 billion guarantee was an undisguised gift. The Treasury didn’t even bother to explain what the crisis was, just that the action was taken in response to Citigroup’s “declining stock price.”

Three hundred billion dollars is still a lot of money. It’s almost 2 percent of gross domestic product, and about what we spend annually on the departments of Agriculture, Education, Energy, Homeland Security, Housing and Urban Development and Transportation combined. Had Mr. Paulson executed his initial plan, and bought Citigroup’s pile of troubled assets at market prices, there would have been a limit to our exposure, as the money would have counted against the $700 billion Mr. Paulson had been given to dispense. Instead, he in effect granted himself the power to dispense unlimited sums of money without Congressional oversight. Now we don’t even know the nature of the assets that the Treasury is standing behind. Under TARP, these would have been disclosed.

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Rather than tackle the source of the problem, the people running the bailout desperately want to reinflate the credit bubble, prop up the stock market and head off a recession. Their efforts are clearly failing: 2008 was a historically bad year for the stock market, and we’ll be in recession for some time to come. Our leaders have framed the problem as a “crisis of confidence” but what they actually seem to mean is “please pay no attention to the problems we are failing to address.”

In its latest push to compel confidence, for instance, the authorities are placing enormous pressure on the Financial Accounting Standards Board to suspend “mark-to-market” accounting. Basically, this means that the banks will not have to account for the actual value of the assets on their books but can claim instead that they are worth whatever they paid for them.

This will have the double effect of reducing transparency and increasing self-delusion (gorge yourself for months, but refuse to step on a scale, and maybe no one will realize you gained weight). And it will fool no one. When you shout at people “be confident,” you shouldn’t expect them to be anything but terrified.

If we are going to spend trillions of dollars of taxpayer money, it makes more sense to focus less on the failed institutions at the top of the financial system and more on the individuals at the bottom. Instead of buying dodgy assets and guaranteeing deals that should never have been made in the first place, we should use our money to A) repair the social safety net, now badly rent in ways that cause perfectly rational people to be terrified; and B) transform the bailout of the banks into a rescue of homeowners.

We should begin by breaking the cycle of deteriorating housing values and resulting foreclosures. Many homeowners realize that it doesn’t make sense to make payments on a mortgage that exceeds the value of their house. As many as 20 million families face the decision of whether to make the payments or turn in the keys. Congress seems to have understood this problem, which is why last year it created a program under the Federal Housing Authority to issue homeowners new government loans based on the current appraised value of their homes.

And yet the program, called Hope Now, seems to have become one more excellent example of the unhappy political influence of Wall Street. As it now stands, banks must initiate any new loan; and they are loath to do so because it requires them to recognize an immediate loss. They prefer to “work with borrowers” through loan modifications and payment plans that present fewer accounting and earnings problems but fail to resolve and, thereby, prolong the underlying issues. It appears that the banking lobby also somehow inserted into the law the dubious requirement that troubled homeowners repay all home equity loans before qualifying. The result: very few loans will be issued through this program.

Corruption at the Heart of US Finance

Here is a bit from an interesting article by Michael Lewis and David Einhorn in the NY Times. The whole article is well worth reading, but here is the key part about the Madoff corruption and the fact that it is endemic and has not been addressed by the Bush administration:

To that end consider the strange story of Harry Markopolos. Mr. Markopolos is the former investment officer with Rampart Investment Management in Boston who, for nine years, tried to explain to the Securities and Exchange Commission that Bernard L. Madoff couldn’t be anything other than a fraud. Mr. Madoff’s investment performance, given his stated strategy, was not merely improbable but mathematically impossible. And so, Mr. Markopolos reasoned, Bernard Madoff must be doing something other than what he said he was doing.

In his devastatingly persuasive 17-page letter to the S.E.C., Mr. Markopolos saw two possible scenarios. In the “Unlikely” scenario: Mr. Madoff, who acted as a broker as well as an investor, was “front-running” his brokerage customers. A customer might submit an order to Madoff Securities to buy shares in I.B.M. at a certain price, for example, and Madoff Securities instantly would buy I.B.M. shares for its own portfolio ahead of the customer order. If I.B.M.’s shares rose, Mr. Madoff kept them; if they fell he fobbed them off onto the poor customer.

In the “Highly Likely” scenario, wrote Mr. Markopolos, “Madoff Securities is the world’s largest Ponzi Scheme.” Which, as we now know, it was.

Harry Markopolos sent his report to the S.E.C. on Nov. 7, 2005 — more than three years before Mr. Madoff was finally exposed — but he had been trying to explain the fraud to them since 1999. He had no direct financial interest in exposing Mr. Madoff — he wasn’t an unhappy investor or a disgruntled employee. There was no way to short shares in Madoff Securities, and so Mr. Markopolos could not have made money directly from Mr. Madoff’s failure. To judge from his letter, Harry Markopolos anticipated mainly downsides for himself: he declined to put his name on it for fear of what might happen to him and his family if anyone found out he had written it. And yet the S.E.C.’s cursory investigation of Mr. Madoff pronounced him free of fraud.

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At the back of the version of Harry Markopolos’s brave paper currently making the rounds is a copy of an e-mail message, dated April 2, 2008, from Mr. Markopolos to Jonathan S. Sokobin. Mr. Sokobin was then the new head of the commission’s office of risk assessment, a job that had been vacant for more than a year after its previous occupant had left to — you guessed it — take a higher-paying job on Wall Street.

At any rate, Mr. Markopolos clearly hoped that a new face might mean a new ear — one that might be receptive to the truth. He phoned Mr. Sokobin and then sent him his paper. “Attached is a submission I’ve made to the S.E.C. three times in Boston,” he wrote. “Each time Boston sent this to New York. Meagan Cheung, branch chief, in New York actually investigated this but with no result that I am aware of. In my conversations with her, I did not believe that she had the derivatives or mathematical background to understand the violations.”

How does this happen? How can the person in charge of assessing Wall Street firms not have the tools to understand them? Is the S.E.C. that inept? Perhaps, but the problem inside the commission is far worse — because inept people can be replaced. The problem is systemic. The new director of risk assessment was no more likely to grasp the risk of Bernard Madoff than the old director of risk assessment because the new guy’s thoughts and beliefs were guided by the same incentives: the need to curry favor with the politically influential and the desire to keep sweet the Wall Street elite.

And here’s the most incredible thing of all: 18 months into the most spectacular man-made financial calamity in modern experience, nothing has been done to change that, or any of the other bad incentives that led us here in the first place.

Say what you will about our government’s approach to the financial crisis, you cannot accuse it of wasting its energy being consistent or trying to win over the masses. In the past year there have been at least seven different bailouts, and six different strategies. And none of them seem to have pleased anyone except a handful of financiers.