Treasury Department responds to oversight panel - BailoutSleuth

Treasury Department responds to oversight panel - BailoutSleuth

So I skimmed the full document of the Treasury Department's response. Except for one reference to the LIBOR it's all "sure, it's working!" bullshit. But more importantly is how utterly LAME the questions posed by the oversight committee were. Good lord - ask some hard questions! What a bunch of fucktards.

Happy New Year!

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Schiff speaks truth to power

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Azurik to the rescue

I was forwarded the following story by a guy in the Amaze Console Studio:

From: Marcus H...

Sent: Wed 12/24/2008 2:41 PM

To: Amaze - Console Team

Subject: Azurik to the rescue

I thought people might get a kick out of this. I wasn't gonna come into work Christmas Eve because of the snow and ice. But I had to pick up a bicycle for my daughter that my wife had ordered and it finally got to the store. It was a matter of life or death for her that I get this bike for Christmas morning. I stopped off at work after I got the bike. There was a delivery truck in front of the building, I noticed he was stuck. He couldn't get any traction due to the snow. Being Christmas and all I thought I would give my fellow man some help. So I told him I would try to find a shovel or something to dig him out. Of course I couldn't find anything in the back, not even the light switch, couldn't find nothin. But a flicker kept catching my eye. I knew what it was, but kept ignoring it. I kept on looking but not even one little trowel could be found. I thought to myself something had brought me here today, and that was to help this man. The flicker could be ignored no longer I went over and picked up the mighty Azurik trident, spear whatever the hell it is and headed outside. The driver of the delivery truck was like what the heck you got there, I told him this is all I could find. I took the mighty blade [and] broke up the snow and ice. The truck and driver were soon on their way. He thanked me and as I walked back to the building I raised Azurik's trident into the air in triumph. Redemption finally.

Marcus

[The 'trident' is called the Axion.]

The Richter Scales: Have Yourself a Merry Little Christmas

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State of the Blog

It's almost the end of 2008 which means it is time to look at my web site and blog logs!

Far and away my most popular blog page is this one about low-light photography posted in 2004. The picture "Japan At Night" was downloaded over 47,000 times this year (2008).

The most popular article at my web site is an article by Alvin Lowi called Andrew Galambos and His Primary Property Ideas.

Almost 3,000 people have listened to Jingle Bell Rag this year.

I agree with Jason Calcanis that blogging has changed a lot and will change more in the future. Toward that end I converted my web site at Above the Garage Productions to a Wiki which supports creating a truly hyperlinked corpus better than anything I've used so far.

A couple of people have asked me how I have time to blog. The answer is ... I type fast! I really spend very little time on it each day - maybe 5 or 10 minutes. (Maybe that shows - I don't know.) One great thing about using MediaWiki is that it allows for direct editing (as does Blogger) but it encourages rewriting and refinement and intertwined linking via a straight forward interface. (Plus, we use it at work so the more I learn about it the better.)

It will take a long time to move the interesting stuff out of the blog and into the Wiki in workloads of 10 minutes a day, but I think the result will be worth it to me even if no one reads it. It helps me organize how I think about things and I view it as exercise for my brain.

Thanks to everyone who has visited me in the last year and let's hope that American ingenuity can outpace lunatic politics in the coming years.

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Nrrrd Grrrl

Nrrrd Grrrl

Nerd girl, I don't deserve you
I don't get the references you refer to
I love your Lipsmackers and your lack of perfume
I hope to get you home by curfew
WORD UP!

...

You can't resist Chris 'cause he helps you de-stress
While you play Animal Crossing on your Nintendo DS

AWESOME!

NSFW picture of the Nerd Girl

Scroll down. She's Number One!


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More Jobs!

The president-elect bulks up his economic-recovery plan. - By Roger McShane - Slate Magazine:

But if Obama thinks he can create 3 million jobs, why not create more? After all, his advisers believe as many as 4 million jobs will be lost in the coming year. The LAT is the one paper to inject some skepticism into their reporting, noting that some economists 'say Obama's new job goals may be rooted in salesmanship. It is virtually impossible to quantify jobs saved, so the figures have little meaning, they said.'

Nice! A little common sense! And from the LA Times!

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snopes.com: Christmas Superstitions

snopes.com: Christmas Superstitions

Oh my.

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Snow Particles

We're in the middle of a "blizzard". The wind gusts are pretty strong (40 mphs?) but it's not insane. Plus we still have power!

I shot this video an hour ago and uploaded it to YouTube. The original was in DV format and 100 megabytes! YouTube did a good job compressing it.

You'll notice the wind is having a hard time choosing what direction to blow. Kind of like a lot of politicians.



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The Reckoning - Bush’s Philosophy Stoked the Mortgage Bonfire - Series - NYTimes.com

The Reckoning - Bush’s Philosophy Stoked the Mortgage Bonfire - Series - NYTimes.com: "

“The Bush administration took a lot of pride that homeownership had reached historic highs,” Mr. Snow said in an interview. “But what we forgot in the process was that it has to be done in the context of people being able to afford their house. We now realize there was a high cost.”"

Seriously? Really? You think?

The article goes on to lay a lot of policy decisions that got us into this mess with Mr. Bush. He was so enamored with people owning homes that he removed every impediment possible. He was alerted multiple times to the problems that were brewing but was in favor of the credit bubble because he helped his position.

Luckily for all of us, this blew up on Bush's watch, and he will get the blame.

Not that others are blameless ... But Mr. Bush's leadership pushed us to where we are now and continues to push us into huge debt.

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More credit! Uh, NOT!

Deflation: Nothing to Fear - Jeff Bonn - Mises Institute: "You would not suggest giving a teen who has just maxed out their first credit card more credit so they could somehow spend their way out of the financial hole they have made, nor will this approach work for a business or a nation."

Somehow people think it is okay for the government to be in debt. I know some Republicans who don't mind the huge increase in debt because somehow higher taxes were avoided. I guess the debt is harder to see and an increase in taxes is easier to see, so the thing that is harder to see is somehow less evil.

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Fred Thompson says what I just said, except sarcastic

It's nice to know that at least a few people recognize how We-Todd-It the government money managers are.

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Regulation that works

http://mises.org/story/3260:

It seems that everyone wants to know how anyone could be so clever as to run a fifty-billion-dollar Ponzi scheme without the SEC — which has seemingly limitless power and resources at its disposal — ever noticing. After all, if the government couldn't protect people who could? The answer is simple: the free market.

This is not a case in which free-market proponents are forced to theorize countless what-if scenarios regarding a solution that would not involve the government. The free market did spot the problem; it even reported it to the SEC. Perhaps unsurprisingly, all of the warnings were ignored by the SEC, which failed its fiduciary obligation to investors.

Due to the lack of government intervention and regulation with respect to hedge funds, consumers demanded some sort of policing of hedge funds in order to protect investors who lack the knowledge or resources to properly investigate the funds in which they plan to entrust their money. The free market responded to the consumer demand and so-called "due-diligence firms" emerged. Individuals seeking to invest in a hedge fund frequently pay one of these due-diligence firms for their opinion about specific hedge funds.

Due-diligence firms use the fees collected from their clients to hire professionals to meticulously review hedge firms for signs of deceit. One such firm is Aksia LLC. After painstakingly investigating the operations of Madoff's operation, they found several red flags. A brief summary of some of the red flags uncovered by Aksia can be found here. Shockingly, Aksia even uncovered a letter to the SEC dating from 2005 which claimed that Madoff was running a Ponzi scheme. As a result of its investigation, Aksia advised all of its clients not to invest their money in Madoff's hedge fund.

Private regulation works. Government regulation works once in awhile but very rarely.

What really doesn't work is pretend government regulation. When the regulators don't regulate everyone gets screwed.

I want to invent a term: defensive capitalism. You must assume every transaction could be rigged, every deal could go sour, and that in every instance you must take defensive measures.

This is the only way capitalism can work. It doesn't "just work" as if by magic or the "invisible hand of the market". It works because people exercise care and due diligence when they know they are taking risks. It's when we get complacent and think that the markets "just work" without our own individual involvement that things go sour.

What about the bond rating agencies? Wasn't that private due-diligence?

Indeed it was but with one key difference. The bond rating companies were paid by the people creating the bonds. That's called a "conflict of interest." So you can't just trust anyone who claims to be doing due-diligence. You need to understand where they get their money. Underwriter's Laboratories doesn't take any money from anyone who has a product they might test. The UL seal has value. But just because it's reliable today does not mean it will be reliable tomorrow! UL might start taking money from the companies whose products they test.

Bernie Madoff had a stellar reputation. But you have to be like W.C. Fields: "Trust everyone but always cut the cards." The bond rating agencies were reliable until they started taking money from the wrong people.

The biggest risk of all is allowing the government to print money.

http://www.slate.com/id/2205574: Fed Chairman Ben Bernanke has used similar language before, explaining in a 2002 speech—when he was a governor on the Federal Reserve Board—that "the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost."

Unfortunately Mr. Bernanke is wrong - there is a cost and the people that pay that cost are the ones at the end of the supply chain. The people that benefit from the printing press are those that receive the money first. By the time that money reaches you and me it has "trickled down" so much it has lost value. This is inflation - prices go up faster than your wages go up and you end up way behind the curve.

I don't know if you remember, but it was not always the case that it took two wage earners to maintain a family. The reason that is the case now is that inflation has gone up 100% since about 1984. Wages have not gone up 100%. Instead, most households have two income earners.

I know talking about money sounds very hypothetical and perhaps even nonsensical. Money is just money, you think. We have to have money, and obviously it has to be controlled by the government! It just seems like common sense. Unfortunately it is wrong.

There is a long history of government failure caused by simply printing too much money. It appears to solve some problems in the short term but the result is always another bubble and as each bubble pops there is less and less real value in the money you hold.

Inflation encourages people to borrow - let's buy something now before the price goes up. I've heard this statement so often recently that it is taken for granted that this is somehow a good thing - that it stimulates the economy. Well, caffeine stimulates you, but you'd better catch up on your sleep later. You can't just keep taking more and more caffeine and the economy can't just keep having money pumped into it.

If it was true that no one would buy anything without the threat of the price going up in the future then the computer business as we know it would not exist. Computer value per dollar goes up at least 100% ever 18 months and still people buy computers even though they know the price will go down. Nobody has to trick anybody into buying a computer.

If the Fed or the Treasury or the Congress is creating money (primarily by allowing huge amounts of leverage) then it is inevitable that some de-leveraging must take place, just as you can't keep breathing in without breathing out. The people close to the money printers don't much care what happens until they get killed by deleveraging. Then they want a bailout. And they get it.

This is wrong and you should be outraged! I know you're not. It all sounds esoteric. I don't want a crash - who does? But would you rather crash your car going 10 mph or 60 mph? The Fed wants to increase the velocity of money. This sounds good but it is bad. People in markets trade at the rate that they feel comfortable. If some people are artificially stimulated to push money around then we get an artificial bubble. It's that simple.

I have no way to end this rant ... except to say ... inflation is not good! Don't believe it when someone tells you that it stimulates the economy in a good way! It's not true.

It's just not true.

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Transformer Costumes

(Thanks Austin for the link.)

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LOLFed » Dr. Doom Weighs In On The Madoff Debacle

LOLFed » Dr. Doom Weighs In On The Madoff Debacle:

Granted, Marc Faber lost the official LOLFed Dr. Doom Poll to Nouriel Roubini, but I will continue to refer to Faber as Dr. Doom until someone can suggest a better pet name. Found this gem on the Lew Rockwell Blog:

Peter Schiff, president of Euro Pacific Capital in New York, also raised concerns about the SEC’s auditing of the firm. “Of course, the fact that the SEC routinely audited Madoff’s investment company and found nothing wrong is further proof that government regulation of the securities industry is ineffective and has done more harm than good,” he said. “Rather than protecting investors, it merely lulls them into a falls sense of confidence. If government stayed out, private-sector due diligence would do a much better job of ferreting out such massive and poorly conceived scams.”

That's what I said! We had alleged auditing and regulation and then it was quietly turned off by Bush administration policy.

Since no one shouted from the rooftops that there was no more auditing going on and therefore everyone was on their own people just kept going along with complete bullshit because they assumed someone must be checking on this crazy ass complicated stuff.

*Sigh*.


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Teut's World: Fiction Book on Nano Tech

Teut's World: Fiction Book on Nano Tech: "a pretty neat book"

Check out other reviews at Amazon: http://preview.tinyurl.com/6ecyh5

More information at http://NanoPlasmBook.com.

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Kindle books sorted by price

Here's a very handy link: Kindle books sorted by price, with cheapest ones first, which means you can see what's free or very cheap!

http://www.amazon.com/s/...

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Boyer-Moore pattern matching

I was trying to remember the name of the cool pattern matching technique that takes less than linear time. I thought it was by Knuth but his version is the simple, obvious way.

Boyer-Moore is genius - it works through the text by making big jumps based on the content of the search string.

I found this cool animation (which just happens to be from my alma mater, UCI). Test it once with the Knuth-Morris-Pratt version and then again with Boyer-Moore.

Interactive Pattern Matching Animation

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Fiat Money - What?

Going the Way of France (1790) - Cyd Malone - Mises Institute

Fiat money - what is it? It's money the government prints "backed by the full force and credit of the United States." Our fiat money is better than other countries, in spite of everything, which is amazing, but none-the-less, fiat money is a bad thing.

Follow the link to read why.



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Jim Vos detected Madoff - good job!

Bloomberg.com: Worldwide: "Not every potential Madoff investor was fooled. Jim Vos, who runs due diligence firm Aksia LLC, said he spent several months probing Madoff’s firm on behalf of clients, only to recommend against investing in it. Vos said eight “feeder funds” invested about $15 billion with Madoff. Vos declined to name the clients.

Among the red flags, Vos said: Madoff’s auditor, Friehling & Horowitz, operated from a 13-by-18-foot office in Rockland County, New York, a small operation for the auditor of such a large firm. Vos had an investigator stake out the office. A call to the New City, New York, office of Friehling & Horowitz after business hours wasn’t returned.

“I’m shocked by how investors turned a blind eye to returns that were too good to be true, constant steady small positive monthly returns,” Vos said. “When something is too good to be true, it probably is.”"

(It turns out he told the SEC about his concerns and they ignored him.)

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An interactive guide to the bailout trillions. - By Chris Wilson and Karim Bardeesy - Slate Magazine

An interactive guide to the bailout trillions. - By Chris Wilson and Karim Bardeesy - Slate Magazine

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All that is necessary for the triumph of evil is that good men do nothing

All that is necessary for the triumph of evil is that good men do nothing

The link is to an essay about how Edmund Burke's quote has been rewritten across the Internet. It then proceeds to dissect what it might actually mean and how the various versions make subtle changes to the meaning.

I was reminded of this famous quote while driving. I was trying to decide if I should listen to The Portable Atheist audiobook or some Christmas music.

As I considered the famous quote, and Christopher Hitchens' compendium of agnostic and/or atheist literature, a modification of Mr. Burke's quote came to me:

All that is necessary for the triumph of evil is for an omnipotent being to do nothing.

I think that about sums it up.

BTW, I chose the Christmas music.

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The Home IT Guy (Updated)

Since everyone in the house has at least one computer and I have the most experience opening up computers that makes me the home IT guy.

Interestingly, I typed SIS 760lv into Google and it came up with a forum post on the exact problem my twins' computers have: A heat sink fell off.





I do have the thermal adhesive and I hope it will do the job, because the little doodads that lock the heat sink down are goners.

I think most of my Thanksgiving break is going to be taken up with home IT tasks.

[two weeks later ...]

Well, it turns out I had Arctic Silver 3 thermal gel which is not the same thing as thermal glue. So I put thermal gel on the heatsink and the Northbridge part and left the PCs on their sides. I had to order Arctic Silver Thermal Glue from NewEgg. That arrived, but by then it was obvious that only one of the machines was fixed - the other one had too much thermal damage to the Northbridge and would lock up when doing a lot of video (2D or 3D). An internet search found the exact motherboard from HP ... in Hong Kong! The price was quite reasonable including shipping and the motherboard arrived intact a few days after that. Today, I tore one of the machines down to the bare metal, installed the new motherboard, and then powered it back up. So far, success!

I used to be afraid to play with the hardware in a PC. I'm a software guy! Then one time I put a SCSI controller into a machine when I had forgotten to turn the power off! There was a big spark and the machine crashed, but after I powered it down and restarted it, everything was fine! PCs are actually pretty resilient.

For the HP Media Center machine, I disconnected everything, swapped the motherboard, reconnected everything, powered it up, and it worked the first time.

So I'm no longer afraid of the insides of PCs. W00t.

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Tim the Charr Chaot: Wintersday Edition

Tim the Charr Chaot: Wintersday Edition

Originally uploaded by ArenaNet

Bad-ass fan made "Tim the Charr Chaot" - now with Christmas clothing.

Gordon Ludlow is curious about himself and thinking about turkey leftovers

http://game-coder.livejournal.com/5859.html

I felt sure you wanted to know.

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Amazon Kindle Sold Out For Holidays

The Book of Kindle: Amazon Kindle Sold Out For Holidays

I'm lucky I ordered mine when I did - which was a couple of days before the Oprah discount expired. I ordered next day shipping but it actually took five days - but that's better than the 11 - 13 weeks now being quoted!

If you have a Kindle, you can download a sample of my book Nano-Plasm - just visit http://NanoPlasmBook.com. And if you like it, you can buy it with just a couple of clicks!

I worked on my book for over seven years. Why did it take so long? Because I didn't work on it very much! Just a few weeks each summer. Finally, earlier this fall, I ran off some copies at LuLu.com and gave them to friends for feedback. I made some revisions based on their comments and decided to declare the book done.

The first few chapters are the roughest, in spite of the time I spent polishing them. I noticed I was really anxious to get the story going and so I think the early chapters move too quickly (although I improved that a lot). Once I got to chapter 10 (the chapters are small, so that's relatively soon for most readers), I think I started to hit a certain stride.

One problem with taking seven years to write a book is that other people also write books. Some of them are good writers like Michael Crichton, who wrote Prey. Prey had the same basic concept - nano-technology and people. While the books are quite different there was one problem - Mr. Crichton had used the ending I had planned! So I dropped that and made up something which I think is better.

In fact, as much as I love Michael Crichton, and in spite of my first (slightly) rough chapters, I like my book better. I'm sure Crichton is a better writer, but I like my story a lot more. And I like how fast it moves. And I like the clever things I came up with nano-tech wise.

The most rewarding feedback has been that most readers have read the last third of the book in one sitting.

Now that the book is declared done I'm pretty excited at what I accomplished - even if it took seven years. I've ordered a bunch of copies to give away as gifts, and I've even sold a few - mostly on the Kindle.

So, all in all, writing the book was a pretty good experience.

I probably won't have time to start on another one for a year, because I expect to be quite busy as the project I am on at work gets closer to shipping. But I already have a story idea and this time I won't be quite so impatient with the first chapters.

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Money

Gold and the Financial Crisis | PricedInGold.com

Here's a great column by a friend of mine that describes our current 'crisis' in fairly readable terms.

He's a big fan of gold, but don't let that put you off - his column is quite general when it comes to describing what's going on with money right now.

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The definition of bad ... Mumbai under attack

Mumbai under attack - The Big Picture - Boston.com: "Late Wednesday night, Mumbai, India found itself the target of a ferocious terrorist attack, and the situation remains unresolved even now, three days later. According to reports, upwards of 60 young men entered Mumbai in small inflatable boats on Wednesday night, carrying bags filled with weapons and ammunition, and spread out to nine locations to begin their attacks. Lobbing grenades and firing their weapons, they entered hotels, a railway station and several other buildings, killing scores and wounding even more. As of this moment, the identity of the attackers has yet to be definitively determined, though there are reports indicating some of the gunmen were Pakistani - at least nine of them have been killed, nine more arrested. As of this writing, there were a reported 151 people killed from 11 different countries - though nearly 100 were Indian. More than 300 injuries have also been reported - those numbers may yet rise as several hostage situations still exist in the city."

As you know, most of the war pictures we see are scrubbed - we never see really horrible images anymore.

If you follow the link you'll see the some extremely graphic pictures from the attacks in Mumbai. The really bloody pictures have a "click to see" cover so you can pass over those if you want.

I read that 2300 people had been killed in terror attacks in India in the past year. 2300!

Here's a paradigm shifter - terror attacks aren't made for political reasons - it's just gangs of hoodlums banding together because they have nothing else to do and no other identity except as destroyers.

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Go Adobe! Excellent Video Processing Interface

Interactive Video Object Manipulation from Dan Goldman on Vimeo.

If you're know the Seattle area, you'll recognize some landmarks. I'm guessing this work was done at the Adobe site in Fremont (the Center of the Universe). I also recognized the atrium at the Computer Science building at UW.

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Ron Paul Girl

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How to sell $20.00 for far more than $20.00

http://operaphantom.blogsome.com/2008/11/26/how-to-sell-a-20-note-for-200/

First of all he demonstrates the $20 note to the whole class and says that he will give it to the student who will give him back the highest sum. But there is one condition. The student whose sum will follow the winner’s sum must give his sum to the professor too. For instance, let’s suppose that the two leading bids are $15 and $16. So, the winner will obtain $20 in exchange for his $16 and the second student will give his $15 to the Professor. 

Auction starts with $1 bid and very fast reaches $12-$16. At this point most students stop bidding and there’re only two students left with the highest bids. Slowly they reach $20 bid. Obviously from this point to win in sum is impossible but to lose own money and get nothing back no one wants.
As soon as the auction gets passed the $21 bid, class rolls with laughter. So smart MBA students are ready to give more money than the face-value is. Indeed, that’s rather comic. However, the auction goes on and reaches $50 bid; then – $100; sometimes – $200 or more.

I assume this has something to do with the current bailout. The Fed keeps printing money and throwing it away in order to make sure the economy doesn't "stall." And since the economy keeps threatening to stall, they keep printing more money, and "injecting" it into the economy. Because in the game of cash manipulation, to come in second is to lose horribly. And yet, once things get out of control, coming in first is also a horrible loss. The only way to win, as they said in "War Games", is not to play.

In real life, with the Fed printing money, there is no way to "not play" except to be broke. If you ignore the whole thing, you lose money due to inflation. If you are in stocks, there is huge variability. If you are in bonds, you also lose money due to inflation - just less. If you're hugely in debt, you can sort of win, because you end up paying off your loan in inflated dollars, although then you're in debt and at risk.

Basically, if you have money of any kind, and someone else has the power to print more of it, you are screwed. I don't see a real way to win at that except to make sure you get the freshly printed money before someone else does. So, in that sense, the winners of the current bailout are the financial firms. Everyone else loses.

It's not good.

Happy Thanksgiving.

Heh - Andrew J. Galambos used to tell a story, which I have not been able to confirm, about the origins of Thanksgiving. The way he describes Thanksgiving is different from the version you learned in grade school. In grade school, you learned that the Puritans were dying right and left until the kind Indians taught them about corn and such like things; eventually they had a bountiful harvest which was celebrated with Thanksgiving. (Never mind that celebrations of bountiful harvests go back to the beginning of time.)

In Galambos' story, the Puritans set up a socialist system where each person was given a hunk of land to farm and then everyone contributed to the global storehouse. For two years, nearly everyone starved, because nobody wanted to work hard to give all their food away. Eventually, the governor threw his hands up and said, "You're all on your own!" and the result was the best harvest the Puritans had ever had. Capitalism FTW.

I wish I could confirm that story. I tried to read Of Plymouth Plantation by Governor William Bradford, but it was too tedious, and I gave up.  [Edit - 2023-04-05  No wonder I couldn't find the story - it's not in Of Plymouth Plantation - it's in History of Plymouth Plantation .]

Anyway, it's fun to think of Thanksgiving as "Happy Capitalism Day" except, well, things are pretty screwed up, and there is a shortage of happiness. I maintain the lack of happiness has little to do with Capitalism and much to do with a consistent policy of inflation, but there you go.

BTW, the reason the government likes inflation is this: it makes people spend money. The idea is that if you know prices are going up, you won't hesitate to buy what you want to get a bargain. (I keep hearing this justification on the Planet Money podcast.)

If this was true, however, no computers would ever have been sold after the first one. Clearly something like a billion computers have been sold in a market where it is a near certainty that prices are going down and performance is going up.

So, it's all a lot of crap. I think the guys in charge just like to print money. It feels good and people are happy until the big crash.


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Memories of Turbo Pascal version 1.0 - Anders Hejlsberg, United States

Sip from the Firehose : Memories of Turbo Pascal version 1.0 - Anders Hejlsberg, United States

My first Pascal was actually UCSD Pascal which generated P-Code (which was just like Java or .NET byte code). I was given the task (at UCI) of making UCSD Pascal run on some machines the department had called "Lockheed Sue's" which were basically a ripoff of the PDP-11 except the BYTES WERE SWAPPED. I had a listing (in assembly) of the PDP-11 P-Code interpreter and I was asked to get it to run on the Lockheed SUE. I eventually succeeded which blew the minds of many people, including some UCI grad students who worked at Sperry Univac and had ported the P-Code system but with the ability to change the compiler which I did not have.

There was one flaw I could never overcome: the "set" operator in Pascal which allowed quick bit tests. I was able to twiddle the bytes to make it work - except for one case - which was where the "bit table" constant was precompiled into the compiler. It wasn't labeled as a "bit table" - it was just constant data - so there was no way to know at runtime exactly whether the bytes should be flipped or not.

Still, it was a mega achievement for me, back in the day (1982?), and I was privileged to work on that project. As a result of it, I met a lot of smart people, and that's always a good thing.

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Walt Disney World Haunted Mansion in Counter-Strike: Source

And with combat:


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Deconstructing the Federation of Star Trek - Giant in the Playground Forums

Deconstructing the Federation of Star Trek - Giant in the Playground Forums

Quite amusing and insightful.

The Federation is a bloated, corrupt communist bureaucracy. The directives are conflicting and often ignored in favor of getting things done or employing the teeming mass of unemployed. Safety regulations are ignored, especially in engineering where jury rigging due to inefficient parts manufactured by hand to give the population a 'job' failing constantly, and 'red shirts' are basically drafted into the service to give them something to do and suffer from a lack of basic weaponry and armor, not to mention the callous treatment at the hand of the 'lifer' officers who honestly couldn't care if they survive.

Technology is advanced but actual understanding of how it functions and efficient use of it is starkly limited due to being manufactured from crap components and restrictive, often times retarded, directives, and a relatively small number of people who know how it works and jealously guard their jobs and knowledge. The poor parts result in infamously lethal working environments - the panels are so under safety regulations that they actually have been known to *explode* during use under stress, killing those nearby. The power transmission systems throughout the ship and its completely unsafe dilithium crystal reactor are known to be death traps to the rest of the galaxy, who stopped using them for safer but less out-put systems that have a smaller chance of randomly killing the users in power surges under duress. The Federation continues to do so due to mining deals worked out with various corporate interests and the fact that the power generated gives their weaponry a distinct edge in combat, as well as powering stronger than usual shields. The equipment is more valuable than the replaceable crew for the most part, and the Star Fleet is fully satisfied with its lethal performance.

War is common despite the proud declaration that the Federation has no warships and is always peaceful in intent. They meddle constantly in affairs to make the outcome in their favor, especially on less advanced worlds, with loose rationals. They get by the 'no warship' clause by having a 'science fleet' that is bizarrely heavily armed for mere exploration vessels.

The corruption of the Star Fleet has resulted in a laissez faire style of captainancy in their ships - a ships captain can get away almost anything short of starting an actual war as long as it looks good and profits the Federation. Acts of piracy, treaty violation, and sexual indecency are fairly common. Bridge crews often conspire to cover up or edit reports to the central command. As a result, Federation ships are infamous for bringing disaster in their wake.

There is more amusement in the entire thread at Giant in the Playground.
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Two Interactive Video Adventures

YouTube - The Time Machine: START HERE!

-- and --

http://www.survivetheoutbreak.com/

Check them out... if you dare... and you're not too busy since you're pretty much going to endure a lot of disappointment as you make wrong choice after wrong choice...

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Sling.com | Top 50 Videos

Sling.com | Top 50 Videos

Sling has launched (in beta) it's video portal. Since I'm on vacation, I took time away from being pissed off about the Bailout and checked it out. The link is to the Top 50. Even though I'm on vacation, I didn't actually have time to watch anything except the Hawaii 5-0 opening. The top 50 list is rather eclectic. It ranges from Barack Obama on 60 Minutes to Victoria's Secret to NCIS to Family Guy.

Anyway, when it's obvious that your money is worth half of what it was (and by that I mean actual dollars, vs. your 401(k) which has already been cut in half), you can stream Sling.com video right onto your PC.

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Peter Schiff predicts our meltdown - with specifics!

Peter Schiff says that the attempt to "get credit markets flowing again" is a huge mistake.

Yup!

This is the famous clip where people are laughing at his position but he just holds his ground ... and of time has proven him correct in every detail.

Which is bad in a way, because he's predicting a very bad depression for the next several years; in fact, he says what the government is doing will prolong the depression.

*Sigh*.


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Outrage over Citigroup Bailout

Economist's View: The Citigroup Bailout

Yay. Someone is mad.

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Banking Regulator Played Advocate Over Enforcer - washingtonpost.com

Banking Regulator Played Advocate Over Enforcer - washingtonpost.com:

"When Countrywide Financial felt pressured by federal agencies charged with overseeing it, executives at the giant mortgage lender simply switched regulators in the spring of 2007.

The benefits were clear: Countrywide's new regulator, the Office of Thrift Supervision, promised more flexible oversight of issues related to the bank's mortgage lending. For OTS, which depends on fees paid by banks it regulates and competes with other regulators to land the largest financial firms, Countrywide was a lucrative catch."

So much for government regulation.

The idea behind our government is that it represents the people and the rule of law. Instead, we've structured our government so that different agencies can compete for fees from the very industry they are meant to regulate. Hmm. I wonder how that will work out. Oh wait ...
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We're up to $7.76 trillion

Bloomberg.com: News:

"The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago."

Ouch. Plus, the GDP overstates production because it includes services, and our economy has a lot of services. It's more like a calculation of the amount of money that moves around in a year, rather than a measure of production.

The problem with inflation like this is that the companies that are getting the money right away benefit from the inflation - they can pay off whatever in current dollars, because the rest of the economy hasn't had access to that money. Your spending power and mine go down once the money starts flowing around the rest of the economy.

Ugh.
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Steve Henifin nominated for Hollywood Music Award

Too Human Nominated for Hollywood Music Awards; Soundtrack Now Available - Video Game News, Video Game Coverage, Video Game Updates, PC Game News, PC Game Coverage - GameDaily:

"Too Human's score, composed by Silicon Knights' Steve Henifin and performed by the FILMharmonic Orchestra and Choir Prague, was released today for $15.98 on Amazon.com, Best Buy and the CD's label Sumthing Distribution."

I know this guy! I hired him back in the day at Virgin. I've been wondering what he's been up to. Now I know!

Congrats Steve!

(Steve, if you or someone who knows you comes across this, email me!  My address is everywhere.)
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Bailout, Version 3 - Floyd Norris Blog - NYTimes.com

The quote below is from the "Bailout, Version 3" comments - which are generally interesting and surprising good - does Floyd Norris moderate them?

"I just finished reading the term sheet — and I don’t get it. How is this not the biggest rip-off in history?

Citibank is getting a $266 billion *non-recourse* loan for its non-performing assets (the $306 billion minus about $40 billion that Citibank has to cover itself). It thus sounds like we’re buying the vast majority of Citibank’s bad paper at face value.

In other words, it sounds like a compulsory gift of $2,600 from each household in America, to Citibank’s shareholders and executives. Will we at least get a thank you note?"

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Now, Citibank

Government outlines a new plan to rescue Citigroup. - By Daniel Politi - Slate Magazine:

The WP adds a little historical gem by pointing out that Citi's origins can be traced back to a firm called First National City Bank that, in the 1920s, repackaged and sold bad loans from Latin America and billed them as safe securities. After the scheme collapsed, it became Citibank. Decades later, repackaging bad loans as safe securities is at least part of the reason why Citigroup is suffering so much heartache. Curious about how Citigroup got into the predicament it's in today? If so, be sure to read yesterday's detailed NYT piece that explains how the company went from being worth $244 billion two years ago to $20.5 billion today. The story is particularly interesting, considering that Robert Rubin, Treasury secretary under President Clinton and an economic adviser in Obama's transition team, plays a starring role in the saga.

To me, this looks like more accounting fixups have been done, and another turd has been identified. This crisis is all about accounting - bad accounting - including bad risk management. This kind of crazy bad news is going to continue until all of the bad accounting has been updated with good accounting.

The article goes on to say that

Speaking of Rubin, the NYT takes a look at how Obama is creating "a virtual Rubin constellation" in his economic team. Obama's three top economic advisers "are past protégés" of Rubin, who also has ties to other members of the president-elect's transition team. But even though the three advisers once shared Rubin's formula of favoring balanced budgets, free trade, and financial deregulation that was so popular in the 1990s, they all recognize that times have changed. They're now following Obama as he promises to increase regulation and plans to take the country deeper into debt.

It shouldn't surprise anyone that if you give someone - anyone - the power to print money - that eventually they will do so, and now - Surprise! - Obama's team is stepping up to the plate for their swing at printing money.

I don't know of any way to explain to "Joe Sixpack" or even "Smart Republican or Democrat" that printing money is bad. The best I've been able to come up with is that printing extra money is a form of central planning - and we all know that central planning brought down the Soviet Union. There's no point in calling it Socialism or Marxism or Modified Capitalism - these terms don't have any broad meaning anymore.

Every time the Congress passes a tax plan they are participating in the process of central planning. Each line in that bill is either (1) a handout (duh); or (2) an attempt to encourage social behavior along a certain path. In our country, nobody is forced to work at a certain job, as was true in the Soviet Union; but through "tax policy" - which is just central planning - people are encouraged to buy a certain type of car, or work in a certain location, or sign up for a certain kind of insurance, or buy a house, or have kids, and so on.

Successful CEOs delegate - they can't be involved in every decision. And yet the Congress - by definition a committee, so that puts them a step behind a CEO right there - got involved with the price of toy wooden arrows for children.

I don't see how central planning is a good thing for our country. It's beyond my capabilities to explain why a fixed currency is a good thing. The best I can do is point out that without a fixed currency the government - and the government consists of people, so in other words, "certain people" - have the power to print extra money. And they will work hard to convince you that printing extra money is in your best interest even though it is not.

I also don't see (if one has to choose the Central Planners), how choosing the guys that screwed up the economy most recently by advocating for increased and dangerous leverage should be the guys in charge of bailing it out.

*Heavy Sigh*.


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Paulson is an idiot

NPR: Bailout Costly For Taxpayers

If the goal is to rescue the banks, the Paulson bailout plan is one of the most expensive ways to go about it.
That's the conclusion of a paper titled "Paulson's Gift" by Luigi Zingales and Peitro Veronesi at the University of Chicago.
They do find one option that would be worse than the current Paulson plan. That would be the plan he originally proposed.

Now, the Citibank bailout includes elements of both plans. Will we get the worst of both worlds?

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Why all those Great Depression analogies are wrong. - By Daniel Gross - Slate Magazine

Why all those Great Depression analogies are wrong. - By Daniel Gross - Slate Magazine: "The specter of the 1930s has also been deployed by political leaders to create a sense of urgency. 'We saw a lot of overblown analogies in the run-up to the passage of the bailout bill,' notes Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. President Bush's Sept. 24 address to the nation warned that 'the entire economy is in danger,' and that 'without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold.'"

*Sigh*. Why do we keep falling for this stuff? "Iraq is going to nuke us." "We're entering another depression." Shoot - why not add: "We're all going to be under 3 feet of water due to Global Warming if we don't start using compact fluorescents."

Everybody calm down! This will automatically get better as businesses deleverage themselves from the crazy 30:1 place they were at. And as a true accounting of all of the bad loans is made.

It just takes time. In the meantime, the Fed has pumped $4 trillion dollars into the economy. The total amount of economic activity is only $13 trillion. I'm not sure if that translates into 25% inflation but it's possible. I think they are just making things worse.

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Official Google Blog: Lively no more

Official Google Blog: Lively no more

I never could figure out what you were supposed to do in this thing.
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Azurik Art Lead Opens New Gallery

Clay Corbisier, the Art Lead for Azurik, is opening a new art gallery in Jackson WY.

Clay says:

We are very excited to be opening the doors to Troutwater Gallery and hope that we will see all of you there at some time! Our website, www.troutwatergallery.com is still under construction but will be up in the near future. Our grand opening party will be on Dec. 20th.

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StockCrashesNov192008.jpg (image)

StockCrashesNov192008.jpg (image)

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The Wild Wordsmith of Wasilla - Dick Cavett Blog - NYTimes.com

The Wild Wordsmith of Wasilla - Dick Cavett Blog - NYTimes.com

Sarah Palin said:

My concern has been the atrocities there in Darfur and the relevance to me with that issue as we spoke about Africa and some of the countries there that were kind of the people succumbing to the dictators and the corruption of some collapsed governments on the continent, the relevance was Alaska’s investment in Darfur with some of our permanent fund dollars.

and Dick Cavett said:

It’s admittedly a rare gift to produce a paragraph in which whole clumps of words could be removed without noticeably affecting the sense, if any.

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The secrets of aXXo, BitTorrent's top movie pirate. - By Josh Levin - Slate Magazine

The secrets of aXXo, BitTorrent's top movie pirate. - By Josh Levin - Slate Magazine:

"(You know you're in a universe with a strange moral code when people start complaining that the stolen goods they're in turn stealing weren't stolen properly.)"

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Tree and Moon

The moon. And a tree. And a 10x zoom. w00t.
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"the dash don't be silent"

snopes.com: Le-a

A woman (supposedly) insists her daughter's name be pronounced "Le-dash-a".

I have a dash in my last name. It is, however, silent.

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Feedback

I said:

My feedback is that I bought [a Kindle] with one day shipping yesterday and the site even said "Get it by 10/31 if you choose one day shipping" and it's not coming until next Tuesday.

That's annoying!

They said:

Greetings from Amazon.com.

Thank you for sending us your comments about the delay on the shipping of your Kindle.

It is very important for us to hear about your experience using Kindle and shopping in the Kindle store. Strong customer feedback like yours helps us continue to improve the service we provide, and we appreciate the time you took to write to us. I've passed your feedback along to the Kindle team.

Thank you for your interest in Amazon Kindle.

I wanted to say:

Greetings from me! Thank you for me your comments about the delay in shipping my Kindle!

It is very important for me to get boiler plate responses to issues I post to you. Canned responses like yours help me evaluate vendors, and I appreciate the small amount of time it took you to send me that canned response. There is no one else here to pass your message along to, so I guess that's about it.

Thank you for your minimal interest in me.

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Harry Markowitz

Information Age - WSJ.com: "In the early 1950s, when young Harry Markowitz was looking for an area of economics to pursue, a chance encounter with a stockbroker in Chicago led him to apply a new logic about risk to what had been an investment industry based on touting individual stocks. He revolutionized the investing world by showing how to create diversified portfolios that reduce risk and maximize return.

Our current credit crisis arose from an imbalance of risk and return in portfolios of mortgage-backed and other debt securities, so it seems timely to ask the father of modern finance what went wrong and what to do about it.

Now 81 and still teaching and advising funds, Mr. Markowitz has good news and bad news. The bad news is that bailouts to restore liquidity aren't addressing the real problem. The good news is that once we have the information to measure the losses of bad risk-taking, markets will recover."

Hey! That's what I said! There's no market because there is no information. But of course accounts around the globe are trying to figure out the real value of these crazy loans and debt instruments. Once that happens, things will settle out.

In the meantime, apparently, lots of banks are signing up for cheap money from the Feds.

"Just as with all securities, the fundamental exercise of the analysis and understanding of the trade-off between risk and return has no shortcuts," Mr. Markowitz says. "Arbitrarily assigning expected returns absent an understanding of the risks of the securities is precisely how the economy arrived at this point."
Mr. Markowitz reckons it could take a year before we have the transparency we need. Assessing the value of mortgage-backed securities requires scrutinizing mortgages down to the level of individual ZIP Codes. "The valuation process will take as long as it takes, but it is the primary step toward effectively utilizing the very controversial bailout and avoiding the structural problem of a stagnant economy."

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King Country Polling Places

List of Polling Places for King County.

Open it up - it's hilarious! Could they make it more difficult?

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Ha!

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Deleveraging

What Does 'Deleveraging' Really Mean Cutting Our Addiction to Debt: Tech Ticker, Yahoo! Finance

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Azurik Halloween Costume

Aaron Hefner made this awesome Azurik costume:

That is bad-ass!
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The World According to AmericanGoy: Is this country run by idiots? Bailout of whom, exactly?

The World According to AmericanGoy: Is this country run by idiots? Bailout of whom, exactly?

All I can do is point to this guy's blog entry. He couldn't be more right about this Bailout nonsense.

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Calculated Risk: Comparing Stock Market Crashes

Calculated Risk: Comparing Stock Market Crashes

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Mr. Christopher Walken makes me laugh

Fatboy Slim |MTV Music

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Netflix streaming goes HD on Xbox 360

Netflix streaming goes HD on Xbox 360: "Netflix has announced that Xbox 360 owners who are subscribers to the rental service will be the first to receive HD streaming capability for Netflix's 15,000 strong streaming library.

The feature will be added on November 19th with the launch of the 'New Xbox Experience' dashboard update.

According to Steve Swasey, vice president of marketing at Netflix, 300 HD titles will be available at launch and that Microsoft is implementing a soft rollout for the service."

Yummy!

A hookup between Netflix streaming and TiVo was announced as well.

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Shocked!

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Microsoft Announces 'Azure' Cloud Services

Microsoft Announces 'Azure' Cloud Services - News and Analysis by PC Magazine

Wow! What an honor! Microsoft has named their new Cloud Services after the Xbox game Azurik!

How cool is that?

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McCain camp hits back at 'diva' Palin - Politico.com

Ben Smith's Blog: McCain camp hits back at 'diva' Palin - Politico.com: "Responding to the grumblings from Palin's camp in my story this morning, McCain's camp hits back in conversations with CNN:

McCain sources say Palin has gone off-message several times, and they privately wonder whether the incidents were deliberate. They cited an instance in which she labeled robocalls -- recorded messages often used to attack a candidate's opponent -- 'irritating' even as the campaign defended their use. Also, they pointed to her telling reporters she disagreed with the campaign's decision to pull out of Michigan.

A second McCain source says she appears to be looking out for herself more than the McCain campaign.

'She is a diva. She takes no advice from anyone,' said this McCain adviser. 'She does not have any relationships of trust with any of us, her family or anyone else."

This is so cool my brain can hardly stand it. They went out looking for a Washington outsider and found one in Sarah Palin. She and John McCain brag about the times they have "gone against" their own party and this proves their independence.

Now, Sarah Palin is doing what Pit Bulls do - whatever they want! What did the campaign expect? She has no ties to anyone!

Personally, I think this is brilliant on her part. Before this, she might have just faded away after this election. Now, I'm not so sure.

Of course, she will have offended so much of the Republican party structure that she'll have to start her own party ... but maybe that would be a good thing, since the Republican party is imploding anyway.

This this article about the Sarah Palin insurgency for more juiciness.
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Microsoft announces Cloud Computing OS - Applications will be called Vaporware

Microsoft announces Cloud Computing OS - Applications will be called Vaporware.

Ba Dum Dum.

Thank you very much. I'll be here all week.


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Krugman's Baby Sitting Co-op

Slate - The Dismal Science - Aug. 13, 1998: "Well, it turned out that there was a small technical problem. Think about the coupon holdings of a typical couple. During periods when it had few occasions to go out, a couple would probably try to build up a reserve--then run that reserve down when the occasions arose. There would be an averaging out of these demands. One couple would be going out when another was staying at home. But since many couples would be holding reserves of coupons at any given time, the co-op needed to have a fairly large amount of scrip in circulation.

Now what happened in the Sweeneys' co-op was that, for complicated reasons involving the collection and use of dues (paid in scrip), the number of coupons in circulation became quite low. As a result, most couples were anxious to add to their reserves by baby-sitting, reluctant to run them down by going out. But one couple's decision to go out was another's chance to baby-sit; so it became difficult to earn coupons. Knowing this, couples became even more reluctant to use their reserves except on special occasions, reducing baby-sitting opportunities still further."

He goes on to describe how issuing more script solved the problem of hoarding. Inflation for the win!

Unfortunately, his story is too simple. For instance, if the baby sitting coop is really trapped by a lack of liquidity, then perhaps the Co-op management should introduce a market for baby-sitting chits. Clearly, people are hoarding their baby-sitting coupons because they feel they have a certain value. If that value could be converted into cash, via a market-mechanism, then it would become clear what the true value of the baby sitting coupons was. And if the value of these coupons is too high, then it will benefit couples to hire outside babysitters. Or, if there was a market for baby-sitting coupons, then perhaps couples would feel free to use up their coupons, because they knew they could buy some (if the price was right) in an emergency.

Anyway, you can go on and on and on and on and on about secondary markets, futures markets, arbitrage, and so on, in the context of babysitting coupons. In Krugman's example, he assumes that babysitting coupons are the sole mechanism for baby sitting exchange and leaves out the larger world. I think that is why I don't buy his argument that it is okay to simply inflate one's way out this problem. And as he says,

Eventually, of course, the co-op issued too much scrip, leading to different problems ...

but one has to ask - how does one know when they have issued the right number of coupons? And what if the people issuing the coupons are themselves members of the baby-sitting coop? What's to keep them from printing coupons for themselves?

Really, the only solution for money problems like these is multiple competing sources of money. Whoever issues the money has the power, so to keep money-issuers honest, it is necessary to let competition keep inflation and greed and corruption in check. It needs to be easy to switch to another currency if you lose faith in your current currency.

You and I can't switch currencies very easily, but world wide money traders can, and they can vote with their money as to which currency they think is the best managed. That currency may not always be the US Dollar. In fact, if we, as a human race, are in fact in the process of switching to multiple currencies, then one can expect a fairly large amount of disruption as the US Dollar loses power. In particular, the ability of the US Government to solve problems by simply printing more money may significantly diminish. And in that case, the $10 trillion in debt the US Government holds may need to get paid back in something other than Dollars. And if that happens, I think there will be significant deflation, because the value of the Dollar has been purposefully inflated over the years.

On the other hand, if all of the governments get together and decide on a "new banking policy" then we may end up with a worldwide currency, which would be a very bad thing, as it would centralize monetary policy in a way we have not ever seen before. Luckily, it is unlikely these thugs will agree on much at all, except that they want less dependence on the US Dollar.

You know the Chinese curse, "May you live in interesting times"? Well, here we are. Although, in the greater context, it seems that the times are frequently interesting, as this story from the Wikipedia article states:

Some years ago, in 1936, I had to write to a very dear and honored friend of mine, who has since died, Sir Austen Chamberlain, brother of the present Prime Minister, and I concluded my letter with a rather banal remark, "that we were living in an interesting age." Evidently he read the whole letter, because by return mail he wrote to me and concluded as follows: "Many years ago, I learned from one of our diplomats in China that one of the principal Chinese curses heaped upon an enemy is, 'May you live in an interesting age.'" "Surely", he said, "no age has been more fraught with insecurity than our own present time." That was three years ago.

— Frederic R. Coudert, Proceedings of the Academy of Political Science, 1939

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Phil Gramm: the worst of the worst

Phil Gramm - the worst of the worst. The video, unfortunately, leaves out how Gramm snuck in a new account rule:

Foreclosure Phil:  But Gramm's most cunning coup on behalf of his friends in the financial services industry—friends who gave him millions over his 24-year congressional career—came on December 15, 2000. It was an especially tense time in Washington. Only two days earlier, the Supreme Court had issued its decision on Bush v. Gore. President Bill Clinton and the Republican-controlled Congress were locked in a budget showdown. It was the perfect moment for a wily senator to game the system. As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act. Written with the help of financial industry lobbyists and cosponsored by Senator Richard Lugar (R-Ind.), the chairman of the agriculture committee, the measure had been considered dead—even by Gramm. Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted. "Nobody in either chamber had any knowledge of what was going on or what was in it," says a congressional aide familiar with the bill's history.

He apparently can't find work in the United States:

Years before Phil Gramm was a McCain campaign adviser and a lobbyist for a Swiss bank at the center of the housing credit crisis, he pulled a sly maneuver in the Senate that helped create today's subprime meltdown.

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Greenspan’s Lament

Greenspan’s Lament - Floyd Norris Blog - NYTimes.com: "Mr. Greenspan is right on one thing. The “whole intellectual edifice” collapsed. But he is wrong to blame it solely on the wrong inputs. It is too bad that Mr. Greenspan never appreciated the work of Hyman Minsky, who understood that stability is destabilizing, and that there will come times when the very calmness of markets, and lack of apparent risk, causes investors to take ever greater and greater risks.

What was missing was a regulator who understood markets, rather than worshiped them."

In a true free market system, everyone assumes every deal is corrupt or at least corruptible, because there is no big government to bail you out.

It's just like the internet - you must assume you are always under attack; that all web sites are potentially infected; that all communication is potentially sniffed. Your only choice, if you want to use the internet, or the 'free market', is to take defensive measures that lower the risk of a successful attack. There are a number of ways of doing this in the market including insurance and credit and/or reputation monitors; requiring a certain amount of transparency and auditing; spreading risk among multiple vendors; creating public markets; and so on.

If history shows anything, it is that there is always someone out there trying to game the market. The federal government is not smart enough or adept enough to stop this level of attack and it is a bad idea to depend on them for that level of service. In fact, it is easy to con them into putting a rubber stamp on the latest scheme. It was a bad idea for the government to go "hands off" without replacing their regulatory authority with either a big sign that says "these bonds are risky" or enabling some third-party to properly judge the value of the bonds (possibly via a public market).

The problem we have here is that a lot of people were told that their investments were safe - AAA rated - when they weren't. How any credit reporting agency could certify a bond as AAA when the company issuing it was leveraged 30:1 is beyond me. The point we're at now is that nobody trusts anything - and guess what - there is no reason for them to trust anything. Pumping money into the economy may grease things - I don't know - but the fundamental problem that it was possible to create a huge number - 10's of trillions of dollars in the least - of falsely rated AAA rated bonds needs to be solved.

Right now, I haven't heard of any proposal to solve this problem - to get a proper, reliable accounting of what is really happening. Until that washes out, one way or another, uncertainty is the order of the day, and I suspect the markets will continue to bounce up and down.

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The Limits of Statistics by Nassim Taleb

Edge: THE FOURTH QUADRANT: A MAP OF THE LIMITS OF STATISTICS By Nassim Nicholas Taleb: "Figure 2 The graph above shows the fate of close to 1000 financial institutions (includes busts such as FNMA, Bear Stearns, Northern Rock, Lehman Brothers, etc.). The banking system (betting AGAINST rare events) just lost > 1 Trillion dollars (so far) on a single error, more than was ever earned in the history of banking. Yet bankers kept their previous bonuses and it looks like citizens have to foot the bills. And one Professor Ben Bernanke pronounced right before the blowup that we live in an era of stability and 'great moderation' (he is now piloting a plane and we all are passengers on it)."

The link is to a great article about the limits of statistics as used by financial modeling people - who consistently underestimate the chances of a penny coming up heads 10 times in a row.
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Greenspan Concedes Error on Regulation

Greenspan Concedes Error on Regulation - NYTimes.com: "“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Mr. Greenspan said.

Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

Mr. Waxman pressed the former Fed chair to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Mr. Waxman said.

“Absolutely, precisely,” Mr. Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”"

Even so - he's not admitting that he helped change the rules on the amount of leverage investment banks could take on. So his 40 years of evidence was useless in the face of the new rules.

At one point, Mr. Greenspan appeared to question the efficacy of increased oversight over the financial system, noting, “I think that it’s interesting to observe that we find failures of regulation all the time.”

“If we are right 60 percent of the time in forecasting, we’re doing exceptionally well,” Mr. Greenspan said. “That means we are wrong 40 percent of the time. We at the Federal Reserve had a much better record forecasting than the private sector, but we were wrong quite a good deal of the time.”

Mr. Greenspan is confusing active regulation with setting the rules. He actively promoted the idea that these banks could overleverage. So he changed the rules, and then told everyone to go for it! When did the real rules about leverage change? As a matter of fact, never, but he convinced himself that with computers and computer modeling that these investment banks would not fuck it up. But what is missed was that with all the leveraging, is that if they did fuck it up, the results would be devastating. So, sure, you can fly your kite next to the powerlines and hope it all works out, but the fact is, if you make one mistake, you're dead.

That's why, after hundreds of years of experience, the amount of rational leverage was set fairly low. (Some would argue we shouldn't allow it all - they might be right.) But certainly a change from 3:1 to 33:1 is just begging for trouble.


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© 2005-2008 Stephen Clarke-Willson, Ph.D. - All Rights Reserved.