Jingle Bell Rag

Annual 'bump':

Happy Holidays from Above the Garage Productions

It's Jingle Bells played ragtime style and very fast, performed by yours truly.

Woot!

© 2005 Stephen Clarke-Willson - All Rights Reserved.

Nano-Plasm FTW

There's still time to order Nano-Plasm and get it by Christmas if you use 2-day shipping!

Be the first on your block to find out what those spirographs are all about!

(More blog posts about Nano-Plasm...)
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Paul A. Samuelson, Who Reshaped Economics, Dies at 94 - Obituary (Obit) - NYTimes.com

Paul A. Samuelson, Who Reshaped Economics, Dies at 94 - Obituary (Obit) - NYTimes.com: "The textbook introduced generations of students to the revolutionary ideas of John Maynard Keynes, the British economist who in the 1930s developed the theory that modern market economies could become trapped in depression and would then need a strong push from government spending or tax cuts, in addition to lenient monetary policy, to restore them. Many economics students would never again rest comfortably with the 19th-century view that private markets would cure unemployment without need of government intervention."

Too bad this guy died.  I wish he had lived another 10 years so he could see just how wrong he truly was.  But I don't think even directly experiencing how poorly his ideas worked would have convinced him.  Japan has been following this nonsensical teaching for the last 20 years (pushing 30 years now) and all they have to show for it is increased debt and stagflation.  So even in the face of evidence that government can not spend its way out of a recession Dr. Samuelson would still have been a believer.

If you read the whole article you'll see that Dr. Samuelson advised President Kennedy to cut taxes to get out of a recession.  No doubt, leaving money in the economy, even at some cost to the government in terms of interest payments, might actually help, as the economy grows enough to cover the additional interest payments.

But just because it works once in a while and at a small scale does not mean that a government like ours with tens of trillions of dollars in public debt with a constituency with another tens of trillions in private debt can spend its way out of the sinkhole of debt that has been created.  Japan, which 20 years ago had a huge surplus, and was therefore in a much stronger position to potentially stimulate their own economy, has utterly failed at the task.

The reason is simple - governments don't create productivity.  Governments can spend money and governments and print money but governments don't generally create much of anything except paperwork.

Unfortunately the die is already cast.  When the stock market crashes again and everyone once again panics we'll be told that we have a liquidity crisis and only intervention by the central banks can save us.  They will print another couple of trillion dollars and give it to the banks who will use it once again to buy their own stock offerings.  More savings by the middle class will be wiped out and another 10 million people will be out of work.  In the meantime, useless politicians will tool around in limousines and pat themselves on the back for the important work they are doing.  Ugh.


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Obama Lincoln

Obama's Big Sellout : Rolling Stone: "What's taken place in the year since Obama won the presidency has turned out to be one of the most dramatic political about-faces in our history. Elected in the midst of a crushing economic crisis brought on by a decade of orgiastic deregulation and unchecked greed, Obama had a clear mandate to rein in Wall Street and remake the entire structure of the American economy. What he did instead was ship even his most marginally progressive campaign advisers off to various bureaucratic Siberias, while packing the key economic positions in his White House with the very people who caused the crisis in the first place. This new team of bubble-fattened ex-bankers and laissez-faire intellectuals then proceeded to sell us all out, instituting a massive, trickle-up bailout and systematically gutting regulatory reform from the inside."

*Sigh*.

Obama says he admires Abraham Lincoln and that Team of Rivals was a huge influence.

I guess he paid particular attention to the part where Lincoln and his Secretary of the Treasury discovered a clever way to pay for the Civil War: print money.

I guess The Peace President needs to print a lot of money because we have a number of wars going: The War on Drugs; The War on Poverty; The War in Iraq; The War In Afghanistan; The War against THE CLIMATE; and I'm sure there are more.

Taken together, the rash of appointments with ties to Bob Rubin may well represent the most sweeping influence by a single Wall Street insider in the history of government. "Rather than having a team of rivals, they've got a team of Rubins," says Steven Clemons, director of the American Strategy Program at the New America Foundation. "You see that in policy choices that have resuscitated — but not reformed — Wall Street."

In fact, Obama is doing what Lincoln did - appointing insiders.  The so-called "Team of Rivals" was Lincoln's cabinet.  It's "ex post facto" storytelling by Doris Kearns Goodwin that Lincoln hired his team because he wanted alternative views.  In fact he wanted insiders to balance his own outsider status ... and if they had conflicts with each other then he resolved them - but Ms. Goodwin gets the cart before the horse.

It's the same for Obama.  He's the outsider but 100% of the people around him are Washington insiders.

Our presidential elections are a no-win situation.  The president is a figure head.  Washington is run by the insiders who have formed a bureaucratic cesspool of toxic insider deals.  I guess as figure-heads go Obama is doing a fine job - he just got the Nobel Peace Prize for not being George Bush.

Today, the great enabler, of course, is the Federal Reserve, working jointly with the banks and the politicians to ensure both groups have plenty of scratch.  Lincoln was on top of the situation in that regard as well, as he created a central bank that printed money to fund the war.  Luckily that bank eventually failed just as the Federal Reserve will.  All paper money eventually fails just as all Ponzi schemes eventually fail.  Figuring out the timing is pretty tricky but one day the people in Bernie Madoff's fund were millionaires and then five minutes later they were completely broke.  When it happens, it happens fast.  Anyone with something called a dollar is a participant in the Federal Reserve Ponzi scheme and when it collapses it will happen very quickly.

It's best to be prepared.  If you can figure out how, that is.  I leave that as an exercise for the reader.
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Stephen Colbert on the Federal Reserve

The Colbert Report	Mon - Thurs 11:30pm / 10:30c
Fed's Dead
www.colbertnation.com
Colbert Report Full Episodes Political Humor Health Care Reform

Apparently there are parts of the media that are not under the control of the monetary elite!

(Click on "Fed's Dead" title in case the movie won't play.)
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Elizabeth Warren on TARP

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Tivoli One

I've always wanted to listen to a Tivoli One and last weekend I got to do it in a decent, quiet listening environment. (That really is one, isn't it? Don't tell me it's a knock-off ... I couldn't stand the truth! I can't find that exact model online.)





.. and indeed ... it sounded wonderful.

(And that's not my book: the spouse was reading it.)

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Winter Sunset

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Overnight case

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The W Seattle

The W in Seattle has very dark hallways with multicolored lighting.

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© 2005-2009 Stephen Clarke-Willson, Ph.D. - All Rights Reserved.

Sarah Palin

I was admiring my bubble of blog tags (which should be to the right somewhere) and I noticed the Sarah Palin is notable enough to deserve her own tag.

And yet ... I have no pictures of her!

Shocking.

(Okay, there are links to a couple of funny videos.)

My wife and I went on a cruise to Alaska last summer and we visited the Governor's Mansion in Juneau. When I tell the story I mention that Sarah Palin would come out and model a new outfit every day at 2:30 p.m. for about a half hour and ... many people buy it!

Instead of adding a picture of Sarah Palin to the blog I thought I'd give you a Google Image Search of Sarah Vowell, who is a true super hero.
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Bernanke - too painful for Nassim Taleb

Nassim Nicholas Taleb: Good Bye! The Reappointment Of Bernanke Is Too Much To Bear: "What I am seeing and hearing on the news -- the reappointment of Bernanke -- is too hard for me to bear. I cannot believe that we, in the 21st century, can accept living in such a society. I am not blaming Bernanke (he doesn't even know he doesn't understand how things work or that the tools he uses are not empirical); it is the Senators appointing him who are totally irresponsible -- as if we promoted every doctor who caused malpractice. The world has never, never been as fragile. Economics make homeopath and alternative healers look empirical and scientific."

Wouldn't be awesome if Obama read the writing on the (Great) wall (of China) and fired the whole bunch of misfits he has in charge of our economy?


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Dubai [World]

Abu Dhabi’s Silence Raises the Heat on Dubai - NYTimes.com: "Many here had assumed that Abu Dha bi would bail out Dubai’s flagship company, Dubai World, which set off a swoon in global markets last week when it said it was seeking to delay payments on $59 billion in debt. But so far there has been no announcement, and insiders suggest that Abu Dhabi — which already bailed out Dubai to the tune of $10 billion earlier this year — is seeking greater economic or even political control over Dubai as the price for any further assistance.

To make matters worse, the Dubai government distanced itself from Dubai World on Monday. Abdulrahman al-Saleh, the general director of Dubai’s Department of Finance, told Dubai TV that Dubai World was “not guaranteed by the government,” and that creditors needed to take some responsibility. “They think Dubai World is part of the government, which is not correct.”"

So I'm not the only person that's confused about what's what. In my earlier posts I said that Dubai was defaulting. It's actually Dubai World, a separate company. But everyone (including me) assumed Dubai World was basically part of Dubai.

In our country, there was a bank called The Bank of The United States that failed, but everyone thought it was the government that failed. This caused a huge bank run.

Having said all that, it's still the case that there are tightly interwoven relationsips in Dubai since nearly all relationships are blood relationships.

In the US, Fannie Mae and Freddie Mac, and the Federal Home Administration (FHA) have implicit government guarantees, but as Market Skeptics points out, these are not real guarantees. So it'll be interesting to see who is left holding the bag when those agencies finally and completely implode.



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Dubai - Incredible

Dubai is in the news because it's defaulting ("postponing") payment on $60 billion in loans.

So I though I'd fly over the place in Google Earth.

I recommend you do the same. Just fly to "Dubai" and zoom out and you'll quickly find the man-made Palm Islands. Hunt around for the monorail track, the aquatic park, the giant hotel, and the range of homes/apartments, and ... lots of still empty sand.

It's unfrickin' believable.



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Key Fact

Legendary Financial Historian Ed Griffin on the Economic Crisis, the Monetary Elite and the Future of the Internet: "Daily Bell: Has the stimulus helped? Why or why not?

Griffin: Has the stimulus helped? I guess the question is has the stimulus helped whom? Or What? The general idea is that the stimulus is supposed to stimulate the American economy and help the American people and in that I don't believe that there is any reason to think that it has helped at all. I don't think it was really designed to do that at all. It was designed to be sold that way but I don't think that anyone in Washington thought that it would actually accomplish the end objective. Now I suppose that some people did think so, I would have to backtrack on that, there are some collectivists that believe the government can solve all problems, that the government can take everything from the citizens and redistribute it back to them in a more efficient manner. There are people like that out there and they thought the stimulus package would help. Surely everybody understands that the money that is being spent is coming out of the pockets of the very people it is supposed to help."

[Emphasis added.]

Actually, I'm pretty sure most people do not understand where money comes from. The value of a dollar has been so greatly cheapened by the Federal Reserve's inflationary policies that an entire generation (especially the politicians) think that money can be called into existence at any time without any cost.

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Writing Nano-Plasm over a seven year period

I posted a short article about writing Nano-Plasm over a seven year period.

I  compiled some size data by looking at the size (in bytes) of the various backup copies I made.  Unfortunately, the history for the first year was lost.




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Great Hatchet Job on Benjamin Bernanke

From The Black Hats Strike Back (Bernanke) - The Market Ticker:

I made most of these points in April of 2008 - but of course you won't pay attention to anyone who gets it right, yes Ben? Nor will you answer those critics, except through Goebbels-style repetition of bald-faced lies.

Or should you read my August 2008 missive in which I cited specifics:

Just like you said 'subprime is contained'? (3/07)

Or 'we do not expect spillovers from the subprime markets to the rest of the economy or to the financial system'? (5/07)

Or 'monetary and fiscal policies are in train that should support a return to growth in the second half of this year'? (4/08)

Or 'our baseline forecast is for moderating inflation'? (7/06)

Or '.... expect energy and other commodity prices to flatten out'? (7/07, right before the insane run in these prices began!)

Or if you prefer, you can read about them right here:

Chairman Bernanke before the Congressional Joint Economic Committee on March 28th 2007, just a few days later: 'Although the turmoil in the subprime mortgage market has created severe financial problems for many individuals and families, the implications of these developments for the housing market as a whole are less clear. The ongoing tightening of lending standards, although an appropriate market response, will reduce somewhat the effective demand for housing, and foreclosed properties will add to the inventories of unsold homes. At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.'

Chairman Bernanke at the Federal Reserve Bank of Chicago’s 43rd Annual Conference on Bank Structure and Competition, May 17th, 2007: 'We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.'

Chairman Ben S. Bernanke speech to the 2007 International Monetary Conference, Cape Town, South Africa, June 5th: 'The troubles in the subprime sector seem unlikely to seriously spill over to the broader economy or the financial system.'

Chairman Bernanke to Committee on Banking, Housing, and Urban Affairs, U.S. Senate, April 3rd, 2008: 'Clearly, the U.S. economy is going through a very difficult period. But among the great strengths of our economy is its ability to adapt and to respond to diverse challenges. Much necessary economic and financial adjustment has already taken place, and monetary and fiscal policies are in train that should support a return to growth in the second half of this year and next year.'

Is it possible to be more wrong Mr. Bernanke? I think not.

Of course, the ultimate goal of all our efforts is to restore and sustain economic prosperity. To support economic growth, the Fed has cut interest rates aggressively and provided further stimulus through lending and asset-purchase programs."

Please read the entire article. Our "crisis" is so simple - too many bad loans brought on by artificially low interest rates created either by the Federal Reserve or implicit and explicit government guarantees (which mask risk and drive rates lower).

I highly recommend Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse. The book does a terrific job of explaining how artificially low interest rates lead to what Austrian Economists call "The Business Cycle" (but which should more accurately be called "The Banking Cycle"). It's a pretty easy read and you'll understand why it's nothing short of disastrous to have a central authority set interest rates.

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Upgrading your PS3 hard drive - what they don't tell you

The online tutorials I found for upgrading my PS3 hard drive were a huge help but most of them left out one crucial fact.

All tutorials mention the fact was that you need a FAT32 file system based external disk for doing the system backup but they don't tell you that you can't make one bigger than 32 gigabytes under XP. And XP will check the drive for about an hour before telling you it can't do it.

So you need a third party app to do the job. I ended up using (with some trepidation) Fat32Formatter and as far as I can tell it didn't add a key logger to my system.

But here's the thing ... why doesn't the PS3 have an option to format an external hard drive as FAT32? Then I wouldn't need a PC.

(The PS3 will format your new internal drive for you so don't worry about that.)

But eventually it all worked out and for a mere $65.00 I went from 40 gigabytes to 320 gigabytes. w00t.

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The banksters can be defeated

Judge Slams Indymac, Sets Aside Defendant's $292,500 Mortgage: "Inequitable. Unconscionable. Vexatious. Opprobrious.

These are just a few of the choice words a New York state judge used to describe the behavior of Indymac in a decision in which he wiped out the $292,500 sub-prime mortgage owed by a homeowner to the bank."

If you default on mortgage payments to your bank, they take your house. But if your bank fails, is your loan forgiven? No, it is sold off by the FDIC to another bank. It seems lopsided. But now, a judge has forced a bank to eat 100% of a loan.

w00t.

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Corporatism

From zero hedge:

Watch the full program or select from the following clips. We would like to draw your attention to clips 2, 7, 11 and 13

01.    Introduction
02.    Flawed Economic Model
03.    Economic Power and Ideology
04.    Collapse of Trust in Legal System
05.    Legal Means of Assistance
06.    Effects of Bailout
07.    How This Crisis Came About
08.    New Unregulated Markets
09.    Modern Capitalism Separates Ownership and Control
10.    Control
11.    Government Controlled by Banking Interest
12.    Property Information System
13.    Protection of Wealthy and Powerful
14.    Documentation of Who Owns What
15.    New Orleans Troubles
16.    Foreclosures are Economic Katrinas

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Ben Bernanke forecasts the future

Don't Worry, We're Vigilantly Monitoring The Plummeting Dollar:

"My own view is that the recent pickup reflects more than purely temporary factors and that continued growth next year is likely. However, some important headwinds--in particular, constrained bank lending and a weak job market--likely will prevent the expansion from being as robust as we would hope. I'll discuss each of these problem areas in a bit more detail and then end with some further comments on the outlook for the economy and for policy."

-- Ben Bernanke

This is the man that said the subprime market problems were contained.

We are well and truly fucked.

This GDP number is a joke. It's a measure (it's hard to see how it could be accurate) of how much money changes hands each year. That's all it is. It's not a measure of economic health. I give you ten dollars and you give it back to me and we do that all year and we can produce $1,000s of dollars of GDP. Banks send money back and forth amongst themselves and they can produce another trillion dollars in GDP. It's just a stupid meaningless number and the fact that it (may) have increased a few percent on the back of nearly two trillion dollars in new money printed by the Federal Reserve is just nothing to get excited about.

The chairman goes on to say:

"We are attentive to the implications of changes in the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability."

Really? You're in charge of maximum employment? Then you're a completely incompetent nincompoop. (The fact is that nobody is in charge of maximum employment - that's central economic planning, Soviet Union style. How did that work out?)

Really? You're in charge of price stability? The price of what? Houses? How's that working out?

Wake up America! These guys are full of shit. It's time to give them the boot.

End the Fed!

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Warren Buffett: Traitor to Capitalism

CNBC TRANSCRIPT: Warren Buffett & Bill Gates - Keeping America Great - Warren Buffett Watch - CNBC.com:

BECKY: Warren, was it a mistake for the government to allow Lehman to go under?

BUFFETT: It may have been. But I would say overall, the officials in Washington did a terrific job of dealing with really what was an economic Pearl Harbor, as we talked about. So I would say that if Merrill hadn't been bought by the B of A, Merrill would have gone very quickly. And the dominoes were really lined up. And I don't think it was fully appreciated, perhaps, what a big domino Lehman was or how close it was to the next big dominoes. But overall, I give (former Treasury Secretary Henry) Paulson, I give (Federal Reserve Chairman Ben)Bernanke, I give (FDIC Chairman) Sheila Bair, I give (Treasury Secretary) Tim Geithner, I give them very high marks for the fact they took unprecedented action. [APPLAUSE]

If Warren Buffett, the most widely known "capitalist" in America, is telling people that government intervention in markets is "good" and part of "capitalism" and the "American system" then who is going to defend true capitalism?

The fact is that Warren's investment in Goldman Sachs benefited hugely from the bailout (as well as Goldman's ridiculous conversion to commercial bank status) as otherwise Goldman would be out of business and Warren would have been $5 billion poorer.

When the markets were going up he was a genius. Then there was a hiccup and he was bailed out.

This kind of hypocrisy is just horrendous.

Let me remind you: capitalism is where individuals make their own decisions as to where and when and what to buy or sell. Fascism (or corporatism) is where corporations team with the government to leverage the government's monopoly power to maintain and increase power. When it comes to big companies we have fascism. It didn't work for Mussolini and it's not going to end well here either. To hear Warren Buffett promote fascism is very problematic because he is viewed as the ultimate capitalist and his words lend great credence to the proposition that capitalism has somehow failed when in fact it is central economic planning by the Federal Reserve that has created the current crisis.

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Butt-Head is Reading on I-405

This butt-head is reading a book while driving on I-405 (Washington) after merging from WA-520.

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Driving in the Rain

I love night time photography. Someday I'm gonna buy myself a real camera. But these cheap things do a pretty good job in the meantime.

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Glass

Photo by my daughter (age 14).

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Sysinternals proposal

I posted the following feedback at the SysInternals.com site:

Hi,

As the number of cores increases, we need Process Explorer and similar tools to display the CPU usage in a more readable format.  I would propose that the first core go half way up the graph and all remaining cores be scaled such that if all cores are 100% busy then the graph looks to be full.  Ideally this would exponential so if two cores are busy, the graph is 3/4 full, and three cores is 7/8ths full, then 15/16ths, and on until the final core fills the last little bit left (depending on the number of cores this might be just 1/32nd or such).

This will solve the problem where you have 16 cores and a process is pegged at 100% of one core but the graph is so small you won't be able to even see it.

Thanks,

-- Stephen Clarke-Willson

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A Model Day at the Park

Read about tilt/shift photography at Wikipedia.
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Sound Banking: A Capitalist Imperative - The Market Ticker

Sound Banking: A Capitalist Imperative - The Market Ticker:

"It is time to 'clear the decks' and talk about exactly what a sound banking system is - and is not.

It is time to identify that which is an exercise in capitalism, and that which is an exercise in fraud."

This is a really good article that describes how fractional reserve banking goes bad. Basically, it says that banks can loan out money they "create" as long as they have a hard asset to back it up. In modern times, of course, banks are making loans against things that don't exist: a building that isn't built yet, your ability to pay (or not pay) your credit card, and incorrect assessment of home values.

So there's lots of fraud and most banks, by this definition, are insolvent.

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Coffee Art

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Power

I had all but the first 10 editions of Nintendo Power. I gave them away to a young man from Spokane. His mom drove across the Cascades to pick them up. For several years Nintendo put a little slice of a picture on the spine of each edition and if you put them together you could see the picture. (The red one in the middle was a special Spider Man cover.)

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Mechanism

Hammering Man seems sad that I can see his mechanism.


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40K

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Turtles

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Sinking Feeling

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W

W Hotel Lobby, Seattle, WA

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Christmas in Seattle

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Parking lot

... from a Stephen King novel ...


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Crystal and Stromberries

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Stromberries

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Vancouver

I'm running Picasa 3.5 over my 50,000 photos. As I'm tagging faces I'm tripping over some old pictures that seem interesting. This is the Vancouver, CA skyline.

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Deflation is good!

I posted this response to a post by Gordon Ludlow about fraction reserve banking.  His original post is worth reading.


[I've made small edits to this version to fix typos.]   I wrote:

You certainly understand the reasoning behind a central bank. The idea is that by printing extra money the central bank will promote "price stability" and this is in fact the charter of the Federal Reserve.

Unfortunately, there is no need for price stability. What would really happen if you planted a potato and then dug up 20 and sold them is that the price of potatoes would go down. The first year, if potatoes were in demand, you might only get $.95 per potato. You'll still make a lot of money but the increased supply of potatoes will probably lower the price - although it's just as possible that potatoes become some kind of fad and you're in the right place at the right time and the price of potatoes goes up!

More likely in the long run is that lots of people will see an opportunity in potato farming and the long term price of potatoes will go down, just as the long term trend of the price of computers is down.

What's wrong with that? Do you want the price of potatoes to go up? Do you want the price of computers to go up? Or even stay the same? No, you want the efficiency of making computers or potatoes to go up which brings the price down and makes the product more affordable for everyone, especially the poor.

Suppose you save the money you make. With enforced monetary inflation, you have to invest or your money will lose value - according to the Federal Reserve, 2-3% a year, which is their inflation target. If you have to invest, you have to take some risk, no matter how small. Why should you have to take a risk just to maintain the value you already earned? Why can't you just keep your money and let it grow in purchasing power as production becomes more efficient? Inflation is a tax on savings and it is particularly brutal to those near retirement age.

Price deflation is portrayed as evil when in fact it is the most honest pricing system there is. Price deflation after a bubble can be brutal - but that's only because of the price inflation that preceded it. The inflation was the problem not the deflation. Deflation is generally good and represents increased efficiency in the economy.

Thanks for the link to my blog, BTW. And thanks for taking the time to think about our economy. It's very important!

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Limits

Fed Considers Bank Pay Limits - NYTimes.com:

"The Federal Reserve is preparing what would be the most sweeping rules yet to regulate the pay at banks across the country, people close to the discussions said on Friday.

The rules would apply not just to the compensation and bonuses of top executives but also to traders, loan officers and other employees. But rather than focusing on the specific amount employees are paid, Fed officials will be scrutinizing whether the structure of compensation, like the use of bonuses based on the volume of loan origination, encourages excessive risk-taking."

This is so stupid. The easiest way to keep anyone from excessive risk taking is to raise interest rates. The source of all the excessive risk taking was the low interest rates created by the Federal Reserve itself.

But you won't hear the Federal Reserve take any responsibility for the meltdown even though they are the source of the original bubbles that cause so much pain and suffering.

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Worms!

This is some of the coolest procedural code I've seen:

worms in a bowl! from blackpawn on Vimeo.

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Inflation required for fractional reserve banking

Web of Debt author Ellen Brown on debt money, why money is collapsing and why central banks need adult supervision:

"Taking the long view, it's the end of a 300 year Ponzi scheme. Virtually all of our money is created by banks as loans; but banks create only the principal, not the interest necessary to pay their loans back. More is always owed back than is created in the first place, and new borrowers must continually be found to take out new loans to create the money to pay this extra interest. After 300 years, the whole world has been locked in debt, and the parasitic pyramid has run out of its food source."

(A Ponzi scheme is basically an inflationary system were fake money is created and put on the books (as a result of fake investments); and if someone wants some real money, a small fraction of the money that has been collected is returned. But you knew that already.)

This is the same thing I was trying to say in this article on fractional reserve banking and inflation.

And the Mogambo Guru put it this way in The Big Payback of Nonexistent Money:

Well, the only thing he wanted to talk about was how I was going to get my Fat Mogambo Butt (FMB) up off that stool and get out and not come back, which I did, but not before telling him that another parabolic curve is provided by Darryl Robert Schoon at drschoon.com, who says, “What people do not understand is that bankers loan money which doesn’t exist and then receive compounding interest and repayment of previously non-existent funds in return.”

Most descriptions of fractional reserve banking get hung up on details about how a bank will keep a certain portion of the money that it loans out in actual cash in case someone wants it and how bad it is if the bank uses up all this cash.

But now, thanks to the Federal Reserve, which has effectively lowered the fractional rate to zero, it is not necessary for the bank to keep any of the money that people deposit.  None of it.

So this makes it much easier to illustrate the point that banks make money out of thin air.  They loan this imaginary money out and then receive real money back as interest.  You know this is imaginary money because if you go to the bank and try to take out a loan for $100,000 and tell them you want it in cash you'll discover that they won't give it to you.  You can only write checks against your loan.  Or they will issue you a bank check you can deposit at another bank and you can try to the the $100,000 out of that bank.  I'd like to see someone try.  Instead, you write checks against your loan, which other banks will cash (possibly including the bank that gave you the loan!) and this imaginary money circulates.  At no time is there any actual money - no dollar bills, no gold, no coins ... no nothin'!

So when you heard that the banking system might have collapsed, you would have heard Federal Reserve and Treasury officials talking about imaginary money.  To fix this problem - that is - that the banks didn't have enough imaginary money - the Federal Reserve issued them some extra imaginary money that it created out of thin air.  The Treasury Department also forced the banks to take some imaginary money as part of the TARP program.

There is a continuing argument - are we facing inflation or deflation?  Both, technically.  It depends where you look - inflation and deflation are not uniform across an economy.   However, I maintain that most of the deflation is the removal of imaginary money from circulation while much of the inflation is in day to day items that I want to buy, like food and gasoline; there is also currently a great deal of inflation in stock prices.  The price to earnings ratio of the S&P 500 is 130 or some ridiculous number; a more sane ratio is 10 to 15.  So the S&P 500 stocks are inflated 10x over any reasonable price.  The reason is that the imaginary money that the banks received was sitting with nothing to do; so the banks bought stocks.  Right now, they seem to be buying each other's stocks, which bids the prices up, and let's them sell those stocks for more imaginary money, which they can put on their balance sheets, which are filled with imaginary asset values such as commercial real estate loans at 100% when the most that could possibly be paid back is 50%.

Our currency is going to collapse.  Nobody knows when and few will offer any predictions.  How would you predict when Bernie Madoff would turn himself in?  How would you predict when the SEC would have found him out if he hadn't turned himself in?

When our currency collapses a great deal of imaginary wealth will disappear.  Just as people who invested with Madoff went from rich to broke in a matter of five minutes so too a great deal of imaginary wealth in the US and around the world will disappear.  People will be forced to switch to some kind of currency that has some value.  I don't know what that will be.  In the worst ( non-violent) case we will all barter; in a lesser case perhaps the states will issue some currency with an inflationary cap.  I don't know.

All Ponzi schemes end and they end badly for many people.  The only safe thing is to not participate and that is really hard in today's world.  It's just not practical for most of us to live off the land.  I wish I could tell you how to survive the collapse but I don't even know when it will happen!  (Sometime in the next two years, methinks ... but who knows?)

Nonetheless, I would say it is better to go into this crisis with your eyes open; when the currency collapses it will happen quickly.  Maybe the powers-that-be will con us all with some new currency - a world currency - and the day of reckoning will be postponed yet again.  Who knows?  More likely, I think, is that the US dollar will be abandoned as a safe store of value by most foreign governments.  When that happens prices will go through the roof because we import so much.

Cripes, what a nightmare.

Here:  watch Debbie Downer; it will cheer you up.

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Calculated Risk: A Moment with Minsky

Calculated Risk: A Moment with Minsky: "He believed in capitalism, but also believed it had almost a genetic weakness. Modern finance, he argued, was far from the stabilizing force that mainstream economics portrayed: rather, it was a system that created the illusion of stability while simultaneously creating the conditions for an inevitable and dramatic collapse."

 
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Underlit

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Succumbed

I succumbed. I bought the Red vs. Blue DVD set.

The guy handling the money says, "Do you want it signed?"

"Sure," I say, "who's signing it?"

"The guy who plays Sarge," he says.

I yell, "Simmons!", doing my best Sarge imitation.

"No," he says, "Sarge." He stares at me a moment and says, "Debit or Credit?"

I give him my Yoda credit card and he doesn't notice!

"Hey," I say, "Just a moment, check out that card."

"Debit or credit?"

"No, the picture!"

"Hey, that's cool! I didn't know they had those. So, debit or credit?"

"Credit. Hey, get him to yell 'Simmons!'"

He says, "Simmons isn't here now."

"No," I say, "Get Sarge to yell 'Simmons!'"

He says to the voice of Sarge, "Hey, yell 'Simmons!'"

Voice of sarge says, "Simmons isn't here now."

"No," the cash handling guy says, "Just yell 'Simmons!'"

"What? Is that all?"

"Yeah, just yell 'Simmons!'"

"Okay," voice of Sarge says. "SIMMONS!"

Awesomeness.

And then cash handling guy says to voice of Sarge, "Hey, check out this guy's credit card! It's Yoda!"

Double awesomeness.

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Seriously

... what is the deal with this guy? He's at every conference. I mean, okay, he could pilot a starship better than any human, but still ... what is the deal?

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Pax 2009

"Hey, it's George Lucas!"

But not for long ...


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Wienies!

Wienies!

"All [previous] park operators contended that Walt's concept of a single entrance was faulty... Walt remained firm. He reasoned that people became disoriented when they entered by different gates. He wanted everyone to be channeled in the same way, to have their visit to Disneyland structured as part of a total experience.

"Throughout the planning [of Disneyland], a familiar Disney word, 'wienie,' was used. A wienie was a lure, an inducement, in the same way that an animal trainer used a frankfurter to evoke tricks from a dog act. In Disneyland, the castle served as the wienie to draw the people down Main Street. Then, when they reached the hub, two other wienies would attract them to the right or to the left. In Tomorrowland, it would be the towering Rocket to the Moon; in Frontierland, the Mark Twain steamboat."

From Walt Disney, An American Original, by Bob Thomas, page 263.

Some parts of Disneyland are more wienie-like than others, e.g., the rock formation above.  According to Disneyland lore, an earlier version of the mountain was a too wienie-like, if you get my drift, and had to be remodeled.

Anyway, check out my article on Disneyland Wienies and then put lots of tall pointy things into your next game.
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