With all due respect, Mr. President, that is not true.

Fiscal Reality Central

Cato Institute ad against Keynes

Thank goodness. Some people spoke up.

I don't agree with these guys either, actually. Stimulating things through tax cuts is still deficit spending. It's better to have a million businessmen decide where to invest - that's for sure - but the only sure fix is to eliminate the government debt. I know - that would be a real buzz kill for those fresh new government officials excited about blowing a trillion dollars on stuff.

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


The Leverage Index

Calculated Risk: Obama to Make Changes to Financial Regulatory System:

"Officials say they will make wide-ranging changes, including stricter federal rules for hedge funds, credit rating agencies and mortgage brokers, and greater oversight of the complex financial instruments that contributed to the economic crisis."
Here's my idea that would solve a lot of problems: create a leverage rating. It would be just like a credit rating except it would be an audited indication of how leveraged a company is. Then a person could tell at a glance how fucked the company is if the slightest problem occurs.

Simple, eh?

The problem with this leverage stuff is this: sure, some idiot leverages his company 60:1 and it fails, as it probably should, and that fucker deserves whatever he gets. But then he takes a zillion other companies with him - which probably should not happen. In our recent history, the government has stepped in (with Long Term Capital Management, the S&L crisis, and now the 'liquidity crisis') which is expensive and inflationary.

Instead, there should be a web page you could go to called "Fucking idiots of management" and it would list the most leveraged companies, and we could all make fun of them.

More importantly, the short sellers would attack those crazy-ass companies and destroy them before they could do real damage.

That would be awesome.

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


Zimbabwe Releases $100 Trillion Note | The Right Perspective

Zimbabwe Releases $100 Trillion Note

My friend Kevin says you can buy one of these on eBay.

Here's one.

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


Another hero emerges

What Went Wrong - washingtonpost.com:

"Their adversary, although also a member of the Working Group, did not belong to their club. Brooksley E. Born, the 57-year-old head of the Commodity Futures Trading Commission, had earned a reputation as a steely, formidable litigator at a high-powered Washington law firm. She had grown used to being the only woman in a room full of men. She didn't like to be pushed around."

The global derivatives market topped $530 trillion as of June 30 this year, including $55 trillion in the suddenly popular credit-default swaps; that $530 trillion represents all contracts outstanding. The total dollars at risk is much smaller, but still a hefty $2.7 trillion, according to an estimate by the International Swaps and Derivatives Association.

Those are some big numbers.

Born didn't back off on derivatives, either. On May 7, 1998, two weeks after her April showdown at Treasury, the commission issued a "concept release" soliciting public comment on derivatives and their risk.

The response was swift and blistering. Within hours, Greenspan, Rubin and Levitt cited their "grave concerns" in an unusual joint statement. Deputy Treasury Secretary Lawrence Summers decried it before Congress as "casting a shadow of regulatory uncertainty over an otherwise thriving market."

Here's a tip for the future, dudes: If that's all it takes to interrupt a market, then you can bet there are serious problems lurking.
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© 2005-2008 Stephen Clarke-Willson, Ph.D. - All Rights Reserved.

Commanding Heights - It's Deja Vu all over again ...


The chapter of the video I have linked to above is only 6 1/2 minutes long. It tells the stagflation story, from 1971, that sounds just like the news today! Okay, we don't have wage and price controls yet, but they are likely given the massive amount of money that has been pumped into the economy. (BTW, the multimedia presentation that plays next to the video is excellent.)

I saw in Henry Paulson's exit interview with Maria Bartiromo that he said, "Everybody agreed with what we were doing."

I don't think he talked to enough people.

He talks about "a build up." That "build up" was the slow steady printing of money at a rate of 2% to 3% a year over twenty years. That was the root cause of all of the other wackiness.

It's the same story as the French Inflation disaster. All the "smart people" said printing money was the fix! (Same as global warming, for that matter - "everyone agrees!" - I don't think so.)

This is like the Shuttle taking off when the weather was too cold. There were people who knew that was a bad idea but the people in charge didn't have the mindset to hear the message.

Result: boom!

I guess the hard thing for people to get is that the root problem is printing too much money. Whether that shows up as stagflation, or a housing bubble, or a tech bubble, or the current US Government bonds bubble - it's all the same root cause.

And think about it - if printing money is such a great thing - then just print it and distribute it democratically! But no ... for some reason, the folks in power give it to their friends. That should tell you there is a problem right there.

If you print a counterfeit $100 bill then you get $100 in value when you first spend it. But as your fake bill circulates it becomes less and less special. (Finally someone gets stuck with the fake - but let's not even consider that for now.) Whoever gets the money first gets the most value. As time goes on, the general money supplies is inflated, and the value of all remaining money goes down.

If this were not true, it would be perfectly legal for you to print counterfeit money. You would be creating an "economic multiplier" in the words of Paul Krugman (read about his goofy "multipliers", although this idea of his is good). You would be helping the economy. If printing money is good - why is it only good if the government prints it? Why shouldn't you?

Huh? Why not?

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


More idiocy

http://www.msnbc.msn.com/id/26708958/ :

“Acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for our shareholders,” Bank of America Chairman and Chief Executive Officer Ken Lewis said in a statement. “Together, our companies are more valuable because of the synergies in our businesses.”
That was four months ago.

Now http://www.nytimes.com/2009/01/17/business/17bofa.html?8au&emc=au

Hours after receiving another government lifeline, Bank of America posted a fourth-quarter loss of $1.79 billion on Friday, down from net income of $268 million a year earlier, in a reversal caused largely by growing consumer loan losses.
And bigger troubles came from Merrill Lynch, which Bank of America hastily snapped up in September for $50 billion. A fresh round of write-downs at Merrill pushed that firm into a $15.3 billion loss for the fourth quarter. That was the firm’s sixth troubled quarter since the credit crisis began. Merrill was among the most aggressive — and most harmed — by mortgage investments.
In a conference call Friday morning, analysts asked Kenneth D. Lewis, the bank’s chairman, whether he had regrets that he had agreed to purchase Merrill.
Mr. Lewis said that as Merrill’s fourth-quarter losses mounted, he did re-evaluate whether he should close the deal and whether he could renegotiate the price for Merrill. But, he said, regulators implored him to complete the transaction and said they would provide support.
“The government was firmly of the view that terminating or delaying the closing of the transaction could lead to significant concerns and could result in significant systemic concerns,” Mr. Lewis said. “We did think we were doing the right thing for the country.”

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


The top 25 Bushisms of all time. - By Jacob Weisberg - Slate Magazine

The top 25 Bushisms of all time. - By Jacob Weisberg - Slate Magazine:

"15. 'It's important for us to explain to our nation that life is important. It's not only life of babies, but it's life of children living in, you know, the dark dungeons of the Internet.'—Arlington Heights, Ill., Oct. 24, 2000"

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



We can't access your loan information online right now. Please try again later in the day. If you're trying to log on during overnight hours or on Sunday morning, we typically update account information during these times, so please try back later. Thank you!
Really? You don't have scheduled maintenance? You just do it randomly? Really? You didn't know at the start of our session you couldn't complete our request? You thought it was best to let us type in a bunch of information and then give us a bullshit error message? Really?

You know what else ... this is the kind of thing a phishing site would tell us after they've bagged us. What? You don't print your web site address on your forms? Really? REALLY?
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© 2005-2008 Stephen Clarke-Willson, Ph.D. - All Rights Reserved.

I Want My Bailout Money (Rap)

The internet might save us.

The "Congressional Oversight Commission" (COP - I didn't make that up) released a report you can read about the TARP (or EESA) program.

Here's my favorite part:

(2) Transparency and Asset Evaluation. The need for transparency is closely related to the issue of accountability. The confidence that Treasury seeks can be restored only when information is completely transparent and reliable. Currently, Treasury’s strategy appears to involve allocating the majority of the $700 billion to “healthy banks,” banks that have been assessed by their regulators as viable without federal assistance. Of course, whether a bank is “healthy” depends critically on the valuation of the bank’s assets. If the banks have not yet recognized losses associated with over-valued assets, then their balance sheets – and Treasury’s assessment of their health – may be suspect.

Many understood the purpose of EESA to be providing assistance to financial institutions that were “unhealthy” and at risk of failing. Such institutions were at risk, the public was told, due to so-called toxic assets that were impairing their balance sheets. EESA was designed to provide a mechanism to remove or otherwise provide clear value to those assets. The case of Citigroup illustrates this problem. Treasury provided Citigroup with a $25 billion cash infusion as part of the “healthy banks” program whereby Treasury made nine initial investments in major banks. About two months later, Treasury provided Citigroup with $20 billion in additional equity financing, apparently to avoid systemic failure, but it did not classify that investment as part of the Systemically Significant Failing Institution program (SSFI program). These events suggest that the marketplace assesses the assets of some banks well below Treasury’s assessment. To date no such mechanism to provide more transparent asset valuation has been developed, meaning that the danger posed by those toxic assets remains unaddressed. The bubble that caused the economic crisis has its foundations in toxic mortgage assets. Until asset valuation is more transparent and until the market is confident that the banks have written down bad loans and accurately priced their assets, efforts to restore stability and confidence in the financial system may fail.
I added the "bolding" in the middle. Let me restate: Citibank was given $25 billion because it was a healthy bank. Then, two months later, it was given $20 billion because it was about to fail.

Anyway, there's a lot more good information floating about now, I suspect, then when France suffered from its hyperinflation. It doesn't really appear to floating around Washington, but after this bailout fails, I think people might get really pissed! I certainly hope so.

It's funny (not really): in Obama's Weekly Address he says, "If we don't take drastic action now, then we will have a more serious problem in the future." Or words to that effect. But isn't that what Paulson and Bernanke said a couple of months ago? We did take drastic action. And then more drastic action. And now still more drastic action is proposed.

*Sigh* Obama is such a great speaker - it's so easy to listen to him spout nonsense. It sounds so good.

Well, more hopeful news: Paul Volker, who last reined in inflation (and was fired for it), is on Obama's "Economic Advisory Board." Maybe he'll get Obama to rein things in. But I doubt it. President's love inflation. It appears to solve so many problems (although it really hides and magnifies them).


Under pressure from Wall Street, Carter reluctantly appointed Paul Volcker to be chairman of the Federal Reserve Board in 1979. Volcker had been under secretary of the Treasury for Richard Nixon and was then serving as president of the Federal Reserve Bank of New York. However, it is naïve to think that Volcker was given a free hand by Carter. His inability to fully implement a tight-money policy is why the inflation rate fell only to 12.5 percent in 1980, despite a sharp recession that year.

It was only after the election, when Volcker knew that Carter had lost, that he really clamped down on the money supply. This illustrates an important point: Presidents get the Fed policy they want, no matter how “independent” the Fed may be. If there had been any doubt about this, it was settled in 1967, when Fed chairman William McChesney Martin buckled under pressure from Lyndon Johnson and eased monetary policy even though Martin knew he should have tightened it. This caused inflation to jump from 3 percent in 1967 to 4.7 percent in 1968 and 6.2 percent in 1969.

90% of government would have to go away if they couldn't print money; and so they print money. Urgh. I wish I knew what to do about that.
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© 2005-2008 Stephen Clarke-Willson, Ph.D. - All Rights Reserved.



Our Daily Bleg: What to Do About Too Much Data? - Freakonomics Blog - NYTimes.com

A reader named Evan Schumacher wrote in with an interesting bleg. (Read about blegs here and send your own here.)

Tucked inside his bleg is the part that tickled me the most: a website Evan created to tell him whether it’s worth it to watch a basketball game he’d recorded. Anyway, I’ll give my answer below, after his bleg.

"I was wondering if too much data is ever a bad thing? I ask because I thought one of the rules of life that I’ve learned is that it’s best to have as much data as possible.

Whether it be hard numbers or smart people around, and at least when you are starting, you want as much information as you can get. The smart guys are the ones who know how to analyze it.

However, in my personal life I was having a problem with too much data. I watch all of the Warriors basketball games on DVR. However, nothing is worse than watching for 1.5 hours and in the end your team gets blown out. However, I never want to see the score before I watch because that ruins the game. To solve the problem I created a little website to warn me if the games are bad (www.shouldiwatch.com), but it won’t tell me anything about the outcome (who won or the score) if the game was relatively close. Trust me, as a Warriors fan this is a huge time saver. It’s a stupid little example, but it makes me wonder if there are other cases when you are doing research when you need to turn away from some information.

Anyway, it’s a little bit backwards to think of, but I thought it might be interesting to explore."
Evan is my nephew. Apparently he is a true child of the Internet.
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© 2005-2008 Stephen Clarke-Willson, Ph.D. - All Rights Reserved.


Obama Warns of ‘Trillion-Dollar Deficits’ - The Caucus Blog - NYTimes.com

Obama Warns of ‘Trillion-Dollar Deficits’ - The Caucus Blog - NYTimes.com:

"In addition to the ban on earmarks, Mr. Obama also said he would create a new Economic Recovery Oversight Board and put all government spending on the Internet in an easy-to-search format."
That would be awesome. The internet generation is good at mining those kinds of things for information. It could be really embarrassing for a lot of folks - which would be a good thing.
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© 2005-2008 Stephen Clarke-Willson, Ph.D. - All Rights Reserved.

NPR: 'Not A Tax Cut!'

NPR: 'Not A Tax Cut!':

"'[A]n increase in spending coupled with lower tax collections is an INCREASE in taxes. AN INCREASE in taxes. NOT A TAX CUT. If I spend more money and collect less, the government is promising to collect more taxes in the future. It is not a tax cut. Not a tax cut. Not a tax cut. And when you don't cut rates but rather give people a lump sum of $500, there are no incentive effects other than to increase the probability that the US Treasury will be unable to honor its obligations in the future.'"

-- Russell Roberts
If you understand that then you understand everything. Deficit spending is difficult-to-see taxation. All this time that you enjoyed "low taxes" under high-spending Republican administrations and you thought it was so great ... well, you were being set up for paying those taxes in the future which is coming soon.


The governors of four states want a trillion dollars. I think there are about 100 million families in the US. That is a debt obligation of $10,000.00 per family. And it's not just a tax - because interest on the $10,000.00 has to be paid as well. $10k at a modest 5% interest for 30 years is 43,219.42. Ouch.

The National Debt Clock says each person (including babies) owes 34,840.14; that's not what the government owes - you are the government. It's what you owe. A family of 4.3 owes 149,812.60. (Let's call it $150K.)

Please ... please ... please ... we must stop printing money. If we stop now, maybe the economy will recover. We are a resilient nation. But we are not infinitely resilient. Please stop ...

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


The End of the Financial World as We Know It - NYTimes.com

Op-Ed Contributors - The End of the Financial World as We Know It - NYTimes.com

I take some comfort that the above-linked article is the most popular on the NY Times site.

(Also some comfort that the follow-on article with "solutions" is less popular.)

And more comfort that at least a few blogs are outraged over all of the money-printing.

It's no fun sounding like a nutjob. But I defy you to read this:

Fiat Money Inflation in France: How It Came, What It Brought, How It Ended*

and then tell me the same thing is not happening here right now.

In France, the money-printing ended with The Terror and the Guillotine. Let's hope we can avoid The Terror and killing part and just stop printing so much money.

*It's a free download from Project Gutenberg and it's a short read.

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


Bringing Down Bear Stearns (Vanity Fair)

Bringing Down Bear Stearns: Politics & Power: vanityfair.com:

"Even among the circle of top executives who lived through that frantic week, no two people see the crisis at Bear the same way. Many, though, agree with some version of the scenario Alan Schwartz has come to believe. Yes, Schwartz tells friends, mistakes were made. Yes, the firm was financially weakened. But the more he learned about what had happened behind the scenes that week, the more Schwartz came to believe that Bear’s collapse was a pre-meditated attack orchestrated by market speculators who stood to profit from its demise. According to those Schwartz has briefed, these unnamed speculators—several now being investigated by the S.E.C.—employed a complex scheme to force a handful of major Wall Street firms to hold up trades with Bear, then leaked the news to the media, creating an artificial panic."
I'm inclined to believe this story. But even if the short selling attack on Bear Stearns was premeditated - so what? Sure, things were "okay". The company said just days before it went nearly bankrupt that it had plenty of liquidity. And it did... except not in the face of an unexpected situation. These big firms were leveraged 30:1 and it wasn't a secret. It would be fairly simple to bring them down with that kind of exposure.

It's my hypothesis that we need to get rid of the blind trust that everyone has either in business or government. The Libertarian crowd somehow believe that businessmen are basically honest and the hidden hand of the market corrects all evils. (Well, it does, eventually - but there can be a lot of discomfort in the meantime.) And then there are those that think all businessmen are criminals and that the government, in spite of the continuing evidence of graft and incompetence, is somehow necessary to keep businessmen honest.

Given a choice I'll go with the Libertarians. But the Libertarians need to ask themselves the following question: if they are right, how come nobody believes them? Probably because everyday there are examples of crooked businessmen. People somehow believe that when a businessman gets bent that he hurts more people than when a government official gets bent.

I would suggest that the proper position is not whether you should trust the hidden hand of the market or trust government - you can't trust either. You can't trust anyone. Just like the internet, where every site is under constant attack, you must assume that every financial transaction might be a fraud. You have to assume that every transaction is a risk. You need to diversify. You need to make sure that you're really diversified - you might be in several mutual funds but they might all invest in the same thing. You need insurance. You need to make sure your insurance company has a lot of cash on hand. You need to assume any company you deal with might go bankrupt tomorrow. You want to look for firms that are fairly transparent.

Consider the case of Paul Bremer, who lost billions of dollars in Iraq. He lost it and he has no documentation as to where it went. Should we give him the benefit of the doubt? No! If I go on a business trip and spend $10,000 on my expense account, and don't have any receipts, or any explanation, what do you think my boss is going to think? He's going to think I'm a crook. Likewise, we should assume that Paul Bremer is a crook, and stole the money. What other point of view is rational? We're talking about billions of dollars! And the Congress does nothing? Nobody is investigating it? He hasn't denied losing the money.

Trust needs to be earned. Right now, there is very little trust to go around, but I would argue there is still too much. Dumping a few trillion dollars into the economy by giving it to banks who have no accountability for the money is not increasing trust. The rule change that allowed Bear Stearns to be leveraged 30:1 has not been reversed!

(I've heard the reason all of these banks are getting the piles of cash is so they can weather the next round of sub-prime loans ("Option ARMS") that will reset to new interest rates. Nobody will own up to this because they don't want to scare you shitless.)

It's hard to be concerned about liberty, freedom, sound economic policy, the future of the dollar, and so on, without sounding like a nutjob.

But seriously ... shouldn't Paul Bremer be in some kind of trouble? Since when is it okay to admit you misplaced a billion dollars?
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© 2005-2008 Stephen Clarke-Willson, Ph.D. - All Rights Reserved.

Nanosoccer debuts at RoboCup 2007

Nanosoccer debuts at RoboCup 2007

My friend Trey Valenta sent the link above which is about teeny-tiny robots pushing teeny-tiny bits of stuff around.

(Here's the link to the Nanosoccer video.)

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


5 governors unite, seek $1 trillion in federal aid - The Boston Globe

5 governors unite, seek $1 trillion in federal aid - The Boston Globe

"Governor Deval Patrick and four other influential Democratic governors pleaded their case yesterday for up to $1 trillion in federal assistance over the next two years, to help alleviate budget cuts, create jobs, and avoid inflicting irreversible damage to schools during a fiscal crisis."

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


Uncle Jay Reviews 2008 in Song

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

Scott Adams Blog: Glucose Equals Free Will 12/30/2008

Scott Adams Blog: Glucose Equals Free Will 12/30/2008:

"I always need to eat something before I attempt writing or else nothing comes out. I eat exactly one banana before I write a blog post, and one chocolate Clif Builder's bar before writing a comic. I always assumed this was just a combination of ordinary hunger plus a habit that borders on OCD. The only thing I knew for sure was that deviating from the routine seriously impeded my productivity.

Recently a reader sent me a link about a writer who has the same experience but better research to explain why. The bottom line is that writing requires will power to avoid distraction, and will power is correlated with your glucose levels. In other words, your free will is actually sugar.

Try programming! You'll want a snack right away.

Then try multi-threaded programming! You'll want a bigger snack!

Then write some code that runs for eight months while handling world-wide internet outages!

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

GMAC is giving your money to subprime buyers - Top Stocks Blog - MSN Money

GMAC is giving your money to subprime buyers - Top Stocks Blog - MSN Money:

"First, they are planning on providing 5-year, zero interest loans on some of the slowest selling cars from the 2008 and 2009 product lines. Essentially, all the time that sales have been slowing, they kept on producing cars and were increasing inventory to record levels. Now with this new lending facility, they have been given the ability to sell those cars with FREE loans from money provided by you and me. That is what I call a bad investment.

But wait, there is more! Not only are we giving money away in the form of FREE loans, GMAC has decided that lowering the lending standards will be a real benefit to GM's bottom line.

'Credit is the lifeblood of the auto industry, both for consumers at the retail level and dealers at the wholesale level,' says Annette Sykora, NADA chairman and owner of two domestic-brand dealerships near Lubbock, Texas. 'Lowering minimum credit scores from 700 to 621 will expand credit availability to thousands of potential car buyers and further increase consumer confidence at this critical time in the auto industry.'

Wasn't this the same kind of lending practices that got us all into big trouble in the first place?"
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© 2005-2008 Stephen Clarke-Willson, Ph.D. - All Rights Reserved.

Sexiest Geeks of 2008, as Voted by Wired.com Readers | The Underwire from Wired.com

Sexiest Geeks of 2008, as Voted by Wired.com Readers | The Underwire from Wired.com:

2008's top 10 Sexiest Geeks are, as of Wednesday's official tally:

1.) Philip DeFranco: Host of sxephil
2.) Marina Orlova: Hostess of HotForWords
3.) Kari Byron: artist and MythBuster
4.) Jade Raymond: videogame producer and Electric Playground host
5.) Mila Kunis: actress and World of Warcraft fan
6.) Tina Fey: 30 Rock actress and Saturday Night Live's Sarah Palin impersonator
7.) Stephen Colbert: faux newsman
8.) Zooey Deschanel: actress, musician and singer-songwriter
9.) Danica McKellar: actress and math advocate
10.) Alyson Hannigan: actress

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

The Beehive Theory

All This Is That: George W. Bush gets stung (literally) -- The Beehive Theory: a "must see" video by Kees Vander Putten



which points to


and it's brilliant.

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