pushing the sky

Between the birthers, deathers and the general right-wing lunacy on show in the US, I think David M. Green picks up a few important threads that we’ve seen:

Can we really live in a country populated by so many fools, people who can so readily, proudly and belligerently be made into tools of their own destruction? Can the greatest political, economic, cultural and military power on the world’s stage possibly be so incredibly backward at its core?

This is what I don’t get: where have all these … nutjobs come from? What makes these people, who ostensibly have some education, behave in such an irrational manner, especially over a topic as apparently uncontroversial as health care?

[W]hat seems to me new about this moment is the political road rage, the thuggishness of masses of Americans who not only are venting about insane nonsense, not only are undermining their own interests acting as marionettes of laughing corporate predators, and not only are taking down democracy around themselves in order to do so, but are in fact also destroying the entire Enlightenment project of rationality-based management of public affairs as well. The single most frightening characteristic of this movement, to my mind, is that fact that no amount of evidence or logic could persuade these folks to abandon the lies they’ve attached themselves to[.]

It’s certainly astonishing to me that these people are arguing against a government service. Virtually everywhere else in the world, government services are considered good, exemplary even. You pay taxes, and in return the government provides services. Sure, commercial entities might be able to do the same deal, but at least you know with the government they’re not looking to make a buck out of it.

But I think the point being made above is that some time in the last 40 years, logic disappeared from the public sphere. It’s as though the last generation to witness truly involved war refused to educate their children about some basic things about respect for others and their views; that or some were taught too well and ended up on the left side of the nominal fence, while those who didn’t pay attention to lessons about humility and the importance of reason ended up on the right side. That or these people truly are pawns of a vaster conspiracy.

Anywho, go read the whole article before I repeat it word for word.

A response to this rather infuriating article:

Paul Sheehan has a rather glaring contradiction in his article on Monday, accusing “Comrade Rudd” of being a great illusionist. To claim on the one hand that the Prime Minister falsely represented himself as an economic conservative, but argue on the other hand that following Keynes’ General Theory is not economic conservatism appears somewhat contradictory.

Keynes’ ideas of macroeconomics had been largely displaced by Milton Friedman and the Chicago School of Business’ laissez-faire monetary approach since the 70s, so it seems that a return to older ideas would indeed conform to the ideas of conservatism in the field of economics. Applying the approach used to solve the Great Depression of the 1930s seems like the very model of conservatism.

It is also telling to read the full text of Niall Ferguson’s quasi-blog-post. Sheehan very selectively quotes from the source, which is primarily focused on proposing a solution for America and its banks.

Niall Ferguson’s article focuses on the fact that the US and UK governments are deeply indebted, along with their banks. He proposes that the US Government effectively seize American banks known to be holding large volumes of potentially bad debt, rewriting mortgages in more favourable terms for borrowers, and reprivatizing seized banks in 10 years. It’s an idea that is widely circulated, and has the backing of Paul Krugman, the Nobel Prize for Economics winner for 2008.

Does Sheehan expect that Kevin Rudd follow this example for the Australian banks? The solutions Sheehan hints at in Ferguson’s “solution” have nothing to do with Australia and the Government’s attempts to stimulate local demand, and would have Sheehan screaming about socialism by any other name. To imagine that these solutions could be brought about without increased government spending and debt is also fatuous.

Australian banks not affected to the extent of their international peers, for which regulation is but one factor, so Ferguson’s proposed solution is largely irrelevant to Australia, despite the allusions Mr Sheehan draws to solutions which “space precludes listing.” Ferguson’s contention that more debt is a problem, which Sheehan has latched onto, is only to set up the argument that the further debt should be targeted more directly at fixing bad loans in America. Paul Sheehan seems to have missed that part.

Caveat lector – let the reader beware – ought to proceed Sheehan’s article.

I’m sure you’ve heard by now of the Mumbai terror blasts and shootings yesterday – the situation still continues today, with a seige at the two hotels targeted still underway. Over 100 are dead, scores injured and the damage both physical and psychological as yet uncounted.

I’m usually one to argue in favour of civil liberties and ensuring fairness, but right now, the only feeling I’ve got is that these scum deserve to die.

The crime is simple: indescriminate murder of innocent civilians in their ordinary places of work and play. There is no defence for this crime, and the callous nature indicates that the perpetrators are dangerous to society and clearly mad – without any respect for human life.

Their shallow claim to a justification is that the anti-terror task force in India is unduly targeting Muslims – apparently oblivious to the irony of their very actions.

The freedom that these people have been allowed in India’s tolerant society and democracy has been abused and exploited. These people, their associates and all who sympathise with their actions deserve whatever they will get in vengence for their contempt for human life. Bastards.

Under the guise of won’t-somebody-think-of-the-kids, the Australian Government is pushing ahead with plans to put in ISP-level filters that block “illegal content” which you can’t opt out of.

In the grand scheme of not living in a marginal electorate, my vote counts for diddly-squat, but this is not something I would’ve voted for. It would appear the transition of Australian Labour from progressive to conservative is complete, along with fully emboldened ministers’ departments seeking to silence dissent. It would appear Chinese is not all that Rudd learnt from his 10 years in China.

From a purely legal stand-point, the valid question to me at this point would be “why is this a bad thing? isn’t stopping illegal activity a bad thing?” A valid question, quite apart from the fact that this is a slippery slope of censorship. I hesistate to think what “illegal content” means – the current definition appears to be:

Australian Communications and Media Authority’s official blacklist, which is in turn based on the country’s National Classification Scheme.

Given that our classification scheme bans games which show a level of violence considered acceptable on movie screens, this absurdity promises to play out across the internet, too.

Given also the behaviour of the communications minister’s department at attempting to silence a dissenting voice, you’ve got to wonder how much this is capable of becoming something in line with The Great Firewall of China, used to silence dissenting political voices.

[Communications Minister] Senator Conroy has himself accused critics of his filtering policy of supporting child pornography – including Greens Senator Scott Ludlam in Senate Estimates this week.

That is a line used to cover anything – you can almost here the cry of “paedophile!”

Political parties nominally left of centre (“liberal” with a small l) that start to try to impose restrictions on dissent put themselves squarely in the spotlight of hypocrisy, and feed the notion of a police state. How far around the corner is Minitrue, Thoughtcrime and pre-crime?

The other fear I have is that this will be used to pander to MPAA and RIAA, and all the other industry groups collectively either as MAFIAA or Big Content. Their tactics in hunting down and imposing $200,000 lawsuits against individuals who’ve downloaded maybe 10 songs in their lifetime are an abuse of the legal system, and more often than not they’ve been denied repeatedly in the courts. This seems to be an open path for their lobbying to try to stop all “illegal content” coming through in the hopes of exploiting consumers for every dollar they’ve got and foisting needless DRM.

The question again arises: “it’s illegal – what’s wrong?” What is wrong is an open secret: it doesn’t work. One:

But neither filter tier will be capable of censoring content obtained over peer-to-peer file sharing networks, which account for an estimated 60 per cent of internet traffic.

Two:

[N]one of the filters [tested] were completely accurate. They allowed access to between 2 per cent and 13 per cent of material that should have been blocked, and wrongly blocked between 1.3 per cent and 7.8 per cent of websites that should have been allowed.

and Three:

Only one of the filters tested resulted in an acceptable speed reduction of 2 per cent or less. The others caused drops in speed between 21 per cent and 86 per cent.

The tests showed the more accurate the filtering, the bigger the impact on network performance.

2 percent is acceptable? 86% is possible? Australia’s broadband is slow enough as is, without this unnecessarily hinderence slowing it down all the more.

In Senate Estimates, Senator Ludlam expressed concern that all sorts of politically-sensitive material could be added to the block list and otherwise legitimate sites – for example, YouTube – could be rendered inaccessible based on content published by users.

“The black list … can become very grey depending on how expansive the list becomes – euthanasia material, politically related material, material about anorexia. There is a lot of distasteful stuff on the internet,” he said.

Senator Ludlam, you’ve got my vote.

You almost want to set a musical to images like those found at this brand-spanking-new tumbl-log.

I’ve largely tried to stay out of saying anything on this “credit crisis” because there are far more credible experts out there, such as Nobel Laureates who blog (a first?). However, it’s getting to the point where I just have to ask one thing – why is everyone in a position of authority seemingly caught unawares?

The Background – or why this matters

The “credit crunch” is taking place behind the scenes far more than it is on measures visible to the public – the equity markets are a mirror to the murky world of money markets, where once billions of dollars flew around the world daily. When I joined DB, I was told almost point blank – the stock market measures you see is a vanishingly small component of what the business of a bank is all about. Brokerage and trading earns tidy sums, but the main reason banks exist is (was?) to handle the flow of money from those who have it to those who need it – creditors to debtors, the flow of capital.

It’s almost the idea that capitalism is built on – someone has extra money than they need, someone else has an idea for which they have insufficient money. The money is lent on the presumption of repayment in future, along with an interest charge to account for the time value and the utility that the money has provided. The borrower will borrow on the expectation that by using it – to buy tools, raw material, whatever – they will earn money from customers, use that to repay debt, and thus complete the cycle.

So: debt is fundamental. But what about shares?

Shares are a way to raise capital without the cost of interest, but in return you give up ownership, and often is limited by the properties of shares. Shares have the advantage to the investor that there’s unlimited upside – when profits are high, it’s returned to the share holders to the maximum value. On the flipside, shares also have unlimited liability – when things go bad, it’s possible to wipe out all your value. Debt is easier: it’s got limited upside – you only get paid back what you lent – and it’s got limited downside – you only lose as much as you lent, and in the capitalist system, you’re also first in line when things go belly-up.

The Crunch

Banks lent. Then they lent some more. Then they thought: I can sell this off and then lend some more again! And lent some more. Eventually, they got so addicted to the profits that they lent to people who really couldn’t pay it off if things turned out less than optimistic.

Which they did, inevitably – and then the crunch began. As default rates climbed, banks started to lose money, writing off values. The loans which had been sold on caused those who bought them to lose money. The haphazardly built house of cards came crashing down, and gradually, over the course of a year from last August, lending – credit – tightened.

Creditors feared that borrowers wouldn’t be able to pay back, so they hung on to their money rather than lending out again, or worse, called in loans. As borrowers sold, the glut forced prices down, and the feedback loop began in earnest. Asset prices falling meant the security against which the debt has been lent was less likely to recoup the cost of the loan, so creditors panicked some more.

As crashes go, the death of the credit market is proportional to the stock market bottoming out at about 1% of the highs.

So now we’re stuck at the point where no-one wants to lend to each other for fear of not getting paid back. Profit margins that were at 0.09% are over 2% for anyone that does lend, but still no-one is lending, and that’s what has everyone spooked – the grease on the gears of capitalism has dried up.

Why didn’t anyone see it coming?

Japan is ahead of the game: they did all this at the start of the 90s.

The Japanese banks lent money with reckless abandon in the 80s, and when the bubble was pricked, it all came to a crashing halt. It led to 10 years of neglegible growth of 1% or less, and petrified Japanese banks with billions of yen of bad debts that they couldn’t write off. The Japanese government attempted make-work programs to kick-start the economy, but failed to do anything other than run up 195% of their GDP as public sector debt. That is to say, it’d take two years of the dollar value of everything Japan made or did to pay off public debt – to contrast, Australia’s at about 14%.

The Japanese bubble was backed on exactly the same thing that the American bubble was – overvalued houses. While we’re skipping ahead to the Japanese solution implemented after nearly a decade – buying into the banks – why didn’t anyone spot the pattern in the first place?

Debt works, but only for so long. As money chased investment opportunities, debt was racked up on the assumption that it would always be as cheap as it was in the early years of the Double-Os, and that payback was a simple matter of selling it to the next sucker. The whole boom was fuelled by debt, not savings, and one day that debt would come due. What’s more, with leverage, the debt was quickly detached from any parity with earnings growth.

The problem seems to be that whenever these things happen, a collective someone thinks, it’ll be different this time.

Alright, but what do we do?

There’s no way to force people to lend money, short of the government taking it off them through taxes and budgets and lending themselves.

Oh wait.

In any case, it seems to me that when something is critical to the infrastructure of a system – like banks to capitalism – you would hope that there’s some level of control and constancy exerted on them. It’s pretty clear free-marketism only works if you’re willing to accept the downsides and the cycles. For a more stable system, you have to smooth the top of the cycle in order to ensure the bottom is smoother too – but that doesn’t sit well with those who cheer free markets (as long as it’s going up) and boo intervenion (unless it’s when their asses are on the line).

I’m an advocate of government involvement and infrastructure investment – critical pieces to the wellbeing of nations should not end up in private hands. To borrow a slogan, you’ve got to keep the bastards honest.

Disclaimers:

• I work for a bank directly affected by this, and my job may be (is?) linked to recovery.
• I’m not a US tax payer, and no longer a UK or EU tax payer.
• I’m no finance or economics expert, so take the above as a crude explanation at best.

If there’s one thing I think you’ll appreciate, it’s the following from The Daily Show:

The Daily Show isn’t exactly a bastion of independence, so let the AP sort out a little fact check on various things said over the last couple of days (via Dooce). Here’s another fact-check from AP on Palin’s claim that she “opposed the bridge to nowhere”, when she did no such thing.

I thought it was an interesting nomination, but it’s proving itself to be quite a bit of a farce.

Barack Obama on MLK and the Civil Rights movement: Obama (and his speechwriters?) is bringing back the great art of oratory (via).

I obviously can’t vote in America, but Obama seems to be the most well-spoken and inspiring candidate out there. The other candidates all look like they’ve calculated their lines and positions by polls; if Obama has, he’s a lot more subtle about it. Whoever gets the nomination, if it’s not him, fer cryin’ out loud, make him your VP.

Howard lost!

Can’t believe it’s finally happened. I mean, it’s been looking like it was going to happen for the last month for sure, even more so at the start of the week, but it was just like supporting the Indian cricket team – you look only through the cracks in your fingers, hoping against hope that the trend that is as plain as anything eventually turns into the result desired. You could never put it past Howard’s Coalition to pull one more rabbit out of the hat.

And now our Prime Minister is one Mr. K. Rudd. (Ed: Crap, did no one look at that initialised form?) The Liberals are in disarray as the loss reverberates, Costello taking the very smart option of going while the going is worth it – good not quite being the operative term here – and who can really blame him? 13 long years he waited, and was denied time and time again.

Now as a conscientious member of the anti-establishment left-liberal chardonnay-sipping brigade, what do we do when the people we were supporting get in? Colour me miffed (a light magenta, I suspect).

Facebook came out this week with their real business plan – to leverage the network of people and the information they have on them to create an advertising behemoth. Using the ideas of viral marketing, combined with targeted advertising based on the interests and activities that many users list in their profiles, Facebook hopes to deliver an effective advertising platform that surpasses others simply because of the social power behind it.

It’s a great business move – with that much data on interests, and people piling in to add more, along with the value of the links between people, it’s an almost foolproof business case. Advertising targeted at user interests means they are more likely to react to it, allowing advertisers to tailor their messages and get the maximum payoff for their investment, which means advertising distribution agencies will lap it up.

Add in the viral marketing angle, where advertising effectively comes with a personal endorsement of someone you (vaguely) trust or at the very least have some shared experience with means you’re more likely to take a look at the message and consider it – for however many hundredths of a second – to be a real message, again making it more likely that you will follow through on it. Personal recommendations have always carried the greatest weight, and only recently have marketers tried to leverage it.

Great move, Facebook. I’m buying none of it.

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• It’s easy to appear the smartest guy in the room, or at least pretty clued in, just by speaking up.

  Picture the scene – 10 people in a classroom-esque environment, learning about Hedge funds. Most of the people in the room come from financial or legal backgrounds, and most are also, if not senior, certainly not junior. Except one, who is a graduate, and in IT at that. Can you pick me yet?

  The instructor asks a question. Result? Not one word. Instructor shrugs it off, answers his own question.

  More questions. “Why do banks love hedge funds?” Still no response, even from the guy on the hedge fund-facing desk. I’ve learnt all I know about finance off the business section of a newspaper, and I pipe up “Because they do stuff?”

  Chuckles. But the instructor doesn’t chuckle – he just grins and says “Exactly!”

  By the end of the class, I had cred for the sheer fact that I spoke up, even if I was way out. Perception is just so much easier than actually knowing the stuff.

• (Note to self: if investing, write down what you plan to do and do exactly the opposite.)
• Self-serve checkouts at supermarkets: what. the. hell.

  I have no idea who thought this a good idea, nor who actually bought into it, but if it was possible to have a more daft idea about retail, I’m yet to see it. Shoppers are not shop assistants (hence the “assistant” part of the latter), nor should they be doing the check out. They get confused. They don’t do this every day – they’re slow at it. The rate of throughput goes down, not up. And you still have to have one person for about every 3 – 4 tills to keep the bastards honest (as the saying goes) and to handle the exceptions (you try getting veggies through a self-serve checkout).

  Plain idiocy as far as I can see, and yet people line up for it here. It’s like, “I want to interact with the minimum number of people possible in my day.” What miserable sods.

  Side note: same applies for daft idea of packing the groceries in the bags yourself. Oh, it helps the checkout chick/guy get your things scanned quicker, but they will invariably wait for you to finish packing before proceeding to the next customer, or even before asking for you to pay. And yet Europe – old fashioned and service oriented and all – seems to have embraced this inconvenience, perhaps for a few pennies knocked off the price of your bread and butter. What a nutso model.

• The weather this week has been roughly the same as August, or perhaps even July – cloudy, 18, 19ish. In August, people were wearing t-shirts and occasionally even shorts; come October, they are wearing coats and scarves and even gloves. What silly people.

  What silly weather.

That is all.